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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required )
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 33-82118
PRIMECO INC.
(Exact name of Registrant as specified in its charter)
TEXAS 74-1951774
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16225 PARK TEN PLACE, SUITE 200, HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 578-5600
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None N/A
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Securities registered pursuant of Section 12 (g) of the Act and the
outstanding number of shares of each class of capital stock as of December 31,
1995:
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CLASS OF STOCK SHARES OUTSTANDING
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None N/A
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Indicate by check mark whether Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES[x] NO[ ]
Indicate by check mark if disclosure of delinquent filer pursuant to
Item 405 of Regulation S-K (17 CFR 229.405) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statement incorporated by reference in Part III of the Form 10-K or
any amendment to this Form 10-K. [x]
All of the capital stock of the Registrant is held by Prime Holding,
Inc., a Delaware corporation.
As of March 31, 1996, 5,000 shares of common stock and 5,000 shares of
preferred stock are outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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PRIMECO INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
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ITEM 1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . 2
ITEM 2. Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 10
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 6. Selected Historical Financial Data . . . . . . . . . . . . . . . . . . . . 11
ITEM 7. Management's Discussion and Analysis of Financial Condition . . . . . . .
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . 20
ITEM 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . 47
PART III
ITEM 10. Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . 48
ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ITEM 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . 58
PART IV
ITEM 14. Exhibits, Financial Statements and Reports on Form 8-K . . . . . . . . . . 58
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PART I
ITEM 1 BUSINESS
Primeco Inc. ("Primeco"), which operates under the name "Prime
Equipment," is one of the three largest rental equipment companies in the
United States, based upon 1995 rental equipment revenues. Primeco's operations
primarily consist of renting equipment and, to a lesser extent, selling
complementary parts, merchandise and used equipment to commercial construction,
industrial and residential users. Primeco also acts as a distributor of new
equipment on behalf of nationally known equipment manufacturers. Primeco is
geographically diversified and as of December 31, 1995 operated 81 rental
equipment yards in 13 states, primarily in the southeastern and southwestern
United States.
Statements in this Form 10-K which are not historical facts, so-called
"forward looking statements", are made pursuant to the safe harbor provisions
of Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such forward looking statements include statements regarding
environmental matters in Item 1 of this Form 10-K and the "Liquidity and
Capital Resources" section in Item 7 of this Form 10-K. Attention is directed
to the cautionary disclosures in those sections regarding such forward looking
statements. Investors are also cautioned that all forward looking statements
involve risks and uncertainties, including those detailed in Primeco's filings
with the Securities and Exchange Commission.
On December 2, 1994, Prime Holding, Inc., a Delaware corporation
("Holdings"), formed on behalf of Investcorp S.A. ("Investcorp") and certain
other investors, acquired 100% of the stock of Primeco (the "Acquisition") from
American Perco, Inc., a subsidiary of Artemis S.A.
OPERATIONS
Primeco is headquartered in Houston, Texas. Typically, Primeco's rental
equipment yards occupy approximately 2.2 acres and include (i) a service
center, (ii) a customer showroom displaying selected rental equipment, new
equipment offered for sale and related merchandise, (iii) an equipment service
area and (iv) storage facilities for equipment requiring protection from
inclement weather. Each rental equipment yard is staffed by, on average,
approximately 15 full-time employees and one part-time employee, including a
manager, assistant manager, sales assistants, truck drivers, mechanics and
other personnel. Each rental equipment yard offers a full range of equipment
for rental and sale, with the actual mix designed to meet the anticipated needs
of the customers in each location. Primeco continues to expand its network of
rental equipment yards selectively through a combination of acquisitions of
suitable existing rental equipment yards in geographic areas contiguous to
Primeco's existing markets and new rental equipment yard openings in its
existing markets. Primeco increased its yard count from 74 in 1994 to 81
(including on-site Fleet Management facilities) as of December 31, 1995, for a
net increase of seven rental facilities. Prior to 1995, Primeco divided its
market area into the Southwest Division and the Southeast Division. In 1995,
Primeco split its two divisions into three geographical divisions (Western,
Central and Eastern) and the Fleet Management Group. Primeco took such action
to realign its operations to provide better operational support and to provide
a management structure for future growth.
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Western Division - The Western Division comprises nine rental yards
located in California (four yards), Oklahoma (three yards), Tennessee (one
yard), and Texas (El Paso, one yard). Primeco's customers in the Western
Division include a variety of commercial construction customers and small
subcontractors and represents a broad range of industries including oil
exploration and production, petrochemical and chemical. Primeco estimates that
revenues from the Western Division represented approximately 12% of Primeco's
total revenues for 1995.
Central Division - The Central Division comprises thirty-four rental
equipment yards located in Texas (twenty eight yards) and Louisiana (six
yards). Primeco's customers in the Central Division include a variety of
commercial construction customers including small subcontractors and homeowners
and represents industries including oil exploration and production,
petrochemical, steel, aluminum and chemical. Primeco estimates that revenues
from the Central Division represented approximately 39% of Primeco's total
revenues for 1995.
Eastern Division - The Eastern Division comprises thirty rental yards
located in North Carolina (ten yards), South Carolina (four yards), Florida
(nine yards), Virginia (one yard), Georgia (five yards), and Alabama (one
yard). Primeco's customers in the Eastern Division include a variety of
commercial construction customers and represent a broad range of industries
including tobacco, textile, pulp and paper, furniture and chemical. Primeco
estimates that revenues from the Eastern Division represented approximately 45%
of Primeco's total revenues for 1995.
Fleet Management - As explained more fully below (see "Products and
Services -- Fleet Management Services"), the Fleet Management yards are located
at sites of major industrial customers with which Primeco has an agreement to
act as the exclusive supplier and manager of industrial rental equipment used
by each such customer, its contractors and subcontractors in connection with
repair, maintenance and construction at such sites.
CUSTOMERS
Primeco has developed a broad and diverse base of over 20,000 active
customers, ranging from "Fortune 100" companies operating nationwide to
subcontractors and homeowners. During 1995, no single customer accounted for
more than 3.0% of Primeco's total revenues, and Primeco's ten largest customers
accounted for less than 9.5% of Primeco's total revenues. Generally, Primeco's
customer base includes three broad categories: (i) commercial construction
companies, (ii) industrial companies and (iii) small subcontractors, homeowners
and others. Management estimates that commercial construction customers
accounted for approximately 50% of Primeco's total revenues in 1995, compared
to approximately 40% for industrial customers, and approximately 10% for small
subcontractors, homeowners and others.
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Commercial Construction. Primeco's commercial construction customers
include national and regional contractors and subcontractors involved in
commercial construction projects, such as office and apartment buildings,
roads, bridges and highways, plants and other manufacturing facilities.
Primeco's equipment is used in each phase of a commercial construction project,
and includes backhoes used for digging, compaction equipment used for
compacting earth, trowels used for laying concrete, and welding machines, booms
and lifts used in the construction of buildings. Although the commercial
construction market is cyclical on a regional and national basis, Primeco's
geographic diversity makes it less sensitive to downturns in any one region.
Industrial. Management believes Primeco is one of the largest suppliers
of rental equipment to industrial companies in the southern United States,
based upon revenues from equipment rentals to such customers. The demand for
rental equipment from Primeco's industrial customers has generally been less
sensitive to economic cycles than that of its commercial and residential
customers and is, therefore, more stable. Management attributes this to the
fact that a major part of rental equipment use by industrial customers is
related to ongoing and periodic maintenance work on existing facilities. Such
maintenance is essential to industrial customers in order to avoid costly
shutdowns that result from equipment failures. Primeco's industrial customers,
many of which operate twenty-four hours per day and seven days per week, use
equipment rented from Primeco to perform work required to construct, maintain
and repair major industrial and manufacturing facilities. Primeco's industrial
customers represent a broad range of industries including pulp and paper,
chemical, petrochemical, steel, aluminum and textiles. In addition, Primeco
serves several electric power generating public utility companies. Aerial
equipment such as boom lifts and platforms are used by industrial customers to
conduct safety inspections and routine maintenance, while equipment such as air
tools and air compressors are used in combustible environments where the risk
of explosion prevents the use of electrical tools and equipment.
Small Subcontractors, Homeowners and Others. Primeco rents landscaping,
plumbing, remodeling and home improvement tools to this market segment.
Equipment rentals to small subcontractors and homeowners generally are for
shorter periods (often one to two days). Revenues from subcontractors,
homeowners and others accounted for approximately 10% of Primeco's total
revenues in 1995 and management does not anticipate any material change in this
percentage.
PRODUCTS AND SERVICES
Equipment rental, including revenues from Fleet Management and shutdown
and turnaround services, represents Primeco's principal line of business. In
1995 equipment rental together with rental related revenue (such as damage
waiver income, delivery charges, labor charges and warranty income), accounted
for 62.9% of Primeco's total revenues. Primeco also acts as a distributor of
new equipment on behalf of nationally known equipment manufacturers. Revenues
from the sale of new equipment accounted for approximately 14.3% of Primeco's
total revenues in 1995. The balance of Primeco's 1995 revenues were derived
from the sale of parts and related merchandise such as diamond saw blades,
coolers, gloves and safety equipment (13.3%) and the sale of used rental
equipment (9.5%).
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Equipment Rental. Primeco, which rents over 100 different types of
equipment, believes it offers one of the most comprehensive and well-maintained
fleets of equipment in the rental equipment industry. Primeco's rental fleet
consisted of 34,613 pieces of equipment at December 31, 1995 including large
machinery such as aerial manlifts, portable air compressors, forklifts and
light earth moving equipment and small equipment such as lawnmowers, plumbing
equipment and hand tools. Five categories of equipment represented 75.7%
(based on original cost) of Primeco's total rental equipment fleet as of
December 31, 1995: (i) platforms and booms, (ii) forklifts, (iii) air
compressors and dryers, (iv) loaders and backhoes and (v) scissors and vertical
platforms. The mix of equipment at each of Primeco's rental equipment yards is
tailored to meet the demands of the local customer base.
Primeco maximizes the utilization of its fleet through the use of its POS
system. Using this system, each rental equipment yard manager can search
Primeco's entire rental fleet for needed equipment, determine its location on a
real time basis and arrange for delivery to customers using Primeco's
radio-dispatched fleet of trucks and trailers and independent carriers.
Primeco offers flexible rental terms and conditions to its customers.
Customers may rent equipment by the day, week or month, with the daily rental
rate declining as the duration of the rental term increases. During 1995, the
average rental was for a period of 13 days. Generally, Primeco's industrial
customers tend to rent for longer periods of time than commercial construction
customers, subcontractors or homeowners. Primeco provides 24-hour maintenance,
repair and support services to customers, including service at the customer's
job site when necessary.
Fleet Management Services. Under its Fleet Management program, Primeco
seeks to enter into exclusive contracts with large industrial customers for the
on-site provision of most of the rental equipment required for a particular
facility or facilities, 24-hour-a-day maintenance and repair, and equipment
management services. Fleet Management permits customers to focus on their
primary businesses, reduce their capital investment in equipment and
efficiently satisfy their equipment needs. Primeco believes that Fleet
Management services offer an attractive opportunity for growth, and that
Primeco is well positioned to take advantage due to its formalized Fleet
Management program, customized POS system and strong national account
relationships. Primeco has agreements with several major oil and petrochemical
companies to act as the exclusive supplier and manager of industrial rental
equipment used by each such customer, its contractors and subcontractors in
connection with repair, maintenance and construction at certain of such
customers' plants. Pursuant to these agreements, Primeco maintains and
services a fleet of rental equipment on the premises of each such plant and
helps the customers to monitor and efficiently manage the equipment in that
fleet. The dedicated rental fleet is stored on the customers' premises. These
existing Fleet Management contracts may be terminated by the customer on
approximately 200 days' notice to Primeco. If Primeco's existing Fleet
Management contracts were to be terminated by the customers, Primeco would
redeploy the rental equipment dedicated to servicing those contracts among its
existing rental equipment yards and, if necessary, proportionately reduce its
purchases of new rental equipment. Fleet Management services are currently
only a small percentage of Primeco's total revenues and Primeco does not
believe that the loss of the existing Fleet Management contracts, either
individually or in the aggregate, would have a material adverse effect on
Primeco. Management believes, however, that Fleet Management affords
significant
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growth opportunities due to the trend by industrial companies toward
outsourcing non-core components of their businesses and heightened safety and
environmental standards that require compliance and ongoing maintenance by
industrial customers.
Shutdown and Turnaround Services. Primeco's "Turnaround Central"
operation, located in Houston, Texas, is dedicated to providing industrial
customers with the equipment, tools and supplies needed to perform scheduled
periodic maintenance and repairs ("turnarounds") as well as required repairs
resulting from accidents or emergencies that curtail operations ("shutdowns").
Primeco provides customers with a computer system and bar-code scanning
equipment that permits Primeco's personnel to assist the customer in managing
and monitoring the location and utilization of the equipment and tools. The
lost production experienced as a consequence of turnarounds and shutdowns make
these procedures costly to manufacturers who therefore place a premium on
efficiency and speed in accomplishing the required maintenance or repairs.
Turnaround Central is generally able to deliver its comprehensive package to a
customer anywhere in the United States in less that 24 hours. Since the
inception of Turnaround Central in May 1993, Primeco has performed over 50
turnaround or shutdown jobs.
Sales of New Equipment. Primeco is a distributor for over 30 major
equipment manufacturers, including JLG Industries, Inc., Snorkel-Economy and
Genie Industries (booms and high reach equipment), Lull Industries, Inc.
(rough terrain forklifts), Sullair Corporation (air compressors), Chicago
Pneumatic Tool Company (air tools), Target Products, Inc. (concrete saws) and
Wacker Corporation (earth compaction equipment). During 1995, five categories
of equipment, consisting of air compressors and dryers, platform booms, saws,
compaction equipment and concrete equipment, accounted for approximately 61% of
Primeco's sales of new equipment.
Sales of Used Equipment. Primeco maintains a regular program of selling
used equipment in order to adjust the size and composition of its rental fleet
to changing market conditions and to support the quality of its available
rental fleet. Primeco is generally able to achieve favorable sales prices for
its used equipment due to its strong preventive maintenance program and its
practice of selling used equipment before it becomes obsolete or irreparable.
Management is also able to adjust and balance the rate of used equipment sales
and new equipment purchases to deal with changing economic conditions and
thereby minimize the short-term adverse effects of declines in economic
activity. Primeco has averaged selling approximately 15% of the used equipment
in its rental fleet in each of the last three years. Sales of used equipment
are accomplished in several ways, including: (i) directly from rental equipment
yards; (ii) from Primeco's two dedicated used equipment yards (one in Texas and
one in Florida); (iii) through advertising; and (iv) through auctions.
Related Parts and Merchandise Sales. Primeco also sells parts, supplies
and merchandise, including diamond and regular saw blades, drill bits, shovels,
goggles, hard hats and other safety gear and coolers, as a complement to its
equipment rental and sales business.
Other Services. Primeco also offers maintenance service to its customers
that own equipment and generates revenues from damage waiver charges, delivery
charges (particularly for larger pieces of equipment) and warranty income.
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PURCHASING AND SUPPLIERS
Primeco's purchasing is coordinated through its headquarters in Houston,
Texas. All suppliers must meet specified standards of quality and experience.
Primeco participates in dealer quality councils and training programs with
certain of its suppliers. Primeco's Product Evaluation Committee analyzes the
effectiveness, quality and profitability of Primeco's equipment and addresses
equipment procurement issues. The Committee is composed of corporate
management and yard employees whose experience with specific equipment brands
and models, supplemented by performance data captured by Primeco's POS system,
provides the basis for equipment procurement decisions. Primeco believes that
it could readily replace any of its existing suppliers if it were to lose its
ability to purchase equipment from such suppliers.
MAINTENANCE PROGRAM
Primeco's preventive maintenance program establishes a schedule of
preventive maintenance customized to each category of equipment. To administer
this program, Primeco employs a full time staff of 411 trained mechanics, who
perform equipment maintenance at both Primeco's yards and at customers' job
sites. As a result of this program, Primeco believes that it is able to obtain
more dependable performance from its fleet, extend the useful life of its
rental equipment fleet and obtain more favorable prices when used equipment is
sold.
POS SYSTEM
Primeco's POS system, which has been in place at all Primeco's rental
equipment yards since October 1992, is used for the day-to-day management of
rental equipment. Using Primeco's Proprietary Point of Sales (POS) system,
each rental equipment yard manager can search Primeco's entire rental fleet for
needed equipment, determine its location and rental status on a real-time basis
and arrange for delivery to customers using Primeco's radio-dispatched fleet of
trucks and trailers and independent carriers. In addition, the POS system
provides information concerning customer sales and credit histories, generates
rental contracts and processes more than 50,000 invoices per month. The POS
system is linked to Primeco's management information system, which provides
management with access to up-to-date financial information concerning Primeco's
performance. Primeco's staff of 19 systems professionals designs, implements,
updates and maintains Primeco's computer systems. These systems professionals
also developed the customized, proprietary software used in Primeco's Fleet
Management and Turnaround Central services, as well as software programs for
specific customer needs. Primeco's data center, located at its headquarters in
Houston, Texas, employs an IBM mainframe computer system. In the event
Primeco's POS system becomes disabled, Primeco has retained disaster recovery
back-up services which will provide computer systems at several offsite
locations.
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SALES, MARKETING AND ADVERTISING
Primeco markets its services in four principal ways, the most important of
which is marketing through its sales force. Primeco also has developed a
national accounts program, a telemarketing program and certain promotional
activities to supplement and support the efforts of Primeco's sales force.
Sales Force. Primeco markets its products and value-added services
primarily through its 149 member sales force, consisting of nine sales managers
who oversee 140 sales representatives. Operating directly from the local
rental equipment yards, sales managers and representatives call regularly on
contractors' job sites and industrial facilities in their sales territories,
often assisting customers in planning for their equipment requirements.
Primeco also provides its sales force with extensive training, including
frequent in-house training by supplier representatives regarding the operating
features and maintenance requirements of new equipment. Members of Primeco's
sales force earn commissions on all equipment rentals and sales that they
generate.
National Accounts. Primeco's national accounts department, located at
Primeco's headquarters in Houston, is dedicated exclusively to marketing to
large customers with a nationwide presence in order to develop regional or
multi- regional relationships. The national accounts department supplements
the efforts of the sales force whose members deal directly with management of
the local production facilities of national firms. National account marketers
call on the corporate headquarters of Primeco's main industrial and commercial
construction customers in order to expand existing business relationships to
include additional production facilities or construction sites. Multi-facility
arrangements are covered by "blanket" contracts designating Primeco as the
preferred supplier of rental equipment at designated customer facilities.
Telemarketing. Primeco's telemarketing department was established in
1991. The primary objectives of the telemarketers are: (i) to generate leads
and open new accounts for sales personnel in the field by calling on companies
in a targeted geographical area; (ii) to call on inactive accounts to review
whether they have current or near-term equipment needs and (iii) to perform
market research.
Promotional Activities. Primeco actively promotes its services by direct
mail and advertising in the yellow pages of telephone directories in the
markets it serves. Primeco also hosts open houses, customer appreciation
events and other special promotional events. Primeco provides a toll-free
telephone number that automatically connects the caller to Primeco's rental
equipment yard closest to that caller. A second toll-free number allows
callers to contact the President of Primeco directly, ensuring that all
customer concerns are heard and addressed. Furthermore, Primeco also prints
its marketing materials in Spanish to address the Hispanic customer base in
many of its markets in the southwestern United States.
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TRADE NAMES
Primeco is the owner of the trademark PRIME EQUIPMENT registered with the
U.S. Patent and Trademark Office for use in connection with the rental of
light-to-medium construction equipment. Although management believes Primeco's
name is recognized among customers in the industry, it does not believe that
Primeco's operations are dependent to any significant extent on any single
trade name.
COMPETITION
The rental equipment industry is fragmented and highly competitive. Each
market in which Primeco operates is served by numerous competitors, ranging
from large multi-regional or regional companies, such as Hertz Equipment
Rental, BET Plant Services, U.S. Rentals, and Rental Service Corporation
(formerly Acme Holding), to small, independent businesses with a limited number
of locations. Participants in the rental equipment market compete on the
basis of service, breadth of product line, quality and price. In general,
Primeco believes that it and other regional and multi-regional operators enjoy
substantial competitive advantages over small, independent rental businesses
who cannot afford to maintain the broad and extensive rental equipment fleet
and high level of maintenance and service that Primeco offers. In its markets,
Primeco's POS system, its commitment to customer service and fleet maintenance
and its centralized management systems enable it to compete successfully with
other large regional and multi-regional operators.
EMPLOYEES
At December 31, 1995, Primeco had a total of 1,384 employees, of which
553 were salaried and 831 were non-salaried personnel. Of these, 88 were
involved in administration, 162 in sales and marketing and 1,134 in operations
and rental equipment yard management. None of Primeco's employees are
represented by a collective bargaining agreement and management believes its
employee relations are good. Primeco is an equal opportunity employer and
provides equal employment opportunities without regard to race, sex, age,
national origin, religion, veteran status or handicap.
ENVIRONMENTAL REGULATION
Primeco is subject to various evolving federal, state and local
environmental laws and regulations governing, among other things, emissions to
air, discharge to waters and the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and wastes. These laws and
regulations provide for substantial fees and sanctions for violations, and, in
many cases, could require Primeco to remediate a site to meet applicable legal
requirements.
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In 1995, Primeco spent approximately $1.3 million on environmental
matters, including remediation costs and compliance costs, and has budgeted
expenditures of approximately $4.4 million in 1996 for such matters. At
December 31, 1995, Primeco had a reserve for environmental remediation of $4.2
million and a related receivable from state trust fund programs of $1.2
million. The actual cost of remediating environmental conditions may be
different than that accrued by Primeco due to the difficulty in estimating such
costs and due to potential changes in the status of legislation and state
reimbursement programs.
Management believes that the amounts required to correct any identified
environmental condition and to maintain compliance with applicable
environmental regulations will not have a material adverse effect on the
financial condition or results of operations of Primeco.
ITEM 2 PROPERTIES
Primeco owns 40 of its rental locations and leases 33 rental locations, as
well as its approximately 23,000 square foot headquarters space in Houston,
Texas, with the majority of its leases having multiple five or ten-year renewal
options. These figures do not include the Fleet Management service centers,
which are located on-site at customer-owned locations. Primeco also operates
used rental equipment yards in Texas and Florida, an equipment service center
and a national warranty center, both in North Carolina and the Turnaround
Central facility in Texas. Primeco granted mortgages on all its owned real
property to its lenders, to secure Primeco's obligations under its Senior
Credit Facility. In addition, Primeco must grant a mortgage to its lenders for
any real property acquired for consideration in excess of $1.0 million.
Management believes that none of Primeco's leased facilities, individually, is
material to the operations of Primeco. In addition, Primeco maintains a fleet
of 628 trucks and 140 trailers, of which 79 trucks and 82 trailers are owned by
Primeco as of December 31, 1995.
ITEM 3 LEGAL PROCEEDINGS
From time to time, Primeco has been, and is, involved in various legal
proceedings, all of which management believes are routine in nature and
incidental to the conduct of its business. The ultimate legal and financial
liability of Primeco with respect to such proceedings cannot be estimated with
certainty, but Primeco believes, based on its examination of such matters, that
none of such proceedings, if determined adversely to Primeco, would have a
material adverse effect on the financial condition or results of operations of
Primeco.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5 MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Primeco is a wholly owned subsidiary of Prime Holding, Inc. The Common
Stock of Primeco is not registered and may not be transferred in the absence of
such registration or an exemption from registration under the Securities Act and
the applicable securities law of any state or other jurisdiction. As part of
the December 2, 1994 acquisition of Primeco, 5,000 shares of redeemable
convertible Preferred Stock were issued. As with Primeco's Common Stock, these
Preferred Stock have not been registered and may not be transferred.
Primeco's payment of cash dividends on the Common Stock and the Preferred
Stock is restricted under the terms of its (i) Credit Agreement, dated as of
December 2, 1994, as amended (the "Senior Credit Facility"), among Primeco, the
lenders party thereto, Chemical Bank as Administrative Agent, and The CIT Group
Business Credit Inc. as Collateral Agent, and (ii) Indenture, dated as of March
6, 1995 (the "Indenture"), between Primeco and Texas Commerce Bank National
Association, as trustee. Primeco's Senior Credit Facility and Indenture
generally prohibit declaration of any dividends, except that Primeco may pay
dividends or make other dividends to Holdings to (i) enable Holdings to pay its
taxes and operating expenses of up to $500,000 per fiscal year, (ii) allow,
subject to certain conditions, Holdings to repurchase capital stock of Holdings
owned by former employees of Primeco, and (iii) allow, subject to certain
conditions, Holdings to pay certain holders of securities of Holdings. Dividends
on the Preferred Stock are payable semi-annually on May 1 and November 1 of each
year. Dividends paid on the Preferred Stock aggregated approximately $1.35
million during 1995.
ITEM 6 SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected financial data for Primeco. The
selected historical financial information at and for the year ended December 31
in each of the five years presented is derived from Primeco's Financial
Statements. The results of operations for the period December 2, 1994 through
December 31, 1994 which are included in the combined 1994 amounts are not
comparable to prior periods due to the Acquisition. This information should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Financial Statements and related
notes thereto.
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SELECTED HISTORICAL FINANCIAL DATA
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<CAPTION>
Year Ended December 31,
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1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Operating Data: (in thousands)
Predecessor Predecessor Predecessor Combined Successor
<S> <C> <C> <C> <C> <C>
Total revenues . . . . . . . . . . . . . . . . . $ 146,231 $ 156,724 $ 174,249 $ 211,924 $ 242,787
Net income (loss) before extraordinary item . . . $ (9,774) $ (3,797) $ 4,548 $ 12,206 $ (6,190)
Extraordinary loss net of tax benefit . . . . . . 0 0 0 0 (1,268)
Preferred stock dividends and accretion . . . . . 0 0 0 (125) (1,528)
Net income (loss) applicable to common
shareholder . . . . . . . . . . . . . . . . . $ (9,774) $ (3,797) $ 4,548 $ 12,081 $ (8,986)
Balance Sheet Data (end of period):
Total assets . . . . . . . . . . . . . . . . . . $ 288,331 $ 278,314 $ 280,072 $ 368,760 $ 390,938
Total debt.. . . . . . . . . . . . . . . . . . . $ 163,000 $ 146,000 $ 133,000 $ 225,000 $ 255,000
Redeemable preferred stock. . . . . . . . . . . . $ 0 $ 0 $ 0 $ 8,975 $ 9,150
</TABLE>
Note: The combined period for 1994 represents the mathematical addition
of the historical amounts for the Predecessor period (January 1,
1994 to December 1, 1994) and the Successor period (December 2,
1994 to December 31, 1994) and are not indicative of results that
would have been obtained had the Acquisition occurred on January
1, 1994, (see Note 1 of Notes to Financial Statements). As a
result of the December 2, 1994 Acquisition, Primeco's assets and
liabilities were adjusted to their estimated fair values as of
December 2, 1994. In addition, Primeco entered into new financing
arrangements and had a change in its capital structure. The
combined results of the 1994 period are, therefore, not
comparable to other periods. The period December 2, 1994 to
December 31, 1994 reflects: increased cost of sales due to higher
depreciation expense for rental equipment and cost of rental
equipment sales; and increased interest expense.
-12-
<PAGE> 14
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements of Primeco and the notes thereto included in Item 8 of this report.
GENERAL
As a result of the Acquisition, Primeco's assets and liabilities were
adjusted to their estimated fair values as of December 2, 1994. In addition,
Primeco entered into new financing arrangements and had a change in its capital
structure. Accordingly, the results of operations for the period December 2,
1994 through December 31, 1994 and the full year ending December 31, 1995
reflect increased costs as a result of higher depreciation and amortization and
higher cost of used equipment sales relating to the step-up of assets to fair
value at the Acquisition and increased interest expense and are not comparable
to prior periods.
The 1994 amounts discussed below represent the mathematical addition of
the historical amounts for the Predecessor period (January 1, 1994 to December
1, 1994) and the Successor period (December 2, 1994 to December 31, 1994), for
purposes of the discussion below only and are not indicative of results that
would actually have been obtained if the Acquisition occurred on January 1,
1994.
1995 COMPARED TO 1994
Total Revenues. Total revenues in 1995 increased 14.6% to $242.8 million
from $211.9 million. This increase reflects an increase in all of Primeco's
revenue components with rental revenues producing the largest dollar increase.
Rental Revenues. Rental revenues in 1995 increased 17.2% to $139.0
million from $118.6 million in 1994. This increase was a result of an
overall improvement in economic conditions, an increase in the average
amount of equipment available for rental, high utilization of rental
equipment, and an increase in rental rates in May 1995. The average
amount of equipment available for rental in 1995 increased as evidenced by
an increase in the monthly average original cost of rental equipment of
19.4% to $228.4 million from $191.2 million in 1994. A measure used by
Primeco to determine the appropriate mix of rental equipment and to manage
the utilization of its rental equipment is "ROI". ROI is defined as gross
rental revenue as a percentage of average original monthly cost of rental
equipment. Primeco's utilization of rental equipment decreased slightly in
1995 with an ROI of 61.8%, versus 63.0% in 1994, primarily due to
substantial additions to the rental fleet and a different mix of rental
equipment. Although slightly less than 1994, 1995's ROI remained at a
historical high level. In May 1995, Primeco raised the average listed
rental rates by varying amounts, depending on the equipment type and
duration of rental. Although Primeco attempts to achieve rental rates
that are as close to list price as possible, actual rental rates realized
are generally lower than listed rental rates owing to competitive
conditions in various markets.
New Equipment Sales. Sales of new equipment in 1995 increased 6.8%
to $34.6 million from $32.4 million in 1994 primarily due to improved
general economic conditions and higher selling prices.
-13-
<PAGE> 15
Used Rental Equipment Sales. Sales of used rental equipment in 1995
increased 12.9% to $23.1 million from $20.4 million in 1994 due to high
demand for used rental equipment and Primeco's normal fleet upgrading.
Parts and Merchandise Sales. Sales of parts and merchandise in 1995
increased 11.9% to $32.2 million from $28.8 million in 1994. This
increase correlates to the higher rental revenue and sales of equipment
since parts and merchandise generally complement the equipment Primeco
rents and sells.
Service and Other Income. Service and other income in 1995
increased 17.4% to $13.8 million from $11.8 million in 1994. This
increase reflects the increased rental revenue.
Gross Profit. Gross profit in 1995 decreased 9.2% to $68.8 million from
$75.8 million in 1994. This decrease primarily reflects higher depreciation
expense and cost of sales of rental equipment sold due to the step up to fair
value of rental equipment as a result of the Acquisition. The effect of the
step up will continue to impact gross profit in 1996. Direct operating expense
increased primarily due to higher compensation costs (reflecting an increased
number of employees) and increased maintenance costs necessary to support the
increased size of the rental fleet and to staff new rental equipment yards. The
increase in direct operating expenses also reflects start-up costs of opening
new rental equipment yards in 1995. Gross profit as a percentage of total
revenues was 28.4% in 1995 and 35.8% in 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1995 increased 19.1% to $36.8 million from $30.9
million in 1994. This increase primarily reflects higher sales commissions due
to increased rental and sales revenue. Total Selling, General and
Administrative Expenses in 1994 were offset by an insurance settlement with a
prior owner which generated approximately a $2.1 million gain and a franchise
tax refund of approximately $500,000. As a percentage of total revenues,
selling, general and administrative expenses in 1995 was 15.2% versus 14.6% in
1994 primarily as a result of the nonrecurring items.
Interest Expense. Interest expense increased 111.4% to $29.0 million in
1995 from $13.7 million in 1994. This increase reflects higher interest
expense relating to higher levels of indebtedness incurred in connection with
the Acquisition. Immediately prior to the Acquisition, Primeco had outstanding
debt of $133.0 million, and immediately after the Acquisition, Primeco had
outstanding debt of $225.0 million. At December 31, 1995, outstanding debt
aggregated $255.0 million, of which $155.0 million was at variable rates and
$100.0 million was at a fixed rate of 12.75% per annum. At that date, after
giving effect to the interest rate swap described in Footnote 8 to the audited
financial statements included in Item 8 of this Form 10-K, approximately $75.0
million of indebtedness bore interest at variable rates.
Income Tax Expense (Benefit). Income tax expense in 1995 was a benefit of
$2.8 million (including a $0.8 million tax benefit on the extraordinary loss),
compared to an expense of $8.5 million in 1994. The effective income tax rate
for both periods differs from the federal statutory rate of 35% primarily as
the result of the non tax-deductible amortization of goodwill. At December 31,
1995, Primeco has an alternative minimum tax credit carry forward of
approximately $2.9 million and a corresponding valuation allowance. The
allowance was established since it is not more likely than not that the benefit
of the credits will be realized due to the high level of interest expense
resulting from the financing of the Acquisition.
-14-
<PAGE> 16
Net Income (Loss) Before Extraordinary Item. Net income decreased from
income of $12.2 million in 1994 to a loss of $6.2 million in 1995. This loss
includes the write off of the covenant not to compete with the former owner of
Prime Equipment. Pinault S.A. has exited the rental industry as a result of the
divestiture of Pinault Equipement. See Footnote 5 to the Financial Statements
contained in Item 8 of this Form 10-K. The amount written off in 1995 was $3.6
million ($5.9 million pretax). Net income was also impacted by the factors
discussed above.
1994 COMPARED TO 1993
Total Revenues. Total Revenues in 1994 increased 21.6% to $211.9 million
from $174.2 million in 1993. This increase was primarily a result of higher
rental revenue and an increase in the sale of new and used equipment.
Rental Revenue. Rental revenue in 1994 increased 17.6% to $118.6
million from $100.8 million in 1993. This increase was a result of an
overall improvement in economic conditions, an increase in the average
amount of equipment available for rental, higher utilization of rental
equipment and an increase in rental rates in March 1994. The average
amount of equipment available for rental in 1994 increased as evidenced by
an increase in the monthly average original cost of rental equipment of
9.8% to $191.2 million from $174.2 million in 1993. Primeco's higher
utilization of rental equipment is reflected by an increase in ROI to
63.0% in 1994 from 59.0% in 1993. In March 1994, Primeco raised average
listed rental rates by varying amounts depending on equipment type and
duration of rental, with a weighted average increase of approximately 5%,
which was the first such increase since 1991. Although Primeco attempts
to achieve rental rates that are as close to list price as possible,
actual rental rates realized are generally lower than listed rental rates
owing to competitive conditions in various markets.
New Equipment Sales. Sales of new equipment in 1994 increased 23.8%
to $32.4 million from $26.2 million in 1993 primarily due to improved
general economic conditions.
Used Rental Equipment Sales. Sales of used rental equipment in 1994
increased 50.8% to $20.4 million from $13.5 million in 1993 due to high
demand for rental equipment in 1994 and a $2.3 million used equipment
auction in 1994 (there was no such auction in 1993).
Parts and Merchandise Sales. Sales of parts and merchandise in 1994
increased 20.6% to $28.8 million from $23.9 million in 1993. This
increase correlates to the higher rental revenue and sales of equipment
since parts and merchandise generally complement the equipment Primeco
rents and sells.
Service and Other Income. Service and other income in 1994
increased 19.2% to $11.8 million from $9.9 million in 1993. This increase
reflects the increased rental revenue.
Gross Profit. Gross profit in 1994 increased 21.5% to $75.8 million from
$62.4 million in 1993. This increase primarily reflects the increase in total
revenues. This increase was partly offset by a 15.7% increase in direct
operating expenses in 1994 to $53.6 million from $46.3 million in 1993. The
increase was also partly offset by higher depreciation expense and cost of
sales of
-15-
<PAGE> 17
rental equipment due to the increase in carrying value of rental equipment as a
result of the Acquisition. The impact of the step up to fair value of the
rental equipment will continue to impact gross profit in future periods.
Direct operating expenses increased primarily due to higher compensation costs
(reflecting an increased number of employees) and increased maintenance costs
necessary to support the increased size of the rental fleet and to staff new
rental equipment yards. The increase in direct operating expenses also
reflects start-up costs of opening five new rental equipment yards in 1994.
Gross profit as a percentage of total revenues was 35.8% in both 1994 and 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1994 increased 9.4% to $30.9 million from $28.2
million in 1993. This increase primarily reflects higher sales commissions due
to increased rental and sales revenue. This increase was partially offset by a
settlement of approximately $2.1 million with a prior owner of Primeco and a
franchise tax refund of approximately $500,000. As a percentage of total
revenues, selling, general and administrative expenses in 1994 declined to
14.6% from 16.2% in 1993 primarily as a result of these nonrecurring items.
Interest Expense. Interest expense increased 7.7% to $13.7 million in
1994 from $12.8 million in 1993. This increase reflects higher interest
expense following the Acquisition. Prior to the Acquisition, reduced
outstanding debts were offset by higher interest rates during that period as
compared to 1993. At December 31, 1994, outstanding debt aggregated $225.0
million, all of which was at variable rates. At that date, after giving effect
to the interest rate swaps described in Footnote 8 to the audited financial
statements included in Item 8 of this Form 10-K, approximately $145.0 million
of indebtedness bore interest at variable rates.
Income Tax Expense (Benefit). Income tax expense was $8.5 million in 1994
compared to an expense of $4.4 million in 1993. The effective income tax rate
for both periods differ from the federal statutory rate of 34.0% due to high
levels of non tax-deductible amortization of goodwill. Primeco had net
operating loss carry forwards for federal and state income tax purposes of
approximately $9.3 million. At December 31, 1994, Primeco had a valuation
allowance established which eliminates the deferred tax asset associated with
the net operating losses. The allowance was established since it is not more
likely than not that the benefit of these losses will be realized due to the
high level of interest expense resulting from the financing of the Acquisition
and the limitations placed on the utilization of the net operating losses as a
result of the Acquisition.
Net Income (Loss). Net income in 1994 increased to $12.2 million from
$4.5 million in 1993. This increase reflects the factors discussed above.
EFFECTS OF INFLATION
Primeco is affected by inflation primarily through the purchase of rental
equipment, increased operating costs and expenses, and higher interest rates.
The effects of inflation on Primeco's operations have not been material in
recent years.
-16-
<PAGE> 18
RECENT DEVELOPMENTS
On February 26, 1996, pursuant to a Stock Purchase Agreement dated as of
January 9, 1996, as amended and supplemented by the Closing Supplement to Stock
Purchase Agreement, dated as of February 26, 1996, (together the "Stock
Purchase Agreement"), by and among Vibroplant plc, a company organized under
the laws of England and Wales, ("Vibroplant plc"), Vibroplant Investments,
Ltd., a company organized under the laws of England and Wales and a wholly
owned subsidiary of Vibroplant plc ("Vibroplant Investments"), and Primeco,
Primeco completed the purchase of all of the outstanding stock of Vibroplant
U.S., Inc., a Florida Corporation and a wholly owned subsidiary of Vibroplant
Investments prior to the closing ("Vibroplant U.S."), from Vibroplant plc and
Vibroplant Investments. Primeco paid a purchase price of $66.5 million for the
shares of Vibroplant U.S., which included repayment of the outstanding bank
debt of Vibroplant U.S. Vibroplant U.S. merged into Primeco after the closing.
Vibroplant U.S. (also known as American Hi-Lift Corporation) operates 17
rental locations in California, Texas, Florida, Louisiana, Ohio, Alabama, South
Carolina and Georgia. Vibroplant U.S., which specializes in renting and
selling aerial lift equipment to industrial and commercial customers, had gross
revenues of $50.4 million for the year ended March 31, 1995.
In conjunction with this transaction, certain existing stockholders of
Holdings invested in additional common equity of Holdings. Holdings then made
a capital contribution of approximately $9.4 million to Primeco. Primeco used
these funds, as well as borrowings under its Senior Credit Facility, to fund
the transaction.
LIQUIDITY AND CAPITAL RESOURCES
During the years ended December 31, 1995, 1994 and 1993, Primeco's
principal sources of funds consisted of the net cash provided by operating
activities, the proceeds from the sale of used rental equipment and in 1995,
the proceeds from the Senior Credit Facility and $100 million in 12.75% Senior
Subordinated Notes due March 1, 2005 (the "Notes"). The components of net cash
provided by operating activities are detailed on the Statements of Cash Flows
in Item 8 of this Form 10-K and include net income or loss adjusted for (i)
depreciation and amortization, (ii) the gains on the sales of used rental
equipment and (iii) the effect of changes in certain operating assets and
liabilities. Net cash provided by operating activities excludes proceeds from
the sale of rental equipment. Net cash provided by operating activities in
1995 decreased 10.8% to $33.6 million from $37.6 million in 1994. This
decrease resulted primarily from increased interest expense and increased
working capital investment. Net cash provided by operating activities in 1994
decreased 4.8% to $37.6 million from $39.5 million in 1993. This decrease
resulted primarily from a decrease in certain operating liabilities and the
absence of the decrease in inventory levels experienced in 1993, and was partly
offset by increased rental revenue and deferred income taxes.
During the years ended December 31, 1995, 1994 and 1993, Primeco's
principal uses of funds was for the purchase of equipment for its rental fleet
and the payment of principal on its outstanding indebtedness. The gross rental
equipment capital expenditures were $89.4 million, $52.8 million and $38.1
million in 1995, 1994 and 1993, respectively. The increase in 1995 over
-17-
<PAGE> 19
1994 represents an increase in investment in rental fleet. Proceeds from the
sale of used rental equipment were $23.1 million, $20.5 million and $13.5
million in 1995, 1994 and 1993, respectively.
Primeco has no long-term minimum purchase commitments for rental
equipment. Management has budgeted net fleet capital expenditures of
approximately $67 million during 1996, (approximately $98 million of gross
fleet capital expenditures net of approximately $31 million in estimated
proceeds from the sale of used rental equipment). Primeco will utilize these
capital expenditures to expand the fleet at existing rental equipment yards, to
satisfy the equipment needs of current and new Fleet Management customers, to
provide for the equipment needs of new rental equipment yards, and to maintain
and grow the fleet at the rental yards recently acquired in connection with the
American Hi-Lift Corporation acquisition. Primeco also expects to spend
approximately $6 million in 1996 on non-equipment related capital expenditures
consisting of buildings, land, furniture and fixtures and environmental capital
expenditures. In addition to the budgeted capital expenditures, Primeco may
seek to acquire suitable local or regional rental equipment businesses to
expand its geographic presence, which could require additional cash
expenditures. In 1996, Primeco purchased all of the outstanding stock of
American Hi-Lift for approximately $66.5 million. The purchase was funded
by a $9.4 million capital contribution from Holdings and the balance through
borrowings from Primeco's Senior Credit Facility. In addition to cash flows
from operating activities and proceeds from the sale of used rental equipment,
at March 31, 1996 (and after giving effect to the American Hi-Lift Corporation
acquisition), Primeco had approximately $72.5 million (excluding outstanding
letters of credit) of unused borrowing capacity under the Senior Credit
Facility available for expansion of the equipment rental fleet, acquisitions or
other general corporate purposes, subject to certain limitations. See
"--Recent Developments". Under its Senior Credit Facility, Primeco has a
current limit on capital expenditures for the purchase of businesses in an
amount not to exceed $30.0 million, which amount may be increased by $10.0
million, under certain circumstances.
Primeco's operations are subject to various environmental laws and
regulations. In order to comply with these requirements, Primeco is engaged in
ongoing remediation, capital improvement and periodic compliance activities.
In connection with the Acquisition, an environmental consultant conducted
certain investigations of Primeco's properties and compliance with applicable
environmental laws. As of December 31, 1995, Primeco had a reserve for
environmental remediation of $4.2 million and a related receivable from state
trust fund programs of $1.2 million.
Primeco incurred substantial indebtedness in connection with the
Acquisition. At December 31, 1995, Primeco had indebtedness outstanding of $255
million, consisting of $155 million under the Senior Credit Facility and $100
million under the Notes. Primeco received net proceeds of approximately $96.0
million from the Notes, which were issued on March 6, 1995. Such proceeds were
used to repay $75.0 million of indebtedness under a subordinated loan facility
plus accrued interest and $20.0 million of indebtedness under the revolving
credit portion of the Senior Credit Facility.
At its current debt level, Primeco anticipates spending approximately
$32.0 million in 1996 in interest payments on the Senior Credit Facility and
the Notes. Primeco also anticipates paying $1.4 million in dividends on its
Preferred Stock in 1996. During the term of the revolving credit portion of
the Senior Credit Facility, Primeco believes that cash provided by operations
and proceeds from the sale of used equipment in the ordinary course of business
will be sufficient to
-18-
<PAGE> 20
permit Primeco to meet its payment obligations under the Senior Credit Facility
and the Notes. Primeco also believes that such amounts in excess of those
required for such debt service, together with funds available under the Senior
Credit Facility, will also be sufficient to meet its anticipated capital
expenditures and dividend payments as described above.
The Senior Credit Facility requires Primeco to maintain interest rate swap
agreements covering a portion of its outstanding and available credit facility
including the portion related to letters of credit. Accordingly, at December
31, 1995, Primeco had outstanding interest rate swap agreements (total notional
amount of $80.0 million) placed with financial institutions that effectively
convert a portion of its floating-rate debt to fixed-rate debt. At December
31, 1995, the market value of the swaps represented a loss of approximately
$2.6 million. See Footnote 8 in the Financial Statements contained in Item 8
of this Form 10-K.
The degree to which Primeco is leveraged could have a significant effect
on its results of operations. For example, the funds available to Primeco for
purposes other than debt service will be reduced; Primeco may be more
vulnerable to increases in interest rates or downturns in economic conditions;
and Primeco's ability to obtain additional financing in the future may be
impaired. While Primeco believes that it should be able to satisfy its
obligations from operations and appropriate refinancings, no assurance to that
effect can be given.
OTHER MATTERS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS 121, which is effective for fiscal years beginning after December 15,
1995, requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Primeco will adopt SFAS 121 at the beginning of 1996. It is
anticipated that the impact of adopting this statement will not have a material
effect on the financial statements.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 123, entitled "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), in October 1995. Primeco will adopt the new
disclosure rules of SFAS No. 123 in Fiscal Year 1997.
-19-
<PAGE> 21
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-20-
<PAGE> 22
<TABLE>
<CAPTION>
Page
<S> <C>
Reports of Independent Accountants 22
Balance Sheet as of December 31, 1995 and 1994 24
Statement of Operations for the year ended December 31, 1995
and for the period from December 2, 1994 to December 31,
1994 for the Successor, and for the period from January 1,
1994 to December 1, 1994 and for the year ended December 31,
1993 for the Predecessor 25
Statement of Common Stockholder's Equity for the year ended
December 31, 1995 and for the period from December 2, 1994
to December 31, 1994 for the Successor, and for the period
from January 1, 1994 to December 1, 1994 and for the
year ended December 31, 1993 for the Predecessor 26
Statement of Cash Flows for the year ended December 31, 1995
and for the period from December 2, 1994 to December 31,
1994 for the Successor, and for the period from January 1,
1994 to December 1, 1994 and for the year ended December 31,
1993 for the Predecessor 27
Notes to Financial Statements 28
</TABLE>
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<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholder
Primeco Inc.:
We have audited the accompanying balance sheet of Primeco Inc. (the "Company")
as of December 31, 1995 and 1994 and the related statements of operations,
common stockholder's equity and cash flows of the Company for the year ended
December 31, 1995 and for the period from December 2, 1994 through December 31,
1994, and of the Predecessor (as defined in Note 1) for the period from January
1, 1994 to December 1, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. The financial statements of
Primeco Inc. for the year ended December 31, 1993 were audited by other
auditors whose report dated January 28, 1994 expressed an unqualified opinion
on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As explained in Note 1 to the financial statements, controlling ownership of
the Predecessor was acquired by the Company's parent in a purchase transaction
as of December 2, 1994. The acquisition was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and liabilities of
the Predecessor based upon their estimated fair value at December 2, 1994.
Accordingly, the financial statements of the Company are not comparable to
those of the Predecessor.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1995 and 1994, and the results of the Company's operations and its cash flows
for the year ended December 31, 1995 and for the period from December 2, 1994
through December 31, 1994, and the results of the Predecessor's operations and
its cash flows for the period from January 1, 1994 through December 1, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 15, 1996, except as to the information
presented in Note 14, for which the date is February 26, 1996.
-22-
<PAGE> 24
Independent Auditor's Report
The Board of Directors
Primeco Inc.:
We have audited the accompanying statements of operations, common
stockholder's equity and cash flows of Primeco Inc. (the Company) for the year
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, an all material respects, the results of the operations and the cash
flows of Primeco Inc. for the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
January 28, 1994
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<PAGE> 25
PRIMECO INC.
BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 174 $ 12,090
Accounts receivable, net 36,467 30,175
Inventories 17,399 12,689
Rental equipment, net 181,798 153,818
Property, plant and equipment, net 22,334 20,768
Cost in excess of fair value of net assets acquired, net 115,084 117,713
Other assets 17,682 21,009
------------ -----------
Total Assets $ 390,938 $ 368,262
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 14,968 $ 12,122
Accrued expenses 27,737 23,465
Debt 255,000 225,000
Deferred income taxes 21,897 27,594
Other liabilities 1,552 1,476
Commitments and contingencies (Notes 8, 9 and 10)
Redeemable convertible preferred stock $.01 par value,
$2,000 per share liquidation value, 5,000 shares
authorized and outstanding (Note 10) 9,150 8,975
Common stock, $.01 par value, 10,000 shares authorized and
5,000 shares outstanding 1 1
Paid-in capital 68,336 69,874
Accumulated deficit (7,703) (245)
------------ -----------
Common Stockholder's Equity 60,634 69,630
------------ -----------
Total Liabilities and Stockholder's Equity $ 390,938 $ 368,262
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-24-
<PAGE> 26
PRIMECO INC.
STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
For the For the
For the Period From Period From For the
Year Ended December 2, 1994 January 1, 1994 Year Ended
December 31, through through December 31,
1995 December 31, 1994 December 1, 1994 1993
------------ ----------------- ---------------- ------------
Successor Successor Predecesor Predecesor
------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Rental revenue $ 138,983 $ 10,321 $ 108,272 $ 100,829
New equipment sales 34,601 2,668 29,728 26,162
Rental equipment sales 23,144 1,641 18,718 13,498
Parts and merchandise sales 32,223 2,236 26,551 23,874
Service revenue and other income 13,836 983 10,806 9,886
---------- ---------------- --------------- -----------
242,787 17,849 194,075 174,249
---------- ---------------- --------------- -----------
Cost of sales:
Depreciation - rental equipment 37,427 2,822 17,365 17,456
Cost of new equipment sales 28,960 2,251 25,269 22,211
Cost of rental equipment sales, net of
accumulated depreciation 22,853 1,134 11,809 7,999
Cost of parts and merchandise sales 24,157 1,736 20,175 17,902
Direct operating expenses 60,553 4,592 48,981 46,288
---------- ---------------- --------------- -----------
173,950 12,535 123,599 111,856
---------- ---------------- --------------- -----------
Gross Profit 68,837 5,314 70,476 62,393
---------- ---------------- --------------- -----------
Selling, general, administrative and other 36,804 2,871 28,030 28,248
Depreciation and amortization:
Noncompete agreements 5,877 123 5,008 7,260
Cost in excess of air value of
assets acquired 2,955 232 2,983 3,254
Property, plant and equipment 2,395 191 1,893 1,980
Interest expense, net of interest income
of $243, $29, $106 and $97,
respectively 29,021 2,125 11,605 12,753
---------- ---------------- --------------- -----------
77,052 5,542 49,519 53,495
---------- ---------------- --------------- -----------
Income (loss) before income taxes (8,215) (228) 20,957 8,898
Income tax expense (benefit) (2,025) 17 8,506 4,350
---------- ---------------- --------------- -----------
Net income (loss) before
extraordinary item (6,190) (245) $ 12,451 $ 4,548
=============== ===========
Extraordinary item - loss on early
extinguishment of debt, net of tax
benefit of $794 (1,268) -
---------- ----------------
Net Loss (7,458) (245)
Dividend requirement and accretion
on preferred stock (1,528) (125)
---------- ----------------
Net loss applicable to common
stockholder $ (8,986) $ (370)
========== ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-25-
<PAGE> 27
PRIMECO INC.
STATEMENT OF COMMON STOCKHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
Total
Common
Common Common Paid-In Accumulated Stockholder's
Shares Stock Capital Deficit Equity
----- ------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Predecessor:
Balance at January 1, 1993 1,000 $ 1 $ 128,736 $ (23,010) $ 105,727
Net Income 4,548 4,548
----- ------ --------- --------- -----------
Predecessor:
Balance at December 31, 1993 1,000 1 128,736 (18,462) 110,275
Net Income 12,451 12,451
----- ------ --------- --------- -----------
Predecessor:
Balance at December 1, 1994 1,000 $ 1 $ 128,736 $ (6,011) $ 122,726
===== ====== ========= ========= ===========
Successor:
Balance at December 2, 1994 - $ - $ - $ - $ -
Sale of common stock on
December 2, 1994 5,000 1 69,999 70,000
Accrued preferred dividends
and accretion (125) (125)
Net loss (245) (245)
----- ------ --------- --------- -----------
Successor:
Balance at December 31, 1994 5,000 1 69,874 (245) 69,630
Accrued preferred dividends
and accretion (1,528) (1,528)
Payment of dividend to Holdings (10) (10)
Net loss (7,458) (7,458)
----- ------ --------- --------- -----------
Successor:
Balance at December 31, 1995 5,000 $ 1 $ 68,336 $ (7,703) $ 60,634
===== ====== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-26-
<PAGE> 28
PRIMECO INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the For the
For the Period from Period from For the
Year Ended December 2, 1994 January 1, 1994 Year Ended
December 31, through through December 31,
1995 December 31, 1994 December 1, 1994 1993
Successor Successor Predecessor Predecessor
------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) $ (7,458) $ (245) $ 12,451 $ 4,548
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 48,656 3,368 27,249 29,949
Deferred income tax provision (benefit) (4,903) 9 4,465 4,351
Net (gain)loss on disposal of rental equipment,
and property,plant and equipment 508 (363) (6,701) (4,817)
Provision for doubtful accounts - - 928
Extraordinary loss on extinguishment of debt 1,268
Effect of changes in operating assets
and liabilities:
Decrease (increase) in accounts
receivable (6,291) 730 (6,611) (3,656)
Decrease (increase) in inventories (4,710) 22 (182) 3,084
Decrease (increase) in prepaid
expenses and other (680) (241) 597 225
Increase (decrease) in accounts
payable, accrued expenses
and other liabilities 7,192 (498) 2,668 5,859
--------- ----------- ---------- ---------
Net cash provided by operating activities 33,582 2,782 34,864 39,543
--------- ----------- ---------- ---------
Investing activities:
Additions to rental equipment (89,372) (3,984) (48,830) (38,088)
Additions to property, plant and equipment (3,736) (223) (2,627) (1,980)
Payment to seller for the acquisition (138,000)
Payments of acquisition costs (328) (13,667)
Proceeds from disposals of rental equipment 23,079 1,680 18,862 13,497
Proceeds from disposals of property, plant
and equipment 154 4 1,075 240
Payments for noncompete agreement
related to acquisition (200)
--------- ----------- ---------- ---------
Net cash used in investing activities (70,203) (154,190) (31,520) (26,531)
--------- ----------- ---------- ---------
Financing activities:
Proceeds from Predecessor revolving
line of credit 10,000 2,000
Payments of Predecessor revolving
line of credit (10,000)
Proceeds from revolving line of credit 26,000
Payments of revolving line of credit (20,000)
Payments of Predecessor debt (133,000) (15,000)
Proceeds from Successor debt 100,000 225,000
Payments of debt (76,000)
Payments of financing costs (3,932) (12,824)
Proceeds from issuance of
Successor common stock 70,000
Proceeds from issuance of
Successor preferred stock 10,000
Preferred stock issuance costs (1,150)
Payments of dividends (1,363)
--------- ----------- ---------- ---------
Net cash provided (used)
by financing activities 24,705 158,026 0 (13,000)
--------- ----------- ---------- ---------
Net (decrease) increase in cash
and cash equivalents (11,916) 6,618 3,344 12
Cash and cash equivalents at beginning
of period 12,090 5,472 2,128 2,116
--------- ----------- ---------- ---------
Cash and cash equivalents at end of period $ 174 $ 12,090 $ 5,472 $ 2,128
========= =========== ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-27-
<PAGE> 29
PRIMECO INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY:
The financial statements include the accounts of Primeco Inc.
