<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BETZDEARBORN INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|_| Fee computed on the table below per Exchange Act Rules 14(a)-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|X| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
WILLIAM R. COOK
Chairman of the Board
President
Chief Executive Officer
[BETZDEARBORN LOGO]
BETZDEARBORN INC.
4636 Somerton Road
PO Box 3002
Trevose, PA 19053-6783
215 355-3300
215 953-2484 Fax
September 4, 1998
DEAR SHAREHOLDER:
You are cordially invited to attend a Special Meeting of shareholders of
BetzDearborn Inc. ("BetzDearborn") to be held at BetzDearborn's headquarters,
4636 Somerton Road, Trevose, Pennsylvania 19053, on Thursday, October 8, 1998,
at 11:00 a.m., local time.
At the Special Meeting you will be asked to vote on a proposal to approve and
adopt an Agreement and Plan of Merger, dated as of July 30, 1998 (the "Merger
Agreement"), among Hercules Incorporated ("Hercules"), a wholly owned subsidiary
of Hercules and BetzDearborn providing for, among other matters, the merger (the
"Merger") of Hercules' subsidiary with and into BetzDearborn. Upon consummation
of the Merger, BetzDearborn will be the surviving company and will become a
wholly owned subsidiary of Hercules, and BetzDearborn shareholders will be
entitled to receive $72.00 in cash, without interest, for each share of
BetzDearborn Common Stock held by them (the "Merger Consideration"). Under
BetzDearborn's Articles of Incorporation, shares of BetzDearborn's Series A ESOP
Convertible Preferred Stock ("Preferred Stock") will be automatically converted
into shares of BetzDearborn Common Stock immediately prior to the effective time
of the Merger, with such Common Stock converted into the right to receive the
Merger Consideration upon consummation of the Merger.
ADDITIONAL INFORMATION REGARDING THE MERGER AND THE MERGER AGREEMENT IS SET
FORTH IN THE ACCOMPANYING PROXY STATEMENT AND THE ANNEXES THERETO, WHICH YOU ARE
URGED TO READ CAREFULLY IN THEIR ENTIRETY. A COPY OF THE MERGER AGREEMENT IS
ATTACHED AS ANNEX A TO THE ACCOMPANYING PROXY STATEMENT.
The Board of Directors of BetzDearborn has carefully considered the terms and
conditions of the proposed Merger. In addition, in connection with its approval
of the transaction with Hercules, the Board of Directors of BetzDearborn has
received a written opinion dated July 30, 1998 from its financial advisor, J.P.
Morgan Securities Inc. ("J.P. Morgan"), to the effect that, as of such date and
based upon and subject to certain matters stated therein, the Merger
Consideration is fair, from a financial point of view, to the shareholders of
BetzDearborn. A copy of J.P. Morgan's written opinion, which sets forth a
description of the assumptions made, matters considered and limits of its
review, is attached to the accompanying Proxy Statement as Annex B, and
BetzDearborn Shareholders are urged to read carefully the opinion in its
entirety.
Approval of the Merger Agreement and the Merger requires the affirmative vote
(i) of holders of a majority of the outstanding shares of Common Stock and
Preferred Stock, voting together, and (ii) of holders of at least two-thirds of
the outstanding shares of Common Stock and Preferred Stock, voting together,
represented in person or by proxy at the Special Meeting. As of September 4,
1998, the executive officers and directors of BetzDearborn may be deemed to be
beneficial owners of less than 1% of the outstanding Common Stock and less than
1% of the outstanding Preferred Stock, and each such person has advised
BetzDearborn that such person intends to vote in favor of the Merger.
In view of the significance of the action to be taken at this important Special
Meeting of BetzDearborn Shareholders, we urge you to review carefully the
accompanying Notice of Special Meeting of Shareholders and the Proxy Statement,
including the Annexes thereto. Whether or not you expect to attend the Special
Meeting, please complete, sign and date the enclosed proxy and return it as
promptly as possible.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS AND CONDITIONS OF THE
PROPOSED MERGER AND HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST
INTERESTS OF, BETZDEARBORN AND THE BETZDEARBORN SHAREHOLDERS. ACCORDINGLY, THE
BOARD UNANIMOUSLY RECOMMENDS THAT BETZDEARBORN SHAREHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Thank you for your cooperation and continued support.
Very truly yours,
/s/ William R. Cook
WILLIAM R. COOK
Chairman of the Board
Shaping the Future of Water and Process Treatment
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
BETZDEARBORN INC.
4636 SOMERTON ROAD
TREVOSE, PENNSYLVANIA 19053
--------------
TO BE HELD OCTOBER 8, 1998
--------------
TO THE SHAREHOLDERS OF BETZDEARBORN INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders (the "Special
Meeting") of BetzDearborn Inc., a Pennsylvania corporation ("BetzDearborn"),
will be held at BetzDearborn's headquarters, 4636 Somerton Road, Trevose,
Pennsylvania 19053, on Thursday, October 8, 1998 at 11:00 a.m.,local time, for
the following purposes:
1. To consider and vote on a proposal (the "Merger Proposal") to approve and
adopt the Agreement and Plan of Merger, dated as of July 30, 1998 (the
"Merger Agreement"), by and among BetzDearborn, Hercules Incorporated., a
Delaware corporation ("Hercules"), and Water Acquisition Co., a
Pennsylvania corporation and a wholly owned subsidiary of Hercules
("Merger Sub"), pursuant to which, among other things, (i) Merger Sub
will be merged with and into BetzDearborn with the result that
BetzDearborn will be the surviving company and will become a wholly owned
subsidiary of Hercules, and (ii) each outstanding share (other than
shares held by Hercules, Merger Sub or any other subsidiary of Hercules
or wholly owned subsidiary of BetzDearborn, which will be canceled, and
other than shares with respect to which the holder thereof exercises
dissenters rights under Pennsylvania law) of Common Stock, par value $.10
per share, of BetzDearborn ("Common Stock"), will be converted into
$72.00 in cash, without interest.
2. To adjourn the Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient votes
at the time of the Special Meeting to approve the foregoing proposal (the
"Adjournment Proposal").
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on September 4, 1998, as
the record date for the determination of the holders of Common Stock and of
shares of BetzDearborn's Series A ESOP Convertible Preferred Stock ("Preferred
Stock") entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof. The Merger Proposal requires the
affirmative vote of (i) holders of a majority of outstanding shares of Common
Stock and Preferred Stock, voting together, and (ii) of holders of at least
two-thirds of the outstanding shares of Common Stock and Preferred Stock, voting
together, represented in person or by proxy at the Special Meeting. The
Adjournment Proposal requires the affirmative vote of the holders of a majority
of the shares of Common Stock and Preferred Stock, voting together, present in
person or represented by proxy at the Special Meeting. Under certain
circumstances, the Merger Agreement may be terminated or amended prior to the
time the Merger becomes effective, whether before or after approval and adoption
of the Merger Agreement by BetzDearborn shareholders. BetzDearborn shareholders
will be entitled to dissenters rights under Pennsylvania law in connection with
the Merger. A list of BetzDearborn shareholders entitled to vote at the Special
Meeting will be open to the examination of any BetzDearborn shareholder at
BetzDearborn's headquarters, 4636 Somerton Road, Trevose, Pennsylvania 19053
during the Special Meeting.
Information regarding the Merger and related matters is contained in the
accompanying Proxy Statement and the Annexes thereto, which form a part of this
Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IT IS
IMPORTANT THAT YOUR INTERESTS BE REPRESENTED AT THE SPECIAL MEETING. YOU MAY
REVOKE YOUR PROXY BY FILING WITH THE SECRETARY OF BETZDEARBORN BEFORE THE TAKING
OF THE VOTE AT THE MEETING A WRITTEN NOTICE OF REVOCATION.
THE BOARD OF DIRECTORS OF BETZDEARBORN HAS UNANIMOUSLY DETERMINED THAT THE TERMS
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO,
AND IN THE BEST INTERESTS OF, BETZDEARBORN AND THE BETZDEARBORN SHAREHOLDERS.
ACCORDINGLY, THE BETZDEARBORN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE MERGER PROPOSAL AND THE ADJOURNMENT PROPOSAL.
By Order of the Board of Directors
/s/ Linda R. Hansen
LINDA R. HANSEN
Secretary
Trevose, Pennsylvania
September 4, 1998
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
<PAGE>
[BETZDEARBORN LOGO]
BETZDEARBORN INC.
PROXY STATEMENT
------------------------
This Proxy Statement ("Proxy Statement") is being furnished to holders
("BetzDearborn Shareholders") of shares of common stock, $.10 par value per
share ("Common Stock"), of BetzDearborn Inc., a Pennsylvania corporation
("BetzDearborn") and to holders of shares of Series A ESOP Convertible Preferred
Stock, $.10 par value per share ("Preferred Stock"), of BetzDearborn, in
connection with the solicitation of proxies by the Board of Directors of
BetzDearborn (the "BetzDearborn Board") for use at the Special Meeting of
BetzDearborn Shareholders to be held on Thursday, October 8, 1998, at
BetzDearborn's headquarters, 4636 Somerton Road, Trevose, Pennsylvania 19053,
commencing at 11:00 a.m., local time, and at any adjournment or postponement
thereof (the "Special Meeting").
At the Special Meeting, BetzDearborn Shareholders as of the close of
business on the Record Date (as defined below) will be asked to consider and
vote on proposals relating to the Agreement and Plan of Merger, dated as of July
30, 1998 (together with the exhibits thereto, the "Merger Agreement"), by and
among Hercules, Incorporated, a Delaware corporation ("Hercules"), Water
Acquisition Co., a Pennsylvania corporation and a wholly owned subsidiary of
Hercules ("Merger Sub"), and BetzDearborn, providing for the merger (the
"Merger") of Merger Sub with and into BetzDearborn. The Merger will be
consummated on the terms and subject to the conditions set forth in the Merger
Agreement, as a result of which (i) BetzDearborn will be the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Hercules and (ii) BetzDearborn Shareholders will be entitled to
receive $72.00 in cash, without interest (the "Merger Consideration"), for each
outstanding share of Common Stock held by them. Under BetzDearborn's Articles of
Incorporation, shares of Preferred Stock will be automatically converted into
shares of Common Stock immediately prior to the Effective Time (as defined
below), with such Common Stock converted into the right to receive the Merger
Consideration. See "The Merger Agreement--Merger Consideration." At the Special
Meeting, BetzDearborn Shareholders also will be asked to consider and vote on a
proposal for the adjournment of the Special Meeting, if necessary, to permit
further solicitation of proxies in the event that there are not sufficient votes
at the time of the Special Meeting to approve the Merger. Under certain
circumstances, the Merger Agreement may be terminated or amended prior to the
time the Merger becomes effective, whether before or after approval and adoption
of the Merger Agreement by BetzDearborn Shareholders.
Common Stock is quoted on the New York Stock Exchange ("NYSE") under the
symbol "BTL." On September 3, 1998, the closing price per share of Common Stock
on the NYSE Composite Tape was $62.44. BetzDearborn Shareholders should obtain
current quotes for the Common Stock.
All information contained or incorporated by reference in this Proxy
Statement with respect to BetzDearborn has been supplied by BetzDearborn. All
information contained or incorporated by reference in this Proxy Statement with
respect to Hercules has been supplied by Hercules.
You may revoke your proxy by filing with the Secretary of BetzDearborn
before the taking of the vote at the meeting a written notice of revocation. See
"The Special Meeting--Voting of Proxies."
This Proxy Statement, the Letter to BetzDearborn Shareholders, the Notice
of the Special Meeting and the form of proxy for use at the Special Meeting are
first being mailed to BetzDearborn Shareholders on or about September 8, 1998.
------------------------
The date of this Proxy Statement is September 4, 1998.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF BETZDEARBORN OR HERCULES SINCE THE DATE OF
THIS PROXY STATEMENT OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROXY
STATEMENT.
FORWARD-LOOKING STATEMENTS
This Proxy Statement includes and incorporates by reference forward-looking
statements based on current plans and expectations of BetzDearborn, Hercules and
Merger Sub, relating to, among other matters, analyses of value, including an
opinion from an independent financial advisor to the BetzDearborn Board of
Directors (the "BetzDearborn Board") as to the fairness, from a financial point
of view, of the Merger Consideration to shareholders of BetzDearborn,
expectations for anticipated growth in the future or future success under
various efforts. Such forward-looking statements are contained in the sections
entitled "Summary," "The Merger," "Certain Federal Income Tax Consequences,"
"The Companies" and other sections of this Proxy Statement. Actual results could
differ materially from the statements contained in this Proxy Statement due to
various factors such as the consummation and impact of the Merger on operating
results and capital resources, currency fluctuations and the impact on
profitability from economic and market conditions, especially as it exists in
the Asia-Pacific region, cash requirements and liquidity, interest rate
fluctuations that may impact BetzDearborn's financing plans, costs of
disruptions associated with the implementation of business process reengineering
and information technology transformation projects and Year 2000 readiness, euro
conversion issues, capital expenditures, environmental remediation and
litigation costs.
AVAILABLE INFORMATION
BetzDearborn is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information filed by BetzDearborn with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at its principal office at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048, and Chicago Regional Office, Citicorp Center, 500 West Madison, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates, or, with respect to certain of such
material, through the Commission's World Wide Web site (http://www.sec.gov). The
Common Stock is listed on the NYSE, and such reports, proxy statements and other
information concerning BetzDearborn are available for inspection and copying at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
BETZDEARBORN SHAREHOLDERS WHO HAVE ANY QUESTIONS ABOUT EXECUTING, CHANGING
OR REVOKING A PROXY, SHOULD CONTACT THE FOLLOWING:
D.F. KING & CO., INC.
77 WATER STREET, 20TH FLOOR
NEW YORK, NEW YORK 10005
TELEPHONE: (800) 659-5550
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by BetzDearborn (Commission File No. 1-11558)
with the Commission pursuant to the Exchange Act are hereby incorporated by
reference in this Proxy:
1. BetzDearborn's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the Commission on March 9, 1998, as
amended by Form 10-K/A (Amendment No. 1) filed with the Commission
on March 30, 1998 (the "1997 BetzDearborn Form 10-K");
2. The information contained in BetzDearborn's Proxy Statement dated
March 9, 1998 for its Annual Meeting of Shareholders held on April
9, 1998 that has been incorporated by reference in the 1997
BetzDearborn Form 10-K and was filed with the Commission on March
10, 1998;
3. BetzDearborn's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998, filed with the Commission on May 15, 1998;
4. BetzDearborn's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1998, filed with the Commission on August 14, 1998;
5. BetzDearborn's Current Report on Form 8-K dated February 12, 1998
filed with the Commission on March 9, 1998;
6. BetzDearborn's Current Report on Form 8-K dated July 30, 1998 filed
with the Commission on July 30, 1998; and
7. BetzDearborn's Current Report on Form 8-K dated July 30, 1998,
filed with the Commission on August 12, 1998.
All reports and other documents filed with the Commission by BetzDearborn
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement and prior to the Special Meeting shall be deemed to
be incorporated by reference herein and to be a part hereof from the respective
dates of filing of such reports and other documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for all purposes to the
extent that a statement contained herein or in any other subsequently filed
document that is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE LISTED OR
DESCRIBED ABOVE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF
THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS OR HEREIN) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED
UPON WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
BETZDEARBORN INC.
4636 SOMERTON ROAD
TREVOSE, PENNSYLVANIA 19053
ATTENTION: WILLIAM T. DRURY, JR.
ASSISTANT VICE PRESIDENT, INVESTOR RELATIONS
TELEPHONE: (215) 953-2355
IN ORDER TO ENSURE TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE
MADE BY OCTOBER 1, 1998.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
FORWARD-LOOKING STATEMENTS........................................................................... ii
AVAILABLE INFORMATION................................................................................ ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................................... iii
SUMMARY.............................................................................................. 1
THE SPECIAL MEETING.................................................................................. 11
General............................................................................................ 11
Matters to Be Considered at the Special Meeting.................................................... 11
Record Date; Vote Required; Voting at the Special Meeting.......................................... 11
Voting of Proxies.................................................................................. 12
Solicitation of Proxies............................................................................ 12
Dissenters Rights.................................................................................. 13
THE MERGER........................................................................................... 13
Background of the Merger........................................................................... 13
Reasons for the Merger; Recommendation of the Board of Directors................................... 15
Opinion of BetzDearborn's Financial Advisor........................................................ 17
Interests of Certain Persons in the Merger......................................................... 21
Accounting Treatment............................................................................... 24
Regulatory Approvals............................................................................... 24
Rights Agreements.................................................................................. 24
Financing of Merger................................................................................ 25
THE MERGER AGREEMENT................................................................................. 26
The Merger......................................................................................... 26
Merger Consideration............................................................................... 26
Stock Options and Restricted Shares................................................................ 26
Exchange Procedures................................................................................ 26
Representations and Warranties..................................................................... 27
Covenants.......................................................................................... 28
Employer and Employee Benefit Plans................................................................ 31
No Solicitation.................................................................................... 32
Corporate Matters.................................................................................. 34
Conditions to the Merger........................................................................... 34
Termination........................................................................................ 35
Termination Fees................................................................................... 36
Amendment or Supplement............................................................................ 37
RIGHTS OF DISSENTING SHAREHOLDERS.................................................................... 37
General............................................................................................ 38
Filing Notice of Intention to Demand Fair Value.................................................... 38
Record and Beneficial Owners....................................................................... 38
Notice to Demand Payment........................................................................... 39
Payment of Fair Value of Common Stock.............................................................. 39
Estimate by Dissenting Shareholder of Fair Value of Common Stock................................... 39
Valuation Proceedings.............................................................................. 40
Costs and Expenses of Valuation Proceedings........................................................ 40
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES................................................ 41
THE COMPANIES........................................................................................ 41
Business of BetzDearborn........................................................................... 41
Business of Hercules............................................................................... 41
Business of Merger Sub............................................................................. 42
OTHER ACTION TO BE TAKEN AT THE SPECIAL MEETING...................................................... 42
Adjournment Proposal............................................................................... 42
SELECTED CONSOLIDATED FINANCIAL DATA................................................................. 43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................................... 44
MARKET PRICES OF COMMON STOCK........................................................................ 46
INDEPENDENT AUDITORS................................................................................. 46
SHAREHOLDER PROPOSALS................................................................................ 46
Agreement and Plan of Merger, dated as of July 30, 1998, among Hercules Incorporated, Water
Acquisition Co. and BetzDearborn Inc............................................................... Annex A
Opinion of J.P. Morgan Securities Inc., dated July 30, 1998.......................................... Annex B
Subchapter D of the Pennsylvania Business Corporation Law............................................ Annex C
</TABLE>
iv
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and the Annexes hereto. This summary is not intended to be
complete and is qualified in its entirety by the more detailed information and
financial statements appearing elsewhere or incorporated by reference in this
Proxy Statement. BetzDearborn Shareholders are urged to read and consider
carefully all of the information contained or incorporated by reference in this
Proxy Statement, including the Annexes.
THE COMPANIES
BETZDEARBORN
BetzDearborn is a leading global manufacturer and supplier of specialty
chemicals used by industrial, commercial, and institutional accounts for the
treatment of water, wastewater and process systems. BetzDearborn employs
approximately 6,400 people worldwide with operating subsidiaries in 37
countries, sales in over 90 countries, and 12 U.S. and 19 non-U.S. production
facilities. The principal executive offices of BetzDearborn are located at 4636
Somerton Road, Trevose, Pennsylvania 19053, and its telephone number is (215)
355-3300. See "Available Information," "Incorporation of Certain Documents By
Reference" and "The Companies--Business of BetzDearborn."
HERCULES AND MERGER SUB
Hercules, a Delaware corporation, is a diversified, worldwide producer of
chemical specialty products and related products for a variety of markets
worldwide. Its businesses include Aqualon, FiberVisions, Food Gums, Paper
Technology and Resins. Hercules has approximately 7,000 employees, 49
manufacturing plants, two major research centers and eight applications
laboratories. In 1997, Hercules' sales were approximately $1.9 billion.
Merger Sub is a newly formed Pennsylvania corporation and a wholly owned
subsidiary of Hercules, formed for the purpose of effecting the Merger.
The principal executive offices of Hercules and Merger Sub are located at
Hercules Plaza, 1313 North Market Street, Wilmington Delaware 19894, and their
telephone number is (302) 594-5000. See "The Companies--Business of Hercules"
and "--Business of Merger Sub."
THE SPECIAL MEETING
SPECIAL MEETING
Date, Time and Place of Special Meeting. The Special Meeting will be held
at BetzDearborn's headquarters, 4636 Somerton Road, Trevose, Pennsylvania 19053,
on October 8, 1998, at 11:00 a.m., local time, for the following purposes:
1. To consider and vote on a proposal (the "Merger Proposal") to
approve and adopt the Merger Agreement, pursuant to which, among
other things, (i) Merger Sub will be merged with and into
BetzDearborn with the result that BetzDearborn will be the
Surviving Corporation and will become a wholly owned subsidiary of
Hercules, and (ii) each outstanding share (other than shares held
by Hercules, Merger Sub or any other subsidiary of Hercules or a
wholly owned subsidiary of BetzDearborn, which will be canceled,
and other than shares with respect to which the holder thereof
exercises dissenters rights under Pennsylvania law) of Common Stock
will be converted into $72.00
1
<PAGE>
in cash, without interest. The Merger Agreement is attached to this
Proxy Statement as Annex A.
2. To adjourn the Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient
votes at the time of the Special Meeting to approve the foregoing
proposal (the "Adjournment Proposal").
3. Such other matters as may properly come before the Special Meeting.
Record Date; Required Vote. Only BetzDearborn Shareholders of record at
the close of business on September 4, 1998 (the "Record Date") will be entitled
to notice of and to vote at the Special Meeting. On the Record Date, there were
29,822,907 shares of Common Stock outstanding held by approximately 3,386
holders of record and 469,981 shares of Preferred Stock outstanding, all of
which were held of record by Boston Safe Deposit & Trust Company, as trustee
(the "KESOP Trustee") under the BetzDearborn Inc. Employee Stock Ownership and
401(k) Plan (the "KESOP"). Under the terms of the KESOP, the KESOP Trustee is
required to vote shares allocated to participants' accounts in accordance with
their instructions and otherwise in accordance with the terms of the KESOP and
applicable law. The Merger Proposal requires the affirmative vote of (i) the
holders of a majority of the outstanding shares of Common Stock and Preferred
Stock, voting together, and (ii) of holders of at least two-thirds of the
outstanding shares of Common Stock and Preferred Stock, voting together,
represented in person or by proxy at the Special Meeting. The Adjournment
Proposal requires the affirmative vote of the holders of a majority of the
Common Stock and Preferred Stock, voting together, present in person or
represented by proxy at the Special Meeting. See "The Special Meeting--Record
Date; Vote Required; Voting at the Special Meeting."
If, in a proxy submitted on behalf of a BetzDearborn Shareholder by a
person acting solely in a representative capacity, the proxy is marked clearly
to indicate that the shares represented thereby are not being voted with respect
to the Merger Proposal or the Adjournment Proposal, then such proxy will be
counted as present for the purpose of establishing a quorum at the Special
Meeting, and such "non-votes" will have the effect of a negative vote with
respect to such proposal. Additionally, proxies submitted abstaining with
respect to the Merger Proposal or the Adjournment Proposal will be counted as
present for the purpose of establishing a quorum at the Special Meeting, and
such abstentions will have the effect of a vote against such proposals.
In the event that BetzDearborn has the right to terminate the Merger
Agreement for any reason, the BetzDearborn Board may make determinations (i)
whether to terminate the Merger Agreement or to waive the condition that gives
rise to such right to terminate the Merger Agreement and proceed to the
consummation of the Merger and (ii) if it determines to waive the condition
giving rise to such right to terminate and proceed to the consummation of the
Merger, whether or not to resolicit the approval of the Merger Proposal. See
"The Merger Agreement--Termination."
RECOMMENDATION OF THE BOARD OF DIRECTORS. THE BETZDEARBORN BOARD HAS
UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF,
BETZDEARBORN AND THE BETZDEARBORN SHAREHOLDERS. ACCORDINGLY, THE BETZDEARBORN
BOARD UNANIMOUSLY RECOMMENDS THAT BETZDEARBORN SHAREHOLDERS VOTE FOR THE MERGER
PROPOSAL AND THE ADJOURNMENT PROPOSAL.
Stock Owned by Directors and Executive Officers of BetzDearborn. As of the
Record Date, the directors and executive officers of BetzDearborn may be deemed
to be beneficial owners of less than 1% of the outstanding Common Stock and less
than 1% of the outstanding Preferred Stock, and each such person has advised
BetzDearborn that such person intends to vote in favor of the Merger Proposal
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and the Adjournment Proposal. See "The Special Meeting--Record Date; Vote
Required; Voting at the Special Meeting."
Proxies. All shares of Common Stock and Preferred Stock that are entitled
to vote and are represented at the Special Meeting by properly executed proxies
received prior to the vote at the Special Meeting, and not duly and timely
revoked, will be voted at the Special Meeting in accordance with the
instructions indicated thereon. If no instructions are indicated, such proxies
will be voted FOR the Merger Proposal and the Adjournment Proposal.
If any other matters incidental to the Merger are properly presented for
consideration at the Special Meeting (or any adjournments or postponements
thereof), the persons named in the enclosed form of Proxy and voting thereunder
will have discretion to vote on such matters in accordance with their best
judgment, unless authorization to use such discretion is withheld.
Revocability of Proxies. Any proxy given pursuant to this solicitation may
be revoked by filing with the Secretary of BetzDearborn, before the taking of
the vote at the Special Meeting, a written notice of revocation. BetzDearborn
Shareholders who require assistance in changing or revoking a proxy should
contact BetzDearborn's proxy solicitor, D.F. King & Co., Inc., 77 Water Street,
20th Floor, New York, New York 10005 or by telephone at (800) 659-5550.
Dissenters Rights. Under Pennsylvania law, BetzDearborn Shareholders have
certain rights to demand payment of "fair value" (as defined in Annex C hereto)
for their shares in connection with the Merger. BetzDearborn Shareholders who do
not follow the requirements of Pennsylvania law with respect to dissenters
rights will only be entitled to receive the Merger Consideration. See "Rights of
Dissenting Shareholders" and Annex C hereto.
THE MERGER
GENERAL; MERGER CONSIDERATION
On July 30, 1998, Hercules, Merger Sub and BetzDearborn entered into the
Merger Agreement. Subject to the terms and conditions of the Merger Agreement,
each share of Common Stock issued and outstanding immediately prior to the
Effective Time (as defined below) (other than shares held by Hercules, Merger
Sub or any other wholly owned subsidiary of Hercules or BetzDearborn, which will
be cancelled, and other than shares with respect to which the holder thereof
exercises dissenters rights under Pennsylvania law) will be converted into and
represent the right to receive $72.00 in cash, without interest (the "Merger
Consideration"). Shares of Preferred Stock will be automatically converted into
shares of Common Stock immediately prior to the Effective Time, with such Common
Stock converted into the right to receive the Merger Consideration at the
Effective Time.
Pursuant to the Merger Agreement, at the Effective Time, Merger Sub will be
merged with and into BetzDearborn, with BetzDearborn continuing as the Surviving
Corporation of the Merger.
BETZDEARBORN OPTIONS AND RESTRICTED SHARES
At the Effective Time, each stock option (a "Stock Option") to purchase
shares of Common Stock pursuant to BetzDearborn's 1981 or 1987 Employee Stock
Option Plans or BetzDearborn's 1997 Employee Stock Purchase Plan (the "ESPP")
outstanding at the Effective Time, whether or not exercisable will, at the
Effective Time, be cancelled and will thereupon be converted into the right to
receive cash, without interest, in the amount equal to the product of (a) the
number of shares of Common Stock issuable upon exercise of such Stock Option
(the "Option Shares") multiplied by (b) the amount by which the Merger
Consideration exceeds the per share exercise price with respect to
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such Option Shares; provided, that each Stock Option granted under the ESPP will
be deemed for purposes of the Merger Agreement to have a per share exercise
price of zero.