("Primeco"), a wholly-owned subsidiary of Prime Holding, Inc.
("Holdings"). On December 2, 1994, Holdings acquired Primeco (the
"Acquisition") from a subsidiary of Artemis S.A. (the "Seller")
through Holdings' subsidiary Prime Acquisition Corp. ("PAC").
Immediately following the completion of the Acquisition, PAC merged
into Primeco, as a result of which Primeco became a wholly-owned
subsidiary of Holdings. Holdings has no assets or investments other
than the shares of stock of Primeco. Holdings was capitalized with
$70.0 million of equity contributed by Investcorp S.A. ("Investcorp"),
its affiliates and other international investors and $10.0 million in
principal amount of subordinated indebtedness (the "Subordinated
Notes") provided by Invifin S.A. ("Invifin"), an affiliate of
Investcorp. For purposes of identification and description, Primeco is
referred to as the "Predecessor" for the period prior to the
Acquisition, the "Successor" for the period subsequent to the
Acquisition and the "Company" for both periods.
The Company's operations primarily consist of renting equipment and,
to a lesser extent, selling complementary parts, merchandise and used
equipment to commercial construction, industrial and residential
users. The Company also acts as a distributor of new equipment on
behalf of major equipment manufacturers.
The total purchase price for the Acquisition, including fees and
expenses relating to the Acquisition and its financing, and the
covenant-not-to-compete payment, was approximately $305.0 million
(repayment of $133.0 million of the Predecessor's debt, cash payment
of $138.0 million to the Seller and $34.0 million of transaction and
financing fees) and was accounted for by the purchase method.
Accordingly, the assets and liabilities of the Predecessor were
adjusted to reflect the allocation of the purchase price based on
estimated fair values.
-28-
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. THE COMPANY, CONTINUED:
The following selected unaudited pro forma financial information
presents the year ended December 31, 1994, as though the controlling
ownership of the Predecessor had been acquired on January 1, 1994, and
assumes that there were no other changes in the operations of the
Predecessor. The pro forma results are not necessarily indicative of
the financial results that might have occurred had the transaction
actually taken place on January 1, 1994, or of future results of
operations (in thousands).
<TABLE>
<CAPTION>
Pro Forma for
the Year
Ended
December 31,
1994
<S> <C>
Revenues $ 211,924
Net loss $ (546)
Dividend requirement and accretion on
preferred stock $ (1,500)
Net loss applicable to common
stockholder $ (2,046)
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
RENTAL AGREEMENTS
The Company rents equipment primarily to the construction, industrial
and homeowner markets. Rental agreements are structured as operating
leases, and rental revenue is recognized in the period in which it is
earned.
INVENTORIES
New equipment held for sale is valued at the lower of cost or market,
with cost being determined on the specific identification method.
Parts and merchandise are valued at lower of cost or market, with cost
determined by the retail method.
-29-
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Depreciation for rental
equipment acquired prior to January 1, 1995 is computed using the
straight-line method over the estimated four-year useful life of the
assets, after giving effect to an estimated salvage value. Rental
equipment acquired subsequent to January 1, 1995 is depreciated over
the estimated five year useful life of the assets, after giving effect
to an estimated salvage value. Accumulated depreciation was $38.9
million and $2.8 million at December 31, 1995 and 1994, respectively.
Expenditures for additions or improvements which extend asset lives
are capitalized in the period incurred. Normal repairs and
maintenance costs are expensed as incurred. When rental equipment is
disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gains or losses are included in
results of operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets, giving effect to an estimated salvage value.
The estimated useful lives for buildings and improvements range from
15 to 30 years and the estimated useful lives for equipment and
furniture and fixtures range from 5 to 10 years.
Expenditures for additions or improvements which extend asset lives
are capitalized in the period incurred. Normal repairs and
maintenance costs are expensed as incurred. When property, plant and
equipment are disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gains
or losses are included in results of operations.
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
Goodwill represents the excess of the cost over the fair value of net
assets acquired. At each balance sheet date, management assesses
whether there has been a permanent impairment in the value of goodwill
by comparing anticipated undiscounted future cash flows from operating
activities with the carrying value of the goodwill. The amount of any
resulting impairment is calculated using the same undiscounted cash
flows from operating activities. The factors considered by management
in this assessment include operating results, trends and prospects as
well as the effects of obsolescence, demand, competition and other
economic factors.
Goodwill is amortized on a straight-line basis over the estimated life
of 40 years. Accumulated amortization was $3.1 million and $232,000
at December 31, 1995 and 1994, respectively.
-30-
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES
The Predecessor filed a consolidated income tax return with the
Seller. The Successor files a consolidated tax return with Holdings.
Amounts recorded for income taxes for both periods were calculated on
a separate return basis.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial
statement carrying value of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured by using enacted tax rates that are applicable to the future
years in which deferred tax assets or liabilities are expected to be
realized or settled. The effect of a change in tax rates on deferred
tax assets and liabilities is recognized in net earnings in the period
in which the tax rate change was enacted. The Company establishes a
valuation allowance when it is more likely than not that a deferred
tax asset will not be recovered.
CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and all highly liquid investment instruments
purchased with original maturities of three months or less.
INTEREST RATE SWAP AGREEMENTS
The existing interest swaps effectively convert a portion of the
Company's variable-rate debt to a fixed rate. The income earned or
expense incurred as a result of the interest paid exceeding interest
received (or vice versa) under terms of interest rate swap agreements
is accrued in the period incurred or earned, as the notional amounts
of the swap agreements were designated to specific debt (Note 8).
Therefore, the related income and expense is accounted for as an
adjustment to the interest expense related to that debt.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist primarily of cash,
accounts receivable and interest rate swaps. As of December 31, 1995
and 1994, the Company had no significant concentrations of credit risk
except for the interest rate swaps discussed in Note 8.
The Company maintains cash and cash equivalents with various financial
institutions located throughout the country to limit exposure. The
Company's periodic evaluations of the relative credit standing of
these financial institutions are considered in the Company's
investment strategy.
-31-
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities comprising
the Company's customer base and their geographic dispersion. The
Company generally does not require collateral on accounts receivable.
At December 31, 1995 and 1994, the Company had an allowance for
doubtful accounts of $925,000.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from estimates.
RECLASSIFICATIONS
Certain amounts previously reported in the financial statements have
been reclassified to conform with the presentation used for the year
ended December 31, 1995 with no impact on stockholder's equity or
operations.
3. INVENTORIES:
Inventories consist of the following as of December 31, 1995 and 1994
(in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
New equipment held for sale $ 6,882 $ 4,662
Merchandise 6,328 4,571
Parts 4,008 3,121
Other 181 335
-------- --------
$ 17,399 $ 12,689
======== ========
</TABLE>
-32-
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following as of December
31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Property, plant and equipment at cost:
Land $ 6,068 $ 5,932
Buildings and improvements 11,160 9,737
Transportation equipment 1,817 1,238
Furniture and fixtures 3,594 2,759
Shop and other equipment 1,954 1,293
------- ----------
24,593 20,959
Accumulated depreciation ( 2,259) ( 191)
--------- -------
Net property, plant and equipment $ 22,334 $20,768
======== =======
</TABLE>
5. OTHER ASSETS:
Other assets consist of the following as of December 31, 1995 and 1994
(in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred financing costs, less accumulated amortization
of $2,647 and $149, respectively $ 12,771 $ 12,684
Noncompete agreement, less accumulated amortization
of $6,000 and $123, respectively -- 5,877
Prepaid expenses and other 836 1,248
Estimated reimbursements related to environmental
remediation obligations (see Note 9) 1,200 1,200
Prepaid management fee (see Note 6) 2,875 --
--------- --------
$ 17,682 $ 21,009
========= ========
</TABLE>
In connection with the Acquisition, the Company paid the Seller $6.0 million
for a noncompete agreement. During 1995 and in January 1996, the Seller
divested itself of all its rental equipment operations which significantly
reduced the Seller's ability to compete against the Company. Consequently, the
Company determined that the noncompete agreement provided no future benefit to
the Company, and accordingly, the unamortized balance of approximately $4.5
million was written off and is included in depreciation and amortization
expense in the statement of operations.
-33-
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. OTHER ASSETS, CONTINUED:
The costs incurred in obtaining long-term financing are amortized over
the terms of the agreement using the effective interest method.
Amortization of deferred financing costs included in interest expense
for the year ended December 31, 1995, the period from December 2, 1994
to December 31, 1994, the period from January 1 to December 1, 1994
and the year ended December 31, 1993 approximated $2.6 million,
$149,000, $319,000 and $399,000, respectively.
6. RELATED PARTY TRANSACTIONS:
Under the terms of a management agreement, the Company will pay an
annual management fee to Investcorp of $1.5 million. During 1995, the
Company prepaid the management fee for the next three years.
In connection with the Acquisition, the Successor paid Investcorp and
its affiliates approximately $11.5 million in exchange for
Investcorp's assistance in arranging the Acquisition, the bank
financing, and issuing the Preferred stock.
The Predecessor paid the Seller an annual management fee of $500,000.
The Predecessor also paid legal fees of approximately $82,000 to a law
firm with which one of the directors of the Predecessor was
affiliated.
7. EMPLOYEE BENEFIT PLANS:
The Company has a noncontributory defined benefit pension plan
covering substantially all of its employees. Benefits are based on
years of service and the employees' highest average earnings received
in any five consecutive years during the last ten years before
retirement. The Company funds the plan in accordance with the
Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code. Plan assets are invested in various segregated accounts
with an insurance company, the underlying investments of which are
cash equivalents, marketable equity securities, government securities
and other corporate securities.
The assumptions used in accounting for the defined benefit plan for
the Successor and Predecessor periods are as follows:
weighted-average discount rate is 7% for 1995, 8% for 1994 and 6.75%
for 1993; rates of increase in compensation levels is 5.5% for all
periods; and the expected long-term rate of return on plan assets is
9.5% for all periods.
-34-
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. EMPLOYEE BENEFIT PLANS, CONTINUED:
Net periodic pension cost consisted of the following components (in
thousands):
<TABLE>
<CAPTION>
For the For the
For the Period from Period from For the
Year Ended December 2, 1994 January 1, 1994 Year Ended
December 31, through through December 31,
1995 December 31, 1994 December 1, 1994 1993
------------ ----------------- ---------------- ------------
Successor Successor Predecessor Predecessor
------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
Service cost $ 1,524 $ 113 $ 1,235 $ 1,180
Interest cost 549 34 379 304
Actual return on plan assets (1,111) (3) (173) (377)
Net total of other components 749 (21) (98) 225
--------- -------- ------- -------
Net periodic pension cost $ 1,711 $ 123 $ 1,343 $ 1,332
========= ======== ======= =======
</TABLE>
The actuarial present value of the accumulated benefit of the plan as
of December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Vested $ 3,808 $ 2,557
Nonvested 1,152 382
--------- --------
Total $ 4,960 $ 2,939
========= ========
</TABLE>
The reconciliation of the funded status of the plan as of December 31,
1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Projected benefit obligation $ 9,880 $ 5,784
Plan assets at fair value 6,740 4,287
--------- ----------
Projected benefit obligation in excess of 3,140 1,497
plan assets
Unrecognized net loss (1,142) -
--------- ----------
Net pension liability $ 1,998 $ 1,497
========= ==========
</TABLE>
-35-
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. EMPLOYEE BENEFIT PLANS, CONTINUED:
The Company sponsors a defined contribution 401(k) plan that covers
substantially all employees. The Company matches 50 percent of
employee contributions limited to a maximum equal to 3 percent of
eligible employee compensation. Company contributions to the plan in
the Successor and Predecessor periods approximated $633,000, $48,000,
$540,000, and $471,000, respectively.
8. DEBT:
Debt consists of the following at December 31, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Senior term loan $ 124,000 $ 125,000
Senior revolving credit loan 31,000 25,000
Subordinated loan facility - 75,000
Senior subordinated notes 100,000 -
--------- ---------
$ 255,000 $ 225,000
========= =========
</TABLE>
The Successor's bank credit agreement provides for a $300 million
senior credit facility including a $125 million term loan and a $175
million revolving credit facility. The term loan requires semiannual
payments which began June 30, 1995, and extend through December 31,
2000. The outstanding balance under the revolving credit facility and
any amounts owed as a result of letters of credit being funded (see
Note 9) become due December 31, 1999. The senior term loan and the
senior revolving credit loan are collateralized by substantially all
the assets of the Company. On March 6, 1995 the Company issued $100
million of 12.75% senior subordinated notes due March 1, 2005. The
Company received net proceeds of approximately $96 million, which were
used to repay $75 million of indebtedness under the subordinated loan
facility plus accrued interest and $20 million of indebtedness under
the revolving credit portion of the senior credit facility. The loss
incurred on the early extinguishment of the subordinated loan
facility, resulting from the write off of deferred financing costs,
has been reflected as an extraordinary loss on the statement of
operations.
The interest rate under the senior bank credit agreement is based, at
the Company's option, on the lead lending bank's alternate base rate
or the bank's Eurodollar deposit rate, plus margins as follows:
<TABLE>
<CAPTION>
REVOLVING
TERM LOAN CREDIT LOAN
--------- -----------
<S> <C> <C>
Alternate base rate margin 1.75% 1.25%
Eurodollar deposit rate margin 3.00% 2.50%
</TABLE>
-36-
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. DEBT, CONTINUED:
The interest rates in effect at December 31, 1995 for the term loan
and the revolving credit loan were 8.8% and 8.4%, respectively. The
interest rates in effect at December 31, 1994 for the term loan,
revolving credit loan and subordinated loan facility were 9.2%, 9.3%,
and 12.5%, respectively.
A commitment fee of 1/2 of 1% per annum is charged on the unused
portion of the revolving credit facility.
With respect to Eurodollar deposit (LIBOR-based) rate loans, the
Company can elect interest rate periods ending one, two, three or six
months from the expiration of the preceding period.
The bank credit agreement requires the maintenance of certain
financial ratios and places restrictions on capital expenditures,
leases, additional borrowings, mergers and acquisitions, and payments
of dividends. Certain of these loan requirements change during the
term of the agreement and some become more restrictive.
The Predecessor bank credit agreement required the Company to
maintain interest rate swap agreements covering a portion of its
outstanding and available credit facility including that portion
related to letters of credit. At December 1, 1994, the Predecessor
had outstanding interest rate swap agreements with two financial
institutions which effectively converted floating rate debt to fixed
rate debt. The Successor's bank credit agreement also has
requirements for interest rate swaps. Accordingly, the interest rate
swaps that were in effect at Acquisition were continued by the
Successor. A fee of $250,000 was paid in connection with this
arrangement. The terms of the interest rate swaps and the unrealized
losses at December 31, 1995 and 1994 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1995 1994
Notional Maturity Pay Receipt Unrealized Unrealized
Amount Date Rate Rate Losses Losses
------ ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
$40,000,000 February 27, 1997 9.13% 6 month LIBOR ($1,405) ($2,200)
$40,000,000 March 21, 1997 8.99% 6 month LIBOR ($1,317) ($1,900)
</TABLE>
The Company is exposed to credit losses for amounts receivable from
counterparties for interest to the extent variable interest rates
exceed fixed interest rates per the swap agreements (an average of
9.06%) each quarter in the event of nonperformance by the
counterparties to the agreements. In addition, cancellation of the
agreements due to nonperformance by the counterparties would also
cause an increase in interest expense in future periods to the extent
that the fixed interest rates per the swap agreements were less than
variable interest rates during such periods. However, the Company
does not anticipate nonperformance by the counterparties. A 1%
increase in interest rates on $80.0 million would increase interest
expense by $800,000 per annum. The Company is subject to
-37-
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. DEBT, CONTINUED:
market loss in the event of falling interest rates on both swaps.
Unrealized losses are the net amounts of money that would be paid for
equal and offsetting interest rate swaps.
Maturities of debt are as follows at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
<S> <C>
1996 $ 1,000
1997 1,000
1998 12,000
1999 66,000
2000 75,000
Thereafter 100,000
---------
$ 255,000
=========
</TABLE>
Outstanding debt of the Predecessor included a term loan of $71.0
million, a revolving credit facility of up to $80.0 million and a $6.0
million commitment for the issuance of letters of credit. As part of
the Acquisition, the Company replaced this debt with the securities
detailed above.
Cash paid for interest, including cash paid under interest rate swaps,
totaled $23.9 million for the year ended December 31, 1995. Cash paid
for interest in 1994 was $1.3 million in the Successor period, and
approximately $12.3 million in the Predecessor period. Cash paid for
interest in 1993 approximated $11.4 million.
9. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases facilities, computer equipment, rental equipment,
autos and trucks under operating leases. Minimum future obligations
for operating leases in effect at December 31, 1995 are (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
<S> <C>
1996 $ 5,979
1997 5,031
1998 3,829
1999 2,116
2000 1,205
Thereafter 1,608
--------
Total Minimum Obligations $ 19,768
========
</TABLE>
-38-
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. COMMITMENTS AND CONTINGENCIES, CONTINUED:
Lease expense charged to operations in the accompanying statements of
operations was approximately $7.2 million for the year ended December
31, 1995. Lease expense charged to operations for 1994 was $537,000
in the Successor period, and $5.1 million in the Predecessor period.
Lease expense charged to operations for 1993 was approximately $4.2
million.
LEGAL MATTERS
The Company is party to legal proceedings and potential claims arising
in the ordinary course of its business. In the opinion of management
based on discussions with legal counsel, the Company has adequate
legal defense and/or insurance coverage with respect to these matters,
and management does not believe that the ultimate resolution of these
matters will materially affect the Company's operations or financial
position for any period.
ENVIRONMENTAL MATTERS
The Company is subject to various evolving federal, state and local
environmental laws and regulations governing, among other things,
emissions to air, discharge to waters and the generation, handling,
storage, transportation, treatment and disposal of hazardous
substances and wastes. These laws and regulations provide for
substantial fees and sanctions for violations, and, in many cases,
could require Primeco to remediate a site to meet applicable legal
requirements.
In 1995, the Company spent approximately $1.3 million on environmental
matters, including remediation and compliance costs, and has budgeted
expenditures of approximately $4.4 million in 1996 for such matters.
At December 31, 1995, the Company had a reserve for environmental
remediation of $4.2 million and a related receivable from state trust
fund programs of $1.2 million. The actual cost of remediating
environmental conditions may be different than that accrued by the
Company due to the difficulty in estimating such costs and due to
potential changes in the status of legislation and state reimbursement
programs.
Management believes that the amounts required to correct any
identified environmental condition and to maintain compliance with
applicable environmental regulations will not have a material adverse
effect on the financial condition or results of operations of the
Company.
RISK MANAGEMENT
The Company is self-insured for physical damage or loss to its rental
equipment. Presently, the Company has an insurance deductible of
$250,000 per occurrence for claims related to workers' compensation,
vehicle liability, and general liability. The annual deductible
related to employee health benefit claims is $100,000 per employee.
-39-
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. COMMITMENTS AND CONTINGENCIES, CONTINUED:
RISK MANAGEMENT, CONTINUED:
In February 1994, the Company settled a dispute with W.R. Grace & Co.,
a former owner, regarding general liability and workers' compensation
insurance. Accordingly, a liability of $2.0 million, originally
recorded in 1990, was reversed and recorded as a reduction of selling,
general and administrative expenses in the statements of operations in
the Predecessor period.
LETTERS OF CREDIT
As of December 31, 1995 and 1994, the Company had letters of credit
outstanding totaling $8.7 million and $5.1 million, respectively.
These letters of credit guarantee the funding of environmental
remediation and the Company's share of insured claims. None of the
Company's assets are pledged as collateral for these letters of
credit.
10. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
As part of the Acquisition, the Company issued 5,000 shares of
Preferred Stock with a redemption and estimated fair value of $10
million. Holdings obtained the funds ($10.0 million) to acquire the
Preferred Stock through the issuance of Subordinated Notes. Holdings
incurred a fee of $1.2 million in connection with the issuance of such
Notes, which the Company paid on behalf of Holdings. Since this fee
is in effect directly attributable to the Preferred Stock, the
Preferred Stock was recorded at $8.8 million, reflecting the costs of
issuance. The Company may redeem, at its option prior to March 15,
2006, all or part of the outstanding shares of the Preferred Stock at
$2,000 per share plus accrued and unpaid dividends and the interest
related thereto; and in any case shall redeem all outstanding shares
of the Preferred Stock on March 15, 2006 at $2,000 per share plus
accrued and unpaid dividends and the interest related thereto. The
Preferred Stock is convertible by the holder, at any time, into the
Company's Common Stock at the conversion price of $2,000 per share
plus accrued and unpaid dividends and the interest related thereto.
This price is subject to change as a result of certain events of
distribution and other changes related to the Company's Common Stock.
The holder of the Preferred Stock is entitled to dividends when
declared by the Board of Directors. Dividends are paid out of assets
legally available for such purpose, on May 1 and November 1 of each
year, commencing, in the case of the first issuance, on May 1, 1995.
All dividends are cumulative and accrue from the date of the original
issue at a rate of 14% per year computed on the basis of actual number
of days elapsed in a 360-day year. In the event dividends are not
declared and paid on the required dates, interest accrues on such
dividends at 16% per annum.
-40-
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. REDEEMABLE CONVERTIBLE PREFERRED STOCK, CONTINUED:
Upon dissolution or liquidation of the Company, the holders of the
Preferred Stock will be entitled to receive $2,000 per share of the
assets of the Company available for distribution to shareholders, in
preference to the holders of the Company's Common Stock and any other
class or series of capital stock of the Company that is junior to the
Preferred Stock in respect of the right to participate in any
distribution of assets upon dissolution or liquidation.
The changes in redeemable convertible Preferred Stock for the period
ended December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
December 2, 1994
<S> <C>
Issuance of preferred stock (net of $1,150
in issuance costs) $ 8,850
Preferred dividends and accretion 125
--------
Balance December 31, 1994 8,975
Preferred dividends and accretion, net of
dividend payments of $1,353 175
--------
Balance December 31, 1995 $ 9,150
========
</TABLE>
-41-
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES:
The components of the provision (benefit) for income taxes consist of
the following (in thousands):
<TABLE>
<CAPTION>
For the For the
For the Period from Period from For the
YearEnded December 2, 1994 January 1, 1994 Year Ended
December 31, through through December 31,
1995 December 31, 1994 December 1, 1994 1993
------------ ----------------- ---------------- ------------
Successor Successor Predecessor Predecessor
------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
Tax provision/(benefit) at
statutory rate (35%) $ (2,875) $ (80) $ 7,335 $ 3,025
Amortization of cost in excess
of fair value net
assets acquired 1,138 96 1,044 1,106
Utilization of net operating loss
carryforwards (626) -- -- --
Change in estimate of prior year
net operating loss and
alternative minimum tax 478 -- -- --
credit carryforward
Change in valuation allowance (667) -- -- --
Increase in alternative
minimum tax credit
carryforward 400 -- -- --
Other 127 1 127 219
-------- ---------- ---------- ----------
(2,025) 17 8,506 4,350
Tax benefit from extraordinary
item - loss on
extinguishment of debt (794) -- -- --
-------- ---------- ---------- ----------
$ (2,819) $ 17 $ 8,506 $ 4,350
======== ========== ========== ==========
</TABLE>
-42-
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES, CONTINUED:
The classification of the provision (benefit) for income taxes
consists of the following (in thousands):
<TABLE>
<CAPTION>
For the For the
For the Period from Period from For the
Year Ended December 2, 1994 January 1, 1994 Year Ended
December 31, through through December 31,
1995 December 31, 1994 December 1, 1994 1993
------------ ----------------- ---------------- ------------
Successor Successor Predecessor Predecessor
------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
Current:
Federal $ 2,516 $ -- $ 3,787 $ --
State 362 8 254 --
Deferred (5,697) 9 4,465 4,350
-------- ---------- ---------- ----------
Total $ (2,819) $ 17 $ 8,506 $ 4,350
======== ========== ========== ==========
</TABLE>
Income taxes payable as of December 31, 1995 and 1994 were $1.5
million and $2.0 million, respectively.
The components of deferred tax liability as of December 31, 1995 and
1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book $ 28,897 $ 31,782
Other 820
---------- ----------
28,897 32,602
Deferred tax assets:
Accrued casualty losses 1,708 1,342
Allowance for doubtful accounts 356 --
Accrued interest 313 --
Accrued pension costs 785 1,158
Accrued medical expenses 539 280
Accrued environmental costs 1,116 860
Accrued bonus -- 1,284
Non-compete agreements 2,143 --
Net operating losses 33 3,637
Investment tax credits -- 47
Alternative minimum tax credit carryforwards 2,900 --
Other 40 --
---------- ----------
9,933 8,608
Less: valuation allowance (2,933) (3,600)
---------- ----------
Net deferred tax liability $ 21,897 $ 27,594
========== ==========
</TABLE>
-43-
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES, CONTINUED:
In conjunction with the acquisition, a deferred tax liability of $14.4
million was recorded.
As of December 31, 1995, the Company has state income tax net
operating loss carryforwards of approximately $962,000. Additionally,
the Company has federal alternative minimum tax credit carryforwards
of approximately $2.9 million. Substantially all of the Company's net
operating loss carryforwards expire in the year 2004. Cash paid for
income taxes during the year ended December 31, 1995 amounted to
approximately $3.5 million. The Company paid no cash for income taxes
during 1994 in the Successor period and approximately $2.9 million in
the Predecessor period. Cash paid for income taxes approximated
$156,000 during 1993. Under federal tax law, the amount and
availability of loss carryforwards (and certain other tax attributes)
are subject to a variety of interpretations and restrictive tests
applicable to the Company and its subsidiaries. The utilization of
such carryforwards could be limited or effectively lost upon certain
changes in ownership. At December 31, 1995 and 1994 the Company had a
valuation allowance established which eliminates the deferred tax
asset associated with the net operating losses and alternative minimum
tax credit carryforwards. The allowance was established since it is
not likely that the benefit of these assets will be realized due to
the high level of interest expense resulting from the financing of the
Acquisition and the limitations placed on the utilization of the net
operating losses as a result of the Acquisition.
12. MANAGEMENT STOCK INCENTIVE PLAN:
Holdings has adopted a Management Stock Incentive Plan (the "Plan"), in
order to provide incentives to employees and directors of Holdings and
Primeco by granting them awards of Class C Stock of Holdings. The Plan
is administered by a committee of the Board of Directors of Holdings
(the "Compensation Committee"), which has broad authority in
administering and interpreting the Plan and in determining the type of
awards granted under the Plan.
Holdings granted options to purchase 12,241 shares of its Class C Stock
to certain senior members of Primeco's management and to other officers
and employees of Primeco. The exercise price of each option is $70.00
per share, which is the same price per share paid by existing holders
of Class C Stock to acquire Class C Stock. Each option is subject to
certain vesting provisions. To the extent not earlier vested or
terminated, all options will vest on the tenth anniversary of the date
of grant and will expire 30 days thereafter if not exercised.
-44-
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company has the following types of financial instruments:
o Cash and cash equivalents
o Accounts receivable
o Accounts payable
o Interest rate swaps
o Debt
Due to the short maturity of these instruments, their carrying values
approximate their fair values, except for debt and interest rate
swaps. Management believes that the carrying value of debt
approximates its fair value as of December 31, 1995 and 1994. The
fair value of the interest rate swaps is disclosed in Note 8.
14. SUBSEQUENT EVENT:
On February 26, 1996, pursuant to a Stock Purchase Agreement dated as
of January 9, 1996, as amended and supplemented by the Closing
Supplement to Stock Purchase Agreement, dated as of February 26, 1996,
(together the "Stock Purchase Agreement"), by and among Vibroplant
plc, a company organized under the laws of England and Wales,
("Vibroplant plc"), Vibroplant Investments, Ltd., a company organized
under the laws of England and Wales and a wholly owned subsidiary of
Vibroplant plc ("Vibroplant Investments"), and Primeco. Primeco
completed the purchase of all of the outstanding stock of Vibroplant
U.S., Inc., a Florida Corporation and a wholly owned subsidiary of
Vibroplant Investments prior to the closing ("Vibroplant U.S."), from
Vibroplant plc and Vibroplant Investments. Primeco paid a purchase
price of $66.5 million for the shares of Vibroplant U.S., which
included repayment of the outstanding bank debt of Vibroplant U.S.
Vibroplant U.S. merged into Primeco after the closing.
Vibroplant U.S. (also known as American Hi-Lift Corporation) operates
17 rental locations in California, Texas, Florida, Louisiana, Ohio,
Alabama, South Carolina and Georgia. Vibroplant U.S., which
specializes in renting and selling aerial lift equipment to industrial
and commercial customers, had gross revenues of $50.4 million for the
year ended March 31, 1995.
In conjunction with this transaction, certain existing stockholders of
Holdings invested in additional common equity of Holdings. Holdings
then made a capital contribution of approximately $9.4 million to
Primeco. Primeco used these funds, as well as borrowings under its
Senior Credit Facility, to fund the transaction.
-45-
<PAGE> 47
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. RECENT ACCOUNTING PRONOUNCEMENTS:
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. SFAS 121, which is effective for fiscal
years beginning after December 15, 1995, requires that long-lived
assets and certain identifiable intangibles be held and used by an
entity to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company will adopt SFAS 121 at the beginning of
1996. It is anticipated that the impact of adopting this statement
will not have a material effect on the financial statements.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 123, entitled "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), in October 1995. The
Company will adopt the new disclosure rules of SFAS No. 123 in Fiscal
Year 1997.
-46-
<PAGE> 48
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-47-
<PAGE> 49
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of
the directors and executive officers of Primeco. Each director of Primeco will
hold office until the next annual meeting of shareholders of Primeco or until
his successor has been elected and qualified. Officers of Primeco are elected
by the Board of Directors of Primeco and serve at the discretion of the Board
of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas E. Bennett . . . . . . 51 President, Chief Executive Officer, Director
Brian Fontana . . . . . . . . . 38 Executive Vice President, Chief Financial Officer, Director
Kevin L. Loughlin . . . . . . 46 Director of Finance, Treasurer, Secretary, Director
John D. Latimer . . . . . . . 50 Controller, Assistant Treasurer, Assistant Secretary
Peter A. Post . . . . . . . . 52 Vice President Operations
Gerald E. Lane . . . . . . . . 55 Director of Central Division
Michael Gordon . . . . . . . . 44 Director of Eastern Region
Rick L. McCurry . . . . . . . . 49 Director of Western Division
</TABLE>
Thomas E. Bennett joined Primeco in 1975 as Equipment Manager. He became
a Rental Equipment Yard Manager in 1978 of Primeco's largest distribution
location, and was named Regional Manager in 1979. In 1987, Mr. Bennett was
promoted to Vice President of the Southwest Division. In 1988, he was selected
as the Vice President of Operations and was named President, Chief Executive
Officer and a director in 1990. Prior to joining Primeco, Mr. Bennett worked
for the Tool Crib, Inc. for eleven years.
Brian Fontana joined Primeco effective April 1, 1996 as Executive Vice
President and Chief Financial Officer. Mr. Fontana was employed previously
with National Convenience Stores, Incorporated (NCS), a company traded on the
New York Stock Exchange until it was acquired by Diamond Shamrock in 1995. Mr.
Fontana joined NCS in 1990 as Assistant Treasurer and was appointed to
Treasurer in February 1992. In August 1993, he was promoted to Vice President
and Treasurer, a position he held until December 1993, when Mr. Fontana was
named Vice President and Chief Financial Officer. Mr. Fontana received a
Bachelor of Business degree in Finance from the University of Texas in 1981.
-48-
<PAGE> 50
Kevin L. Loughlin joined Primeco in 1980 as Controller and Vice President
of Finance and in 1990, was named Executive Vice President, Chief Financial
Officer, Secretary and Treasurer. He was elected a director of Primeco in
January 1995. In April 1996, Mr. Loughlin was appointed as Director of
Finance, Treasurer and Secretary. From 1973 to 1979, Mr. Loughlin was employed
by W.R. Grace where he served in various accounting and financial capacities.
Prior to joining W.R. Grace, Mr. Loughlin was an accounting supervisor for Dun
& Bradstreet from 1971 to 1973. Mr. Loughlin received a Bachelor of Science
degree in Accounting from the University of New Haven in 1971.
John D. Latimer served as Assistant Controller of Primeco from 1979 to
1989. In 1982, he was elected to the office of Assistant Secretary of Primeco.
In December 1989, he was name Controller and Assistant Treasurer of Primeco.
Mr. Latimer received a Bachelor's degree from University California Los
Angeles in 1969 and his MBA at Los Angeles State University in 1974.
Peter A. Post joined Primeco in 1979 as a Rental Equipment Yard Manager.
In December 1979, Mr. Post was promoted to Regional Manager for East Texas,
Louisiana and Alabama, where he served until 1988 when he was name Vice
President of Operations for the Southwest Division. In January 1990, Mr. Post
became Vice President, Southwest Division and in August 1995 he became Vice
President of Operations. Mr. Post received a Bachelor of Arts degree in
liberal arts from Baldwin-Wallace College in 1966.
Gerald E. Lane joined Primeco in 1981 as a Rental Equipment Yard Manager.
In 1983, he was promoted to Regional Manager, in October 1992 was named Vice
President, Southeast Division and in September 1995 became Director of Central
Division. Prior to joining Primeco, Mr. Lane worked for Hertz Equipment Rental
Company for 18 years.
Michael Gordon joined Primeco in 1981 as an inside salesman. In 1982, he
was promoted to Rental Equipment Yard Manager. In 1988, Mr. Gordon was
promoted to Regional Manager for the Houston area. In 1993 he became Regional
Manager for Primeco's California Region. Mr. Gordon was promoted to Director
of the Eastern Division in September 1995. Prior to joining Primeco, Mr.
Gordon was employed by JLG Industries for 3 years.
Rick L. McCurry joined Primeco in 1989 as Regional Manager for North Texas
and Oklahoma. He remained in this position until September 1995 when he was
named Director of Operations Western Division. Mr. McCurry attended Kearney
State College in Kearney, Nebraska. Prior to joining Primeco, Mr. McCurry
served as General Manager at Zuni Rental in Albuquerque, New Mexico for 6
years.
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<PAGE> 51
ITEM 11 EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in
fiscal 1995 by Primeco's Chief Executive Officer and each of the other four
most highly compensated executive officers, whose remuneration exceeded
$100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
====================================================================================================================================
Long Term
Annual Compensation Compensation Other
------------------
Awards
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
All
LTPIC Other
Bonus Payouts Holdings Compensation
Name and Salary ($) ($) (Options) ($)
Principal Position Year ($) (1) (2) (#) (3) (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett 1995 225,000 330,000 -- 3,215 4,620
President and Chief 1994 172,500 95,757 74,000 -- 4,620
Executive Officer 1993 161,000 93,980 -- -- 4,497
Kevin L. Loughlin 1995 140,000 160,000 -- 1,071 4,620
Director of Finance 1994 135,600 63,544 47,017 -- 4,620
Treasurer and Secretary 1993 130,000 61,750 -- -- 4,497
Peter A. Post 1995 130,625 140,000 -- 929 4,620
Vice President Operation 1994 110,500 41,387 38,040 -- 4,620
1993 105,000 30,975 -- -- 4,122
Gerald E. Lane 1995 110,000 110,000 -- 800 4,620
Director of Central 1994 96,700 56,441 14,080 -- 4,620
Division 1993 86,000 51,887 -- -- 2,944
John D. Latimer 1995 97,983 29,792 -- 571 3,863
Assistant Secretary, 1994 94,650 30,288 490 -- 3,673
Assistant Treasurer and 1993 91,000 27,300 -- -- 3,218
Controller
</TABLE>
(1) Earned in year shown, but paid in subsequent year.
(2) Amounts paid upon termination of the Seller's phantom stock plan pursuant
to the Acquisition.
(3) Amounts paid pursuant to Primeco's defined contribution 401(k) plan
matching program.
(4) In December 1994, certain members of management were offered the
opportunity to purchase shares of Class C Common Stock at a price of $70
per share following the closing the Acquisition from the original
investors. Purchases were at market value, and the number of shares
purchased were as follows: Thomas E. Bennett (3,215); Kevin L. Loughlin
(1,071); Peter A. Post (929); Gerald E. Lane (800); and John D. Latimer
(571). All of Primeco's issued and outstanding common stock is owned by
Holdings. All references to common stock in the Executive Compensation
tables and discussion contained in this Item 11 refer to Class C Common
Stock of Holdings.
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<PAGE> 52
The following table provides information with respect to stock options
granted during the fiscal year ended December 31, 1995 to the Named Executive
Officers:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
======================================================================================================================
Potential Realizable Value at
Individual Grants Assumed Annual Rates of Stock
- ---------------------------------------------------------------------------------------- Price Appreciation For Option
Percent of Term
Number of Total (D)
Securities Options/ -----------------------------
underlying SAR's Granted Exercise of
option/SARs to Employees Base Price Expiration
Name Granted in Fiscal Year ($ / Sh) Date 5% 10%
(a) (b) (c) (d) (e) (f) (g)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett 3,215 (A) 26.3% $70 / Sh 12-02-2004 $141,524 (B) $358,665 (C)
Kevin L. Loughlin 1,071 (A) 8.7 70 / Sh 12-02-2004 47,145 (B) 119,481 (C)
Peter A. Post 929 (A) 7.6 70 / Sh 12-02-2004 40,895 (B) 103,639 (C)
Gerald E. Lane 800 (A) 6.5 70 / Sh 12-02-2004 35,216 (B) 89,248 (C)
John D. Latimer 571 (A) 4.7 70 / Sh 12-02-2004 25,135 (B) 63,701 (C)
</TABLE>
(A) The options are for shares of Class C Common Stock of Holdings and were
granted on December 2, 1994, and vest at 20% per year over 5 years upon
achievement of certain objectives. Primeco achieved its 1995 objective
and 20% of the options for each named executive officer vested on March
30, 1996. To the extent not earlier vested or terminated, all options will
vest on the tenth anniversary of the date of grant and will expire 30 days
thereafter if not exercised. All options will also vest upon certain
changes in control.
(B) Represents an assumed market price per share of $114.02.
(C) Represents an assumed market price per share of $181.56.
(D) The dollar amounts under columns (f) and (g) represent the hypothetical
gain or "option spread" that would exist for the options based on assumed
5% and 10% annual compounded rates of Share price appreciation over the
full option term. These assumed rates for a 5% hypothetical gain would
result in a price per Share on December 2, 2004 of $114.02 and for a 10%
hypothetical gain would result in a price per Share on December 2, 2004 of
$181.56.
-51-
<PAGE> 53
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FY-END OPTION VALUE
=================================================================================================================
(a) (b) (c) (d) (e)
Number of
Securities Underlying Value of Un-exercised
Holdings Unexercised Holdings "In-the-money"
Shares Value Options at FY-End (#) Holdings Options at
Name Acquired on Realized ($) Exercisable/ FY-End ($)
Exercise Unexercisable Exercisable/
(#) (A) Unexercisable (B)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas E. Bennett -- -- 0/3,215 --
Kevin L. Loughlin -- -- 0/1,071 --
Peter A. Post -- -- 0/929 --
Gerald E. Lane -- -- 0/800 --
John D. Latimer -- -- 0/571 --
</TABLE>
___________________________
(A) Options are for shares of the Class C Common Stock of Holdings and vest
20% per year over 5 years upon achievement of certain objectives. Primeco
achieved its 1995 objective and 20% of the options for each named
executive officer vested on March 30, 1996.
(B) Underlying shares are not publicly traded and are subject to repurchase by
Holdings at the employee's cost or at the then current value of the
underlying shares as determined by Primeco's Board of Directors upon the
termination of the employee's employment with Primeco; therefore, options
have not been categorized as "in-the-money". Primeco has not established
any recent valuations for such shares.
EMPLOYMENT AGREEMENTS; TERMINATION AND CHANGE-IN-CONTROL AGREEMENTS
Primeco has entered into employment agreements with Thomas E. Bennett,
Kevin L. Loughlin, Peter A. Post and Gerald E. Lane. Mr. Bennett's agreement,
effective as of December 2, 1994, provides that he shall serve as President and
Chief Executive Officer. Upon the expiration of the initial five (5) year
term, the agreement shall automatically be extended for an additional term of
one year, unless either party has notified the party of its election to
terminate the agreement, not later than 90 days prior to the scheduled
expiration date. During the term of employment, the agreement provides for an
annual base salary of $225,000 subject to annual review by the Board provided
that the level of base salary shall not be subject to reduction. Mr. Bennett
is entitled to participate in the management cash incentive bonus program, and
in all fringe benefit programs maintained by Primeco. Mr. Bennett's employment
agreement also provides that in the event that Primeco terminates his
employment or elects to not renew the agreement other than for cause, Mr.
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<PAGE> 54
Bennett will receive monthly one-twelfth (1/12) of his annual base salary at
the time of such termination for the period ending on the earlier of the
expiration date of the employment agreement or the first anniversary of the
date of termination. If Mr. Bennett's employment is terminated by death,
Primeco shall pay to Mr. Bennett's estate or legal representative a lump sum
payment equal to 25% of Mr. Bennett's annual base salary in effect at such
time. If Mr. Bennett is terminated based upon a permanent disability, Primeco
shall pay to Mr. Bennett 50% of Mr. Bennett's annual base salary in effect at
such time.
Mr. Loughlin, Mr. Post and Mr. Lane's employment agreements are
substantially identical to Mr. Bennett's except that the annual base salaries
differ and the initial terms are for three (3) years. The initial annual base
salaries for Messrs. Loughlin, Post and Lane are $140,000, $125,000 and
$110,000 respectively.
Mr. Fontana and Primeco intend to enter into an employment agreement,
which will have an initial term of three (3) years and an annual base salary of
$160,000, subject to annual review by the Board. Primeco contemplates that Mr.
Fontana's employment agreement will contain severance provisions, the terms of
which have not been finalized. Primec also contemplates that Mr. Fontana will
be offered the opportunity to purchase shares of Class C Common Stock and will
be awarded options for Class C Common Stock. The amount of such purchase and
award has not been finalized. Mr. Fontana will also participate in Primeco's
bonus plan. Bonuses awarded under the plan for 1996 would be paid in 1997.
DIRECTOR COMPENSATION
Primeco pays no additional remuneration to its employees or to executives
of Investcorp for serving as directors. See "Management - Executive
Compensation". There are no family relationships among any of the directors of
executive officers.
PENSION PLAN
Primeco has a noncontributory defined benefit pension plan (the "Pension
Plan") covering substantially all of its employees.
The following table sets forth the estimated annual benefits payable upon
retirement under the Pension Plan based on retirement at age 65 and 1995
covered compensation of $25,920:
<TABLE>
<CAPTION>
REMUNERATION (i.e. final earnings) Years of Service
- ---------------------------------- ----------------
15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 . . . . . . . . . . . . . . . . . $24,695 $32,926 $41,158 $49,390 $57,621
$150,000 and above . . . . . . . . . . . . 29,945 39,926 49,908 59,890 69,871
</TABLE>
For each of the individuals the Pension Plan covers, total compensation as
listed in the Summary Compensation Table, but limited to $150,000 as required
by the Retirement Protection Act. Each of the five officers listed in the
Summary Compensation Table has credited services as of December 31, 1995 of
approximately 6.3 years. Benefits under the Pension Plan are based on (i)
final earnings (the highest five consecutive years' earnings out of the last
ten years before retirement date or average earnings received in the last five
full years before early retirement or termination of employment), (ii) covered
compensation (the average of the Social Security Taxable Wage Bases for the 35
year period ending at Social Security Retirement Age) and (iii) years of
credited service. Benefits under the Pension Plan are determined by a formula
which multiplies (x) the sum of 1% of final earnings up to covered compensation
and 1.4% of final earnings in excess of covered compensation by (y) the years
-53-
<PAGE> 55
of credited service up to 35 years. There is no reduction for early retirement
at age 62. Primeco's policy is to fund the Pension Plan in accordance with the
Employee Retirement Income Security Act of 1974 and Internal Revenue Code
Limitations. Pension Plan assets are invested in various segregated accounts
with an insurance company. Benefits under the Pension Plan are not subject to
any offset.
Primeco also sponsors a defined contribution 401(k) plan that covers
substantially all employees. Primeco matches 50 percent of employee
contributions limited to a maximum equal to three percent of eligible employee
compensation. Primeco's contributions to the plan were approximately $633,000,
$588,000 and $471,000 in 1995, 1994 and 1993, respectively.
MANAGEMENT STOCK INCENTIVE PLAN
Holdings has adopted a Management Stock Incentive Plan (the "Stock Plan"),
in order to provide incentives to employees and directors of Holdings and
Primeco by granting them awards tied to the Class C Stock of Holdings. The
Stock Plan is administered by a committee of the Board of Directors of
Holdings, which has broad authority in administering and interpreting the Stock
Plan. Awards to employees are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options or stock appreciation rights (collectively,
"Awards"). Options granted under the Stock Plan may be options intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended, or options not intended to so qualify. An award
granted under the Stock Plan to an employee may include a provision terminating
the award upon termination of employment under certain circumstances or
accelerating the receipt of benefits upon the occurrence of specified events,
including, at the discretion of the Compensation Committee, any change of
control of Primeco.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of Primeco's issued and outstanding capital stock is owned by
Holdings. Class D Stock, par value $.01 per share is the only class of
Holding's stock that currently possesses voting rights. At December 31, 1995,
there were 10,000 shares of Holdings' Class D Stock issued and outstanding.
Certain of the investors in the equity of Holdings intend to offer certain
members of Primeco's management an opportunity to purchase shares of Class C
Stock, par value $.01 per share, which stock has no voting rights except in
certain limited circumstances. The following table sets forth the beneficial
ownership of each class of issued and outstanding securities of Holdings, as of
the date hereof, by each director of Primeco, each of the executive officers of
Primeco listed under "Management", the directors and executive officers of
Primeco as a group and each person who beneficially owns more than 5% of the
outstanding shares of any class of voting securities of Holdings.
<TABLE>
<CAPTION>
NUMBER VOTING
OF PERCENTAGE
CLASS D VOTING STOCK: SHARES (1) (1)
- -------------------- ---------- ----------
<S> <C> <C>
INVESTCORP S.A. (2)(5) . . . . . . . . . . . 10,000 100.0%
37 rue Notre-Dame, Luxembourg
SIPCO Limited (6) . . . . . . . . . . . . . . 10,000 100.0%
P.O. Box 1111
West Wind Building
George Town, Grand Cayman
Cayman Islands
</TABLE>
-54-
<PAGE> 56
<TABLE>
<CAPTION>
NUMBER VOTING
OF PERCENTAGE
CLASS D VOTING STOCK: SHARES (1) (1)
- -------------------- ---------- ----------
<S> <C> <C>
CIP Limited (3)(4) . . . . . . . . . . . . . 9,200 92.0%
P.O. Box 1111
West Wind Building
George Town, Grand Cayman
Cayman Islands
Ballet Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Denary Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Gleam Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Highlands Limited (3)(4) . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Noble Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Outrigger Limited (3)(4) . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Quill Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
</TABLE>
-55-
<PAGE> 57
<TABLE>
<CAPTION>
NUMBER VOTING
OF PERCENTAGE
CLASS D VOTING STOCK: SHARES (1) (1)
- -------------------- ---------- ----------
<S> <C> <C>
Radial Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Shoreline Limited (3)(4) . . . . . . . . . . 920 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Zinnia Limited (3)(4) . . . . . . . . . . . . 920 9.2%
P.O. Box 2197 West Wind Building
George Town, Grand Cayman
Cayman Islands
INVESTCORP Investment Equity Limited (5) . . 800 8.0%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
</TABLE>
__________________
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared
power to dispose, or direct the disposition of, a security.
(2) Investcorp does not directly own any stock in Holdings. The number of
shares shown as owned by Investcorp includes all of the shares owned by
INVESTCORP Investment Equity Limited (see (5) below). Investcorp owns no
stock in Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited,
Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
Limited, Zinnia Limited, or the beneficial owners of these entities.
Investcorp may be deemed to share beneficial ownership of the shares of
voting stock held by these entities because the entities have entered into
revocable management services or similar agreements with an affiliate of
Investcorp pursuant to which each of such entities has granted such
affiliate the authority to direct the voting and disposition of the
Holdings voting stock owned by such entity for so long as such agreement
is in effect. Investcorp is a Luxembourg corporation.
(3) CIP Limited ("CIP") owns no stock in Holdings. CIP indirectly owns less
than 0.1% of the stock in each of Ballet Limited, Denary Limited, Gleam
Limited, Highlands Limited, Noble Limited, Outrigger Limited, quill
Limited, Radial Limited, shoreline Limited and Zinnia Limited (see (4)
below). CIP may be deemed to share beneficial ownership of the shares of
voting stock of Holdings held by such entities because CIP acts as a
director of such entities and the ultimate beneficial shareholders of each
of those entities have granted to CIP revocable proxies in companies that
own those entities' stock. None of the ultimate beneficial owners of such
entities beneficially owns individually more than 5% of Holdings' voting
stock.
(4) CIP, Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited,
Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
Limited and Zinnia Limited each is a Cayman Islands corporation.
-56-
<PAGE> 58
(5) INVESTCORP Investment Equity Limited is a Cayman Islands corporation, a
wholly owned subsidiary of Investcorp.
(6) SIPCO Limited may be deemed to control Investcorp through its ownership of
a majority of a company's stock that indirectly owns a majority of
Investcorp's shares.
<TABLE>
<CAPTION>
CLASS C NON-VOTING STOCK
- ------------------------- PERCENTAGE OF
NUMBER OF OUTSTANDING
SHARES OF HOLDINGS SHARES OF HOLDINGS
CLASS C CLASS C
NAME AND ADDRESS NON-VOTING STOCK NON-VOTING STOCK
OF BENEFICIAL OWNER: BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (1)
- ------------------- ---------------------- ----------------------
<S> <C> <C>
All Directors and Executive Officers
of Primeco as a group of 5 persons . . . . . . . . . . . . . . . 6,586 6.1
Thomas E. Bennett
c/o Prime Equipment
16225 Park Ten Place, #200
Houston, Texas 77084 . . . . . . . . . . . . . . . . . . . . . 3,215 3.0
Kevin L. Loughlin
c/o Prime Equipment
16225 Park Ten Place, #200
Houston, Texas 77084 . . . . . . . . . . . . . . . . . . . . . 1,071 1.0
Peter A Post
c/o Prime Equipment
16225 Park Ten Place, #200
Houston, Texas 77084 . . . . . . . . . . . . . . . . . . . . . 929 0.86
Gerald E. Lane
c/o Prime Equipment
16225 Park Ten Place, #200
Houston, Texas 77084 . . . . . . . . . . . . . . . . . . . . . 800 0.74
John D. Latimer
c/o Prime Equipment
16225 Park Ten Place, #200
Houston, Texas 77084 . . . . . . . . . . . . . . . . . . . . . 571 0.53
</TABLE>
______________________
(1) As used in this table, beneficial ownership means the sole or shared
power to vote, or direct the voting of a security or the sole or shared
power to dispose, or direct the disposition of, a security.
-57-
<PAGE> 59
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Holdings was capitalized with $70.0 million of equity contributed by
Investcorp, its affiliates and other international and domestic investors and
$10.0 million in principal amount of junior subordinated indebtedness (the
"Junior Notes") provided by Invifin S.A. ("Invifin"), an affiliate of
Investcorp. In December 1994, certain members of Primeco management were
offered the opportunity to purchase shares of Class C Stock at a price of $70
per share following the closing of the Acquisition from the original investors.
Holdings capitalized Primeco with $80.0 million in exchange for 100% of the
outstanding common and preferred stock of Primeco in connection with the
consummation of the Acquisition. This capital contribution to Primeco, in
addition to borrowings under the Senior Credit Facility and the Subordinated
Loan Facility, provided the sources of the consideration for the Acquisition
and related costs and fees. In connection with the Acquisition, Primeco paid
Investcorp International Inc. ("International") fees of $2.7 million for
arranging the commercial bank financing. Holdings, on behalf of Primeco, also
paid $1.15 million in commitment fees to Invifin in connection with the Junior
Notes.
In connection with the Acquisition, Primeco entered into an agreement for
management advisory, strategic planning and consulting services (the
"Management Agreement") with International pursuant to which Primeco agreed to
pay International $1.5 million per annum for a five year term. Primeco prepaid
International $4.5 million for the first three years of the term and agreed to
make quarterly payments during the fourth and fifth years. In connection with
the Acquisition, Primeco also entered into an agreement with Investcorp Bank
E.C. ("EC") for a term of five years pursuant to which Primeco paid EC
approximately $7.6 million in exchange for EC's assistance in arranging
financing for the Acquisition and for EC's covenant not to arrange or
facilitate the acquisition of a competitor of Primeco without Primeco's
consent.
In connection with the purchase of Vibroplant U.S., Holdings made a
capital contribution of approximately $9.4 million to Primeco. Primeco, in
turn, paid on February 26, 1996 $1.0 million to International for financial
advisory services related to the purchase of Vibroplant U.S. This capital
contribution, plus borrowing from Primeco's Senior Credit Facility, provided
funds for the completion of the Vibroplant U.S. purchase.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Financial Statements and Schedules:
(1) Financial Statements: The financial statements listed in the
Index under Item 8 are included in this report.
(2) Schedules: No schedules are included because such information
is immaterial, not required or can be derived from the
Financial Statements included in Item 8 of this Form 10-K.
-58-
<PAGE> 60
(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
3.1 Articles of Merger dated December 2, 1994 including the Amended and Restated Articles of Incorporation
of Primeco and the Certificate of Designations with respect to the Preferred Stock of Primeco as amended
by the Article of Merger filed on February 2, 1996.
3.2 Amended and Restated Bylaws of Primeco.
4.1 Form of Indenture between Primeco and Texas Commerce Bank National Association, a trust.
(Incorporated by reference to Exhibit 4 of Primeco's Registration Statement on Form S-1, originally
filed with the SEC on February 27, 1995.)
10.1 Agreement for Management Advisory, Strategic Planning and Consulting Services dated as of December 1,
1994 between Investcorp International Inc. and Prime Acquisition Corp. (Incorporated by reference to
Exhibit 10(c) of Primeco's Registration Statement on Form S-1,Registration No. 33-87404, originally
filed with the SEC on December 15, 1994.)
10.2 Agreement for Management Advisor, Strategic Planning and Consulting Services dated as of February 26,
1996 between Investcorp International Inc. and Prime Acquisition Corp.
10.3 Prime Holding, Inc. Management Stock Incentive Plan.
10.4 Credit Agreement dated as of December 1, 1994 among Prime Acquisition Corp., the lenders party thereto,
Chemical Bank as Administrative Agent, The CIT Group Business Credit, Inc., as collateral agent, and
Chemical Securities Inc. and BT Securities Corporation, as arrangers. (Incorporated by reference to
Exhibit 10(d) of Primeco's Registration Statement on Form S-1,Registration No. 33-87404, originally
filed with the SEC on December 15, 1994.)
10.5 Amendment No. 1 to Credit Agreement dated as of November 1, 1995 among Primeco Inc. the leaders party
thereto, Chemical Bank as Administrative Agent, The CIT Group/Business Credit, Inc. as collateral agent,
and Chemical Securities Inc. and BT Securities Corporation as managers.
</TABLE>
-59-
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
10.6 Amendment No. 2 to Credit Agreement dated as of January 10, 1996 among Primeco Inc. the leaders party
thereto, Chemical Bank as Administrative Agent, The CIT Group/Business Credit, Inc. as collateral agent,
and Chemical Securities Inc. and BT Securities Corporation as managers..
10.7 Security Agreement dated as of December 1, 1994 between Prime Acquisition Corp. and The CIT Group /
Business Credit, Inc., as collateral agent. (Incorporated by reference to Exhibit 10(e) of Primeco's
Registration Statement on Form S-1, Registration No. 33-87404, originally filed with the SEC on December
15, 1994.)
10.8 Interest Rate and Currency Exchange Agreement dated as of March 7, 1990 between Primeco and Salomon
Brothers Holding Company, Inc., as modified by the Schedule to the Interest Rate and Currency Exchange
Agreement dated as of March 7, 1990, as supplemented by the Letter Agreement dated March 7, 1990
confirming the swap transaction and as amended by the Letter Agreement dated as of December 1, 1995.
(Incorporated by reference to Exhibit 10(g) of Primeco's Registration Statement on Form S-1,Registration
No. 33-87404, originally filed with the SEC on December 15, 1994.)
10.9 Letter Agreement dated as of December 1, 1994 between Primeco and Chemical Bank confirming a swap
transaction. (Incorporated by reference to Exhibit 10(h) of Primeco's Registration Statement on Form S-
1,Registration No. 33-87404, originally filed with the SEC on December 15, 1994.)
10.10 Employment Agreement dated December 2, 1994 between Primeco and Thomas E. Bennett.
10.11 Employment Agreement dated December 2, 1994 between Primeco and Kevin L. Loughlin.
10.12 Employment Agreement dated December 2, 1994 between Primeco and Peter A. Post
10.13 Employment Agreement dated December 2, 1994 between Primeco and Gerald E. Lane.
10.14 Indemnity Agreement dated as of December 2, 1994 between Primeco and Charles J. Phillipin.
(Incorporated by reference to Exhibit 10(k) of Primeco's Registration Statement on Form S-1,Registration
No. 33-87404, originally filed with the SEC on December 15, 1994.)
</TABLE>
-60-
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
10.15 Indemnity Agreement dated as of December 2, 1994 between Primeco and Christopher J. O'Brien.
(Incorporated by reference to Exhibit 10(l) of Primeco's Registration Statement on Form S-1,Registration
No. 33-87404, originally filed with the SEC on December 15, 1994.)
10.16 Indemnity Agreement dated as of December 2, 1994 between Primeco and Thomas E. Bennett. (Incorporated
by reference to Exhibit 10(m) of Primeco's Registration Statement on Form S-1,Registration No. 33-87404,
originally filed with the SEC on December 15, 1994.)
10.17 Indemnity Agreement dated as of December 2, 1994 between Primeco and E. Garrett Bewkes, III.
(Incorporated by reference to Exhibit 10(i) of Primeco's Registration Statement on Form S-1,Registration
No. 33-87404, originally filed with the SEC on December 15, 1994.)
10.18 Indemnity Agreement dated as of December 2, 1994 between Primeco and Robert V. Glaser. (Incorporated by
reference to Exhibit 10(j) of Primeco's Registration Statement on Form S-1,Registration No. 33-87404,
originally filed with the SEC on December 15, 1994.)
10.19 Indemnity Agreement dated as of January 30, 1995 between Primeco and Kevin L. Loughlin. (Incorporated
by reference to Exhibit 10(o) of Primeco's Registration Statement on Form S-1,Registration No. 33-87404,
originally filed with the SEC on December 15, 1994.)
10.20 Settlement Agreement and Release, dated as of February 26, 1996, by and among Michael Murnin, Randal
Shields, Lloyd Glick, Randolph Goss, Thomas Darnell, Chris Fix, Carlos Guff, Cathy Albritton, Vibroplant
U.S., Inc., and Vibroplant plc.
10.21 Stock Purchase Agreement by and among Vibroplant plc, Vibroplant Investments, Ltd. and Primeco Inc.
dated as of January 9, 1996. (Incorporated by reference to Exhibit 2.1 of Primeco's Current Report on
Form 8-K, filed with the SEC on 3-12-96.)
10.22 Closing Supplement to Stock Purchase Agreement by and among Vibroplant plc, Vibroplant Investments, Ltd
and Primeco Inc. dated as of February 26, 1996. (Incorporated by reference to Exhibit 2.2 of Primeco's
Current Report on Form 8-K, filed with the SEC on 3-12-96).
</TABLE>
-61-
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
10.23 Form of Mortgage from Primeco Inc. to the CI T Group / Business Credit, Inc. pursuant to the Credit
Agreement dated as of December 1, 1994 and schedule of substantially identical mortgages pursuant to
Rule 12b-31 of the Exchange Act.
10.24 Stock Purchase Agreement dated October 2, 1994 between Prime Acquisition Corp. and American Perco, Inc.
(Incorporated by reference to Exhibit 10(a) of Primeco's Registration Statement on Form S-1,Registration
No. 33-87404, originally filed with the SEC on December 15, 1994.)
10.25 Amendment No. 1 to Stock Purchase Agreement dated as of November 28, 1994 between Prime Acquisition
Corp. and American Perco, Inc.(Incorporated by reference to Exhibit 10(b) of Primeco's Registration
Statement on Form S-1,Registration No. 33-87404, originally filed with the SEC on December 15, 1994.)
27 Financial Data Schedule.
</TABLE>
(B) Reports on Form 8-K:
No reports on Form 8-K were filed by Primeco during the fourth quarter
of 1995.
-62-
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigne,d thereunto duly authorized.
PRIMECO INC.
By: /s/ Thomas E. Bennett
-----------------------------------
April 10, 1996 Thomas E. Bennett
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas E. Bennett President, Chief Executive Officer April 10, 1996
- ------------------------------------------- and Director
Thomas E. Bennett
/s/ Brian Fontana Executive Vice President, April 10, 1996
- ------------------------------------------- Chief Financial Officer and Director
Brian Fontana
/s/ Kevin L. Loughlin Director of Finance, Treasurer, April 10, 1996
- ------------------------------------------- Secretary and Director
Kevin L. Loughlin
/s/ John D. Latimer Controller, Assistant Treasurer April 10, 1996
- ------------------------------------------- and Assistant Secretary
John D. Latimer
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No annual report or proxy material has been or will be sent to the
security holder of Primeco.
-63-
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
3.1 Articles of Merger dated December 2, 1994 including the Amended and Restated Articles of Incorporation
of Primeco and the Certificate of Designations with respect to the Preferred Stock of Primeco as amended
by the Article of Merger filed on February 2, 1996.
3.2 Amended and Restated Bylaws of Primeco.
10.2 Agreement for Management Advisor, Strategic Planning and Consulting Services dated as of February 26,
1996 between Investcorp International Inc. and Prime Acquisition Corp.
10.3 Prime Holding, Inc. Management Stock Incentive Plan.
10.5 Amendment No. 1 to Credit Agreement dated as of November 1, 1995 among Primeco Inc. the leaders party
thereto, Chemical Bank as Administrative Agent, The CIT Group/Business Credit, Inc. as collateral agent,
and Chemical Securities Inc. and BT Securities Corporation as managers.
10.6 Amendment No. 2 to Credit Agreement dated as of January 10, 1996 among Primeco Inc. the leaders party
thereto, Chemical Bank as Administrative Agent, The CIT Group/Business Credit, Inc. as collateral agent,
and Chemical Securities Inc. and BT Securities Corporation as managers..
10.10 Employment Agreement dated December 2, 1994 between Primeco and Thomas E. Bennett.
10.11 Employment Agreement dated December 2, 1994 between Primeco and Kevin L. Loughlin.
10.12 Employment Agreement dated December 2, 1994 between Primeco and Peter A. Post
10.13 Employment Agreement dated December 2, 1994 between Primeco and Gerald E. Lane.
10.20 Settlement Agreement and Release, dated as of February 26, 1996, by and among Michael Murnin, Randal
Shields, Lloyd Glick, Randolph Goss, Thomas Darnell, Chris Fix, Carlos Guff, Cathy Albritton, Vibroplant
U.S., Inc., and Vibroplant plc.
10.23 Form of Mortgage from Primeco Inc. to the CI T Group / Business Credit, Inc. pursuant to the Credit
Agreement dated as of December 1, 1994 and schedule of substantially identical mortgages pursuant to
Rule 12b-31 of the Exchange Act.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
<PAGE> 2
ARTICLES OF MERGER
Pursuant to the provisions of Article 5.16 of the Texas Business
Corporation Act, as amended (the "TBCA"), and Section 607.1105 of the 1989
Business Corporation Act of the State of Florida, as amended ("FBCA"), Primeco
Inc., a Texas corporation ("Prime" or "Surviving Corporation"), and Vibroplant
U.S., Inc., a Florida corporation ("Vibroplant") adopt the following Articles of
Merger for the purpose of merging Vibroplant into the Surviving Corporation (the
"Merger").
1. The Plan of Merger (the "Plan"), adopted by Prime as of February
26, 1996, attached hereto as Exhibit A and incorporated herein by reference,
contains the terms and conditions of the merger of Vibroplant with and into
Prime.
2. Vibroplant is a wholly owned subsidiary of Prime. Vibroplant
currently has 475,000 shares of its common stock outstanding.
3. A copy of the resolution of the board of directors of Prime
approving the Plan, adopted on February 26, 1996, is attached hereto as Exhibit
B and incorporated herein by reference.
4. Shareholder approval of the Merger and the Plan was not required
under either the TBCA or the FBCA.
[SIGNATURES ON NEXT PAGE]
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have caused these Articles of
Merger to be executed on ___________________, 1996.
PRIMECO INC.
By:
Name: Thomas E. Bennett
Title: President
VIBROPLANT U.S., INC.
By:
Name: Kevin L. Loughlin
Title: Vice President
<PAGE> 4
PLAN OF MERGER
Plan of Merger (this "Agreement"), adopted by Primeco Inc., a
Texas corporation ("Prime"), and dated as of February 26, 1996.
WHEREAS, Prime is a corporation organized and existing under the
laws of the State of Texas and having an authorized capitalization of 15,000
shares of capital stock.; and
WHEREAS, Vibroplant U.S., Inc., a Florida corporation
("Vibroplant", together with Prime, the "Merging Companies"), a wholly owned
subsidiary of Prime, is organized and existing under the laws of the State of
Florida and has an authorized capitalization of 1,225,000 shares of capital
stock.
WHEREAS, Prime desires to merge Vibroplant with and into Prime for
certain business reasons;
NOW, THEREFORE, Prime adopts the following plan of merger:
1. Merger. The Merging Companies shall be merged into a single
corporation by Vibroplant merging with and into Prime. Prime shall survive the
merger (the "Surviving Corporation") pursuant to the provisions of the Texas
Business Corporation Act ("TBCA") and the Florida 1989 Business Corporation Act
(the "FBCA"). Upon this merger the separate corporate existence of Vibroplant
shall cease and the Surviving Corporation shall become the owner, without other
transfer, of all the rights and property of Prime and Vibroplant, and the
Surviving Corporation shall become subject to all the debts and liabilities of
the Merging Companies in the same manner as if it had itself incurred them.
2. Effective Date. This Agreement shall become effective
immediately upon compliance with the laws of the States of Texas and Florida
(the "Effective Date").
3. Surviving Corporation. The name of the Surviving Corporation
shall be Primeco Inc. The purposes and county where the registered office for
the Surviving Corporation shall be located shall be as they appear in the
articles of incorporation of the Surviving Corporation.
4. Authorized Capital. The authorized capital stock of the
Surviving Corporation following the Effective Date shall be 15,000 shares, of
which 10,000 shares shall be common stock, par value $0.01 per share, and 5,000
shall be preferred stock, par value $0.01 per share, unless and until the same
shall be changed in accordance with the laws of the State of Texas.
5. Articles of Incorporation of Surviving Corporation. The
articles of incorporation of Prime, as in effect on the Effective Date, shall be
the articles of incorporation of the Surviving Corporation, until the same shall
be altered or amended pursuant to the TBCA.
6. Bylaws. The bylaws of Prime, as in effect on the Effective
Date, shall be the bylaws of the Surviving Corporation, until the same shall be
altered, amended, or repealed, or until new bylaws are adopted as provided
therein.
7. Board of Directors. The directors of Prime immediately prior
to the Effective Date
<PAGE> 5
shall constitute the board of directors of the Surviving Corporation and shall
hold office from the Effective Date until their successors are duly elected or
appointed and qualified, or until they are removed from office, in the manner
provided in the bylaws of the Surviving Corporation.
8. Officers. The officers of Prime immediately prior to the
Effective Date shall be the officers of the Surviving Corporation and shall hold
office from the Effective Date until their successors are duly elected or
appointed, or until they are removed from office, in the manner provided in the
bylaws of the Surviving Corporation.
9. Conversion of Stock of Merging Companies. Shares of stock of
the Merging Companies shall be converted into shares of the Surviving
Corporation as follows, for a total of 5,000 shares of common stock, par value
$0.01 per share, and 5,000 shares of Preferred Stock, par value $0.01 per share,
of the Surviving Corporation outstanding:
(a) Shares of Prime. Each share of common stock of Prime that
is issued and outstanding on the Effective Date of merger
shall be converted to one share of common stock of the
Surviving Corporation. Each share of preferred stock of
Prime that is issued and outstanding on the Effective Date
of the merger shall be converted to one share of preferred
stock of the Surviving Corporation.
(b) Shares of Vibroplant. Each share of common stock of
Vibroplant that is issued and outstanding on the Effective
Date of the merger shall be canceled, and the sole
shareholder of Vibroplant shall not receive shares of
common stock of the Surviving Corporation.
(c) Shareholders in the Surviving Corporation shall be
entitled to receive any and all dividends on stock of the
Surviving Corporation that may be declared and paid
between the Effective Date of the merger and issuance to
such shareholder of a certificate of common stock in the
Surviving Corporation.
10. Retirement of Stock. On and after the Effective Date of the
merger, the sole shareholder of Vibroplant shall surrender for cancellation its
certificate or certificates of stock in Vibroplant to the Surviving Corporation
by delivering the same to its offices at 16225 Park Ten Place, Suite 200,
Houston, Texas 77084.
11. Appraised Rights. The shareholders of Vibroplant, if the
shareholder were to dissent from this merger pursuant to Section 607.1320 of the
FBCA, may be entitled, upon compliance with the provisions of the FBCA regarding
the rights of dissenting shareholders, to be paid the fair value of its shares.
12. Waiver of Notice. Prime, as the sole shareholder of
Vibroplant, waives (i) the requirement that a copy of this Agreement be mailed
to it pursuant to Section 607.1104(2), and (ii) the 30-day waiting period prior
to filing the articles of merger with the Florida Secretary of State pursuant to
Section 607.1104(3) of the FBCA.
13. Abandonment by Board of Directors. The board of directors of
Prime may, in its discretion, abandon this merger, subject to the rights of
third parties under and contracts relating to this merger without further action
or approval by the shareholders of Prime, at any time before the merger has been
completed.
<PAGE> 6
15. Tax-Free Merger. This Agreement is considered to be a tax-free
merger pursuant to Section 368(a)(1)(A) or (F) of the Internal Revenue Code of
1986, as amended.
<PAGE> 7
WRITTEN CONSENT OF THE BOARD OF DIRECTORS
OF PRIMECO INC.
IN LIEU OF A SPECIAL MEETING
OF THE BOARD OF DIRECTORS
Each of the undersigned, being the all of the directors of Primeco
Inc., a Texas corporation (this "Corporation"), takes the following action by
written consent in lieu of a special meeting of the board of directors (the
"Board") pursuant to Article 9.10 of the Texas Business Corporation Law:
1. Adoption of Plan of Merger.
WHEREAS, the directors desire to merge Vibroplant U.S., Inc., a wholly owned
subsidiary of the Corporation ("Vibroplant"), with and into the Corporation,
with the Corporation as the surviving corporation;
WHEREAS, the directors have reviewed the Plan of Merger attached
hereto as Exhibit A (the "Plan"), pursuant to which Vibroplant would merge with
and into the Corporation, with the Corporation as the surviving corporation;
WHEREAS, the directors deem the adoption of the Plan to be in the
best interests of the Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby
authorized and approved;
RESOLVED, FURTHER, that the performance of the Corporation under
the Plan and the transactions contemplated thereby, be, and hereby are,
authorized and approved;
RESOLVED, FURTHER, that the officers of the Corporation are, and
each of them hereby is, authorized and directed to make, execute, deliver, file
and record such other related agreements, certificates, documents, and
instruments, and to take such actions and do such things on behalf of the
Corporation that such officer deems necessary or appropriate to effect the
transactions contemplated by the Plan and to carry out and perform each
transaction contemplated thereby.
2. Approval of Articles of Merger. WHEREAS, the directors have
reviewed the Articles of Merger attached hereto as Exhibit B (the "Articles"),
to be filed with the Secretaries of State of Texas and Florida in connection
with the Plan;
WHEREAS, the directors deem the Articles to be in the best
interests of the Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Articles are hereby
authorized and approved;
RESOLVED, FURTHER, that the performance of the Corporation under
the Articles are and the transactions contemplated thereby, be, and hereby are,
authorized and approved;
<PAGE> 8
RESOLVED, FURTHER, that the officers of the Corporation be, and
each of them hereby is, authorized and directed, in the name and on behalf of
the Corporation, to execute, deliver and file the Articles, with such changes
therein as any officer of the Corporation shall, in such officer's sole
discretion, approve, the execution thereof to be conclusive evidence of such
approval;
RESOLVED, FURTHER, that the officers of the Corporation are, and
each of them hereby is, authorized and directed to make, execute, deliver, file
and record such other related agreements, certificates, documents, and
instruments, and to take such actions and do such things on behalf of the
Corporation that such officer deems necessary or appropriate to effect the
transactions contemplated by the Articles and to carry out and perform each
transaction contemplated thereby.
3. GENERAL AUTHORIZATION.
RESOLVED, that the officers of the Corporation are, and each of
them hereby is, authorized and directed to execute and deliver all documents and
to take all actions that they deem necessary or appropriate to carry out the
purposes of the foregoing resolutions.
[SIGNATURES ON NEXT PAGE]
<PAGE> 9
IN WITNESS WHEREOF, each of the undersigned has executed this
Written Consent of the Board of Directors of Primeco Inc. in Lieu of a Special
Meeting of the Board of Directors (which he may do in counterpart and by
facsimile signature) as of the day of , 1996.
---- --------------
------------------------------------
Thomas E. Bennett
------------------------------------
Kevin L. Loughlin
<PAGE> 10
PLAN OF MERGER
Plan of Merger (this "Agreement"), adopted by Primeco Inc., a Texas
corporation ("Prime"), and dated as of February 26, 1996.
WHEREAS, Prime is a corporation organized and existing under the laws
of the State of Texas and having an authorized capitalization of 15,000 shares
of capital stock.; and
WHEREAS, Vibroplant U.S., Inc., a Florida corporation ("Vibroplant",
together with Prime, the "Merging Companies"), a wholly owned subsidiary of
Prime, is organized and existing under the laws of the State of Florida and has
an authorized capitalization of 1,225,000 shares of capital stock.
WHEREAS, Prime desires to merge Vibroplant with and into Prime for
certain business reasons;
NOW, THEREFORE, Prime adopts the following plan of merger:
1. Merger. The Merging Companies shall be merged into a single
corporation by Vibroplant merging with and into Prime. Prime shall survive the
merger (the "Surviving Corporation") pursuant to the provisions of the Texas
Business Corporation Act ("TBCA") and the Florida 1989 Business Corporation Act
(the "FBCA"). Upon this merger the separate corporate existence of Vibroplant
shall cease and the Surviving Corporation shall become the owner, without other
transfer, of all the rights and property of Prime and Vibroplant, and the
Surviving Corporation shall become subject to all the debts and liabilities of
the Merging Companies in the same manner as if it had itself incurred them.
2. Effective Date. This Agreement shall become effective immediately
upon compliance with the laws of the States of Texas and Florida (the "Effective
Date").
3. Surviving Corporation. The name of the Surviving Corporation shall
be Primeco Inc. The purposes and county where the registered office for the
Surviving Corporation shall be located shall be as they appear in the articles
of incorporation of the Surviving Corporation.
4. Authorized Capital. The authorized capital stock of the Surviving
Corporation following the Effective Date shall be 15,000 shares, of which 10,000
shares shall be common stock, par value $0.01 per share, and 5,000 shall be
preferred stock, par value $0.01 per share, unless and until the same shall be
changed in accordance with the laws of the State of Texas.
5. Articles of Incorporation of Surviving Corporation. The articles of
incorporation of Prime, as in effect on the Effective Date, shall be the
articles of incorporation of the Surviving Corporation, until the same shall be
altered or amended pursuant to the TBCA.
6. Bylaws. The bylaws of Prime, as in effect on the Effective Date,
shall be the bylaws of the Surviving Corporation, until the same shall be
altered, amended, or repealed, or until new bylaws are adopted as provided
therein.
7. Board of Directors. The directors of Prime immediately prior to the
Effective Date shall constitute the board of directors of the Surviving
Corporation and shall hold office from the Effective
<PAGE> 11
Date until their successors are duly elected or appointed and qualified, or
until they are removed from office, in the manner provided in the bylaws of the
Surviving Corporation.
8. Officers. The officers of Prime immediately prior to the Effective
Date shall be the officers of the Surviving Corporation and shall hold office
from the Effective Date until their successors are duly elected or appointed, or
until they are removed from office, in the manner provided in the bylaws of the
Surviving Corporation.
9. Conversion of Stock of Merging Companies. Shares of stock of the
Merging Companies shall be converted into shares of the Surviving Corporation as
follows, for a total of 5,000 shares of common stock, par value $0.01 per share,
and 5,000 shares of Preferred Stock, par value $0.01 per share, of the Surviving
Corporation outstanding:
(a) Shares of Prime. Each share of common stock of Prime that is
issued and outstanding on the Effective Date of merger shall be
converted to one share of common stock of the Surviving
Corporation. Each share of preferred stock of Prime that is
issued and outstanding on the Effective Date of the merger
shall be converted to one share of preferred stock of the
Surviving Corporation.
(b) Shares of Vibroplant. Each share of common stock of Vibroplant
that is issued and outstanding on the Effective Date of the
merger shall be canceled, and the sole shareholder of
Vibroplant shall not receive shares of common stock of the
Surviving Corporation.
(c) Shareholders in the Surviving Corporation shall be entitled to
receive any and all dividends on stock of the Surviving
Corporation that may be declared and paid between the Effective
Date of the merger and issuance to such shareholder of a
certificate of common stock in the Surviving Corporation.
10. Retirement of Stock. On and after the Effective Date of the merger,
the sole shareholder of Vibroplant shall surrender for cancellation its
certificate or certificates of stock in Vibroplant to the Surviving Corporation
by delivering the same to its offices at 16225 Park Ten Place, Suite 200,
Houston, Texas 77084.
11. Appraised Rights. The shareholders of Vibroplant, if the
shareholder were to dissent from this merger pursuant to Section 607.1320 of the
FBCA, may be entitled, upon compliance with the provisions of the FBCA regarding
the rights of dissenting shareholders, to be paid the fair value of its shares.
12. Waiver of Notice. Prime, as the sole shareholder of Vibroplant,
waives (i) the requirement that a copy of this Agreement be mailed to it
pursuant to Section 607.1104(2), and (ii) the 30-day waiting period prior to
filing the articles of merger with the Florida Secretary of State pursuant to
Section 607.1104(3) of the FBCA.
13. Abandonment by Board of Directors. The board of directors of Prime
may, in its discretion, abandon this merger, subject to the rights of third
parties under and contracts relating to this merger without further action or
approval by the shareholders of Prime, at any time before the merger has been
completed.
<PAGE> 12
15. Tax-Free Merger. This Agreement is considered to be a tax-free
merger pursuant to Section 368(a)(1)(A) or (F) of the Internal Revenue Code of
1986, as amended.
<PAGE> 13
ARTICLES OF MERGER
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, as amended (the "TBCA"), and Section 252 of the General
Corporation Law of the State of Delaware, as amended ("GCL"), Prime Acquisition
Corp., a Delaware corporation ("PAC"), and Primeco Inc., a Texas corporation
("Prime" or "Surviving Corporation") adopt the following Articles of Merger for
the purpose of merging PAC into the Surviving Corporation.
1. The Agreement of Merger (the "Agreement"), dated as of December
___, 1994, by and among Prime and PAC, attached hereto as Exhibit A and
incorporated herein by reference, contains the terms and conditions of the
merger of Prime and PAC. The Agreement was duly authorized by PAC by all action
required by its Certificate of Incorporation and the Delaware Corporation Law.
The Agreement was duly authorized by Prime by all action required by its
Articles of Incorporation and the Texas Business Corporation Act.
2. As to each of the undersigned corporations, the total number of
shares outstanding and entitled to vote on the Agreement, and the designation of
and number of outstanding shares of each class entitled to vote as a class on
the Agreement, are as follows:
ENTITLED TO VOTE
ONLY AS A CLASS
<TABLE>
<CAPTION>
Total Total
Number Number of
of Shares Shares of
Name of Common Preferred Number
of Stock Stock Designation of
Corporation Outstanding Outstanding of Class Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime 1,000 Common 1,000
Pac 5,000 Common 5,000
5,000 Preferred 5,000
</TABLE>
3. As to each of the undersigned corporations, the total number of
shares voted for and against the Agreement, respectively, and, as to each class
entitled to vote thereon as a class, the number of shares of such class voted
for and against the Agreement, respectively, are as follows:
<PAGE> 14
ENTITLED TO VOTE
ONLY AS A CLASS
<TABLE>
<CAPTION>
Total Total
Name of Voted Voted Voted Voted
Corporation For Against Class For Against
- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Prime 1,000 0 Common 1,000 0
PAC 5,000 0 Common 5,000 0
PAC 5,000 0 Preferred 5,000 0
</TABLE>
4. The Restated and Amended Articles of Incorporation of the Surviving
Corporation shall be set forth in their entirety below:
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PRIMECO INC.
ARTICLE I
NAME
The name of the Corporation (hereinafter called the "Corporation") is
"Primeco Inc."
ARTICLE II
DURATION
The period of duration of the Corporation is perpetual.
ARTICLE III
PURPOSE
The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the Texas Business Corporations Act.
<PAGE> 15
ARTICLE IV
CAPITALIZATION
The total number of shares of stock which the Corporation shall have
authority to issue is 15,000 shares. 10,000 of said shares shall be designated
as shares of Common Stock, all of which shall be of the same series with $.01
par value per share. 5,000 of said shares shall be designated as Preferred Stock
all of which shall be of the same series with $.01 par value per share. The
Preferred Stock will have such rights, preferences, privileges and restrictions
thereof as follows:
(a) Designation.
The Preferred Stock shall be designated "Series A Cumulative
Convertible Preferred Stock" (hereinafter "Convertible Preferred
Stock") and the number of authorized shares constituting the
Convertible Preferred Stock is Five Thousand (5,000).
(b) Dividend Rate.
(1) Dividends on the shares of Convertible Preferred Stock shall
accrue from the date of their original issue at a rate of fourteen
percent (14%) per annum computed on the basis of the actual number of
days elapsed in a 360-day year, and, to the extent any such dividends
and any other dividends accrued with respect to such dividends pursuant
to this paragraph (1) shall have accrued, but are in arrears because
they have not been declared and paid, such undeclared and unpaid
dividends shall accrue additional dividends from the date upon which
such undeclared and unpaid dividends accrued until the date upon which
they are paid at the rate of sixteen percent (16%) per annum
(compounded on the Dividend Payment Dates and computed on the basis of
the actual number of days elapsed in a 360-day year). All such
dividends shall be cumulative and shall be payable when and as declared
by the Board of Directors of the Corporation, out of assets legally
available for such purpose, on May 1 and November 1 of each year,
commencing, in the case of the first issuance of shares of Convertible
Preferred Stock, May 1, 1995 (each such date being hereinafter
individually a "Dividend Payment Date" and collectively the "Dividend
Payment Dates"), except that if any Dividend Payment Date is a
Saturday, Sunday or legal holiday then such dividend shall be paid on
the next business day following such Dividend Payment Date and no
additional amount shall accrue as a result of such delay.
(2) Each dividend shall be paid to the holders of record of
shares of Convertible Preferred Stock as they appear on the books of
the Corporation on the record date, not exceeding 30 days prior to the
Dividend Payment Date thereof, as shall be fixed by the Board of
Directors of the Corporation. Dividends in arrears may be declared and
paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of
Directors of the Corporation.
<PAGE> 16
(3) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on the shares of Convertible
Preferred Stock for any period if the Corporation shall be in default
in the payment of any dividends (including cumulative dividends, if
applicable) on any shares of Preferred Stock ranking, as to dividends,
prior to the Convertible Preferred Stock, unless a dividend sufficient
to cure such default shall be contemporaneously declared and paid.
(4) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on the Preferred Stock of any
series ranking, as to dividends, on a parity with or junior to the
Convertible Preferred Stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid on the
Convertible Preferred Stock through the last Dividend Payment Date.
When dividends are not paid in full, as aforesaid, upon the shares of
Convertible Preferred Stock and any other Preferred Stock ranking on a
parity as to dividends with the Convertible Preferred Stock, all
dividends declared upon shares of the Convertible Preferred Stock and
any other Preferred Stock ranking on a parity as to dividends with the
Convertible Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Convertible Preferred
Stock and such other Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the shares of
the Convertible Preferred Stock and such other Preferred Stock bear to
each other. Holders of shares of Convertible Preferred Stock shall not
be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as provided in
paragraphs (1) and (2) of this Section (b), on the Convertible
Preferred Stock.
(5) So long as any share of the Convertible Preferred Stock is
outstanding, no dividend (other than (i) a dividend in the
Corporation's Common Stock, par value $.01 per share ("the Common
Stock"), or in any other stock of the Corporation ranking junior to the
Convertible Preferred Stock as to dividends and upon liquidation or
(ii) as provided in paragraph (4) of this Section (b)), shall be
declared or paid or set aside for payment, or other distribution
declared or made, upon the Common Stock or upon any other stock of the
Corporation ranking junior to or on a parity with the Convertible
Preferred Stock as to dividends or upon liquidation, nor shall any
Common Stock nor any other stock of the Corporation ranking junior to
or on a parity with the Convertible Preferred Stock as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the
Corporation (except by conversion into or exchange for stock of the
Corporation ranking junior to the Convertible Preferred Stock as to
dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of the Convertible
Preferred Stock shall have been paid or contemporaneously are declared
and paid through the last Dividend Payment Date; provided, however,
that nothing contained in this paragraph (5) shall prevent the
Corporation from repurchasing or redeeming any of its capital stock
pursuant to the terms of any subscription agreement entered into with
any officer, director or employee of the Corporation or any of its
subsidiaries.
(c) Optional Redemption.
<PAGE> 17
The shares of Convertible Preferred Stock are redeemable on the
terms and conditions set forth below, at any time or from time to time,
at the option of the Corporation expressed by resolution of the Board
of Directors, at a per share redemption price of Two Thousand Dollars
($2,000.00) plus, in each case, accrued and unpaid dividends thereon to
the date fixed for redemption. The shares of Convertible Preferred
Stock may be redeemed in whole or in not more than two partial
redemptions, provided that in the first of such two partial redemptions
not less than 50% of the number of shares of Convertible Preferred
Stock then outstanding shall be redeemed and that in the second of such
two partial redemptions all of the shares of Convertible Preferred
Stock then outstanding shall be redeemed.
(d) Mandatory Redemption.
On March 15, 2006, the Corporation shall redeem all outstanding shares
of Convertible Preferred Stock at a per share redemption price of Two
Thousand Dollars ($2,000.00) plus accrued and unpaid dividends thereon
to the date fixed for redemption.
(e) Procedure for Redemption.
(1) If fewer than all the outstanding shares of Convertible
Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Board of Directors, subject to the
provisions of Sections (c) and (d) above, and the shares to be redeemed
shall be determined by lot or pro rata as may be determined by the
Board of Directors or by any other method as may be determined by the
Board of Directors in its sole discretion to be equitable.
(2) Notice of a redemption shall be given by first class mail,
postage prepaid, mailed not less than 20 nor more than 60 days prior to
the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the books of
the Corporation. Each such notice shall state: (i) the redemption date;
(ii) the number of shares of Convertible Preferred Stock to be redeemed
and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder;
(iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease to
accrue on such redemption date; and (vi) any other information required
by applicable laws or regulations.
(3) Notice having been mailed as aforesaid, on or prior to the
redemption date, the Corporation shall deposit with any bank or trust
company in the State of Texas, or any bank or trust company in the
United States duly appointed and acting as transfer agent for the
Corporation, as a trust fund, a sum sufficient to redeem the shares of
Convertible Preferred Stock called for redemption, with irrevocable
instructions and authority to such bank or trust company to give or
complete the notice of redemption thereof and to pay, on or after the
redemption date, to the respective holders of shares of Convertible
Preferred Stock, as evidenced by a list of holders of such shares
certified by an officer of the Corporation, the share redemption price
plus accrued and unpaid dividends as determined pursuant to the
provisions of Sections (c) and (d) above. From and after the
<PAGE> 18
redemption date (and upon deposit of the trust fund as provided in the
preceding sentence) dividends on the shares of Convertible Preferred
Stock so called for redemption shall cease to accrue, and said shares
shall no longer be deemed to be outstanding, and all rights of the
holders thereof as shareholders of the Corporation (except the right to
receive from the Corporation the redemption price plus accrued and
unpaid dividends to the date fixed for redemption) shall cease. Upon
surrender of the certificates for any shares so redeemed in accordance
with said notice (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation at
the redemption price aforesaid. In case fewer than all of the shares
represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the
holder thereof.
(4) Any shares of Convertible Preferred Stock which shall at any
time have been redeemed shall, after such redemption, have the status
of authorized but unissued shares of Preferred Stock, without
designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors. None of such
redeemed shares of Convertible Preferred Stock shall be reissued as
shares of Convertible Preferred Stock.
(5) If the Corporation shall be in default in the payment of any
dividends on any shares of Preferred Stock ranking, as to dividends,
prior to the Convertible Preferred Stock, then no shares of Convertible
Preferred Stock shall be redeemed and the Corporation shall not
purchase or otherwise acquire any shares of Convertible Preferred
Stock.
(6) Notwithstanding the foregoing provisions of this Section (e),
unless the full cumulative dividends on all outstanding shares of
Convertible Preferred Stock shall have been paid or contemporaneously
are declared and paid through the last Dividend Payment Date, no shares
of Convertible Preferred Stock shall be redeemed unless all outstanding
shares of Convertible Preferred Stock are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of Convertible Preferred Stock pursuant to a
purchase or exchange offer made on the same terms to all holders of
outstanding shares of Convertible Preferred Stock.
(f) Conversion.
(1) The holder of any shares of Convertible Preferred Stock at
his option may at any time (except that if any such share shall have
been called for redemption, then, as to such share, such right shall
terminate at the close of business on the date fixed for such
redemption, unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares
called for redemption) convert the shares of Convertible Preferred
Stock into fully paid and non-assessable shares of Common Stock at the
conversion price in effect at the time of conversion, and the number of
shares of Common Stock deliverable upon such conversion shall be the
number obtained by
<PAGE> 19
dividing Two Thousand Dollars ($2,000.00) for each share of Convertible
Preferred Stock being so converted by the conversion price fixed or
determined pursuant to the provisions of paragraph (4) of this Section
(f). A holder of shares of Convertible Preferred Stock must present for
conversion shares having a total liquidation preference at least equal
to the conversion price specified in paragraph (4) of this Section (f).
Such right shall be exercised by the surrender to the Corporation of
the shares so to be converted at any time during normal business hours
at the office or agency then maintained by it for payment of dividends
on the shares of Convertible Preferred Stock (the "Payment Office"),
accompanied (i) by written notice of such holder's election to convert,
(ii) if so required by the Corporation or any conversion agent, by
instruments of transfer, in form satisfactory to the Corporation and to
any conversion agent, duly executed by the registered holder or by his
duly authorized attorney, (iii) transfer tax stamps or funds therefor,
if required pursuant to paragraph (9) of this Section (f), and (iv) in
the case of shares surrendered for conversion between the record date
preceding a Dividend Payment Date for the Convertible Preferred Stock,
but prior to such Dividend Payment Date, an amount equal to the
dividends payable on such Dividend Payment Date on the shares to be
converted.
(2) As promptly as practicable after the surrender for conversion
of any shares of Convertible Preferred Stock in the manner provided in
paragraph (1) of this Section (f) and the payment in cash of any amount
required by the provisions of paragraphs (1) and (9) of this Section
(f), the Corporation will deliver or cause to be delivered at the
Payment Office to or upon the written order of the holder of such
shares, certificates representing the number of full shares of Common
Stock issuable upon such conversion, issued in such name or names as
such holder may direct. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such
surrender of the shares, and all rights of the holder of such shares as
a holder of such shares shall cease at such time and the person or
persons in whose name or names the certificates for such shares of
Common Stock are to be issued shall be treated for all purposes as
having become the record holder or holders thereof at such time and
such conversion shall be at the conversion price in effect at such
time; provided, however, that any such surrender and payment on any
date when the stock transfer books of the Corporation shall be closed
shall constitute the person or persons in whose name or names the
certificates for such shares of Common Stock are to be issued as the
record holder or holders thereof for all purposes immediately prior to
the close of business on the next succeeding day on which such stock
transfer books are opened and such conversion shall be at the
conversion price in effect at such time on such succeeding day.
If the last day for the exercise of the conversion right shall be
other than a business day, then such conversion right may be exercised
on the next succeeding business day.
<PAGE> 20
(3) Shares of Convertible Preferred Stock surrendered for
conversion between the close of business on any record date preceding a
Dividend Payment Date for the Convertible Preferred Stock and the
opening of business on such Dividend Payment Date shall (except in the
case of shares of Convertible Preferred Stock which have been called
for redemption on a redemption date within such period) be accompanied
by payment of an amount equal to the dividend payable on such Dividend
Payment Date on the shares being surrendered for conversion. Except as
provided in the preceding sentence, no adjustments in respect of
dividends on either the shares of Convertible Preferred Stock or the
Common Stock shall be made upon the conversion of any shares of
Convertible Preferred Stock; provided, however, that if shares shall be
converted subsequent to the record date preceding a Dividend Payment
Date for the Convertible Preferred Stock, but prior to such Dividend
Payment Date, the registered holder of such shares at the close of
business on such record date shall be entitled to receive the dividend
payable on such shares on such Dividend Payment Date notwithstanding
the conversion thereof or the Corporation's default in payment of the
dividend due on such Dividend Payment Date.
(4) The initial conversion price shall be Two Thousand Dollars
($2,000.00) per share of the Common Stock. The conversion price shall
be subject to adjustment as follows:
(a) In case the Corporation shall (i) pay a dividend or make a
distribution in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class), (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue
by reclassification of its shares of Common Stock any shares of capital
stock of the Corporation, the conversion privilege and the conversion
price in effect immediately prior to such action shall be adjusted so
that the holder of any shares of Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of capital stock of the Corporation which he would have owned
immediately following such action had such shares of Convertible
Preferred Stock been converted immediately prior thereto; provided,
however, that no such adjustment of the conversion privilege and the
conversion price shall be made with respect to any such dividend or
distribution or part thereof, paid during any fiscal year of the
Corporation which results in the increase of shares of Common Stock
outstanding immediately prior to such payment by less than 1% and such
dividends and distributions or parts thereof shall not be carried
forward or taken into account in any subsequent adjustment.
(b) An adjustment made pursuant to subparagraph (a) above shall
become effective retroactively immediately after the record date in the
case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to subparagraph (a), the holder of any shares thereafter
surrendered for conversion shall become entitled to receive shares of
two or more classes of capital stock of the Corporation, the Board of
Directors (whose determination shall be conclusive) shall determine the
allocation of the adjusted conversion price between or among shares of
such classes of capital stock.
<PAGE> 21
(c) In case the Corporation shall distribute to all holders of
its Common Stock evidences of its indebtedness or assets (excluding any
cash dividends not exceeding the total of the retained earnings of the
Corporation and any current income not yet reflected therein) then in
each such case the conversion price of the Common Stock shall be
adjusted so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the
date of such distribution by a fraction of which the numerator shall be
the current market price per share (determined as provided in
subparagraph (d) below) of the Common Stock on the record date
mentioned below less the then fair market value (as determined by the
Board of Directors of the Corporation, whose determination shall be
conclusive) of the portion of the assets or evidences of indebtedness
so distributed applicable to one share of Common Stock, and the
denominator shall be such current market price per share (determined as
provided in subparagraph (d) below) of the Common Stock. Such
adjustment shall become effective retroactively immediately after the
record date for the determination of shareholders entitled to receive
such distribution.
(d) For the purpose of any computation under subparagraph (c)
above, the current market price per share of Common Stock on any date
shall be deemed to be the average of the daily Closing Price for 15
consecutive business days commencing 45 business days before the day in
question. The term "Closing Price" shall mean, for each day, the last
reported sale price regular way on the New York Stock Exchange, or, if
not reported for such Exchange, on the Composite Tape, or, in case no
such reported sale takes place on such day, the average of the reported
closing bid and asked quotations on the New York Stock Exchange, or, if
the Common Stock is not listed on such Exchange or no such quotations
are available, the last reported sale price on the principal national
securities exchange on which the Common Stock is listed, or if not
listed on any national securities exchange, the last reported sale
price in the over-the-counter market as reported by the National
Quotation Bureau Co., or similar organization, or, if no such sale
price is available, the average of the high bid and low asked
quotations in the over-the-counter market as so reported, or if no such
quotations are available, the fair market price as determined by the
Board of Directors of the Corporation (whose determination shall be
conclusive).
(e) In any case in which this paragraph (4) shall require that an
adjustment be made retroactively immediately following a record date,
the Corporation may elect to defer (but only until five business days
following the mailing by the Corporation of the certificate of
independent public accountants described in subparagraph (g) below)
issuing to the holder of any shares converted after such record date
(i) the shares of Common Stock and other capital stock of the
Corporation issuable upon such conversion over and above (ii) the
shares of Common Stock and other capital stock of the Corporation
issuable upon such conversion only on the basis of the conversion price
prior to the adjustment.
(f) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided; however,
<PAGE> 22
that any adjustments which solely by reason of this subparagraph (f)
are not required to be made shall be carried forward and taken into
account in any subsequent adjustment; and, provided, further, that
adjustment shall be required and made in accordance with the provisions
of this Section (f) (other than this subparagraph (f)) not later than
such time as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock. All
calculations under this Section (f) shall be made to the nearest cent
or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the conversion
price in addition to those required by this paragraph (4), as it in its
discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, distribution of rights to purchase
stock or securities, or distribution of securities convertible into or
exchangeable for stock hereafter made by the Corporation to its
shareholders shall not be taxable.
(g) Whenever the conversion price is adjusted as herein provided,
the Corporation shall promptly (i) file with each conversion agent a
certificate of a firm of independent public accountants setting forth
the conversion price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, which certificate
shall be conclusive evidence of the correctness of such adjustment, and
(ii) mail or cause to be mailed a notice of such adjustment to the
holders of shares of Convertible Preferred Stock at their last
addresses as they shall appear upon the books of the Corporation.
(h) The term "Common Stock" shall mean the Corporation's Common
Stock, par value $.01 per share, as the same exists at the date of
filing of this Certificate or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time as a
result of an adjustment made pursuant to subparagraph (a) above, the
holder of any share of Convertible Preferred Stock thereafter
surrendered for conversion shall become entitled to receive any shares
of the Corporation other than shares of its Common Stock, thereafter
the conversion price of such other shares so receivable upon conversion
of any share shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in subparagraphs (a)
through (g) above, and the provisions of paragraph (1) through (3) and
paragraphs (5) through (12) with respect to the Common Stock shall
apply on like or similar terms to any such other shares.
(5) No fractional shares of stock shall be issued upon the
conversion of any share or shares of Convertible Preferred Stock. If
more than one such share shall be surrendered for conversion at the
same time by the same holder, the number of full shares which shall be
issuable upon the conversion thereof shall be computed on the basis of
the aggregate liquidation preference as specified in Section (h) below
of shares so surrendered. If any fractional interest in a share of
Common Stock would, except for the provisions of this
<PAGE> 23
paragraph (5), be deliverable upon the conversion of any share or
shares, the Corporation shall in lieu of delivering the fractional
share therefor, adjust such fractional interest by payment to the
holder of such surrendered share or shares of an amount in cash equal
(computed to the nearest cent) to the current market value of such
fractional interest, computed on the basis of the last reported sales
price regular way of Common Stock on the New York Stock Exchange, or,
if not reported for such Exchange, on the Composite Tape, on the
business day prior to the date of conversion, or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asked quotations on the New York Stock Exchange, or, if
the Common Stock is not listed on such Exchange or no such quotations
are available, the last reported sale price on the principal national
securities exchange on which the Common Stock is listed, or if not
listed on any national securities exchange, the last reported sale
price in the over-the-counter market as reported by the National
Quotation Bureau Co., or similar organization, or if no sale price is
available, the average of the high bid and low asked quotations in the
over-the-counter market as so reported, or if no such quotations are
available, the fair market price as determined by the Board of
Directors of the Corporation (whose determination shall be conclusive).
(6) If either of the following shall occur: (a) any
consolidation, reorganization or merger to which the Corporation is a
party, other than a consolidation, reorganization or a merger in which
the Corporation is a continuing corporation and which does not result
in any reclassification, change or exchange (other than changes in par
value or from par value to no par value or from no par value to par
value or changes as a result of a subdivision or combination) in
outstanding shares of Common Stock, or (b) any sale or conveyance to
another corporation of the property of the Corporation as an entirety
or substantially as an entirety; then the holder of each share of
Convertible Preferred Stock then outstanding shall upon conversion of
such share have the right to convert such share only into the kind and
amount of shares of stock and other securities and property receivable
upon such consolidation, reorganization, merger, sale or conveyance by
a holder of the number of shares of Common Stock issuable upon
conversion of such share of Convertible Preferred Stock immediately
prior to such consolidation, reorganization, merger, sale or
conveyance, subject to adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section
(f). The provisions of this paragraph (6) shall similarly apply to
successive consolidations, reorganizations, mergers, sales or
conveyances.
(7) The Corporation covenants that it will at all times reserve
and keep available, solely for the purpose of issue upon conversion of
the shares of Convertible Preferred Stock, such number of shares of
Common Stock as shall be issuable upon the conversion of all such
outstanding shares, provided, that nothing contained herein shall be
construed to preclude the Corporation from satisfying its obligations
in respect of the conversion of the shares by delivery of purchased
shares of Common Stock which are held in the treasury of the
Corporation.
The Corporation covenants that if any shares of Common Stock
required to be
<PAGE> 24
reserved for purposes of conversion of the shares hereunder require
registration with or approval of any governmental authority under any
Federal or State law or regulation before such shares may be issued
upon conversion, the Corporation will cause such shares to be duly
registered or approved, as the case may be. The Corporation will use
its best efforts to list the shares of Common Stock required to be
delivered upon conversion of shares prior to such delivery upon each
national securities exchange, if any, upon which the outstanding Common
Stock is listed at the time of such delivery, and, if such outstanding
Common Stock is not listed on any exchange but is traded in the
over-the-counter market, to qualify such shares for trading and
quotation privileges such as are then available for the outstanding
Common Stock. The Corporation covenants that all shares of Common Stock
which shall be issued upon conversion of the shares will upon issue be
fully paid and non-assessable and not subject to any preemptive rights.
(8) Before taking any action which would cause an adjustment
reducing the conversion price below the then par value of the Common
Stock, the Corporation will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of
Common Stock at the conversion price as so adjusted.
(9) The issuance of certificates for shares of Common Stock upon
conversion shall be made without charge for any stamp or other similar
tax in respect of such issuance. However, if any such certificate is to
be issued in a name other than that of the holder of the share or
shares converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be payable
in respect of any transfer involved in such issuance or shall establish
to the satisfaction of the Corporation that such tax has been paid.
(10) Notwithstanding anything elsewhere contained in these
Articles, any funds which at any time shall have been deposited by the
Corporation or on its behalf with any paying agent for the purpose of
paying dividends on or the redemption price of any of the shares of
Convertible Preferred Stock and which shall not be required for such
purposes because of the conversion of such shares, as provided in this
Section (f), shall, upon delivery to the paying agent of evidence
satisfactory to it of such conversion, be repaid to the Corporation by
the paying agent.
(11) If and whenever the Corporation shall grant to the holders
of Common Stock, as such, rights to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible
into or exchangeable for or carrying a right or option to purchase
Common Stock at a price per share less than the current market price
per share (as determined pursuant to subparagraph 4(d) above) on the
day fixed for determining those holders of Common Stock entitled
thereto, the Corporation shall concurrently therewith grant to the then
registered holders of shares of Convertible Preferred Stock all of such
rights or options to which such holder would have been entitled if, on
the date of determination of shareholders entitled to the rights or
options being granted by the Corporation, such holder were the holder
of record of the number
<PAGE> 25
of whole shares of Common Stock then issuable upon conversion of his
shares of Convertible Preferred Stock. Such grant by the Corporation to
the holders of Convertible Preferred Stock shall be in lieu of any
adjustment to the conversion price.
(12) If:
(a) The Corporation shall take any action which would require an
adjustment in the conversion price pursuant to subparagraph (4)(c) of
this Section (f); or
(b) There shall be any capital reorganization or reclassification
of the Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in par value or from
par value to no par value or from no par value to par value of the
Common Stock), or any consolidation or merger to which the Corporation
is a party and for which approval of any shareholders of the
Corporation is required, or any sale or transfer of all or
substantially all of the assets of the Corporation; or
(c) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with any conversion
agent, and shall cause to be given to the holders of the shares of
Convertible Preferred Stock at least ten days prior to the applicable
date hereinafter specified, a notice that (i) the date on which a
record is to be taken for the purpose of any distribution to holders of
Common Stock, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
distribution are to be determined or (ii) the date on which such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such
notice or any defect therein shall not affect the legality or validity
of the proceedings described in subsection (a), (b) or (c) of this
subparagraph (12).
(g) Voting.
The shares of Convertible Preferred Stock shall not have any
voting powers either general or special, except as required by law or
regulation and except that unless the vote or consent of the holders of
a greater number of shares shall then be required by law, the consent
of the holders of at least a majority of all of the shares of
Convertible Preferred Stock, and all other series of Preferred Stock
ranking on a parity with the Convertible Preferred Stock either as to
dividends or upon liquidation and upon which like voting rights have
been conferred and are then exercisable, at the time outstanding, given
in person or by proxy, either in writing or by a vote at a meeting
called for the purpose at which the holders of such shares shall vote
together as a single class without regard to series, shall be necessary
for authorizing, effecting or validating the amendment, alteration or
repeal of any of the provisions of the Articles of Incorporation or of
any amendment thereto (including any Statement with Respect to Shares
or any similar
<PAGE> 26
document relating to any series of Preferred Stock) so as to affect
materially and adversely the rights, preferences, privileges or voting
power of shares of Convertible Preferred Stock. In case the shares of
Convertible Preferred Stock would be so affected in a materially
different manner than any other series of Preferred Stock then
outstanding by any such action, the holders of shares of Convertible
Preferred Stock shall be entitled to vote as a separate class, and the
Corporation shall not take such action without the consent or
affirmative vote, as above provided, of at least a majority of the
total number of shares of Convertible Preferred Stock then outstanding,
in addition to or as a specific part of the consent or affirmative vote
hereinabove otherwise required. The increase of the authorized amount
of the Preferred Stock, or the creation, authorization or issuance of
any shares of any other class of stock of the Corporation ranking, (i)
junior to the Convertible Preferred Stock, or (ii) on a parity with the
shares of Convertible Preferred Stock, as to dividends or upon
liquidation, or the reclassification of any authorized or outstanding
stock of the Corporation into any such junior or parity shares, or the
creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase any such junior or
parity shares shall not be deemed to affect materially and adversely
the rights, preferences, privileges or voting power of shares of
Convertible Preferred Stock.
(h) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Convertible Preferred Stock shall be entitled to receive out
of the assets of the Corporation available for distribution to
shareholders, before any payment or distribution shall be made on the
Common Stock or on any other class of stock ranking junior to
Convertible Preferred Stock upon liquidation, the amount of Two
Thousand Dollars ($2,000.00) per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued
and unpaid thereon to the date of final distribution, subject only to
the provisions of this paragraph (1) of this Section (h). Once any
portion of such a liquidation distribution is made to any holder of
shares of Convertible Preferred Stock, there shall not be any
conversion rights in respect of such shares pursuant to Section (f)
hereof unless the full amount of such distribution in respect of such
shares being converted is remitted to the Corporation prior to or
contemporaneously with the conversion of such shares. All shares of
Preferred Stock ranking in whole or in part prior to the shares of
Convertible Preferred Stock as to liquidation shall be entitled to be
paid to the extent of such priority in full in cash, or money for the
payment thereof set apart, before any payment provided for in this
Section (h) shall be made with respect to the shares of Convertible
Preferred Stock.
(2) Neither the sale, lease or exchange (for cash, shares of
stock, securities or other consideration) of all or substantially all
the property and assets of the Corporation nor the merger or
consolidation of the Corporation into or with any other corporation or
the merger or consolidation of any other corporation into or with the
Corporation, shall be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, for the purposes of this Section
(h).
<PAGE> 27
(3) After the payment to the holders of the shares of Convertible
Preferred Stock of the full preferential amounts provided for in this
Section (h), the holders of shares of Convertible Preferred Stock as
such shall have no right or claim to any of the remaining assets of the
Corporation.
(4) In the event the assets of the Corporation available for
distribution to the holders of shares of Convertible Preferred Stock
upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full
all amounts to which such holders are entitled pursuant to paragraph
(1) of this Section (h), no such distribution shall be made on account
of any of shares of any other class or series of Preferred Stock
ranking in whole or in part on a parity with the shares of Convertible
Preferred Stock upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the
shares of Convertible Preferred Stock, ratably, in proportion to the
full distributable parity amounts for which holders of all such parity
shares are respectively entitled upon such dissolution, liquidation or
winding up.
(i) Priority.
For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(1) Prior to the shares of the Convertible Preferred Stock,
either as to dividends or upon liquidation, if the holders of such
class or classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, as the case may be,
in preference or priority to the holders of shares of Convertible
Preferred Stock. Each holder of any share of Convertible Preferred
Stock, by his acceptance thereof, expressly covenants and agrees that
the rights of the holders of any shares of any other series of
Preferred Stock of the Corporation to receive dividends or amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, shall be and hereby are
expressly prior to his rights unless in the case of any particular
series of Preferred Stock the certificate or other instrument creating
or evidencing the same expressly provides that the rights of the
holders of such series shall not be prior to the shares of Convertible
Preferred Stock.
(2) On a parity with shares of Convertible Preferred Stock,
either as to dividends or upon liquidation, whether or not the dividend
rates, dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those of
the Convertible Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, whether
voluntary or involuntary, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or
priority, one over the other, as between the holders of such stock and
the holders of shares of Convertible Preferred Stock.
(3) Junior to shares of Convertible Preferred Stock, either as to
dividends or upon
<PAGE> 28
liquidation, if such class or classes shall be Common Stock or if the
holders of shares of Convertible Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary of
involuntary, as the case may be, in preference or priority to the
holders of shares of such class or classes.