In addition, any and all restrictions pursuant to BetzDearborn's Employee
Stock Incentive Plan (the "Stock Incentive Plan") on the ownership of each share
of Common Stock issued pursuant to the Stock Incentive Plan and outstanding
immediately prior to the Effective Time (the "Restricted Shares") will lapse at
the Effective Time.
As of the Record Date, 3,735,936 shares of Common Stock were issuable upon
the exercise of outstanding Stock Options. The weighted average exercise price
per share of all Stock Options outstanding as of the Record Date (other than
those granted under the ESPP) is $53.84. As of the Record Date, 139,282
Restricted Shares were outstanding. See "The Merger Agreement--Stock Options and
Restricted Shares."
EFFECTIVE TIME OF THE MERGER; CLOSING DATE
The Merger will become effective (the "Effective Time") upon the filing of
duly executed articles of merger with the office of the Department of State of
the Commonwealth of Pennsylvania or at such later time as shall be specified in
the articles of merger. This filing will be made as soon as practicable
following the closing of the Merger which will occur on a day to be specified by
the parties (the "Closing Date") which will be no later than the second business
day after the satisfaction or waiver of all conditions set forth in the Merger
Agreement, or such other date as agreed by the parties. See "The Merger
Agreement--Conditions to the Merger." Subject to the satisfaction or waiver
of the conditions to the Merger set forth in the Merger Agreement,
BetzDearborn and Hercules currently intend for the Closing Date for
consummation of the Merger to be October 15, 1998.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Hercules, Merger Sub and BetzDearborn to effect the
Merger are subject to the fulfillment at or prior to the Effective Time of the
following conditions:
o approval of the Merger Agreement by the BetzDearborn Shareholders
in accordance with applicable law and the rules of the NYSE;
o no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
enforced by any court or other tribunal or governmental body or
authority which prohibits the consummation of the transactions
contemplated by the Merger Agreement, including the Merger,
substantially on the terms contemplated thereby, and shall continue
to be in effect; and
o any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have
expired or been terminated and any other approvals of any
governmental entity shall have been obtained, except where the
failure to obtain such other approvals of any governmental entity
would not have a Material Adverse Effect (as defined under "The
Merger Agreement--Representations and Warranties") on BetzDearborn
or Hercules, as the case may be.
The obligations of Hercules and Merger Sub to effect the Merger are further
subject to the receipt of certain closing certificates and the satisfaction of,
or waiver by Hercules, of the following conditions:
o the representations and warranties of BetzDearborn contained in the
Merger Agreement that are qualified by reference to a Material
Adverse Effect on BetzDearborn shall be true and correct and the
representations and warranties that are not so qualified shall be
true and correct except where the failure to be true and correct
would not have a Material Adverse Effect on BetzDearborn or on the
ability of BetzDearborn to
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consummate the transactions contemplated by the Merger Agreement,
in each case as of the date of the Merger Agreement and, except to
the extent such representations and warranties speak as of an
earlier date, as of the Effective Time, as though made at and as of
the Effective Time; and
o BetzDearborn shall have performed all obligations required to be
performed by it under the Merger Agreement at or prior to the
Effective Time except where the failure to so perform would not
have a Material Adverse Effect on BetzDearborn or on the ability of
BetzDearborn to consummate the transactions contemplated by the
Merger Agreement.
The obligations of BetzDearborn to effect the Merger are further subject to
the receipt of certain closing certificates and the satisfaction of, or waiver
by BetzDearborn, of the following conditions:
o the representations and warranties of Hercules and Merger Sub
contained in the Merger Agreement that are qualified by reference
to a Material Adverse Effect on Hercules shall be true and correct
and the representations and warranties that are not so qualified
shall be true and correct except where the failure to be true and
correct would not have a Material Adverse Effect on Hercules or on
the ability of Hercules or Merger Sub to consummate the
transactions contemplated by the Merger Agreement, in each case as
of the date of the Merger Agreement and, except to the extent such
representations and warranties speak as of an earlier date, as of
the Effective Time, as though made at and as of the Effective Time;
and
o each of Hercules and Merger Sub shall have performed all
obligations required to be performed by it under the Merger
Agreement at or prior to the Effective Time except where the
failure to so perform would not have a Material Adverse Effect on
Hercules or on the ability of Hercules or Merger Sub to consummate
the transactions contemplated by the Merger Agreement.
See "The Merger--Regulatory Approvals" and "The Merger
Agreement--Representations and Warranties," "--Covenants" and "--Conditions to
the Merger."
TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after the approval of the Merger Agreement
by the BetzDearborn Shareholders
o by the mutual written consent of BetzDearborn and Hercules;
o by either BetzDearborn or Hercules, if (i) the Closing Date shall
not have occurred on or before February 28, 1999 (the "Termination
Date") and (ii) the party so seeking to terminate the Merger
Agreement has not breached in any material respect its obligations
under the Merger Agreement in any manner that has contributed to
the failure to consummate the Merger on or before such date;
o by either BetzDearborn or Hercules, if (i) a statute, rule,
regulation or executive order has been enacted, entered or
promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated in the Merger Agreement or
(ii)(A) an order, decree, ruling or injunction has been entered
permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger substantially on the terms contemplated
in the Merger Agreement and such order, decree, ruling or
injunction has become final and non-appealable and (B) the party
seeking to so terminate the Merger Agreement has used all
reasonable efforts to remove such order, decree, ruling or
injunction;
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o by either BetzDearborn or Hercules, if the approval of the
BetzDearborn Shareholders has not been obtained by reason of the
failure to obtain the required vote at a duly held meeting of
BetzDearborn Shareholders or of any adjournment, postponement or
continuation thereof;
o by BetzDearborn pursuant to the provisions described under "The
Merger Agreement--No Solicitation," except that BetzDearborn may
not terminate pursuant to such provisions unless and until (i)
BetzDearborn shall have complied with its obligations described
under "The Merger Agreement--No Solicitation," and (ii)
BetzDearborn shall simultaneously pay to Hercules the Hercules
Termination Fee (as defined below) and, to the extent required by
the Merger Agreement, the Hercules Expense Amount (as defined
below);
o by Hercules, if the BetzDearborn Board shall have approved or
recommended any Takeover Proposal (as defined below);
o by BetzDearborn, if any person or group (other than any party to
the Merger Agreement or any of its subsidiaries or affiliates)
acquires, prior to the Effective Time, or if prior to the Effective
Time, Hercules enters into an agreement pursuant to which any
person or group is to acquire, more than 50% of the issued and
outstanding voting securities of Hercules; or
o by either BetzDearborn or Hercules, if there has been a material
breach by the other of any of its representations, warranties,
covenants or agreements contained in the Merger Agreement which, if
not cured would cause the conditions set forth in the Merger
Agreement not to be satisfied, and such breach has not been cured
within 30 days after notice thereof shall have been received by the
party alleged to be in breach.
Under certain circumstances described in detail below (see "The Merger
Agreement--Termination Fees"), in the event of termination of the Merger
Agreement, BetzDearborn has agreed to pay Hercules a fee (the "Hercules
Termination Fee") equal to $76 million and, subject to certain conditions, an
amount (the "Hercules Expense Amount") equal to $15 million in respect of
Hercules' expenses in connection with the Merger Agreement. Under certain
circumstances described in detail below (see "The Merger Agreement--Termination
Fees"), in the event of termination of the Merger Agreement, Hercules has agreed
to pay BetzDearborn a fee (the "BetzDearborn Termination Fee") equal to $76
million and an amount (the "BetzDearborn Expense Amount") equal to $15 million
in respect of BetzDearborn's expenses in connection with the Merger Agreement.
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for accounting purposes. See
"The Merger--Accounting Treatment."
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The BetzDearborn Board has unanimously determined that the terms of the
Merger Agreement and the transactions contemplated thereby are fair to, and in
the best interests of, BetzDearborn and the BetzDearborn Shareholders.
ACCORDINGLY, THE BETZDEARBORN BOARD UNANIMOUSLY RECOMMENDS THAT BETZDEARBORN
SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER PROPOSAL AND THE
ADJOURNMENT PROPOSAL.
In reaching its unanimous determination that the Merger Agreement and the
transactions contemplated thereby are fair to and in the best interests of
BetzDearborn and the BetzDearborn
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Shareholders, the BetzDearborn Board considered the following factors in
addition to those factors more fully described in "The Merger--Reasons for the
Merger; Recommendation of the Board of Directors."
o the fact that the $72.00 per share Merger Consideration to be
received by BetzDearborn Shareholders in the Merger represents a
substantial premium over the recent market prices of Common Stock
prior to the announcement of the signing of the Merger Agreement
(approximately 101% over the closing price of the Common Stock on
the last full trading day prior to announcement of the signing of
the Merger Agreement);
o the facts that the Merger Consideration is all cash and that the
Merger is not subject to any financing contingencies (see "The
Merger Agreement--The Merger" and "--Conditions to the Merger");
o the BetzDearborn Board's evaluation of a number of strategic
alternatives, including a major restructuring of BetzDearborn, an
alliance or joint venture with certain of its suppliers and
competitors, various acquisitions and business combinations and a
merger with another participant in the industry or a strategic
partner, and the conclusion of the BetzDearborn Board that the
Merger was the most favorable strategic alternative, in terms of
value to be received by the BetzDearborn Shareholders, based on its
own judgment, the advice of senior management and the financial
advice of J.P. Morgan (see "The Merger--Background of the Merger");
o information relating to the financial condition, results of
operations, capital levels, asset quality and prospects of the
Company (see "Selected Consolidated Financial Data"), and
management's assessment of the prospects of the Company; and
o the terms of the Merger Agreement as reviewed by the Board with its
legal advisors, including the ability of BetzDearborn, under
certain circumstances, to terminate the Merger Agreement and enter
into an agreement with respect to a Superior Proposal (as defined
below) (see "The Merger Agreement").
See "The Merger--Reasons for the Merger; Recommendation of the Board of
Directors."
OPINION OF BETZDEARBORN'S FINANCIAL ADVISOR
On July 30, 1998, J.P. Morgan delivered to the BetzDearborn Board its
written opinion (the "J.P. Morgan Opinion") to the effect that, as of such date
and based upon and subject to certain matters stated therein, the Merger
Consideration is fair, from a financial point of view, to shareholders of
BetzDearborn. A copy of the J.P. Morgan Opinion, which sets forth a description
of the assumptions made, matters considered and limits of its review, is
attached to this Proxy Statement as Annex B. BetzDearborn Shareholders are urged
to read carefully the J.P. Morgan Opinion in its entirety. See "The
Merger--Opinion of BetzDearborn's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the BetzDearborn Board with respect to
the Merger Agreement, BetzDearborn Shareholders should be aware that certain
officers and directors of BetzDearborn (or their affiliates) have employment
agreements, stock options, directors' and officers' indemnification and
insurance policies and employment opportunities, which give them interests in
the Merger that are different from and in addition to the interests of
BetzDearborn Shareholders generally. See "The Merger--Interests of Certain
Persons in the Merger" and "The Merger Agreement--Corporate Matters."
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The Merger Agreement provides that, at or prior to the Effective Time,
Hercules will (i) cause each of R. Keith Elliott, currently Chairman and Chief
Executive Officer of Hercules, and William R. Cook, currently Chairman and Chief
Executive Officer of BetzDearborn, to be appointed Co-Chief Executive Officers
of Hercules, (ii) establish and maintain for so long as Messrs. Elliott and Cook
serve as Co-Chief Executive Officers an "Office of the Chairman," comprised of
Mr. Elliott, who shall serve as Chairman, Mr. Cook who shall serve as Vice
Chairman, and Vincent J. Corbo, currently President of Hercules, who shall serve
as President and Chief Operating Officer, (iii) provide that Larry V. Rankin,
currently Executive Vice President of BetzDearborn, shall be appointed Senior
Vice President (BetzDearborn Non-Paper Operations) of Hercules, and (iv)
increase the size of its Board of Directors to 14 members and elect four current
directors of BetzDearborn chosen by the BetzDearborn Board, including Mr. Cook,
to fill the resulting vacancies. See "The Merger--Interests of Certain Persons
in the Merger" and "The Merger Agreement--Corporate Matters."
The BetzDearborn Board recognized these interests and took these interests
into account in approving the Merger Agreement and the transactions contemplated
thereby.
EMPLOYEE MATTERS
Pursuant to the Merger Agreement, following the Effective Time, Hercules
and the Surviving Corporation will (i) select employees for continued employment
based upon a process providing equal opportunity and fairness to BetzDearborn
Employees and individuals who are employees of Hercules and its Subsidiaries
immediately before the Effective Time ("Hercules Employees") and (ii) deal
fairly with both BetzDearborn Employees and Hercules Employees without regard to
their prior affiliation.
TREATMENT OF KESOP IN AND FOLLOWING THE MERGER
Under the terms of BetzDearborn's articles of incorporation, the Preferred
Stock will be automatically converted into Common Stock immediately prior to the
Effective Time, with such Common Stock converted into the right to receive the
Merger Consideration upon consummation of the Merger. In order to permit the
KESOP to continue to qualify as an employee stock ownership plan, the trustee of
the KESOP will then reinvest such Merger Consideration in Hercules common stock.
This treatment will apply both to shares allocated to the accounts of KESOP
participants and to shares that have not yet been allocated. The KESOP
participants will be fully vested in their account balances as of the Effective
Time. Unallocated shares will continue to be allocated following the Effective
Time over time, as required by applicable law and the terms of the KESOP. See
"The Merger Agreement--Employer and Employee Benefit Plans."
REGULATORY APPROVALS
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), the Merger may not be consummated
unless certain filings have been submitted to the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. On August 24, 1998,
Hercules and BetzDearborn submitted the required filings to the FTC and the
Antitrust Division. The waiting period under the HSR Act is currently scheduled
to expire on September 23, 1998.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the consummation of the Merger, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the consummation of the Merger
or seeking the divestiture of substantial assets of BetzDearborn or Hercules.
Private parties and state attorneys
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general may also bring actions under the antitrust laws under certain
circumstances. BetzDearborn and Hercules believe that the consummation of the
Merger will not violate the antitrust laws. There can be no assurance, however,
that a challenge to the Merger on antitrust grounds will not be made, or, if
such a challenge is made, what the result will be.
Under Regulation (EEC) No. 4064/89 of the Council of the European Union,
the Merger may not be consummated until the Commission of the European
Communities (the "European Commission") has granted its approval thereof or such
approval has been deemed to have been granted. On September 2, 1998, the
requisite notification was filed with respect to the Merger with the European
Commission. The waiting period applicable to this filing will expire on October
5, 1998, unless earlier terminated or the European Commission determines to
enter into a second phase of investigation.
In addition, BetzDearborn and Hercules will make mandatory pre-Merger
filings with the relevant governmental authorities in Australia and Poland and
any other jurisdiction in which similar filings are required. The parties must
observe certain waiting periods with respect to these filings. The parties
anticipate that they will receive the requisite clearances or approvals within a
reasonable time, although there can be no assurance that this will be the case.
Other than as described in this Proxy Statement, BetzDearborn believes that
consummation of the Merger does not require the approval of any federal, state
or foreign agency. Certain state, federal and foreign filings will be required
in connection with consummation of the Merger. See "The Merger--Regulatory
Approvals."
EXCHANGE PROCEDURES
As soon as reasonably practicable after the Effective Time, American Stock
Transfer & Trust Co., or such other bank or trust company designated by Hercules
and reasonably satisfactory to BetzDearborn (the "Exchange Agent"), will mail to
each holder of record of a certificate which immediately prior to the Effective
Time represented outstanding shares of Common Stock or Preferred Stock (a
"Certificate") whose shares were converted into the right to receive the Merger
Consideration (i) a letter of transmittal, and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the product
of the Merger Consideration multiplied by the number of shares of Common Stock
represented by such Certificate (including, with respect to Certificates
representing Preferred Stock, the number of shares of Common Stock into which
such Preferred Stock have been converted immediately prior to the Effective
Time), and the Certificate so surrendered shall forthwith be cancelled. See "The
Merger Agreement--Merger Consideration." BETZDEARBORN SHAREHOLDERS SHOULD NOT
SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The Merger will be a taxable transaction to BetzDearborn Shareholders. For
federal income tax purposes, BetzDearborn Shareholders will generally recognize
gain or loss in the Merger in an amount determined by the difference between the
cash received and their tax basis in the Common Stock exchanged therefor. For
further information regarding certain federal income tax consequences to
BetzDearborn Shareholders, see "Certain United States Federal Income Tax
Consequences."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 4, 1998, the directors and executive officers of
BetzDearborn may be deemed to be the beneficial owners, in the aggregate, of
189,989 shares of Common Stock (excluding certain shares which could be acquired
upon the exercise of options), representing less than 1% of the outstanding
Common Stock, and of 1,530 shares of Preferred Stock, representing less than 1%
of the outstanding Preferred Stock. To the knowledge of BetzDearborn, such
directors and executive officers intend to vote their outstanding shares of
Common Stock for approval of the Merger Proposal and for approval of the
Adjournment Proposal. See "Security Ownership of Certain Beneficial Owners and
Management."
MARKET PRICES OF COMMON STOCK
The Common Stock is traded on the NYSE under the symbol "BTL." On July 29,
1998, the last full trading day prior to the execution, delivery and public
announcement of the Merger Agreement, the closing price per share of Common
Stock was $35.88, as reported on the NYSE Composite Tape. On September 3, 1998,
the most recent practicable date prior to the mailing of this Proxy Statement,
the closing price per share of Common Stock was $62.44. For additional
information concerning historical market prices of the Common Stock and
dividends paid thereon, see "Market Prices of Common Stock."
SELECTED CONSOLIDATED FINANCIAL DATA
Certain selected historical financial data of BetzDearborn is set forth
under "Selected Consolidated Financial Data." That information should be read in
conjunction with the financial statements and related notes incorporated by
reference in this Proxy Statement. See "Selected Consolidated Financial Data"
and "Incorporation of Certain Documents by Reference."
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THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to BetzDearborn Shareholders in
connection with the solicitation of proxies by the BetzDearborn Board for use at
the Special Meeting to be held on October 8, 1998, at BetzDearborn's
headquarters, 4636 Somerton Road, Trevose, Pennsylvania 19053, commencing at
11:00 a.m., local time, and at any adjournment or postponement thereof.
This Proxy Statement, the Letter to BetzDearborn Shareholders, the Notice
of the Special Meeting and the form of proxy for use at the Special Meeting are
first being mailed to BetzDearborn Shareholders on or about September 8, 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, BetzDearborn Shareholders will consider and vote
on:
1. The Merger Proposal, which is a proposal to approve and adopt the
Merger Agreement, pursuant to which, among other things, (i) Merger
Sub will be merged with and into BetzDearborn with the result that
BetzDearborn will be the Surviving Corporation and will become a
wholly owned subsidiary of Hercules, and (ii) each outstanding
share (other than shares held by Hercules, Merger Sub or any other
subsidiary of Hercules or any wholly owned subsidiary of
BetzDearborn, which will be canceled, and other than shares with
respect to which the holder thereof exercises dissenters rights
under Pennsylvania law) of Common Stock will be converted into
$72.00 in cash, without interest. A copy of the Merger Agreement is
attached as Annex A to this Proxy Statement.
2. The Adjournment Proposal, which is a proposal for the adjournment
of the Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient
votes at the time of the Special Meeting to approve the foregoing
proposal.
3. Such other business as may properly come before the Special
Meeting.
RECORD DATE; VOTE REQUIRED; VOTING AT THE SPECIAL MEETING
The BetzDearborn Board has fixed September 4, 1998 as the Record Date for
determination of BetzDearborn Shareholders entitled to notice of and to vote at
the Special Meeting. Accordingly, only holders of Common Stock or Preferred
Stock of record at the close of business on the Record Date, will be entitled to
notice of and to vote at the Special Meeting. Each holder of record of Common
Stock or Preferred Stock on the Record Date is entitled to cast one vote per
share, exercisable in person or by a properly executed proxy, at the Special
Meeting. As of the Record Date, there were 29,822,907 shares of Common Stock
outstanding and entitled to vote which were held by approximately 3,386 holders
of record, and 469,981 shares of Preferred Stock outstanding and entitled to
vote, all of which were held of record by the KESOP Trustee under the KESOP.
Under the terms of the KESOP, the KESOP Trustee is required to vote shares
allocated to participants' accounts in accordance with their instructions and
otherwise in accordance with the terms of the KESOP and applicable law.
The affirmative vote of (i) the holders of a majority of the outstanding
shares of Common Stock and Preferred Stock, voting together, and (ii) of holders
of at least two-thirds of the outstanding shares of Common Stock and Preferred
Stock, voting together, represented in person or by proxy at the Special Meeting
is required to approve the Merger Proposal. The affirmative vote of holders of a
majority of the shares of Common Stock and Preferred Stock, voting together,
present in person or represented by proxy at the Special Meeting is required to
approve the Adjournment Proposal. As of
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the Record Date, the directors and executive officers of BetzDearborn may be
deemed to be beneficial owners of less than 1% of the outstanding shares of
Common Stock and of less than 1% of the outstanding shares of Preferred Stock,
and each such person has advised BetzDearborn that such person intends to vote
in favor of the Merger Proposal and the Adjournment Proposal.
In the event that BetzDearborn has the right to terminate the Merger
Agreement for any reason, the BetzDearborn Board may make determinations (i)
whether to terminate the Merger Agreement or to waive the condition that gives
rise to such right to terminate the Merger Agreement and proceed to the
consummation of the Merger, and (ii) if it determines to waive the condition
giving rise to such right to terminate and proceed to the consummation of the
Merger, whether or not to resolicit the approval of the Merger Proposal. See
"The Merger Agreement--Termination."
VOTING OF PROXIES
All BetzDearborn Shareholders who are entitled to vote and are represented
at the Special Meeting by properly executed proxies received prior to or at such
meeting and not duly and timely revoked will have their shares voted at such
meeting in accordance with the instructions indicated in such proxies. If no
instructions are indicated, such proxies will be voted, in the case of
BetzDearborn Shareholders, FOR approval and adoption of the Merger Proposal and
the Adjournment Proposal.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the enclosed form of proxy, and acting
thereunder, will have discretion to vote on such matters in accordance with
their best judgment (unless authorization to use such discretion is withheld).
BetzDearborn is not aware of any matters expected to be presented at the Special
Meeting other than as described in the Notice of Special Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by filing with
the Secretary of BetzDearborn before the taking of the vote at the Special
Meeting, a written notice of revocation. In order to vote in person at the
Special Meeting, BetzDearborn Shareholders must attend the Special Meeting and
cast their votes in accordance with the voting procedures established for such
meeting. Attendance at the Special Meeting will not in and of itself constitute
a revocation of a proxy. Any written notice of revocation or subsequent proxy
must be sent so as to be delivered at or before the taking of the vote at the
meeting, to BetzDearborn Inc., 4636 Somerton Road, Trevose, Pennsylvania 19053,
Telecopy: (215) 953-5536, Attention: Secretary.
BetzDearborn Shareholders who require assistance in changing or revoking a
proxy should contact D.F. King & Co., Inc., at the addresses or phone numbers
provided in this Proxy Statement under the caption "Available Information."
Broker non-votes and abstaining votes will not be counted in favor of the
Merger Proposal or the Adjournment Proposal and will not be treated as votes
cast with respect to such proposals. Abstentions and broker non-votes will have
the same effect as votes against the Merger Proposal and against the Adjournment
Proposal.
SOLICITATION OF PROXIES
The expenses of the solicitations for the Special Meeting will be borne by
BetzDearborn. In addition to solicitation by mail, proxies may be solicited by
directors, officers and employees of BetzDearborn in person or by telephone,
telegram or other means of communication. These persons will receive no
additional compensation for solicitation of proxies, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
BetzDearborn has retained D.F. King & Co., Inc., at an estimated cost of
$10,000, plus reimbursement of expenses, to assist in its
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solicitation of proxies from brokers, nominees, institutions and individuals.
Arrangements will also be made by BetzDearborn with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of shares held of record by such custodians, nominees and fiduciaries, and
BetzDearborn will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
DISSENTERS RIGHTS
Under Pennsylvania law, BetzDearborn Shareholders have certain rights to
demand payment of "fair value" (as defined in Annex C hereto) for their shares
in connection with the Merger Agreement and the consummation of the transactions
contemplated thereby. BetzDearborn Shareholders who do not follow the
requirements of Pennsylvania law with respect to dissenters rights will only be
entitled to receive the Merger Consideration. See "Rights of Dissenting
Shareholders" and Annex C hereto.
THE MERGER
BACKGROUND OF THE MERGER
In early 1998, BetzDearborn's management was evaluating various strategic
alternatives in an effort to seek to enhance the performance of BetzDearborn and
to increase shareholder value. Among other alternatives, BetzDearborn's
management explored an alliance or joint venture with certain of its suppliers
and competitors, various acquisitions and business combinations.
At the end of January, 1998, following preliminary discussions regarding a
strategic marketing alliance or joint venture among BetzDearborn's and Hercules'
respective paper businesses, R. Keith Elliott, Chairman and Chief Executive
Officer of Hercules, approached William R. Cook, Chairman and Chief Executive
Officer of BetzDearborn, and in an informal discussion raised the possibility of
a business combination between BetzDearborn and Hercules. Shortly thereafter,
Mr. Cook expressed to Mr. Elliott a lack of interest in such a combination.
In April, 1998, Messrs. Cook and Elliott again discussed the possibility of
a business combination and agreed to hold further talks through representatives
of their respective companies. Following preliminary consultation with its
financial advisor, J.P. Morgan, BetzDearborn determined to consider whether such
a business combination might be beneficial to BetzDearborn's shareholders and
other constituencies, in light of the other alternatives the BetzDearborn Board
and management were exploring. Shortly thereafter, Larry Rankin, Senior Vice
President of BetzDearborn, George L. James, III, Senior Vice President and Chief
Financial Officer of BetzDearborn, and Harry J. Tucci, Senior Vice President,
Corporate Development, of Hercules, met to discuss the possibility of a business
combination. In May 1998, Hercules and BetzDearborn entered into a
confidentiality agreement. Thereafter, Messrs. Rankin, James and Tucci, as well
as George Mackenzie, Senior Vice President and Chief Financial Officer of
Hercules, met again and made preliminary presentations to each other regarding
their respective companies. Such individuals met again shortly thereafter,
together with representatives of J.P. Morgan and SBC Warburg Dillon Read Inc.
("Dillon Read"), financial advisors to BetzDearborn and Hercules, respectively,
to discuss and exchange preliminary financial analyses.
In the first half of June, members of senior management of BetzDearborn and
Hercules, in certain cases together with representatives of J.P. Morgan and
Dillon Read, met to discuss synergies in the companies' paper businesses which
potentially could be realized in a business combination, as well as structural
and social issues relating to a potential transaction.
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The BetzDearborn Board held a regularly scheduled meeting on June 18, at
which the BetzDearborn Board was informed of the discussions relating to the
potential business combination, and was updated by BetzDearborn's management
regarding the current prospects of BetzDearborn's business.
At the end of June, members of senior management of BetzDearborn and
Hercules held further discussions regarding synergies in areas other than the
paper business, including technology synergies, which were potentially
realizable in a combination.
Also at the end of June, BetzDearborn formally retained J.P. Morgan to act
as financial advisors to BetzDearborn in respect of a possible business
combination.
On June 30, the BetzDearborn Board held a special meeting to receive an
update from BetzDearborn's management regarding discussions with Hercules, and
to receive advice from BetzDearborn's legal and financial advisors. While the
BetzDearborn Board took no action at such meeting regarding any possible
transaction, the consensus of the BetzDearborn Board was that management should
continue its discussions with Hercules, as well as consider the restructuring of
its business.
Following discussions at the BetzDearborn Board's June 30th meeting,
BetzDearborn inquired as to Hercules' willingness to pursue a stock-for-stock
merger or a combination cash-and-stock merger transaction that would be tax-free
to all or some of the BetzDearborn Shareholders. In the first half of July,
members of senior management of BetzDearborn and Hercules, in certain cases
together with representatives of J.P. Morgan and Dillon Read, met to discuss
various alternative structures for a business combination and related matters
with respect to a potential transaction between the two companies. Following an
analysis of various transaction structures, Hercules indicated that it was
willing to offer the highest per share consideration to the BetzDearborn
Shareholders in a cash transaction that would be structured as a one-step merger
transaction.
On July 20, the BetzDearborn Board held a special meeting at which it was
updated on discussions with Hercules. Over the course of several days following
the July 20th BetzDearborn Board meeting, members of senior management of
BetzDearborn and Hercules met to discuss a number of issues regarding a
potential combination, including how a transaction could be structured, as well
as social and valuation issues. Also during this time, a draft merger agreement
was exchanged between counsel for the parties. Negotiations with respect to the
terms of a definitive merger agreement commenced between BetzDearborn and
Hercules, and their respective counsel, and continued through the evening of
July 29.
On July 27, Mr. Cook attended a meeting of the Board of Directors of
Hercules, at which he gave an overview of BetzDearborn. Later the same day, Mr.
Cook met with the Compensation Committee of the Board of Directors of Hercules
to discuss the possibility and terms of his becoming a Co-Chief Executive
Officer of the combined company.
On July 28, the BetzDearborn Board held a special meeting, among other
things, to be updated regarding discussions with Hercules by BetzDearborn's
management and its legal and financial advisors. At this meeting, BetzDearborn
management made a presentation to the BetzDearborn Board regarding a possible
restructuring of its business if the transaction with Hercules were not pursued.
The BetzDearborn Board discussed the proposed terms and conditions of the
possible merger with Hercules, as well as the remaining open issues in the
negotiations with Hercules, and authorized management to continue negotiations.
Following this meeting, negotiations regarding the draft merger agreement
continued between BetzDearborn and Hercules, and their respective counsel.
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The BetzDearborn Board held a meeting on July 29, at which time the
BetzDearborn Board was updated as to the negotiations which had occurred since
the prior Board meeting and the changes to the proposed terms and conditions of
the Merger Agreement and the transactions contemplated thereby. Following a
presentation by J.P. Morgan and extensive deliberations and discussions, the
BetzDearborn Board approved and adopted the Merger Agreement and the
transactions contemplated thereby and an amendment to each of BetzDearborn's
1988 Rights Agreement (as restated by its 1992 Rights Agreement) and 1998 Rights
Agreement to exempt the execution of the Merger Agreement and the consummation
of the transactions contemplated thereby from triggering certain provisions of
such Rights Agreements.
On July 30, BetzDearborn and Hercules executed the definitive Merger
Agreement and issued a joint press release announcing the Merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The BetzDearborn Board, in the course of reaching its decision to approve
the Merger Agreement and the transactions contemplated thereby, consulted with
BetzDearborn's legal and financial advisors as well as with BetzDearborn's
management and considered a number of factors, including the following material
factors (the order of which does not necessarily reflect the relative
significance of the various factors considered):
(i) the fact that the $72.00 per share Merger Consideration to be
received by BetzDearborn Shareholders in the Merger represents a
substantial premium over the recent market prices of Common
Stock prior to the announcement of the signing of the Merger
Agreement. The premium to be received by BetzDearborn
Shareholders was approximately 101% over the closing price of
the Common Stock on the last full trading day prior to
announcement of the signing of the Merger Agreement, and
approximately 47.8% over the average closing price of the Common
Stock for the 90 trading days prior to the date of the
announcement;
(ii) the facts that the Merger Consideration is all cash and that
the Merger is not subject to any financing contingencies (see
"The Merger Agreement--The Merger" and "The Merger
Agreement--Conditions to the Merger");
(iii) the BetzDearborn Board's knowledge of the business, operations,
properties, assets, financial condition and operating results
of BetzDearborn, as well as information relating to the
financial condition, results of operations, capital levels,
asset quality and prospects of BetzDearborn (see "Selected
Consolidated Financial Data"), and management's assessment of
the prospects of BetzDearborn;
(iv) the current and prospective environment in which BetzDearborn
operates, including foreign, national and local economic
conditions, the competitive environment for specialty chemical
companies in which customers are increasingly consolidating
purchases among fewer suppliers and the apparent trend toward
consolidation in the specialty chemicals industry;
(v) the presentation by J.P. Morgan and its opinion that, as of the
date of such opinion, the Merger Consideration is fair, from a
financial point of view, to shareholders of BetzDearborn (see
"--Opinion of BetzDearborn's Financial Advisor");
(vi) the BetzDearborn Board's evaluation of a number of strategic
alternatives, including a major restructuring of BetzDearborn,
an alliance or joint venture with certain of its suppliers and
competitors, various acquisitions and business combinations and
a
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merger with another participant in the industry or a strategic
partner, and the conclusion of the BetzDearborn Board that the
Merger was the most favorable strategic alternative, in terms of
value to be received by the BetzDearborn Shareholders, based on
its own judgment, the advice of senior management and the
financial advice of J.P. Morgan (see "--Background of the
Merger");
(vii) the opportunity to align BetzDearborn with a world class
company that offers the opportunity to obtain significant cost
savings and to better position the combined company for
long-term growth;
(viii) the fact that Hercules' technologies are complementary to the
process chemical technologies offered by BetzDearborn, which
will allow the combined company to have the largest technology
portfolio of any supplier to the pulp and paper industry;
(ix) the terms of the Merger Agreement as reviewed by the Board with
its legal advisors (see "The Merger Agreement");
(x) the terms of the Merger Agreement which provide that, under
certain circumstances and subject to certain conditions more
fully described under "The Merger Agreement--No Solicitation,"
"--Termination" and "--Termination Fees," BetzDearborn can
furnish information to and conduct negotiations with a third
party and could terminate the Merger Agreement and enter into an
agreement relating to a Superior Proposal;
(xi) the terms of the Merger Agreement providing for adoption of a
severance policy to be applicable to BetzDearborn and Hercules
employees following the Merger;
(xii) the fact that the BetzDearborn Shareholders will not have a
continuing equity interest in the combined company and, thus,
will not participate in any future growth of the combined
company, absent an independent investment in stock of Hercules;
and
(xiii) the BetzDearborn Board's awareness and assessment of (i) the
potential that, under certain circumstances, following the
Merger, certain payments might be made pursuant to certain
employment agreements previously entered into with certain of
BetzDearborn's executives and (ii) the facts that at or prior
to the Effective Time Mr. Cook will be appointed Co-Chief
Executive Officer, Vice Chairman and a member of the Office of
the Chairman of Hercules, that four current directors of
BetzDearborn, including Mr. Cook, will be appointed to the
Board of Directors of Hercules and that Mr. Rankin will be
appointed Senior Vice President (BetzDearborn Non-Paper
Operations) of Hercules (see "--Interests of Certain Persons in
the Merger").
The foregoing discussion of the information and factors considered by the
BetzDearborn Board is not meant to be exhaustive but is believed to include the
material factors considered by the BetzDearborn Board. The BetzDearborn Board
did not quantify or attach any particular weight to the various factors that it
considered in reaching its determination that the Merger Agreement and the
transactions contemplated thereby, including the Merger, are fair to and in the
best interests of the Shareholders. In reaching its determination, the Board
took the various factors into account collectively and the Board did not perform
a factor-by-factor analysis. In addition, individual directors may have given
different weights to different factors.
FOR THE REASONS DISCUSSED ABOVE, THE BETZDEARBORN BOARD HAS UNANIMOUSLY
DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, BETZDEARBORN AND
THE BETZDEARBORN SHAREHOLDERS.
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ACCORDINGLY, THE BETZDEARBORN BOARD UNANIMOUSLY RECOMMENDS THAT BETZDEARBORN
SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER PROPOSAL AND THE
ADJOURNMENT PROPOSAL.
OPINION OF BETZDEARBORN'S FINANCIAL ADVISOR
J.P. Morgan has acted as financial advisor to BetzDearborn in connection
with the Merger. As part of its role as financial advisor to BetzDearborn, J.P.
Morgan rendered to the BetzDearborn Board the J.P. Morgan Opinion as to the
fairness, from a financial point of view, of the Merger Consideration to be
received by the BetzDearborn shareholders in the Merger.
The full text of the J.P. Morgan Opinion, dated July 30, 1998, is attached
as Annex B to this Proxy Statement and is incorporated herein by reference.
BetzDearborn Shareholders should read the J.P. Morgan Opinion for a discussion
of assumptions made, matters considered and limitations on the review undertaken
by J.P. Morgan in rendering its opinion. The summary of the J.P. Morgan Opinion
set forth in this Proxy Statement is qualified in its entirety by reference to
the full text of such opinion.
No limitations were imposed by BetzDearborn on the scope of J.P. Morgan's
investigation or the procedures to be followed by J.P. Morgan in rendering its
opinion, except that J.P. Morgan was not authorized to solicit, and did not
solicit, any indications of interest from any third party with respect to a
purchase of all or a part of BetzDearborn's business. J.P. Morgan was not
requested to and did not make any recommendation to the BetzDearborn Board as to
the form or amount of the consideration to be received by the shareholders of
BetzDearborn, which was determined through arm's-length negotiations between the
parties. In arriving at its opinion, J.P. Morgan did not ascribe a specific
range of values to BetzDearborn, but rather made its determination as to the
fairness, from a financial point of view, of the Merger Consideration to be
received by the shareholders of BetzDearborn in the Merger on the basis of the
financial and comparative analyses described below. The J.P. Morgan Opinion is
for the use and benefit of the BetzDearborn Board and was rendered to the
BetzDearborn Board in connection with the BetzDearborn Board's consideration of
the Merger. The J.P. Morgan Opinion is not intended to be and does not
constitute a recommendation to any BetzDearborn Shareholder as to how such
Shareholder should vote with respect to the Merger. J.P. Morgan was not
requested to opine as to, and the J.P. Morgan Opinion does not address,
BetzDearborn's underlying business decision to proceed with or effect the
Merger.
In arriving at its opinion, J.P. Morgan reviewed (i) the Merger Agreement;
(ii) certain publicly available information concerning the business of
BetzDearborn and of certain other companies engaged in businesses comparable to
those of BetzDearborn, and the reported market prices for certain other
companies' securities deemed comparable; (iii) publicly available terms of
certain transactions involving companies comparable to BetzDearborn and the
consideration received for such companies; (iv) current and historical market
prices of the Common Stock; (v) the audited financial statements of BetzDearborn
for the fiscal year ended December 31, 1997, and the unaudited financial
statements of BetzDearborn for the period ended March 31, 1998; (vi) certain
internal financial analyses and forecasts prepared by BetzDearborn and its
management; and (vii) the terms of other business combinations that J.P. Morgan
deemed relevant.
In giving its opinion, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or was furnished to it by BetzDearborn or otherwise
reviewed by J.P. Morgan, and has not assumed any responsibility or liability
therefor. J.P. Morgan has not conducted any valuation or appraisal of any assets
or liabilities, nor have any such valuations or appraisals been provided to J.P.
Morgan. In relying on financial analyses and forecasts provided to it, J.P.
Morgan has assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by
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management as to the expected future results of operations and financial
condition of BetzDearborn to which such analyses or forecasts relate. J.P.
Morgan has also assumed that the Merger and the other transactions contemplated
by the Merger Agreement will be consummated as described in the Merger
Agreement.
The projections furnished to J.P. Morgan for BetzDearborn were prepared by
the BetzDearborn management. BetzDearborn does not publicly disclose internal
management projections of the type provided to J.P. Morgan in connection with
J.P. Morgan's analysis of the Merger, and such projections were not prepared
with a view toward public disclosure. These projections were based on numerous
variables and assumptions that are inherently uncertain and may be beyond the
control of management, including, without limitation, factors related to general
economic and competitive conditions and prevailing interest rates. Accordingly,
actual results could vary significantly from those set forth in such
projections.
The J.P. Morgan Opinion is based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, July
30, 1998, the date of its opinion. Subsequent developments may affect the J.P.
Morgan Opinion, and J.P. Morgan does not have any obligation to update, revise
or reaffirm its opinion.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion.
Discounted Cash Flow Analysis
J.P. Morgan calculated the unlevered free cash flows that BetzDearborn is
expected to generate during fiscal years 1998 through 2007 based upon a set of
financial projections through the years ended 2002 prepared by the management of
BetzDearborn (the "Projections") and extended through the years ended 2007 by
J.P. Morgan to reflect reasonable growth in revenues and operating earnings
during the period from 2002 to 2007. In addition, J.P. Morgan calculated the
unlevered free cash flows that BetzDearborn is expected to generate during
fiscal years 1998 through 2007 based upon financial projections, adjusted upward
by management to reflect a cost savings program which would result in annual
cost savings of $25 million and higher operating margins during the 1998 to 2002
period (the "Restructuring Projections") and extended through the years ended
2007 by J.P. Morgan to reflect reasonable growth in revenues and operating
earnings during the period from 2002 to 2007. J.P. Morgan also calculated a
range of terminal firm values of BetzDearborn at the end of the ten year period
ending 2007 by applying a firm value/earnings before interest, taxes and
depreciation and amortization ("EBITDA") multiple of 7.0x to 8.0x to the
projected year 2007 EBITDA. The unlevered free cash flows and the range of
terminal values were then discounted to present values using a range of discount
rates from 9.0% to 9.75%, which were chosen by J.P. Morgan based upon an
analysis of the weighted average cost of capital of BetzDearborn. Based on the
Projections and a discount rate range of 9.0% to 9.75%, the discounted cash flow
analysis indicated a range of firm values of between $2.5 billion and $2.8
billion for BetzDearborn, or $58 to $68 per share of Common Stock on an
unlevered basis. Based on the Restructuring Projections and a discount rate
range of 9.0% to 9.75%, the discounted cash flow analysis indicated a range of
firm values of between $2.7 billion and $3.1 billion for BetzDearborn, or $65 to
$76 per share of Common Stock on an unlevered basis. If annual cost savings of
$40 million could be achieved, the discounted cash flow analysis indicated a
range of firm values of between $69 to $80 per share of Common Stock on an
unlevered basis.
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Public Trading Multiples
Using publicly available information, J.P. Morgan compared selected
financial data of BetzDearborn with similar data for selected publicly traded
companies engaged in businesses which J.P. Morgan judged to be analogous to the
business of BetzDearborn. The companies selected by J.P. Morgan were A. Schulman
Inc., Albemarle Corporation, Cytec Industries Inc., Hercules Inc., Ethyl
Corporation, Ecolab Inc., Ferro Corporation, H.B. Fuller Company, Lubrizol
Corporation, M.A. Hanna Company, Morton International Inc., Nalco Chemical
Company, Rohm & Haas Company, and Witco Corporation. These companies were
selected, among other reasons, because their businesses operations, in
aggregate, are similar to those of BetzDearborn. J.P. Morgan used the average
projected 1998 and 1999 firm value/earnings before interest and taxes ("EBIT"),
firm value/EBITDA, and equity value/net income for its analysis.
The average multiple of 10.0x 1998 EBIT and 8.9x 1999 EBIT were applied to
the Restructuring Projections for 1998 and 1999, yielding an implied stand alone
trading value range of $35 to $44 per share. The average multiple of 7.0x 1998
EBITDA and 6.4x 1999 EBITDA were applied to the Restructuring Projections for
1998 and 1999, yielding an implied stand alone trading value range of $39 to $47
per share. The average multiple of 14.6x 1998 net income and 12.7x 1999 net
income were applied to the Restructuring Projections for 1998 and 1999, yielding
an implied stand alone trading value range of $40 to $49 per share. If each of
these multiples were applied to the Projections for 1998 and 1999, the implied
stand alone trading value ranges would, in each case, be lower than as set forth
above.
Selected Transaction Analysis
J.P. Morgan reviewed and analyzed a number of recent transactions involving
other companies in the specialty chemicals industry that it deemed comparable to
the Merger. The following recent transactions were reviewed and analyzed
(target/acquiror): Allied Colliods Group plc/Ciba Spezialitaeten Chemie AG; NL
Industries Inc. (Rheox)/Elementis plc; Freedom Chemical Company/The B.F.
Goodrich Company; Triarc Companies, Inc. (C.H. Patrick & Co. Inc.)/The
B.F. Goodrich Company; Holliday Chemical Holdings plc/Yule Catto & Co. plc;
Melamine Chemicals Inc./Borden Chemicals & Plastics L.P.; Gibson Chemical
Industries Ltd./Ecolab Inc.; BioWhittaker Inc./Cambrex Corporation; Prestone
Products Corporation/AlliedSignal Inc.; Degussa AG/VEBA AG; Laporte plc (U.S.
Adhesives and Sealants)/Sovereign Speciality Chemicals Inc.; Unilever N.V.
(Specialty Chemicals)/Imperial Chemical Industries plc; Petrolite
Corporation/Baker Hughes, Inc.; Hercules Inc. and Mallinckrodt Inc. (50/50
Tastemaker Joint Venture)/Roche Holdings, Inc.; U.S. Industries, Inc. (SCM
Metals)/OM Group, Inc.; CPS Chemical Co. Inc./Allied Colloids Group plc; Loctite
Corp./Henkel Kgaa; Sandoz AG (Master Builders Technologies)/VIAG AG, (SKW
Trostberg AG); Royal Dutch Petroleum Co. (Shell Fine Chemicals)/Inspec Group
plc; Uniroyal Chemical Co. Inc./Crompton & Knowles Corporation; W.R. Grace & Co.
(Dearborn)/Betz Laboratories Inc.; Molson Companies Ltd. (Diversey)/Unilever
N.V.; and Merck & Co., Inc. (Calgon Water Management)/English China Clays plc.
J.P. Morgan noted that no transaction reviewed was identical to the Merger, and
that, accordingly, an assessment of the results of the following analysis
necessarily involves complex considerations and judgments concerning differences
in financial and operating characteristics of BetzDearborn and other factors
that would affect the transaction value of the companies to which it is being
compared. Among other factors, J.P. Morgan indicated that the merger and
acquisition transaction environment varies over time because of macroeconomic
factors such as industry results, the business cycle and growth expectations.
J.P. Morgan reviewed each acquiree's ratio of firm value to last twelve months'
EBITDA, (median and mean ratio of 10.6x and 9.7x, respectively), EBIT (median
and mean ratio of 14.4x and 12.9x, respectively), and equity value to last
twelve months' net income (median and mean ratio of 24.1x and 23.3x,
respectively) J.P. Morgan
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applied the average multiple derived from such analysis to BetzDearborn's 1997
EBITDA, EBIT, and net income, and arrived at an estimated range of equity values
for the Common Stock of between $72 and $75 per share.
Control Premium Analysis
J.P. Morgan also analyzed the distribution of control premiums (i.e., the
final per share transaction price paid divided by the per share price five days
prior to the initial offer) paid in 1,217 transactions in the U.S. between 1993
and 1997. As shown by this analysis, 96.5% of control premiums paid in such
transactions were less than 100%, and 3.5% of control premiums paid in such
transactions were equal to or greater than 100%. J.P. Morgan also noted that
only 2.5% of announced transactions in the first six months of 1998 have had
control premiums of more than 100%. The control premium to be paid in the Merger
is greater than 100%.
The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set forth
above and its analysis must be considered as a whole and that selecting portions
thereof, without considering all of its analyses, could create an incomplete
view of the processes underlying its analyses and opinion. J.P. Morgan based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and industry-specific
factors. The other principal assumptions upon which J.P. Morgan based its
analyses are set forth above under the description of each such analysis. J. P
Morgan's analyses are not necessarily indicative of actual values or actual
future results that might be achieved, which values my be higher or lower than
those indicated. Moreover, J.P. Morgan's analyses are not and do not purport to
be appraisals or otherwise reflective of the prices at which businesses actually
could be bought or sold.
J.P. Morgan is an internationally recognized investment banking firm and,
as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The BetzDearborn Board selected
J.P. Morgan because of its expertise, reputation and familiarity with
BetzDearborn in particular and the specialty chemicals industry in general, and
because its investment banking professionals have substantial experience in
transactions similar to the Merger.
As compensation for the services of J.P. Morgan in connection with the
Merger, including rendering its opinion, BetzDearborn has agreed to pay J.P.
Morgan a fee (the "Success Fee") in an amount equal to 0.35% of the Transaction
Value; provided, that in the event BetzDearborn receives an unsolicited offer
from one or more parties in connection with an extraordinary transaction, the
Success Fee shall be in an amount equal to 0.45% of the Transaction Value.
"Transaction Value" means the aggregate amount of consideration received by
BetzDearborn and/or the BetzDearborn Shareholders in the Merger, plus the amount
of debt securities or other liabilities of BetzDearborn assumed, redeemed or
remaining outstanding in connection with the Merger, plus, without duplication,
the value of any securities, cash or other assets distributed to the
BetzDearborn Shareholders. The Success Fee shall be payable upon consummation of
the Merger. In addition, BetzDearborn has agreed that if it receives the
BetzDearborn Termination Fee and/or the BetzDearborn Expense Amount, then
BetzDearborn will pay J.P. Morgan a fee in an amount equal to the lesser of $15
million or 25% of such amounts, net of expenses and before taxes, paid or
payable to BetzDearborn. BetzDearborn also has agreed to reimburse J.P. Morgan
for reasonable out-of-pocket expenses incurred in connection with the Merger
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and to indemnify J.P. Morgan and certain related persons for certain liabilities
that may arise out of its engagement by BetzDearborn and the rendering of its
opinion.
J.P. Morgan is acting as financial advisor to BetzDearborn in connection
with the Merger. J.P. Morgan has also performed various investment banking
services for BetzDearborn in the past and has received customary fees for such
services. In the ordinary course of its business, J.P. Morgan may actively trade
in BetzDearborn and Hercules securities for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities. In addition, J.P. Morgan is serving as Co-Arranger and
Co-Syndication Agent for the Facilities (as defined below).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the BetzDearborn Board with respect to
the Merger Agreement, BetzDearborn Shareholders should be aware that certain
officers and directors of BetzDearborn (or their affiliates) have interests in
the Merger that are different from and in addition to the interests of
BetzDearborn Shareholders generally. The BetzDearborn Board was aware of these
interests and took these interests into account in approving the Merger
Agreement and the transactions contemplated thereby.
Employment Agreements
BetzDearborn has entered into employment agreements with its executive
officers, under which the executives are entitled to certain severance benefits
in the event of the termination of their employment under certain specified
circumstances. Hercules has agreed, in the Merger Agreement, that all
individuals with such agreements will be deemed to have experienced a
termination for "Good Reason" under their agreements and will be entitled to
receive the specified severance benefits as a result (unless otherwise agreed by
the executive). Such severance benefits (the "Severance Benefits") will include
(i) a lump sum cash payment equal to three times the sum of (A) the executive's
base salary and (B) the greater of (I) the incentive bonus that would have been
payable to the executive for the fiscal year that includes the date of
termination, computed at target, and (II) the average of the incentive bonuses
paid to the executive during the three most recent fiscal years ending before
the date of termination (or such shorter period as the executive has been
employed by BetzDearborn) (the "Cash Payment"); (ii) continued welfare benefits
for three years or a lump sum cash payment in lieu thereof; and (iii) a lump sum
cash payment equal to the present value (using a discount rate of 7.25%) of the
additional retirement benefits (expressed as a lump sum) that the executive
would have been entitled to receive if he or she had remained employed for
another three years. Moreover, each executive is entitled to receive an
additional payment to the extent necessary to make him or her whole for any
excise tax on "excess parachute payments" that may be imposed on him or her.
Each executive is subject to certain restrictive covenants regarding
confidential information and noncompetition for two years after termination of
employment, and a violation of the noncompetition covenant could result in the
executive's being required to return a portion of the severance payments
described above. As noted below, Mr. Cook and Mr. Rankin are discussing with
Hercules the possibility of waiving some or all of their rights under their
respective agreements in exchange for continued employment after the Merger on
the terms and conditions described below. Their total Severance Benefits (before
any such waiver) would be approximately $4.77 million for Mr. Cook and
approximately $2.55 million for Mr. Rankin, assuming all such Severance Benefits
were provided in cash. If all of the other executive officers were to receive
such payments, the approximate aggregate amount of their Severance Benefits
would be $9.29 million, assuming all such Severance Benefits were provided in
cash.
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Hercules is currently discussing with Messrs. Cook and Rankin the terms and
conditions on which they may agree to be employed by Hercules following the
Merger. It is expected that Mr. Cook will be appointed Vice Chairman of the
Board of Hercules and co-Chief Executive Officer of Hercules, effective upon the
Merger. The terms and conditions of his employment that are being discussed
would include cash compensation consisting of (i) effective immediately after
the Merger, a base salary of $700,000 and a bonus opportunity of 70% of base
salary; (ii) beginning 9 months from the Merger, a base salary of $750,000 and a
bonus opportunity of 80% of base salary; and (iii) beginning 18 months from the
Merger, a base salary based upon competitive market conditions and a bonus
opportunity of 90% of base salary, in each case on a pro rata basis. In
addition, Mr. Cook would receive a grant of Hercules restricted stock, the
amount of which is being discussed. Such restricted stock would vest in three
equal installments at the end of the 8th, 16th and 24th months following the
Merger, with accelerated vesting in the event of termination of Mr. Cook's
employment by Hercules without cause, by Mr. Cook for good reason, or upon his
death or disability, or, after the 8th month anniversary of the Merger, by the
executive because of unforeseen financial emergency or other family
circumstances. Additional shares of unrestricted stock would be granted as and
when such restricted stock vests, if and to the extent that at the time of
vesting, the value of the restricted stock had declined since grant. Further,
Mr. Cook would invest 2/3 of the after-tax proceeds that he receives from the
cashout of his BetzDearborn restricted stock and BetzDearborn options in
unrestricted Hercules common stock. Mr. Cook would also receive, in lieu of all
options that would otherwise be granted to him under Hercules's plans for the
three years after the Merger, a grant of Performance Accelerated Stock Options
with respect to the following number of shares of Hercules common stock: 500,000
shares upon the Merger; 250,000 shares on September 30, 1999; and 250,000 shares
on June 30, 2000. Mr. Cook would also receive pension benefits no less favorable
than those available under the "rule of 85" under BetzDearborn's qualified and
nonqualified pension plans, and fringe benefits comparable to those provided to
Mr. Elliott. In the event of a termination of Mr. Cook's employment without
cause, or by Mr. Cook for "good reason," he would receive severance pay based
upon three, two or one year's salary and target bonus (depending upon whether
the termination occurred during the first, second or third year following the
Merger). Mr. Cook would also receive a standard Hercules change-of-control
employment agreement, and would continue to be entitled to receive payments as
necessary to make him whole for any excise tax on "excess parachute payments"
that may be imposed on him. See "--Officers of Hercules" and "--Hercules Board
of Directors."
It is also expected that the terms and conditions of employment offered by
Hercules to Mr. Rankin will include an annual salary of $325,000 with a target
bonus and long-term incentive compensation designed so that his total
compensation opportunity will be comparable to that of peer executives of
Hercules. Mr. Rankin would also receive a grant of Hercules restricted stock,
the amount of which is being discussed. Such restricted stock would vest on the
same terms and conditions as those with respect to Mr. Cook's restricted stock
described in the immediately preceding paragraph. Additional shares of
unrestricted Hercules stock would be granted as and when such restricted stock
vests, if and to the extent that at the time of vesting, the value of the
restricted stock had declined since grant. Mr. Rankin would also be required to
comply with Hercules' stock ownership guidelines within three years after the
Merger, would receive a standard Hercules change-of-control agreement, and would
continue to be entitled to receive payments as necessary to make him whole for
any excise tax on "excess parachute payments" that may be imposed on him. Mr.
Rankin would also receive pension benefits no less favorable than those
available under the "rule of 85" under BetzDearborn's qualified and nonqualified
pension plans.