(j) Payments. All payments to a holder of Convertible Preferred
Stock shall be made at the office or agency of the Corporation
maintained for such purpose in such coin or currency of the United
States of America as at the time of payment is legal tender for the
payment of public and private debts; provided, however, that at the
option of the Corporation payment may be made (i) by check mailed to
such holder at his address appearing on the records of the Corporation
or, (ii) at the request of such holder, by wire transfer of immediately
available funds to the address designated by such holder in writing.
ARTICLE V
ISSUANCE OF SHARES
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of at least $1,000,
consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE
The street address of the registered office of the Corporation is 16225
Park Ten Place, Suite 200, Houston, Texas 77084; and the name of the registered
agent of the Corporation at such address is Thomas E. Bennett.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial board of directors of
the Corporation is four, and the name and address of the persons who are to
serve as such directors until the next annual meeting of the shareholders or
until their successors are elected and qualified are:
<TABLE>
<CAPTION>
Name Address
<S> <C>
E. Garrett Bewkes, III 280 Park Avenue, 37th Floor
New York, NY 10017
Robert V. Glaser 280 Park Avenue, 37th Floor
New York, NY 10017
Charles J. Philippin 280 Park Avenue, 37th Floor
New York, NY 10017
Christopher J. O'Brien 280 Park Avenue, 37th Floor
New York, NY 10017
</TABLE>
<PAGE> 29
ARTICLE VIII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder of the Corporation shall be entitled as a matter of
rights to purchase or acquire any additional shares of stock of the Corporation
or any security or other obligation convertible into, exchangeable for, or
conferring the right to purchase or acquire, shares of stock of the Corporation.
<PAGE> 30
ARTICLE IX
DENIAL OF CUMULATIVE VOTING
When electing directors, a shareholder of the Corporation shall not be
permitted to cumulate such shareholder's vote.
ARTICLE X
REQUIRED SHAREHOLDER VOTE AND CONSENT
Except as otherwise required by law, the affirmative vote of the
holders of a majority of the issued and outstanding shares of the Corporation
shall decide any matter submitted to a vote of the shareholders of the
Corporation. The holders of a majority of the issued and outstanding shares of
the Corporation may take any action that the shareholders of the Corporation are
permitted or required to take at a meeting pursuant to a consent setting for the
action taken that such holders sign.
ARTICLE XI
INDEMNIFICATION
The Corporation shall (i) indemnify any person who was, is, or is
threatened to be made a defendant or respondent in any completed, pending, or
threatened action, proceeding, or suit (whether civil, criminal, administrative,
or investigative, any appeal in such action, proceeding, or suit, and any
inquiry or investigation that could lead to such an action, proceeding, or suit)
because such person was or is a director or officer of the Corporation, or while
a director or officer of the Corporation, was or is serving at the request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, proceeding, or suit; and
(ii) advance reasonable expenses to such person in connection with such action,
proceeding or suit. Any repeal or modification of this Article shall not
adversely affect any rights to indemnification of any person with respect to any
competed, pending, or threatened action, proceeding, or suit existing
immediately prior to such repeal or modification. The rights provided in this
Article shall not be exclusive of any other rights to which such person may be
entitled under any provision of the bylaws of the Corporation, a resolution of
the shareholders or the directors of the Corporation, an agreement, or
otherwise.
ARTICLE XII
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for breach of his or her fiduciary duty as
a director. Any repeal or modification of this Article shall not adversely
affect any rights or protection of a director of the Corporation existing
immediately prior to such repeal or modification.
<PAGE> 31
ARTICLE XIV
CORPORATE POWER
The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on the shareholders of
the Corporation herein are granted subject to this reservation.
[SIGNATURES ON NEXT PAGE]
<PAGE> 32
IN WITNESS WHEREOF, the undersigned have caused these Articles of
Merger to be executed by their respective Presidents on December ___, 1994.
PRIMECO INC.
By:___________________________
Name: Robert V. Glaser
Title: President
PRIME ACQUISITION CORP.
By:___________________________
Name: Robert V. Glaser
Title: President
<PAGE> 33
AGREEMENT OF MERGER
Agreement of Merger (this "Agreement"), dated as of December ___,
1994, between Primeco Inc., a Texas corporation ("Prime") and Prime Acquisition
Corp., Inc., a Delaware corporation ("PAC", together with Prime, the "Merging
Companies").
WHEREAS, Prime is a corporation organized and existing under the
laws of the State of Texas and having an authorized capitalization of 1,000
shares of common stock, $1.00 par value; and
WHEREAS, PAC is a corporation organized and existing under the
laws of the State of Delaware and having an authorized capitalization of 5,000
shares of common stock, $0.01 par value and 5,000 shares of preferred stock
$0.01 par value;
In consideration of the mutual promises and covenants, and
subject to the conditions set forth herein, the Merging Companies agree as
follows:
1. Merger. The Merging Companies shall be merged into a single
corporation by PAC merging with and into Prime, which shall survive the merger
(the "Surviving Corporation"), pursuant to the provisions of the Texas Business
Corporation Act and the Delaware General Corporation Law. Upon this merger the
separate corporate existence of PAC shall cease and the Surviving Corporation
shall become the owner, without other transfer, of all the rights and property
of Prime and PAC, and the Surviving Corporation shall become subject to all the
debts and liabilities of the Merging Companies in the same manner as if it had
itself incurred them.
2. Effective Date. The merger shall become effective
immediately upon compliance with the laws of the States of Texas and Delaware
(the "Effective Date").
3. Surviving Corporation. The name of the Surviving
Corporation shall be Primeco Inc. The purposes and county where the registered
office for the Surviving Corporation shall be located shall be as they appear in
the articles of incorporation of the Surviving Corporation.
4. Authorized Capital. The authorized capital stock of the
Surviving Corporation following the Effective Date shall be 10,000 shares of
common stock, par value $0.01 and 5,000 shares of preferred stock, $0.01 par
value, unless and until the same shall be changed in accordance with the laws of
the State of Texas.
5. Amended and Restated Articles of Incorporation of Surviving
Corporation. The Amended and Restated and Articles of Incorporation of Prime, as
attached hereto as Exhibit A, shall be the articles of incorporation of the
Surviving Corporation, until the same shall be altered or amended pursuant to
the Texas Business Corporation Act.
6. Bylaws. The bylaws of Prime, as attached hereto as Exhibit
B, shall be the bylaws of the Surviving Corporation, until the same shall be
altered, amended, or repealed, or until new bylaws are adopted as provided
therein.
7. Board of Directors. The names and addresses of the persons
who shall constitute the board of directors of the Surviving Corporation, and
who shall hold office until the first annual meeting of the shareholders of the
Surviving Corporation are as follows:
<PAGE> 34
8. Conversion of Stock of Merging Companies. On the Effective
Date, the shares of stock of the Merging Companies shall be treated as set forth
below, for a total capitalization of the Surviving Corporation of 5,000 shares
of common stock, par value $0.01, and 5,000 shares of preferred stock, $0.01 par
value:
(a) Shares of PAC. Each share of common stock of PAC that
is issued and outstanding on the Effective Date shall, by virtue of the merger
and without any action on the part of the holder thereof, be canceled and
converted into the right to receive one share of common stock of the Surviving
Corporation and each share of preferred stock of PAC that is issued and
outstanding on the Effective Date shall, by virtue of the merger and without any
action on the part of the holder thereof, be canceled and converted into the
right to receive one share of Series A Cumulative Convertible Preferred Stock of
the Surviving Corporation, such shares to represent all issued and outstanding
shares of the Surviving Corporation on the Effective Date. The Series A
Cumulative Preferred Stock of the Surviving Corporation shall have the rights,
preferences, privileges and restrictions contained in the Amended and Restated
Articles of Incorporation attached hereto as Exhibit A.
(b) Shares of Prime. Each share of common and preferred
stock of Prime that is issued and outstanding on the Effective Date of the
merger shall be canceled.
(c) Prime Holding, Inc., as sole shareholder, shall be
entitled to receive any and all dividends on stock of the Surviving Corporation
that may be declared and paid between the Effective Date of the merger and
issuance to such shareholder of a certificate of common stock or preferred stock
in the Surviving Corporation.
9. Retirement of Stock. On and after the Effective Date of the
merger, Holding shall surrender for cancellation its certificates of stock in
PAC to the Surviving Corporation by delivering the same to its appointed agent,
Sean Griffiths, Esq., Gibson, Dunn & Crutcher, 200 Park Avenue, New York, NY
10166-0193.
10. Approval of Shareholders. This Agreement shall be
submitted to the shareholders of the Merging Companies for their approval in the
manner provided by the applicable laws of the States of Texas and Delaware at
such time as the boards of directors of the Merging Companies shall agree.
11. Abandonment by Board of Directors. The directors of the
Merging Companies may, in their discretion, abandon this merger, subject to the
rights of third parties under and contracts relating to this merger without
further action or approval by the shareholders of the Merging Companies, at any
time before the merger has been completed.
12. Counterparts. This Agreement may be executed in any number
of counterparts, and all such counterparts and copies shall be and constitute
one original instrument.
<PAGE> 35
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by the undersigned on the date first written above.
PRIMECO INC.
By:
Name:
Title:
PRIME ACQUISITION CORP.
By:
Name:
Title:
<PAGE> 36
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PRIMECO INC.
ARTICLE I
NAME
The name of the Corporation (hereinafter called the
"Corporation") is "Primeco Inc."
ARTICLE II
DURATION
The period of duration of the Corporation is perpetual.
ARTICLE III
PURPOSE
The purpose for which the Corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the Texas Business Corporations Act.
ARTICLE IV
CAPITALIZATION
The total number of shares of stock which the Corporation
shall have authority to issue is 15,000 shares. 10,000 of said shares shall be
designated as shares of Common Stock, all of which shall be of the same series
with $.01 par value per share. 5,000 of said shares shall be designated as
Preferred Stock all of which shall be of the same series with $.01 par value per
share. The Preferred Stock will have such rights, preferences, privileges and
restrictions thereof as follows:
(a) Designation.
The Preferred Stock shall be designated "Series A
Cumulative Convertible Preferred Stock" (hereinafter "Convertible
Preferred Stock") and the number of authorized shares constituting the
Convertible Preferred Stock is Five Thousand (5,000).
(b) Dividend Rate.
(1) Dividends on the shares of Convertible Preferred Stock
shall accrue from the date of their original issue at a rate of
fourteen percent (14%) per annum computed on the basis of the actual
number of days elapsed in a 360-day year, and, to the extent any such
dividends and any other dividends accrued with respect to such
dividends pursuant to this paragraph (1) shall have accrued, but are in
arrears because they have not been declared and paid, such undeclared
and unpaid dividends shall accrue additional dividends from the date
upon which such undeclared and unpaid dividends accrued until the date
upon which they are paid at the rate of sixteen percent (16%) per annum
(compounded on the Dividend Payment Dates and computed
<PAGE> 37
on the basis of the actual number of days elapsed in a 360-day year).
All such dividends shall be cumulative and shall be payable when and as
declared by the Board of Directors of the Corporation, out of assets
legally available for such purpose, on May 1 and November 1 of each
year, commencing, in the case of the first issuance of shares of
Convertible Preferred Stock, May 1, 1995 (each such date being
hereinafter individually a "Dividend Payment Date" and collectively the
"Dividend Payment Dates"), except that if any Dividend Payment Date is
a Saturday, Sunday or legal holiday then such dividend shall be paid on
the next business day following such Dividend Payment Date and no
additional amount shall accrue as a result of such delay.
(2) Each dividend shall be paid to the holders of record of
shares of Convertible Preferred Stock as they appear on the books of
the Corporation on the record date, not exceeding 30 days prior to the
Dividend Payment Date thereof, as shall be fixed by the Board of
Directors of the Corporation. Dividends in arrears may be declared and
paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of
Directors of the Corporation.
(3) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on the shares of Convertible
Preferred Stock for any period if the Corporation shall be in default
in the payment of any dividends (including cumulative dividends, if
applicable) on any shares of Preferred Stock ranking, as to dividends,
prior to the Convertible Preferred Stock, unless a dividend sufficient
to cure such default shall be contemporaneously declared and paid.
(4) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on the Preferred Stock of any
series ranking, as to dividends, on a parity with or junior to the
Convertible Preferred Stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid on the
Convertible Preferred Stock through the last Dividend Payment Date.
When dividends are not paid in full, as aforesaid, upon the shares of
Convertible Preferred Stock and any other Preferred Stock ranking on a
parity as to dividends with the Convertible Preferred Stock, all
dividends declared upon shares of the Convertible Preferred Stock and
any other Preferred Stock ranking on a parity as to dividends with the
Convertible Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Convertible Preferred
Stock and such other Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the shares of
the Convertible Preferred Stock and such other Preferred Stock bear to
each other. Holders of shares of Convertible Preferred Stock shall not
be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as provided in
paragraphs (1) and (2) of this Section (b), on the Convertible
Preferred Stock.
(5) So long as any share of the Convertible Preferred Stock is
outstanding, no dividend (other than (i) a dividend in the
Corporation's Common Stock, par value $.01 per share ("the Common
Stock"), or in any other stock of the Corporation ranking junior to the
Convertible Preferred Stock as to dividends and upon liquidation or
(ii) as provided in paragraph (4) of this Section (b)), shall be
declared or paid or set aside for payment, or other distribution
declared or made, upon the Common Stock or upon any other stock of the
Corporation ranking junior to or on a parity with the Convertible
Preferred Stock as to dividends or upon liquidation, nor shall any
Common Stock nor any other stock of the Corporation ranking junior to
or on a parity with
<PAGE> 38
the Convertible Preferred Stock as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation (except
by conversion into or exchange for stock of the Corporation ranking
junior to the Convertible Preferred Stock as to dividends and upon
liquidation) unless, in each case, the full cumulative dividends on all
outstanding shares of the Convertible Preferred Stock shall have been
paid or contemporaneously are declared and paid through the last
Dividend Payment Date; provided, however, that nothing contained in
this paragraph (5) shall prevent the Corporation from repurchasing or
redeeming any of its capital stock pursuant to the terms of any
subscription agreement entered into with any officer, director or
employee of the Corporation or any of its subsidiaries.
(c) Optional Redemption.
The shares of Convertible Preferred Stock are redeemable
on the terms and conditions set forth below, at any time or from time
to time, at the option of the Corporation expressed by resolution of
the Board of Directors, at a per share redemption price of Two Thousand
Dollars ($2,000.00) plus, in each case, accrued and unpaid dividends
thereon to the date fixed for redemption. The shares of Convertible
Preferred Stock may be redeemed in whole or in not more than two
partial redemptions, provided that in the first of such two partial
redemptions not less than 50% of the number of shares of Convertible
Preferred Stock then outstanding shall be redeemed and that in the
second of such two partial redemptions all of the shares of Convertible
Preferred Stock then outstanding shall be redeemed.
(d) Mandatory Redemption.
On March 15, 2006, the Corporation shall redeem all
outstanding shares of Convertible Preferred Stock at a per share
redemption price of Two Thousand Dollars ($2,000.00) plus accrued and
unpaid dividends thereon to the date fixed for redemption.
(e) Procedure for Redemption.
(1) If fewer than all the outstanding shares of
Convertible Preferred Stock are to be redeemed, the number of shares to
be redeemed shall be determined by the Board of Directors, subject to
the provisions of Sections (c) and (d) above, and the shares to be
redeemed shall be determined by lot or pro rata as may be determined by
the Board of Directors or by any other method as may be determined by
the Board of Directors in its sole discretion to be equitable.
(2) Notice of a redemption shall be given by first class
mail, postage prepaid, mailed not less than 20 nor more than 60 days
prior to the redemption date, to each holder of record of the shares to
be redeemed, at such holder's address as the same appears on the books
of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Convertible Preferred Stock to be
redeemed and, if fewer than all the shares held by such holder are to
be redeemed, the number of such shares to be redeemed from such holder;
(iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease to
accrue on such redemption date; and (vi) any other information required
by applicable laws or regulations.
<PAGE> 39
(3) Notice having been mailed as aforesaid, on or prior
to the redemption date, the Corporation shall deposit with any bank or
trust company in the State of Texas, or any bank or trust company in
the United States duly appointed and acting as transfer agent for the
Corporation, as a trust fund, a sum sufficient to redeem the shares of
Convertible Preferred Stock called for redemption, with irrevocable
instructions and authority to such bank or trust company to give or
complete the notice of redemption thereof and to pay, on or after the
redemption date, to the respective holders of shares of Convertible
Preferred Stock, as evidenced by a list of holders of such shares
certified by an officer of the Corporation, the share redemption price
plus accrued and unpaid dividends as determined pursuant to the
provisions of Sections (c) and (d) above. From and after the redemption
date (and upon deposit of the trust fund as provided in the preceding
sentence) dividends on the shares of Convertible Preferred Stock so
called for redemption shall cease to accrue, and said shares shall no
longer be deemed to be outstanding, and all rights of the holders
thereof as shareholders of the Corporation (except the right to receive
from the Corporation the redemption price plus accrued and unpaid
dividends to the date fixed for redemption) shall cease. Upon surrender
of the certificates for any shares so redeemed in accordance with said
notice (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all of the shares
represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the
holder thereof.
(4) Any shares of Convertible Preferred Stock which shall
at any time have been redeemed shall, after such redemption, have the
status of authorized but unissued shares of Preferred Stock, without
designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors. None of such
redeemed shares of Convertible Preferred Stock shall be reissued as
shares of Convertible Preferred Stock.
(5) If the Corporation shall be in default in the payment
of any dividends on any shares of Preferred Stock ranking, as to
dividends, prior to the Convertible Preferred Stock, then no shares of
Convertible Preferred Stock shall be redeemed and the Corporation shall
not purchase or otherwise acquire any shares of Convertible Preferred
Stock.
(6) Notwithstanding the foregoing provisions of this
Section (e), unless the full cumulative dividends on all outstanding
shares of Convertible Preferred Stock shall have been paid or
contemporaneously are declared and paid through the last Dividend
Payment Date, no shares of Convertible Preferred Stock shall be
redeemed unless all outstanding shares of Convertible Preferred Stock
are simultaneously redeemed; provided, however, that the foregoing
shall not prevent the purchase or acquisition of shares of Convertible
Preferred Stock pursuant to a purchase or exchange offer made on the
same terms to all holders of outstanding shares of Convertible
Preferred Stock.
(f) Conversion.
(1) The holder of any shares of Convertible Preferred
Stock at his option may at any time (except that if any such share
shall have been called for redemption, then, as to such share, such
right shall terminate at the close of business on the date fixed for
such redemption, unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares
called for redemption) convert the shares of Convertible Preferred
Stock into
<PAGE> 40
fully paid and non-assessable shares of Common Stock at the conversion
price in effect at the time of conversion, and the number of shares of
Common Stock deliverable upon such conversion shall be the number
obtained by dividing Two Thousand Dollars ($2,000.00) for each share of
Convertible Preferred Stock being so converted by the conversion price
fixed or determined pursuant to the provisions of paragraph (4) of this
Section (f). A holder of shares of Convertible Preferred Stock must
present for conversion shares having a total liquidation preference at
least equal to the conversion price specified in paragraph (4) of this
Section (f). Such right shall be exercised by the surrender to the
Corporation of the shares so to be converted at any time during normal
business hours at the office or agency then maintained by it for
payment of dividends on the shares of Convertible Preferred Stock (the
"Payment Office"), accompanied (i) by written notice of such holder's
election to convert, (ii) if so required by the Corporation or any
conversion agent, by instruments of transfer, in form satisfactory to
the Corporation and to any conversion agent, duly executed by the
registered holder or by his duly authorized attorney, (iii) transfer
tax stamps or funds therefor, if required pursuant to paragraph (9) of
this Section (f), and (iv) in the case of shares surrendered for
conversion between the record date preceding a Dividend Payment Date
for the Convertible Preferred Stock, but prior to such Dividend Payment
Date, an amount equal to the dividends payable on such Dividend Payment
Date on the shares to be converted.
(2) As promptly as practicable after the surrender for
conversion of any shares of Convertible Preferred Stock in the manner
provided in paragraph (1) of this Section (f) and the payment in cash
of any amount required by the provisions of paragraphs (1) and (9) of
this Section (f), the Corporation will deliver or cause to be delivered
at the Payment Office to or upon the written order of the holder of
such shares, certificates representing the number of full shares of
Common Stock issuable upon such conversion, issued in such name or
names as such holder may direct. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of such surrender of the shares, and all rights of the holder of such
shares as a holder of such shares shall cease at such time and the
person or persons in whose name or names the certificates for such
shares of Common Stock are to be issued shall be treated for all
purposes as having become the record holder or holders thereof at such
time and such conversion shall be at the conversion price in effect at
such time; provided, however, that any such surrender and payment on
any date when the stock transfer books of the Corporation shall be
closed shall constitute the person or persons in whose name or names
the certificates for such shares of Common Stock are to be issued as
the record holder or holders thereof for all purposes immediately prior
to the close of business on the next succeeding day on which such stock
transfer books are opened and such conversion shall be at the
conversion price in effect at such time on such succeeding day.
If the last day for the exercise of the conversion right
shall be other than a business day, then such conversion right may be
exercised on the next succeeding business day.
(3) Shares of Convertible Preferred Stock surrendered for
conversion between the close of business on any record date preceding a
Dividend Payment Date for the Convertible Preferred Stock and the
opening of business on such Dividend Payment Date shall (except in the
case of shares of Convertible Preferred Stock which have been called
for redemption on a redemption date within such period) be accompanied
by payment of an amount equal to the dividend payable on such Dividend
Payment Date on the shares being surrendered for conversion. Except as
provided in the preceding sentence, no adjustments in respect of
<PAGE> 41
dividends on either the shares of Convertible Preferred Stock or the
Common Stock shall be made upon the conversion of any shares of
Convertible Preferred Stock; provided, however, that if shares shall be
converted subsequent to the record date preceding a Dividend Payment
Date for the Convertible Preferred Stock, but prior to such Dividend
Payment Date, the registered holder of such shares at the close of
business on such record date shall be entitled to receive the dividend
payable on such shares on such Dividend Payment Date notwithstanding
the conversion thereof or the Corporation's default in payment of the
dividend due on such Dividend Payment Date.
(4) The initial conversion price shall be Two Thousand
Dollars ($2,000.00) per share of the Common Stock. The conversion price
shall be subject to adjustment as follows:
(a) In case the Corporation shall (i) pay a dividend
or make a distribution in shares of its capital stock (whether shares
of Common Stock or of capital stock of any other class), (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue
by reclassification of its shares of Common Stock any shares of capital
stock of the Corporation, the conversion privilege and the conversion
price in effect immediately prior to such action shall be adjusted so
that the holder of any shares of Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of capital stock of the Corporation which he would have owned
immediately following such action had such shares of Convertible
Preferred Stock been converted immediately prior thereto; provided,
however, that no such adjustment of the conversion privilege and the
conversion price shall be made with respect to any such dividend or
distribution or part thereof, paid during any fiscal year of the
Corporation which results in the increase of shares of Common Stock
outstanding immediately prior to such payment by less than 1% and such
dividends and distributions or parts thereof shall not be carried
forward or taken into account in any subsequent adjustment.
(b) An adjustment made pursuant to subparagraph (a)
above shall become effective retroactively immediately after the record
date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to subparagraph (a), the holder of any shares
thereafter surrendered for conversion shall become entitled to receive
shares of two or more classes of capital stock of the Corporation, the
Board of Directors (whose determination shall be conclusive) shall
determine the allocation of the adjusted conversion price between or
among shares of such classes of capital stock.
(c) In case the Corporation shall distribute to all
holders of its Common Stock evidences of its indebtedness or assets
(excluding any cash dividends not exceeding the total of the retained
earnings of the Corporation and any current income not yet reflected
therein) then in each such case the conversion price of the Common
Stock shall be adjusted so that the same shall equal the price
determined by multiplying the conversion price in effect immediately
prior to the date of such distribution by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (d) below) of the Common Stock on the record
date mentioned below less the then fair market value (as determined by
the Board of Directors of the Corporation, whose determination shall be
conclusive) of the portion of the assets or evidences of indebtedness
so distributed applicable to one share of Common Stock, and the
denominator shall be such current market price per share (determined as
provided in
<PAGE> 42
subparagraph (d) below) of the Common Stock. Such adjustment shall
become effective retroactively immediately after the record date for
the determination of shareholders entitled to receive such
distribution.
(d) For the purpose of any computation under
subparagraph (c) above, the current market price per share of Common
Stock on any date shall be deemed to be the average of the daily
Closing Price for 15 consecutive business days commencing 45 business
days before the day in question. The term "Closing Price" shall mean,
for each day, the last reported sale price regular way on the New York
Stock Exchange, or, if not reported for such Exchange, on the Composite
Tape, or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked quotations on the New
York Stock Exchange, or, if the Common Stock is not listed on such
Exchange or no such quotations are available, the last reported sale
price on the principal national securities exchange on which the Common
Stock is listed, or if not listed on any national securities exchange,
the last reported sale price in the over-the-counter market as reported
by the National Quotation Bureau Co., or similar organization, or, if
no such sale price is available, the average of the high bid and low
asked quotations in the over-the-counter market as so reported, or if
no such quotations are available, the fair market price as determined
by the Board of Directors of the Corporation (whose determination shall
be conclusive).
(e) In any case in which this paragraph (4) shall
require that an adjustment be made retroactively immediately following
a record date, the Corporation may elect to defer (but only until five
business days following the mailing by the Corporation of the
certificate of independent public accountants described in subparagraph
(g) below) issuing to the holder of any shares converted after such
record date (i) the shares of Common Stock and other capital stock of
the Corporation issuable upon such conversion over and above (ii) the
shares of Common Stock and other capital stock of the Corporation
issuable upon such conversion only on the basis of the conversion price
prior to the adjustment.
(f) No adjustment in the conversion price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided; however, that any adjustments
which solely by reason of this subparagraph (f) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment; and, provided, further, that adjustment shall be required
and made in accordance with the provisions of this Section (f) (other
than this subparagraph (f)) not later than such time as may be required
in order to preserve the tax-free nature of a distribution to the
holders of shares of Common Stock. All calculations under this Section
(f) shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be. Anything in this Section (f) to the
contrary notwithstanding, the Corporation shall be entitled to make
such reductions in the conversion price in addition to those required
by this paragraph (4), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or distribution
of securities convertible into or exchangeable for stock hereafter made
by the Corporation to its shareholders shall not be taxable.
(g) Whenever the conversion price is adjusted as
herein provided, the Corporation shall promptly (i) file with each
conversion agent a certificate of a firm of independent public
accountants setting forth the conversion price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence
<PAGE> 43
of the correctness of such adjustment, and (ii) mail or cause to be
mailed a notice of such adjustment to the holders of shares of
Convertible Preferred Stock at their last addresses as they shall
appear upon the books of the Corporation.
(h) The term "Common Stock" shall mean the
Corporation's Common Stock, par value $.01 per share, as the same
exists at the date of filing of this Certificate or any other class of
stock resulting from successive changes or reclassifications of such
Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the event
that at any time as a result of an adjustment made pursuant to
subparagraph (a) above, the holder of any share of Convertible
Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of the Corporation other than shares of
its Common Stock, thereafter the conversion price of such other shares
so receivable upon conversion of any share shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common
Stock contained in subparagraphs (a) through (g) above, and the
provisions of paragraph (1) through (3) and paragraphs (5) through (12)
with respect to the Common Stock shall apply on like or similar terms
to any such other shares.
(5) No fractional shares of stock shall be issued upon the
conversion of any share or shares of Convertible Preferred Stock. If
more than one such share shall be surrendered for conversion at the
same time by the same holder, the number of full shares which shall be
issuable upon the conversion thereof shall be computed on the basis of
the aggregate liquidation preference as specified in Section (h) below
of shares so surrendered. If any fractional interest in a share of
Common Stock would, except for the provisions of this paragraph (5), be
deliverable upon the conversion of any share or shares, the Corporation
shall in lieu of delivering the fractional share therefore, adjust such
fractional interest by payment to the holder of such surrendered share
or shares of an amount in cash equal (computed to the nearest cent) to
the current market value of such fractional interest, computed on the
basis of the last reported sales price regular way of Common Stock on
the New York Stock Exchange, or, if not reported for such Exchange, on
the Composite Tape, on the business day prior to the date of
conversion, or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked quotations on the New
York Stock Exchange, or, if the Common Stock is not listed on such
Exchange or no such quotations are available, the last reported sale
price on the principal national securities exchange on which the Common
Stock is listed, or if not listed on any national securities exchange,
the last reported sale price in the over-the-counter market as reported
by the National Quotation Bureau Co., or similar organization, or if no
sale price is available, the average of the high bid and low asked
quotations in the over-the-counter market as so reported, or if no such
quotations are available, the fair market price as determined by the
Board of Directors of the Corporation (whose determination shall be
conclusive).
(6) If either of the following shall occur: (a) any
consolidation, reorganization or merger to which the Corporation is a
party, other than a consolidation, reorganization or a merger in which
the Corporation is a continuing corporation and which does not result
in any reclassification, change or exchange (other than changes in par
value or from par value to no par value or from no par value to par
value or changes as a result of a subdivision or combination) in
outstanding shares of Common Stock, or (b) any sale or conveyance to
another corporation of the property of the Corporation as an entirety
or substantially as an entirety; then the holder of each share of
Convertible Preferred Stock then outstanding shall upon conversion of
such
<PAGE> 44
share have the right to convert such share only into the kind and
amount of shares of stock and other securities and property receivable
upon such consolidation, reorganization, merger, sale or conveyance by
a holder of the number of shares of Common Stock issuable upon
conversion of such share of Convertible Preferred Stock immediately
prior to such consolidation, reorganization, merger, sale or
conveyance, subject to adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section
(f). The provisions of this paragraph (6) shall similarly apply to
successive consolidations, reorganizations, mergers, sales or
conveyances.
(7) The Corporation covenants that it will at all times
reserve and keep available, solely for the purpose of issue upon
conversion of the shares of Convertible Preferred Stock, such number of
shares of Common Stock as shall be issuable upon the conversion of all
such outstanding shares, provided, that nothing contained herein shall
be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the shares by delivery of
purchased shares of Common Stock which are held in the treasury of the
Corporation.
The Corporation covenants that if any shares of Common Stock
required to be reserved for purposes of conversion of the shares
hereunder require registration with or approval of any governmental
authority under any Federal or State law or regulation before such
shares may be issued upon conversion, the Corporation will cause such
shares to be duly registered or approved, as the case may be. The
Corporation will use its best efforts to list the shares of Common
Stock required to be delivered upon conversion of shares prior to such
delivery upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery, and,
if such outstanding Common Stock is not listed on any exchange but is
traded in the over-the-counter market, to qualify such shares for
trading and quotation privileges such as are then available for the
outstanding Common Stock. The Corporation covenants that all shares of
Common Stock which shall be issued upon conversion of the shares will
upon issue be fully paid and non-assessable and not subject to any
preemptive rights.
(8) Before taking any action which would cause an adjustment
reducing the conversion price below the then par value of the Common
Stock, the Corporation will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of
Common Stock at the conversion price as so adjusted.
(9) The issuance of certificates for shares of Common Stock
upon conversion shall be made without charge for any stamp or other
similar tax in respect of such issuance. However, if any such
certificate is to be issued in a name other than that of the holder of
the share or shares converted, the person or persons requesting the
issuance thereof shall pay to the Corporation the amount of any tax
which may be payable in respect of any transfer involved in such
issuance or shall establish to the satisfaction of the Corporation that
such tax has been paid.
(10) Notwithstanding anything elsewhere contained in these
Articles, any funds which at any time shall have been deposited by the
Corporation or on its behalf with any paying agent for the purpose of
paying dividends on or the redemption price of any of the shares of
Convertible Preferred Stock and which shall not be required for such
purposes because of the conversion of such shares, as provided in this
Section (f), shall, upon delivery to the paying agent
<PAGE> 45
of evidence satisfactory to it of such conversion, be repaid to the
Corporation by the paying agent.
(11) If and whenever the Corporation shall grant to the
holders of Common Stock, as such, rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or
securities convertible into or exchangeable for or carrying a right or
option to purchase Common Stock at a price per share less than the
current market price per share (as determined pursuant to subparagraph
4(d) above) on the day fixed for determining those holders of Common
Stock entitled thereto, the Corporation shall concurrently therewith
grant to the then registered holders of shares of Convertible Preferred
Stock all of such rights or options to which such holder would have
been entitled if, on the date of determination of shareholders entitled
to the rights or options being granted by the Corporation, such holder
were the holder of record of the number of whole shares of Common Stock
then issuable upon conversion of his shares of Convertible Preferred
Stock. Such grant by the Corporation to the holders of Convertible
Preferred Stock shall be in lieu of any adjustment to the conversion
price.
(12) If:
(a) The Corporation shall take any action which would
require an adjustment in the conversion price pursuant to subparagraph
(4)(c) of this Section (f); or
(b) There shall be any capital reorganization or
reclassification of the Common Stock (other than a subdivision or
combination of the outstanding Common Stock and other than a change in
par value or from par value to no par value or from no par value to par
value of the Common Stock), or any consolidation or merger to which the
Corporation is a party and for which approval of any shareholders of
the Corporation is required, or any sale or transfer of all or
substantially all of the assets of the Corporation; or
(c) There shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with any
conversion agent, and shall cause to be given to the holders of the
shares of Convertible Preferred Stock at least ten days prior to the
applicable date hereinafter specified, a notice that (i) the date on
which a record is to be taken for the purpose of any distribution to
holders of Common Stock, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to
such distribution are to be determined or (ii) the date on which such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such
notice or any defect therein shall not affect the legality or validity
of the proceedings described in subsection (a), (b) or (c) of this
subparagraph (12).
(g) Voting.
The shares of Convertible Preferred Stock shall not have
any voting powers either
<PAGE> 46
general or special, except as required by law or regulation and except
that unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at
least a majority of all of the shares of Convertible Preferred Stock,
and all other series of Preferred Stock ranking on a parity with the
Convertible Preferred Stock either as to dividends or upon liquidation
and upon which like voting rights have been conferred and are then
exercisable, at the time outstanding, given in person or by proxy,
either in writing or by a vote at a meeting called for the purpose at
which the holders of such shares shall vote together as a single class
without regard to series, shall be necessary for authorizing, effecting
or validating the amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation or of any amendment thereto
(including any Statement with Respect to Shares or any similar document
relating to any series of Preferred Stock) so as to affect materially
and adversely the rights, preferences, privileges or voting power of
shares of Convertible Preferred Stock. In case the shares of
Convertible Preferred Stock would be so affected in a materially
different manner than any other series of Preferred Stock then
outstanding by any such action, the holders of shares of Convertible
Preferred Stock shall be entitled to vote as a separate class, and the
Corporation shall not take such action without the consent or
affirmative vote, as above provided, of at least a majority of the
total number of shares of Convertible Preferred Stock then outstanding,
in addition to or as a specific part of the consent or affirmative vote
hereinabove otherwise required. The increase of the authorized amount
of the Preferred Stock, or the creation, authorization or issuance of
any shares of any other class of stock of the Corporation ranking, (i)
junior to the Convertible Preferred Stock, or (ii) on a parity with the
shares of Convertible Preferred Stock, as to dividends or upon
liquidation, or the reclassification of any authorized or outstanding
stock of the Corporation into any such junior or parity shares, or the
creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase any such junior or
parity shares shall not be deemed to affect materially and adversely
the rights, preferences, privileges or voting power of shares of
Convertible Preferred Stock.
(h) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary, the holders of
the shares of Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation available for distribution to
shareholders, before any payment or distribution shall be made on the
Common Stock or on any other class of stock ranking junior to
Convertible Preferred Stock upon liquidation, the amount of Two
Thousand Dollars ($2,000.00) per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued
and unpaid thereon to the date of final distribution, subject only to
the provisions of this paragraph (1) of this Section (h). Once any
portion of such a liquidation distribution is made to any holder of
shares of Convertible Preferred Stock, there shall not be any
conversion rights in respect of such shares pursuant to Section (f)
hereof unless the full amount of such distribution in respect of such
shares being converted is remitted to the Corporation prior to or
contemporaneously with the conversion of such shares. All shares of
Preferred Stock ranking in whole or in part prior to the shares of
Convertible Preferred Stock as to liquidation shall be entitled to be
paid to the extent of such priority in full in cash, or money for the
payment thereof set apart, before any payment provided for in this
Section (h) shall be made with respect to the shares of Convertible
Preferred Stock.
(2) Neither the sale, lease or exchange (for cash,
shares of stock, securities or
<PAGE> 47
other consideration) of all or substantially all the property and
assets of the Corporation nor the merger or consolidation of the
Corporation into or with any other corporation or the merger or
consolidation of any other corporation into or with the Corporation,
shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section (h).
(3) After the payment to the holders of the shares
of Convertible Preferred Stock of the full preferential amounts
provided for in this Section (h), the holders of shares of Convertible
Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
(4) In the event the assets of the Corporation
available for distribution to the holders of shares of Convertible
Preferred Stock upon any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient to
pay in full all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (h), no such distribution shall be made
on account of any of shares of any other class or series of Preferred
Stock ranking in whole or in part on a parity with the shares of
Convertible Preferred Stock upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on
account of the shares of Convertible Preferred Stock, ratably, in
proportion to the full distributable parity amounts for which holders
of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(i) Priority.
For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(1) Prior to the shares of the Convertible Preferred
Stock, either as to dividends or upon liquidation, if the holders of
such class or classes shall be entitled to the receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, as the case may be,
in preference or priority to the holders of shares of Convertible
Preferred Stock. Each holder of any share of Convertible Preferred
Stock, by his acceptance thereof, expressly covenants and agrees that
the rights of the holders of any shares of any other series of
Preferred Stock of the Corporation to receive dividends or amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, shall be and hereby are
expressly prior to his rights unless in the case of any particular
series of Preferred Stock the certificate or other instrument creating
or evidencing the same expressly provides that the rights of the
holders of such series shall not be prior to the shares of Convertible
Preferred Stock.
(2) On a parity with shares of Convertible Preferred
Stock, either as to dividends or upon liquidation, whether or not the
dividend rates, dividend payment dates or redemption or liquidation
prices per share or sinking fund provisions, if any, be different from
those of the Convertible Preferred Stock, if the holders of such stock
shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the case may be, in
proportion to their respective dividend rates or liquidation prices,
without preference or priority, one over the other,
<PAGE> 48
as between the holders of such stock and the holders of shares of
Convertible Preferred Stock.
(3) Junior to shares of Convertible Preferred Stock,
either as to dividends or upon liquidation, if such class or classes
shall be Common Stock or if the holders of shares of Convertible
Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, whether voluntary of involuntary, as the case may be, in
preference or priority to the holders of shares of such class or
classes.
(j) Payments. All payments to a holder of Convertible
Preferred Stock shall be made at the office or agency of the
Corporation maintained for such purpose in such coin or currency of the
United States of America as at the time of payment is legal tender for
the payment of public and private debts; provided, however, that at the
option of the Corporation payment may be made (i) by check mailed to
such holder at his address appearing on the records of the Corporation
or, (ii) at the request of such holder, by wire transfer of immediately
available funds to the address designated by such holder in writing.
<PAGE> 49
ARTICLE V
ISSUANCE OF SHARES
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of at least $1,000,
consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE
The street address of the registered office of the Corporation is 16225
Park Ten Place, Suite 200, Houston, Texas 77084; and the name of the registered
agent of the Corporation at such address is Thomas E. Bennett.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial board of directors of
the Corporation is four, and the name and address of the persons who are to
serve as such directors until the next annual meeting of the shareholders or
until their successors are elected and qualified are:
<TABLE>
<CAPTION>
Name Address
<S> <C>
E. Garrett Bewkes, III 280 Park Avenue, 37th Floor
New York, NY 10017
Robert V. Glaser 280 Park Avenue, 37th Floor
New York, NY 10017
Charles J. Philippin 280 Park Avenue, 37th Floor
New York, NY 10017
Christopher J. O'Brien 280 Park Avenue, 37th Floor
New York, NY 10017
</TABLE>
ARTICLE VIII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder of the Corporation shall be entitled as a matter of
rights to purchase or acquire any additional shares of stock of the Corporation
or any security or other obligation convertible into, exchangeable for, or
conferring the right to purchase or acquire, shares of stock of the Corporation.
ARTICLE IX
DENIAL OF CUMULATIVE VOTING
When electing directors, a shareholder of the Corporation shall not be
permitted to cumulate such shareholder's vote.
<PAGE> 50
ARTICLE X
REQUIRED SHAREHOLDER VOTE AND CONSENT
Except as otherwise required by law, the affirmative vote of the
holders of a majority of the issued and outstanding shares of the Corporation
shall decide any matter submitted to a vote of the shareholders of the
Corporation. The holders of a majority of the issued and outstanding shares of
the Corporation may take any action that the shareholders of the Corporation are
permitted or required to take at a meeting pursuant to a consent setting for the
action taken that such holders sign.
ARTICLE XI
INDEMNIFICATION
The Corporation shall (i) indemnify any person who was, is, or is
threatened to be made a defendant or respondent in any completed, pending, or
threatened action, proceeding, or suit (whether civil, criminal, administrative,
or investigative, any appeal in such action, proceeding, or suit, and any
inquiry or investigation that could lead to such an action, proceeding, or suit)
because such person was or is a director or officer of the Corporation, or while
a director or officer of the Corporation, was or is serving at the request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, proceeding, or suit; and
(ii) advance reasonable expenses to such person in connection with such action,
proceeding or suit. Any repeal or modification of this Article shall not
adversely affect any rights to indemnification of any person with respect to any
competed, pending, or threatened action, proceeding, or suit existing
immediately prior to such repeal or modification. The rights provided in this
Article shall not be exclusive of any other rights to which such person may be
entitled under any provision of the bylaws of the Corporation, a resolution of
the shareholders or the directors of the Corporation, an agreement, or
otherwise.
ARTICLE XII
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for breach of his or her fiduciary duty as
a director. Any repeal or modification of this Article shall not adversely
affect any rights or protection of a director of the Corporation existing
immediately prior to such repeal or modification.
ARTICLE XIV
CORPORATE POWER
The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on the shareholders of
the Corporation herein are granted subject to this reservation.
<PAGE> 1
EXHIBIT 3.2
<PAGE> 2
AMENDED AND RESTATED BYLAWS
OF
PRIMECO INC.
(A TEXAS CORPORATION)
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. The registered office of Primeco Inc.
(hereinafter called the Corporation) in the State of Texas shall be at 16225
Park Ten Place, Suite 200, Houston, Texas 77084; and the name of the registered
agent in charge thereof shall be Primeco Inc.
SECTION 1.02 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Texas, as the Board of Directors (hereinafter called the Board) may from time to
time determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.01 Annual Meetings. Annual meetings of the shareholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the shareholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 Place of Meetings. All meetings of the shareholders shall
be held at such places, within or without the State of Texas, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the shareholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each shareholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail or in the care of an express
courier, in a postage prepaid envelope, directed to him at his post office
address or other delivery address furnished by him to the Secretary of the
Corporation for such purpose or, if he shall not have furnished to the Secretary
his address for such purpose, then at his post office address last known to the
Secretary, or by transmitting a notice thereof to him at such address by
facsimile, telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the shareholders shall be
required. Every notice of a meeting of the shareholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of shareholders shall not be required to be given to any shareholder who
shall have waived such notice and such notice shall be deemed waived by any
shareholder who shall attend such meeting
<PAGE> 3
in person or by proxy, except as a shareholder who shall attend such meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the shareholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the election
of directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the shareholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
shareholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the shareholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called. .
SECTION 2.06 Voting.
(a) Each shareholder shall, at each meeting of the shareholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as
the record date for the determination of shareholders entitled to notice of and
to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then
(a) at the close of business on the day next preceding the day on which notice
of the meeting shall be given or (b) if notice of the meeting shall be waived,
at the close of business on the day next preceding the day on which the meeting
shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons or
other entities, whether fiduciaries, members of a partnership, joint tenants in
common, tenants by entirety or otherwise, or with respect to which two or more
persons or other entities have the same fiduciary relationship, shall be voted
in accordance with the provisions of the Texas Business Corporation Act.
(c) Any such voting rights may be exercised by the shareholder entitled
thereto in person or by
<PAGE> 4
his proxy appointed by an instrument in writing, subscribed by such shareholder
or by his attorney thereunto authorized and delivered to the secretary of the
meeting; provided, however, that no proxy shall be voted or acted upon after
eleven months from its date unless said proxy shall provide for a longer period.
The attendance at any meeting of a shareholder who may theretofore have given a
proxy shall not have the effect of revoking the same unless he shall in writing
so notify the secretary of the meeting prior to the voting of the proxy. At any
meeting of the shareholders all matters, except as otherwise provided in the
Articles of Incorporation, in these Bylaws or by law, shall be decided by the
vote of a majority in voting interest of the shareholders present in person or
by proxy and entitled to vote thereat and thereon, a quorum being present. The
vote at any meeting of the Shareholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. On a vote by ballot each
ballot shall be signed by the shareholder voting, or by his proxy, if there be
such proxy, and it shall state the number of shares voted.
<PAGE> 5
SECTION 2.07 List of Shareholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any shareholder who is
present.
SECTION 2.08 Judges. If at any meeting of the shareholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be shareholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest. SECTION 2.09 Action Without Meeting.
Any action required to be taken at any annual or special meeting of shareholders
of the Corporation, or any action which may be taken at any annual or special
meeting of much shareholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding shares of
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those shareholders who have not consented in writing.
SECTION 2.10 Telephonic Meetings. The shareholders may hold a meeting
by means of conference telephone or similar communications equipment if all
persons participating n the meeting can hear each other. Participation in a
meeting pursuant to this Section 2.10 shall constitute presence in person at
such meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The Board shall initially
consist of the number of directors established in the Corporation's Amended and
Restated Articles of Incorporation and may be changed by a resolution of the
Board; provided, that the number of directors shall not be less than
<PAGE> 6
one (l) and not more than ten (10). Each of the directors of the Corporation
shall hold office until his successor shall have been duly elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall initially
consist of the persons listed in the Corporation's Amended and Restated Articles
of Incorporation and thereafter shall be elected annually by the shareholders of
the Corporation entitled to vote thereon and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
SECTION 3.04 Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the Articles of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed in the manner hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Texas as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given. .
SECTION 3.09 Special Meetings. Special meetings of the Board shall be
held whenever called by the President or a majority of the number of directors
then serving on the Board of Directors. Except as otherwise provided by law
notice of the time and place of each such special meeting shall be mailed to
each director, addressed to him at his residence or usual place of business, at
least five (5) days before the day on which the meeting is to be held, or shall
be sent to him at such place by facsimile, wireless, telegraph or cable or be
delivered personally not less than forty-eight (48) hours before the time at
which the meeting is to be held.
<PAGE> 7
Except where otherwise required by law or by these Bylaws, notice of
the purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise provided
in the Articles of Incorporation, in these Bylaws or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. In the absence of a
quorum, a majority of directors present at any meeting may adjourn the same from
time to time until a quorum shall be present. Notice of any adjourned meeting
need not be given. The directors shall act only as a Board, and the individual
directors shall have no power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
Articles of Incorporation, any director may be removed at any time, either with
or without cause, by the affirmative vote of the shareholders having a majority
of the shares entitled to elect directors of the Corporation given at a special
meeting of the Shareholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors Of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member.
<PAGE> 8
ARTICLE IV
OFFICERS
SECTION 4.01 Number. The Board shall elect a President, a Secretary and
a Treasurer and it may, if it so determines, choose a Chairman of the Board from
among its members. The Board may also choose one or more Vice Presidents, one or
more Assistant Secretaries and one or more Assistant Treasurers. The same person
may hold any two or more offices.
<PAGE> 9
SECTION 4.02 Election, Term of Office and Qualifications. The officers
of the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor shall have been duly chosen and shall qualify or until his
resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to the
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of any other officer, assistant,
agent or employee, by any officer of the Corporation or committee of the Board
upon whom or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at any
time by giving written notice of his resignation to the Board or the Secretary
of the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall be
the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. At
the request of the President, or in case of the President's absence or inability
to act upon the request of the Board, a Vice President shall perform the duties
of the President and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President.
SECTION 4.09 The Secretary. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the shareholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the
<PAGE> 10
Corporation and shall affix and attest the seal to all documents to be executed
on behalf of the Corporation under its seal; and, in general, he shall perform
all the duties incident to the office of Secretary and such other duties as may
from time to time be assigned to him by the board.
SECTION 4.10 The Treasurer. The Treasurer shall have the general care
and custody of the funds and securities of the Corporation, and shall deposit
all such funds in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board. He shall receive, and give
receipts for, moneys due and payable to the Corporation from any source
whatsoever. He shall exercise general supervision over expenditures and
disbursements made by officers, agents and employees of the Corporation and the
preparation of such records and reports in connection therewith as may be
necessary or desirable. He shall, in general, perform all other duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
<PAGE> 11
SECTION 5.04 General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
<PAGE> 12
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Shareholders of Record.
In order that the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If in any case involving the determination of
shareholders for any purpose other than notice of or voting at a meeting of
shareholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
shareholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Indemnification. Subject to any limitation which may be
contained in the Articles of Incorporation, the Corporation shall to the full
extent permitted by law, including without limitation, Texas Business
Corporation Act Art. 2.02-1, as such Article now exists or shall hereafter be
amended, indemnify any person who was, is, or is threatened to be made a named
defendant or respondent to any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, arbitral, administrative, or
investigative, any appeal in such action, suit, or proceeding, and any inquiry
or investigation that could lead to such an action, suit, or proceeding, because
such person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, against judgments, penalties
(including excise and similar taxes), fines, settlements, and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit, or proceeding. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that an individual did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 7.02 Expenses. Subject to any limitation which may be contained
in the Articles of Incorporation, the Corporation shall, to the full extent
permitted by law, including without limitation, Art. 2.02-1 of the Texas
Business Corporation Act, as such Article now exists or shall hereafter be
amended, pay or reimburse on a current basis the expenses incurred by any person
described in Section
<PAGE> 13
7.01 in connection with any such action, suit, or proceeding in advance of the
final disposition thereof, if the Corporation has received (i) a written
affirmation by the recipient of his good faith belief that he has met the
standard of conduct necessary for indemnification under the Texas Business
Corporation Act and (ii) a written undertaking by or on behalf of the director
to repay the amount paid or reimbursed if it is ultimately determined that he
has not satisfied such standard of conduct or if indemnification is prohibited
by law.
SECTION 7.03 Notice to Shareholders. If required by law at the time
such payment is made, any payment of indemnification or advance of expenses to a
director shall be reported in writing to the shareholders with or before the
notice or waiver of notice of the next Shareholder's meeting or with or before
the next submission to Shareholders of a consent to action without a meeting
pursuant to Article 9.10.A. of the Texas Business Corporation Act, and, in any
case, within the 12-month period immediately following the date of the
indemnification or advance.
<PAGE> 14
SECTION 7.04 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or who is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the corporation would have the power to indemnify him
against that liability under this article, subject to any restrictions imposed
by law. The Corporation may create a trust fund, establish any form of
self-insurance, grant a security interest or other lien on the assets of the
Corporation, or use other means (including, without limitation, a letter of
credit, guarantee or surety arrangement) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
SECTION 7.05 Other Rights and Remedies. The rights provided under this
Article VII shall not be deemed exclusive of any other rights permitted by law
to which such person may be entitled under any provision of the Charter, a
resolution of shareholders or directors of the Corporation, an agreement or
otherwise, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person. The rights provided in this
Article VII shall be deemed to be provided by a contract between the Corporation
and the individuals who serve in the capacities described in Section 7.01 at any
time while these bylaws are in effect, and no repeal or modification of this
Article VII by the Shareholders shall adversely affect any right of any person
otherwise entitled to indemnification by virtue of this Article VII at the time
of such repeal or modification.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board.
SECTION 8.02 Seal. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Texas and the year of incorporation.
SECTION 8.03 Waiver of Notices. Whenever notice is required to be given
by these Bylaws or the Articles of Incorporation, the person entitled to said
notice may waive such notice in writing, either before or after the time stated
therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.04 Amendments. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board, or (ii) by the shareholders holding shares of a class of
stock entitled to vote for the election of directors, at any annual meeting of
shareholders, without previous notice, or at any special meeting of
shareholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the shareholders may be altered or repealed by either the Board or
the shareholders.
<PAGE> 1
EXHIBIT 10.2
<PAGE> 2
PRIMECO, INC.
16225 PARK TEN PLACE
SUITE 200
HOUSTON, TEXAS 77084
February 26, 1996
Investcorp International, Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Dear Sirs:
This will confirm the understanding and agreement between Investcorp
International, Inc. ("III") and Primeco, Inc. ("Prime").
1. Prime hereby engages III to render financial advisory
services concerning the proposed acquisition of Vibroplant
U.S., Inc., a Florida corporation (the "Company") by Prime
or a subsidiary or affiliate of Prime.
2. III hereby accepts the engagement and, in that connection,
agrees to:
(a) conduct such financial review of the Company and its
business and operations as III shall deem appropriate
and feasible, which review shall be limited to an
analysis of (i) publicly available information with
respect to the Company, and (ii) such other information
as shall be supplied to III by the Company; and
(b) assist in negotiations and related acquisition
strategy.
3. For purposes of this Agreement, "Acquisition" shall mean any
transaction or series or combination of transactions, other
than in the ordinary course of trade or business, whereby,
directly or indirectly, control of or a material interest in
the Company or any of its businesses or assets is
transferred to Prime or to a subsidiary or affiliate of
Prime for consideration, including, without limitation, a
sale or exchange of capital stock or assets, a lease of
assets with or without a purchase option, a merger or
consolidation, a tender or exchange offer, a leveraged
buy-out, the formation of a joint venture or partnership, or
any similar transaction.
4. The term of III's engagement hereunder shall extend from the
date hereof through the later of February 26, 1996 or the
closing of the Acquisition, provided, that in no event shall
the term extend beyond June 30, 1996. Subject to the
provisions of paragraphs 5 through 10 hereof, which shall
survive any termination of this Agreement (including by
operation of the preceding sentence) Prime may terminate
III's engagement hereunder at any time by giving III at
least 10 days' prior written notice.
<PAGE> 3
5. If an Acquisition occurs during the term of III's engagement
hereunder, or at any time during a period of 12 months
following the effective date of termination of III's
engagement hereunder, regardless of whether or not III
rendered advice concerning the Acquisition, then Prime shall
pay the sum of $1,000,000 to III on the day after the
closing of the acquisition.
6. Prime shall reimburse III for its reasonable out-of-pocket
expenses incurred during the period of its engagement
hereunder with respect to the services to be rendered by it.
Out-of-pocket expenses shall include, but not be limited to,
professional fees and disbursements incurred by III.
7. Prime shall:
(a) indemnify III and hold it harmless against any losses,
claims, damages or liabilities to which III may become
subject arising in any manner out of or in connection
with the rendering of services by III hereunder, unless
it is finally judicially determined that such losses,
claims, damages or liabilities arose primarily out of
the gross negligence or bad faith of III; and
(b) reimburse III immediately for any legal or other
expenses reasonably incurred by it in connection with
investigating, preparing to defend or defending any
lawsuits or other proceedings arising in any manner out
of or in connection with the rendering of services of
III hereunder; provided, however, that in the event a
final judicial determination is made to the effect
specified in subparagraph 7(a) above, III will remit to
Prime any amounts reimbursed under this subparagraph
7(b).