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Stock Options, Restricted Shares and KESOP
Pursuant to the Merger Agreement, each Stock Option (including those held
by directors and executive officers) outstanding at the Effective Time, whether
or not exercisable, will, at the Effective Time, be cancelled and will thereupon
be converted into the right to receive cash, without interest, in the amount, if
any, equal to the product of (a) the number of Option Shares multiplied by (b)
the amount, if any, by which the Merger Consideration exceeds the per share
exercise price with respect to such Option Shares; provided, that each Stock
Option granted under the ESPP will be deemed for purposes of the Merger
Agreement to have a per share exercise price of zero.
In addition, the Merger Agreement provides that any and all restrictions
pursuant to the Stock Incentive Plan on the ownership of each Restricted Share
will lapse at the Effective Time.
As of September 4, 1998, the number of unexercised and effective Stock
Options held by the directors and executive officers of BetzDearborn as a group
was 552,836 and the number of Restricted Shares held by the directors and
executive officers of BetzDearborn as a group was 48,906.
Also pursuant to the Merger Agreement, all employees of BetzDearborn
(including its executive officers) will be fully vested in their account
balances, as of immediately before the Merger, in the KESOP.
Officers of Hercules
The Merger Agreement provides that, at or prior to the Effective Time,
Hercules will (i) cause each of Messrs. Elliott and Cook to be appointed
Co-Chief Executive Officer of Hercules, (ii) establish and maintain for so long
as Messrs. Elliott and Cook serve as Co-Chief Executive Officers of Hercules an
"Office of the Chairman," comprised of Mr. Elliott, who shall serve as Chairman,
Mr. Cook, who shall serve as Vice Chairman, and Vincent J. Corbo, currently
President of Hercules, who shall serve as President and Chief Operating Officer
of Hercules, (iii) provide that (A) Larry V. Rankin, currently Executive Vice
President of BetzDearborn shall be appointed Senior Vice President (BetzDearborn
Non-Paper Operations), (B) certain officers and senior management reporting to
the Chief Operating Officer shall be determined by Messrs. Elliott, Cook and
Corbo and (C) certain other officers and senior management reporting to the
Co-Chief Executive Officers shall be determined by Messrs. Elliott and Cook. See
"--Hercules Board of Directors" and "The Merger Agreement--Corporate Matters."
Hercules Board of Directors
Pursuant to the Merger Agreement, at or prior to the Effective Time,
Hercules will increase the size of its Board of Directors to 14 members and
elect four current directors of BetzDearborn chosen by the BetzDearborn Board,
including Mr. Cook, to fill the resulting vacancies. As of the date of this
Proxy Statement, the BetzDearborn Board had made no decision as to the identity
of the current BetzDearborn directors to be appointed to the Hercules Board. See
"--Officers of Hercules" and "The Merger Agreement--Corporate Matters."
Directors' and Officers' Indemnification and Insurance
Pursuant to the Merger Agreement and subject to certain limitations,
Hercules has agreed that all rights to indemnification existing in favor of any
director, officer, employee or agent of BetzDearborn or its Subsidiaries (the
"Indemnified Parties") as provided in the articles of incorporation, by-laws or
comparable organizational documents of BetzDearborn or its Subsidiaries or in
previously disclosed indemnification agreements with BetzDearborn or any of its
Subsidiaries will survive the Merger and will continue in full force and effect
for a period of not less than six years from the Effective Time. In addition,
the Surviving Corporation shall maintain, subject to certain limitations, for a
period of at least
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six years, policies of director's and officer's liability insurance and
fiduciary liability insurance comparable to those currently maintained by
BetzDearborn with respect to claims arising from facts or events that occurred
at or before the Effective Time. See "The Merger Agreement--Covenants."
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," as amended. Under this method of accounting, the purchase price
will be allocated to assets acquired and liabilities assumed based on their
estimated fair values at the Effective Time (with the excess of the purchase
price after such allocation being recorded as goodwill).
REGULATORY APPROVALS
Under the HSR Act and the rules that have been promulgated thereunder by
the FTC, the Merger may not be consummated unless certain filings have been
submitted to the Antitrust Division and the FTC and certain waiting period
requirements have been satisfied. On August 24, 1998, Hercules and BetzDearborn
submitted the required filings to the FTC and the Antitrust Division. The
waiting period under the HSR Act is currently scheduled to expire on September
23, 1998.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the consummation of the Merger, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the consummation of the Merger
or seeking the divestiture of substantial assets of BetzDearborn or Hercules.
BetzDearborn and Hercules believe that the consummation of the Merger will not
violate the antitrust laws. There can be no assurance, however, that a challenge
to the Merger on antitrust grounds will not be made, or, if such a challenge is
made, what the result will be.
Under Regulation (EEC) No. 4064/89 of the Council of the European Union,
the Merger may not be consummated until the European Commission has granted its
approval thereof or such approval has been deemed to have been granted. On
September 2, 1998, the requisite notification was filed with respect to the
Merger with the European Commission. The waiting period applicable to this
filing will expire on October 5, 1998, unless earlier terminated or the European
Commission determines to enter into a second phase of investigation.
In addition, BetzDearborn and Hercules will make mandatory pre-Merger
filings with the relevant governmental authorities in Australia and Poland and
any other jurisdiction in which similar filings are required. The parties must
observe certain waiting periods with respect to these filings. The parties
anticipate that they will receive the requisite clearances or approvals within a
reasonable time, although there can be no assurance that this will be the case.
Other than as described in this Proxy Statement, consummation of the Merger
does not require the approval of any federal, state or foreign agency. Certain
state, federal and foreign filings will be required in connection with
consummation of the Merger.
RIGHTS AGREEMENTS
On February 12, 1998, the BetzDearborn Board declared a dividend
distribution of one Right granted under BetzDearborn's 1998 Rights Agreement for
each outstanding share of Common Stock to BetzDearborn Shareholders of record at
the close of business on September 19, 1998 (the expiration date of the Rights
granted under BetzDearborn's 1998 Rights Agreement).
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BetzDearborn has entered into an amendment to each of its 1988 Rights
Agreement (as restated by its 1992 Rights Agreement) and 1998 Rights Agreement
to exempt the execution of the Merger Agreement and the consummation of the
transactions contemplated thereby from triggering certain provisions of such
Rights Agreements.
FINANCING OF MERGER
In connection with the transactions contemplated by the Merger Agreement,
NationsBank, N.A. has delivered to Hercules its commitment, subject to certain
terms and conditions, to provide up to $4.5 billion in senior credit facilities
(the "Facilities"). Hercules anticipates using funds borrowed under the
Facilities, in part, (i) to pay the Merger Consideration and related fees and
expenses and (ii) to refinance existing indebtedness of Hercules and
BetzDearborn. NationsBank, N.A. is currently in the process of assembling a
syndicate of institutions to syndicate the Facilities. Pursuant to the Merger
Agreement, Hercules and Merger Sub have represented and warranted that they will
have available at the Effective Time all funds necessary to consummate the
transactions contemplated by the Merger Agreement.
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THE MERGER AGREEMENT
The following is a summary of material provisions of the Merger Agreement,
a copy of which is attached as Annex A to this Proxy Statement. This summary is
qualified in its entirety by reference to the Merger Agreement which is attached
as Annex A hereto and is incorporated herein by this reference.
THE MERGER
The Merger Agreement provides that Merger Sub will be merged with and into
BetzDearborn, with BetzDearborn continuing as the Surviving Corporation of the
Merger, subject to the requisite approval of BetzDearborn Shareholders and the
satisfaction or waiver of the other conditions to the Merger. The Merger will
become effective at the Effective Time upon the filing of duly executed articles
of merger with the office of the Department of State of the Commonwealth of
Pennsylvania or at such later time as is agreed to by the parties. This filing
will be made on the Closing Date following the closing of the Merger which will
be no later than the second business day after the satisfaction or waiver of the
conditions as described under "--Conditions to the Merger" or at such other date
as agreed to by the parties. Subject to the satisfaction or waiver of the
conditions to the Merger set forth in the Merger Agreement, BetzDearborn and
Hercules currently intend for the Closing Date for consummation of the Merger
to be October 15, 1998.
MERGER CONSIDERATION
Each share of Common Stock outstanding at the Effective Time (other than
shares owned by BetzDearborn, Hercules, Merger Sub or any other subsidiary of
Hercules or any wholly owned subsidiary of BetzDearborn, which will be cancelled
and retired, and other than shares with respect to which the holder thereof
exercises dissenters rights under Pennsylvania law) will be converted into the
right to receive $72.00 in cash, without interest (the "Merger Consideration").
STOCK OPTIONS AND RESTRICTED SHARES
Pursuant to the Merger Agreement, each Stock Option outstanding at the
Effective Time, whether or not exercisable, will, at the Effective Time, be
cancelled and will thereupon be converted into the right to receive cash,
without interest, in the amount, if any, equal to the product of (a) the number
of Option Shares multiplied by (b) the amount, if any, by which the Merger
Consideration exceeds the per share exercise price with respect to such Option
Shares; provided, that each Stock Option granted under the ESPP will be deemed
for purposes of the Merger Agreement to have a per share exercise price of zero.
In addition, the Merger Agreement provides that any and all restrictions
pursuant to the Stock Incentive Plan on the ownership of each Restricted Share
will lapse at the Effective Time. For additional information, including
information regarding the number of outstanding Stock Options and Restricted
Shares, see "The Merger--Interests of Certain Persons in the Merger."
EXCHANGE PROCEDURES
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each holder of record of a Certificate whose shares were
converted into the right to receive the Merger Consideration (i) a letter of
transmittal, and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the product of the Merger Consideration
multiplied by the number of shares of Common Stock represented by such
Certificate (including, with respect to
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Certificates representing Preferred Stock, the number of shares of Common Stock
into which such Preferred Stock has been converted immediately prior to the
Effective Time), and the Certificate so surrendered shall forthwith be
cancelled.
Until so surrendered, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration into which the Common Stock formerly represented by
such Certificate (including, with respect to Certificates that represented
Common Stock into which Preferred Stock was converted immediately prior to the
Effective Time) has been converted. No interest will be paid or will accrue on
any cash payable to holders of Certificates.
BETZDEARBORN SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
BetzDearborn, Hercules and the Merger Sub. Representations and warranties of
BetzDearborn include those relating to organization, capitalization, corporate
authority and conflicts with other agreements, reports filed with the
Commission, undisclosed liabilities, permits and violations of law,
environmental matters, employee benefit plans, certain changes and events since
March 31, 1998, investigations and litigation, tax matters, intellectual
property and labor matters. Representations and warranties of Hercules and
Merger Sub include those relating to organization, corporate authority and
conflicts with other agreements, litigation and ownership of BetzDearborn stock.
In addition, Hercules and Merger Sub have represented and warranted that they
will have available at the Effective Time all funds necessary to consummate the
transactions contemplated by the Merger Agreement. The representations and
warranties made by the parties in the Merger Agreement will not survive the
Effective Time, although it is a condition to each of Hercules' and Merger
Sub's, on the one hand, and BetzDearborn's, on the other hand, obligations under
the Merger Agreement that the representations and warranties of the other party
which are qualified by reference to a Material Adverse Effect on such party
shall be true and correct and the representations and warranties that are not so
qualified will be true and correct except where the failure to be true and
correct would not have a Material Adverse Effect on the party or on the ability
of the party to consummate the transactions contemplated by the Merger
Agreement, in each case as of the date of the Merger Agreement and, except to
the extent such representations and warranties speak as of an earlier date, as
of the Effective Time as though made at and as of the Effective Time. See
"--Conditions to the Merger."
For purposes of the Merger Agreement, "Material Adverse Effect" means, with
respect to any entity, such state of facts, event, change or effect that has
had, or would reasonably be expected to have, a material adverse effect on the
business, assets or financial condition of such entity and its Subsidiaries,
taken as a whole.
COVENANTS
Mutual Covenants. Under the Merger Agreement, BetzDearborn and Hercules
have agreed to:
o promptly make their respective filings and thereafter make any other
required submissions under the HSR Act;
o use all reasonable efforts to cooperate with one another in (A)
determining whether any filings are required to be made with, or
consents, permits, authorizations or approvals are required to be
obtained from, any third party or other governmental or regulatory
bodies or
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authorities of federal, state, local and foreign jurisdictions in
connection with the execution and delivery of the Merger Agreement
and the consummation of the transactions contemplated thereby and
(B) timely making all such filings and timely seeking all such
consents, permits, authorizations or approvals; and
o use all reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective the
transactions contemplated by the Merger Agreement, including taking
all such further action as reasonably may be necessary to resolve
such objections, if any, as the FTC, the Antitrust Division, state
antitrust enforcement authorities or competition authorities of any
other jurisdiction or any other person may assert under relevant
antitrust or competition laws with respect to the transactions
contemplated by the Merger Agreement.
Subject to certain limitations, BetzDearborn and Hercules have agreed in
the Merger Agreement to furnish to one another and to one another's counsel all
information as may be required in order to effect Hercules' covenant to
cooperate with BetzDearborn to lift any injunction or remove any other
impediment to the consummation of the transactions contemplated by the Merger
Agreement and to use all reasonable efforts to lift or remove any such
injunction or impediment, and to effect BetzDearborn's covenant to cooperate
with Hercules to lift any injunction or remove any other impediment to the
consummation of the transactions contemplated by the Merger Agreement and to use
all reasonable efforts to lift or remove any such injunction or impediment.
BetzDearborn and Hercules have also agreed in the Merger Agreement to
consult with and provide each other the reasonable opportunity to review and
comment upon any press release or other public statement or comment prior to the
issuance of such press release or other public statement or comment relating to
the Merger Agreement or the transactions contemplated thereby and will not issue
any such press release or other public statement or comment prior to such
consultation, except, in any case, as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
Covenants of Hercules and Merger Sub. The Merger Agreement provides that
Hercules and Merger Sub will cooperate with BetzDearborn in order to lift any
injunctions or remove any other impediment to the consummation of the
transactions contemplated by the Merger Agreement and will each use all
reasonable efforts to lift or remove any such injunction or impediment.
Hercules has agreed
o that all rights to indemnification existing in favor of any
Indemnified Party as provided in the articles of incorporation,
by-laws or comparable organizational documents of BetzDearborn or
its Subsidiaries or in previously disclosed indemnification
agreements with BetzDearborn or any of its Subsidiaries will survive
the Merger and will continue in full force and effect for a period
of not less than six years from the Effective Time;
o to guarantee the performance of the Surviving Corporation of its
obligations described in the immediately preceding clause;
o to indemnify all Indemnified Parties to the fullest extent permitted
by applicable law with respect to all acts or omissions arising out
of such individuals' services as officers, directors, employees or
agents of BetzDearborn or any of its Subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees or directors
of, or otherwise on behalf of BetzDearborn or any of its
Subsidiaries, occurring prior to the Effective Time, including the
transactions contemplated by the Merger Agreement;
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o that the provisions of the by-laws of BetzDearborn relating to
indemnity and limitation of liability will not be rescinded, amended
or modified prior to the sixth anniversary of the Effective Time;
and
o for a period of six years after the Effective Time, to cause,
subject to certain limitations, the Surviving Corporation to
maintain in effect the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by
BetzDearborn (provided that Hercules may substitute therefor
policies of at least the same coverage and amounts containing terms
and conditions which are, in the aggregate, no less advantageous to
the insured) with respect to any claims arising from facts or events
that occurred on or before the Effective Time.
Hercules has agreed that none of Hercules, Merger Sub or any other
Subsidiary of Hercules will acquire any shares of Common Stock at any time prior
to the earlier to occur of (i) the Effective Time and (ii) the Termination Date.
Covenants of BetzDearborn. Pursuant to the Merger Agreement, BetzDearborn
has agreed that from and after the date of the Merger Agreement and prior to the
Effective Time or the date, if any, on which the Merger Agreement is earlier
terminated and except as may be required by law, as may be agreed in writing by
Hercules or as may be expressly permitted pursuant to the Merger Agreement,
BetzDearborn:
o will, and will cause each of its Subsidiaries to, conduct its
operations in the ordinary course of business in substantially the
same manner as heretofore conducted;
o will use all reasonable efforts, and will cause each of its
Subsidiaries to use all reasonable efforts, to preserve intact its
business organization and goodwill, keep available the services of
its key employees and preserve its relationships with those persons
having business dealings with BetzDearborn and its Subsidiaries;
o will report material matters and the general status of ongoing
operations and will provide financial and operating data to Hercules
to the extent reasonably requested by Hercules;
o will not, and will not permit any of its Subsidiaries that is not
wholly owned to, authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of stock (other
than regular quarterly cash dividends with record dates and payment
dates consistent with past practice of not more than $.38 per share
of Common Stock and $4.00 per share of Preferred Stock and, with
respect to any Subsidiary of BetzDearborn that is not wholly owned
by BetzDearborn, except as contractually required on the date
hereof);
o will not, and will not permit any of its Subsidiaries to, split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of BetzDearborn which
remains a wholly owned Subsidiary after consummation of such
transaction;
o will not, and will not permit any of its Subsidiaries to, enter into
or amend any employment, severance or similar agreements or
arrangements with any of their respective directors or executive
officers or key employees, or adopt any new or amend any existing
employee benefit plans, programs or arrangements, except as may be
required by applicable law or an existing benefit plan of
BetzDearborn or collective bargaining or similar agreement;
provided, that BetzDearborn and any Subsidiary may engage in any of
the following in the ordinary course of business with respect to key
employees: hiring and terminating; conducting performance reviews;
awarding merit increases in pay; and
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provision of severance payments and benefits; and provided, further,
that BetzDearborn may implement an agreed upon retention plan for
key employees of BetzDearborn and its Subsidiaries;
o subject to the provisions described under "--No Solicitation," will
not, and will not permit any of its Subsidiaries to, authorize,
publicly announce or enter into an agreement with respect to, any
merger, consolidation or business combination (other than the
Merger);
o will not propose or adopt any amendment to its charter or by-laws,
or similar governing documents;
o will not, and will not permit any of its Subsidiaries to, issue or
authorize the issuance of, or agree to issue or sell any shares of
their capital stock of any class, or any other equity interests (in
each case, whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or
otherwise) other than the issuance of capital stock upon exercise of
Stock Options outstanding on the date of the Merger Agreement and
the release of shares of capital stock from restrictions pursuant to
the terms in effect on the date of the Merger Agreement and other
than any issuances, authorizations, agreements and sales (to
BetzDearborn or any other wholly owned Subsidiary of BetzDearborn)
by a wholly owned Subsidiary of BetzDearborn in the ordinary course
of business;
o will not, and will not permit any of its Subsidiaries to, purchase
or redeem any shares of its capital stock, or any other equity
interests or any rights, warrants or options to acquire any such
shares or interests, except for any such purchases or redemptions by
a wholly owned Subsidiary of BetzDearborn in the ordinary course of
business;
o will not, and will not permit any of its Subsidiaries to, incur,
assume or prepay any material indebtedness or any other material
liabilities, other than in the ordinary course of business
consistent with past practice;
o will not, and will not permit any of its Subsidiaries to, (A) make
any material loans, advances or capital contributions to, or
investments in, any other person, other than by BetzDearborn or a
Subsidiary of BetzDearborn to or in BetzDearborn or any wholly owned
Subsidiary of BetzDearborn or (B) pay, discharge or satisfy any
claims, liabilities or obligations, in each case, other than
indebtedness, issuances of debt securities, guarantees, loans,
advances, capital contributions, investments, payments, discharges
or satisfactions incurred or committed to in the ordinary course of
business consistent with past practice;
o will not sell, lease, license, mortgage or otherwise encumber or
subject to any lien, or otherwise dispose of, any of its material
properties or material assets, other than in the ordinary course of
business consistent with past practice;
o will not, and will not permit any of its Subsidiaries to, (A) make
any material tax election, except those made in the ordinary course
of business that are consistent with past practice and would not
have an effect with respect to periods following the Merger, or
settle or compromise any material tax liability or (B) change its
fiscal year;
o except as required by a governmental body or authority, will not
change its methods of accounting (including make any material
write-off or reduction in the carrying value of any assets) in
effect at December 31, 1997, other than as required by changes in
generally accepted accounting principles as agreed by BetzDearborn's
independent auditors; and
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o will not, and will not permit any of its Subsidiaries to, agree, in
writing or otherwise, to take any of the foregoing actions or take
any action which would (A) make any of its representations or
warranties contained in the Merger Agreement untrue or incorrect in
any material respect or (B) result in any of the conditions to the
Merger set forth in the Merger Agreement not being satisfied.
For purposes of the Merger Agreement, "Subsidiaries" of any party means any
corporation, partnership, association, trust or other form of legal entity of
which (i) 50% or more of the outstanding voting securities are on the date of
the Merger Agreement directly or indirectly owned by such party, or (ii) such
party or any Subsidiary of such party is a general partner (excluding
partnerships in which such party or any Subsidiary of such party does not have a
majority of the voting interests in such partnership).
BetzDearborn has also agreed to:
o afford to Hercules and to Hercules' officers, employees,
accountants, counsel and other authorized representatives (except to
the extent prohibited by applicable law as advised by counsel and
except as may be limited by any confidentiality obligation contained
in any contract with a third party) reasonable access during normal
business hours, throughout the period prior to the earlier of the
Effective Time or the Termination Date, to its and its Subsidiaries'
properties, books and records and any report, schedule or other
document filed or received by it pursuant to the requirements of
federal or state securities laws;
o cooperate with Hercules in order to lift any injunctions or remove
any impediment to the consummation of the transactions contemplated
by the Merger Agreement;
o use all reasonable efforts to lift or remove any such injunction or
impediment; and
o give Hercules the opportunity to participate in the defense or
settlement of any shareholder litigation against BetzDearborn or its
directors relating to the transactions contemplated by the Merger
Agreement; provided, that no such settlement will be agreed to
without Hercules' consent which will not be unreasonably withheld or
delayed.
EMPLOYER AND EMPLOYEE BENEFIT PLANS
For two years after the Effective Time, Hercules will, or will cause the
Surviving Corporation to, provide employee (i) welfare benefits, (ii) pension
and savings benefits, (iii) incentive compensation, (iv) executive benefits, (v)
severance and (vi) other employee benefits for the benefit of employees of
BetzDearborn, which, in the aggregate, are no less favorable than such benefits
provided immediately prior to the Effective Time by BetzDearborn and its
Subsidiaries. In addition, Hercules has agreed that any BetzDearborn Employee
(as defined below) who has met the requirements of the "rule of 85" under any
benefit plan of BetzDearborn that is a "pension plan" within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
(as in effect as of the date of the Merger Agreement) (such plans, collectively,
the "Company Pension Plans") on or before the Effective Time, or who would meet
such requirements if he or she remained an active participant in such benefit
plan until the second anniversary of the Effective Time, will be entitled to
pension benefits no less favorable than the pension benefits to which he or she
would be entitled under all Company Pension Plans (as in effect as of the date
of the Merger Agreement) if he or she retired when he or she first met such
requirements (regardless of whether or when he or she actually retires).
Hercules has agreed to adopt, at or prior to the Effective Time, a
severance plan in the form agreed to between the parties. From and after the
Effective Time, Hercules will cause the Surviving Corporation to honor such
severance plan.
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Pursuant to the Merger Agreement, BetzDearborn has amended the ESPP (i) to
prohibit prior to the termination of the Merger Agreement the modification by
any participant of any election thereunder the effect of which is to increase
such participant's contributions to the plan above the level of such
participant's contributions as of the date of the Merger Agreement and (ii) to
provide that no further Stock Options will be granted thereunder, and that the
Option Term (as defined in the ESPP) for the Stock Options granted thereunder on
July 1, 1998 will end on the earlier of December 31, 1998 or the day on which
occurs the Effective Time.
Hercules has agreed that, following the Effective Time, it will provide,
and will cause the Surviving Corporation and all of its other Subsidiaries to
provide, to individuals who are employed by BetzDearborn and its Subsidiaries
immediately before the Effective Time ("BetzDearborn Employees"), credit for all
service with BetzDearborn and its Subsidiaries and their respective predecessors
for all purposes (except where such credit would cause a duplication of
benefits) under employee benefit plans and programs, as if such service were
service with Hercules and its Subsidiaries. BetzDearborn, Hercules and the
Surviving Corporation will take all steps necessary so that, effective at the
Effective Time, all BetzDearborn Employees who are participants in the KESOP at
the Effective Time are fully vested in their accounts in such plan.
Under the terms of BetzDearborn's articles of incorporation, the Preferred
Stock will be automatically converted into Common Stock immediately prior to the
Effective Time, with such Common Stock converted into the right to receive the
Merger Consideration upon consummation of the Merger. In order to permit the
KESOP to continue to qualify as an employee stock ownership plan, the trustee of
the KESOP will then reinvest such Merger Consideration in Hercules common stock.
This treatment will apply both to shares allocated to the accounts of KESOP
participants, and to shares that have not yet been allocated. Unallocated shares
will continue to be allocated following the Effective Time over time, as
required by applicable law and the terms of the KESOP.
Pursuant to the Merger Agreement, following the Effective Time, Hercules
and the Surviving Corporation will (i) select employees for continued employment
based upon a process providing equal opportunity and fairness to BetzDearborn
Employees and individuals who are Hercules Employees and (ii) deal fairly with
both BetzDearborn Employees and Hercules Employees without regard to their prior
affiliation.
NO SOLICITATION
Pursuant to the Merger Agreement, BetzDearborn has agreed that it will not,
nor will it permit its Subsidiaries to, nor will it authorize or permit any of
its directors, officers, employees, attorneys, financial advisors, accountants,
agents or other representatives or those of any of its Subsidiaries to, directly
or indirectly through any person, (i) solicit or initiate (including by way of
furnishing non-public information) any inquiries or the making of a proposal
which constitutes a Takeover Proposal; or (ii) engage in, or continue,
discussions or negotiations relating thereto; provided, that, so long as
BetzDearborn complies in all respects with its covenants set forth in the Merger
Agreement relating to no solicitation, BetzDearborn may engage in discussions or
negotiations with, and, subject to entering into a confidentiality agreement
substantially similar to the confidentiality agreement previously entered into
between BetzDearborn and Hercules, furnish information concerning BetzDearborn
and its Subsidiaries, businesses, properties or assets to, any bona fide third
party which has made a bona fide unsolicited Superior Proposal (as defined
below) if BetzDearborn promptly (but in no case later than 36 hours) notifies
Hercules of the receipt of such Superior Proposal, including the material terms
and conditions thereof (and any change in the material terms and conditions
thereof) and, subject to the fiduciary duties of the BetzDearborn Board under
applicable law, the identity of the person making such Superior Proposal.
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Except as expressly permitted by the terms of the Merger Agreement, neither
the BetzDearborn Board nor any committee thereof may (a) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Hercules, the
approval or recommendation of the Merger by the BetzDearborn Board or such
committee or the Merger Agreement (except as required by their fiduciary duties
under applicable law), (b) approve or recommend, or propose publicly to approve
or recommend, any Takeover Proposal or (c) cause BetzDearborn to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement, arrangement or understanding (each, an "Acquisition Agreement")
related to any Takeover Proposal, or to redeem or otherwise render inapplicable
BetzDearborn's 1988 Rights Agreement (as restated by its 1992 Rights Agreement),
1998 Rights Agreement or the Rights granted under such Rights Agreements in
response to any Takeover Proposal. Notwithstanding the foregoing, in the event
that prior to the adoption of the Merger Agreement by the BetzDearborn
Shareholders, the BetzDearborn Board receives a Superior Proposal (that is not
subject to any financing condition), the BetzDearborn Board may, if it
determines in good faith, by resolution duly adopted after consultation with its
outside counsel (who may be its regularly engaged outside counsel), that the
failure to take such action would reasonably be expected to constitute a breach
of its fiduciary duties under applicable law, (a) withdraw or modify its
approval or recommendation of the Merger or the Merger Agreement and (b) approve
or recommend such Superior Proposal and terminate the Merger Agreement as
permitted pursuant to the terms described under "--Termination" (and
concurrently with or immediately after such termination cause BetzDearborn to
enter into a definitive agreement with respect to such Superior Proposal) but
only at a time that is after the third business day following Hercules' receipt
of written notice from BetzDearborn advising Hercules that the BetzDearborn
Board has received a Superior Proposal, providing Hercules with a copy of such
Superior Proposal and identifying the person making such Superior Proposal with
the intent of enabling Hercules to agree to a modification of the terms and
conditions of the Merger Agreement so that the transactions contemplated in it
may be effected.