Prime agrees that (i) the indemnification and
reimbursement commitments set forth in this paragraph
shall apply whether or not III is a formal party to any
such lawsuits, claims or other proceedings, and (ii)
III is entitled to retain separate counsel of its
choice in connection with any of the matters to which
such commitments relate, and (iii) such commitments
shall extend upon the terms set forth in this paragraph
to any controlling person, director, officer, employee
or agent of III; provided, however, that to the extent
that III retains separate counsel in connection with
any matters set forth in this subparagraph 7(b), such
counsel shall coordinate its efforts with Prime's
counsel.
8. Except as contemplated by the terms hereof or as required by
applicable law, III shall keep confidential all material
non-public information provided to it by Prime or the
Company, and shall not disclose such information to any
third party, other than such of its employees and advisors
as III determines to have a need to know.
9. Except as required (i) by applicable law or (ii) under the
terms of any agreements relating to the Acquisition, any
advice to be provided by III under this Agreement shall not
be disclosed publicly or made available to third parties
without the prior approval of III, which approval shall not
be unreasonably withheld or delayed.
<PAGE> 4
10. Prime agrees that III has the right to place
advertisements in financial and other newspapers and
journals at its own expense describing its services to
Prime hereunder, provided that III will submit a copy
of any such advertisement to Prime for its approval,
which approval shall not be unreasonably withheld or
delayed.
11. Prime and III acknowledge and agree that there are no
brokers, representatives or other persons which have an
interest in compensation due to III from any
transaction contemplated herein.
12. No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party
from any such provision, shall in any event be
effective unless the same shall be in writing and
signed by the parties to this Agreement and then such
amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for
which given.
13. Any and all notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when
mailed, if the same shall be sent by registered or
certified mail, return receipt requested, and the
mailing date shall be deemed the date from which all
time periods pertaining to a date of notice shall run.
Notices shall be addressed to the parties at the
following address:
If to III, to:
Investcorp International, Inc.
280 Park Avenue
37th Floor
New York, New York 10017
Attention:
with a copy to:
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Suite 900
Washington, D.C. 20036
Attention: Peter L. Baumbusch, Esq.
If to Prime, to:
Primeco, Inc.
16225 Park Ten Place
Suite 200
Houston, Texas 77084
Attention: Thomas E. Bennett,
President
<PAGE> 5
14. This Agreement may be signed in one or more
counterparts, each of which shall constitute an
original and which together shall constitute one and
the same agreement.
15. This Agreement shall constitute the entire agreement
between the parties with respect to the subject matter
hereof, and shall supersede all previous oral and
written (and all contemporaneous oral) negotiations,
commitments, agreements and understandings relating
hereto.
16. This Agreement shall be construed and enforced in
accordance with the laws of New York and shall inure to
the benefit of, and be binding upon, III and Prime and
their respective successors and assigns.
17. The waiver by any party of any breach of this Agreement
shall not operate or be construed to be a waiver of any
subsequent breach.
If the foregoing correctly sets forth the understanding and
agreement between III and Prime, please so indicate in the space provided for
that purposes below, whereupon this letter shall constitute a binding agreement
as of the date first above written.
PRIMECO, INC.
By:
Name:
Title:
AGREED:
INVESTCORP INTERNATIONAL, INC.
By:
Name: Jon P. Hedley
Title: President
<PAGE> 1
EXHIBIT 10.3
<PAGE> 2
PRIME HOLDING, INC.
MANAGEMENT STOCK INCENTIVE PLAN
1. Establishment and Purpose of the Plan. This Management Stock
Incentive Plan (the "Plan") is established by Prime Holding, Inc., a Delaware
corporation ("Holding"), as of December 2, 1994. The Plan is designed to enable
Holding to attract, retain and motivate members of the management and certain
other officers and key employees of Holding, Primeco Inc., a Texas corporation
("Prime") and its subsidiaries, by providing for or increasing their proprietary
interest in Holding. The Plan provides for the grant of options ("Options") that
qualify as incentive stock options ("Incentive Stock Options") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
Options that do not so qualify ("Non-Qualified Options"), for the grant of stock
appreciation rights ("Stock Appreciation Rights") and for the sale or grant of
restricted stock ("Restricted Stock").
2. Stock Subject to Plan. The maximum number of shares of stock that
may be subject to Options or Stock Appreciation Rights granted hereunder and the
number of shares of stock that may be granted or sold as Restricted Stock
hereunder shall not in the aggregate exceed 25,000 shares of the Class C Stock,
$0.01 par value (the "Shares"), of Holding, subject to adjustment under Section
13 hereof. The Shares that may be subject to Options granted and Restricted
Stock sold or granted under the Plan may be authorized and unissued Shares or
Shares reacquired by Holding and held as treasury stock.
Shares that are subject to the unexercised portions of any Options that
expire, terminate or are canceled, and Shares that are subject to any Stock
Appreciation Rights that expire, terminate or are canceled, and Shares of
Restricted Stock that are reacquired by Holding pursuant to the restrictions
thereon, shall again be available for the grant of Options or Stock Appreciation
Rights and the sale or grant of Restricted Stock under the Plan. If a Stock
Appreciation Right is exercised, any Option or portion thereof that is
surrendered in connection with such exercise shall terminate and the Shares
theretofore subject to the Option or portion thereof shall not be available for
further use under the Plan.
In addition to the grant of Options, Stock Appreciation Rights and
Restricted Stock to Participants (as hereinafter defined), Holding may also
issue Restricted Stock to non-Participants to be held for the benefit of the
Participants.
3. Shares Subject to Certificate of Designation. All Shares issuable
under Options or Stock Appreciation Rights and all Shares of Restricted Stock
sold or granted pursuant to this Plan shall be subject to the terms and
restrictions contained in the Certificate of Designation of Holding. A copy of
the Certificate of Designation shall be delivered to the recipient of an Option,
Stock Appreciation Right or Restricted Stock at the time of grant or issuance.
<PAGE> 3
4. Administration of the Plan. The Plan shall be administered by a
committee (the "Committee") appointed by the Board of Directors (the "Board") of
Holding. If no persons are designated by the Board to serve on the Committee,
the Plan shall be administered by the Board and all references herein to the
Committee shall refer to the Board. The Board shall have the discretion to add,
remove or replace members of the Committee, and shall have the sole authority to
fill vacancies on the Committee.
All actions of the Committee shall be authorized by a majority vote
thereof at a duly called meeting. The Committee shall have the sole authority,
in its absolute discretion, to adopt, amend, and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan, to construe and interpret the Plan, the rules and regulations, and the
agreements and other instruments evidencing Options and Stock Appreciation
Rights granted and Restricted Stock sold or granted under the Plan and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. All decisions, determinations, and interpretations of the Committee
shall be final and conclusive upon the Eligible Employees, as hereinafter
defined. Notwithstanding the foregoing, any dispute arising under any Agreement
(as defined below) shall be resolved pursuant to the dispute resolution
mechanism set forth in such Agreement.
Subject to the express provisions of the Plan, the Committee shall
determine the number of Shares subject to grants or sales and the terms thereof,
including the provisions relating to the exercisability of Options and Stock
Appreciation Rights, lapse and non-lapse restrictions upon the Shares obtained
or obtainable under the Plan and the termination and/or forfeiture of Options
and Stock Appreciation Rights and Restricted Stock under the Plan. The terms
upon which Options and Stock Appreciation Rights are granted and Restricted
Stock is sold or granted shall be evidenced by a written agreement executed by
Holding and the Participant to whom such Options, Stock Appreciation Rights or
Restricted Stock are sold or granted (the "Agreement").
5. Eligibility. Persons who shall be eligible for grants of Options or
Stock Appreciation Rights or sales or grants of Restricted Stock hereunder
("Eligible Employees") shall be those employees of Holding, Prime or a
subsidiary of Prime who are members of a select group of management or other key
employees that the Committee may from time to time designate to participate
under the Plan ("Participants") through grants of Non-Qualified Options,
Incentive Stock Options and, if applicable, Stock Appreciation Rights, and/or
through sales or grants of Restricted Stock.
6. Terms and Conditions of Options. No Incentive Stock Option shall be
granted for a term of more than ten years and no Non-Qualified Option shall be
granted for a term of more than ten years and thirty days. Options may, in the
discretion of the Committee, be granted with associated Stock Appreciation
Rights or be amended so as to provide for associated Stock Appreciation Rights.
The Agreement may contain such other terms, provisions, and conditions as may be
determined by the Committee as long as such terms, conditions and provisions are
not inconsistent with the Plan. The Committee shall designate as such those
Options intended to be eligible to qualify and be treated as Incentive Stock
Options and, correspondingly, those Options not intended to be eligible to
qualify and be treated as Incentive Stock Options.
<PAGE> 4
7. Exercise Price of Options. The exercise price for each Non-Qualified
Option granted hereunder shall be set forth in the Agreement. For so long as
required under Section 422 of the Code and the regulations promulgated
thereunder (or any successor statute or rules), the exercise price of any Option
intended to be eligible to qualify and be treated as an Incentive Stock Option
shall not be less than the fair market value of the Shares on the date such
Incentive Stock Option is granted, except that if such Incentive Stock Option is
granted to a Participant who on the date of grant is treated under Section
424(d) of the Code as owning stock (not including stock purchasable under
outstanding options) possessing more than ten percent of the total combined
voting power of all classes of Holding's stock, the exercise price shall not be
less than one hundred ten percent (110%) of the fair market value of the Shares
on the date such Incentive Stock Option is granted.
For all Options granted within six months of the date of adoption of the
Plan, the fair market value of the Shares subject to the Option shall be $70.00.
Thereafter, the fair market value of Shares for the purposes of this Plan shall
be determined by the Board, whose valuation shall be binding upon each Optionee.
Payment for Shares purchased upon exercise of any Option granted
hereunder shall be in cash at the time of exercise, except that, if either the
Agreement so provides or the Committee so permits, and if Holding is not then
prohibited from doing so, such payment may be made in whole or in part with
shares of stock of the same class as the stock then subject to the Option. The
Committee also may on an individual basis permit payment or agree to permit
payment by such other alternative means as may be lawful, including by delivery
of an executed exercise notice together with irrevocable instructions to a
broker promptly to deliver to Holding the amount of sale or loan proceeds
required to pay the exercise price.
8. Non-transferability. Unless provided otherwise in the Agreement, any
Option granted under this Plan shall by its terms be nontransferable by the
Participant other than by will or the laws of descent and distribution (in which
case such descendant or beneficiary shall be subject to all terms of the Plan
applicable to Participants) and is exercisable during the Participant's lifetime
only by the Participant or by the Participant's guardian or legal
representative.
9. Incentive Stock Options. The provisions of the Plan are intended to
satisfy the requirements set forth in Section 422 of the Code and the
regulations promulgated thereunder (including the aggregate fair market value
limits set forth in Section 422(d) of the Code) with respect to Incentive Stock
Options granted under the Plan. For so long as required under Section 422 of the
Code and the regulations promulgated thereunder (or any successor statute or
rules), during the term of the Plan, the aggregate fair market value of the
Shares with respect to which Incentive Stock Options are first exercisable by an
Eligible Employee during any calendar year shall not exceed $100,000. For the
purpose of this Section 9, the fair market value of the Shares shall be
determined at the time the Incentive Stock Option is granted.
10. Stock Appreciation Rights. The Committee may, under such terms and
conditions as it deems appropriate, grant to any Eligible Employee selected by
the Committee Stock Appreciation Rights, which may or may not be associated with
Options. Upon exercise of a Stock Appreciation
<PAGE> 5
Right, the Participant shall be entitled to receive payment of an amount equal
to the excess of the fair market value, as defined by the Committee, of the
underlying Shares on the date of exercise over the Stock Appreciation Right's
exercise price. Such payment may be made in additional Shares valued at their
fair market value on the date of exercise or in cash, or partly in Shares and
partly in cash, as the Committee may designate. The Committee may require that
any Stock Appreciation Right shall be subject to the condition that the
Committee may at any time in its absolute discretion not allow the exercise of
such Stock Appreciation Right. The Committee may further impose such conditions
on the exercise of Stock Appreciation Rights as may be necessary or desirable to
comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
11. Restricted Stock. The Committee may sell or grant Restricted Stock
under the Plan (either independently or in connection with the exercise of
Options or Stock Appreciation Rights under the Plan) to Eligible Employees
selected by the Committee. The Committee shall in each case determine the number
of Shares of Restricted Stock to be sold or granted, the price at which such
Shares are sold, if applicable, and the terms and duration of the restrictions
to be imposed upon those Shares.
12. Investment Representation. Each Agreement may contain an agreement
that, upon demand by the Committee for such a representation, the optionee shall
deliver to the Committee at the time of any exercise of an Option a written
representation that the Shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to the delivery
of any Shares issued upon exercise of an Option and prior to the expiration of
the option period shall be a condition precedent to the right of the optionee or
such other person to purchase any Shares.
13. Adjustments. In the event of any one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends,
extraordinary dividends, or distributions, or similar events, an appropriate
adjustment shall be made in the number, exercise or sale price and/or type of
shares or securities for which Options or Stock Appreciation Rights may
thereafter be granted and Restricted Stock may thereafter be sold or granted
under the Plan. The Committee also shall designate the appropriate changes that
shall be made in Options or Stock Appreciation Rights, or rights to purchase
Restricted Stock under the Plan, so as to preserve the value of any such
Options, Stock Appreciation Rights or Restricted Stock. The Committee may do so
either at the time the Option or Stock Appreciation Right is granted or
Restricted Stock offered or at the time of the event causing the adjustments.
Any such adjustment in outstanding Options shall be made without changing the
aggregate exercise price applicable to the unexercised portions of such Options.
Any such adjustments in outstanding rights to purchase Restricted Stock shall be
made without changing the aggregate purchase price of such Restricted Stock.
14. Duration of Plan. Options may not be granted and Restricted Stock
may not be sold or granted under the Plan after December 2, 2004.
15. Amendment and Termination of the Plan. The Board may at any time
amend, suspend or terminate the Plan. The Committee may amend the Plan or any
Agreement issued hereunder to
<PAGE> 6
the extent necessary for any Option or Stock Appreciation Right granted or
Restricted Stock sold or granted under the Plan to comply with applicable tax or
securities laws. If Holding shall become a reporting company under the Exchange
Act and if the Board determines that the approval of the stockholders of Holding
is advisable and necessary for compliance with Exchange Act Rule 16b-3 or any
successor or similar rule or regulation, no such action of the Board or the
Committee shall be permitted unless taken with or ratified by such approval.
No Option or Stock Appreciation Right may be granted or Restricted Stock
sold or granted during any suspension of the Plan or after the termination of
the Plan. No amendment, suspension or termination of the Plan or of any
Agreement issued hereunder shall, without the consent of the affected holder of
such Option or Stock Appreciation Right or Restricted Stock, alter or impair any
rights or obligations in any Option or Stock Appreciation Right or Restricted
Stock theretofore granted or sold to such holder under the Plan.
16. Nature of Plan. This Plan is intended to qualify as a compensatory
benefit plan within the meaning of Rule 701 under the Act. This Plan is intended
to constitute an unfunded arrangement for a select group of management or other
key employees.
17. Cancellation of Options. Any Option granted under the Plan may be
canceled at any time with the consent of the holder and a new Option may be
granted to such holder in lieu thereof.
18. Withholding Taxes. Whenever Shares are to be issued with respect to
the exercise of Options or amounts are to be paid or income earned with respect
to Stock Appreciation Rights or Restricted Stock under the Plan, the Committee
in its discretion may require the Participant to remit to Holding, prior to the
delivery of any certificate or certificates for such Shares or the payment of
any such amounts, all or any part of the amount determined in the Committee's
discretion to be sufficient to satisfy federal, state and local withholding tax
obligations (the "Withholding Obligation") that Holding or its counsel
determines may arise with respect to such exercise, issuance or payment.
Pursuant to a procedure established by the Committee or as set forth in the
Agreement, the Participant may (i) request Holding to withhold delivery of a
sufficient number of Shares or a sufficient amount of the Participant's
compensation or (ii) deliver a sufficient number of previously-issued Shares, to
satisfy the Withholding Obligation.
<PAGE> 1
EXHIBIT 10.5
<PAGE> 2
FIRST AMENDMENT
FIRST AMENDMENT, dated as of November 1, 1995 (this
("Amendment"), to the Credit Agreement, dated as of December 1, 1994 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among PRIMECO INC., a Texas corporation, formerly PRIME ACQUISITION
CORP., Adelaware corporation (the "Borrower"), the several lenders parties
thereto (the "Lenders"), CHEMCIAL BANK, a New York banking corporation, as
Administrative Agent for the Lenders (in such capacity, the "Administrative
Agent") and THE CIT GROUP/BUSINESS CREDIT, INC., as Collateral Agent for the
Lenders (in such capacity, the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders, the Administrative Agent
and the Collateral Agent are parties to the Credit Agreement:
WHEREAS, the Borrower has requested that the Administrative
Agent, the Collateral Agent and the Lenders amend certain provisions of the
Credit Agreement as herein provided: and
WHEREAS, the Lenders, the Administrative Agent and the
Collateral Agent are willing so to amend the Credit Agreement, but only upon the
terms and subject to the provisions set forth herein:
NOW, THEREFORE, in consideration of the premises and for
other good valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Borrower, the Administrative Agent, the Collateral
Agent and the Lenders hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Credit
Agreement.
2. Amendment of Subsection 8.7(a). Sectin 8.7(a) of the
Credit Agreement is hereby amended by deleting "$80,000,000" under the Base
Amount heading opposite the 1995 Fiscal Year and substituting "$92,100,000".
3. Miscellaneous. (a) Except as otherwise expressly
modified by this Amendment, the Credit Agreement is and shall continue to be in
full force and effect in accordance with its terms.
(b) This Amendment may be executed by the parties hereto on
one or more counterparts, and all of such counterparts shall be deemed to
constitute one and the same instrument.
(c) This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without regard to
the choice of laws rules thereof.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their duly authorized officers as of
the date first above written.
PRIMECO INC.
------------------------------
Title:
CHEMICAL BANK, as Administrative Agent and as
a Lender
------------------------------
Title:
THE CIT GROUP/BUSINESS CREDIT, INC., as
Collateral Agent and as a Lender
------------------------------
Title:
BANKERS TRUST COMPANY
------------------------------
Title:
BANK OF TOKYO TRUST COMPANY
------------------------------
Title:
BANQUET PARIBAS
------------------------------
Title:
CRESCENT MACH I PARTNERS, L.P.
------------------------------
Title:
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC.
------------------------------
Title:
DEAN WITTER INTERCAPITAL INC.
------------------------------
Title:
<PAGE> 4
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
------------------------------
Title:
FLEET BANK
------------------------------
Title:
HELLER FINANCIAL, INC.
------------------------------
Title:
MERRILL LYNCH
------------------------------
Title:
PILGRIM AMERICA
------------------------------
Title:
PROSPECT STREET SENIOR PORTFOLIO, L.P.
------------------------------
Title:
PROTECTIVE LIFE INSURANCE COMPANY
------------------------------
Title:
THE DAIWA BANK, LTD.
------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
------------------------------
Title:
VAN KAMPEN MERRIT INVESTMENT ADVISOR CORP.
------------------------------
Title:
<PAGE> 1
EXHIBIT 10.6
<PAGE> 2
SECOND AMENDMENT
SECOND AMENDMENT, dated as of January 10, 1996 (this
"Amendment"), to the Credit Agreement, dated as of December 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement";
capitalized terms used but not defined herein shall have the respective meanings
specified in the Credit Agreement), among Primeco Inc., a Texas corporation (the
"Company"), the Lenders party thereto (the "Lenders"), Chemical Bank, as
Administrative Agent for the Lenders (in such capacity, the "Administrative
Agent"), and The CIT Group/Business Credit, Inc., as Collateral Agent for the
Lenders (in such capacity, the "Collateral Agent").
WHEREAS, the Company, the Lenders, the Administrative Agent
and the Collateral Agent are party to the Credit Agreement;
WHEREAS, the Company has requested the Administrative Agent,
the Collateral Agent and the Lenders amend certain provisions of the Credit
Agreement; and
WHEREAS, the Administrative Agent, Collateral Agent and the
Lenders party hereto are willing to agree to the requested amendments on the
terms and conditions contained herein.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit
Agreement is hereby amended as follows:
(a) Amendment to Section 1. Section 1 of the Credit
Agreement shall be amended (i) to insert the following definition in its
appropriate alphabetic location:
"VIBROPLANT ACQUISITION": THE ACQUISITION BY THE COMPANY OR
ANY OF ITS SUBSIDIARIES OF ALL OF THE ISSUED AND OUTSTANDING CAPITAL
STOCK, OR SUBSTANTIALLY ALL OF THE ASSETS, OF VIBROPLANT U.S., INC., A
FLORIDA CORPORATION D/B/A AMERICAN HI-LIFT, FOR AGGREGATE CONSIDERATION
NOT TO EXCEED $70,000,000.
and (ii) to insert immediately preceding the final period of the definition of
"Environmental Audit" the words "AND, WITH RESPECT TO VIBROPLANT U.S., INC. AND
ANY ASSETS ACQUIRED IN THE VIBROPLANT ACQUISITION, ANY ENVIRONMENTAL REPORT
DELIVERED TO THE ADMINISTRATIVE AGENT PRIOR TO THE CONSUMMATION OF THE
VIBROPLANT ACQUISITION".
(b) Amendment to Subsection 8.7. Subsection 8.7 of the
Credit Agreement shall be amended by (i) deleting in paragraph (a) thereof the
amounts under the heading "Base Amount" set forth opposite fiscal year 1996
through fiscal year 2000 and substituting therefor the amounts set forth below
opposite each such fiscal year:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1996 $106,000,000
1997 110,000,000
1998 113,000,000
1999 114,000,000
2000 115,000,000
</TABLE>
<PAGE> 3
and (ii) deleting paragraph (b) substituting therefor the following therefor:
"(B) ADDITIONAL CAPITAL EXPENDITURES IN RESPECT OF (I) THE
VIBROPLANT ACQUISITION AND (II) SECTION 8.6 ACQUISITIONS IN AN AGGREGATE AMOUNT
NOT TO EXCEED $30,000,000 (THE "ACQUISITION BASE AMOUNT"); PROVIDED THAT THE
AGGREGATE AMOUNT OF CAPITAL EXPENDITURES PERMITTED TO BE MADE PURSUANT TO THIS
SUBSECTION 8.7(B)(II) MAY BE INCREASED FROM TIME TO TIME BY A MAXIMUM OF
$10,000,000 IN THE AGGREGATE BY APPLYING A PORTION OF THE BASE AMOUNT FOR THE
RESPECTIVE FISCAL YEAR EQUAL TO SUCH INCREASE TO SUCH SECTION 8.6 ACQUISITIONS
(SUCH APPLICATION OF THE BASE AMOUNT FOR ANY SUCH YEAR NOT BEING CONSIDERED A
USAGE OF THE ACQUISITION BASE AMOUNT)."
(c) Amendment to Subsection 8.8. Subsection 8.8 of the
Credit Agreement shall be amended by deleting the amounts under the heading
"Amount" set forth opposite the first fiscal quarter of fiscal year 1996 through
the fourth fiscal quarter of fiscal year 2000 and substituting therefor the
amounts set forth below opposite each such fiscal quarter of each such fiscal
year:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL QUARTER AMOUNT
----------- -------------- ------
<S> <C> <C>
1996 First $ 60,000,000
Second 66,000,000
Third 74,000,000
Fourth 81,000,000
1997 First 85,000,000
Second 91,000,000
Third 97,000,000
Fourth 103,000,000
1998 First 103,000,000
Second 106,000,000
Third 111,000,000
Fourth 116,000,000
1999 First 116,000,000
Second 120,000,000
Third 123,000,000
Fourth 130,000,000
2000 First 130,000,000
Second 133,000,000
Third 138,000,000
Fourth 142,000,000
</TABLE>
2. EFFECTIVENESS. This Amendment shall become effective
upon (a) the execution of this Amendment by the Company, the Administrative
Agent, Collateral Agent and Required Lenders and receipt of the same by the
Administrative Agent and (b) the receipt by the Company of no less than
$9,400,000 from a capital contribution from, or the issuance of additional
Common Stock to, Holdings.
<PAGE> 4
3. COUNTERPARTS. This Amendment may be executed by the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
4. GOVERNING LAW. This Amendment shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York,
without regard to the choice of law rules thereof.
5. CONTINUING EFFECT OF CREDIT AGREEMENT. Except as
expressly modified and amended herein, the Credit Agreement shall continue to
be, and shall remain, in full force and effect in accordance with its terms.
<PAGE> 5
IN WITNESS WHEREOF, the parties have hereto caused this
Amendment to be executed by their respective duly authorized officers as of the
day first above written.
PRIMECO INC.
By:
-----------------------------
Name:
Title:
CHEMICAL BANK, as Administrative Agent
and as a Lender
By:
-----------------------------
Name:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Collateral Agent and as a Lender
By:
-----------------------------
Name:
Title:
BANKERS TRUST COMPANY
By:
-----------------------------
Name:
Title:
BANK OF TOKYO TRUST COMPANY
By:
-----------------------------
Name:
Title:
BANQUET PARIBUS
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
<PAGE> 6
CRESCENT MACH I PARTNERS, L.P.
By:
-----------------------------
Name:
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured
Management, Inc.
By:
-----------------------------
Name:
Title:
STICHTING RESTRUCTURED
OBLIGATIONS BACKED BY SENIOR
ASSETS 2 (ROSA 2)
By: Chancellor Senior Secured
Management, Inc.
By:
-----------------------------
Name:
Title:
DEAN WITTER INTERCAPITAL INC.
By:
-----------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:
-----------------------------
Name:
Title:
FLEET BANK
By:
-----------------------------
Name:
Title:
<PAGE> 7
HELLER FINANCIAL, INC.
By:
-----------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
-----------------------------
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO,
INC.
By:
-----------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:
-----------------------------
Name:
Title:
PILGRIM PRIME RATE PORTFOLIO,
INC.
By:
-----------------------------
Name:
Title:
PROSPECT STREET SENIOR
PORTFOLIO, L.P.
By:
-----------------------------
Name:
Title:
PROTECTIVE LIFE INSURANCE
COMPANY
By:
-----------------------------
Name:
Title:
<PAGE> 8
THE DAIWA BANK, LTD.
By:
-----------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
BOSTON
By:
-----------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH
By:
-----------------------------
Name:
Title:
VAN KAMPEN MERRITT INVESTMENT
ADVISORY CORP.
By:
-----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.10
<PAGE> 2
EMPLOYMENT AGREEMENT
This Agreement is made and entered into effective as of
December 2, 1994 by and between Primeco Inc., a Texas corporation ("Employer"),
and Thomas E. Bennett ("Employee").
Employer hereby agrees to employ Employee, and Employee hereby
accepts such employment, on the terms and conditions hereinafter set forth.
1. Period of Employment. The period of Employee's
employment under this Agreement (the "Period of Employment") shall commence on
the date hereof (the "Effective Date") and shall expire on December 2, 1999
(the "Expiration Date"), subject to any extension as may be agreed or any
earlier termination of Employee's employment as provided in Section 6 hereof.
Upon the expiration of the initial term of this Agreement, and each subsequent
term or extension thereof, this Agreement shall automatically be extended for
an additional term of one year, unless the employer or the Employee shall have
notified the other party hereto of its election to terminate this Agreement not
later than 90 days prior to the scheduled Expiration Date. If Employee's
employment is terminated pursuant to Section 6 hereof, the Period of Employment
shall expire as of the Date of Termination (as hereinafter defined).
2. Duties. During the Period of Employment, Employee
will faithfully perform those duties and responsibilities assigned by the Board
of Directors of the corporate parent ("Parent") of Employer (the "Board") or
the Chief Executive Officer of Employer and Employee will devote his full
working time and use his best efforts to advance the business and welfare of
Employer in furtherance of the policies established by the Board. During the
Period of Employment, Employee shall not engage in any other employment
activities for any direct or indirect remuneration without the concurrence of
the Board, except that Employee may continue to devote reasonable time to the
management of investments and to participation in community and charitable
affairs, so long as such activities do not interfere with his duties under this
Agreement. Employee shall have such title as the Board shall determine from
time to time; Employee's initial title is set forth on Exhibit A hereto.
3. Compensation.
3.1 Base Salary. During the Period of Employment,
Employer shall pay Employee a Base Salary at the rate of $225,000 per annum
payable at least as frequently as bi-weekly and subject to payroll deductions
as may be necessary or customary in respect of Employer's salaried employees in
general. The amount of Employee's Base Salary shall be subject to annual
review by the Board, provided that the level of such Base Salary shall not be
subject to reduction.
<PAGE> 3
3.2 Incentive Compensation. In addition to the Base
Salary provided for in Section 3.1 hereof, Employee shall participate in the
Management Cash Incentive Bonus Program (the "Program") as adopted by the Board
and pursuant to which Employee shall be entitled to annual cash bonuses as set
forth on Exhibit B hereto. Employer agrees that it will not amend or modify
the Program in any manner materially adverse to Employee's interest thereunder
without Employee's written consent. It is understood that, at the discretion
of the Board, the Program may be terminated upon an initial public offering of
the securities of Employer or Parent ("IPO") and that by its terms the Program
terminates after five years unless extended beyond that date by the Board in
its sole discretion.
4. Benefits. During the Period of Employment, Employee
shall be entitled to participate in all fringe benefit programs maintained by
Employer that are available to its executive officers generally. Any payments
or benefits payable to Employee hereunder in respect of any calendar year
during which Employee is employed by Employer for less than the entire year
shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such calendar year during
which he is so employed. Employee acknowledges that he shall have no vested
rights under or to participate in any such program except as expressly provided
under the terms hereof or thereof.
5. Expenses. Employer will pay or reimburse Employee
for such reasonable travel, entertainment or other expenses as he may incur on
behalf of Employer during the Period of Employment in connection with the
performance of his duties hereunder but only to the extent that such expenses
were either specifically authorized by Employer or incurred in accordance with
policies established by the Board and provided that Employee shall furnish
Employer with such evidence relating to such expenses as Employer may
reasonably require to substantiate such expenses for tax purposes.
6. Termination of Employment.
6.1 Circumstances of Termination.
Notwithstanding the terms set forth in Section 1 hereof, Employee's employment
shall terminate under any of the following circumstances:
(a) Death. In the event of Employee's
death.
(b) Permanent Disability. If during the
Period of Employment Employee becomes physically or mentally incapacitated or
disabled so that (i) he is unable to perform for Employer substantially the
same services as he performed prior to incurring such incapacity or disability
or to devote his full working time or use his best efforts to advance the
business and welfare of Employer or otherwise to perform his duties under this
Agreement and (ii) such condition exists for an aggregate of six months in any
12 consecutive calendar month period (Employer, at its option and expense,
being entitled to retain a physician reasonably acceptable to Employee to
confirm the existence of such incapacity or disability, and the determination
of such physician being binding upon Employer and Employee).
<PAGE> 4
(c) Cause. At the option of Employer,
because Employee:
(i) has been convicted of, or has
pled guilty or nolo contendere to, a felony or a
crime involving moral turpitude, or
(ii) has embezzled or
misappropriated Employer funds or property, or
(iii) has continued use of alcohol
or drugs to an extent that interferes with the
performance by Employee of his employment
responsibilities, or
(iv) has violated Section 8.1,
Section 8.2, Section 8.3 or Section 8.4 hereof, or
(v) has willfully failed or refused
to perform those duties reasonably assigned or
delegated to him by the Board of Directors or the
Chief Executive Officer, which failure or refusal
continues following (a) the Board of Directors giving
the Employee written notice setting forth the facts
or events constituting such failure or refusal and
(b) a reasonable opportunity to correct the
deficiencies or other problems specified in such
notice to the reasonable satisfaction of the Board of
Directors.
(d) Not For Cause. At the option of
Employer at any time for any reason other than those referred to above or for
no reason at all, whereupon the Employer shall become obligated to make those
payments set forth in Section 7.1(d) hereof.
6.2 Notice of Termination. Any termination of
Employee's employment by Employer (other than termination pursuant to Section
6.1(a) hereof) or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9.2. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
terminating Employee's employment by Employer. If a Notice of Termination is
given by Employer, such notice shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances that provide a basis for termination of
Employee's employment under the provision so indicated. For purposes of this
Agreement, the "Date of Termination" shall be the date on which the Notice of
Termination is delivered except that with respect to Section 6.1(a) the "Date
of Termination" shall be the date of Employee's death.
7. Payments Upon Termination of Employment.
7.1 Payments. In the event that Employee's
employment is terminated prior to the Expiration Date (including any extension
thereof), the Period of Employment shall expire as of the Date of Termination.
(a) If Employer terminates Employee's
employment for Cause or if Employee voluntarily terminates his employment,
Employer's obligation to compensate Employee shall in all respects cease as of
the Date of Termination, except that Employer shall pay Employee the Base
Salary accrued under Section 3 and the reimbursable expenses incurred under
Section 5 of this Agreement up to such Date of Termination (the "Accrued
Obligations");
(b) If Employee's employment is terminated
upon the death of Employee, Employer's obligation to compensate Employee shall
in all respects cease as of the Date of Termination, except that within thirty
(30) days after the Date of Termination Employer shall (i) pay Employee's
estate or legal representative the Accrued Obligations and a lump sum payment
equal to 25% of the Employee's annual Base Salary payable under Section 3
hereof at the rate in effect immediately prior to such termination and (ii)
continue to maintain during the three-month period following the Date of
Termination for the benefit of the Employee's dependents, basic health and
dental insurance and related medical expenses coverage on terms no less
favorable to the Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time during such
period;
(c) If Employee's employment is terminated
upon the Permanent Disability of Employee, Employer's obligation to compensate
Employee shall in all respects cease as of the Date of Termination, except that
within thirty (30) days after the Date of Termination Employer shall (i) pay
Employee Accrued Obligations and a lump sum payment equal to 50% of the
Employee's annual Base Salary payable under Section 3 hereof at the rate in
effect immediately prior to such termination less the amount of any disability
payments
<PAGE> 5
payable to Employee during the six-month period following the Date of
Termination pursuant to any Employer-paid or state sponsored insurance policy
or employer self-insured program and (ii) continue to maintain during the
six-month period following the Date of Termination for the benefit of Employee
and his dependents, basic health, disability and dental insurance and related
medical expenses coverage on terms no less favorable to the Employee than
Employer provides to its executive officers generally, as such benefits may be
modified from time to time during such period provided that the Employee shall
continue to be obligated to make any contributions or payments in connection
with such benefits to the same extent as other executive officers generally;
and
(d) If Employee's employment is terminated by
Employer pursuant to Section 6.1(d), Employer's obligation to compensate
Employee shall in all respects cease, except that within thirty (30) days after
the Date of Termination Employer shall pay to Employee the Accrued Obligations
and during the period ending on the earlier of the Expiration Date or the first
anniversary of the Date of Termination (the "Severance Period"), Employer shall
(i) pay to Employee on a monthly basis the sum of one-twelfth (1/12th) of the
annual Base Salary of Employee in effect at the Date of Termination (the
"Continuation Payments") and (ii) continue to maintain, during the Severance
Period for the benefit of the Employee and his dependents, basic health, dental
and life insurance and related medical expenses coverage (including disability
and hospitalization coverage) (the "Continuation Benefits") on terms no less
favorable to the Employee than the Employer provides to its executive officers
generally, as such benefits may be modified from time to time during the
Severance Period. During the Severance Period, Employee shall be required to
make any contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments; provided that such
contributions are also required to be made by the Employer's executive officers
generally. If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which Employee is
entitled to receive basic health benefits in connection with such employment on
terms provided by the Substitute Employer to its similarly situated employees
generally, the Employer shall no longer be required to provide Continuation
Benefits to the Employee, regardless of whether such benefits differ in any
respect from the Continuation Benefits. The Employer shall be excused from its
obligations to make payments under this Section 7.1(d) if the Employee breaches
its obligations hereunder (including its obligations under Article 8 hereof).
7.2 Release and Satisfaction. With respect to
Employee, his heirs, successors and assigns, payment by Employer of the amounts
provided under this Section 7 shall release, relinquish and forever discharge
Employer and any director, officer, employee, shareholder or agent of Employer
from any and all claims, damages, losses, costs, expenses, liabilities or
obligations, whether known or unknown (other than any such claims, damages,
losses, costs, expenses, liabilities or obligations (a) covered by any
indemnification arrangement of Employer with respect to Employee or (b) arising
under any written employee benefit plan or arrangement (whether or not tax-
qualified) covering Employee), which Employee has incurred or suffered or may
incur or suffer as a result of Employee's employment by Employer or the
termination of such employment.
7.3 Effect on This Agreement. Any termination of
Employee's employment and any expiration of the Period of Employment under this
Agreement shall not affect the continuing operation and effect of Sections 7.2,
8.1, 8.2, 8.3, 8.4 and 8.5 hereof, which shall continue in full force and
effect with respect to Employer and Employee, and its and his heirs, successors
and assigns. Nothing in Section 7.1 hereof shall be deemed to operate or shall
operate as a release, settlement or discharge of any liability of Employee to
Employer or others from any action or omission by Employee enumerated in
Section 6.1(c) hereof as a possible basis for termination of Employee's
employment for Cause.
7.4 No Duty to Mitigate. Subject to the
provisions of Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof, Employee shall be
free to accept such employment and engage in such business as Employee may
desire following the termination of his employment hereunder, and no
compensation received by Employee therefrom shall reduce or affect any payments
required to be made by Employer hereunder except to the extent expressly
provided in the benefit plans of Employer.
<PAGE> 6
8. Non-disclosure of Proprietary Information, Surrender
of Records; Inventions and Patents; Non-Compete.
8.1 Proprietary Information. Employee shall not
during the Period of Employment or at any time thereafter (irrespective of the
circumstances under which Employee's employment by Employer terminates),
directly or indirectly use for his own purpose or for the benefit of any person
or entity other than Employer, nor otherwise disclose, any proprietary
information, as defined below, to any individual or entity, unless such
disclosure has been authorized in writing by the Board or is otherwise required
by law. For purposes of this Agreement, the term "proprietary information"
shall include, but is not limited to: (a) the name or address of any customer,
vendor or affiliate of Employer or any information concerning the transactions
or relations of any customer, vendor or affiliate of Employer with Employer or
any of its shareholders; (b) any information concerning any product, technology
or procedure employed by Employer but not generally known to its customers,
vendors or competitors, or under development by or being tested by Employer but
not at the time offered generally to customers or vendors; (c) any information
relating to Employer's computer software, computer systems, pricing or
marketing methods, sales margins, cost of goods, cost of material, capital
structure, operating results, borrowing arrangements or business plans; (d) any
information which is generally regarded as confidential or proprietary in any
line of business engaged in by Employer; (e) any information contained in any
of Employer's written or oral policies and procedures or employee manuals; (f)
any information belonging to customers, vendors or affiliates of Employer which
Employer has agreed to hold in confidence; (g) any inventions, innovations or
improvements covered by Section 8.3 below; (h) any other information which the
Board has reasonably determined by resolution and communicated to Employee to
be confidential or proprietary; and (i) all written, graphic and other material
relating to any of the foregoing. Information that is not novel or copyrighted
or patented may nonetheless be proprietary information. However, proprietary
information shall not include (i) any information that is or becomes generally
known to the industries in which Employer competes through sources independent
of Employer or through authorized publication to persons other than Employer's
employees by Employer or (ii) other non-sensitive information that may be
disclosed by Employee in the ordinary course of business, the disclosure of
which is not reasonably likely to adversely affect Employer's business
operations, their relationships with customers, vendors or employees or the
results of their operations.
8.2 Confidentiality and Surrender of Records.
Employee shall not during the Period of Employment or at any time thereafter
(irrespective of the circumstances under which Employee's employment by
Employer terminates), except as required by law, directly or indirectly give
any "confidential records" (as hereinafter defined) to, or permit any
inspection or copying of confidential records by, any individual or entity
other than in the course of such individual's or entity's employment or
retention by Employer, nor shall he retain, and will deliver promptly to
Employer, any of the same following termination of his employment. For
purposes hereof, "confidential records" means all correspondence, memoranda,
files, manuals, books, lists, financial, operating or marketing records,
magnetic tape, or electronic or other media or equipment of any kind which may
be in Employee's possession or under his control or accessible to him which
contain any proprietary information as defined in Section 8.1. above. All
confidential records shall be and remain the sole property of Employer during
the Period of Employment and thereafter.
8.3 Inventions and Patents. All inventions,
innovations or improvements in Employer's method of conducting its business
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether patentable or copyrightable or not) conceived or made by
Employee, either alone or jointly with others, during the Period of Employment
belong to Employer. Employee will promptly disclose in writing such
inventions, innovations or improvements to the Board and perform all actions
reasonably requested by the Board to establish and confirm such ownership by
Employer, including, but not limited to, cooperating with and assisting
Employer in obtaining patents for Employer in the United States and in foreign
countries. Any patent application filed by Employee within a year after
termination of his employment hereunder shall be presumed to relate to an
invention which was made during the Period of Employment unless Employee can
provide evidence to the contrary.
<PAGE> 7
8.4 Covenant Not to Compete; No Solicitation.
(a) Employee acknowledges and recognizes
the highly competitive nature of Employer's business and, in consideration of
the payment by Employer to Employee of amounts that may hereafter be paid to
Employee pursuant to Sections 7.1 and 8.4(d) hereof, Employee agrees that
during the period (the "Covered Time") beginning on the Date of Termination and
ending (i) if Employee's employment is terminated for any reason other than
pursuant to Section 6.1(d) hereof, on the second anniversary of the Date of
Termination or (ii) if Employee's employment is terminated pursuant to Section
6.1(d) hereof and subject to Section 8.4(d) hereof, on the earlier of (A) the
first anniversary of the Date of Termination or (B) the last day of the Period
of Employment remaining under Section 1 hereof immediately prior to the Date of
Termination, Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of America
in which the Employer is conducting business or proposes to conduct business as
of the Date of Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area"). For purposes of
this Agreement, (i) "Covered Business" shall mean the renting and selling of
the following types of equipment (and parts and supplies for such equipment):
high-reach booms, forklifts, tractors, dump trucks, air compressors and
high-reach scissor lifts, and small tools such as electrical generators, power
saws and hand tools; and (ii) the phrase "engage, directly or indirectly" shall
mean engaging directly or having an interest, directly or indirectly, as owner,
partner, shareholder, independent contractor, capital investor, lender,
renderer of consultation services or advice or otherwise (other than as the
holder of less than 2% of the outstanding stock of a publicly-traded
corporation), either alone or in association with others, in the operation of
any aspect of any type of business or enterprise engaged in any aspect of the
Covered Business. Employee shall be deemed engaged in business in the Covered
Area if his place of business is located in the Covered Area or if he solicits
customers located anywhere in, or delivers products anywhere in, the Covered
Area.
(b) Employee agrees that during the term
of this Agreement (including any extensions thereof) and during the Covered
Time he shall not (i) directly or indirectly solicit or attempt to solicit any
of the employees, agents or representatives of Employer or affiliates of
Employer to leave any of such entities; (ii) directly or indirectly solicit or
attempt to solicit any of the employees, agents, consultants or representatives
of Employer or affiliates of Employer to become employees agents,
representatives or consultants of any other person or entity; or (iii) directly
or indirectly solicit or attempt to solicit any customer, vendor or distributor
of Employer or affiliates of Employer with respect to any product or service
being furnished, made, sold or leased by Employer.
(c) Employee understands that the
provisions of Section 8.4(a) may limit his ability to earn a livelihood in a
business similar to the business of Employer but nevertheless agrees and hereby
acknowledges that the consideration provided under this Agreement, including
any amounts or benefits provided under Section 7 hereof, is sufficient to
justify the restrictions contained in such provisions and in consideration
thereof and in light of Employee's education, skills and abilities, Employee
agrees that he will not assert that, and it should not be considered that, such
provisions prevent him from earning a living or otherwise are void or
unenforceable or should be voided or held unenforceable. Employee acknowledges
and agrees that his duties with Employer are of an executive nature and that he
is a member of Employer's management group.
(d) If Employee's employment is
terminated pursuant to Section 6.1(d) hereof, Employer may extend the Covered
Time to extend up to and through the second anniversary of the Date of
Termination by delivering written notice to Employee (specifying the duration
of the extended Covered Time), within ten (10) days of such Date of
Termination, that Employer has elected to continue to pay to Employee the
Continuation Payments and provide the Continuation Benefits (on terms no less
favorable to Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time) for each month
of such extended Covered Time. During the extended Covered Time, Employee
shall be required to make any contributions required to maintain such
Continuation Benefits, which may be withheld from the Continuation Payments;
provided that such contributions are also required to be made by the Employer's
executive officers generally. If at any time during the extended Covered Time
Employee shall obtain employment with a Substitute Employer in which Employee
is entitled to receive basic health benefits in connection
<PAGE> 8
with such employment on terms provided by the Substitute Employer to its
similarly situated employees generally, Employer shall no longer be required to
provide Continuation Benefits to the Employee, regardless of whether such
benefits differ in any respect from the Continuation Benefits. Employer shall
be excused from its obligations to make payments under this Section 8.4(d) if
Employee breaches its obligations hereunder.
8.5 Litigation Assistance. Employee agrees that
after the Date of Termination he shall, at the request of Employer, render all
assistance and perform all lawful acts that Employer considers necessary or
advisable in connection with any litigation involving Employer or any director,
officer, employee, shareholder, agent, representative, consultant, customer or
vendor of Employer. In the event that Employer requests Employee's assistance
under this Section 8.5, Employer shall pay to Employee for each day such
assistance is rendered an amount equal to the annual Base Salary of Employee in
effect at the Date of Termination divided by 250 and shall promptly pay or
reimburse Employee for such reasonable travel expenses as he may incur in
connection with rendering assistance hereunder.
8.6 Definition of Employer. For purposes of this
Section 8, the term Employer shall include Employer and any and all of its
subsidiaries, ventures or affiliates, whether currently existing or hereafter
formed, which are engaged in the Covered Business or a portion thereof, as well
as any person to whom this Agreement is assigned as permitted by Section 9.8
hereof.
8.7 Enforcement.
(a) The parties hereto agree and
acknowledge that the covenants and agreements contained herein are reasonably
necessary in duration and to protect the reasonable competitive business
interests of Employer, including, without limitation, the value of the
proprietary information and goodwill of Employer.
(b) Employee agrees that the covenants
and undertakings contained in Article 8 of this Agreement relate to matters
which are of a special, unique and extraordinary character and that Employer
cannot be reasonably or adequately compensated in damages in an action at law
in the event Employee breaches any of these covenants or undertakings.
Therefore, Employee agrees that Employer shall be entitled, as a matter of
course, without the need to prove irreparable injury, to an injunction,
restraining order or other equitable relief from any court of competent
jurisdiction, restraining any violation or threatened violation of any of such
terms by Employee and such other persons as the court shall order. Employee
agrees to pay costs and legal fees incurred by Employer in obtaining such
injunction.
<PAGE> 9
(c) Rights and remedies provided for in
this Section are cumulative and shall be in addition to rights and remedies
otherwise available to the parties under any other agreement or applicable law.
(d) In the event that any provision of
this Agreement shall to any extent be held invalid, unreasonable or
unenforceable in any circumstances, the parties hereto agree that the remainder
of this Agreement and the application of such provision of this Agreement to
other circumstances shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Agreement, or any part thereof, is
held to be unenforceable because of the scope or duration of or the area
covered by such provision, the parties hereto agree that the court or
arbitrator making such determination shall reduce the scope, duration and/or
area of such provision (and shall substitute appropriate provisions for any
such unenforceable provisions) in order to make such provision enforceable to
the fullest extent permitted by law, and/or shall delete specific words and
phrases, and such modified provision shall then be enforceable and shall be
enforced. The parties hereto recognize that if, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants contained in this
Agreement, then that unenforceable covenant contained in this Agreement shall
be deemed eliminated from these provisions to the extent necessary to permit
the remaining separate covenants to be enforced. In the event that any court
or arbitrator determines that the time period or the area, or both, are
unreasonable and that any of the covenants is to that extent unenforceable, the
parties hereto agree that such covenants will remain in full force and effect,
first, for the greatest time period, and second, in the greatest geographical
area that would not render them unenforceable.
9. Miscellaneous.
9.1 Key Man Insurance. Employee recognizes and
acknowledges that Employer or its affiliates may seek and purchase one or more
policies providing key man life insurance with respect to Employee, the
proceeds of which would be payable to Employer or such affiliate. Employee
hereby consents to Employer or its affiliates seeking and purchasing such
insurance and will provide such information, undergo such medical examinations
(at Employer's expense), execute such documents, and otherwise take any and all
actions necessary or desirable in order for Employer or its affiliates to seek,
purchase and maintain in full force and effect such policy or policies.
9.2 Notice. Any notice required or permitted to
be given hereunder shall be deemed sufficiently given if sent by registered or
certified mail, postage prepaid, addressed to the addressee at his or its
address last provided the sender in writing by the addressee for purposes of
receiving notices hereunder or, unless or until such address shall be so
furnished, to the address indicated opposite his or its signature to this
Agreement. For purposes of this Agreement, notice sent in conformity with this
Section 9.2 shall be deemed to have been received on the third business day
following the date on which such notices are so sent.
<PAGE> 10
9.3 Modification and No Waiver of Breach. No
waiver or modification of this Agreement shall be binding unless it is in
writing signed by the parties hereto. No waiver by a party of a breach hereof
by the other party shall be deemed to constitute a waiver of a future breach,
whether of a similar or dissimilar nature, except to the extent specifically
provided in any written waiver under this Section 9.3.
9.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND ALL QUESTIONS RELATING TO THE VALIDITY AND PERFORMANCE
HEREOF AND REMEDIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
9.5 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same agreement.
9.6 Captions. The captions used herein are for
ease of reference only and shall not define or limit the provisions hereof.
9.7 Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto relating to the matters
encompassed hereby and supersedes any prior oral or written agreements.
9.8 Assignment. The rights of Employer under
this Agreement may, without the consent of Employee, be assigned by Employer to
any person, firm, corporation, or other business entity which at any time,
whether by purchase, merger, or otherwise, directly or indirectly, acquires all
or material portions of the stock, assets or any line of business of Employer.
9.9 Non-Transferability of Interest. None of the
rights of Employee to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Employee. Any attempted assignment, transfer, conveyance, or other disposition
(other than as aforesaid) of any interest in the rights of Employee to receive
any form of compensation to be made by Employer pursuant to this Agreement
shall be void.
9.10 Arbitration. The parties shall endeavor to
settle all disputes by amicable negotiations. Except as otherwise provided
herein, any claim, dispute, disagreement or controversy that arises among the
parties relating to this Agreement that is not amicably settled shall be
resolved by arbitration, as follows:
<PAGE> 11
(a) Any such arbitration shall be heard
in The City of New York, New York, before a panel consisting of one (l) to
three (3) arbitrators, each of whom shall be impartial. Upon the written
Request of Arbitration of either party hereto to commence arbitration
hereunder, the parties shall attempt to mutually agree as to the number and
identity of the arbitrator(s), within thirty (30) days of the date of such
Request. Except as the parties may otherwise agree, all arbitrators (if not
selected by the parties hereto within thirty (30) days of a written Request for
Arbitration) shall be appointed pursuant to the commercial arbitration rules of
the American Arbitration Association. In determining the number and
appropriate background of the arbitrators, the appointing authority shall give
due consideration to the issues to be resolved, but his or her decision as to
the number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by
any party to this Agreement by the service of a written Request for Arbitration
upon the other affected parties. Such Request for Arbitration shall summarize
the controversy or claim to be arbitrated.
(c) All attorneys' fees and costs of the
arbitration shall in the first instance be borne by the respective party
incurring such costs and fees, but the arbitrators shall have the discretion to
award costs and/or attorneys' fees as they deem appropriate under the
circumstances. The parties hereby expressly waive punitive damages, and under
no circumstances shall an award contain any amount that in any way reflects
punitive damages.
<PAGE> 12
(d) Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
(e) It is intended that controversies or
claims submitted to arbitration under this Section 9.10 shall remain
confidential, and to that end it is agreed by the parties that neither the
facts disclosed in the arbitration, the issues arbitrated, nor the views or
opinions of any persons concerning them, shall be disclosed to third persons at
any time, except to the extent necessary to enforce an award or judgment or as
required by law or in response to legal process or in connection with such
arbitration.
(f) Any arbitration under this Section
9.10 shall be conducted pursuant to the commercial arbitration rules of the
American Arbitration Association.
9.11 Jurisdiction; Venue. Subject to Section 9.10
hereof, the parties hereto irrevocably and unconditionally submit to the
exclusive jurisdiction of any State or Federal court sitting in The City of New
York over any suit, action or proceeding arising out of or relating to this
Agreement. Service of any process, summons, notice or document by registered
mail addressed to any party as provided in Section 9.2 hereof shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. A final judgment in any suit, action or proceeding brought
in any such court shall be conclusive and binding upon the parties and may be
enforced in any other courts to whose jurisdiction a party is or may be
subject, by suit upon such judgment.
<PAGE> 13
IN WITNESS WHEREOF, this Agreement has been duly executed
effective as of the day and year first written above.
Address for notices: PRIMECO INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
By:
-----------------------------------
With a copy to:
INVESTCORP International Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Attention: Robert V. Glaser
EMPLOYEE
- -------------------------------
- ------------------------------- ---------------------------------------
Thomas E. Bennett
<PAGE> 14
EXHIBIT A
Employee's initial title shall be:
President and Chief Executive Officer
<PAGE> 15
EXHIBIT B
Management Cash Bonus Incentive Program
The following is the bonus formula for Employee for fiscal years 1995 through
1999:
EBITDA(1) TARGETS
1995 $68 million
1996 $90 million
1997 $108 million
1998 $120 million
1999 $132 million
__________________________
(1) Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as:
a. Consolidated Net Income (loss) of Holding and its
subsidiaries as it would appear on a statement of income (loss), which
sall reflect a reduction for all management and employee bonuses
payable with respect to the Fiscal Year, of consolidated Holding
prepared in accordance with U.S. GAAP, consistently applied; plus
(minus)
b. Any provision (benefit) for taxes (including
franchise taxes) deducted (added) in calculating such consolidated net
income (loss); plus
c. Any interest expense (net of interest income),
deducted in calculating such consolidated net income (loss); (minus)
d. Costs charged against any purchase accounting
reserves established in connection with the acquisition; (minus)
e. The effects of the reversal of any excess purchase
accounting reserves established in connection with the acquisition;
plus
f. Amortization expenses deducted in calculating
consolidated net income (loss); plus
g. Depreciation expense deducted in calculating
consolidated net income (loss); plus
h. Management fees paid to Investcorp; plus (minus)
i. Any unusual losses (gains) deducted (added) in
calculating consolidated net income (loss). (Unusual items are
intended to include transactions considered outside the ordinary
course of business. EBITDA will be adjusted to eliminate the effects,
if any, of such
[Footnote continued on next page]
<PAGE> 16
<TABLE>
<CAPTION>
% of Base
% of EBITDA Salary Payable
Target Achieved as Bonus (2)
--------------- ------------
Equal to Or
Greater Than: But Less Than:
------------ -------------
<S> <C> <C>
0 85 0
85 90 10 - 15
90 95 27 - 40
95 100 43 - 65
100 110 67 - 100
110 120 80 - 120
120 130 93 - 140
130 140 107 - 160
140 150 120 - 180
150 160 133 - 200
160 170 147 - 220
170 180 160 - 240
180 190 173 - 260
190 200 187 - 280
200 ----- 200 - 300
- -----------------------
</TABLE>
[Footnote continued from previous page]
transactions, the intent being to calculate EBITDA as if such
transactions had not occurred); plus (minus)
j. Any compensation expense (income) deducted (added) in
calculating consolidated net income (loss) attributable to
transactions involving equity securities of Holding or its
subsidiaries.
EBITDA shall be determined based upon the Management Case Financial
Model dated 1:44 PM December 5, 1994. The Optionee and his or her
representative shall be provided reasonable opportunity to review the
computation of EBITDA and reasonable access to the data and
information supporting such computation and shall have the right to
challenge in good faith such computation.
(2) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be dtermined on an
individual basis and may differ among eligible employees.
<PAGE> 1
EXHIBIT 10.11
<PAGE> 2
EMPLOYMENT AGREEMENT
This Agreement is made and entered into effective as of
December 2, 1994 by and between Primeco Inc., a Texas corporation ("Employer"),
and Kevin L. Loughlin ("Employee").
Employer hereby agrees to employ Employee, and Employee hereby
accepts such employment, on the terms and conditions hereinafter set forth.
1. Period of Employment. The period of Employee's
employment under this Agreement (the "Period of Employment") shall commence on
the date hereof (the "Effective Date") and shall expire on December 2, 1997
(the "Expiration Date"), subject to any extension as may be agreed or any
earlier termination of Employee's employment as provided in Section 6 hereof.
Upon the expiration of the initial term of this Agreement, and each subsequent
term or extension thereof, this Agreement shall automatically be extended for
an additional term of one year, unless the employer or the Employee shall have
notified the other party hereto of its election to terminate this Agreement not
later than 90 days prior to the scheduled Expiration Date. If Employee's
employment is terminated pursuant to Section 6 hereof, the Period of Employment
shall expire as of the Date of Termination (as hereinafter defined).
2. Duties. During the Period of Employment, Employee
will faithfully perform those duties and responsibilities assigned by the Board
of Directors of the corporate parent ("Parent") of Employer (the "Board") or
the Chief Executive Officer of Employer and Employee will devote his full
working time and use his best efforts to advance the business and welfare of
Employer in furtherance of the policies established by the Board. During the
Period of Employment, Employee shall not engage in any other employment
activities for any direct or indirect remuneration without the concurrence of
the Board, except that Employee may continue to devote reasonable time to the
management of investments and to participation in community and charitable
affairs, so long as such activities do not interfere with his duties under this
Agreement. Employee shall have such title as the Board shall determine from
time to time; Employee's initial title is set forth on Exhibit A hereto.
3. Compensation.
3.1 Base Salary. During the Period of Employment,
Employer shall pay Employee a Base Salary at the rate of $140,000 per annum
payable at least as frequently as bi-weekly and subject to payroll deductions
as may be necessary or customary in respect of Employer's salaried employees in
general. The amount of Employee's Base Salary shall be subject to annual
review by the Board, provided that the level of such Base Salary shall not be
subject to reduction.
<PAGE> 3
3.2 Incentive Compensation. In addition to the Base
Salary provided for in Section 3.1 hereof, Employee shall participate in the
Management Cash Incentive Bonus Program (the "Program") as adopted by the Board
and pursuant to which Employee shall be entitled to annual cash bonuses as set
forth on Exhibit B hereto. Employer agrees that it will not amend or modify
the Program in any manner materially adverse to Employee's interest thereunder
without Employee's written consent. It is understood that, at the discretion
of the Board, the Program may be terminated upon an initial public offering of
the securities of Employer or Parent ("IPO") and that by its terms the Program
terminates after five years unless extended beyond that date by the Board in
its sole discretion.
4. Benefits. During the Period of Employment, Employee
shall be entitled to participate in all fringe benefit programs maintained by
Employer that are available to its executive officers generally. Any payments
or benefits payable to Employee hereunder in respect of any calendar year
during which Employee is employed by Employer for less than the entire year
shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such calendar year during
which he is so employed. Employee acknowledges that he shall have no vested
rights under or to participate in any such program except as expressly provided
under the terms hereof or thereof.
5. Expenses. Employer will pay or reimburse Employee
for such reasonable travel, entertainment or other expenses as he may incur on
behalf of Employer during the Period of Employment in connection with the
performance of his duties hereunder but only to the extent that such expenses
were either specifically authorized by Employer or incurred in accordance with
policies established by the Board and provided that Employee shall furnish
Employer with such evidence relating to such expenses as Employer may
reasonably require to substantiate such expenses for tax purposes.
6. Termination of Employment.
6.1 Circumstances of Termination.
Notwithstanding the terms set forth in Section 1 hereof, Employee's employment
shall terminate under any of the following circumstances:
(a) Death. In the event of Employee's
death.
(b) Permanent Disability. If during the
Period of Employment Employee becomes physically or mentally incapacitated or
disabled so that (i) he is unable to perform for Employer substantially the
same services as he performed prior to incurring such incapacity or disability
or to devote his full working time or use his best efforts to advance the
business and welfare of Employer or otherwise to perform his duties under this
Agreement and (ii) such condition exists for an aggregate of six months in any
12 consecutive calendar month period (Employer, at its option and expense,
being entitled to retain a physician reasonably acceptable to Employee to
confirm the existence of such incapacity or disability, and the determination
of such physician being binding upon Employer and Employee).
<PAGE> 4
(c) Cause. At the option of Employer,
because Employee:
(i) has been convicted of, or has
pled guilty or nolo contendere to, a felony or a
crime involving moral turpitude, or
(ii) has embezzled or
misappropriated Employer funds or property, or
(iii) has continued use of alcohol
or drugs to an extent that interferes with the
performance by Employee of his employment
responsibilities, or
(iv) has violated Section 8.1,
Section 8.2, Section 8.3 or Section 8.4 hereof, or
(v) has willfully failed or refused
to perform those duties reasonably assigned or
delegated to him by the Board of Directors or the
Chief Executive Officer, which failure or refusal
continues following (a) the Board of Directors giving
the Employee written notice setting forth the facts
or events constituting such failure or refusal and
(b) a reasonable opportunity to correct the
deficiencies or other problems specified in such
notice to the reasonable satisfaction of the Board of
Directors.
(d) Not For Cause. At the option of
Employer at any time for any reason other than those referred to above or for
no reason at all, whereupon the Employer shall become obligated to make those
payments set forth in Section 7.1(d) hereof.
6.2 Notice of Termination. Any termination of
Employee's employment by Employer (other than termination pursuant to Section
6.1(a) hereof) or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9.2. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
terminating Employee's employment by Employer. If a Notice of Termination is
given by Employer, such notice shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances that provide a basis for termination of
Employee's employment under the provision so indicated. For purposes of this
Agreement, the "Date of Termination" shall be the date on which the Notice of
Termination is delivered except that with respect to Section 6.1(a) the "Date
of Termination" shall be the date of Employee's death.
7. Payments Upon Termination of Employment.
7.1 Payments. In the event that Employee's
employment is terminated prior to the Expiration Date (including any extension
thereof), the Period of Employment shall expire as of the Date of Termination.
(a) If Employer terminates Employee's
employment for Cause or if Employee voluntarily terminates his employment,
Employer's obligation to compensate Employee shall in all respects cease as of
the Date of Termination, except that Employer shall pay Employee the Base
Salary accrued under Section 3 and the reimbursable expenses incurred under
Section 5 of this Agreement up to such Date of Termination (the "Accrued
Obligations");
(b) If Employee's employment is terminated
upon the death of Employee, Employer's obligation to compensate Employee shall
in all respects cease as of the Date of Termination, except that within thirty
(30) days after the Date of Termination Employer shall (i) pay Employee's
estate or legal representative the Accrued Obligations and a lump sum payment
equal to 25% of the Employee's annual Base Salary payable under Section 3
hereof at the rate in effect immediately prior to such termination and (ii)
continue to maintain during the
<PAGE> 5
three-month period following the Date of Termination for the benefit of the
Employee's dependents, basic health and dental insurance and related medical
expenses coverage on terms no less favorable to the Employee than Employer
provides to its executive officers generally, as such benefits may be modified
from time to time during such period;
(c) If Employee's employment is terminated
upon the Permanent Disability of Employee, Employer's obligation to compensate
Employee shall in all respects cease as of the Date of Termination, except that
within thirty (30) days after the Date of Termination Employer shall (i) pay
Employee Accrued Obligations and a lump sum payment equal to 50% of the
Employee's annual Base Salary payable under Section 3 hereof at the rate in
effect immediately prior to such termination less the amount of any disability
payments payable to Employee during the six-month period following the Date of
Termination pursuant to any Employer-paid or state sponsored insurance policy
or employer self-insured program and (ii) continue to maintain during the
six-month period following the Date of Termination for the benefit of Employee
and his dependents, basic health, disability and dental insurance and related
medical expenses coverage on terms no less favorable to the Employee than
Employer provides to its executive officers generally, as such benefits may be
modified from time to time during such period provided that the Employee shall
continue to be obligated to make any contributions or payments in connection
with such benefits to the same extent as other executive officers generally;
and
(d) If Employee's employment is terminated by
Employer pursuant to Section 6.1(d), Employer's obligation to compensate
Employee shall in all respects cease, except that within thirty (30) days after
the Date of Termination Employer shall pay to Employee the Accrued Obligations
and during the period ending on the earlier of the Expiration Date or the first
anniversary of the Date of Termination (the "Severance Period"), Employer shall
(i) pay to Employee on a monthly basis the sum of one-twelfth (1/12th) of the
annual Base Salary of Employee in effect at the Date of Termination (the
"Continuation Payments") and (ii) continue to maintain, during the Severance
Period for the benefit of the Employee and his dependents, basic health, dental
and life insurance and related medical expenses coverage (including disability
and hospitalization coverage) (the "Continuation Benefits") on terms no less
favorable to the Employee than the Employer provides to its executive officers
generally, as such benefits may be modified from time to time during the
Severance Period. During the Severance Period, Employee shall be required to
make any contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments; provided that such
contributions are also required to be made by the Employer's executive officers
generally. If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which Employee is
entitled to receive basic health benefits in connection with such employment on
terms provided by the Substitute Employer to its similarly situated employees
generally, the Employer shall no longer be required to provide Continuation
Benefits to the Employee, regardless of whether such benefits differ in any
respect from the Continuation Benefits. The Employer shall be excused from its
obligations to make payments under this Section 7.1(d) if the Employee breaches
its obligations hereunder (including its obligations under Article 8 hereof).
7.2 Release and Satisfaction. With respect to
Employee, his heirs, successors and assigns, payment by Employer of the amounts
provided under this Section 7 shall release, relinquish and forever discharge
Employer and any director, officer, employee, shareholder or agent of Employer
from any and all claims, damages, losses, costs, expenses, liabilities or
obligations, whether known or unknown (other than any such claims, damages,
losses, costs, expenses, liabilities or obligations (a) covered by any
indemnification arrangement
<PAGE> 6
of Employer with respect to Employee or (b) arising under any written employee
benefit plan or arrangement (whether or not tax-qualified) covering Employee),
which Employee has incurred or suffered or may incur or suffer as a result of
Employee's employment by Employer or the termination of such employment.
7.3 Effect on This Agreement. Any termination of
Employee's employment and any expiration of the Period of Employment under this
Agreement shall not affect the continuing operation and effect of Sections 7.2,
8.1, 8.2, 8.3, 8.4 and 8.5 hereof, which shall continue in full force and
effect with respect to Employer and Employee, and its and his heirs, successors
and assigns. Nothing in Section 7.1 hereof shall be deemed to operate or shall
operate as a release, settlement or discharge of any liability of Employee to
Employer or others from any action or omission by Employee enumerated in
Section 6.1(c) hereof as a possible basis for termination of Employee's
employment for Cause.
7.4 No Duty to Mitigate. Subject to the
provisions of Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof, Employee shall be
free to accept such employment and engage in such business as Employee may
desire following the termination of his employment hereunder, and no
compensation received by Employee therefrom shall reduce or affect any payments
required to be made by Employer hereunder except to the extent expressly
provided in the benefit plans of Employer.
<PAGE> 7
8. Non-disclosure of Proprietary Information, Surrender
of Records; Inventions and Patents; Non-Compete.
8.1 Proprietary Information. Employee shall not
during the Period of Employment or at any time thereafter (irrespective of the
circumstances under which Employee's employment by Employer terminates),
directly or indirectly use for his own purpose or for the benefit of any person
or entity other than Employer, nor otherwise disclose, any proprietary
information, as defined below, to any individual or entity, unless such
disclosure has been authorized in writing by the Board or is otherwise required
by law. For purposes of this Agreement, the term "proprietary information"
shall include, but is not limited to: (a) the name or address of any customer,
vendor or affiliate of Employer or any information concerning the transactions
or relations of any customer, vendor or affiliate of Employer with Employer or
any of its shareholders; (b) any information concerning any product, technology
or procedure employed by Employer but not generally known to its customers,
vendors or competitors, or under development by or being tested by Employer but
not at the time offered generally to customers or vendors; (c) any information
relating to Employer's computer software, computer systems, pricing or
marketing methods, sales margins, cost of goods, cost of material, capital
structure, operating results, borrowing arrangements or business plans; (d) any
information which is generally regarded as confidential or proprietary in any
line of business engaged in by Employer; (e) any information contained in any
of Employer's written or oral policies and procedures or employee manuals; (f)
any information belonging to customers, vendors or affiliates of Employer which
Employer has agreed to hold in confidence; (g) any inventions, innovations or
improvements covered by Section 8.3 below; (h) any other information which the
Board has reasonably determined by resolution and communicated to Employee to
be confidential or proprietary; and (i) all written, graphic and other material
relating to any of the foregoing. Information that is not novel or copyrighted
or patented may nonetheless be proprietary information. However, proprietary
information shall not include (i) any information that is or becomes generally
known to the industries in which Employer competes through sources independent
of Employer or through authorized publication to persons other than Employer's
employees by Employer or (ii) other non-sensitive information that may be
disclosed by Employee in the ordinary course of business, the disclosure of
which is not reasonably likely to adversely affect Employer's business
operations, their relationships with customers, vendors or employees or the
results of their operations.
8.2 Confidentiality and Surrender of Records.
Employee shall not during the Period of Employment or at any time thereafter
(irrespective of the circumstances under which Employee's employment by
Employer terminates), except as required by law, directly or indirectly give
any "confidential records" (as hereinafter defined) to, or permit any
inspection or copying of confidential records by, any individual or entity
other than in the course of such individual's or entity's employment or
retention by Employer, nor shall he retain, and will deliver promptly to
Employer, any of the same following termination of his employment. For
purposes hereof, "confidential records" means all correspondence, memoranda,
files, manuals, books, lists, financial, operating or marketing records,
magnetic tape, or electronic or other media or equipment of any kind which may
be in Employee's possession or under his control or accessible to him which
contain any proprietary information as defined in Section 8.1. above. All
confidential records shall be and remain the sole property of Employer during
the Period of Employment and thereafter.
8.3 Inventions and Patents. All inventions,
innovations or improvements in Employer's method of conducting its business
(including policies, procedures,
<PAGE> 8
products, improvements, software, ideas and discoveries, whether patentable
or copyrightable or not) conceived or made by Employee, either alone or jointly
with others, during the Period of Employment belong to Employer. Employee will
promptly disclose in writing such inventions, innovations or improvements to
the Board and perform all actions reasonably requested by the Board to
establish and confirm such ownership by Employer, including, but not limited
to, cooperating with and assisting Employer in obtaining patents for Employer
in the United States and in foreign countries. Any patent application filed by
Employee within a year after termination of his employment hereunder shall be
presumed to relate to an invention which was made during the Period of
Employment unless Employee can provide evidence to the contrary.
8.4 Covenant Not to Compete; No Solicitation.
(a) Employee acknowledges and recognizes
the highly competitive nature of Employer's business and, in consideration of
the payment by Employer to Employee of amounts that may hereafter be paid to
Employee pursuant to Sections 7.1 and 8.4(d) hereof, Employee agrees that
during the period (the "Covered Time") beginning on the Date of Termination and
ending (i) if Employee's employment is terminated for any reason other than
pursuant to Section 6.1(d) hereof, on the second anniversary of the Date of
Termination or (ii) if Employee's employment is terminated pursuant to Section
6.1(d) hereof and subject to Section 8.4(d) hereof, on the earlier of (A) the
first anniversary of the Date of Termination or (B) the last day of the Period
of Employment remaining under Section 1 hereof immediately prior to the Date of
Termination, Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of America
in which the Employer is conducting business or proposes to conduct business as
of the Date of Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area"). For purposes of
this Agreement, (i) "Covered Business" shall mean the renting and selling of
the following types of equipment (and parts and supplies for such equipment):
high-reach booms, forklifts, tractors, dump trucks, air compressors and
high-reach scissor lifts, and small tools such as electrical generators, power
saws and hand tools; and (ii) the phrase "engage, directly or indirectly" shall
mean engaging directly or having an interest, directly or indirectly, as owner,
partner, shareholder, independent contractor, capital investor, lender,
renderer of consultation services or advice or otherwise (other than as the
holder of less than 2% of the outstanding stock of a publicly-traded
corporation), either alone or in association with others, in the operation of
any aspect of any type of business or enterprise engaged in any aspect of the
Covered Business. Employee shall be deemed engaged in business in the Covered
Area if his place of business is located in the Covered Area or if he solicits
customers located anywhere in, or delivers products anywhere in, the Covered
Area.
(b) Employee agrees that during the term
of this Agreement (including any extensions thereof) and during the Covered
Time he shall not (i) directly or indirectly solicit or attempt to solicit any
of the employees, agents or representatives of Employer or affiliates of
Employer to leave any of such entities; (ii) directly or indirectly solicit or
attempt to solicit any of the employees, agents, consultants or representatives
of Employer or affiliates of Employer to become employees agents,
representatives or consultants of any other person or entity; or (iii) directly
or indirectly solicit or attempt to solicit any customer, vendor or distributor
of Employer or affiliates of Employer with respect to any product or service
being furnished, made, sold or leased by Employer.
(c) Employee understands that the
provisions of Section 8.4(a) may limit his ability to earn a livelihood in a
business similar to the business of Employer but nevertheless agrees and hereby
acknowledges that the consideration provided under this
<PAGE> 9
Agreement, including any amounts or benefits provided under Section 7 hereof,
is sufficient to justify the restrictions contained in such provisions and in
consideration thereof and in light of Employee's education, skills and
abilities, Employee agrees that he will not assert that, and it should not be
considered that, such provisions prevent him from earning a living or otherwise
are void or unenforceable or should be voided or held unenforceable. Employee
acknowledges and agrees that his duties with Employer are of an executive
nature and that he is a member of Employer's management group.
(d) If Employee's employment is
terminated pursuant to Section 6.1(d) hereof, Employer may extend the Covered
Time to extend up to and through the second anniversary of the Date of
Termination by delivering written notice to Employee (specifying the duration
of the extended Covered Time), within ten (10) days of such Date of
Termination, that Employer has elected to continue to pay to Employee the
Continuation Payments and provide the Continuation Benefits (on terms no less
favorable to Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time) for each month
of such extended Covered Time. During the extended Covered Time, Employee
shall be required to make any contributions required to maintain such
Continuation Benefits, which may be withheld from the Continuation Payments;
provided that such contributions are also required to be made by the Employer's
executive officers generally. If at any time during the extended Covered Time
Employee shall obtain employment with a Substitute Employer in which Employee
is entitled to receive basic health benefits in connection with such employment
on terms provided by the Substitute Employer to its similarly situated
employees generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether such benefits
differ in any respect from the Continuation Benefits. Employer shall be
excused from its obligations to make payments under this Section 8.4(d) if
Employee breaches its obligations hereunder.
8.5 Litigation Assistance. Employee agrees that
after the Date of Termination he shall, at the request of Employer, render all
assistance and perform all lawful acts that Employer considers necessary or
advisable in connection with any litigation involving Employer or any director,
officer, employee, shareholder, agent, representative, consultant, customer or
vendor of Employer. In the event that Employer requests Employee's assistance
under this Section 8.5, Employer shall pay to Employee for each day such
assistance is rendered an amount equal to the annual Base Salary of Employee in
effect at the Date of Termination divided by 250 and shall promptly pay or
reimburse Employee for such reasonable travel expenses as he may incur in
connection with rendering assistance hereunder.
8.6 Definition of Employer. For purposes of this
Section 8, the term Employer shall include Employer and any and all of its
subsidiaries, ventures or affiliates, whether currently existing or hereafter
formed, which are engaged in the Covered Business or a portion thereof, as well
as any person to whom this Agreement is assigned as permitted by Section 9.8
hereof.
8.7 Enforcement.
(a) The parties hereto agree and
acknowledge that the covenants and agreements contained herein are reasonably
necessary in duration and to protect the reasonable competitive business
interests of Employer, including, without limitation, the value of the
proprietary information and goodwill of Employer.
(b) Employee agrees that the covenants
and undertakings contained in Article 8 of this Agreement relate to matters
which are of a special, unique and
<PAGE> 10
extraordinary character and that Employer cannot be reasonably or adequately
compensated in damages in an action at law in the event Employee breaches any
of these covenants or undertakings. Therefore, Employee agrees that Employer
shall be entitled, as a matter of course, without the need to prove irreparable
injury, to an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any violation or threatened
violation of any of such terms by Employee and such other persons as the court
shall order. Employee agrees to pay costs and legal fees incurred by Employer
in obtaining such injunction.
(c) Rights and remedies provided for in
this Section are cumulative and shall be in addition to rights and remedies
otherwise available to the parties under any other agreement or applicable law.
(d) In the event that any provision of
this Agreement shall to any extent be held invalid, unreasonable or
unenforceable in any circumstances, the parties hereto agree that the remainder
of this Agreement and the application of such provision of this Agreement to
other circumstances shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Agreement, or any part thereof, is
held to be unenforceable because of the scope or duration of or the area
covered by such provision, the parties hereto agree that the court or
arbitrator making such determination shall reduce the scope, duration and/or
area of such provision (and shall substitute appropriate provisions for any
such unenforceable provisions) in order to make such provision enforceable to
the fullest extent permitted by law, and/or shall delete specific words and
phrases, and such modified provision shall then be enforceable and shall be
enforced. The parties hereto recognize that if, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants contained in this
Agreement, then that unenforceable covenant contained in this Agreement shall
be deemed eliminated from these provisions to the extent necessary to permit
the remaining separate covenants to be enforced. In the event that any court
or arbitrator determines that the time period or the area, or both, are
unreasonable and that any of the covenants is to that extent unenforceable, the
parties hereto agree that such covenants will remain in full force and effect,
first, for the greatest time period, and second, in the greatest geographical
area that would not render them unenforceable.
9. Miscellaneous.
9.1 Key Man Insurance. Employee recognizes and
acknowledges that Employer or its affiliates may seek and purchase one or more
policies providing key man life insurance with respect to Employee, the
proceeds of which would be payable to Employer or such affiliate. Employee
hereby consents to Employer or its affiliates seeking and purchasing such
insurance and will provide such information, undergo such medical examinations
(at Employer's expense), execute such documents, and otherwise take any and all
actions necessary or desirable in order for Employer or its affiliates to seek,
purchase and maintain in full force and effect such policy or policies.
9.2 Notice. Any notice required or permitted to
be given hereunder shall be deemed sufficiently given if sent by registered or
certified mail, postage prepaid, addressed to the addressee at his or its
address last provided the sender in writing by the addressee for purposes of
receiving notices hereunder or, unless or until such address shall be so
furnished, to the address indicated opposite his or its signature to this
Agreement. For purposes of this Agreement, notice sent in conformity with this
Section 9.2 shall be deemed to have been received on the third business day
following the date on which such notices are so sent.
<PAGE> 11
9.3 Modification and No Waiver of Breach. No
waiver or modification of this Agreement shall be binding unless it is in
writing signed by the parties hereto. No waiver by a party of a breach hereof
by the other party shall be deemed to constitute a waiver of a future breach,
whether of a similar or dissimilar nature, except to the extent specifically
provided in any written waiver under this Section 9.3.
9.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND ALL QUESTIONS RELATING TO THE VALIDITY AND PERFORMANCE
HEREOF AND REMEDIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
9.5 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same agreement.
9.6 Captions. The captions used herein are for
ease of reference only and shall not define or limit the provisions hereof.
9.7 Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto relating to the matters
encompassed hereby and supersedes any prior oral or written agreements.
9.8 Assignment. The rights of Employer under
this Agreement may, without the consent of Employee, be assigned by Employer to
any person, firm, corporation, or other business entity which at any time,
whether by purchase, merger, or otherwise, directly or indirectly, acquires all
or material portions of the stock, assets or any line of business of Employer.
9.9 Non-Transferability of Interest. None of the
rights of Employee to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Employee. Any attempted assignment, transfer, conveyance, or other disposition
(other than as aforesaid) of any interest in the rights of Employee to receive
any form of compensation to be made by Employer pursuant to this Agreement
shall be void.
9.10 Arbitration. The parties shall endeavor to
settle all disputes by amicable negotiations. Except as otherwise provided
herein, any claim, dispute, disagreement or controversy that arises among the
parties relating to this Agreement that is not amicably settled shall be
resolved by arbitration, as follows:
<PAGE> 12
(a) Any such arbitration shall be heard
in The City of New York, New York, before a panel consisting of one (l) to
three (3) arbitrators, each of whom shall be impartial. Upon the written
Request of Arbitration of either party hereto to commence arbitration
hereunder, the parties shall attempt to mutually agree as to the number and
identity of the arbitrator(s), within thirty (30) days of the date of such
Request. Except as the parties may otherwise agree, all arbitrators (if not
selected by the parties hereto within thirty (30) days of a written Request for
Arbitration) shall be appointed pursuant to the commercial arbitration rules of
the American Arbitration Association. In determining the number and
appropriate background of the arbitrators, the appointing authority shall give
due consideration to the issues to be resolved, but his or her decision as to
the number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by
any party to this Agreement by the service of a written Request for Arbitration
upon the other affected parties. Such Request for Arbitration shall summarize
the controversy or claim to be arbitrated.
(c) All attorneys' fees and costs of the
arbitration shall in the first instance be borne by the respective party
incurring such costs and fees, but the arbitrators shall have the discretion to
award costs and/or attorneys' fees as they deem appropriate under the
circumstances. The parties hereby expressly waive punitive damages, and under
no circumstances shall an award contain any amount that in any way reflects
punitive damages.
<PAGE> 13
(d) Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
(e) It is intended that controversies or
claims submitted to arbitration under this Section 9.10 shall remain
confidential, and to that end it is agreed by the parties that neither the
facts disclosed in the arbitration, the issues arbitrated, nor the views or
opinions of any persons concerning them, shall be disclosed to third persons at
any time, except to the extent necessary to enforce an award or judgment or as
required by law or in response to legal process or in connection with such
arbitration.
(f) Any arbitration under this Section
9.10 shall be conducted pursuant to the commercial arbitration rules of the
American Arbitration Association.
9.11 Jurisdiction; Venue. Subject to Section 9.10
hereof, the parties hereto irrevocably and unconditionally submit to the
exclusive jurisdiction of any State or Federal court sitting in The City of New
York over any suit, action or proceeding arising out of or relating to this
Agreement. Service of any process, summons, notice or document by registered
mail addressed to any party as provided in Section 9.2 hereof shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. A final judgment in any suit, action or proceeding brought
in any such court shall be conclusive and binding upon the parties and may be
enforced in any other courts to whose jurisdiction a party is or may be
subject, by suit upon such judgment.
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed
effective as of the day and year first written above.
Address for notices: PRIMECO INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
By:
----------------------------------
Thomas E. Bennett
With a copy to:
INVESTCORP International Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Attention: Robert V. Glaser
EMPLOYEE
- -------------------------------
- ------------------------------- ---------------------------------------
Kevin L. Loughlin
<PAGE> 15
EXHIBIT A
Employee's initial title shall be:
Director of Financial Services
<PAGE> 16
EXHIBIT B
Management Cash Bonus Incentive Program
The following is the bonus formula for Employee for fiscal years 1995 through
1999:
EBITDA(1) TARGETS
1995 $68 million
1996 $90 million
1997 $108 million
1998 $120 million
1999 $132 million
__________________________
(1) Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as:
a. Consolidated Net Income (loss) of Holding and its
subsidiaries as it would appear on a statement of income (loss), which
sall reflect a reduction for all management and employee bonuses
payable with respect to the Fiscal Year, of consolidated Holding
prepared in accordance with U.S. GAAP, consistently applied; plus
(minus)
b. Any provision (benefit) for taxes (including
franchise taxes) deducted (added) in calculating such consolidated net
income (loss); plus
c. Any interest expense (net of interest income),
deducted in calculating such consolidated net income (loss); (minus)
d. Costs charged against any purchase accounting
reserves established in connection with the acquisition; (minus)
e. The effects of the reversal of any excess purchase
accounting reserves established in connection with the acquisition;
plus
f. Amortization expenses deducted in calculating
consolidated net income (loss); plus
g. Depreciation expense deducted in calculating
consolidated net income (loss); plus
h. Management fees paid to Investcorp; plus (minus)
i. Any unusual losses (gains) deducted (added) in
calculating consolidated net income (loss). (Unusual items are
intended to include transactions considered outside the ordinary
course of business. EBITDA will be adjusted to eliminate the effects,
if any, of such
[Footnote continued on next page]
<PAGE> 17
<TABLE>
<CAPTION>
% of Base
% of EBITDA Salary Payable
Target Achieved as Bonus (2)
--------------- ------------
Equal to Or
Greater Than: But Less Than:
------------ -------------
<S> <C> <C>
0 85 0
85 90 10 - 15
90 95 27 - 40
95 100 43 - 65
100 110 67 - 100
110 120 80 - 120
120 130 93 - 140
130 140 107 - 160
140 150 120 - 180
150 160 133 - 200
160 170 147 - 220
170 180 160 - 240
180 190 173 - 260
190 200 187 - 280
200 ----- 200 - 300
</TABLE>
- -----------------------
[Footnote continued from previous page]
transactions, the intent being to calculate EBITDA as if such
transactions had not occurred); plus (minus)
j. Any compensation expense (income) deducted (added) in
calculating consolidated net income (loss) attributable to
transactions involving equity securities of Holding or its
subsidiaries.
EBITDA shall be determined based upon the Management Case Financial
Model dated 1:44 PM December 5, 1994. The Optionee and his or her
representative shall be provided reasonable opportunity to review the
computation of EBITDA and reasonable access to the data and
information supporting such computation and shall have the right to
challenge in good faith such computation.
(2) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be dtermined on an
individual basis and may differ among eligible employees.
<PAGE> 1
EXHIBIT 10.12
<PAGE> 2
EMPLOYMENT AGREEMENT
This Agreement is made and entered into effective as of
December 2, 1994 by and between Primeco Inc., a Texas corporation ("Employer"),
and Peter A. Post ("Employee").
Employer hereby agrees to employ Employee, and Employee hereby
accepts such employment, on the terms and conditions hereinafter set forth.
1. Period of Employment. The period of Employee's
employment under this Agreement (the "Period of Employment") shall commence on
the date hereof (the "Effective Date") and shall expire on December 2, 1997
(the "Expiration Date"), subject to any extension as may be agreed or any
earlier termination of Employee's employment as provided in Section 6 hereof.
Upon the expiration of the initial term of this Agreement, and each subsequent
term or extension thereof, this Agreement shall automatically be extended for
an additional term of one year, unless the employer or the Employee shall have
notified the other party hereto of its election to terminate this Agreement not
later than 90 days prior to the scheduled Expiration Date. If Employee's
employment is terminated pursuant to Section 6 hereof, the Period of Employment
shall expire as of the Date of Termination (as hereinafter defined).
2. Duties. During the Period of Employment, Employee
will faithfully perform those duties and responsibilities assigned by the Board
of Directors of the corporate parent ("Parent") of Employer (the "Board") or
the Chief Executive Officer of Employer and Employee will devote his full
working time and use his best efforts to advance the business and welfare of
Employer in furtherance of the policies established by the Board. During the
Period of Employment, Employee shall not engage in any other employment
activities for any direct or indirect remuneration without the concurrence of
the Board, except that Employee may continue to devote reasonable time to the
management of investments and to participation in community and charitable
affairs, so long as such activities do not interfere with his duties under this
Agreement. Employee shall have such title as the Board shall determine from
time to time; Employee's initial title is set forth on Exhibit A hereto.
3. Compensation.
3.1 Base Salary. During the Period of Employment,
Employer shall pay Employee a Base Salary at the rate of $125,000 per annum
payable at least as frequently as bi-weekly and subject to payroll deductions
as may be necessary or customary in respect of Employer's salaried employees in
general. The amount of Employee's Base Salary shall be subject to annual
review by the Board, provided that the level of such Base Salary shall not be
subject to reduction.
<PAGE> 3
3.2 Incentive Compensation. In addition to the Base
Salary provided for in Section 3.1 hereof, Employee shall participate in the
Management Cash Incentive Bonus Program (the "Program") as adopted by the Board
and pursuant to which Employee shall be entitled to annual cash bonuses as set
forth on Exhibit B hereto. Employer agrees that it will not amend or modify
the Program in any manner materially adverse to Employee's interest thereunder
without Employee's written consent. It is understood that, at the discretion
of the Board, the Program may be terminated upon an initial public offering of
the securities of Employer or Parent ("IPO") and that by its terms the Program
terminates after five years unless extended beyond that date by the Board in
its sole discretion.
4. Benefits. During the Period of Employment, Employee
shall be entitled to participate in all fringe benefit programs maintained by
Employer that are available to its executive officers generally. Any payments
or benefits payable to Employee hereunder in respect of any calendar year
during which Employee is employed by Employer for less than the entire year
shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such calendar year during
which he is so employed. Employee acknowledges that he shall have no vested
rights under or to participate in any such program except as expressly provided
under the terms hereof or thereof.
5. Expenses. Employer will pay or reimburse Employee
for such reasonable travel, entertainment or other expenses as he may incur on
behalf of Employer during the Period of Employment in connection with the
performance of his duties hereunder but only to the extent that such expenses
were either specifically authorized by Employer or incurred in accordance with
policies established by the Board and provided that Employee shall furnish
Employer with such evidence relating to such expenses as Employer may
reasonably require to substantiate such expenses for tax purposes.
6. Termination of Employment.
6.1 Circumstances of Termination.
Notwithstanding the terms set forth in Section 1 hereof, Employee's employment
shall terminate under any of the following circumstances:
(a) Death. In the event of Employee's
death.
(b) Permanent Disability. If during the
Period of Employment Employee becomes physically or mentally incapacitated or
disabled so that (i) he is unable to perform for Employer substantially the
same services as he performed prior to incurring such incapacity or disability
or to devote his full working time or use his best efforts to advance the
business and welfare of Employer or otherwise to perform his duties under this
Agreement and (ii) such condition exists for an aggregate of six months in any
12 consecutive calendar month period (Employer, at its option and expense,
being entitled to retain a physician reasonably acceptable to Employee to
confirm the existence of such incapacity or disability, and the determination
of such physician being binding upon Employer and Employee).
<PAGE> 4
(c) Cause. At the option of Employer,
because Employee:
(i) has been convicted of, or has
pled guilty or nolo contendere to, a felony or a
crime involving moral turpitude, or
(ii) has embezzled or
misappropriated Employer funds or property, or
(iii) has continued use of alcohol
or drugs to an extent that interferes with the
performance by Employee of his employment
responsibilities, or
(iv) has violated Section 8.1,
Section 8.2, Section 8.3 or Section 8.4 hereof, or
(v) has willfully failed or refused
to perform those duties reasonably assigned or
delegated to him by the Board of Directors or the
Chief Executive Officer, which failure or refusal
continues following (a) the Board of Directors giving
the Employee written notice setting forth the facts
or events constituting such failure or refusal and
(b) a reasonable opportunity to correct the
deficiencies or other problems specified in such
notice to the reasonable satisfaction of the Board of
Directors.
(d) Not For Cause. At the option of
Employer at any time for any reason other than those referred to above or for
no reason at all, whereupon the Employer shall become obligated to make those
payments set forth in Section 7.1(d) hereof.
6.2 Notice of Termination. Any termination of
Employee's employment by Employer (other than termination pursuant to Section
6.1(a) hereof) or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9.2. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
terminating Employee's employment by Employer. If a Notice of Termination is
given by Employer, such notice shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances that provide a basis for termination of
Employee's employment under the provision so indicated. For purposes of this
Agreement, the "Date of Termination" shall be the date on which the Notice of
Termination is delivered except that with respect to Section 6.1(a) the "Date
of Termination" shall be the date of Employee's death.
7. Payments Upon Termination of Employment.
7.1 Payments. In the event that Employee's
employment is terminated prior to the Expiration Date (including any extension
thereof), the Period of Employment shall expire as of the Date of Termination.
(a) If Employer terminates Employee's
employment for Cause or if Employee voluntarily terminates his employment,
Employer's obligation to compensate Employee shall in all respects cease as of
the Date of Termination, except that Employer shall pay Employee the Base
Salary accrued under Section 3 and the reimbursable expenses incurred under
Section 5 of this Agreement up to such Date of Termination (the "Accrued
Obligations");
(b) If Employee's employment is terminated
upon the death of Employee, Employer's obligation to compensate Employee shall
in all respects cease as of the Date of Termination, except that within thirty
(30) days after the Date of Termination Employer shall (i) pay Employee's
estate or legal representative the Accrued Obligations and a lump sum payment
equal to 25% of the Employee's annual Base Salary payable under Section 3
hereof at the rate in effect immediately prior to such termination and (ii)
continue to maintain during the
<PAGE> 5
three-month period following the Date of Termination for the benefit of the
Employee's dependents, basic health and dental insurance and related medical
expenses coverage on terms no less favorable to the Employee than Employer
provides to its executive officers generally, as such benefits may be modified
from time to time during such period;
(c) If Employee's employment is terminated
upon the Permanent Disability of Employee, Employer's obligation to compensate
Employee shall in all respects cease as of the Date of Termination, except that
within thirty (30) days after the Date of Termination Employer shall (i) pay
Employee Accrued Obligations and a lump sum payment equal to 50% of the
Employee's annual Base Salary payable under Section 3 hereof at the rate in
effect immediately prior to such termination less the amount of any disability
payments payable to Employee during the six-month period following the Date of
Termination pursuant to any Employer-paid or state sponsored insurance policy
or employer self-insured program and (ii) continue to maintain during the
six-month period following the Date of Termination for the benefit of Employee
and his dependents, basic health, disability and dental insurance and related
medical expenses coverage on terms no less favorable to the Employee than
Employer provides to its executive officers generally, as such benefits may be
modified from time to time during such period provided that the Employee shall
continue to be obligated to make any contributions or payments in connection
with such benefits to the same extent as other executive officers generally;
and
(d) If Employee's employment is terminated by
Employer pursuant to Section 6.1(d), Employer's obligation to compensate
Employee shall in all respects cease, except that within thirty (30) days after
the Date of Termination Employer shall pay to Employee the Accrued Obligations
and during the period ending on the earlier of the Expiration Date or the first
anniversary of the Date of Termination (the "Severance Period"), Employer shall
(i) pay to Employee on a monthly basis the sum of one-twelfth (1/12th) of the
annual Base Salary of Employee in effect at the Date of Termination (the
"Continuation Payments") and (ii) continue to maintain, during the Severance
Period for the benefit of the Employee and his dependents, basic health, dental
and life insurance and related medical expenses coverage (including disability
and hospitalization coverage) (the "Continuation Benefits") on terms no less
favorable to the Employee than the Employer provides to its executive officers
generally, as such benefits may be modified from time to time during the
Severance Period. During the Severance Period, Employee shall be required to
make any contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments; provided that such
contributions are also required to be made by the Employer's executive officers
generally. If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which Employee is
entitled to receive basic health benefits in connection with such employment on
terms provided by the Substitute Employer to its similarly situated employees
generally, the Employer shall no longer be required to provide Continuation
Benefits to the Employee, regardless of whether such benefits differ in any
respect from the Continuation Benefits. The Employer shall be excused from its
obligations to make payments under this Section 7.1(d) if the Employee breaches
its obligations hereunder (including its obligations under Article 8 hereof).
7.2 Release and Satisfaction. With respect to
Employee, his heirs, successors and assigns, payment by Employer of the amounts
provided under this Section 7 shall release, relinquish and forever discharge
Employer and any director, officer, employee, shareholder or agent of Employer
from any and all claims, damages, losses, costs, expenses, liabilities or
obligations, whether known or unknown (other than any such claims, damages,
losses, costs, expenses, liabilities or obligations (a) covered by any
indemnification arrangement
<PAGE> 6
of Employer with respect to Employee or (b) arising under any written employee
benefit plan or arrangement (whether or not tax-qualified) covering Employee),
which Employee has incurred or suffered or may incur or suffer as a result of
Employee's employment by Employer or the termination of such employment.
7.3 Effect on This Agreement. Any termination of
Employee's employment and any expiration of the Period of Employment under this
Agreement shall not affect the continuing operation and effect of Sections 7.2,
8.1, 8.2, 8.3, 8.4 and 8.5 hereof, which shall continue in full force and
effect with respect to Employer and Employee, and its and his heirs, successors
and assigns. Nothing in Section 7.1 hereof shall be deemed to operate or shall
operate as a release, settlement or discharge of any liability of Employee to
Employer or others from any action or omission by Employee enumerated in
Section 6.1(c) hereof as a possible basis for termination of Employee's
employment for Cause.
7.4 No Duty to Mitigate. Subject to the
provisions of Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof, Employee shall be
free to accept such employment and engage in such business as Employee may
desire following the termination of his employment hereunder, and no
compensation received by Employee therefrom shall reduce or affect any payments
required to be made by Employer hereunder except to the extent expressly
provided in the benefit plans of Employer.
<PAGE> 7
8. Non-disclosure of Proprietary Information, Surrender
of Records; Inventions and Patents; Non-Compete.
8.1 Proprietary Information. Employee shall not
during the Period of Employment or at any time thereafter (irrespective of the
circumstances under which Employee's employment by Employer terminates),
directly or indirectly use for his own purpose or for the benefit of any person
or entity other than Employer, nor otherwise disclose, any proprietary
information, as defined below, to any individual or entity, unless such
disclosure has been authorized in writing by the Board or is otherwise required
by law. For purposes of this Agreement, the term "proprietary information"
shall include, but is not limited to: (a) the name or address of any customer,
vendor or affiliate of Employer or any information concerning the transactions
or relations of any customer, vendor or affiliate of Employer with Employer or
any of its shareholders; (b) any information concerning any product, technology
or procedure employed by Employer but not generally known to its customers,
vendors or competitors, or under development by or being tested by Employer but
not at the time offered generally to customers or vendors; (c) any information
relating to Employer's computer software, computer systems, pricing or
marketing methods, sales margins, cost of goods, cost of material, capital
structure, operating results, borrowing arrangements or business plans; (d) any
information which is generally regarded as confidential or proprietary in any
line of business engaged in by Employer; (e) any information contained in any
of Employer's written or oral policies and procedures or employee manuals; (f)
any information belonging to customers, vendors or affiliates of Employer which
Employer has agreed to hold in confidence; (g) any inventions, innovations or
improvements covered by Section 8.3 below; (h) any other information which the
Board has reasonably determined by resolution and communicated to Employee to
be confidential or proprietary; and (i) all written, graphic and other material
relating to any of the foregoing. Information that is not novel or copyrighted
or patented may nonetheless be proprietary information. However, proprietary
information shall not include (i) any information that is or becomes generally
known to the industries in which Employer competes through sources independent
of Employer or through authorized publication to persons other than Employer's
employees by Employer or (ii) other non-sensitive information that may be
disclosed by Employee in the ordinary course of business, the disclosure of
which is not reasonably likely to adversely affect Employer's business
operations, their relationships with customers, vendors or employees or the
results of their operations.
8.2 Confidentiality and Surrender of Records.
Employee shall not during the Period of Employment or at any time thereafter
(irrespective of the circumstances under which Employee's employment by
Employer terminates), except as required by law, directly or indirectly give
any "confidential records" (as hereinafter defined) to, or permit any
inspection or copying of confidential records by, any individual or entity
other than in the course of such individual's or entity's employment or
retention by Employer, nor shall he retain, and will deliver promptly to
Employer, any of the same following termination of his employment. For
purposes hereof, "confidential records" means all correspondence, memoranda,
files, manuals, books, lists, financial, operating or marketing records,
magnetic tape, or electronic or other media or equipment of any kind which may
be in Employee's possession or under his control or accessible to him which
contain any proprietary information as defined in Section 8.1. above. All
confidential records shall be and remain the sole property of Employer during
the Period of Employment and thereafter.
8.3 Inventions and Patents. All inventions,
innovations or improvements in Employer's method of conducting its business
(including policies, procedures,
<PAGE> 8
products, improvements, software, ideas and discoveries, whether patentable
or copyrightable or not) conceived or made by Employee, either alone or jointly
with others, during the Period of Employment belong to Employer. Employee will
promptly disclose in writing such inventions, innovations or improvements to
the Board and perform all actions reasonably requested by the Board to
establish and confirm such ownership by Employer, including, but not limited
to, cooperating with and assisting Employer in obtaining patents for Employer
in the United States and in foreign countries. Any patent application filed by
Employee within a year after termination of his employment hereunder shall be
presumed to relate to an invention which was made during the Period of
Employment unless Employee can provide evidence to the contrary.
8.4 Covenant Not to Compete; No Solicitation.
(a) Employee acknowledges and recognizes
the highly competitive nature of Employer's business and, in consideration of
the payment by Employer to Employee of amounts that may hereafter be paid to
Employee pursuant to Sections 7.1 and 8.4(d) hereof, Employee agrees that
during the period (the "Covered Time") beginning on the Date of Termination and
ending (i) if Employee's employment is terminated for any reason other than
pursuant to Section 6.1(d) hereof, on the second anniversary of the Date of
Termination or (ii) if Employee's employment is terminated pursuant to Section
6.1(d) hereof and subject to Section 8.4(d) hereof, on the earlier of (A) the
first anniversary of the Date of Termination or (B) the last day of the Period
of Employment remaining under Section 1 hereof immediately prior to the Date of
Termination, Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of America
in which the Employer is conducting business or proposes to conduct business as
of the Date of Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area"). For purposes of
this Agreement, (i) "Covered Business" shall mean the renting and selling of
the following types of equipment (and parts and supplies for such equipment):
high-reach booms, forklifts, tractors, dump trucks, air compressors and
high-reach scissor lifts, and small tools such as electrical generators, power
saws and hand tools; and (ii) the phrase "engage, directly or indirectly" shall
mean engaging directly or having an interest, directly or indirectly, as owner,
partner, shareholder, independent contractor, capital investor, lender,
renderer of consultation services or advice or otherwise (other than as the
holder of less than 2% of the outstanding stock of a publicly-traded
corporation), either alone or in association with others, in the operation of
any aspect of any type of business or enterprise engaged in any aspect of the
Covered Business. Employee shall be deemed engaged in business in the Covered
Area if his place of business is located in the Covered Area or if he solicits
customers located anywhere in, or delivers products anywhere in, the Covered
Area.
(b) Employee agrees that during the term
of this Agreement (including any extensions thereof) and during the Covered
Time he shall not (i) directly or indirectly solicit or attempt to solicit any
of the employees, agents or representatives of Employer or affiliates of
Employer to leave any of such entities; (ii) directly or indirectly solicit or
attempt to solicit any of the employees, agents, consultants or representatives
of Employer or affiliates of Employer to become employees agents,
representatives or consultants of any other person or entity; or (iii) directly
or indirectly solicit or attempt to solicit any customer, vendor or distributor
of Employer or affiliates of Employer with respect to any product or service
being furnished, made, sold or leased by Employer.
(c) Employee understands that the
provisions of Section 8.4(a) may limit his ability to earn a livelihood in a
business similar to the business of Employer but nevertheless agrees and hereby
acknowledges that the consideration provided under this
<PAGE> 9
Agreement, including any amounts or benefits provided under Section 7 hereof,
is sufficient to justify the restrictions contained in such provisions and in
consideration thereof and in light of Employee's education, skills and
abilities, Employee agrees that he will not assert that, and it should not be
considered that, such provisions prevent him from earning a living or otherwise
are void or unenforceable or should be voided or held unenforceable. Employee
acknowledges and agrees that his duties with Employer are of an executive
nature and that he is a member of Employer's management group.
(d) If Employee's employment is
terminated pursuant to Section 6.1(d) hereof, Employer may extend the Covered
Time to extend up to and through the second anniversary of the Date of
Termination by delivering written notice to Employee (specifying the duration
of the extended Covered Time), within ten (10) days of such Date of
Termination, that Employer has elected to continue to pay to Employee the
Continuation Payments and provide the Continuation Benefits (on terms no less
favorable to Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time) for each month
of such extended Covered Time. During the extended Covered Time, Employee
shall be required to make any contributions required to maintain such
Continuation Benefits, which may be withheld from the Continuation Payments;
provided that such contributions are also required to be made by the Employer's
executive officers generally. If at any time during the extended Covered Time
Employee shall obtain employment with a Substitute Employer in which Employee
is entitled to receive basic health benefits in connection with such employment
on terms provided by the Substitute Employer to its similarly situated
employees generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether such benefits
differ in any respect from the Continuation Benefits. Employer shall be
excused from its obligations to make payments under this Section 8.4(d) if
Employee breaches its obligations hereunder.
8.5 Litigation Assistance. Employee agrees that
after the Date of Termination he shall, at the request of Employer, render all
assistance and perform all lawful acts that Employer considers necessary or
advisable in connection with any litigation involving Employer or any director,
officer, employee, shareholder, agent, representative, consultant, customer or
vendor of Employer. In the event that Employer requests Employee's assistance
under this Section 8.5, Employer shall pay to Employee for each day such
assistance is rendered an amount equal to the annual Base Salary of Employee in
effect at the Date of Termination divided by 250 and shall promptly pay or
reimburse Employee for such reasonable travel expenses as he may incur in
connection with rendering assistance hereunder.
8.6 Definition of Employer. For purposes of this
Section 8, the term Employer shall include Employer and any and all of its
subsidiaries, ventures or affiliates, whether currently existing or hereafter
formed, which are engaged in the Covered Business or a portion thereof, as well
as any person to whom this Agreement is assigned as permitted by Section 9.8
hereof.
8.7 Enforcement.
(a) The parties hereto agree and
acknowledge that the covenants and agreements contained herein are reasonably
necessary in duration and to protect the reasonable competitive business
interests of Employer, including, without limitation, the value of the
proprietary information and goodwill of Employer.
(b) Employee agrees that the covenants
and undertakings contained in Article 8 of this Agreement relate to matters
which are of a special, unique and
<PAGE> 10
extraordinary character and that Employer cannot be reasonably or adequately
compensated in damages in an action at law in the event Employee breaches any
of these covenants or undertakings. Therefore, Employee agrees that Employer
shall be entitled, as a matter of course, without the need to prove irreparable
injury, to an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any violation or threatened
violation of any of such terms by Employee and such other persons as the court
shall order. Employee agrees to pay costs and legal fees incurred by Employer
in obtaining such injunction.
(c) Rights and remedies provided for in
this Section are cumulative and shall be in addition to rights and remedies
otherwise available to the parties under any other agreement or applicable law.
(d) In the event that any provision of
this Agreement shall to any extent be held invalid, unreasonable or
unenforceable in any circumstances, the parties hereto agree that the remainder
of this Agreement and the application of such provision of this Agreement to
other circumstances shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Agreement, or any part thereof, is
held to be unenforceable because of the scope or duration of or the area
covered by such provision, the parties hereto agree that the court or
arbitrator making such determination shall reduce the scope, duration and/or
area of such provision (and shall substitute appropriate provisions for any
such unenforceable provisions) in order to make such provision enforceable to
the fullest extent permitted by law, and/or shall delete specific words and
phrases, and such modified provision shall then be enforceable and shall be
enforced. The parties hereto recognize that if, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants contained in this
Agreement, then that unenforceable covenant contained in this Agreement shall
be deemed eliminated from these provisions to the extent necessary to permit
the remaining separate covenants to be enforced. In the event that any court
or arbitrator determines that the time period or the area, or both, are
unreasonable and that any of the covenants is to that extent unenforceable, the
parties hereto agree that such covenants will remain in full force and effect,
first, for the greatest time period, and second, in the greatest geographical
area that would not render them unenforceable.
9. Miscellaneous.
9.1 Key Man Insurance. Employee recognizes and
acknowledges that Employer or its affiliates may seek and purchase one or more
policies providing key man life insurance with respect to Employee, the
proceeds of which would be payable to Employer or such affiliate. Employee
hereby consents to Employer or its affiliates seeking and purchasing such
insurance and will provide such information, undergo such medical examinations
(at Employer's expense), execute such documents, and otherwise take any and all
actions necessary or desirable in order for Employer or its affiliates to seek,
purchase and maintain in full force and effect such policy or policies.
9.2 Notice. Any notice required or permitted to
be given hereunder shall be deemed sufficiently given if sent by registered or
certified mail, postage prepaid, addressed to the addressee at his or its
address last provided the sender in writing by the addressee for purposes of
receiving notices hereunder or, unless or until such address shall be so
furnished, to the address indicated opposite his or its signature to this
Agreement. For purposes of this Agreement, notice sent in conformity with this
Section 9.2 shall be deemed to have been received on the third business day
following the date on which such notices are so sent.
<PAGE> 11
9.3 Modification and No Waiver of Breach. No
waiver or modification of this Agreement shall be binding unless it is in
writing signed by the parties hereto. No waiver by a party of a breach hereof
by the other party shall be deemed to constitute a waiver of a future breach,
whether of a similar or dissimilar nature, except to the extent specifically
provided in any written waiver under this Section 9.3.
9.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND ALL QUESTIONS RELATING TO THE VALIDITY AND PERFORMANCE
HEREOF AND REMEDIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
9.5 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same agreement.
9.6 Captions. The captions used herein are for
ease of reference only and shall not define or limit the provisions hereof.
9.7 Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto relating to the matters
encompassed hereby and supersedes any prior oral or written agreements.
9.8 Assignment. The rights of Employer under
this Agreement may, without the consent of Employee, be assigned by Employer to
any person, firm, corporation, or other business entity which at any time,
whether by purchase, merger, or otherwise, directly or indirectly, acquires all
or material portions of the stock, assets or any line of business of Employer.
9.9 Non-Transferability of Interest. None of the
rights of Employee to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Employee. Any attempted assignment, transfer, conveyance, or other disposition
(other than as aforesaid) of any interest in the rights of Employee to receive
any form of compensation to be made by Employer pursuant to this Agreement
shall be void.
9.10 Arbitration. The parties shall endeavor to
settle all disputes by amicable negotiations. Except as otherwise provided
herein, any claim, dispute, disagreement or controversy that arises among the
parties relating to this Agreement that is not amicably settled shall be
resolved by arbitration, as follows:
<PAGE> 12
(a) Any such arbitration shall be heard
in The City of New York, New York, before a panel consisting of one (l) to
three (3) arbitrators, each of whom shall be impartial. Upon the written
Request of Arbitration of either party hereto to commence arbitration
hereunder, the parties shall attempt to mutually agree as to the number and
identity of the arbitrator(s), within thirty (30) days of the date of such
Request. Except as the parties may otherwise agree, all arbitrators (if not
selected by the parties hereto within thirty (30) days of a written Request for
Arbitration) shall be appointed pursuant to the commercial arbitration rules of
the American Arbitration Association. In determining the number and
appropriate background of the arbitrators, the appointing authority shall give
due consideration to the issues to be resolved, but his or her decision as to
the number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by
any party to this Agreement by the service of a written Request for Arbitration
upon the other affected parties. Such Request for Arbitration shall summarize
the controversy or claim to be arbitrated.