As used in the Merger Agreement, (x) "Takeover Proposal" means any inquiry,
proposal or offer made by a third party prior to the shareholder vote at a
shareholder meeting for any acquisition of 20% or more of the assets, or 20% or
more of the voting securities, of BetzDearborn or any of its Subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of
BetzDearborn or any of its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving BetzDearborn or any of its Subsidiaries, other than the transactions
contemplated by the Merger Agreement and (y) "Superior Proposal" means a
Takeover Proposal made on terms that a majority of the members of the
BetzDearborn Board determines in good faith (after consultation with an
independent financial advisor) is more favorable than the transactions
contemplated by the Merger Agreement if such Takeover Proposal were to be
consummated.
CORPORATE MATTERS
Pursuant to the Merger Agreement, Hercules has agreed that, at or prior to
the Effective Time, it will (i) increase the size of its Board of Directors to
14 members and elect four current directors of BetzDearborn selected by the
BetzDearborn Board, including Mr. Cook, to fill the vacancies created thereby;
(ii) cause each existing committee of its Board of Directors to be comprised of
the current members thereof plus a number of the former directors of
BetzDearborn such that approximately one-third of the directors on each such
committee will be former directors of BetzDearborn; (iii) cause each of Messrs.
Elliott and Cook to be appointed Co-Chief Executive Officer of Hercules; (iv)
establish and maintain for so long as Messrs. Elliott and Cook serve as Co-Chief
Executive Officers of Hercules an "Office of the Chairman," comprised of Mr.
Elliott, who will serve as Chairman, Mr. Cook who will serve as Vice Chairman
and Mr. Corbo who will serve as President and Chief Operating Officer of
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Hercules; (v) provide that (A) George MacKenzie will continue to serve as Senior
Vice President and Chief Financial Officer of Hercules, (B) Mr. Rankin will be
appointed Senior Vice President (BetzDearborn Non-Paper Operations), (C)
Dominick Di Donna, currently Senior Vice President, International and General
Manager, Paper Technology of Hercules, will be appointed Senior Vice President
(Paper Operations), (D) all other officers and senior management reporting to
the Chief Operating Officer will be determined by Messrs. Elliott, Cook and
Corbo and (E) all other officers and senior management reporting to the Co-Chief
Executive Officers will be determined by Messrs. Elliott and Cook.
Pursuant to the Merger Agreement, from and after the Effective Time, (i)
unless tax and other considerations result in another location being more
favorable to Hercules, Hercules will continue to maintain its corporate
headquarters in Wilmington, Delaware and all other specific business
headquarters will be determined by Messrs. Elliott and Cook; (ii) Hercules will
conduct its businesses under the "Hercules" name provided that (A) the water
treatment business of Hercules and the Surviving Corporation will be conducted
under the "BetzDearborn" name and (B) as determined by Messrs. Elliott and Cook,
certain businesses of the Surviving Corporation will be conducted under the
"Hercules/BetzDearborn" name.
CONDITIONS TO THE MERGER
Mutual Conditions. The obligations of Hercules, BetzDearborn and Merger
Sub to effect the Merger are subject to the fulfillment at or prior to the
Effective Time of the following conditions:
o the approval of the BetzDearborn Shareholders shall have been
obtained in accordance with applicable law and the rules of the
NYSE;
o no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced
by any court or other tribunal or governmental body or authority
which prohibits the consummation of the transactions contemplated by
the Merger Agreement, including the Merger, substantially on the
terms contemplated hereby, and shall continue to be in effect; and
o any applicable waiting period under the HSR Act shall have expired
or been terminated and any other approvals of any governmental
entity shall have been obtained, except where the failure to obtain
such other approvals of any governmental entity would not have a
Material Adverse Effect on BetzDearborn or Hercules, as the case may
be.
Conditions to Obligations of BetzDearborn to Effect the Merger. The
obligation of BetzDearborn to effect the Merger is further subject to the
fulfillment of the following conditions:
o the representations and warranties of Hercules and Merger Sub that
are qualified by reference to a Material Adverse Effect on Hercules
shall be true and correct and the representations and warranties
that are not so qualified shall be true and correct except where the
failure to be true and correct would not have a Material Adverse
Effect on Hercules or on the ability of Hercules or Merger Sub to
consummate the transactions contemplated by the Merger Agreement, in
each case as of the date of the Merger Agreement and, except to the
extent such representations and warranties speak as of an earlier
date, as of the Effective Time, as though made at and as of the
Effective Time; and
o each of Hercules and Merger Sub shall have performed all obligations
required to be performed by it under the Merger Agreement at or
prior to the Effective Time except where the failure to so perform
would not have a Material Adverse Effect on Hercules or
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on the ability of Hercules or Merger Sub to consummate the
transactions contemplated by the Merger Agreement.
Conditions to Obligations of Hercules and Merger Sub to Effect the
Merger. The obligation of Hercules and Merger Sub to effect the Merger is
further subject to the fulfillment of the following conditions:
o the representations and warranties of BetzDearborn that are
qualified by reference to a Material Adverse Effect on BetzDearborn
shall be true and correct and the representations and warranties
that are not so qualified shall be true and correct except where the
failure to be true and correct would not have a Material Adverse
Effect on BetzDearborn or on the ability of BetzDearborn to
consummate the transactions contemplated by the Merger Agreement, in
each case as of the date of the Merger Agreement and, except to the
extent such representations and warranties speak as of an earlier
date, as of the Effective Time, as though made at and as of the
Effective Time; and
o BetzDearborn shall have performed all obligations required to be
performed by it under the Merger Agreement at or prior to the
Effective Time except where the failure to so perform would not have
a Material Adverse Effect on BetzDearborn or on the ability of
BetzDearborn to consummate the transactions contemplated by the
Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after the approval by the BetzDearborn
Shareholders, (a) by the mutual written consent of BetzDearborn and Hercules;
(b) by either BetzDearborn or Hercules, if (i) the Closing Date shall not have
occurred on or before the Termination Date, February 28, 1998, and (ii) the
party so seeking to terminate the Merger Agreement has not breached in any
material respect its obligations under the Merger Agreement in any manner that
has contributed to the failure to consummate the Merger on or before such date;
(c) by either BetzDearborn or Hercules, if (i) a statute, rule, regulation or
executive order has been enacted, entered or promulgated prohibiting the
consummation of the Merger substantially on the terms contemplated in the Merger
Agreement or (ii)(A) an order, decree, ruling or injunction has been entered
permanently restraining, enjoining or otherwise prohibiting the consummation of
the Merger substantially on the terms contemplated in the Merger Agreement and
such order, decree, ruling or injunction has become final and non-appealable and
(B) the party so seeking to terminate the Merger Agreement has used all
reasonable efforts to remove such order, decree, ruling or injunction; (d) by
either BetzDearborn or Hercules, if the approval of the BetzDearborn
Shareholders has not been obtained by reason of the failure to obtain the
required vote at a duly held meeting of BetzDearborn Shareholders or of any
adjournment, postponement or continuation thereof; (e) by BetzDearborn pursuant
to the provisions described under "--No Solicitation," except that BetzDearborn
may not terminate pursuant to such provisions unless and until (i) BetzDearborn
shall have complied with its obligations described under "--No Solicitation" and
(ii) BetzDearborn shall simultaneously pay to Hercules the Hercules Termination
Fee and, to the extent required by the Merger Agreement, the Hercules Expense
Amount; (f) by Hercules, if the BetzDearborn Board shall have approved or
recommended any Takeover Proposal; (g) by BetzDearborn, if any person or group
(other than any party to the Merger Agreement or any of its Subsidiaries or
affiliates) acquires prior to the Effective Time, or if prior to the Effective
Time, Hercules enters into an agreement pursuant to which any person or group is
to acquire, more than 50% of the issued and outstanding voting securities of
Hercules; or (h) by either BetzDearborn or Hercules, if there has been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in the Merger Agreement, which if not cured
would cause certain of the
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conditions set forth in the Merger Agreement not to be satisfied, and such
breach has not been cured within 30 days after notice thereof shall have been
received by the party alleged to be in breach.
The Merger Agreement provides that, from and after termination of the
Merger Agreement, Hercules and its controlled affiliates are prohibited from
acquiring any Common Stock prior to May 7, 1999; provided, that nothing
prohibits Hercules or any of its controlled affiliates from commencing a tender
offer or exchange offer for Common Stock pursuant to Section 14(d) of the
Exchange Act prior to such time so long as no Common Stock is acquired prior to
such time.
TERMINATION FEES
If (i) the Merger Agreement is terminated by BetzDearborn pursuant to the
provisions described under "--No Solicitation,"
(ii) the Merger Agreement is terminated by Hercules if the BetzDearborn
Board shall have approved or recommended any Takeover Proposal, or
(iii) (A) prior to the termination of the Merger Agreement, a Takeover
Proposal is publicly proposed or publicly disclosed, (B) the Merger Agreement is
terminated by BetzDearborn pursuant to the provisions described in clause (b)
under "--Termination" or by Hercules or BetzDearborn pursuant to the provisions
described in clause (d) under "--Termination," and (C) concurrently with or
within 12 months after the date of such termination (1) BetzDearborn shall have
entered into an Acquisition Agreement with any party (other than Hercules) with
respect to a Takeover Proposal or (2) a Takeover Proposal shall have been
consummated,
then, in each case, BetzDearborn will (without prejudice to any other rights of
Hercules against BetzDearborn) pay to Hercules the Hercules Termination Fee and
the Hercules Expense Amount. Payment of the Hercules Termination Fee and the
Hercules Expense Amount shall be made simultaneously with termination in the
case of a termination by BetzDearborn pursuant to the provisions described under
"--No Solicitation" and promptly, but in no event later than the fifth business
day following a termination by Hercules if the BetzDearborn Board shall have
approved or recommended any Takeover Proposal and, in the case of the events
described in clause (iii) of the first sentence of this paragraph, upon the
earlier of the execution by BetzDearborn of an Acquisition Agreement and the
consummation of any Takeover Proposal.
If the Merger Agreement is terminated by BetzDearborn pursuant to the
provisions described in clause (g) under "--Termination," Hercules will pay
BetzDearborn the BetzDearborn Termination Fee and the BetzDearborn Expense
Amount, promptly but in no event later than the fifth business day following
such termination.
AMENDMENT OR SUPPLEMENT
At any time before or after approval of the Merger Agreement by the
BetzDearborn Shareholders and prior to the Effective Time, the Merger Agreement
may be amended or supplemented in writing by Hercules and BetzDearborn with
respect to any of the terms contained in the Merger Agreement if such amendment
or supplement is approved by the respective Boards of Directors of Hercules and
BetzDearborn, except that following approval by the BetzDearborn Shareholders,
there may be no amendment or change which (a) by law or in accordance with the
rules of any relevant stock exchange requires further approval by the
BetzDearborn Shareholders without such further approval or (b) is not permitted
under applicable law. Pennsylvania law provides that following approval of the
Merger Agreement by BetzDearborn Shareholders, there may be no amendment or
change of (i) the amount or kind of consideration to be received by BetzDearborn
Shareholders in the Merger, (ii) the terms of the articles of the Surviving
Corporation or (iii) any terms or conditions of the Merger Agreement if such
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change would adversely affect the BetzDearborn Shareholders. At any time prior
to the Effective Time, either party may: (a) extend the time for the performance
of any of the obligations or acts of the other party; (b) waive any inaccuracies
in the representations and warranties of the other party contained in the Merger
Agreement or in any document delivered pursuant thereto; or (c) waive compliance
with any of the agreements or conditions of the other party contained in the
Merger Agreement.
RIGHTS OF DISSENTING SHAREHOLDERS
For purposes of this section, the term "BetzDearborn" will be deemed to
refer also to the Surviving Corporation with respect to actions taken after the
Effective Time. In addition, for purposes of this section, references to a
record holder, shareholder or beneficial owner include both a holder or
beneficial owner of Common Stock and a holder or beneficial owner of Preferred
Stock who will receive shares of Common Stock upon the automatic conversion of
the Preferred Stock immediately prior to the Effective Time pursuant to
BetzDearborn's articles of incorporation.
Pursuant to the Merger Agreement and the Pennsylvania Business Corporation
Law of 1988, as amended (the "PBCL"), shareholders will have dissenters rights
in connection with the Merger under Sections 1571 through 1580 of Subchapter 15D
of the PBCL (hereinafter "Subchapter 15D"), a copy of which (as well as a copy
of Section 1930 of the PBCL) is included in this Proxy Statement as Annex C, and
may demand in writing that BetzDearborn pay the fair value of their Common
Stock.
If any shareholders exercise dissenters rights in connection with the
Merger under Subchapter 15D (a "Dissenting Shareholder"), any shares of Common
Stock held by such holders at the Effective Time will not be converted into the
right to receive the Merger Consideration, but instead will be converted into
the right to receive the "fair value" of such shares pursuant to Subchapter 15D.
THE FOLLOWING SUMMARY OF THE PROVISIONS OF SUBCHAPTER 15D IS NOT INTENDED TO BE
A COMPLETE STATEMENT OF SUCH PROVISIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUBCHAPTER 15D, A COPY OF WHICH (AS WELL AS A COPY
OF SECTION 1930 OF THE PBCL) IS ATTACHED TO THIS PROXY STATEMENT AS ANNEX C AND
INCORPORATED HEREIN BY REFERENCE. BetzDearborn will not give any notice of the
following requirements other than as described in this Proxy Statement and as
required by the PBCL.
GENERAL
Any shareholder who has duly demanded the payment of the fair value of his
or her shares of Common Stock owned at the Effective Time under Subchapter 15D
will not, after the Effective Time, be a shareholder of BetzDearborn for any
purpose or be entitled to the payment of dividends or other distributions on any
such Common Stock. Moreover, the Common Stock of any Dissenting Shareholder will
be converted into the right to receive the fair value of such Common Stock,
determined in accordance with Subchapter 15D.
BETZDEARBORN SHAREHOLDERS SHOULD NOTE THAT, UNLESS ALL THE REQUIRED
PROCEDURES FOR CLAIMING DISSENTERS RIGHTS ARE FOLLOWED WITH PARTICULARITY,
DISSENTERS RIGHTS WILL BE LOST. VOTING AGAINST APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT, WHETHER IN PERSON OR BY PROXY, IS NOT SUFFICIENT NOTICE TO
PERFECT DISSENTERS RIGHTS.
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FILING NOTICE OF INTENTION TO DEMAND FAIR VALUE
Before any BetzDearborn Shareholder vote is taken on the Merger Agreement,
a Dissenting Shareholder must deliver to BetzDearborn a written notice of his or
her intention to demand the fair value of his or her Common Stock if the Merger
is effected. Such written notice may be sent to the Secretary of BetzDearborn at
BetzDearborn's address set forth under "Incorporation of Certain Documents by
Reference." Neither the return of a proxy by the Dissenting Shareholder with
instructions to vote the shares represented thereby against the approval and
adoption of the Merger Agreement nor a vote against the approval and adoption of
the Merger Agreement or an abstention from voting on the approval and adoption
of the Merger Agreement is sufficient to satisfy the requirement of delivering a
written notice to BetzDearborn. In addition, the Dissenting Shareholder must not
effect any change in the beneficial ownership of his or her shares from the date
of filing the notice with BetzDearborn through the Effective Time, and the
Dissenting Shareholder must not vote his or her shares for which payment of fair
value is sought in favor of the approval and adoption of the Merger Agreement.
The submission of a signed blank proxy will serve to waive dissenters rights if
not revoked, but a failure to vote, a vote against or an abstention from voting
on the approval and adoption of the Merger Agreement will not waive such rights.
Proper revocation of a signed blank proxy or a signed proxy instructing a vote
for approval and adoption of the Merger Agreement will also preserve dissenters
rights under the PBCL. Failure by a Dissenting Shareholder to comply with any of
the foregoing will result in such Dissenting Shareholder's forfeiting any right
to payment of the fair value of such Dissenting Shareholder's Common Stock.
RECORD AND BENEFICIAL OWNERS
A record holder may assert dissenters rights as to fewer than all the
Common Stock registered in the record holder's name only if the record holder
dissents with respect to all the Common Stock beneficially owned by any one
person and discloses the name and address of the person or persons on whose
behalf the record holder dissents. A beneficial owner who is not the record
holder may assert dissenters rights with respect to Common Stock held on the
beneficial owner's behalf if such beneficial owner submits to BetzDearborn the
written consent of the record holder not later than the time of assertion of
dissenters rights. A beneficial owner may not dissent with respect to less than
all the Common Stock such beneficial owner owns, whether or not such Common
Stock is registered in such beneficial owner's name.
NOTICE TO DEMAND PAYMENT
If the Merger is approved by the requisite vote at the Special Meeting,
BetzDearborn shall mail to all Dissenting Shareholders who gave due notice of
their intention to demand payment of fair value and who refrained from voting in
favor of the Merger a notice stating where and when a demand for payment must be
sent, and share certificates representing the Common Stock held by the
Dissenting Shareholder must be deposited to obtain payment. The notice shall be
accompanied by a copy of Subchapter 15D and include a form for demanding
payment, which form shall have a request for certification of the date that
beneficial ownership of the Common Stock was acquired by the Dissenting
Shareholder or the person on whose behalf the Dissenting Shareholder dissents.
The time set for the receipt of a demand and the Dissenting Shareholder's share
certificates shall not be less than 30 days from the mailing of the notice.
Failure by a Dissenting Shareholder to timely demand payment and deposit the
share certificates pursuant to such notice will cause such Dissenting
Shareholder to lose all right to receive payment of the fair value of his or her
Common Stock. All mailings to BetzDearborn are at the risk of the Dissenting
Shareholder. However, BetzDearborn recommends that the notice of intention to
dissent, the demand form and the holder's share certificates be sent by
certified mail. If the Merger has not been effected within 60 days after the
date set for demanding
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payment and depositing stock certificates, BetzDearborn shall return any stock
certificates that have been deposited. BetzDearborn, however, may at any later
time send a new notice regarding demand for payment and deposit of share
certificates with like effect.
PAYMENT OF FAIR VALUE OF COMMON STOCK
Promptly after the Effective Time, or upon timely receipt of demand for
payment if the Merger has already been effected, BetzDearborn shall either remit
to Dissenting Shareholders who have made demand and deposited their share
certificates the amount BetzDearborn estimates to be the fair value of the
Common Stock or give written notice that no remittance will be made under
Section 1577 of the PBCL. Such remittance or notice shall be accompanied by:
(i) BetzDearborn's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months prior to the date of remittance
or notice, together with the latest available interim financial statements;
(ii) a statement of BetzDearborn's estimate of the fair value of the
Common Stock; and
(iii) a notice of the right of a Dissenting Shareholder to demand
payment or supplemental payment, as the case may be, accompanied by a copy
of Subchapter 15D.
If BetzDearborn does not remit the amount of its estimate of the fair value of
the Common Stock, it will return all share certificates that have been deposited
and may make a notation thereon that a demand for payment has been made. If
shares with respect to which such notation has been made are thereafter
transferred, each new share certificate issued therefor will bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares will not acquire by such transfer any
rights in BetzDearborn other than those which the original dissenter had after
making demand for payment of their fair value.
ESTIMATE BY DISSENTING SHAREHOLDER OF FAIR VALUE OF COMMON STOCK
If a Dissenting Shareholder believes that the amount estimated or paid by
BetzDearborn for his or her Common Stock is less than its fair value, the
Dissenting Shareholder may send to BetzDearborn his or her own estimate of its
fair value, which shall be deemed a demand for payment of the amount of the
deficiency. If the Dissenting Shareholder does not file his or her own estimate
of the fair value within 30 days after such remittance or notice has been mailed
by BetzDearborn, the Dissenting Shareholder will be entitled to no more than the
amount estimated in the notice or remitted by BetzDearborn.
VALUATION PROCEEDINGS
Within 60 days after the latest of (i) the Effective Time, (ii) timely
receipt of any demands for payment or (iii) timely receipt of any Dissenting
Shareholder estimates of fair value, if any demands for payment remain
unsettled, BetzDearborn may file in court an application for relief requesting
that the fair value of the Common Stock be determined by the court. Each
Dissenting Shareholder whose demands have not been settled will be made a party
to the proceeding and will be entitled to recover the amount by which the fair
value of such Dissenting Shareholder's Common Stock is found to exceed the
amount, if any, previously remitted. Such Dissenting Shareholder will also be
entitled to interest on such amount from the Effective Time until the date of
payment. There is no assurance, however, that BetzDearborn will file such an
application. If BetzDearborn fails to file an application within the 60-day
period, any Dissenting Shareholder who has not settled his or her claim may do
so in BetzDearborn's name within 30 days after the expiration of the 60-day
period. If a Dissenting Shareholder does not file an application within such
30-day period, each Dissenting Shareholder who
39
<PAGE>
has not settled his or her claim will be paid no more than BetzDearborn's
estimate of the fair value of the Common Stock and may bring an action to
recover any amount not previously remitted.
COSTS AND EXPENSES OF VALUATION PROCEEDINGS
The costs and expenses of any valuation proceeding, including the
reasonable compensation and expenses of any appraiser appointed by the court,
will be determined by the court and assessed against BetzDearborn, except that
any part of such costs and expenses may be assessed as the court deems
appropriate against all or some of the Dissenting Shareholders whose action in
demanding supplemental payment is found by the court to be dilatory, obdurate,
arbitrary, vexatious or in bad faith. The court may also assess the fees and
expenses of counsel and experts for any or all of the Dissenting Shareholders
against BetzDearborn if it fails to comply substantially with Subchapter 15D or
acts in a dilatory, obdurate, arbitrary or vexatious manner or in bad faith. The
court can also assess any such fees or expenses incurred by BetzDearborn against
any Dissenting Shareholder if such Dissenting Shareholder is found to have acted
in a dilatory, obdurate, arbitrary or vexatious manner or in bad faith. If the
court finds that the services of counsel for any Dissenting Shareholder were of
substantial benefit to the other Dissenting Shareholders and should not be
assessed against BetzDearborn, it may award to such counsel reasonable fees to
be paid out of the amounts awarded to the Dissenting Shareholders who were
benefited.
Under the PBCL, a BetzDearborn Shareholder has no right to obtain, in the
absence of fraud or fundamental unfairness, an injunction against the Merger,
nor any right to valuation and payment of the fair value of the holder's shares
because of the Merger, except to the extent provided by the dissenters rights
provisions of Subchapter 15D. The PBCL also provides that absent fraud or
fundamental unfairness, the rights and remedies provided by Subchapter 15D are
exclusive.
THE FOREGOING DESCRIPTION OF THE RIGHTS OF DISSENTERS UNDER SUBCHAPTER 15D
SHOULD BE READ IN CONJUNCTION WITH ANNEX C TO THIS PROXY STATEMENT, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PROVISIONS OF SUBCHAPTER 15D.
BetzDearborn Shareholders who do not follow the requirements of Subchapter
15D will only be entitled to receive the Merger Consideration.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary of the material
United States federal income tax consequences of the Merger and does not purport
to be a complete analysis or listing of all potential tax effects relative to a
decision whether to vote for the approval of the Merger. The discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), treasury
regulations, Internal Revenue Service rulings and judicial and administrative
decisions in effect as of the date hereof, all of which are subject to change at
any time, possibly with retroactive effect. The discussion does not address all
aspects of United States federal income taxation that may be applicable to
certain BetzDearborn Shareholders subject to special United States federal
income tax treatment, including, without limitation, foreign persons, insurance
companies, tax-exempt entities, retirement plans and persons who acquired their
Common Stock pursuant to the exercise of employee stock options or otherwise as
compensation. The discussion addresses neither the effect of applicable state,
local or foreign tax laws, nor the effect of any United States federal tax laws
other than those pertaining to United States federal income tax.
The receipt of cash in exchange for Common Stock pursuant to the Merger
will be a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign tax laws. A
BetzDearborn Shareholder will generally recognize gain or loss for
40
<PAGE>
federal income tax purposes in an amount determined by the difference between
such BetzDearborn Shareholder's adjusted tax basis in the Common Stock, and the
amount of cash received in exchange therefor. Such gain or loss will be a
capital gain or loss if such Common Stock is held as a capital asset and will be
long-term capital gain or loss if at the Effective Time, such Common Stock was
held for more than one year. Gain or loss should be computed separately for
different blocks of Common Stock.
THE FOREGOING DISCUSSION OF MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE.
BECAUSE OF THE COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES OF
ANY PARTICULAR BETZDEARBORN SHAREHOLDER MAY BE AFFECTED BY MATTERS NOT DISCUSSED
HEREIN, EACH BETZDEARBORN SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO HIS OR HER OWN PARTICULAR CIRCUMSTANCES AND WITH RESPECT
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, ESTATE TAX LAWS
AND PROPOSED CHANGES IN APPLICABLE TAX LAWS.
THE COMPANIES
BUSINESS OF BETZDEARBORN
BetzDearborn is a leading global manufacturer and supplier of specialty
chemicals used in industrial, commercial, and institutional accounts for the
treatment of water, wastewater and process systems. BetzDearborn employs
approximately 6,400 people worldwide with operating subsidiaries in 37
countries, sales in over 90 countries, and 12 U.S. and 19 non-U.S. production
facilities. The principal executive offices of BetzDearborn are located at 4636
Somerton Road, Trevose, Pennsylvania 19053, and its telephone number is (215)
355-3300. See "Available Information" and "Incorporation of Certain Documents By
Reference."
BUSINESS OF HERCULES
Hercules, a Delaware corporation, is a diversified, worldwide producer of
chemical specialty products and related products for a variety of markets
worldwide. Its businesses include Aqualon, FiberVisions, Food Gums, Paper
Technology and Resins. Hercules has approximately 7,000 employees, 49
manufacturing plants, two major research centers and eight applications
laboratories. In 1997, Hercules' sales were approximately $1.9 billion.
BUSINESS OF MERGER SUB
Merger Sub is a newly formed Pennsylvania corporation and a wholly owned
subsidiary of Hercules formed for the purpose of effecting the Merger.
OTHER ACTION TO BE TAKEN AT THE SPECIAL MEETING
ADJOURNMENT PROPOSAL
BetzDearborn is submitting a proposal to authorize the named
attorneys-in-fact to vote in favor of the adjournment of the Special Meeting, in
the event that there are not sufficient votes to approve the Merger Proposal at
the time of the Special Meeting. Even though a quorum may be present at the
Special Meeting, it is possible that BetzDearborn may not have received
sufficient votes to approve the Merger Proposal at the time of the Special
Meeting. In that event, the Merger Proposal could not be approved unless the
Special Meeting were adjourned in order to permit further solicitation of
proxies.
41
<PAGE>
In order to allow the proxies that have been received by BetzDearborn at
the time of the Special Meeting to be voted for such adjournment, if necessary,
BetzDearborn has submitted the question of adjournment under such circumstances,
and only under such circumstances, to the BetzDearborn Shareholders for their
consideration. A majority of the shares of Common Stock and Preferred Stock
present in person or represented by proxy at the Special Meeting is required in
order to approve any such adjournment.
The BetzDearborn Board unanimously recommends that the BetzDearborn
Shareholders vote their proxies in favor of the Adjournment Proposal so that
their proxies may be used for such purpose, should it become necessary. Properly
executed proxies will be voted in favor of such adjournment unless otherwise
noted thereon. If it is necessary to adjourn the Special Meeting, no notice of
the time and place of the adjourned meeting is required to be given to
shareholders other than an announcement of such time and place at the Special
Meeting. This adjournment proposal relates only to an adjournment occurring for
purposes of soliciting additional proxies for approval of the Merger Proposal in
the event that there are insufficient votes to approve the Merger Proposal at
the Special Meeting. Any other adjournment (e.g., an adjournment required
because of the absence of a quorum) would be voted upon pursuant to the
discretionary authority granted by the proxy.
The BetzDearborn Board retains full authority to postpone the Special
Meeting prior to such meeting being convened, without the consent of any
BetzDearborn Shareholder.
THE BETZDEARBORN BOARD UNANIMOUSLY RECOMMENDS THAT BETZDEARBORN
SHAREHOLDERS VOTE FOR THE ADJOURNMENT PROPOSAL.
42
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1997 are derived from the audited consolidated financial statements of
BetzDearborn. The financial data for the six month periods ended June 30, 1998
and 1997 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which BetzDearborn considers necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the six months ended June 30, 1998 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1998.
The data should be read in conjunction with the consolidated financial
statements, related notes, and other financial information incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- --------------------
1997 1996 1995 1994 1993 1998 1997
-------- -------- ------ ------ ------ -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales.................................. $1,294.8 $1,037.0 $752.5 $708.3 $684.9 $ 619.3 $ 628.8
Operating Costs and Expenses:
Cost of products sold.................... 518.7 409.3 273.7 252.5 237.5 254.3 251.1
Selling, research and administrative
expenses............................... 570.6 472.0 353.2 338.3 329.9 292.6 277.7
Provision for
integration/restructuring.............. 15.6 30.0 15.6 -- 16.2 -- 15.3
-------- -------- ------ ------ ------ -------- --------
1,104.9 911.3 642.5 590.8 583.6 546.9 544.1
-------- -------- ------ ------ ------ -------- --------
Operating Earnings......................... 189.9 125.7 110.0 117.5 101.3 72.4 84.7
Other Income (Expense):
Investment income and other, net......... (1.5) (0.3) 2.7 3.6 2.9 (0.2) (0.2)
Interest expense......................... (45.5) (25.7) (1.1) (0.2) (0.1) (19.7) (23.0)
-------- -------- ------ ------ ------ -------- --------
(47.0) (26.0) 1.6 3.4 2.8 (19.9) (23.2)
-------- -------- ------ ------ ------ -------- --------
Earnings Before Income Taxes and Cumulative
Effect of Accounting Changes............. 142.9 99.7 111.6 120.9 104.1 52.5 61.5
Income Taxes............................... 50.7 35.4 43.3 47.7 40.7 18.6 21.8
Cumulative Effect of Accounting Changes,
net...................................... (6.0) -- -- -- 2.1 -- --
Net Earnings............................... $ 86.2 $ 64.3 $ 68.3 $ 73.2 $ 65.5 $ 33.9 $ 39.7
-------- -------- ------ ------ ------ -------- --------
-------- -------- ------ ------ ------ -------- --------
Earnings per Share of Common Stock:
Basic.................................... $ 2.81 $ 2.13 $ 2.30 $ 2.47 $ 2.15 $ 1.06 $ 1.30
Diluted.................................. $ 2.61 $ 2.01 $ 2.16 $ 2.30 $ 2.01 $ 1.01 $ 1.21
Cash Dividends Declared per Share of Common
Stock.................................... $ 1.51 $ 1.49 $ 1.47 $ 1.43 $ 1.39 $ 0.76 $ 0.75
Average Number of Shares of Common Stock
(in millions):
Basic.................................... 28.7 27.7 27.6 27.6 28.1 29.4 28.5
Diluted.................................. 32.0 30.7 30.6 30.8 31.4 32.4 31.8
SELECTED BALANCE SHEET DATA:
Total assets............................. $1,433.6 $1,418.3 $630.5 $555.5 $521.1 $1,393.1 $1,436.1
Long-term debt........................... $ 679.5 $ 745.5 $ 96.5 $ 97.5 $ 98.0 $ 681.4 $ 755.3
</TABLE>
- ------------------
Notes: On June 28, 1996, BetzDearborn acquired the Dearborn Division of W.R.
Grace and Co.
1997 includes the cumulative effect of accounting change relating to
business process reengineering amounting to basic and diluted earnings
per share of ($.21) and ($.19), respectively.
1993 includes the cumulative effect of accounting changes relating to
income taxes, retiree health benefits and pensions amounting to basic and
diluted earnings per share of $.07.
43
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes information regarding beneficial ownership of
the Common Stock by owners of more than 5% of such shares, as of September 4,
1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAMES AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS OUTSTANDING
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Scudder, Stevens & Clark, Inc. 2,678,024(1) 8.99%
345 Park Avenue
New York, NY 10154
Common Stock The Regents of 1,573,500(2) 5.28%
the University of California
300 Lakeside Drive
Oakland, CA 94612
</TABLE>
- ------------------
(1) Based on information provided to BetzDearborn as of June 30, 1998.
(2) Based on information provided to BetzDearborn as of August 13, 1998.
BetzDearborn is not aware of any other person or group which is the
beneficial owner of more than 5% of the Common Stock or Preferred Stock.
The table below includes information regarding beneficial ownership of
BetzDearborn's shares by each Director, nominee and named executive officer, as
defined below, and for all Directors and executive officers of BetzDearborn as a
group as of September 4, 1998. Unless otherwise indicated in the footnotes, each
individual exercises sole voting and investment power over all common shares set
forth opposite his or her name.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COMMON PERCENT OF DEFERRED PLAN PERCENT OF
SHARES(1) CLASS OUTSTANDING SHARES(2) CLASS OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John W. Boyer, Jr................................ 1,700 * 893 *
Patrick F. Brennan............................... 2,200 * 2,172 *
William R. Cook.................................. 55,219(3) * -- *
John G. Drosdick................................. 2,375 * -- *
Richard A. Heberle............................... 20,444(3) * -- *
Alan R. Hirsig................................... 1,600 * 893 *
John L. Holland.................................. 11,981(3) * -- *
Ronald A. Kutsche................................ 12,931(3) * -- *
John F. McCaughan................................ 44,450(4) * 378 *
John Quarles..................................... 1,700 * 2,657 *
Larry V. Rankin.................................. 17,648(3) * -- *
John A.H. Shober................................. 3,500 * 893 *
Robert L. Yohe................................... 2,000 * 2,172 *
All Directors and executive officers as a group
(15 persons)................................... 189,989 * 10,058 *
</TABLE>
- ------------------
* Indicates ownership of less than 1% of the class outstanding.
(1) The numbers shown include shares granted subject to forfeiture and
restrictions on transfer pursuant to the Stock Incentive Plan over which the
persons named have voting power as follows: Mr. Cook, 22,244 shares; Mr.
Heberle, 5,190 shares; Mr. Holland, 5,159 shares; Mr. Kutsche, 5,839 shares;
and Mr. Rankin, 5,556 shares; all Directors and executive officers as
44
<PAGE>
a group (15 persons), 48,906 shares. Also included is each person's
respective interest in certain shares held by the Trustee of the KESOP over
which such persons have voting and investment power: Mr. Cook, 741 shares;
Mr. Heberle, 505 shares; Mr. Holland, 152 shares; Mr. Kutsche, 185 shares;
Mr. McCaughan, 10,699 shares; and Mr. Rankin, 2,815 shares; all Directors
and executive officers as a group (15 persons), 15,862 shares. Not included
are shares which may be acquired upon the exercise of Stock Options granted
under the 1981 and 1987 Stock Option Plans over which the named individuals
have neither voting nor investment power until exercise of the Stock
Options: Mr. Cook, 168,904 shares; Mr. Heberle, 46,253 shares; Mr. Holland,
45,394 shares; Mr. Kutsche, 64,754 shares; and Mr. Rankin, 64,943 shares;
all Directors and executive officers as a group (15 persons), 552,836
shares.
(2) Deferred Plan shares represent shares of Common Stock hypothetically
purchased by the persons named under the Company's Directors' Deferred
Compensation Plan. Such Plan provides that Directors who are not employees
of the Company may elect to defer all or any portion of their compensation
earned as a Director and invest such amount in shares of common stock of the
Company. Common stock so invested is adjusted to reflect stock dividends and
splits; however, upon retirement, payments of deferred compensation are made
in cash.
(3) Does not include interest in shares of Preferred Stock over which the
persons named have voting power only as follows: Mr. Cook, 270 shares; Mr.
Heberle, 248 shares; Mr. Holland, 210 shares; Mr. Kutsche, 248 shares; Mr.
McCaughan, 232 shares; and Mr. Rankin, 268 shares.
(4) Does not include 200 shares held by Mr. McCaughan's wife for herself or as a
trustee or 280 shares held by his mother for herself with respect to which
Mr. McCaughan disclaims beneficial ownership.
- --------------------------------------------------------------------------------
45
<PAGE>
MARKET PRICES OF COMMON STOCK
The Common Stock is traded on the NYSE under the symbol "BTL." The
following table reflects the range of the reported high and low closing prices
of Common Stock on the NYSE Composite Tape for the calendar quarters indicated
and the per share dividends paid on the Common Stock.
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW DIVIDENDS
- ---------------------------------------------------------------------------------- ------ ------ ---------
<S> <C> <C> <C>
1995:
First quarter................................................................... $46.63 $42.88 .36
Second quarter.................................................................. 45.63 41.25 .36
Third quarter................................................................... 46.38 40.75 .37
Fourth quarter.................................................................. 41.63 38.75 .37
1996:
First quarter................................................................... $47.25 $40.13 .37
Second quarter.................................................................. 48.00 41.75 .37
Third quarter................................................................... 53.50 43.13 .37
Fourth quarter.................................................................. 60.13 50.00 .375
1997:
First quarter................................................................... $67.25 $55.25 .375
Second quarter.................................................................. 67.38 61.25 .375
Third quarter................................................................... 71.00 59.69 .375
Fourth quarter.................................................................. 70.13 57.69 .38
1998:
First quarter................................................................... $65.13 $55.00 .38
Second quarter.................................................................. 58.00 41.38 .38
Third quarter
(through September 3, 1998).................................................. $69.25 $34.13 .38
</TABLE>
On July 29, 1998, the last full trading day prior to the execution,
delivery and public announcement of the Merger Agreement, the closing price of
the Common Stock was $35.88 per share, as reported on the NYSE Composite Tape.
On September 3, 1998, the most recent practicable date prior to the mailing of
this Proxy Statement, the closing price of Common Stock was $62.44 per share, as
reported on the NYSE Composite Tape. BetzDearborn Shareholders are encouraged to
obtain current market quotations for Common Stock.
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP, BetzDearborn's independent auditors,
are expected to be present at the Special Meeting with the opportunity to make
statements if they so desire. Such representatives are also expected to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals in respect of the 1999 Annual Meeting of BetzDearborn
Shareholders are required to be submitted to BetzDearborn by November 9, 1998
for inclusion in the proxy statement and form of proxy relating to that meeting.
If the Merger is consummated, there will be no 1999 Annual Meeting of
BetzDearborn Shareholders.
46
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
HERCULES INCORPORATED,
WATER ACQUISITION CO.
AND
BETZDEARBORN INC.
DATED AS OF JULY 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of July 30, 1998 (the "Agreement"),
among Hercules Incorporated, a Delaware corporation ("Parent"), Water
Acquisition Co., a Pennsylvania corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and BetzDearborn Inc., a Pennsylvania corporation (the
"Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved the acquisition of the Company by Parent upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement and the merger of Merger Sub with and into
the Company (the "Merger") in accordance with the Pennsylvania Business
Corporation Law of 1988, as amended (the "PBCL"), and upon the terms and subject
to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, Parent, Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement and in accordance with the PBCL, Merger Sub shall be
merged with and into the Company at the Effective Time (as defined below) of the
Merger. Following the Merger, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with the PBCL.
Section 1.2. CLOSING. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to the satisfaction or waiver of the conditions set forth
in Article VI) shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Section 6.1, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware,
unless another date or place is agreed to in writing by the parties hereto.
Section 1.3. EFFECTIVE TIME. Subject to the provisions of this Agreement,
on the Closing Date, the parties shall file in the office of the Department of
State of the Commonwealth of Pennsylvania articles of merger (the "Articles of
Merger") containing the information required to be set forth therein under
Section 1926 of the PBCL and executed in accordance with the PBCL and shall make
all other filings or recordings, if any, required under the PBCL. The Merger
shall become effective at the time of filing of the Articles of Merger, or at
such later time as is agreed upon by the parties hereto and set forth in an
amendment to this Agreement (such time as the Merger becomes effective is
referred to herein as the "Effective Time").
Section 1.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 1929 of the PBCL.
A-1
<PAGE>
Section 1.5. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION.
(a) At the Effective Time, the Restated Articles of Incorporation of
the Company as in effect immediately prior to the Effective Time shall
become the articles of incorporation of the Surviving Corporation after the
Effective Time, until thereafter amended as provided by the PBCL and
therein.
(b) The Bylaws of the Company as in effect immediately prior to the
Effective Time shall become the bylaws of the Surviving Corporation after
the Effective Time, until thereafter amended as provided by the PBCL, the
articles of incorporation of the Surviving Corporation and such Bylaws.
Section 1.6. DIRECTORS. The directors of Merger Sub immediately prior to
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their death, resignation or removal or until their
respective successors are duly elected and qualified.
Section 1.7. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall become the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified.
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.1. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Merger Sub or the
holders of any securities of the Company or Merger Sub:
(a) Each Common Share, par value $0.10 per share, of the Company (the
"Company Common Shares") issued and held, immediately prior to the
Effective Time, in the Company's treasury or by any of the Company's direct
or indirect wholly owned subsidiaries, and each Company Common Share that
is owned by Parent, Merger Sub or any other subsidiary of Parent, shall
automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding Company Common Share (other than
shares to be cancelled in accordance with Section 2.1(a) and Dissenting
Shares (as defined below)), including Company Common Shares outstanding by
virtue of the conversion immediately prior to the Effective Time of each
share of issued and outstanding Series A ESOP Convertible Preferred Stock,
par value $.10 per share, of the Company (the "Company Series A Preferred
Shares"), shall be converted into the right to receive $72 in cash, without
interest thereon (the "Merger Consideration"). As of the Effective Time,
all Company Common Shares converted pursuant to Sections 2.1(a) or (b)
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Company Common Shares (together with certificates which
immediately prior to the Effective Time represented outstanding Company
Series A Preferred Shares, the "Certificates") shall cease to have any
rights as shareholders of the Company, except the right to receive the
Merger Consideration for Company Common Shares held by them.
(c) Shares of Dissenting Shareholders. Notwithstanding any provision
of this Agreement to the contrary, any issued and outstanding Company
Common Shares ("Dissenting Shares") held by a Dissenting Shareholder (as
defined below) shall not be converted as described in Section 2.1(b) but
shall become the right to receive such consideration as may be determined
to be
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due to such Dissenting Shareholder pursuant to the PBCL; provided, however,
that each Company Common Share outstanding immediately prior to the
Effective Time and held by a Dissenting Shareholder who, after the
Effective Time, loses his or her right of appraisal, pursuant to the PBCL,
shall be deemed to be converted as of the Effective Time into the right to
receive the Merger Consideration. The Company shall give Parent (i) prompt
notice of any written demands for appraisal of Company Common Shares
received by the Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to any such demands. The Company shall not,
without prior written consent of Parent, voluntarily make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands. As used in this Agreement, the term "Dissenting Shareholder" means
any record holder or beneficial owner of Company Common Shares or Company
Series A Preferred Shares who complies with all provisions of the PBCL
concerning the right of holders of Company Common Shares and Company Series
A Preferred Shares to dissent from the Merger and obtain fair value for
their shares.
(d) Each issued and outstanding common share, par value $.01 per
share, of Merger Sub shall be converted into one validly issued, fully paid
and nonassessable common share of the Surviving Corporation.
Section 2.2. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time, Parent shall enter
into an agreement with American Stock Transfer & Trust Co., or such other
bank or trust company as may be designated by Parent and as shall be
reasonably satisfactory to the Company (the "Exchange Agent"). No later
than the Effective Time, Parent shall deposit with the Exchange Agent, for
the benefit of the holders of Company Common Shares, for exchange in
accordance with this Article II, through the Exchange Agent, cash in an
amount sufficient to make any cash payment due under Section 2.1 (the
"Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1(b) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify), and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor the product of the Merger Consideration multiplied by
the number of Company Common Shares represented by such Certificate
(including, with respect to Certificates representing Company Series A
Preferred Shares, the number of Company Common Shares into which such
Company Series A Preferred Shares have been converted immediately prior to
the Effective Time), and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Company Common Shares
or Company Series A Preferred Shares represented by any Certificate which
is not registered in the transfer records of the Company, the Merger
Consideration payable in respect of such Company Common Shares or such
Company Series A Preferred Shares may be issued to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or
other non-income taxes required by reason of the payment of such Merger
Consideration to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that any such tax
has been paid or is
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not applicable. Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Shares such amounts as Parent or
the Exchange Agent is required to withhold or deduct under the Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state,
local or foreign law with respect to the making of such payment. To the
extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of Company Common Shares in respect of whom
such deduction and withholding were made by Parent or the Exchange Agent.
Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the Merger Consideration into which
the Company Common Shares formerly represented by such Certificate
(including, with respect to Certificates that represented Company Series A
Preferred Shares, the Company Common Shares into which the Company Series A
Preferred Shares were converted immediately prior to the Effective Time)
have been converted. No interest will be paid or will accrue on any cash
payable to holders of Certificates pursuant to the provisions of this
Article II.
(c) Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the Company Common Shares or Company Series A
Preferred Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
cancelled and exchanged as provided in this Article II, except as otherwise
provided by law.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for nine
months after the Effective Time shall be delivered to Parent upon demand,
and any holders of the Certificates who have not theretofore complied with
this Article II shall thereafter look only to Parent for payment of their
claim for Merger Consideration.
(e) No Liability. None of the Company, Parent, Merger Sub, the
Surviving Corporation or the Exchange Agent shall be liable to any person
in respect of any Merger Consideration paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(f) Investment of Exchange Fund. The Exchange Agent shall invest all
cash included in the Exchange Fund, as reasonably directed by Parent, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Parent.
(g) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will pay in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable in respect
thereof pursuant to this Agreement.
Section 2.3. STOCK OPTIONS AND RESTRICTED SHARES.
(a) Each Stock Option (as defined below) outstanding at the Effective
Time, whether or not exercisable, shall, at the Effective Time, be
cancelled and shall thereupon be converted into the right to receive cash,
without interest thereon, in the amount, if any, equal to the product of
(i) the number of Company Common Shares issuable upon the exercise of such
Stock Option (the "Option Shares") multiplied by (ii) the amount, if any,
by which the Merger Consideration
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exceeds the per share exercise price with respect to such Option Shares;
provided, however, that each Stock Option granted under the ESPP (as
defined below) shall be deemed for purposes hereof to have a per share
exercise price of zero.
(b) Any and all restrictions pursuant to the Stock Incentive Plan (as
defined below) on the ownership of each Company Common Share issued
pursuant to the Stock Incentive Plan and outstanding immediately prior to
the Effective Time ("Restricted Shares") shall lapse at the Effective Time.
(c) Notwithstanding anything to the contrary herein, if it is
determined that compliance with any of the foregoing provisions of this
Section 2.3 may cause any individual subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to become
subject to the profit recovery provisions thereof, any Stock Options held
by such individual may, if such person so agrees, subject to the proviso of
this sentence, be cancelled or purchased, as the case may be, at the
Effective Time or at such later time as may be necessary to avoid
application of such profit recovery provisions and such person will be
entitled to receive from the Company or the Surviving Corporation cash in
the amount, if any, equal to the product of (i) the number of Option Shares
multiplied by (ii) the amount, if any, by which the Merger Consideration
exceeds the per share exercise price with respect to such Option Shares;
provided that the parties hereto will cooperate, including by attempting to
provide alternate arrangements, so as to achieve the intent of the
foregoing without giving rise to such profit recovery.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth with respect to matters disclosed in the letter
delivered by the Company to Parent prior to the execution of this Agreement (the
"Company Letter") or in the Company SEC Reports (as defined below) filed with
the SEC prior to the execution of this Agreement, the Company represents and
warrants to Parent and Merger Sub as follows:
Section 3.1. ORGANIZATION; QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect (as hereinafter defined) on the
Company. As used in this Agreement, any reference to any state of facts, event,
change or effect having a "Material Adverse Effect" on or with respect to the
Company or Parent, as the case may be, means such state of facts, event, change
or effect that has had, or would reasonably be expected to have, a material
adverse effect on the business, assets or financial condition of the Company and
its Subsidiaries (as defined below), taken as a whole, or Parent and its
Subsidiaries, taken as a whole, as the case may be. Each of the Company's
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate power and authority to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the conduct of its business requires such
qualification, except for jurisdictions in which the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. All outstanding shares of capital stock of, or
other ownership interests in, the Company's Subsidiaries (i) are validly issued,
fully paid and non-assessable, (ii) except for director qualifying shares and
minimum shareholder requirements or as may
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be required under applicable foreign laws, are owned by the Company, directly or
indirectly, and (iii) to the extent owned by the Company, directly or
indirectly, are free and clear of all liens, claims, mortgages, encumbrances,
pledges, security interests, equities or charges of any kind (each, a "Lien").
There are no existing options, rights of first refusal, preemptive rights,
calls, claims or commitments of any character relating to the issued or unissued
capital stock or other securities of, or other ownership interests in, any
Subsidiary of the Company, except for director qualifying shares and minimum
shareholder requirements or as may be required under applicable foreign laws.
Section 3.2. CAPITAL STOCK.
(a) The authorized capital stock of the Company consists of (i)
250,000,000 Company Common Shares and (ii) 1,000,000 preferred shares, par
value $.10 per share, of which 500,030 shares have been designated as
Company Series A Preferred Shares. At the close of business on July 24,
1998, (i) 33,630,831 Company Common Shares were issued, of which 3,876,818
Company Common Shares were held by the Company in its treasury, (ii)
471,271 Company Series A Preferred Shares were issued and outstanding (and
2,638,991 Company Common Shares were reserved for issuance upon the
conversion thereof), (iii) 4,986,186 Company Common Shares were reserved
for issuance pursuant to the Company's 1981 and 1987 Employee Stock Option
Plans (together, the "Stock Option Plan"), (iv) 256,508 Company Common
Shares were reserved for issuance pursuant to the Company's 1997 Employee
Stock Purchase Plan (the "ESPP") and (v) 425,474 Company Common Shares were
reserved for issuance pursuant to the Company's Employee Stock Incentive
Plan (the "Stock Incentive Plan"). In addition, Company Common Shares are
potentially issuable upon distribution and exercise of the rights (the
"1988 Rights") to purchase Company Common Shares issued pursuant to the
Rights Agreement dated as of January 1, 1992 (as amended from time to time,
the "1988 Rights Plan") between the Company and American Stock Transfer and
Trust Company, as rights agent, which restates with a successor rights
agent the Rights Agreement dated as of September 8, 1988 between the
Company and Mellon Bank (East) N.A., as rights agent. The 1988 Rights
Agreement expires on September 19, 1998 and from and after that date,
Company Common Shares will be potentially issuable upon distribution and
exercise of the rights (the "Rights") to purchase Company Common Shares
pursuant to the Rights Agreement dated as of February 12, 1998 (as amended
from time to time, the "Company Rights Plan") between the Company and
American Stock Transfer and Trust Company, as rights agent. At the close of
business on July 24, 1998, (i) options under the Stock Option Plan to
acquire 3,797,214 Common Shares were outstanding, of which options to
acquire 3,173,349 Company Common Shares were exercisable, and (ii) options
to acquire 1,188,972 Company Common Shares remained available for grant
under the Stock Option Plan. During the period commencing on January 1,
1998 and ending on June 30, 1998, 96,277 Company Common Shares were
acquired pursuant to Stock Options exercised under the ESPP. Except as set
forth above, at the close of business on July 24, 1998, no shares of
capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. At the close of business on July 24,
1998, there were no outstanding stock appreciation rights or rights (other
than outstanding employee stock options to purchase Company Common Shares
pursuant to the Stock Option Plan or the ESPP (collectively, the "Stock
Options") to purchase or acquire Company Common Shares on a deferred basis.
All outstanding shares of capital stock of the Company are, and all shares
which may be issued will be, when issued and paid for, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no notes, bonds, debentures or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders
of the Company may vote. Except as set forth above or in Section 3.1, at
the close of business on July 24, 1998, there were no outstanding
securities, options, warrants,
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calls, rights, commitments, agreements, arrangements or undertakings of any
kind to which the Company or any of its Subsidiaries was a party or by
which any of them was bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of the
Company or of any of its Subsidiaries or obligating the Company or any of
its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. At the close of business on July 24, 1998, except as provided
pursuant to the terms of the Company Series A Preferred Shares, there were
no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries. At the close of
business on July 24, 1998, there were no outstanding contractual
obligations of the Company to vote or to dispose of any shares of the
capital stock of any of its Subsidiaries.
Section 3.3. CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION;
NO EXISTING VIOLATION.
(a) The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (subject to the terms and conditions hereof) have been
duly and validly authorized by the Board of Directors of the Company (the
"Company Board"), and except for the approval and adoption of this
Agreement by the Company's shareholders, no other corporate proceedings on
the part of the Company are necessary to authorize the execution and
delivery of this Agreement, or the consummation of the transactions
contemplated hereby. As of the date hereof, the Company Board has
determined that the transactions contemplated by this Agreement are in the
best interests of the Company and its shareholders and to recommend to such
shareholders that they approve and adopt this Agreement. This Agreement has
been duly and validly executed and delivered by the Company and, assuming
this Agreement constitutes the valid and binding agreement of the other
parties hereto, this Agreement constitutes the valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms.
(b) The execution and delivery by the Company of this Agreement do
not, and the consummation by the Company of the transactions contemplated
hereby will not, result in any violation of, default or event of default
(with or without notice or lapse of time or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries under: (i) any provision of the Restated Articles of
Incorporation or Bylaws of the Company or the comparable organizational
documents of any of its Subsidiaries, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease, agreement, instrument, permit,
concession, franchise, license or guarantee applicable to the Company or
any of its Subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such violations, defaults,
events of default, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or prevent the consummation of any
of the transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any governmental body or authority
is required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the
Company, or the consummation of the transactions contemplated hereby,
except: (i) in connection, or in compliance, with the provisions of the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), applicable non-United States
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competition, antitrust and investment laws, and the Exchange Act, (ii) for
the filing of Articles of Merger with the Department of State of the
Commonwealth of Pennsylvania and (iii) for such other consents, orders,
authorizations, registrations, declarations and filings the failure of
which to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and would not prevent the
consummation of any of the transactions contemplated hereby.
(c) Neither the Company nor any of its Subsidiaries is in violation of
(i) its charter or other organizational documents or by-laws, (ii) any
applicable law, ordinance or administrative or governmental rule or
regulation or (iii) any order, decree or judgment of any governmental body
or authority having jurisdiction over the Company or any of its
Subsidiaries, except, in the case of clause (i) with respect to the
Company's Subsidiaries and, in the case of clause (ii) or (iii) with
respect to the Company and its Subsidiaries, for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect
on the Company. As of the date hereof, there is no existing default, event
of default or event that, but for the giving of notice or lapse of time or
both, would constitute a default or event of default under any loan or
credit agreement, note, bond, mortgage, indenture, lease, agreement,
instrument, permit, concession, franchise, license or guarantee, which
would, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.4. REPORTS AND FINANCIAL STATEMENTS. Since June 30, 1996, the
Company has filed all reports, statements, prospectuses and other filings
required to be filed by it with the Securities and Exchange Commission (the
"SEC") under the rules and regulations of the SEC. As of their respective dates,
such reports, statements, prospectuses and other filings (collectively, the
"Company SEC Reports") filed with the SEC prior to the date of this Agreement
(i) complied, and each Company SEC Report filed with the SEC on or after the
date of this Agreement (collectively, the "Subsequent SEC Reports") will comply,
as to form in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act
and, in each case, the rules and regulations promulgated thereunder and (ii) did
not, and each Subsequent SEC Report will not, at the time of filing, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements included in the Company SEC Reports (including any related notes and
schedules) fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods or as of the dates then
ended (subject, in the case of the unaudited interim financial statements, to
normal recurring year-end adjustments and any other adjustments described
therein), in each case, in accordance with generally accepted accounting
principles in the United States ("GAAP") consistently applied during the periods
involved (except as otherwise disclosed therein or in the notes thereto). None
of the Company's Subsidiaries is required to file any reports, statements,
prospectuses or other filings with the SEC.