(c) All attorneys' fees and costs of the
arbitration shall in the first instance be borne by the respective party
incurring such costs and fees, but the arbitrators shall have the discretion to
award costs and/or attorneys' fees as they deem appropriate under the
circumstances. The parties hereby expressly waive punitive damages, and under
no circumstances shall an award contain any amount that in any way reflects
punitive damages.
<PAGE> 13
(d) Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
(e) It is intended that controversies or
claims submitted to arbitration under this Section 9.10 shall remain
confidential, and to that end it is agreed by the parties that neither the
facts disclosed in the arbitration, the issues arbitrated, nor the views or
opinions of any persons concerning them, shall be disclosed to third persons at
any time, except to the extent necessary to enforce an award or judgment or as
required by law or in response to legal process or in connection with such
arbitration.
(f) Any arbitration under this Section
9.10 shall be conducted pursuant to the commercial arbitration rules of the
American Arbitration Association.
9.11 Jurisdiction; Venue. Subject to Section 9.10
hereof, the parties hereto irrevocably and unconditionally submit to the
exclusive jurisdiction of any State or Federal court sitting in The City of New
York over any suit, action or proceeding arising out of or relating to this
Agreement. Service of any process, summons, notice or document by registered
mail addressed to any party as provided in Section 9.2 hereof shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. A final judgment in any suit, action or proceeding brought
in any such court shall be conclusive and binding upon the parties and may be
enforced in any other courts to whose jurisdiction a party is or may be
subject, by suit upon such judgment.
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed
effective as of the day and year first written above.
Address for notices: PRIMECO INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
By:
-----------------------------------
Thomas E. Bennett
With a copy to:
INVESTCORP International Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Attention: Robert V. Glaser
EMPLOYEE
- -------------------------------
- ------------------------------- ---------------------------------------
Peter A. Post
<PAGE> 15
EXHIBIT A
Employee's initial title shall be:
Director of Operations
<PAGE> 16
EXHIBIT B
Management Cash Bonus Incentive Program
The following is the bonus formula for Employee for fiscal years 1995 through
1999:
EBITDA(1) TARGETS
1995 $68 million
1996 $90 million
1997 $108 million
1998 $120 million
1999 $132 million
__________________________
(1) Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as:
a. Consolidated Net Income (loss) of Holding and its
subsidiaries as it would appear on a statement of income (loss), which
sall reflect a reduction for all management and employee bonuses
payable with respect to the Fiscal Year, of consolidated Holding
prepared in accordance with U.S. GAAP, consistently applied; plus
(minus)
b. Any provision (benefit) for taxes (including
franchise taxes) deducted (added) in calculating such consolidated net
income (loss); plus
c. Any interest expense (net of interest income),
deducted in calculating such consolidated net income (loss); (minus)
d. Costs charged against any purchase accounting
reserves established in connection with the acquisition; (minus)
e. The effects of the reversal of any excess purchase
accounting reserves established in connection with the acquisition;
plus
f. Amortization expenses deducted in calculating
consolidated net income (loss); plus
g. Depreciation expense deducted in calculating
consolidated net income (loss); plus
h. Management fees paid to Investcorp; plus (minus)
i. Any unusual losses (gains) deducted (added) in
calculating consolidated net income (loss). (Unusual items are
intended to include transactions considered outside the ordinary
course of business. EBITDA will be adjusted to eliminate the effects,
if any, of such
[Footnote continued on next page]
<PAGE> 17
<TABLE>
<CAPTION>
% of Base
% of EBITDA Salary Payable
Target Achieved as Bonus (2)
--------------- ------------
Equal to Or
Greater Than: But Less Than:
------------ -------------
<S> <C> <C>
0 85 0
85 90 10 - 15
90 95 27 - 40
95 100 43 - 65
100 110 67 - 100
110 120 80 - 120
120 130 93 - 140
130 140 107 - 160
140 150 120 - 180
150 160 133 - 200
160 170 147 - 220
170 180 160 - 240
180 190 173 - 260
190 200 187 - 280
200 ----- 200 - 300
</TABLE>
- ----------------------
[Footnote continued from previous page]
transactions, the intent being to calculate EBITDA as if such
transactions had not occurred); plus (minus)
j. Any compensation expense (income) deducted (added) in
calculating consolidated net income (loss) attributable to
transactions involving equity securities of Holding or its
subsidiaries.
EBITDA shall be determined based upon the Management Case Financial
Model dated 1:44 PM December 5, 1994. The Optionee and his or her
representative shall be provided reasonable opportunity to review the
computation of EBITDA and reasonable access to the data and
information supporting such computation and shall have the right to
challenge in good faith such computation.
(2) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be dtermined on an
individual basis and may differ among eligible employees.
<PAGE> 1
EXHIBIT 10.13
<PAGE> 2
EMPLOYMENT AGREEMENT
This Agreement is made and entered into effective as of
December 2, 1994 by and between Primeco Inc., a Texas corporation ("Employer"),
and Gerald E. Lane ("Employee").
Employer hereby agrees to employ Employee, and Employee hereby
accepts such employment, on the terms and conditions hereinafter set forth.
1. Period of Employment. The period of Employee's
employment under this Agreement (the "Period of Employment") shall commence on
the date hereof (the "Effective Date") and shall expire on December 2, 1997
(the "Expiration Date"), subject to any extension as may be agreed or any
earlier termination of Employee's employment as provided in Section 6 hereof.
Upon the expiration of the initial term of this Agreement, and each subsequent
term or extension thereof, this Agreement shall automatically be extended for
an additional term of one year, unless the employer or the Employee shall have
notified the other party hereto of its election to terminate this Agreement not
later than 90 days prior to the scheduled Expiration Date. If Employee's
employment is terminated pursuant to Section 6 hereof, the Period of Employment
shall expire as of the Date of Termination (as hereinafter defined).
2. Duties. During the Period of Employment, Employee
will faithfully perform those duties and responsibilities assigned by the Board
of Directors of the corporate parent ("Parent") of Employer (the "Board") or
the Chief Executive Officer of Employer and Employee will devote his full
working time and use his best efforts to advance the business and welfare of
Employer in furtherance of the policies established by the Board. During the
Period of Employment, Employee shall not engage in any other employment
activities for any direct or indirect remuneration without the concurrence of
the Board, except that Employee may continue to devote reasonable time to the
management of investments and to participation in community and charitable
affairs, so long as such activities do not interfere with his duties under this
Agreement. Employee shall have such title as the Board shall determine from
time to time; Employee's initial title is set forth on Exhibit A hereto.
3. Compensation.
3.1 Base Salary. During the Period of Employment,
Employer shall pay Employee a Base Salary at the rate of $110,000 per annum
payable at least as frequently as bi-weekly and subject to payroll deductions
as may be necessary or customary in respect of Employer's salaried employees in
general. The amount of Employee's Base Salary shall be subject to annual
review by the Board, provided that the level of such Base Salary shall not be
subject to reduction.
<PAGE> 3
3.2 Incentive Compensation. In addition to the Base
Salary provided for in Section 3.1 hereof, Employee shall participate in the
Management Cash Incentive Bonus Program (the "Program") as adopted by the Board
and pursuant to which Employee shall be entitled to annual cash bonuses as set
forth on Exhibit B hereto. Employer agrees that it will not amend or modify
the Program in any manner materially adverse to Employee's interest thereunder
without Employee's written consent. It is understood that, at the discretion
of the Board, the Program may be terminated upon an initial public offering of
the securities of Employer or Parent ("IPO") and that by its terms the Program
terminates after five years unless extended beyond that date by the Board in
its sole discretion.
4. Benefits. During the Period of Employment, Employee
shall be entitled to participate in all fringe benefit programs maintained by
Employer that are available to its executive officers generally. Any payments
or benefits payable to Employee hereunder in respect of any calendar year
during which Employee is employed by Employer for less than the entire year
shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such calendar year during
which he is so employed. Employee acknowledges that he shall have no vested
rights under or to participate in any such program except as expressly provided
under the terms hereof or thereof.
5. Expenses. Employer will pay or reimburse Employee
for such reasonable travel, entertainment or other expenses as he may incur on
behalf of Employer during the Period of Employment in connection with the
performance of his duties hereunder but only to the extent that such expenses
were either specifically authorized by Employer or incurred in accordance with
policies established by the Board and provided that Employee shall furnish
Employer with such evidence relating to such expenses as Employer may
reasonably require to substantiate such expenses for tax purposes.
6. Termination of Employment.
6.1 Circumstances of Termination.
Notwithstanding the terms set forth in Section 1 hereof, Employee's employment
shall terminate under any of the following circumstances:
(a) Death. In the event of Employee's
death.
(b) Permanent Disability. If during the
Period of Employment Employee becomes physically or mentally incapacitated or
disabled so that (i) he is unable to perform for Employer substantially the
same services as he performed prior to incurring such incapacity or disability
or to devote his full working time or use his best efforts to advance the
business and welfare of Employer or otherwise to perform his duties under this
Agreement and (ii) such condition exists for an aggregate of six months in any
12 consecutive calendar month period (Employer, at its option and expense,
being entitled to retain a physician reasonably acceptable to Employee to
confirm the existence of such incapacity or disability, and the determination
of such physician being binding upon Employer and Employee).
<PAGE> 4
(c) Cause. At the option of Employer,
because Employee:
(i) has been convicted of, or has
pled guilty or nolo contendere to, a felony or a
crime involving moral turpitude, or
(ii) has embezzled or
misappropriated Employer funds or property, or
(iii) has continued use of alcohol
or drugs to an extent that interferes with the
performance by Employee of his employment
responsibilities, or
(iv) has violated Section 8.1,
Section 8.2, Section 8.3 or Section 8.4 hereof, or
(v) has willfully failed or refused
to perform those duties reasonably assigned or
delegated to him by the Board of Directors or the
Chief Executive Officer, which failure or refusal
continues following (a) the Board of Directors giving
the Employee written notice setting forth the facts
or events constituting such failure or refusal and
(b) a reasonable opportunity to correct the
deficiencies or other problems specified in such
notice to the reasonable satisfaction of the Board of
Directors.
(d) Not For Cause. At the option of
Employer at any time for any reason other than those referred to above or for
no reason at all, whereupon the Employer shall become obligated to make those
payments set forth in Section 7.1(d) hereof.
6.2 Notice of Termination. Any termination of
Employee's employment by Employer (other than termination pursuant to Section
6.1(a) hereof) or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9.2. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
terminating Employee's employment by Employer. If a Notice of Termination is
given by Employer, such notice shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances that provide a basis for termination of
Employee's employment under the provision so indicated. For purposes of this
Agreement, the "Date of Termination" shall be the date on which the Notice of
Termination is delivered except that with respect to Section 6.1(a) the "Date
of Termination" shall be the date of Employee's death.
7. Payments Upon Termination of Employment.
7.1 Payments. In the event that Employee's
employment is terminated prior to the Expiration Date (including any extension
thereof), the Period of Employment shall expire as of the Date of Termination.
(a) If Employer terminates Employee's
employment for Cause or if Employee voluntarily terminates his employment,
Employer's obligation to compensate Employee shall in all respects cease as of
the Date of Termination, except that Employer shall pay Employee the Base
Salary accrued under Section 3 and the reimbursable expenses incurred under
Section 5 of this Agreement up to such Date of Termination (the "Accrued
Obligations");
(b) If Employee's employment is terminated
upon the death of Employee, Employer's obligation to compensate Employee shall
in all respects cease as of the Date of Termination, except that within thirty
(30) days after the Date of Termination Employer shall (i) pay Employee's
estate or legal representative the Accrued Obligations and a lump sum payment
equal to 25% of the Employee's annual Base Salary payable under Section 3
hereof at the rate in effect immediately prior to such termination and (ii)
continue to maintain during the
<PAGE> 5
three-month period following the Date of Termination for the benefit of the
Employee's dependents, basic health and dental insurance and related medical
expenses coverage on terms no less favorable to the Employee than Employer
provides to its executive officers generally, as such benefits may be modified
from time to time during such period;
(c) If Employee's employment is terminated
upon the Permanent Disability of Employee, Employer's obligation to compensate
Employee shall in all respects cease as of the Date of Termination, except that
within thirty (30) days after the Date of Termination Employer shall (i) pay
Employee Accrued Obligations and a lump sum payment equal to 50% of the
Employee's annual Base Salary payable under Section 3 hereof at the rate in
effect immediately prior to such termination less the amount of any disability
payments payable to Employee during the six-month period following the Date of
Termination pursuant to any Employer-paid or state sponsored insurance policy
or employer self-insured program and (ii) continue to maintain during the
six-month period following the Date of Termination for the benefit of Employee
and his dependents, basic health, disability and dental insurance and related
medical expenses coverage on terms no less favorable to the Employee than
Employer provides to its executive officers generally, as such benefits may be
modified from time to time during such period provided that the Employee shall
continue to be obligated to make any contributions or payments in connection
with such benefits to the same extent as other executive officers generally;
and
(d) If Employee's employment is terminated by
Employer pursuant to Section 6.1(d), Employer's obligation to compensate
Employee shall in all respects cease, except that within thirty (30) days after
the Date of Termination Employer shall pay to Employee the Accrued Obligations
and during the period ending on the earlier of the Expiration Date or the first
anniversary of the Date of Termination (the "Severance Period"), Employer shall
(i) pay to Employee on a monthly basis the sum of one-twelfth (1/12th) of the
annual Base Salary of Employee in effect at the Date of Termination (the
"Continuation Payments") and (ii) continue to maintain, during the Severance
Period for the benefit of the Employee and his dependents, basic health, dental
and life insurance and related medical expenses coverage (including disability
and hospitalization coverage) (the "Continuation Benefits") on terms no less
favorable to the Employee than the Employer provides to its executive officers
generally, as such benefits may be modified from time to time during the
Severance Period. During the Severance Period, Employee shall be required to
make any contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments; provided that such
contributions are also required to be made by the Employer's executive officers
generally. If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which Employee is
entitled to receive basic health benefits in connection with such employment on
terms provided by the Substitute Employer to its similarly situated employees
generally, the Employer shall no longer be required to provide Continuation
Benefits to the Employee, regardless of whether such benefits differ in any
respect from the Continuation Benefits. The Employer shall be excused from its
obligations to make payments under this Section 7.1(d) if the Employee breaches
its obligations hereunder (including its obligations under Article 8 hereof).
7.2 Release and Satisfaction. With respect to
Employee, his heirs, successors and assigns, payment by Employer of the amounts
provided under this Section 7 shall release, relinquish and forever discharge
Employer and any director, officer, employee, shareholder or agent of Employer
from any and all claims, damages, losses, costs, expenses, liabilities or
obligations, whether known or unknown (other than any such claims, damages,
losses, costs, expenses, liabilities or obligations (a) covered by any
indemnification arrangement
<PAGE> 6
of Employer with respect to Employee or (b) arising under any written employee
benefit plan or arrangement (whether or not tax-qualified) covering Employee),
which Employee has incurred or suffered or may incur or suffer as a result of
Employee's employment by Employer or the termination of such employment.
7.3 Effect on This Agreement. Any termination of
Employee's employment and any expiration of the Period of Employment under this
Agreement shall not affect the continuing operation and effect of Sections 7.2,
8.1, 8.2, 8.3, 8.4 and 8.5 hereof, which shall continue in full force and
effect with respect to Employer and Employee, and its and his heirs, successors
and assigns. Nothing in Section 7.1 hereof shall be deemed to operate or shall
operate as a release, settlement or discharge of any liability of Employee to
Employer or others from any action or omission by Employee enumerated in
Section 6.1(c) hereof as a possible basis for termination of Employee's
employment for Cause.
7.4 No Duty to Mitigate. Subject to the
provisions of Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof, Employee shall be
free to accept such employment and engage in such business as Employee may
desire following the termination of his employment hereunder, and no
compensation received by Employee therefrom shall reduce or affect any payments
required to be made by Employer hereunder except to the extent expressly
provided in the benefit plans of Employer.
<PAGE> 7
8. Non-disclosure of Proprietary Information, Surrender
of Records; Inventions and Patents; Non-Compete.
8.1 Proprietary Information. Employee shall not
during the Period of Employment or at any time thereafter (irrespective of the
circumstances under which Employee's employment by Employer terminates),
directly or indirectly use for his own purpose or for the benefit of any person
or entity other than Employer, nor otherwise disclose, any proprietary
information, as defined below, to any individual or entity, unless such
disclosure has been authorized in writing by the Board or is otherwise required
by law. For purposes of this Agreement, the term "proprietary information"
shall include, but is not limited to: (a) the name or address of any customer,
vendor or affiliate of Employer or any information concerning the transactions
or relations of any customer, vendor or affiliate of Employer with Employer or
any of its shareholders; (b) any information concerning any product, technology
or procedure employed by Employer but not generally known to its customers,
vendors or competitors, or under development by or being tested by Employer but
not at the time offered generally to customers or vendors; (c) any information
relating to Employer's computer software, computer systems, pricing or
marketing methods, sales margins, cost of goods, cost of material, capital
structure, operating results, borrowing arrangements or business plans; (d) any
information which is generally regarded as confidential or proprietary in any
line of business engaged in by Employer; (e) any information contained in any
of Employer's written or oral policies and procedures or employee manuals; (f)
any information belonging to customers, vendors or affiliates of Employer which
Employer has agreed to hold in confidence; (g) any inventions, innovations or
improvements covered by Section 8.3 below; (h) any other information which the
Board has reasonably determined by resolution and communicated to Employee to
be confidential or proprietary; and (i) all written, graphic and other material
relating to any of the foregoing. Information that is not novel or copyrighted
or patented may nonetheless be proprietary information. However, proprietary
information shall not include (i) any information that is or becomes generally
known to the industries in which Employer competes through sources independent
of Employer or through authorized publication to persons other than Employer's
employees by Employer or (ii) other non-sensitive information that may be
disclosed by Employee in the ordinary course of business, the disclosure of
which is not reasonably likely to adversely affect Employer's business
operations, their relationships with customers, vendors or employees or the
results of their operations.
8.2 Confidentiality and Surrender of Records.
Employee shall not during the Period of Employment or at any time thereafter
(irrespective of the circumstances under which Employee's employment by
Employer terminates), except as required by law, directly or indirectly give
any "confidential records" (as hereinafter defined) to, or permit any
inspection or copying of confidential records by, any individual or entity
other than in the course of such individual's or entity's employment or
retention by Employer, nor shall he retain, and will deliver promptly to
Employer, any of the same following termination of his employment. For
purposes hereof, "confidential records" means all correspondence, memoranda,
files, manuals, books, lists, financial, operating or marketing records,
magnetic tape, or electronic or other media or equipment of any kind which may
be in Employee's possession or under his control or accessible to him which
contain any proprietary information as defined in Section 8.1. above. All
confidential records shall be and remain the sole property of Employer during
the Period of Employment and thereafter.
8.3 Inventions and Patents. All inventions,
innovations or improvements in Employer's method of conducting its business
(including policies, procedures,
<PAGE> 8
products, improvements, software, ideas and discoveries, whether patentable
or copyrightable or not) conceived or made by Employee, either alone or jointly
with others, during the Period of Employment belong to Employer. Employee will
promptly disclose in writing such inventions, innovations or improvements to
the Board and perform all actions reasonably requested by the Board to
establish and confirm such ownership by Employer, including, but not limited
to, cooperating with and assisting Employer in obtaining patents for Employer
in the United States and in foreign countries. Any patent application filed by
Employee within a year after termination of his employment hereunder shall be
presumed to relate to an invention which was made during the Period of
Employment unless Employee can provide evidence to the contrary.
8.4 Covenant Not to Compete; No Solicitation.
(a) Employee acknowledges and recognizes
the highly competitive nature of Employer's business and, in consideration of
the payment by Employer to Employee of amounts that may hereafter be paid to
Employee pursuant to Sections 7.1 and 8.4(d) hereof, Employee agrees that
during the period (the "Covered Time") beginning on the Date of Termination and
ending (i) if Employee's employment is terminated for any reason other than
pursuant to Section 6.1(d) hereof, on the second anniversary of the Date of
Termination or (ii) if Employee's employment is terminated pursuant to Section
6.1(d) hereof and subject to Section 8.4(d) hereof, on the earlier of (A) the
first anniversary of the Date of Termination or (B) the last day of the Period
of Employment remaining under Section 1 hereof immediately prior to the Date of
Termination, Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of America
in which the Employer is conducting business or proposes to conduct business as
of the Date of Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area"). For purposes of
this Agreement, (i) "Covered Business" shall mean the renting and selling of
the following types of equipment (and parts and supplies for such equipment):
high-reach booms, forklifts, tractors, dump trucks, air compressors and
high-reach scissor lifts, and small tools such as electrical generators, power
saws and hand tools; and (ii) the phrase "engage, directly or indirectly" shall
mean engaging directly or having an interest, directly or indirectly, as owner,
partner, shareholder, independent contractor, capital investor, lender,
renderer of consultation services or advice or otherwise (other than as the
holder of less than 2% of the outstanding stock of a publicly-traded
corporation), either alone or in association with others, in the operation of
any aspect of any type of business or enterprise engaged in any aspect of the
Covered Business. Employee shall be deemed engaged in business in the Covered
Area if his place of business is located in the Covered Area or if he solicits
customers located anywhere in, or delivers products anywhere in, the Covered
Area.
(b) Employee agrees that during the term
of this Agreement (including any extensions thereof) and during the Covered
Time he shall not (i) directly or indirectly solicit or attempt to solicit any
of the employees, agents or representatives of Employer or affiliates of
Employer to leave any of such entities; (ii) directly or indirectly solicit or
attempt to solicit any of the employees, agents, consultants or representatives
of Employer or affiliates of Employer to become employees agents,
representatives or consultants of any other person or entity; or (iii) directly
or indirectly solicit or attempt to solicit any customer, vendor or distributor
of Employer or affiliates of Employer with respect to any product or service
being furnished, made, sold or leased by Employer.
(c) Employee understands that the
provisions of Section 8.4(a) may limit his ability to earn a livelihood in a
business similar to the business of Employer but nevertheless agrees and hereby
acknowledges that the consideration provided under this
<PAGE> 9
Agreement, including any amounts or benefits provided under Section 7 hereof,
is sufficient to justify the restrictions contained in such provisions and in
consideration thereof and in light of Employee's education, skills and
abilities, Employee agrees that he will not assert that, and it should not be
considered that, such provisions prevent him from earning a living or otherwise
are void or unenforceable or should be voided or held unenforceable. Employee
acknowledges and agrees that his duties with Employer are of an executive
nature and that he is a member of Employer's management group.
(d) If Employee's employment is
terminated pursuant to Section 6.1(d) hereof, Employer may extend the Covered
Time to extend up to and through the second anniversary of the Date of
Termination by delivering written notice to Employee (specifying the duration
of the extended Covered Time), within ten (10) days of such Date of
Termination, that Employer has elected to continue to pay to Employee the
Continuation Payments and provide the Continuation Benefits (on terms no less
favorable to Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time) for each month
of such extended Covered Time. During the extended Covered Time, Employee
shall be required to make any contributions required to maintain such
Continuation Benefits, which may be withheld from the Continuation Payments;
provided that such contributions are also required to be made by the Employer's
executive officers generally. If at any time during the extended Covered Time
Employee shall obtain employment with a Substitute Employer in which Employee
is entitled to receive basic health benefits in connection with such employment
on terms provided by the Substitute Employer to its similarly situated
employees generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether such benefits
differ in any respect from the Continuation Benefits. Employer shall be
excused from its obligations to make payments under this Section 8.4(d) if
Employee breaches its obligations hereunder.
8.5 Litigation Assistance. Employee agrees that
after the Date of Termination he shall, at the request of Employer, render all
assistance and perform all lawful acts that Employer considers necessary or
advisable in connection with any litigation involving Employer or any director,
officer, employee, shareholder, agent, representative, consultant, customer or
vendor of Employer. In the event that Employer requests Employee's assistance
under this Section 8.5, Employer shall pay to Employee for each day such
assistance is rendered an amount equal to the annual Base Salary of Employee in
effect at the Date of Termination divided by 250 and shall promptly pay or
reimburse Employee for such reasonable travel expenses as he may incur in
connection with rendering assistance hereunder.
8.6 Definition of Employer. For purposes of this
Section 8, the term Employer shall include Employer and any and all of its
subsidiaries, ventures or affiliates, whether currently existing or hereafter
formed, which are engaged in the Covered Business or a portion thereof, as well
as any person to whom this Agreement is assigned as permitted by Section 9.8
hereof.
8.7 Enforcement.
(a) The parties hereto agree and
acknowledge that the covenants and agreements contained herein are reasonably
necessary in duration and to protect the reasonable competitive business
interests of Employer, including, without limitation, the value of the
proprietary information and goodwill of Employer.
(b) Employee agrees that the covenants
and undertakings contained in Article 8 of this Agreement relate to matters
which are of a special, unique and
<PAGE> 10
extraordinary character and that Employer cannot be reasonably or adequately
compensated in damages in an action at law in the event Employee breaches any
of these covenants or undertakings. Therefore, Employee agrees that Employer
shall be entitled, as a matter of course, without the need to prove irreparable
injury, to an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any violation or threatened
violation of any of such terms by Employee and such other persons as the court
shall order. Employee agrees to pay costs and legal fees incurred by Employer
in obtaining such injunction.
(c) Rights and remedies provided for in
this Section are cumulative and shall be in addition to rights and remedies
otherwise available to the parties under any other agreement or applicable law.
(d) In the event that any provision of
this Agreement shall to any extent be held invalid, unreasonable or
unenforceable in any circumstances, the parties hereto agree that the remainder
of this Agreement and the application of such provision of this Agreement to
other circumstances shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Agreement, or any part thereof, is
held to be unenforceable because of the scope or duration of or the area
covered by such provision, the parties hereto agree that the court or
arbitrator making such determination shall reduce the scope, duration and/or
area of such provision (and shall substitute appropriate provisions for any
such unenforceable provisions) in order to make such provision enforceable to
the fullest extent permitted by law, and/or shall delete specific words and
phrases, and such modified provision shall then be enforceable and shall be
enforced. The parties hereto recognize that if, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants contained in this
Agreement, then that unenforceable covenant contained in this Agreement shall
be deemed eliminated from these provisions to the extent necessary to permit
the remaining separate covenants to be enforced. In the event that any court
or arbitrator determines that the time period or the area, or both, are
unreasonable and that any of the covenants is to that extent unenforceable, the
parties hereto agree that such covenants will remain in full force and effect,
first, for the greatest time period, and second, in the greatest geographical
area that would not render them unenforceable.
9. Miscellaneous.
9.1 Key Man Insurance. Employee recognizes and
acknowledges that Employer or its affiliates may seek and purchase one or more
policies providing key man life insurance with respect to Employee, the
proceeds of which would be payable to Employer or such affiliate. Employee
hereby consents to Employer or its affiliates seeking and purchasing such
insurance and will provide such information, undergo such medical examinations
(at Employer's expense), execute such documents, and otherwise take any and all
actions necessary or desirable in order for Employer or its affiliates to seek,
purchase and maintain in full force and effect such policy or policies.
9.2 Notice. Any notice required or permitted to
be given hereunder shall be deemed sufficiently given if sent by registered or
certified mail, postage prepaid, addressed to the addressee at his or its
address last provided the sender in writing by the addressee for purposes of
receiving notices hereunder or, unless or until such address shall be so
furnished, to the address indicated opposite his or its signature to this
Agreement. For purposes of this Agreement, notice sent in conformity with this
Section 9.2 shall be deemed to have been received on the third business day
following the date on which such notices are so sent.
<PAGE> 11
9.3 Modification and No Waiver of Breach. No
waiver or modification of this Agreement shall be binding unless it is in
writing signed by the parties hereto. No waiver by a party of a breach hereof
by the other party shall be deemed to constitute a waiver of a future breach,
whether of a similar or dissimilar nature, except to the extent specifically
provided in any written waiver under this Section 9.3.
9.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND ALL QUESTIONS RELATING TO THE VALIDITY AND PERFORMANCE
HEREOF AND REMEDIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
9.5 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same agreement.
9.6 Captions. The captions used herein are for
ease of reference only and shall not define or limit the provisions hereof.
9.7 Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto relating to the matters
encompassed hereby and supersedes any prior oral or written agreements.
9.8 Assignment. The rights of Employer under
this Agreement may, without the consent of Employee, be assigned by Employer to
any person, firm, corporation, or other business entity which at any time,
whether by purchase, merger, or otherwise, directly or indirectly, acquires all
or material portions of the stock, assets or any line of business of Employer.
9.9 Non-Transferability of Interest. None of the
rights of Employee to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Employee. Any attempted assignment, transfer, conveyance, or other disposition
(other than as aforesaid) of any interest in the rights of Employee to receive
any form of compensation to be made by Employer pursuant to this Agreement
shall be void.
9.10 Arbitration. The parties shall endeavor to
settle all disputes by amicable negotiations. Except as otherwise provided
herein, any claim, dispute, disagreement or controversy that arises among the
parties relating to this Agreement that is not amicably settled shall be
resolved by arbitration, as follows:
<PAGE> 12
(a) Any such arbitration shall be heard
in The City of New York, New York, before a panel consisting of one (l) to
three (3) arbitrators, each of whom shall be impartial. Upon the written
Request of Arbitration of either party hereto to commence arbitration
hereunder, the parties shall attempt to mutually agree as to the number and
identity of the arbitrator(s), within thirty (30) days of the date of such
Request. Except as the parties may otherwise agree, all arbitrators (if not
selected by the parties hereto within thirty (30) days of a written Request for
Arbitration) shall be appointed pursuant to the commercial arbitration rules of
the American Arbitration Association. In determining the number and
appropriate background of the arbitrators, the appointing authority shall give
due consideration to the issues to be resolved, but his or her decision as to
the number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by
any party to this Agreement by the service of a written Request for Arbitration
upon the other affected parties. Such Request for Arbitration shall summarize
the controversy or claim to be arbitrated.
(c) All attorneys' fees and costs of the
arbitration shall in the first instance be borne by the respective party
incurring such costs and fees, but the arbitrators shall have the discretion to
award costs and/or attorneys' fees as they deem appropriate under the
circumstances. The parties hereby expressly waive punitive damages, and under
no circumstances shall an award contain any amount that in any way reflects
punitive damages.
<PAGE> 13
(d) Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
(e) It is intended that controversies or
claims submitted to arbitration under this Section 9.10 shall remain
confidential, and to that end it is agreed by the parties that neither the
facts disclosed in the arbitration, the issues arbitrated, nor the views or
opinions of any persons concerning them, shall be disclosed to third persons at
any time, except to the extent necessary to enforce an award or judgment or as
required by law or in response to legal process or in connection with such
arbitration.
(f) Any arbitration under this Section
9.10 shall be conducted pursuant to the commercial arbitration rules of the
American Arbitration Association.
9.11 Jurisdiction; Venue. Subject to Section 9.10
hereof, the parties hereto irrevocably and unconditionally submit to the
exclusive jurisdiction of any State or Federal court sitting in The City of New
York over any suit, action or proceeding arising out of or relating to this
Agreement. Service of any process, summons, notice or document by registered
mail addressed to any party as provided in Section 9.2 hereof shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. A final judgment in any suit, action or proceeding brought
in any such court shall be conclusive and binding upon the parties and may be
enforced in any other courts to whose jurisdiction a party is or may be
subject, by suit upon such judgment.
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed
effective as of the day and year first
written above.
Address for notices: PRIMECO INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
By:
-----------------------------------
Thomas E. Bennett
With a copy to:
INVESTCORP International Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Attention: Robert V. Glaser
EMPLOYEE
- -------------------------------
- ------------------------------- ---------------------------------------
Gerald E. Lane
<PAGE> 15
EXHIBIT A
Employee's initial title shall be:
Director of Operations
<PAGE> 16
EXHIBIT B
Management Cash Bonus Incentive Program
The following is the bonus formula for Employee for fiscal years 1995 through
1999:
EBITDA(1) TARGETS
1995 $68 million
1996 $90 million
1997 $108 million
1998 $120 million
1999 $132 million
__________________________
(1) Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as:
a. Consolidated Net Income (loss) of Holding and its
subsidiaries as it would appear on a statement of income (loss), which
sall reflect a reduction for all management and employee bonuses
payable with respect to the Fiscal Year, of consolidated Holding
prepared in accordance with U.S. GAAP, consistently applied; plus
(minus)
b. Any provision (benefit) for taxes (including
franchise taxes) deducted (added) in calculating such consolidated net
income (loss); plus
c. Any interest expense (net of interest income),
deducted in calculating such consolidated net income (loss); (minus)
d. Costs charged against any purchase accounting
reserves established in connection with the acquisition; (minus)
e. The effects of the reversal of any excess purchase
accounting reserves established in connection with the acquisition;
plus
f. Amortization expenses deducted in calculating
consolidated net income (loss); plus
g. Depreciation expense deducted in calculating
consolidated net income (loss); plus
h. Management fees paid to Investcorp; plus (minus)
i. Any unusual losses (gains) deducted (added) in
calculating consolidated net income (loss). (Unusual items are
intended to include transactions considered outside the ordinary
course of business. EBITDA will be adjusted to eliminate the effects,
if any, of such
[Footnote continued on next page]
<PAGE> 17
<TABLE>
<CAPTION>
% of Base
% of EBITDA Salary Payable
Target Achieved as Bonus (2)
--------------- ------------
Equal to Or
Greater Than: But Less Than:
------------ -------------
<S> <C> <C>
0 85 0
85 90 10 - 15
90 95 27 - 40
95 100 43 - 65
100 110 67 - 100
110 120 80 - 120
120 130 93 - 140
130 140 107 - 160
140 150 120 - 180
150 160 133 - 200
160 170 147 - 220
170 180 160 - 240
180 190 173 - 260
190 200 187 - 280
200 ----- 200 - 300
</TABLE>
- -----------------------
[Footnote continued from previous page]
transactions, the intent being to calculate EBITDA as if such
transactions had not occurred); plus (minus)
j. Any compensation expense (income) deducted (added) in
calculating consolidated net income (loss) attributable to
transactions involving equity securities of Holding or its
subsidiaries.
EBITDA shall be determined based upon the Management Case Financial
Model dated 1:44 PM December 5, 1994. The Optionee and his or her
representative shall be provided reasonable opportunity to review the
computation of EBITDA and reasonable access to the data and
information supporting such computation and shall have the right to
challenge in good faith such computation.
(2) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be dtermined on an
individual basis and may differ among eligible employees.
<PAGE> 1
EXHIBIT 10.20
<PAGE> 2
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is executed as of
the 23rd day of February, 1996, by and among Michael Murnin, Randal Shields,
Lloyd Glick, Randolph Goss, Thomas Darnell, Chris Fix, Carlos Goff and Cathy
Albritton (collectively, the "Executives"), Vibroplant U.S., Inc. ("American
Hi-Lift") and Vibroplant plc ("Vibroplant").
RECITALS
WHEREAS, each of the Executives has entered into an employment
agreement with American Hi-Lift pursuant to the terms of which such Executive
may be entitled, subject to certain conditions, to a short-term bonus (the
"Short-Term Bonus") and a severance payment upon termination of his or her
employment with American Hi-Lift (the "Severance Payment").
WHEREAS, each of the Executives is a participant in American Hi-Lift's
Divestiture Incentive Program, (the "Divestiture Plan"), pursuant to the terms
of which each of the Executives is entitled, subject to certain conditions, to a
payment (the "Divesture Bonus Payment") in connection with the pending sale (the
"Sale") of the stock of American Hi-Lift to Primeco Inc., (or its assignee)
pursuant to the terms of the Stock Purchase Agreement dated as of January 9,
1996, by and among Vibroplant, Vibroplant Investments, Ltd. and Primeco Inc., as
amended (the "Stock Purchase Agreement").
WHEREAS, disputes have arisen between the Executives, on the one hand,
and American Hi-Lift and Vibroplant, on the other hand, as to the interpretation
of various provisions of the employment agreements and the Divestiture Plan in
connection with the Sale.
WHEREAS, the parties hereto desire to resolve each such dispute and
memorialize certain monetary or other obligations that may become due relating
to the employment agreements, the Short-Term Bonus, the Severance Payment, and
Divestiture Bonus Payment.
WHEREAS, each of the Executives has agreed to waive and release
pursuant to this Agreement any and all claims he or she may have arising from or
related to his or her employment with American Hi-Lift, the termination or
potential termination thereof, his or her employment agreement with American
Hi-Lift or the Divestiture Plan to induce American Hi-Lift to enter into this
Agreement and to make the payments listed below when and if such payments become
due and payable.
<PAGE> 3
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
following mutual promises, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DIVESTITURE INCENTIVE BONUS PLAN PAYMENT. Subject to the condition set
forth in paragraph 1(a) and consummation of the Sale, American Hi-Lift
agrees to pay each of the Executives the Divestiture Bonus Payment set
forth opposite such Executive's name in the following schedule, less
applicable withholding:
<TABLE>
<S> <C>
Michael Murnin $256,000
Randal Shields $105,500
Lloyd Glick $115,500
Randolph Goss $115,500
Thomas Darnell $115,500
Chris Fix $105,500
Carlos Goff $105,500
Cathy Albritton $105,500
</TABLE>
(a) Notwithstanding the foregoing, an Executive shall not be entitled
to receive his or her Divestiture Bonus Payment unless such Executive remains
available to continue his or her employment with America Hi-Lift (or its
successor) in his or her present capacity for a period up to 90 days following
consummation of the Sale.
(b) American Hi-Lift shall pay the Divestiture Bonus Payment, less
applicable withholding, to each Executive within two (2) business days after
consummation of the Sale, provided that if an Executive is requested to continue
his or her employment with American Hi-Lift (or its successor) in his or her
present capacity for a period up to 90 days following the consummation of the
Sale, the Divestiture Bonus Payment shall be made to the Executive within two
(2) business days of the end of that period of service.
2. OTHER BONUSES. American Hi-Lift agrees to pay each of the following
Executives the Short-Term Bonus set forth opposite such Executive's name in the
following schedule, less applicable withholding:
<TABLE>
<S> <C>
Michael Murnin $87,000
Lloyd Click $50,000
Randolph Goss $33,120
Thomas Darnell $27,000
</TABLE>
(a) American Hi-Lift shall pay the Short-Term Bonus, less applicable
withholding, to each Executive listed in paragraph (2)(a) within two (2)
business days after consummation of the Sale.
3. EARNED VACATION. In connection with any termination of any Executive's
employment with American Hi-Lift, such Executive shall be paid by American
Hi-Lift all earned vacation ("Earned Vacation"), less applicable withholding,
payable to such Executive as determined in accordance with American Hi-Lift's
vacation policy, and each Executive acknowledges and agrees that the amount of
Earned Vacation due him or her as of February 29, 1996, is as set forth opposite
his or her name in the following schedule:
<PAGE> 4
<TABLE>
<CAPTION>
Earned Hours Amount
------------ ------
<S> <C> <C>
Michael Murnin 152.00 $12,714.80
Lloyd Glick 64.00 $ 3,845.76
Randal Shields 128.00 $ 6,314.24
Randolph Goss 24.00 $ 955.44
Catharine Albritton 80.00 $ 3,600.00
Thomas Darnell 0.00 $ 0.00
Christopher Fix 96.00 $ 3,519.36
Carlos Goff 12.62 $ 552.00
</TABLE>
(a) Vacation continues to accrue during any continued employment, to
the extent any Executive is requested to continue his or her employment with
American Hi-Lift (or its successor) in his or her present capacity for up to 90
days following consummation of the Sale. All Earned Vacation shall be paid to
each Executive within two (2) business days of his last day of active employment
with American Hi-Lift. If an Executive is requested to continue his or her
employment with American Hi-Lift (or its successor) in his or her present
capacity for up to 90 days following the Sale, these monies shall be paid to the
Executive within two (2) business days of the end of that period of service.
4. NOTICE OF TERMINATION. Notice is hereby given that the employment of
each of Michael Murnin, Lloyd Glick, Randolph Goss and Thomas Darnell with
American Hi-Lift is hereby terminated effective immediately upon consummation of
the Sale and such individuals are relieved of any obligation to remain available
to continue employment in order to receive payment under this Agreement. Notice
is also hereby given that the employment of Randal Shields with American Hi-Lift
shall be terminated 90 days from the date of consummation of the Sale.
5. CONFIRMATION OF SEVERANCE ARRANGEMENTS.
(a) American Hi-Lift shall pay each Executive, whose employment with
American Hi-Lift is involuntarily terminated in connection with the Sale or for
reasons other than "cause" as determined pursuant to the terms of such
Executive's respective employment agreement, within two (2) business days of his
or her last day of active employment with American Hi-Lift the Severance
Payment, which is comprised of a notice period payment (the "Notice Period
Payment") and a severance amount (the "Severance Amount"), set forth opposite
such Executive's name in the schedule below, less applicable withholding:
<TABLE>
<CAPTION>
Notice Period Severance
Payment Amount Total
------- ------ -----
<S> <C> <C> <C>
Michael Murnin $53,000 $174,000 $227,000
Randal Shields $25,650 $ 51,300 $ 76,950
Lloyd Glick $62,500 $125,000 $187,500
Randolph Goss $41,400 $ 82,800 $124,200
Thomas Darnell $45,000 -0- $ 45,000
Chris Fix $38,100 -0- $ 38,100
Carlos Goff $45,500 -0- $ 45,500
Cathy Albritton $46,800 -0- $ 46,800
</TABLE>
(b) An Executive, who has been given notice of termination of his or
her employment with American Hi-Lift (or its successor) in connection with the
Sale or for reasons other than "cause" as determined pursuant to the terms of
his employment agreement, may be requested to continue his or her employment
with American Hi-Lift (or its successor) in his or her present capacity for a
period up to 90 days after the date notice of his or her termination is received
by such Executive. Each Executive fully understands and agrees that,
notwithstanding paragraph 5(a), and to the extent that he or she continues his
or her employment with American Hi-Lift (or its successor) in his or her present
capacity for up to 90 days as requested, he or she shall not be entitled to
receive the full amount of the Notice P Period Payment to the extent he or she
<PAGE> 5
receives salary during such extended employment period. If an Executive refuses
to extend his or her employment, in his or her present capacity, for up to 90
days at the request of American Hi-Lift or its successor, such Executive shall
not be entitled to receive any portion of the Notice Period Payment. Each
Executive also agrees that if he or she is required to work for up to 90 days,
then, as a condition to his or her receipt of the Severance Amount such
Executive shall give American Hi-Lift (or its successor or assignee) a release
substantially similar to the release in paragraph 6(a) hereof upon expiration of
such notice period, provided that American Hi-Lift (or its successor or
assignee) also gives such Executive a release substantially similar to the
release in paragraph 6(b) hereof.
(c) In addition to the foregoing, Randal Shields shall also be
entitled to medical insurance coverage on the same terms and conditions as an
active employee for a period of six months following termination of his
employment, or until such time that Randal Shields is enrolled in a medical
insurance plan of a new employer, whichever occurs first, and three months of
out placement assistance with Drake Beam Morin, Inc. or no less that their peer
equivalent. It is recognized that the notification for COBRA election for Randal
Shields shall not begin until after the conclusion of the period set forth in
the previous sentence.
(d) In addition to the foregoing, Michael Murnin shall also be
entitled to (i) medical insurance coverage on the same terms and conditions as
an active employee for a period of six months following termination of his
employment, or until such time that Michael Murnin is enrolled in a medical
insurance plan of a new employer, whichever occurs first, (ii) reimbursement of
rental payments made pursuant to the terms of the lease agreement for Michael
Murnin's furnished apartment in Texas through March 31, 1996, and (iii) use of
an automobile leased by American Hi-Lift through March 31, 1996. It is
recognized that the notification for COBRA election for Michael Murnin shall not
begin until after the conclusion of the period set forth in the previous
sentence.
(e) In addition to the foregoing, Randolph Goss shall also be
entitled to medical insurance coverage on the same terms and conditions as an
active employee for a period of six months following termination of his
employment, or until such time that Randolph Goss is enrolled in a medical
insurance plan of a new employer, whichever occurs first. It is recognized that
the notification for COBRA election for Randolph Goss shall not begin until
after the conclusion of the period set forth in the previous sentence.
(f) In addition to the foregoing, Lloyd Glick shall also be entitled
to full medical insurance coverage on the same terms and conditions as an active
employee for a period of six months following termination of his employment, or
until such time that Lloyd Glick is enrolled in a medical insurance plan of a
new employer, whichever occurs first. It is recognized that the notification for
COBRA election for Lloyd Glick shall not begin until after the conclusion of the
period set forth in the previous sentence.
6. MUTUAL RELEASE.
(a) For and in consideration of the covenants made herein, each of
the Executives, individually, for and on behalf of himself/herself, his or her
predecessors, employees, agents, assigns, heirs, executors, administrators, and
legal representatives, hereby releases, discharges, and forever acquits American
Hi-Lift, Vibroplant, Primeco Inc. and their respective predecessors, successors,
assigns, employees, agents, heirs, executors, administrators, partners,
partnerships, shareholders, subsidiaries, parent companies, related companies,
joint venturers, joint ventures, and legal representatives, including without
limitation, their officers and directors (collectively, the "Released Parties"),
of and from any and all claims, demands, causes of action, and liabilities of
any kind whatsoever, whether known or unknown, against the Released Parties,
which such Executive may have, and which relate to such Executive's relationship
with American Hi-Lift, Primeco Inc. or Vibroplant, including without limitation,
any dispute relating to, arising from, or in connection with the employment of
such Executive by American Hi-Lift, the termination of such Executive's
employment, any employment bonus or divestiture incentive agreement between such
Executive and American Hi-Lift, the Short-Term Bonus, any vacation pay, the
Severance Payment, the Divestiture Bonus Payment, or the Divestiture Plan, and
any
<PAGE> 6
dispute arising on or prior to the date of execution of this Agreement under the
Age Discrimination in Employment Act of 1967; the Civil Rights Acts of 1964 and
1991; the Americans With Disabilities Act of 1990; the Employee Retirement
Income Security Act of 1974; and any other federal or state statute, law,
regulation, or ruling relating to employment under which such Executive may have
a potential claim (collectively, the "Released Claims"). Each Executive
understands and expressly agrees that the Released Claims include all claims of
every nature and kind whatsoever related thereto, known or unknown, suspected or
unsuspected, past or present, including claims which such Executive did not know
or suspect to exist in his or her favor at the time of executing this Agreement,
which, if known by such Executive, would have materially affected such
Executive's full and final settlement with American Hi-Lift. Each Executive
understands and agrees that the significance and consequence of his or her
release and waiver of the Released Claims is that even if such Executive should
eventually discover or suffer damages arising out of his or her employment with
American Hi-Lift, such Executive will not be able to make any claim for those
damages. This applies even to claims or damages that may exist as of the date of
this Agreement, but which such Executive does not know exists, even if having
known about them would have affected his or her decision to sign this Agreement.
Notwithstanding the foregoing, this release shall not apply to the obligations
of American Hi-Lift (or it successors) and Vibroplant pursuant to this
Agreement, and to any obligations of American Hi-Lift (or its successors) and
Vibroplant to provide indemnification in the future to any Executive that would
be entitled to such indemnification under applicable corporate law, the articles
of incorporation of American Hi-Lift or Vibroplant or their respective bylaws.
Notwithstanding the foregoing, each Executive shall retain the benefits provided
under the Director's and Officer's Liability Insurance Policy of American
Hi-Lift (or its successor) to the extent such Executive is entitled to benefits
thereunder.
(b) For and in consideration of the covenants made herein, American
Hi-Lift and Vibroplant, for and on behalf of their respective predecessors,
successors, assigns, employees, agents, heirs, executors, administrators,
partners, partnerships, shareholders, subsidiaries, parent companies, related
companies, joint venturers and legal representatives, including without
limitation their officers and directors, hereby release, discharge, and forever
acquit the Executives and their respective assigns, employees, agents, heirs,
executors, administrator, and legal representatives (the "Executive Released
Parties") of and from any and all claims, demands, causes of action, and
liabilities of any kind whatsoever, whether known or unknown, against the
Executive Released Parties, which such parties may have, including, without
limitation, any dispute relating to, arising from, or in connection with the
employment of the Executives by American Hi-Lift, any claims or demands made by
such Executives or their legal representatives relating to monies claimed to be
owed under the Executive's employment agreements, the Short-Term Bonus, Earned
Vacation, the Severance payment, the divestiture Bonus Payment, and the
Divestiture Plan, specifically including any claim that the Executives
interfered in any way with the Sale, but excluding any acts of fraud or illegal
acts that cause or result in material liability to Vibroplant under the terms of
the Stock Purchase Agreement.
7. RETURN OF INFORMATION. Each Executive agrees not to use, disclose to
others, or permit anyone access to any of American Hi-Lift's trade secrets or
confidential or proprietary information and if such Executive's employment with
American Hi-Lift is terminated, to immediately return to American Hi-Lift all
equipment, books, notebooks, documents, reports, files, memoranda, records,
computers, computer software and program design samples, correspondence, work
papers, financial data, plans, business records, mailing lists, client or
contact lists, calendars, card files, rolodexes, cardkey passes, door, file and
computer keys, computer access codes or disks, company charge cards, company
telephone charge cards, instructional or employee manuals, and any other
American Hi-Lift property which such Executive received during his or her
employment with American Hi-Lift. Such Executive shall not maintain any copy or
other reproduction whatsoever of any of the items described in this section
after termination of his or her employment. Such Executive and American Hi-Lift
further agree to settle all outstanding expense accounts with the appropriate
party making payments to the other party as dictated by the net balance due to
or owed by such Executive, such settlement to take place no later than seven (7)
business days following the effective date of his or her termination.
<PAGE> 7
8. EXECUTIVE AVAILABILITY. Each Executive whose employment with American
Hi-Lift (or its successor) has ended agrees to voluntarily make himself or
herself available to American Hi-Lift, Vibroplant and their respective legal
counsel, at American Hi-Lift's or Vibroplant's reasonable request and at
American Hi-Lift's or Vibroplant's sole expense (including without limitation
reasonable compensation of such Executive for time in excess of 3 days that is
incurred by him or her in connection with his or her compliance with such
request and any attorney's fees reasonably incurred by such Executive in
connection with such requests) without the necessity of obtaining a subpoena or
court order, in American Hi-Lift's or Vibroplant's investigation, preparation,
prosecution and/or defense of any actual or potential legal proceeding
(excluding any actual or potential legal proceeding in which the Executive
requested to make himself or herself available is an adverse party), regulatory
action or audit or internal matter. Each Executive agrees to provide any
information reasonably within such Executive's recollection, except such
Executive does not agree to provide information that would constitute a waiver
of his or her attorney-client privilege.
9. INDEMNIFICATION. Each party to this Agreement agrees that, in the event
it breaches any provision of this Agreement, it will indemnify and hold harmless
every other party hereto for all liability, claims, loss, damages and expenses
(including, without limitation, reasonable attorneys' fees and expenses and
costs of suit) arising out of or in connection with its breach of any provision
of this Agreement and any action to enforce any provision of this Agreement
arising out of such breach.
10. NO ADMISSION OF WRONGDOING. The parties to this Agreement acknowledge
that by entering into this Agreement none of such parties is in any manner
admitting or agreeing that it has acted illegally or improperly in connection
with any of the matters being settled by this Agreement. In fact, the same is
denied.
11. INDUCEMENT. The parties acknowledge that they have read this Agreement,
they fully understand its provisions and its final and binding effect, and that
in entering into it they are not acting on any representations, warranties,
agreements, or inducements other than those made herein. It is agreed and
acknowledged that each of the undersigned is acting fully and freely upon his or
its own investigation and knowledge and that each voluntarily executes this
Agreement of his or its own free will. In signing this Agreement, each of the
undersigned further acknowledges that he or it has relied upon the advice of his
or its own selection and has been fully informed by his or its counsel of the
legal effect of this Agreement.
12. INTEGRATION AND MODIFICATION. The parties further acknowledge that this
Agreement contains the entire agreement between the parties and that it
supersedes any and all prior agreements, arrangements, or undertakings between
the parties relating to the subject matter of this Agreement, including, without
limitation, the employment agreements, any severance agreements and the
Divestiture Plan, except to the extent incorporated herein by reference. No oral
understandings, statements, promises, or inducements contrary to the terms of
this Agreement exist. This Agreement may be amended or terminated only by a
writing signed by the parties hereto.
13. TERMINATION. This Agreement shall terminate, no party hereto shall have
any obligation hereunder and the releases contained herein shall be of no force
and effect if the closing of the Sale shall not have occurred on or before March
31, 1996.
14. HEADINGS. The section headings are inserted for convenience only and
shall in no way alter, amend or define the text of this Agreement. Nor shall
such headings be used in the construction or interpretation of the text of the
Agreement.
15. SEVERABILITY. If any provision of this Agreement, or of any amendment
or other provision hereafter adopted, is for any reason found to be
inapplicable, invalid, illegal or unenforceable in any respect, such
inapplicability, invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or that of any related attachments or
exhibits. Such other provisions, attachments and exhibits shall be construed as
if the inapplicable, invalid, illegal, or unenforceable provision(s) had never
been contained herein. In the alternative, such
<PAGE> 8
inapplicable, invalid, illegal, or unenforceable provision shall be modified to
the extent necessary to alleviate such inapplicability, invalidity, illegality,
or unenforceability and to have such provision be in compliance with the laws of
the State of Texas.
16. INUREMENT. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, devisees, executives,
administrators, representatives, successors, assigns, trustees, receivers and
subsidiaries.
17. COUNTERPARTS. It is acknowledged by the parties that this Agreement may
be executed in several counterparts, all of which take together shall constitute
one single Agreement between the parties.
18. APPLICABLE LAW. IT IS ACKNOWLEDGED BY THE PARTIES THAT THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS. THIS AGREEMENT IS PERFORMABLE IN TARRANT COUNTY, TEXAS.
19. CONFIDENTIALITY. The parties to this Agreement represent, warrant, and
agree that they will keep the terms of this Agreement confidential and will not
disclose the substance or contents of this Agreement except (a) to their
attorney(s), financial advisor(s), or spouse as reasonably necessary, (b) to the
extent required by applicable law, rule, regulation, or order or (c) to the
extent American Hi-Lift or Vibroplant, or any subsequent owner or owners of the
capital stock of American Hi-Lift or counsel or agents for any of said
corporations or other persons may need or wish to disclose the terms of this
Agreement to any prospective buyers or lenders and/or said buyers' or lenders'
counsel or agents or otherwise to enforce this Agreement. Each Executive further
agrees to refrain from making any disparaging remarks, whether written or oral,
to any third parties concerning American Hi-Lift (or its successors) or any
other Released Party that could materially adversely affect the business,
operations, financial condition or business reputation of American Hi-Lift (or
its successors) or any other Released Party. This provision is not, however,
intended to limit an Executive's right to give non-malicious and truthful
testimony should such Executive be subpoenaed to give such testimony. Each of
American Hi-Lift and Vibroplant further agrees to, and to cause its directors,
officers, employees, agents and other representatives (collectively, the
"Representatives") to, refrain from making any disparaging remarks, whether
written or oral, to any third parties concerning any Executive; provided,
however, that this provision is not intended to limit the right of American
Hi-Lift or Vibroplant or their respective Representatives to give non-malicious
and truthful testimony should such persons be subpoenaed to give such testimony.
20. DISPUTES. Any dispute between an Executive and American H-Lift
concerning this Agreement will be settled by binding arbitration in Dallas,
Texas, using a single arbitrator, and will be governed by the Commercial
Arbitration Rules of the American Arbitration Association. The costs of
arbitration, including attorneys' fees, shall be borne by the parties to the to
the arbitration as assessed by the arbitrator after considering the merits of
the respective positions taken by the parties to the dispute. The parties hereby
expressly waive any punitive, exemplary, consequential, or special damages, and
under no circumstances shall an award contain any amount that in any way
reflects any of such types of damages. The arbitrator shall have the authority
to grant equitable relief and issue orders providing for the same. Judgement on
any award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
21. RESPONSIBILITY. The obligations of the Executives set forth herein are
the independent obligation of each Executive, and no Executive shall have any
obligation to perform the obligations of any other Executive, and no Executive
shall have any responsibility for or liability arising out of the breach or
violation of the provisions of this Agreement by any other Executive.