Section 3.5. NO UNDISCLOSED LIABILITIES. As of the date hereof, neither
the Company nor any of its Subsidiaries has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and there is no
existing condition, situation or set of circumstances which would reasonably be
expected to result in such a liability or obligation, in each case, that would
be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its Subsidiaries (or disclosed in the notes thereto) except
liabilities or obligations which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
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Section 3.6. PERMITS; NO VIOLATION OF LAW.
(a) The Company and its Subsidiaries have received such certificates,
permits, licenses, franchises, consents, approvals, orders, authorizations
and clearances from appropriate governmental bodies and authorities (the
"Company Licenses") as are necessary to conduct their respective businesses
substantially in the manner currently conducted, and all such Company
Licenses are valid and in full force and effect, except for any such
Company Licenses which the failure to have or to be in full force and
effect would not have, individually or in the aggregate, a Material Adverse
Effect on the Company. The Company and its Subsidiaries are in compliance
with their respective obligations under the Company Licenses, with only
such exceptions as, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(b) The businesses of the Company and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any
governmental body or authority (provided that no representation or warranty
is made in this Section 3.6 with respect to Environmental Laws (as
hereinafter defined)) except for violations or possible violations which
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
Section 3.7. ENVIRONMENTAL LAWS AND REGULATIONS. (a) The Company and each
of its Subsidiaries is in compliance with all applicable federal, state, local
and foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), which compliance includes, but is not limited to, the
possession by the Company and its Subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, except for non-compliance
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company; (b) neither the Company nor any of its Subsidiaries has
received written notice of, or, is the subject of, any actions, causes of
action, claims, investigations, demands or notices by any person asserting an
obligation to conduct investigations or clean-up activities under Environmental
Law or alleging liability under or non-compliance with any Environmental Law
(collectively, "Environmental Claims") which would, individually or in the
aggregate, have a Material Adverse Effect on the Company; and (c) to the
Company's knowledge, there are no facts, circumstances or conditions in
connection with the operation of its business or any currently or formerly
owned, leased or operated facilities that are reasonably likely to lead to any
Environmental Claims in the future which would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.8. EMPLOYEE BENEFIT PLANS. The Company Letter sets forth the
name of each material Company Plan (as defined below). Except as set forth in
the Company Letter, true, correct and complete copies of such material Company
Plans have heretofore been delivered to Parent. Each Company Plan that is an
employment, severance, termination, consulting or retirement plan or agreement
which contains any provision that becomes effective upon the occurrence of a
change of control of the Company is referred to herein as a "Severance
Arrangement" and is specifically identified as such in the Company Letter. Each
Company Plan complies in all material respects with the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA"), the Code (to the extent that ERISA and the
Code are applicable) and all other applicable laws and administrative or
governmental rules and regulations. No "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred with respect to any Company Plan for which
the 30-day notice requirement has not been waived (other than with respect to
the transactions contemplated by this Agreement), and no condition exists which
would subject the Company or any ERISA Affiliate (as defined below) to any fine
under Section 4071 of ERISA; and no action has been taken, or is currently being
considered, to terminate any Company Plan subject to Title
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IV of ERISA. No Company Plan, or any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. There are no actions, suits or claims pending or, to the
Company's knowledge, threatened (other than routine claims for benefits) with
respect to any Company Plan which would have, individually or in the aggregate,
a Material Adverse Effect on the Company. Neither the Company nor any of its
ERISA Affiliates has incurred or would reasonably be expected to incur any
liability under or pursuant to Title IV of ERISA that has not previously been
satisfied (other than payment of premiums to the PBGC). No prohibited
transactions described in Section 406 of ERISA or Section 4975 of the Code have
occurred which would result in any material liability to the Company or its
Subsidiaries. All Company Plans that are intended to be qualified under Section
401(a) of the Code have received a favorable determination letter as to such
qualification from the Internal Revenue Service, and the Company knows of no
event that has occurred, either by reason of any action or failure to act, which
would cause the loss of any such qualification. There are no Company
Multiemployer Plans. As used herein: (i) "Company Plan" means each deferred
compensation and each incentive compensation, equity compensation plan,
"welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA);
"pension" plan, fund or program (within the meaning of Section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by the
Company or an "ERISA Affiliate", or to which the Company or an ERISA Affiliate
is party, whether written or oral, for the benefit of any employee or former
employee of the Company or any Subsidiary other than a Company Multiemployer
Plan (the "Company Plans"); (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which the
Company or any of its ERISA Affiliates is or has been obligated to contribute or
otherwise may have any liability; and (iii) "ERISA Affiliate" means any trade or
business, whether or not incorporated, that together with the Company or any of
its Subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b)(1) of ERISA.
Section 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1998
(a) the businesses of the Company and its Subsidiaries have been conducted in
the ordinary course consistent with past practice, (b) there has not been any
event, occurrence, development or state of circumstances or facts that has had,
or would have, a Material Adverse Effect on the Company and (c) neither the
Company nor any of its Subsidiaries has taken any action or omitted to take any
action, which act or omission, if taken after the date of this Agreement, would
result in a breach or violation of Section 5.1(e), (i), (m), (n) or (o).
Section 3.10. INVESTIGATIONS; LITIGATION.
(a) To the Company's knowledge, there is no investigation or review
pending by any governmental body or authority with respect to the Company
or any of its Subsidiaries which would, individually or in the aggregate,
have a Material Adverse Effect on the Company, nor has any governmental
body or authority notified the Company of an intention to conduct the same;
and
(b) There are no actions, suits or proceedings pending (or, to the
Company's knowledge, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign governmental body or authority
which, individually or in the aggregate, would have a Material Adverse
Effect on the Company.
Section 3.11. PROXY STATEMENT. None of the information to be included in
the Proxy Statement (as defined below) or any amendments thereof or supplements
thereto will, at the time of the mailing of the Proxy Statement or any
amendments or supplements thereto, and at the time of the Company
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Meeting (as defined below), contains any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information regarding Parent and Merger Sub that is
incorporated by reference or supplied to the Company by or on behalf of Parent
or Merger Sub for inclusion in the Proxy Statement or any amendments thereof or
supplements thereto. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. The letter to shareholders of the Company, notice of
meeting, proxy statement and form of proxy to be distributed to holders of
Company Common Shares and Company Series A Preferred Shares in connection with
the Merger and any annexes, schedules and exhibits required to be filed with the
SEC in connection therewith are collectively referred to herein as the "Proxy
Statement."
Section 3.12. COMPANY RIGHTS PLAN. The Company, including the Company
Board, has taken all action necessary to ensure that the execution and delivery
of this Agreement, and, subject to the accuracy of the representations and
warranties contained in Section 4.8, the consummation of the transactions
contemplated hereby, including the Merger, will not cause (i) Parent or Merger
Sub to become an "Acquiring Person" (as defined in the Company Rights Plan or
the 1988 Rights Plan), (ii) a "Stock Acquisition Date" (as defined in the
Company Rights Plan or the 1988 Rights Plan) or a "Distribution Date" (as
defined in the Company Rights Plan or the 1988 Rights Plan) to occur, (iii) the
Rights issued pursuant to the Company Rights Plan to become exercisable or (iv)
the 1988 Rights issued pursuant to the 1988 Rights Plan to become exercisable.
Section 3.13. TAX MATTERS.
(a) All federal, state, local and foreign Tax Returns (as defined
below) required to be filed by or on behalf of the Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group
of which the Company or any of its Subsidiaries is or was a member
("Company Affiliated Group"), have been timely filed (taking into account
extensions), and all such Tax Returns are complete and accurate except to
the extent any failure to file or any inaccuracies in filed Tax Returns
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. All material Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Affiliated Group have been timely
paid (taking into account extensions), or adequately reserved for in
accordance with GAAP in the financial statements included in the Company
SEC Reports filed with the SEC prior to the date of this Agreement. There
are no liens for Taxes upon any assets of the Company, the Subsidiaries of
the Company or any Company Affiliated Group apart from liens for Taxes not
yet due and payable and liens for Taxes which would not have a Material
Adverse Effect on the Company. There is no audit examination, deficiency,
refund litigation, proposed adjustment or matter in controversy with
respect to (i) any federal Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Affiliated Group or (ii) any Taxes
(other than federal Taxes) due and owing by the Company, any Subsidiary of
the Company or any Company Affiliated Group except those relating to Taxes
(other than federal Taxes) which, if adversely determined, would not have a
Material Adverse Effect on the Company. Prior to the date of this
Agreement, the Company has provided Parent with written schedules of (i)
the taxable years of the Company for which the statutes of limitations with
respect to federal and Material State (as defined below) income Taxes have
not expired, and (ii) with respect to federal and Material State income
Taxes, those years for which examinations have been completed, those years
for which examinations are presently being conducted, and those years for
which examinations have not yet been initiated. The Company and each of its
Subsidiaries have complied in all respects with all rules and regulations
relating to the payment and withholding of Taxes, except to the extent any
such failure to comply would not,
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individually or in the aggregate, have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries (i) has waived any
statutory period of limitations in respect of its or their Taxes or Tax
Returns except where such waiver would not have a Material Adverse Effect
on the Company or (ii) is a party to, bound by or has any obligation under
any Tax sharing, allocation, indemnity, or similar contract or arrangement.
(b) For purposes of this Agreement: (i) "Taxes" means any and all
federal, state, local, foreign, provincial, territorial and other taxes,
imposts, rates, levies, assessments and other charges of any kind
whatsoever whether imposed directly or through withholding (together with
any and all interest, penalties, additions to tax and additional amounts
applicable with respect thereto), including income, franchise, windfall and
other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, net worth, excise, withholding, ad valorem and value added
taxes; (ii) "Tax Return" means any declaration, return, report, schedule,
certificate, statement or other similar document (including relating or
supporting information) required to be filed or, where none is required to
be filed with a taxing authority, the statement or other document issued by
a taxing authority in connection with any Tax, including any information
return, claim for refund, amended return or declaration of estimated Tax;
and (iii) "Material State" means any state for which the allocation
percentage of any of the Company, BetzDearborn Hydrocarbon Process Group or
BetzDearborn Paper Process Group in the 1996 taxable year exceeds 10%.
Section 3.14. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received the opinion of J.P. Morgan Securities Inc., dated the date
of this Agreement, to the effect that, as of such date, the Merger Consideration
is fair to the holders of Company Common Shares from a financial point of view.
Section 3.15. REQUIRED VOTE OF THE COMPANY SHAREHOLDERS. The affirmative
vote of the holders of (a) a majority of the outstanding Company Common Shares
and Company Series A Preferred Shares, voting together and not by class, and (b)
at least two-thirds of the outstanding Company Common Shares and Company Series
A Preferred Shares (regardless of class), voting together and not by class,
represented in person or by proxy at the Company Meeting (together, the "Company
Shareholder Approval"), are required to approve and adopt this Agreement. No
other vote of the holders of any shares of capital stock of the Company, or of
the holders of any other securities of the Company (equity or otherwise), is
required by law, including the PBCL, the Restated Articles of Incorporation or
Bylaws of the Company, or otherwise, in order for the Company to consummate the
transactions contemplated hereby, including the Merger.
Section 3.16. INTELLECTUAL PROPERTY. The Company and its Subsidiaries own,
or are validly licensed or otherwise have the right to use, all material
patents, patent rights, trademarks, trade names, service marks, copyrights,
know-how and other proprietary intellectual property rights and computer
programs that are material to the conduct of the business of the Company and its
Subsidiaries, taken as a whole (collectively, "Intellectual Property Rights").
As of the date hereof, to the Company's knowledge, no claims are pending or
threatened that the Company or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right so as to materially adversely affect any of the
Company's Intellectual Property Rights, and the Company is not aware of any
basis for any such claims. To the Company's knowledge, no person is infringing
the rights of the Company or any of its Subsidiaries with respect to any
Intellectual Property Right so as to materially adversely affect such
Intellectual Property Right.
Section 3.17. LABOR MATTERS. As of the date hereof, neither the Company
nor any of its Subsidiaries is party to any collective bargaining agreement,
memorandum of understanding, settlement or other labor agreement with any union
or labor organization and no union or labor
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organization has been recognized by the Company or any of its Subsidiaries as an
exclusive bargaining representative for employees of the Company or any of its
Subsidiaries. As of the date hereof, to the Company's knowledge: (a) there is no
current union representation matter involving employees of the Company or any of
its Subsidiaries, nor does the Company have knowledge of any significant
activity or proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees; (b) there is no material labor
dispute, strike, picketing or work stoppage, or any lockout, involving employees
of the Company or any of its Subsidiaries pending or, to the Company's
knowledge, threatened against or involving the Company or any of its
Subsidiaries; and (c) there is no (i) arbitration, unfair labor practice,
investigation, employment discrimination or other labor or employment related
charge, complaint or claim against the Company or any of its Subsidiaries
pending or, to the Company's knowledge, threatened before any court, arbitrator,
mediator or governmental agency or tribunal, or (ii) no adjudication by any
court, arbitrator, mediator or governmental agency or tribunal that, in the case
of either clause (i) or (ii) above, has or would have a Material Adverse Effect
on the Company.
Section 3.18. TAKEOVER STATUTES. Subchapters D (Section 2538), E, F, G, H,
I and J of Chapter 25 of the PBCL do not apply to this Agreement or the
transactions contemplated hereby. The Company Board has approved this Agreement
and the transactions contemplated hereby. Part IV of Article 5th of the
Company's Restated Articles of Incorporation does not apply to this Agreement or
the transactions contemplated hereby. No Pennsylvania takeover statute (other
than Sections 1921 through 1930 of Subchapter C of Chapter 19 of the PBCL and
provisions of the PBCL generally applicable to the powers of a corporation and
the duties and powers of its board of directors in a takeover context, including
Section 1502(a)(18), 1525(b), 1715 and 2513) is applicable to the transactions
contemplated hereby, including the Merger.
Section 3.19. FINDERS OR BROKERS. Except for J.P. Morgan Securities Inc.,
a true, correct and complete copy of whose engagement agreement has been
provided to Parent, neither the Company nor any of its Subsidiaries has employed
any investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to any fee or any
commission in connection with or upon consummation of the Merger based on
arrangements made by or on behalf of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth with respect to matters disclosed in the letter
delivered by Parent to the Company prior to the execution of this Agreement (the
"Parent Letter"), or in Parent's reports, statements, prospectuses and other
filings required to be filed and filed by it with the SEC under the rules and
regulations of the SEC prior to the execution of this Agreement, Parent and
Merger Sub represent and warrant to the Company as follows:
Section 4.1. ORGANIZATION; QUALIFICATION. Parent is a corporation duly
organized, validly existing and is in good standing under the laws of the State
of Delaware; Merger Sub is a corporation duly organized, validly existing, is in
good standing under the laws of the Commonwealth of Pennsylvania and is a
direct, wholly owned subsidiary of Parent; and each of Parent and Merger Sub has
the corporate power and authority to carry on its business as it is now being
conducted and is duly qualified and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of its business requires
such qualification, except for jurisdictions in which the failure to be so
qualified or in good standing would not, individually or in the aggregate, have
a Material Adverse Effect on Parent.
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Section 4.2. CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION.
(a) Each of Parent and Merger Sub has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (subject to the terms
and conditions hereof) have been duly and validly authorized by the Board
of Directors of Parent and Merger Sub, and by Parent as the sole
shareholder of Merger Sub, and no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize the execution and
delivery of this Agreement, or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming this Agreement constitutes
the valid and binding agreement of the other party hereto, this Agreement
constitutes the valid and binding agreement of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the consummation by Parent and Merger Sub of the
transactions contemplated hereby will not, result in any violation of, or
default or event of default (with or without notice or lapse of time or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Parent or Merger Sub under: (i) any provision of the Certificate
of Incorporation or By-laws of Parent or the comparable organizational
documents of any of its Subsidiaries, including Merger Sub, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease, agreement,
instrument, permit, concession, franchise, license or guarantee applicable
to Parent or Merger Sub, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such violations, defaults,
events of default, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent or would not prevent the consummation of
any of the transactions contemplated hereby. No filing or registration
with, or authorization, consent or approval of, any governmental body or
authority is required by or with respect to Parent or any of its
Subsidiaries, including Merger Sub, in connection with the execution and
delivery of this Agreement by Parent or Merger Sub, or the consummation of
the transactions contemplated hereby, except: (i) in connection, or in
compliance, with the provisions of the HSR Act, applicable non-United
States competition, antitrust and investment laws, and the Exchange Act,
(ii) for the filing of Articles of Merger with the Department of State of
the Commonwealth of Pennsylvania and (iii) for such other consents, orders,
authorizations, registrations, declarations and filings the failure of
which to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
Section 4.3. PROXY STATEMENT. None of the information regarding Parent or
Merger Sub that is incorporated by reference or supplied to the Company by or on
behalf of Parent or Merger Sub for inclusion in the Proxy Statement or any
amendments thereof or supplements thereto will, at the time of the mailing of
the Proxy Statement or any amendments or supplements thereto, and at the time of
the Company Meeting, contains any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 4.4. LITIGATION. There are no actions, suits or proceedings
pending (or, to Parent's knowledge, threatened) against or affecting Parent or
Merger Sub or any of their respective properties at law or in equity, or before
any federal, state, local or foreign governmental body or authority which,
individually or in the aggregate, would have a Material Adverse Effect on Parent
or Merger Sub.
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Section 4.5. VOTING REQUIREMENTS. No vote of the holders of any class or
series of the capital stock of Parent is necessary to approve and adopt this
Agreement or the transactions contemplated hereby.
Section 4.6. FINANCING. At the Effective Time, Parent and Merger Sub will
have available all of the funds necessary to consummate the transactions
contemplated hereby.
Section 4.7. FINDERS OR BROKERS. Except for SBC Warburg Dillon Read Inc.,
neither Parent nor Merger Sub has employed any investment banker, broker, finder
or intermediary in connection with the transactions contemplated hereby who
might be entitled to any fee or any commission in connection with or upon
consummation of the Merger based on arrangements made by or on behalf of Parent
or Merger Sub.
Section 4.8. CONTROL SHARES, INTERESTED SHAREHOLDER OR ACQUIRING
PERSON. Except to the extent, if any, caused by the execution and delivery of
this Agreement, or the negotiation of or discussions concerning the transactions
contemplated by this Agreement, none of Parent, Merger Sub or any of their
respective "affiliates" or "associates" (each as defined in Section 2552 of the
PBCL for purposes of clauses (i) and (ii) below, as defined in the Company
Rights Plan or the 1988 Rights Plan for purposes of clause (iii) below and as
defined in Part IV of Article 5th of the Company's Restated Articles of
Incorporation for purposes of clause (iv) below) (i) directly or indirectly,
alone or as part of a group, owns or may exercise or direct the exercise of
voting power of any "control shares" of the Company as defined in Section 2562
of the PBCL, (ii) has been or is an "interested shareholder" as defined in
Section 2538 or Section 2553 of the PBCL or is, or is part of, a "controlling
person or group" (as defined in Section 2543 or 2573 of the PBCL), (iii)
directly or indirectly, together or as part of a group, is the beneficial owner
(as defined in the Company Rights Plan or the 1988 Rights Plan) of 20% or more
of the outstanding Company Common Shares or (iv) is an "Interested Shareholder"
as defined in Part IV of Article 5th of the Company's Restated Articles of
Incorporation. None of Parent, Merger Sub or any other Subsidiary of Parent
beneficially owns (as such term is defined in Section 13(d) of the Exchange Act)
any Company Common Shares, except for any such shares owned by any benefit or
similar plan of Parent as to which neither Parent nor any of its Subsidiaries
exercises investment authority.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1. CONDUCT OF BUSINESS BY THE COMPANY. From and after the date
hereof and prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1 (the "Termination
Date"), and except (i) as may be required by law, (ii) as may be agreed in
writing by Parent, (iii) as may be expressly permitted pursuant to this
Agreement or (iv) as set forth in Section 5.1 of the Company Letter, the
Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations in the ordinary course of business in substantially the same
manner as heretofore conducted;
(b) shall use all reasonable efforts, and shall cause each of its
Subsidiaries to use all reasonable efforts, to preserve intact its business
organization and goodwill, keep available the services of its key employees
and preserve its relationships with those persons having business dealings
with the Company and its Subsidiaries;
(c) shall confer at such times as Parent may reasonably request with
one or more representatives of Parent to report material matters and the
general status of ongoing operations
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and shall provide financial and operating data to Parent to the extent
reasonably requested by Parent;
(d) shall not, and shall not permit any of its Subsidiaries that is
not wholly owned to, authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of stock (other than
regular quarterly cash dividends with record dates and payment dates
consistent with past practice of not more than $.38 per Company Common
Share and $4.00 per Company Series A Preferred Share) and, with respect to
any Subsidiary of the Company that is not wholly owned by the Company,
except as contractually required on the date hereof;
(e) shall not, and shall not permit any of its Subsidiaries to, split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of the Company which remains a
wholly owned Subsidiary after consummation of such transaction;
(f) shall not, and shall not permit any of its Subsidiaries to, enter
into or amend any employment, severance or similar agreements or
arrangements with any of their respective directors or executive officers
or key employees, or adopt any new or amend any existing employee benefit
plans, programs or arrangements, except as may be required by applicable
law or an existing Company Plan or collective bargaining or similar
agreement; provided, that the Company and any Subsidiary may engage in any
of the following in the ordinary course of business with respect to key
employees: hiring and terminating; conducting performance reviews; awarding
merit increases in pay; and provision of severance payments and benefits;
and provided, further, that the Company may implement a retention plan for
key employees of the Company and its Subsidiaries, as described in the
Company Letter;
(g) subject to Section 5.7(b), shall not, and shall not permit any of
its Subsidiaries to, authorize, publicly announce or enter into an
agreement with respect to, any merger, consolidation or business
combination (other than the Merger);
(h) shall not propose or adopt any amendment to its charter or Bylaws,
or similar governing documents;
(i) shall not, and shall not permit any of its Subsidiaries to, issue
or authorize the issuance of, or agree to issue or sell any shares of their
capital stock of any class, or any other equity interests (in each case,
whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) other than the issuance of
capital stock upon exercise of Stock Options outstanding on the date hereof
and the release of shares of capital stock from restrictions pursuant to
the terms in effect on the date hereof and other than any issuances,
authorizations, agreements and sales (to the Company or any other wholly
owned Subsidiary of the Company) by a wholly owned Subsidiary of the
Company in the ordinary course of business;
(j) shall not, and shall not permit any of its Subsidiaries to,
purchase or redeem any shares of its capital stock, or any other equity
interests or any rights, warrants or options to acquire any such shares or
interests, except for any such purchases or redemptions by a wholly owned
Subsidiary of the Company in the ordinary course of business;
(k) shall not, and shall not permit any of its Subsidiaries to, incur,
assume or prepay any material indebtedness or any other material
liabilities, other than in the ordinary course of business consistent with
past practice;
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(l) shall not, and shall not permit any of its Subsidiaries to, (i)
make any material loans, advances or capital contributions to, or
investments in, any other person, other than by the Company or a Subsidiary
of the Company to or in the Company or any wholly owned Subsidiary of the
Company or (ii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), in each case, other than indebtedness, issuances of debt
securities, guarantees, loans, advances, capital contributions,
investments, payments, discharges or satisfactions incurred or committed to
in the ordinary course of business consistent with past practice;
(m) shall not sell, lease, license, mortgage or otherwise encumber or
subject to any Lien, or otherwise dispose of, any of its material
properties or material assets (including securitizations), other than in
the ordinary course of business consistent with past practice;
(n) shall not, and shall not permit any of its Subsidiaries to, (i)
make any material Tax election, except those made in the ordinary course of
business that are consistent with past practice and would not have an
effect with respect to periods following the Merger, or settle or
compromise any material Tax liability or (ii) change its fiscal year;
(o) except as described in the Company SEC Reports filed with the SEC
prior to the date of this Agreement, or as required by a governmental body
or authority, shall not change its methods of accounting (including make
any material write-off or reduction in the carrying value of any assets) in
effect at December 31, 1997, other than as required by changes in GAAP as
agreed by the Company's independent auditors; and
(p) shall not, and shall not permit any of its Subsidiaries to, agree,
in writing or otherwise, to take any of the foregoing actions or take any
action which would (x) make any representation or warranty in Article III
untrue or incorrect in any material respect or (y) result in any of the
conditions to the Merger set forth in Article VI not being satisfied.
Section 5.2. ACCESS. The Company shall afford to Parent and to Parent's
officers, employees, accountants, counsel and other authorized representatives
(except to the extent prohibited by applicable law as advised by counsel and
except as may be limited by any confidentiality obligation contained in any
contract with a third party) reasonable access during normal business hours,
throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' properties, books and records
(including Tax Returns) and any report, schedule or other document filed or
received by it pursuant to the requirements of federal or state securities laws,
including all Subsequent SEC Reports. Parent hereby agrees that it will treat
all such information in accordance with the Confidentiality Agreement, dated as
of May 7, 1998, between the Company and Parent (the "Confidentiality
Agreement").
Section 5.3. OTHER AGREEMENTS.
(a) The Company shall:
(i) prepare and file with the SEC as soon as is reasonably
practicable the Proxy Statement on a confidential basis, and shall use
all reasonable efforts to have the Proxy Statement cleared by the SEC
under the Exchange Act as soon as is reasonably practicable; and
(ii) (A) cooperate with Parent in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated by this Agreement and (B) use all reasonable efforts to
lift or remove any such injunction or impediment.
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(b) Parent and Merger Sub shall (i) cooperate with the Company in
order to lift any injunctions or remove any other impediment to the
consummation of the transactions contemplated by this Agreement and (ii)
each use all reasonable efforts to lift or remove any such injunction or
impediment.
(c) Subject to the limitations contained in Section 5.2, the Company
and Parent shall each furnish to one another and to one another's counsel
all such information as may be required in order to effect the foregoing
actions pursuant to Sections 5.3(a) and (b).
(d) The Company shall cause the Proxy Statement to be mailed to
holders of the Shares as promptly as practicable after the Proxy Statement
is cleared by the SEC under the Exchange Act.
(e) The Company shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its shareholders (the "Company Meeting") for the purpose of obtaining the
Company Shareholder Approval and shall, through its Board of Directors,
and, subject to its fiduciary duties under applicable law, recommend to its
shareholders the adoption of this Agreement and the transactions
contemplated hereby, including the Merger. Without limiting the generality
of the foregoing but subject to its rights to terminate this Agreement
pursuant to Section 7.1, the Company agrees that its obligations pursuant
to the first sentence of this Section 5.3(d) shall not be affected by the
commencement, public proposal, public disclosure or communication to the
Company of any Takeover Proposal or Superior Proposal (each as defined
below).
Section 5.4. EMPLOYER AND EMPLOYEE BENEFIT PLANS.