22. REPRESENTATION OF AMERICAN HI-LIFT. American Hi-Lift hereby confirms
that it has given Primeco Inc. a copy of this Agreement and is not aware of any
objections by Primeco Inc. to the terms hereof.
<PAGE> 9
EXECUTED as of the date first above written.
--------------------------
Michael Murnin
--------------------------
Randal Shields
--------------------------
Lloyd Glick
--------------------------
Randolph Goss
--------------------------
Thomas Darnell
--------------------------
Chris Fix
--------------------------
Carlos Goff
--------------------------
Cathy Albritton
<PAGE> 10
VIBROPLANT U.S., INC.
By:
-------------------------
Name: Jeremy F.G. Pilkington
-----------------------
Title: Director
----------------------
VIBROPLANT P.L.C.
By:
-------------------------
Name: Eric R. Woolley
-----------------------
Title: Director
----------------------
<PAGE> 11
APPROVED AS TO FORM AND CONTENT:
------------------------------------
Brian N. Hail, counsel to Randal Shields,
Lloyd Glick, Randolph Goss and
Thomas Darnell
APPROVED AS TO FORM AND CONTENT:
------------------------------------
Jane Makela, attorney for Michael Murnin
<PAGE> 1
EXHIBIT 10.23
<PAGE> 2
DEED OF TRUST AND SECURITY AGREEMENT
from
PRIMECO INC., successor-by-merger
with KINCO, INC., Grantor
to C. E. Seal II, Trustee
for the use and
benefit of
THE CIT GROUP/BUSINESS CREDIT, INC., Beneficiary
DATED AS OF JANUARY 13, 1995
After recording, please return to:
Simpson, Thacher & Bartlett
a partnership which includes
professional corporation
425 Lexington Avenue
New York, New York 10017
Attn: Pascale I. Bissainthe, Esq.
<PAGE> 3
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT,
dated as of January 13, 1995 is made by PRIMECO INC., a Texas corporation,
successor-by-merger with KINCO, INC. ("Grantor"), whose address is 16225 Park
Ten Place, Suite 200, Houston, Texas 77084 to C.E. Seal II, and individual
("Trustee") whose address is 500 North Akard Street, Suite 2900, Lock Box 6,
Dallas, Texas 75201-4083, for the use and benefit of THE CIT GROUP/BUSINESS
CREDIT, INC., a New York corporation, whose address 1211 Avenue of the Americas,
New York, New York 10019 as collateral agent (in such capacity, "Beneficiary")
for the Lenders (defined below) under the Credit Agreement referred to below.
References to this "Deed of Trust" shall mean this instrument and any and all
renewals, modifications, amendments, supplements, extension, consolidations,
substitutions, spreaders and replacements of this instrument.
Background
A. Pursuant to a Credit Agreement, dated as
December 1, 1994 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Grantor, several lenders (collectively, the
"Lenders"), Chemical Bank, a New York banking corporation, as administrative
agent (in such capacity, the "Administrative Agent"), and Beneficiary, the
Lenders have severally agreed to make loans to, and the Issuing Lender has
agreed to issue and certain of the other Lenders have agreed to participate in
letters of credit for the account of, Grantor upon the terms and subject to the
conditions set forth therein. Capitalized terms used herein and not defined
herein shall have the meanings given to them in the Credit Agreement.
B. It is a condition precedent to the obligation
of the Lenders to make their respective loans to, and the obligation of the
Issuing Lender to issue and the Lenders to participate in letters of credit for
the account of, Grantor under the Credit Agreement that Grantor shall have
executed and delivered this Deed of Trust to Trustee for the benefit of
Beneficiary for the ratable benefit of the Lenders.
C. Grantor is the owner of each of the parcels
of real property described on Schedule A attached hereto (each such parcel of
real property, together with all of the buildings, improvements, structures and
fixtures now or subsequently located thereon (the "Improvements"), being
collectively referred to as the "Real Estate"). References in the Deed of Trust
to the "Default Rate" shall mean the rate set forth in subsection 4.5(c) of the
Credit Agreement.
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Grantor agrees that to secure the prompt and
complete payment when due of (i) the Obligations (as defined on Schedule B
attached hereto); (ii) all interest and fees payable thereon and (iii) the
prompt and complete performance when due of the Obligations;
GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY MORTGAGES, GRANTS, ASSIGNS,
TRANSFERS AND SETS OVER TO TRUSTEE AND ALSO TO SUBSTITUTE TRUSTEE (AS DEFINED
BELOW), IN TRUST WITH POWER OF SALE FOR THE USE AND BENEFIT OF BENEFICIARY FOR
THE RATABLE BENEFIT OF THE LENDERS, AND GRANTS BENEFICIARY AND TRUSTEE A
SECURITY INTEREST IN:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand
whatsoever of Grantor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Grantor in,
to and under all easements, rights of way, gores of land, street, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian rights,
development rights, air rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditaments and appurtenances
belonging, relating or appertaining to the Real Estate, and any reversions,
remainders, rents, issues, profits and revenue thereof and all land lying in the
bed of any street, road or avenue, in front of or adjoining the Real Estates to
the center lin thereof;
(D) All of the fixtures currently owned or
subsequently acquired by Grantor and now or subsequently attached to, or
contained in or used or usable in any way in connection with any operation or
letting of the Real Estate, including but without limiting the generality of the
foregoing, all screens, awnings, shades, blinds, curtains, draperies, carpets,
rugs, storm doors and windows, heating and electrical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and air-cooling apparatus,
refrigerating, and incinerating equipment, escalators, elevators, loading and
unloading equipment and systems, stoves, ranges, laundry equipment, cleaning
systems (including window cleaning apparatus), sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems, motors,
engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and
fixtures of every kind and description (all of the foregoing in this paragraph
(D) being referred to as the "Equipment");
(E) all right, title and interest of Grantor in
and to all substitutes and replacements of, and all additions and improvements
to, the Real Estate and the Equipment, subsequently acquired by or released to
grantor or constructed, assembled or placed by Grantor on the Real Estate,
immediately upon such acquisition, release, construction, assembling or
placement, including, without limitation, any and all building materials,
whether stored at the Real Estate or offsite, and, in each such case, without
any further mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in,
to and under all leases, subleases, underlettings, concession agreements,
management agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now existing
or subsequently entered into by Grantor and whether written or oral and all
guarantees of any of the foregoing, collectively, as any of the foregoing may be
amended, restated, extended, renewed or modified from time to time, the
"Leases"), and all rights of Grantor in respect of cash and securities deposited
thereunder and the right to receive and collect the revenues, income, rents,
issues and profits thereof, together with all other rents, royalties, issues,
profits, revenue, income and other benefits arising from the use and enjoyment
of the Trust Property (as defined below) (collectively, the "Rents");
<PAGE> 5
(G) all unearned premiums under insurance
policies now or subsequently obtained by Grantor relating to the Real Estate or
Equipment and Grantor's interest in and to all proceeds of any such insurance
policies (including title insurance policies) including the right to collect and
receive such proceeds, subject to the provisions relating to insurance generally
set forth below; and all awards and other compensation, including the interest
payable thereon and the right to collect and receive the same, made to the
present or any subsequent owner of the Real Estate or Equipment for the taking
by eminent domain, condemnation or otherwise, of all or any part of the Real
Estate or any easement or other right therein, subject to the provision relating
to such awards and proceeds generally set forth below;
(H) all right, title and interest of Grantor in
and to (i) all contracts from time to time executed by Grantor or any manager or
agent on its behalf relating to ownership, construction, maintenance, repair or
occupancy, of the Real Estate or Equipment or any part thereof and all lease of
Equipment, (ii) all consent, licenses, building permits, certificates of
occupancy and other governmental approvals relating to construction, completion,
occupancy or use of the Real Estate or any part thereof and (iii) all drawings,
plans, specifications and similar or related items relating to the Real Estate;
and
(I) all proceeds, both cash and noncash, of the
foregoing;
(All of the foregoing property and rights and
interest now owned or held or subsequently acquired by Grantor and described in
the foregoing clauses (A) through (E) are collectively referred to as the
"Premises", and those described in the foregoing clauses (A) through (I) are
collectively referred to as the "Trust Property").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto Trustee, Substitute Trustee, their successors and assigns
for the uses and purposes set forth, until the Obligations are fully paid and
performed.
<PAGE> 6
Terms and Conditions
Grantor further represents, warrants, covenants and agrees with
Trustee and Beneficiary as follows:
1. Warrants of Title. Grantor warrants that Grantor has good
title to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to (i) the matters that are set forth in Schedule B of
the title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and (ii) the matters permitted under subsection 5.13
of the Credit Agreement (collectively, the "Permitted Exceptions") and Grantor
shall warrant, defend and preserve such title and the rights granted by this
Deed of Trust with respect thereto against all claims of all persons and
entities, provided however, that the representation set forth herein is given
solely to the Beneficiary for the benefit of the Lender and the Issuing Lender
and nothing herein contained may be relied upon by, nor benefit, the title
insurance company issuing a title insurance policy or policies being issued to
Beneficiary. Grantor further warrants that it has the right to grant this Deed
of Trust.
2. Payment and Performance of Obligations. Grantor shall pay and
perform the Obligations at the times and places and in the manner specified in
the Credit Documents.
3. Requirements.
(a) Grantor shall promptly comply with, or cause to be
complied with, and conform to all present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements, and
irrespective of the nature of the work to be done, of each of the United States
of America, any State and any municipality, local government or other political
subdivision thereof and any agency, department, bureau, board, commission or
other instrumentality of any of the, now existing or subsequently created
(collectively, "Government Authority") which has jurisdiction over the Trust
Property and all covenants, restrictions and conditions now or later of record
which may be applicable to any of the Trust Property, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Trust Property, except (i) as set forth in the
Phase I Environmental Reports, (ii) to the extent that Grantor's failure to
comply concerns a Legal Requirement which is being contested in good faith by
appropriate proceedings, or (iii) to the extent that Grantor's failure to comply
would not have a material adverse effect on Trust Property or the business
operations or financial condition of Beneficiary. All present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to Grantor or to any of
the Trust Property and all covenants, restrictions, and conditions which now or
later may be applicable to any of the Trust Property are collectively referred
to as the "Legal Requirements".
<PAGE> 7
(b) From and after the date of this Deed of Trust, Grantor
shall not by act or omission permit any building or other improvement on any
premises not subject to this Deed of Trust to rely on the Premises or my part
thereof or any interest therein to fulfill any Legal Requirement, and Grantor
hereby assigns to Beneficiary any and all rights to give consent for all or any
portion of the Premises or any interest therein to be so used. Grantor shall not
by act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Any act or omission by
Grantor which would result in a violation of any of the Provisions of this
subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly when due,
subject to subsection 7.3 of the Credit Agreement, Grantor shall pay and
discharge all real estate taxes and assessments of every kind and nature, all
charges for any easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other public
charges even if unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising in respect of
the occupancy, use or possession thereof, together with any penalties or
interest on any of the foregoing (all of the foregoing are collectively referred
to as the "Impositions"). Upon request by Beneficiary, Grantor shall deliver to
Beneficiary (i) original or copies of receipted bills and canceled checks
evidencing payment of such imposition if it is a real estate tax or other public
charge and (ii) evidence acceptable to Beneficiary showing the payment of any
other such Imposition. If by law any imposition, at Grantor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Grantor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of
Trustee or Beneficiary under this Deed of Trust or otherwise, without notice or
demand to Grantor, to pay any imposition after the date such Imposition shall
have become due, and to add to the Obligations the amount so paid, together with
interest from the time of payment at the Default Rate. Any sums paid by Trustee
or Beneficiary in discharge of any impositions shall be (i) a charge on the
Premises secured hereby prior to any right or title to, interest in, or claim
upon the Premises subordinate to the lien of this Deed of Trust, and (ii)
payable on demand by Grantor to Trustee or Beneficiary, as the case may be,
together with interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to
receive any credit or credits toward the satisfaction of this Deed of Trust or
on any interest payable thereon for any taxes assessed against the Trust
Property or any part thereof, and shall not claim any deduction from the taxable
value of the Trust Property by reason of this Deed of Trust.
(d) Grantor shall have the right before any delinquency
occurs to contest or object in good faith to the amount or validity of any
imposition by appropriate legal proceedings.
<PAGE> 8
5. Insurance. (a) Grantor shall maintain or cause to be
maintained on all of the Premises insurance required by subsection 7.5 of the
Credit Agreement Each insurance policy shall (i) provide that it shall not be
canceled, non-renewed or materially amended without 30-days' prior written
notice to Beneficiary, and (ii) with respect to all property insurance, provide
for loss payable to Beneficiary (modified to provide that proceeds shall be
payable to Grantor unless and until title insurance company is notified by
Beneficiary of the occurrence of an Event of Default in which case proceeds will
be paid to Beneficiary) as its interest may appear, without contribution, under
a "standard" or "New York" mortgage clause acceptable to Beneficiary and be
written by insurance companies as reasonably approved by Beneficiary. Liability
insurance policies shall name Beneficiary (and Trustee, if Trustee shall so
request) as an additional insured and contain a waiver of subrogation against
Beneficiary (and Trustee, if Trustee shall so request).
(b) Grantor shall deliver to Beneficiary a certificate of
insurance acceptable to Beneficiary, together with a copy of the declaration
page for each policy. Grantor shall (i) pay as they become due all premiums for
such insurance, (ii) not later than 15 days prior to the expiration of each
policy to be furnished pursuant to the provisions of this Section, deliver a
renewed policy or policies, or duplicate original or originals thereof, marked
"premium paid," or accompanied by such other evidence of payment satisfactory to
Beneficiary with standard non-contributory mortgage clauses in favor of and
acceptable to Beneficiary.
(c) If Grantor is in default of its obligations to insure
or deliver any such prepaid policy or policies, then Beneficiary, at its option
and without notice, may effect such insurance from year to year, and pay the
premiums or premiums therefor, and Grantor shall pay to Beneficiary on demand
such premium or premiums so paid by Beneficiary with interest from the time of
payment at the Default Rate and the same shall be deemed to be secured by this
Deed of Trust and shall be collectible in the same manner as the Obligations
secured by this Deed of Trust.
(d) Grantor promptly shall comply with and conform to (i)
all provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Grantor or to any of the Trust Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration, or
repair of any of the Trust Property. Grantor shall not use or permit the use of
the Trust Property in any manner which would permit any insurer to cancel any
insurance policy or void coverage required to be maintained by this Deed of
Trust.
(e) Any insurance proceeds payable in connection with a
casualty involving the Trust Property or any portion thereof shall be applied in
accordance with the terms of the Credit Agreement.
(f) In the event of foreclosure of this Deed of Trust or
other transfer of title to the Trust Property in extinguishment of the
Obligations, all right, title and interest of Grantor in and to any insurance
policies then in force shall pass to the purchaser or grantee and Grantor hereby
appoints Beneficiary its attorney-in-fact, in Grantor's name, to assign and
transfer all such policies and proceeds to such purchaser or grantee.
6. Maintenance; No Alteration; Inspection. (a) Grantor shall
maintain or cause to be maintained all the Improvements in good condition and
repair and shall not commit or suffer any waste of the Improvements. Grantor
shall repair, restore, replace or rebuild promptly any part of the Premises
which may be damaged or destroyed by any casualty whatsoever. The Improvements
shall not be demolished without the written consent of Beneficiary.
(b) Beneficiary and any persons authorized by Beneficiary
shall have the right to, upon reasonable notice and in such a manner as to
minimize interference with the store operations on the Premises, enter and
inspect the Premises and the right to inspect all work done, labor performed and
materials furnished in and about the Improvements and the right to inspect and
make copies of all invoices, contracts and records of Grantor relating to the
Trust Property.
<PAGE> 9
7. Condemnation/Eminent Domain. Immediately upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Trust Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. All condemnation proceeds shall be applied in
accordance with the terms of the Credit Agreement.
8. Further Assurances. To further assure Beneficiary's and
Trustee's rights under this Deed of Trust, Grantor agrees upon demand of
Beneficiary or Trustee to execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Trust Property and a separate assignment of each Lease in recordable form)
as may be reasonably required by Beneficiary or Trustee to confirm the rights or
benefits conferred on Beneficiary or Trustee by this Deed of Trust.
9. Beneficiary's Right to Perform. If Grantor fails to perform
any of the covenants or agreements of Grantor after an Event of Default shall
have occurred and be continuing, Beneficiary or Trustee, without waiving or
releasing Grantor from any obligation or default under this Deed of Trust with
reasonable efforts to provide simultaneous written notice to Grantor may, at any
time (but shall be under no obligation to) pay or perform the same, and the
amount or cost thereof, with interest at the Default Rate, shall immediately be
due from Grantor to Beneficiary or Trustee (as the case may be) and the same
shall be secured by this Deed of Trust and shall be an encumbrance on the Trust
Property prior to any right, title to, interest in or claim upon the Trust
Property attaching subsequent to the date of this Deed of Trust. No payment or
advance of money by Beneficiary or Trustee under this Section shall be deemed or
construed to cure Grantor's default or waive any right or remedy of Beneficiary
or Trustee.
10. Intentionally Omitted.
11. Leases. (a) Grantor shall not execute an assignment or pledge
of any Lease relating to all or any portion of the Trust Property other than in
favor of Beneficiary.
(b) As to any Lease, Grantor shall:
(i) promptly perform all of the material
provisions of the Lease on the part of the
lessor thereunder to be performed:
(ii) promptly enforce all of the material
provisions of the Lease on the part of the
lessee thereunder to be performed;
(iii) upon request of Beneficiary, promptly
deliver to Beneficiary a true and complete
copy of a fully executed original of the
Lease; and
(iv) promptly deliver to Beneficiary, upon
Beneficiary's request, an assignment of the
Grantor's interest under such Lease.
(c) All Leases entered into by Grantor after the date
hereof, if any, and all rights of any lessees thereunder shall be subject and
subordinate in all respects to the lien and provisions of this Deed of Trust
unless Beneficiary shall otherwise elect in writing. Notwithstanding the
foregoing, so long as the tenant under any existing or future Lease is not in
beneficiary's designee) upon its acquisition of title to the Trust Property,
Beneficiary shall not disturb the use or possession by such tenant to the
premises demised under such Lease. If an Event of Default shall have occurred
and be continuing and Beneficiary elects to foreclose this Deed of Trust, so
long as the tenant under any Lease is not in default under the terms of the
applicable Lease, Beneficiary shall take no action the effect of which would be
to terminate the rights of such Tenant under its Lease; provided that if, in
order to validly foreclose the lien of the Deed of Trust such Lease must be
terminated, Beneficiary may nevertheless proceed with such foreclosure but
following the completion of such foreclosure shall enter into a new lease of the
premises demised under such Lease with such tenant on the same terms and
conditions as those set forth in such Tenant's Lease.
12. Events of Default. The occurrence of an Event of Default under
the Credit Agreement
<PAGE> 10
shall constitute and Event of Default hereunder.
13. Remedies.
(a) Upon the occurrence of any Event of Default, in
addition to any other rights and remedies Beneficiary may have pursuant to the
Loan Documents, or as provided by law, and without limitation, (a) if such event
is an Event of Default specified in subsection 9(f) of the Credit Agreement with
respect to the Grantor, automatically the Obligations and all other amounts
owing under this Deed of Trust and the other Credit Documents immediately shall
become due and payable, and (b) if such event is nay other Event of Default , by
notice to Grantor, Beneficiary may declare the Obligations (together with
accrued interest thereon) and all other amounts payable under this Deed of Trust
and the other Credit Documents to be immediately due and payable. Except as
expressly provided above in this Section, notice of intention to accelerate,
notice of acceleration, presentment, demand, protest and all other notices or
any kind are hereby expressly waived. In addition, upon the occurrence and
during the continuance of any Event of Default, Beneficiary may immediately take
such action, without notice or demand, as it deems advisable to protect and
enforce its rights against Grantor and in and to the Trust Property, including,
but not limited to, the following actions, each of which may be pursued
concurrently or otherwise, at such time and in such manner as Beneficiary may
determine, in its sole discretion, without impairing or otherwise affecting the
other rights and remedies of Beneficiary:
(i) Beneficiary may direct Trustee to sell or offer for
sale the Trust Property in such portions, order and
parcels as Beneficiary may determine, with or without
having first taken possession of the same, to the
highest bidder for cash at public auction. Such sale
shall be made at the courthouse door of the County
wherein the Real Estate (or any of that portion
thereof to be sold) is situated (whether the parts or
parcels thereof, if any, in different counties are
contiguous or not, and without the necessity of
having any personal property hereby mortgaged present
at such sale) on the first Tuesday of any month
between the hours of 10:00 a.m. and 4:00 p.m. after
posting a written or printed notice or notices of the
place, time and terms of the sale of the Trust
Property for twenty-one (21) days prior to the date
of the sale at the courthouse door of the county in
which the sale is to be made and at the courthouse
door of any other county in which a portion of the
Trust Property may be situated and filing a copy of
such notice(s) in the office of the county clerk in
each of such counties, and by serving written notice
of the proposed sale at least twenty-one (21) days
preceding the date of sale by certified mall on
Grantor and on each debtor obligated to pay the
Obligations according to the records of the
Beneficiary. It is agreed that the posting and
transmittal of notices may be performed by the
Trustee, Beneficiary, or by any person acting for
them. The sale shall be accomplished by following the
procedures permitted or required by Tex. Prop. Code
Ann. 51.002 (Vernon 1984), as same may be amended
from time to time, relating to the sale of real
estate and/or by Chapter 9 of the Texas Uniform
Commercial Code relating to the sale of personal
property collateral after default by a debtor (as
said Section and Chapter may now exist or may
hereafter be amended or succeeded), or by any other
present or subsequent articles or enactments relating
to the same. Nothing contained in this subsection (d)
shall be construed to limit in any way Trustee's
rights to sell the Trust Property by private sale if;
and to the extent that such private sale is permitted
under the laws of the State of Texas or by public or
private sale after entry of judgment by any court of
competent jurisdiction ordering the same. At any such
sale (i) whether made under power herein contained,
the aforesaid 51.002, the Texas Uniform Commercial
Code, any other legal requirement or by virtue of any
judicial procedure or any other legal right, remedy
or recourse, it shall not be necessary for Trustee to
have physically present, or to have constructive
possession of, the Trust Property (Grantor hereby
covenanting and agreeing to deliver to Trustee any
portion of the Trust Property not actually or
constructively possessed by Trustee immediately upon
demand by Trustee), and the title to and right of
possession
<PAGE> 11
of any such property shall pass to the purchaser
thereof as completely as if the same had been
actually present and delivered to purchaser at such
sale, (ii) each instrument of conveyance executed by
Trustee shall contain a special warranty of title,
subject to Permitted Encumbrances, binding upon
Grantor, (iii) each and every recital contained in
any instrument of conveyance made by Trustee shall be
prima facie proof of the truth and accuracy of the
matters recited therein, including, without
limitation, nonpayment of the Obligations,
advertisement and conduct of such sale in the manner
provided herein and otherwise by law and appointment
of any successor Trustee hereunder, (iv) there shall
be a prima facie presumption that any and all
prerequisites to the validity thereof shall have been
performed, (v) the receipt of Trustee or of such
other party or officer making the sale shall be a
sufficient discharge to the purchaser or purchasers
for his or their purchase money and no such purchaser
or purchasers, or his or their assigns or personal
representatives, shall thereafter be obligated to see
to the application of such purchase money or be in
any way answerable for any loss, misapplication or
nonapplication thereof, (vi) to the fullest extent
permitted by law, Grantor shall be completely and
irrevocably divested of all of its right, title,
interest, claim and demand whatever, either at law or
in equity, in and to the property sold and such sale
shall be a perpetual bar, both at law and in equity,
against Grantor, and against any and all other
persons claiming or to claim the property sold or any
part thereof, by, through or under Grantor, and (vii)
to the extent and under such circumstances as are
permitted by law, Beneficiary may be a purchaser at
any such sale;
(ii) Beneficiary may, to the extent permitted by
applicable law, (A) institute and maintain an action
of judicial foreclosure against all or any part of
the Trust Property, (B) institute and maintain an
action on the Notes, or (C) take such other action at
law or in equity for the enforcement of this Deed of
Trust or any of the Credit Documents as the law may
allow. Beneficiary may proceed in any such action to
final judgment and execution thereon for all sums due
hereunder, together with interest thereon at the
Default Rate and all costs of suit, including,
without limitation, reasonable attorneys' fees and
disbursements. Interest at the Default Rate shall be
due on any judgment obtained by Beneficiary from the
date of judgment until actual payment is made of the
full amount of the judgment.
(iii) Beneficiary may personally, or by its agents,
attorneys and employees and without regard to the
adequacy or inadequacy of the Trust Property or any
other collateral as security for the Obligations
enter into and upon the Trust Property and each and
every part thereof and exclude Grantor and its agents
and employees therefrom without liability for
trespass or otherwise (Grantor hereby agreeing to
surrender possession of the Trust Property to
Beneficiary upon demand at any such time) and use,
operate, manage maintain and control the Trust
Property and every part thereof. Following such entry
and taking of possession, Beneficiary shall be
entitled, without limitation, (x) to lease all or any
part or parts of the Trust Property for such periods
of time and upon such conditions as Beneficiary may,
in its discretion, deem proper, (y) to enforce,
cancel or modify any Lease and (z) generally to
execute, do and perform any other act, deed, matter
or thing concerning the Trust Property as Beneficiary
shall deem appropriate as fully as Grantor might do.
(b) Beneficiary, in any action to foreclose this Deed of
Trust in a judicial procedure or in connection with the exercise of any
nonjudicial power of sale by Trustee, shall be entitled to the appointment of a
receiver. In case of a trustee's sale or foreclosure sale, the Real Estate may
be sold, at Beneficiary's election, in one parcel or in more than one parcel and
Beneficiary is specifically empowered, (without being required to do so, and in
its sole and absolute discretion) to cause successive sales of portions of the
Trust Property to be held.
<PAGE> 12
(c) In the event of any breach of any of the covenants,
agreements, terms or conditions contained in this Deed of Trust, and
notwithstanding to the contrary any exculpatory or non-recourse language which
may be contained herein, Beneficiary or Trustee shall be entitled to enjoin such
breach and obtain specific performance of any covenant, agreement, term or
condition and Beneficiary or Trustee shall have the right to invoke any
equitable right or remedy as though other remedies were not provided for in this
Deed of Trust.
(d) Following any sale of the Trust Property, or any part
hereof, under the provisions of this instrument, all persons and parties in
possession of the property sold shall be divested of any and all interest in and
claim to the Trust Property, and shall be obligated to immediately vacate the
premises, and prior to such vacation shall be tenants at sufferance of the
purchaser of the property sold and shall be subject to eviction in an action of
forcible detainer; provided, the provisions of this subparagraph shall be
subject to subparagraph 11(c) and any other agreements made in writing by
Beneficiary with reference to any existing and/or future leases; provided,
further, the purchaser at any foreclosure sale shall have the option but not the
obligation to affirm any then existing leases or tenancies or otherwise succeed
to the rights of Grantor thereunder.
14. Right of Beneficiary to Credit Sale. Upon the occurrence of
any sale made under this Deed of Trust, whether made under the power of sale or
by virtue of judicial proceedings or of a judgment or decree of foreclosure arid
sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Obligations or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and documents evidencing expenditures secured hereby may be
presented to the person or persons conducting the sale in order that the amount
so used or applied may be credited upon the Obligations as having been paid.
15. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Obligations or the interest of Grantor therein, shall have the
right to apply to any court having jurisdiction to appoint a receiver or
receivers or other manager of the Trust Property, and Grantor hereby irrevocably
consents to such appointment arid waives notice of any application therefor
(except as may be required by law). Any such receiver or receivers shall have
all the usual powers and duties of receivers in like or similar cases and all
the powers and duties of Beneficiary in case of entry as provided in this Deed
of Trust, including, without limitation and to the extent permitted by law, the
right to enter into leases of all or any part of the Trust property, and shall
continue as such and exercise all such powers until the date of confirmation of
sale of the Trust Property unless such receivership is sooner terminated.
16. Extension, Release, etc.. (a) Without affecting the
encumbrance or charge of this Deed of Trust upon any portion of the Trust
Property not then or theretofore released as security for the full amount of the
Obligations, Beneficiary may, from time to time and without notice, agree to (i)
release any person liable for the Obligations, (ii) extend the maturity or alter
any of the terms of the Obligations or any guaranty thereof, (iii) grant other
indulgences (iv) release or reconvey, or cause to be released or reconveyed at
any time at Beneficiary's option any parcel, portion or all of the Trust
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Obligations, it is expressly agreed
that any repayments of the principal amount of the Obligations shall not reduce
the amount of the encumbrance of this Deed of Trust until the encumbrance amount
shall equal the principal amount of the Obligations outstanding.
(b) No recovery of any judgment by Beneficiary and no
levy of an execution under any judgment upon the Trust Property or upon any
other property of Grantor shall affect the
<PAGE> 13
encumbrance of this Deed of Trust or any liens, rights, powers or remedies of
Beneficiary or Trustee hereunder, and such liens, rights, powers and remedies
shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this
Deed of Trust or to direct the Trustee to exercise its power of sale, Grantor
authorizes Beneficiary at its option to foreclose the lien of this Deed of Trust
(or direct the Trustee to sell the Trust Property, as the case may be) subject
to the rights of any tenants of the Trust Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Trust Property by Trustee, or to terminate
such tenant's rights in such sale will not be asserted by Grantor as a defense
to any proceeding instituted by Beneficiary to collect the Obligations or to
foreclose this Deed of Trust.
(d) Unless expressly provided otherwise, in the event
that Beneficiary's interest in this Deed of Trust and title to the Trust
Property or any estate therein shall become vested in the same person or entity,
this Deed of Trust shall not merge in such title but shall continue as a valid
charge on the Trust Property for the amount secured hereby.
17. Fixture Filing. (a) Grantor and Beneficiary agree, to the
extent permitted by law, that: (i) all of the goods described within the
definition of the word "Equipment" are or are to become fixtures on the Real
Estate; (ii) this Deed of Trust upon recording or registration in the real
estate records of the proper office shall constitute a financing statement filed
as a "fixture filing" within the meaning of Sections 9-313 and 9-402 of the
Code; (iii) Grantor is the record owner of the Real Estate; and (iv) the
addresses of Grantor and Beneficiary are as set forth on the first page of this
Deed of Trust.
<PAGE> 14
(b) Grantor, upon request by Beneficiary from time to
time, shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered, any financing statement, affidavit, continuation
statement or certificate or other document as Beneficiary may request in order
to perfect, preserve, maintain, continue or extend the security interest under
and the priority of this Deed of Trust and such security instrument. Grantor
further agrees to pay to Beneficiary on demand all costs and expenses incurred
by Beneficiary in connection with the preparation, execution, recording, filing
and re-filing of any such document and all reasonable costs and expenses of any
record searches for financing statements Beneficiary shall reasonably require.
If Grantor shall fail to execute any financing or continuation statement within
10 days after receipt of such financing or continuation statement from
Beneficiary, then pursuant to the provisions of the Code, Grantor hereby
authorizes Beneficiary, without the signature of Grantor, and hereby irrevocably
appoints and constitutes Beneficiary as its true and lawful attorney-in-fact,
which appointment is coupled with an interest, in its name, place and stead to
execute and file any such financing and continuation statements. The filing of
any financing or continuation statements in the records relating to personal
property or chattels shall not be construed as in any way impairing the right of
Beneficiary to proceed against any personal property encumbered by this Deed of
Trust as real property, as set forth above.
18. Assignment of Rents. (a) Grantor hereby assigns to Beneficiary
the Rents as further security for the payment and performance of the
Obligations, and Grantor grants to Beneficiary the right to enter the Trust
Property for the purpose of collecting the same and to let the Trust Property or
any part thereof, and to apply the Rents on account of the Obligations. The
foregoing assignment and grant is present and absolute and shall continue in
effect until the Obligations are paid in full, but Beneficiary and Trustee
hereby waive the right to enter the Trust Property for the purpose of collecting
the Rents and Grantor shall be entitled to collect, receive, use and retain the
Rents until the occurrence of an Event of Default under this Deed of Trust; such
right of Grantor to collect, receive, use and retain the Rents may be revoked by
Beneficiary upon the occurrence of any Event of Default under this Deed of Trust
by giving not less than five days written notice of such revocation to Grantor;
in the event such notice is given, Grantor shall pay over to Beneficiary, or to
any receiver appointed to collect the Rents, any lease security deposits (which
shall not be applied to the Obligations), and shall pay monthly in advance to
Beneficiary, or to any such receiver, the fair and reasonable rental value as
determined by Beneficiary for the use and occupancy of the Trust property or of
such part thereof as may be in the possession of Grantor or any affiliate of
Grantor, and upon default in any such payment Grantor and any such affiliate
will vacate and surrender the possession of the Trust Property to Beneficiary or
to such receiver, and in default thereof may be evicted by summary proceedings
or otherwise. Grantor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
(b) Beneficiary's acceptance of this assignment shall
not, prior to entry upon and taking possession of the Trust Property by
Beneficiary, be deemed to constitute Beneficiary a "mortgagee in possession,"
nor obligate Beneficiary to appear in or defend any proceeding relating to any
of the Leases or to the Trust Property, take any action hereunder, expend any
money, incur any expenses, or perform any obligation or liability under the
Leases, or assume any obligation for any deposits delivered to Grantor by any
tenant and not delivered to Beneficiary, or render Beneficiary liable for any
injury or damage to person or Property in or about the Trust Property. Neither
the collection of Rents due under the Leases herein described, nor possession of
the Trust Property by Beneficiary under any of the circumstances set forth
herein shall render Beneficiary liable with respect to any obligations of
Grantor to my tenant or subtenant unless said Leases, such liability to arise
only with respect to a party purchasing the Trust Property at a foreclosure sale
or receiving a deed covering the Trust Property in lieu of foreclosure and then
to arise only with respect to obligations accruing subsequent to such
foreclosure sale or deed in lieu thereof.
(c) By Beneficiary's acceptance of this Deed of Trust, it
is understood and agreed that a full and complete release of this Deed of Trust
shall operate as a full and complete reassignment to Grantor of the
Beneficiary's rights and interests under this Section.
(d) All provisions hereof shall inure to the benefit of
and all actions authorized hereunder shall be exercisable by the Trustee or the
Substitute Trustee at Beneficiary's request.
<PAGE> 15
19. Notices. All notices, requests, demands and other
communications hereunder shall be given in the manner and to the addresses
specified under Section 11.2 of the Agreement.
20. No Oral Modification. This Deed of Trust may not be changed or
terminated orally. Any agreement made by Grantor and Beneficiary after the date
of this Deed of Trust relating to this Deed of Trust shall be superior to the
rights of the holder of any intervening or subordinate deed of trust, lien or
encumbrance. Trustee's execution of any written agreement between Grantor and
Beneficiary shall not be required for the effectiveness thereof as between
Grantor and Beneficiary.
21. Partial Invalidity. In the event any one or more of the
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Credit Documents, the obligations of Grantor
and of any other obligor under the Credit Documents shall be subject to the
limitation that Beneficiary shall not charge, take or receive, nor shall Grantor
or any other obligor be obligated to pay to Beneficiary, any amounts
constituting interest in excess of the maximum rate permitted by law to be
charged by Beneficiary.
22. Grantor's Waiver of Rights. To the fullest extent permitted by
law, Grantor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Obligations or the creation or extension of
a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured Obligations and marshaling in the event of
exercise by Trustee or Beneficiary of the power of sale or other rights hereby
created.
23. Remedies Not Exclusive. Beneficiary and Trustee shall be
entitled to enforce payment and performance of the Obligations and to exercise
all rights and powers under this Deed of Trust or under any of the other Credit
Documents or other agreement or any laws now or hereafter in force,
notwithstanding the fact that some or all of the Obligations may now or
hereafter be otherwise secured, whether by deed of trust, mortgage, rarity
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Deed of Trust nor its enforcement, shall prejudice or in any manner affect
Beneficiary's or Trustee's right to realize upon or enforce any other security
now or hereafter held by Beneficiary or Trustee, it being agreed that
Beneficiary and Trustee shall be entitled to enforce this Deed of Trust and any
other security now or hereafter held by Beneficiary or Trustee in such order and
manner as Beneficiary may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Beneficiary or Trustee is intended to be exclusive
of any other remedy herein or by law provided or permitted but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Credit Documents to Beneficiary or Trustee or to which
either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Beneficiary or Trustee, as the case may be. In no event shall Beneficiary or
Trustee, in the exercise of the remedies provided in this Deed of Trust
(including, without limitation, in connection with the assignment of Rents, or
the appointment of a receiver and the entry of such receiver on to all or any
part of the Trust Property), be deemed a "mortgage in possession," and neither
Beneficiary nor Trustee shall in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
24. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or
<PAGE> 16
not contiguous and whether or not located in the same county, or (b) in addition
to this Deed of Trust, Beneficiary shall now or hereafter hold or be the
beneficiary of one or more additional mortgages, liens, deeds of trust or other
security (directly or indirectly) for the Obligations upon other property in the
State in which the Premises art located (whether or not such property is owned
by Grantor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Beneficiary
may, at its election, commence or consolidate in a single trustee's sale or
foreclosure action all trustee's sale or foreclosure proceedings against all
such collateral securing the Obligations (including the Trust Property), which
action may be brought or consolidated in the courts of, or sale conducted in,
any county in which any of such collateral is located. Grantor acknowledges that
the right to maintain a consolidated trustee's sale or foreclosure action is a
specific inducement to Beneficiary to extend the Obligations, and Grantor
expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Grantor further agrees that if
Trustee or Beneficiary shall be prosecuting one or more foreclosure or other
proceedings against a portion of the Trust Property or against any collateral
other than the Trust Property, which collateral directly or indirectly scores
the Obligations, or if Beneficiary shall have obtained a judgment of foreclosure
and sale or similar judgement against such collateral (or, in the case of a
trustee's sale, shall have met the statutory requirements therefor with respect
to such collateral), then, whether or not such proceeding being maintained or
judgements were obtained in or outside the State in which the Premises are
located, Beneficiary may commence or continue any trustee's sale or foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all of or any part of the Trust Property and Grantor waives any
objections to the commencement or continuation of a foreclosure of this Deed of
Trust or exercise of any other remedies hereunder based on such other
proceedings or judgements, and waives any right to seek to dismiss, stay,
remove, transfer or consolidate either any action under this Deed of Trust or
such other proceedings on such basis. The commencement or continuation of
proceedings to sell the Trust Property in a trustee's sale, to foreclose this
Deed of Trust or the exercise of any other rights hereunder or the recovery of
any judgment by Beneficiary or the occurrence of any sale by the Trustee in any
such proceedings shall not prejudice, limit or preclude Beneficiary's right to
commence or continue one or more trustee's sales, foreclosure or other
proceedings or obtain a judgement against (or, in the case of a trustee's sale,
to meet the statutory requirements for, any such sale of) any other collateral
(either in or outside the State in which the Real Estate is located) which
directly or indirectly secures the Obligations, and Grantor expressly waives any
objections to the commencement of, continuation of, or entry of a judgment in
such other sales or proceedings or exercise of any remedies in such sales or
proceedings based upon any action or judgment connected to this Deed of Trust,
and Grantor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other sales or proceedings or any sale or action under
this Deed of Trust on such basis. it is expressly understood and agreed that to
the fullest extent permitted by law, Beneficiary may, at its election, cause the
sale of all collateral which is the subject of a single trustee's sale or
foreclosure action at either a single sale or at multiple sales conducted
simultaneously and take such other measures as are appropriate in order to
effect the agreement of the parties to dispose of and administer all collateral
securing the Obligations (directly or indirectly) in the most economical and
least time-consuming manner.
25. Expenses. If (a) any sale (or any prerequisite to a sale),
action or proceeding shall be commenced by Beneficiary or Trustee (including but
not limited to any sale of the Trust Property or any action to foreclose this
Deed of Trust or to collect the Obligations), or any action or proceeding is
commenced to which Beneficiary or Trustee is made a party, or in which it
becomes necessary to defend or uphold the rights granted by this Deed of Trust
(including, without limitation, any proceeding or other action relating to the
bankruptcy, insolvency or reorganization of any Obligor), or in which
Beneficiary or Trustee is served with any legal process, discovery notice or
subpoena and (b) in each of the foregoing instances such action or proceeding in
any manner relates to or arises out of this Deed of Trust or Beneficiary's
lending to Grantor or acceptance of a guaranty of any of the Obligations from
any of the Credit Parties or any of the transactions contemplated by this Deed
of Trust, then Grantor will immediately reimburse or pay to Beneficiary and
Trustee all of the expenses which have been or may be incurred by Beneficiary
and Trustee, respectively, with respect to the foregoing (including reasonable
counsel fees and disbursements), together with interest thereon at the Default
Rate, and any such Sum and the interest thereon shall be included in the
Obligations and have the full benefit of this
<PAGE> 17
Deed of Trust, prior to any right, or title to, interest in or claim upon the
Trust Property attaching or accruing to this Deed of Trust, and shall be deemed
to be secured by this Deed of Trust. In any action or proceeding to sell the
Trust Property, to foreclose this Deed of Trust, or to recover or collect the
Obligations, the provisions of law respecting the recovering of costs,
disbursements and allowances shall prevail unaffected by this covenant.
26. Successors and Assigns. All covenants of Grantor contained in
this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
such waiver is deemed advisable. All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. Without limiting the generality of the
foregoing, any successor to Trustee appointed by Beneficiary shall succeed to
all rights of Trustee as if such successor had been originally named as Trustee
hereunder. The word "Grantor" shall be construed as if it read "Grantors"
whenever the sense of this Deed of Trust so requires.
27. No Waivers, etc.. Any failure by Beneficiary to insist upon
the strict performance by Grantor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Beneficiary or Trustee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust to be performed
by Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in any way impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
28. GOVERNING LAW, ETC. THIS DEED OF TRUST SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT THAT
GRANTOR EXPRESSLY ACKNOWLEDGES THAT BY THEIR TERMS THE NOTES SHALL BE GOVERNED
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAW, AND FOR PURPOSES OF CONSISTENCY,
GRANTOR AGREES THAT IN ANY IN PERSONAM PROCEEDING RELATED TO THIS DEED OF TRUST
THE RIGHTS OF THE PARTIES TO THIS DEED OF TRUST SHALL ALSO BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK GOVERNING
CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW.
29. Waiver of Trial by Jury. Grantor, Trustee and Beneficiary each
hereby irrevocably and unconditionally waive trial by jury in any action, claim,
suit or proceeding relating to this Deed of Trust and for any counterclaim
brought therein. Grantor hereby waives all rights to interpose any counterclaim
in any suit brought by Beneficiary or Trustee hereunder and all rights to have
any such suit consolidated with any separate suit, action or proceeding.
<PAGE> 18
30. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form and
the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of
the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any subsequent holder of the
Obligations," the word "Trustee" shall mean "Trustee and any successor trustee
hereunder," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Trust Property" shall include any
portion of the Trust Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Deed of Trust are for
convenience or reference only and in no way limit or amplify the provisions
hereof. All terms used herein which are defined in the Texas Uniform Commercial
Code shall be used in accordance with the definition therefor in said Code.
31. Enforceability; Usury. In no event shall any provision of this
Deed of Trust, the Notes, or any other instrument evidencing or securing the
indebtedness ever obligate Grantor to pay or allow Beneficiary to collect
interest on the Notes or any other indebtedness secured hereby at a rate greater
than the maximum non-usurious rate permitted by applicable law (herein referred
to as the "Highest Lawful Rate"), or obligate Grantor to pay any taxes,
assessments, charges, insurance premiums or other amounts to the extent that
such payments, when added to the interest payable on the Notes or any other note
secured hereby, would be held to constitute the payment by Grantor of Interest
at a rate greater than the Highest Lawful Rate; and this provision shall control
over any provision to the contrary. To the extent the Highest Lawful Rate is
determined by reference to the laws of the State of Texas, same shall be
determined by reference to the indicated (weekly) rate ceiling (as defined and
described in Texas Revised Civil Statutes Article 5069-1.04, as amended) at the
applicable time in effect.
Without limiting the generality of the foregoing, in the event
the maturity of all or any part of the principal amount of the Obligations shall
be accelerated for any reason, then such principal amount so accelerated shall
be credited with any interest theretofore paid thereon in advance and remaining
unearned at the time of such acceleration. If, pursuant to the terms of this
instrument or the Notes, any funds are applied to the payment of any part of the
principal amount of the Obligations prior to the maturity thereof, then (a) any
interest which would otherwise thereafter accrue on the principal amount so paid
by such application shall be canceled, and (b) the Obligations remaining unpaid
after such application shall be credited with the amount of all interest, if
any, theretofore collected on the principal amount so paid by such application
and remaining unearned at the date of said application; and if the funds so
applied shall be sufficient to pay in full all the Obligations, then Beneficiary
shall refund to Grantor all interest theretofore paid thereon in advance and
remaining unearned at the time of such acceleration. Regardless of any other
provision in this instrument, or in any of the written evidences of the
Obligations, Grantor shall never be required to pay any unearned interest on the
Obligations or any portion thereof, and shall never be required to pay interest
thereon at a rate in excess of the Highest Lawful Rate construed by courts
having competent jurisdiction thereof.
32. Homestead. Grantor represents and covenants that the Trust
Property forms no part any property owned, used or claimed by Grantor as a
business or residential homestead, or as exempt from forced sale under the laws
of the State of Texas, and disclaims and renounces all and every such claim
thereto.
33. Substitute Trustee. In case of the resignation of the Trustee,
or the inability (through death or otherwise), refusal or failure of the Trustee
to act, or at the option of Beneficiary or the holder(s) of a majority of the
Obligations for any other reason (which reason need not be stated), a Substitute
Trustee may be named, constituted and appointed by Beneficiary or the holder(s)
of a majority of the Obligations, without other formality than an appointment
and designation in writing, which appointments and designation shall be full
evidence of the right and authority to make the same and of all facts therein
recited, and this conveyance shall vest in the Substitute Trustee the title,
powers and duties herein conferred on the Trustee originally named herein, and
<PAGE> 19
the conveyance by Substitute Trustee to the purchasers) at any sale of the Trust
Property or any part thereof shall be fully valid and effective. The right to
appoint a Substitute Trustee shall exist as often and whenever from any of said
causes, the Trustee, original or Substitute, resigns or cannot, will not or does
not act, or Beneficiary or the holder(s) of a majority of the Obligations
desires to appoint a new Trustee. No bond shall ever be required of the Trustee,
original or Substitute. The recitals in any conveyance made by the Trustee,
original or Substitute, shall be accepted and construed in court and elsewhere a
prima facie evidence and proof of the facts recited, and not other proof shall
be required as to the request by Beneficiary or the Holder(s) of a majority of
the obligations to the Trustee to enforce this Deed of Trust, or as to notice of
or holding of the sale, or as to any particulars thereof, or as to the
resignation of the Trustee, original or Substitute, or as to the inability,
refusal or failure of the trustee, original or Substitute, to act, or as to the
election of Beneficiary or the holder(s) of a majority of the Obligations to
appoint a new Trustee, or as to appointment of a substitute Trustee, and all
prerequisites of said sale shall be presumed to have been performed; and each
sale made under powers herein granted shall be a perpetual bar against Grantor
and the heirs, personal representatives, successors and assigns of Grantor.
Trustee, original or substitute, is hereby authorized and empowered to appoint
any one or more persons as attorney-in-fact to act as Trustee under him and in
his name, place and stead in order to take any actions that Trustee is signed
and acknowledged by said Trustee, original or substitute; and all acts done by
said attorney-in-fact shall be valid, lawful and binding as if done by said
Trustee, original or substitute, in person.
34. Indemnification of Trustee. Except for gross negligence or
willful misconduct, Trustee shall not be liable for any act or omission or error
of judgment. Trustee may rely on any document believed by him in good faith to
be genuine. All money received by Trustee shall, until used or applied as herein
provided, be held in Trust, and Trustee shall not be liable for interest
therein. Grantor shall indemnify Trustee against all liability and expense that
he may incur in the performance of his duties hereunder except for gross
negligence or willful misconduct.
35. Business of Commercial Purpose. Grantor hereby warrants that
the extension of credit evidenced by the Notes secured hereby is solely for
business or commercial purposes, other than agricultural purposes. Grantor
further warrants that the credit transaction evidenced by the notes is
specifically exempted under Section 226.3(a) of Regulation Z issued by the Board
of Governors of the Federal Reserve System and Title 12 (Truth in Lending Act)
and section 1603 of Title 14 (General Provision) of the Consumer Credit
Protection Act and that no disclosures are required to be given under such
regulations and federal laws in connection with the above transaction.
36. Loan Agreement. In consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor hereby confirms and agrees that this Deed of Trust
(including the Schedules hereto), the Notes, any guarantees of the Notes
executed by any guarantors and all other Loan Documents and loan papers together
constitute a written "loan agreement" as defined in Section 26.02(a) of the
Texas Business and Commerce Code.
37. FINAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
This Deed of Trust has been duly executed by Grantor on the date first
above written.
PRIMECO INC., a Texas Corporation,
successor-by-merger with KINCO, INC.
<PAGE> 20
By:
-----------------------------------
Kevin L. Loughlin
Executive Vice President and Chief
Financial Officer
CORPORATION
STATE OF )
---------------------------
:s.s.:
COUNTY OF )
---------------------------
On this the day of January, 1995, personally came Kevin L.
---
Loughlin, to be duly sworn by me, and did depose and say that he executed the
foregoing instrument in the firm name of PRIMECO INC., a Texas corporation,
successor-by-merger with KINCO, INC., the corporation therein mentioned for the
purposes therein mentioned.
-----------------------------------
Notary Public
- -----------------------------------
(Stamp)
<PAGE> 21
Site No. 215
Galveston County, Texas
SCHEDULE A
LEGAL DESCRIPTION
A 6.659 Acre Tract out of Blocks 5 and 6 of Subdivision "S" of Kohfeldt's
Re-Subdivision of the James Smith Survey in Galveston County, Texas, according
to the Map as recorded in Vol. 10, Page 35, of the Galveston County Map Records:
Commencing at the Southwest corner of said Block 5;
Thence N 89 degrees 25' 40 degrees E 25.67 feet along the South line of said
Block 5 to the point of beginning of this tract;
Thence N 89 degrees 25' 40 degrees E 579.66 feet along the South line of said
Blocks 5 and 6 to the Southeast corner of this tract;
Thence North, at 52.00 feet pass an iron rod set in the North right-of-way line
of FM Road 1765, a total distance of 554.86 feet to an iron rod;
Thence West 385.30 feet to an iron rod;
Thence South 190.50 feet to an iron rod;
Thence West 194.33 feet to an iron rod;
Thence South, at 318.15 feet pass an iron rod in the North right-of-way line of
FM Road 1765, a total distance of 370.15 feet to the point of beginning and
containing 6.659 acres of land, save and except a 52 foot strip off the South
side and a 20 foot strip off the West side.
<PAGE> 22
SCHEDULE B
"Obligations" means (i) the unpaid principal amount of, and interest on
(including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, organization or like
proceeding, relating to Grantor, whether or not a claim for post-filing or
post-petition interest is allowed), the Loans and all other obligations and
liabilities of Grantor to the Administrative Agent, Beneficiary, the Issuing
Lender or the Lenders, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Credit Agreement, any Letter of Credit of L/C
Application, the other Credit Documents and any other document executed and
delivered or given in connection therewith or herewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all reasonable fees and disbursements
of counsel to the Administrative Agent, Beneficiary, the Issuing Lender or the
Lenders that are required to be paid by Grantor pursuant to the terms of the
Credit Agreement) or otherwise, and (ii) all obligations of Grantor to any
Lender or Lenders under or in respect of any Interest Rate Agreement with
respect to any obligations arising under or in connection with any of the Credit
Documents or the Subordinated Debt.
<PAGE> 23
SCHEDULE OF SUBSTANTIALLY IDENTICAL DOCUMENTS
1. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 215 - Galveston
County, TX)
2. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 219 - Dallas
County, TX)
3. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 115 - Tarrant
County, TX)
4. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 116 - Collin
County, TX)
5. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 202 - Bexar
County, TX)
6. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 211 - Wichita
County, TX)
7. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 104 - Brazoria
County, TX)
8. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 106 - Fort Bend
County, TX)
9. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 118-1 - Potter
County, TX)
10. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 118-2 - Randall
County, TX)
11. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 101, 103, 107,
109, 111, 114, 214, 225 - Harris County, TX)
12. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 108 - Nueces
County, TX)
13. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 112 - Jefferson
County, TX)
14. Deed of Trust and Security Agreement, dated as of January 13, 1995, from
Primeco Inc. to The CIT Group/Business Credit, Inc. (Site 208 - Jefferson
County, TX)
15. Mortgage, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 204 - Mobile County, AL)
16. Mortgage, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 205 - Escambia County, FL)
17. Mortgage, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 618 - Polk County, FL)
18. Mortgage, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 621 - Duval County, FL)
19. Mortgage, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 622 - Orange County, FL)
<PAGE> 24
20. Deed, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 412 - Chatham County, GA)
21. Deed, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 414 - Richmond County, GA)
22. Deed, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 417 - Cobb County, GA)
23. Deed, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 418 - Clayton County, GA)
24. Deed, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Sites 419-3 and 419-4 - Camden County, GA)
25. Act of Mortgage, Security Agreement, Pledge and Assignment, dated as of
January 13, 1995, from Primeco Inc. to The CIT Group/Business Credit, Inc.
(Site 206 - Parish of Iberville, LA)
26. Act of Mortgage, Security Agreement, Pledge and Assignment, dated as of
January 13, 1995, from Primeco Inc. to The CIT Group/Business Credit, Inc.
(Site 207 - Ascension Parish, LA)
27. Act of Mortgage, Security Agreement, Pledge and Assignment, dated as of
January 13, 1995, from Primeco Inc. to The CIT Group/Business Credit, Inc.
(Site 216 - Parish of East Baton Rouge, LA)
28. Deed of Trust, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 410 - Buncombe County, NC)
29. Deed of Trust, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 411 - Forsyth County, NC)
30. Deed of Trust, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 420 - Durham County, NC)
31. Mortgage, dated as of January 13, 1995, from Primeco Inc. to The CIT
Group/Business Credit, Inc. (Site 415 - Horry County, SC)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 174
<SECURITIES> 0
<RECEIVABLES> 36,467<F1>
<ALLOWANCES> 0
<INVENTORY> 17,399
<CURRENT-ASSETS> 54,040
<PP&E> 204,132<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 390,938
<CURRENT-LIABILITIES> 42,705
<BONDS> 255,500
9,150
0
<COMMON> 1
<OTHER-SE> 60,633
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 89,968
<TOTAL-REVENUES> 242,787
<CGS> 75,970
<TOTAL-COSTS> 123,599
<OTHER-EXPENSES> 77,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,021
<INCOME-PRETAX> (8,215)
<INCOME-TAX> (2,025)
<INCOME-CONTINUING> (6,190)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,268)
<CHANGES> 0
<NET-INCOME> (7,458)<F3>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
<F2>INCLUDES RENTAL EQUIPMENT AND IS NET OF ACCUMULATED DEPRECIATION
<F3>BEFORE DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK
</FN>
</TABLE>