(a) For two years after the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, provide employee (i) welfare benefits,
(ii) pension and savings benefits, (iii) incentive compensation, (iv)
executive benefits, (v) severance and (vi) other employee benefits for the
benefit of employees of the Company, which, in the aggregate, are no less
favorable than such benefits provided immediately prior to the Effective
Time by the Company and its Subsidiaries. Without limiting the generality
of the foregoing, any Company Employee (as defined below) who has met the
requirements of the "rule of 85" under any Company Plan that is a "pension
plan" within the meaning of Section 3(2) of ERISA (as in effect as of the
date hereof) (such plans, the "Company Pension Plans") on or before the
Effective Time, or who would meet such requirements if he or she remained
an active participant in such Company Plan until the second anniversary of
the Effective Time, shall be entitled to pension benefits no less favorable
than the pension benefits he or she would be entitled under all Company
Pension Plans (as in effect as of the date hereof) if he or she retired
when he or she first met such requirements (regardless of whether or when
he or she actually retires). Nothing in this Agreement shall be interpreted
as limiting the power of Parent or the Surviving Corporation to amend or
terminate any such plan of the Company or any other employee benefit plan,
program, agreement or policy or as requiring Parent or the Surviving
Corporation to retain any individual as an employee of Parent.
(b) At or prior to the Effective Time, Parent shall adopt the
severance plan in the form of Exhibit A attached hereto (the "Merger
Severance Plan"). From and after the Effective Time, Parent shall cause the
Surviving Corporation to honor the Merger Severance Plan. Each individual
who is a party to an agreement that is a Severance Arrangement shall be
deemed to have experienced a termination for "good reason" (as defined
therein) at the Effective Time and the Surviving Corporation shall provide
such individual with all payments and benefits required by such agreement,
except as may be otherwise agreed in writing by such individual prior to
the Effective Time in accordance with the provisions of Exhibit B hereto.
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(c) Immediately after the date hereof, the Company shall amend the
ESPP (i) to prohibit prior to the termination of this Agreement the
modification by any participant of any election thereunder the effect of
which is to increase such participant's contributions to the plan above the
level of such participant's contributions as of the date hereof and (ii) to
provide that no further Stock Options will be granted thereunder, and that
the Option Term (as defined in the ESPP) for the Stock Options granted
thereunder on July 1, 1998 shall end on the earlier of December 31, 1998 or
the day on which occurs the Effective Time.
(d) Following the Effective Time, Parent shall provide, and shall
cause the Surviving Corporation and all of Parent's other Subsidiaries to
provide, to individuals who are employed by the Company and its
Subsidiaries immediately before the Effective Time ("Company Employees"),
credit for all service with the Company and its Subsidiaries and their
respective predecessors for all purposes (except where such credit would
cause a duplication of benefits) under employee benefit plans and programs,
as if such service were service with Parent and its Subsidiaries.
(e) The Company, Parent and the Surviving Corporation shall take all
steps necessary so that, effective at the Effective Time, all Company
Employees who are participants in the Company's Employee Stock Ownership
and 401(k) Plan (the "KESOP") at the Effective Time are fully vested in
their accounts in such plan and the Company shall direct the trustee of the
KESOP to use the Merger Consideration received with respect to unallocated
shares to purchase shares of Parent Common Stock.
(f) Following the Effective Time, Parent and the Surviving Corporation
shall (i) select employees for continued employment based upon a process
providing equal opportunity and fairness to Company Employees and
individuals who are employees of Parent and its Subsidiaries immediately
before the Effective Time ("Parent Employees") and (ii) deal fairly with
both Company Employees and Parent Employees without regard to their prior
affiliation.
Section 5.5. FILINGS; OTHER ACTIONS. Subject to the terms and conditions
herein provided, the Company and Parent shall (i) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act,
(ii) use all reasonable efforts to cooperate with one another in (x) determining
whether any filings are required to be made with, or consents, permits,
authorizations or approvals are required to be obtained from, any third party or
other governmental or regulatory bodies or authorities of federal, state, local
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (y)
timely making all such filings and timely seeking all such consents, permits,
authorizations or approvals, and (iii) use all reasonable efforts to take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby, including taking all such further action as
reasonably may be necessary to resolve such objections, if any, as the Federal
Trade Commission, the Antitrust Division of the Department of Justice, state
antitrust enforcement authorities or competition authorities of any other
jurisdiction or any other person may assert under relevant antitrust or
competition laws with respect to the transactions contemplated hereby.
Section 5.6. TAKEOVER STATUTE. If any "fair price," "moratorium," "control
share acquisition" or other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated hereby, including any
provision of the PBCL, each of Parent and the Company, and the members of their
respective Boards of Directors, shall, subject to their fiduciary duties under
applicable law, grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the
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terms contemplated hereby and otherwise act to eliminate or minimize the effects
of such statute or regulation on the transactions contemplated hereby.
Section 5.7. NO SOLICITATION.
(a) From and after the date hereof, the Company shall not, nor shall
it permit its Subsidiaries to, nor shall it authorize or permit any of its
directors, officers, employees, attorneys, financial advisors, accountants,
agents or other representatives or those of any of its Subsidiaries to,
directly or indirectly through any person, (i) solicit or initiate
(including by way of furnishing non-public information) any inquiries or
the making of a proposal which constitutes a Takeover Proposal or (ii)
engage in, or continue, discussions or negotiations relating thereto;
provided, however, that, so long as the Company complies in all respects
with its obligations under this Section 5.7, the Company may engage in
discussions or negotiations with, and, subject to entering into a
confidentiality agreement substantially similar to the Confidentiality
Agreement, furnish information concerning the Company and its Subsidiaries,
businesses, properties or assets to, any bona fide third party which has
made a bona fide unsolicited Superior Proposal if the Company promptly (but
in no case later than 36 hours) notifies Parent of the receipt of such
Superior Proposal, including the material terms and conditions thereof (and
any change in the material terms and conditions thereof) and, subject to
the fiduciary duties of the Company Board under applicable law, the
identity of the person making such Superior Proposal. As used in this
Agreement, (x) "Takeover Proposal" shall mean any inquiry, proposal or
offer made by a third party prior to the shareholder vote at the Company
Shareholder Meeting for any acquisition of 20% or more of the assets, or
20% or more of the voting securities, of the Company or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 20% or more of any class of equity
securities of the Company or any of its Subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement
and (y) "Superior Proposal" shall mean a Takeover Proposal made on terms
that a majority of the members of the Company Board determines in good
faith (after consultation with an independent financial advisor) is more
favorable than the transactions contemplated by this Agreement if such
Takeover Proposal were to be consummated.
(b) Except as expressly permitted by this Section 5.7, neither the
Company Board nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of
the Merger or this Agreement (except as required by their fiduciary duties
under applicable law), (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement, arrangement or understanding (each,
an "Acquisition Agreement") related to any Takeover Proposal, or to redeem
or otherwise render inapplicable the Company Rights Plan, the 1988 Rights
Plan, or the Rights or the 1988 Rights granted thereunder in response to
any Takeover Proposal. Notwithstanding the foregoing, in the event that
prior to the adoption of this Agreement by the shareholders of the Company,
the Company Board receives a Superior Proposal (that is not subject to any
financing condition), the Company Board may, if it determines in good
faith, by resolution duly adopted after consultation with its outside
counsel (who may be its regularly engaged outside counsel), that the
failure to take such action would reasonably be expected to constitute a
breach of its fiduciary duties under applicable law, (x) withdraw or modify
its approval or recommendation of the Merger or this Agreement and (y)
approve or recommend such Superior Proposal and terminate this Agreement as
permitted pursuant to the terms of Section 7.1(e) (and concurrently with or
immediately after such termination cause the Company to enter into a
definitive agreement with respect to such
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Superior Proposal) but only at a time that is after the third business day
following Parent's receipt of written notice from the Company advising
Parent that the Company Board has received a Superior Proposal, providing
Parent with a copy of such Superior Proposal and identifying the person
making such Superior Proposal with the intent of enabling Parent to agree
to a modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected.
(c) Nothing contained herein shall prohibit the Company from taking
and disclosing to its shareholders a position contemplated by Rule 14e-2(a)
under the Exchange Act with respect to any tender or exchange offer.
Section 5.8. PUBLIC ANNOUNCEMENTS. The Company and Parent shall consult
with and provide each other the reasonable opportunity to review and comment
upon any press release or other public statement or comment prior to the
issuance of such press release or other public statement or comment relating to
this Agreement or the transactions contemplated herein and shall not issue any
such press release or other public statement or comment prior to such
consultation, except, in any case, as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange, it
being understood that this Section 5.8 shall, with respect to Parent, Merger Sub
and the Company, supersede Section 18 of the Confidentiality Agreement.
Section 5.9. INDEMNIFICATION AND INSURANCE. Parent agrees that (i) all
rights to indemnification existing in favor of any director, officer, employee
or agent of the Company or its Subsidiaries (the "Indemnified Parties") as
provided in their respective certificates of incorporation, by-laws or
comparable organizational documents or in indemnification agreements with the
Company or any of its Subsidiaries which are listed in or attached to the
Company Letter shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time and (ii)
Parent shall guarantee the performance of the Surviving Corporation of its
obligations referred to in clause (i) provided, that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims, and Parent's guarantee
with respect thereto, shall continue until final disposition of any and all such
claims. Parent also agrees to indemnify all Indemnified Parties to the fullest
extent permitted by applicable law with respect to all acts or omissions arising
out of such individuals' services as officers, directors, employees or agents of
the Company or any of its Subsidiaries or as trustees or fiduciaries of any plan
for the benefit of employees or directors of, or otherwise on behalf of the
Company or any of its Subsidiaries, occurring prior to the Effective Time,
including the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter, including the transactions contemplated by this
Agreement, occurring prior to or at the Effective Time, Parent shall pay as
incurred such Indemnified Party's reasonable legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith.
From and after the Effective Time, Parent shall pay all reasonable expenses,
including attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in this Section 5.9.
Parent further agrees that Section 4.1(b) and Article VII of the Bylaws of the
Company shall not be rescinded, amended or modified prior to the sixth
anniversary of the Effective Time. For a period of six years after the Effective
Time, Parent shall cause the Surviving Corporation to maintain in effect the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company (provided that Parent may
substitute therefore policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to any claims arising from facts or
events that occurred on or before the Effective Time; provided, however, that in
no event shall Parent be required to expend
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with respect to such insurance policies in any one year greater than an amount
equal to 150% of the annual premiums currently paid by the Company for such
insurance.
Section 5.10. CORPORATE MATTERS.
(a) At or prior to the Effective Time, Parent shall (i) increase the
size of its Board of Directors to fourteen members and elect four current
directors of the Company selected by the Company Board, including William
R. Cook, to fill the vacancies created thereby, (ii) cause each existing
committee of its Board of Directors to be comprised of the current members
thereof plus a number of the former directors of the Company such that
approximately one-third of the directors on each such committee shall be
former directors of the Company, (iii) cause each of R. Keith Elliott and
William R. Cook to be appointed Co-Chief Executive Officer of Parent, (iv)
establish and maintain for so long as Messrs. Elliott and Cook serve as
Co-Chief Executive Officers of Parent an "Office of the Chairman",
comprised of R. Keith Elliott, who shall serve as Chairman, William R. Cook
who shall serve as Vice Chairman and Vincent J. Corbo who shall serve as
President and Chief Operating Officer of Parent, (v) provide that (A)
George MacKenzie shall continue to serve as Senior Vice President and Chief
Financial Officer of Parent, (B) Larry V. Rankin shall be appointed Senior
Vice President (Company Non-Paper Operations), (C) Dominick Di Donna shall
be appointed Senior Vice President (Paper Operations), (D) all other
officers and senior management reporting to the Chief Operating Officer
shall be determined by Messrs. Elliott, Cook and Corbo and (E) all other
officers and senior management reporting to the Co-Chief Executive Officers
shall be determined by Messrs. Elliott and Cook, all of the foregoing to be
effective from and after the Effective Time. If any person named in this
Section 5.10(a) is unwilling or unable to hold such office as is set forth
above, his successor shall be selected by the Board of Directors of Parent.
(b) From and after the Effective Time, unless tax and other
considerations result in another location being more favorable to Parent,
(i) Parent shall continue to maintain its corporate headquarters in
Wilmington, Delaware and (ii) all other specific business headquarters
shall be determined by Messrs. Elliott and Cook.
(c) From and after the Effective Time, Parent shall conduct its
businesses under the "Hercules" name provided that (i) the water treatment
business of Parent and the Surviving Corporation shall be conducted under
the "BetzDearborn" name and (ii) as determined by Messrs. Elliott and Cook,
certain businesses of the Surviving Corporation shall be conducted under
the "Hercules/BetzDearborn" name.
Section 5.11. SHAREHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company or its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement shall
be agreed to without Parent's consent which shall not be unreasonably withheld
or delayed; provided, further, that nothing contained in this Section 5.11 shall
prevent the Company or its directors, as the case may be, from being represented
in any such litigation by counsel of its or his choice.
Section 5.12. NO ACQUISITION OF COMPANY COMMON SHARES. None of Parent,
Merger Sub or any other Subsidiary of Parent shall acquire any Company Common
Shares at any time prior to the earlier to occur of (i) the Effective Time and
(ii) the Termination Date, it being understood and intended by the parties that
this Section 5.12 shall, with respect to Parent, Merger Sub and the other
Subsidiaries of Parent, supersede Section 17 of the Confidentiality Agreement.
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ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Company Shareholder Approval shall have been obtained in
accordance with applicable law and the rules of the New York Stock
Exchange, Inc.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits
the consummation of the transactions contemplated by this Agreement,
including the Merger, substantially on the terms contemplated hereby, and
shall continue to be in effect.
(c) Any applicable waiting period under the HSR Act shall have expired
or been terminated and any other approvals of any governmental entity shall
have been obtained, except where the failure to obtain such other approvals
of any governmental entity would not have a Material Adverse Effect on the
Company or Parent, as the case may be.
Section 6.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the fulfillment of the following conditions:
(a) The representations and warranties of Parent and Merger Sub that
are qualified by reference to a Material Adverse Effect on Parent shall be
true and correct and the representations and warranties that are not so
qualified shall be true and correct except where the failure to be true and
correct would not have a Material Adverse Effect on Parent or on the
ability of Parent or Merger Sub to consummate the transactions contemplated
by this Agreement, in each case as of the date hereof and, except to the
extent such representations and warranties speak as of an earlier date, as
of the Effective Time, as though made at and as of the Effective Time, and
the Company shall have received a certificate signed on behalf of Parent by
its chief executive officer or executive vice president to such effect.
(b) Each of Parent and Merger Sub shall have performed all obligations
required to be performed by it under this Agreement at or prior to the
Effective Time except where the failure to so perform would not have a
Material Adverse Effect on Parent or on the ability of Parent or Merger Sub
to consummate the transactions contemplated by this Agreement, and the
Company shall have received a certificate signed on behalf of Parent by its
chief executive officer or executive vice president to such effect.
Section 6.3. CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT
THE MERGER. The obligation of Parent and Merger Sub to effect the Merger is
further subject to the fulfillment of the following conditions:
(a) The representations and warranties of the Company that are
qualified by reference to a Material Adverse Effect on the Company shall be
true and correct and the representations and warranties that are not so
qualified shall be true and correct except where the failure to be true and
correct would not have a Material Adverse Effect on the Company or on the
ability of the Company to consummate the transactions contemplated by this
Agreement, in each case as of the date hereof and, except to the extent
such representations and warranties speak as of an earlier date, as of the
Effective Time, as though made at and as of the Effective Time, and Parent
shall
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have received a certificate signed on behalf of the Company by its chief
executive officer or executive vice president to such effect.
(b) The Company shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Effective Time
except where the failure to so perform would not have a Material Adverse
Effect on the Company or on the ability of the Company to consummate the
transactions contemplated hereby, and Parent shall have received a
certificate signed on behalf of the Company by its chief executive officer
or executive vice president to such effect.
ARTICLE VII
TERMINATION
Section 7.1. TERMINATION OR ABANDONMENT. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether before or after
the Company Shareholder Approval:
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if (i) the Closing Date shall not
have occurred on or before February 28, 1999 (the "Termination Date") and
(ii) the party seeking to terminate this Agreement pursuant to this clause
7.1(b) shall not have breached in any material respect its obligations
under this Agreement in any manner that shall have contributed to the
failure to consummate the Merger on or before such date;
(c) by either the Company or Parent, if (i) a statute, rule,
regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Merger substantially on the
terms contemplated hereby or (ii)(A) an order, decree, ruling or
injunction shall have been entered permanently restraining, enjoining or
otherwise prohibiting the consummation of the Merger substantially on the
terms contemplated hereby and such order, decree, ruling or injunction
shall have become final and non-appealable and (B) the party seeking to
terminate this Agreement pursuant to this clause 7.1(c)(ii) shall have used
all reasonable efforts to remove such order, decree, ruling or injunction;
(d) by either the Company or Parent, if the Company Shareholder
Approval shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of shareholders or of any
adjournment, postponement or continuation thereof;
(e) by the Company pursuant to Section 5.7(b), except that the Company
may not terminate this Agreement pursuant to this clause 7.1(e) unless and
until (i) the Company shall have complied with its obligations under
Section 5.7, and (ii) the Company shall simultaneously pay to Parent the
Parent Termination Fee (as defined below) and, to the extent required by
Section 7.2, the Parent Expense Amount (as defined below);
(f) by Parent, if the Company Board shall have approved or recommended
any Takeover Proposal;
(g) by the Company, if any person or group (other than any party
hereto or any of its Subsidiaries or affiliates) acquires prior to the
Effective Time, or if prior to the Effective Time, Parent enters into an
agreement pursuant to which any person or group is to acquire, more than
50% of the issued and outstanding voting securities of Parent; or
(h) by either the Company or Parent, if there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement,
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which if not cured would cause the conditions set forth in Sections 6.2(a)
or 6.3(a), as the case may be, not to be satisfied, and such breach shall
not have been cured within 30 days after notice thereof shall have been
received by the party alleged to be in breach.
In the event of termination of this Agreement pursuant to this Section 7.1,
this Agreement shall terminate (except for the provisions of this Section 7.1,
Section 7.2 and Article VIII) and there shall be no other liability hereunder on
the part of Parent, Merger Sub or the Company, except liability arising out of
any willful breach of this Agreement occurring prior to the date on which this
Agreement is terminated or as provided for in the Confidentiality Agreement. In
addition, the Confidentiality Agreement shall survive the termination hereof,
provided that upon termination of this Agreement for any reason, the
Confidentiality Agreement shall be amended, without any further action on the
part of any party thereto, to delete Section 17 thereof in its entirety; and
from and after such termination, neither Parent nor any of its controlled
affiliates (as defined therein) shall acquire any Company Common Shares prior to
May 7, 1999; provided, however, that nothing contained herein shall prohibit
Parent or any of its controlled affiliates from commencing a tender offer or
exchange offer for Company Common Shares pursuant to Section 14(d) of the
Exchange Act prior to such time so long as no Company Common Shares are acquired
prior to such time.
Section 7.2. TERMINATION FEES.
(a) Notwithstanding any provision in this Agreement to the contrary,
if (i) this Agreement is terminated by the Company pursuant to Section
7.1(e), (ii) this Agreement is terminated by Parent pursuant to Section
7.1(f), or (iii)(A) prior to the termination of this Agreement, a Takeover
Proposal is publicly proposed or publicly disclosed, (B) this Agreement is
terminated by the Company pursuant to Section 7.1(b) or by Parent or the
Company pursuant to Section 7.1(d), and (C) concurrently with or within
twelve months after the date of such termination (x) the Company shall have
entered into an Acquisition Agreement with any party (other than Parent)
with respect to a Takeover Proposal or (y) a Takeover Proposal shall have
been consummated, then, in each case, the Company shall (without prejudice
to any other rights of Parent against the Company) pay to Parent, by wire
transfer of immediately available funds, (i) a fee in cash (the "Parent
Termination Fee") equal to $76 million and (ii) an amount in cash equal to
$15 million which Parent believes is a good faith estimate of its
anticipated expenses in connection with this Agreement (including
attorneys' fees and fees of financial advisors) ("Parent Expense Amount");
provided, that payment of the Parent Expense Amount shall not be made to
the extent that it is reasonably determined that such payment would prevent
the Company from accounting for any subsequent business combination as a
pooling-of-interests for financial accounting purposes. Payment of the
Parent Termination Fee and the Parent Expense Amount shall be made
simultaneously with such termination in the case of a termination by the
Company pursuant to Section 7.1(e) and promptly, but in no event later than
the fifth business day following a termination by Parent pursuant to
Section 7.1(f) and, in the case of clause (iii) of the first sentence of
this Section 7.2(a), upon the earlier of the execution by the Company of an
Acquisition Agreement and the consummation of any Takeover Proposal.
(b) Notwithstanding any provision in this Agreement to the contrary,
if this Agreement is terminated by the Company pursuant to Section 7.1(g),
then Parent shall (without prejudice to any other rights of the Company
against Parent) pay to the Company, by wire transfer of immediately
available funds, a fee in cash (the "Company Termination Fee") equal to (i)
$76 million and (ii) an amount in cash equal to $15 million to reimburse
the Company for its anticipated expenses in connection with this Agreement
(including attorney's fees and fees of financial advisors) ("Company
Expense Amount"). Payment of the Company Termination Fee and the Company
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Expense Amount shall be made promptly, but in no event later than the fifth
business day following termination of this Agreement by the Company
pursuant to Section 7.1(g).
(c) Any payment made pursuant to Section 7.2(a) or (b) hereunder shall
represent the sole remedy for any termination requiring such payment and
the party making such payment shall have no further liability hereunder
except as otherwise provided in the last paragraph of Section 7.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger.
Section 8.2. EXPENSES. Except as set forth in Section 7.2, whether or not
the Merger is consummated, all costs and expenses (including applicable filing
fees of the SEC) incurred in connection with this Agreement and the transactions
contemplated hereby, including the Merger, shall be paid by the party required
to incur such expenses.
Section 8.3. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed
in counterparts, each of which shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument, and shall
become effective when one or more counterparts have been signed by each of the
parties and delivered (by telecopy or otherwise) to the other parties.
Section 8.4. AMENDMENT OR SUPPLEMENT. At any time before or after approval
of the matters presented in connection with the Merger by the shareholders of
the Company and prior to the Effective Time, this Agreement may be amended or
supplemented in writing by Parent and the Company with respect to any of the
terms contained in this Agreement if such amendment or supplement is approved by
the respective Boards of Directors of Parent and the Company, except that
following approval by the shareholders of the Company, there shall be no
amendment or change to the provisions hereof which (x) by law or in accordance
with the rules of any relevant stock exchange requires further approval by such
shareholders without such further approval nor any amendment or (y) is not
permitted under applicable law.
Section 8.5. EXTENSION OF TIME; WAIVER. At any time prior to the Effective
Time, the Company and Parent may:
(a) extend the time for the performance of any of the obligations or
acts of the other party;
(b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant
hereto; or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein.
Notwithstanding the foregoing, no failure or delay by the Company or Parent
in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise of
any other right hereunder. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Section 8.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to the principles of conflicts of law.
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Section 8.7. JURISDICTION. Each of the parties hereto (i) consents to
submit itself to the personal jurisdiction of any Federal court located in the
Commonwealth of Pennsylvania or any Commonwealth of Pennsylvania state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (iii) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal court sitting in the Commonwealth of Pennsylvania or a
Commonwealth of Pennsylvania state court.
Section 8.8. NOTICES. All notices and other communications hereunder shall
be in writing (including telecopy or similar writing) and shall be effective (a)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 8.8 and the appropriate telecopy confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section 8.8:
To Parent or Merger Sub:
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: General Counsel
Telecopy: (302) 594-7032
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Telecopy: (302) 651-3001
To the Company:
BetzDearborn Inc.
4636 Somerton Road
P.O. Box 3002
Trevose, Pennsylvania 19053-6783
Attention: Mr. Larry V. Rankin
Telecopy: (215) 953-2484
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY l0019
Attention: David A. Katz, Esquire
Telecopy: (212) 403-2000
Section 8.9. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
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Section 8.10. SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 8.11. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
money damages or other remedy at law would not be a sufficient or adequate
remedy for any breach or violation of, or a default under, this Agreement by
them and that in addition to all other remedies available to them, each of them
shall be entitled to the fullest extent permitted by law to an injunction
restraining such breach, violation or default or threatened breach, violation or
default and to any other equitable relief, including specific performance,
without bond or other security being required.
Section 8.12. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement
and, as modified by Sections 5.8 and 5.12, the Confidentiality Agreement
constitute the entire agreement among the parties hereto, and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or between any of them, with respect to the subject matter hereof and
thereof, and is not intended to and shall not confer upon any person other than
the parties hereto any rights or remedies hereunder (except for the provisions
of Article II, Section 5.9 and 5.10(a) which are intended for the benefit of,
and may be enforced by, the persons referred to therein and the third sentence
of Section 5.4(b) which may be enforced by Messrs. Cook or Rankin but only to
the extent that such individual has not taken a position as an employee with
Parent after the Effective Time).
Section 8.13. HEADINGS. Headings and captions of the articles and sections
of this Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.14. CERTAIN DEFINITIONS; INTERPRETATION. References in this
Agreement to "Subsidiaries" of any party shall mean any corporation,
partnership, association, trust or other form of legal entity of which (i) 50%
or more of the outstanding voting securities are on the date hereof directly or
indirectly owned by such party, or (ii) such party or any Subsidiary of such
party is a general partner (excluding partnerships in which such party or any
Subsidiary of such party does not have a majority of the voting interests in
such partnership). References in this Agreement (except as specifically
otherwise defined) to "affiliates" shall mean, as to any person, any other
person which, directly or indirectly, controls, or is controlled by, or is under
common control with, such person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of management or policies of a person, whether
through the ownership of securities or partnership of other ownership interests,
by contract or otherwise. References in this Agreement to "person" shall mean an
individual, a corporation, a partnership, an association, a trust or any other
entity, group (as such term is used in Section 13 of the Exchange Act) or
organization, including, without limitation, a governmental body or authority.
References in this Agreement to the "knowledge" of any party hereto, or words of
similar import, shall mean the knowledge, after due inquiry, of such party's
"officers" (as such term is defined in Rule 16a-1 promulgated under the Exchange
Act). When used in this Agreement, the word "including" shall be deemed in all
cases to be followed by the words "without limitation."
[SIGNATURE PAGE FOLLOWS]
A-28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be duly executed and delivered as of the date first above written.
HERCULES INCORPORATED
By: /s/ R. KEITH ELLIOTT
----------------------------------
Name: R. Keith Elliott
Title: Chairman and Chief Executive
Officer
WATER ACQUISITION CO.
By: /s/ R. KEITH ELLIOTT
----------------------------------
Name: R. Keith Elliott
Title: Chairman of the Board of
Directors and Chief Executive
Officer
BETZDEARBORN INC.
By: /s/ WILLIAM R. COOK
----------------------------------
Name: William R. Cook
Title: Chairman of the Board of
Directors and Chief Executive
Officer
A-29
<PAGE>
ANNEX B
[JP MORGAN LOGO]
J.P. Morgan Securities Inc.
60 Wall Street
New York NY 10260-0060 July 30, 1998
The Board of Directors
BetzDearborn, Inc.
4636 Somerton Road
Trevose, PA 19053-2443
Attention: William R. Cook
Chairman of the Board, President and Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of BetzDearborn, Inc. (the "Company") of the
consideration proposed to be paid to them in connection with the proposed merger
(the "Merger") of Water Acquisition Co. ("Merger Sub"), a wholly owned
subsidiary of Hercules Inc. (the "Buyer"), with and into the Company. Pursuant
to the Agreement and Plan of Merger, dated as of July 30, 1998 (the
"Agreement"), among the Company, the Buyer and Merger Sub, Merger Sub shall be
merged with and into the Company, and each issued and outstanding Common Share,
par value $0.10 per share, of the Company (other than Common Shares to be
canceled in accordance with the Agreement and Dissenting Shares, as defined in
the Agreement) shall be converted into the right to receive $72 in cash, without
interest thereon.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving companies comparable to the Company and the consideration received for
such companies; (iv) current and historical market prices of the common stock of
the Company; (v) the audited financial statements of the Company for the fiscal
year ended December 31, 1997, and the unaudited financial statements of the
Company for the period ended March 31, 1998; (vi) certain internal financial
analyses and forecasts prepared by the Company and its management; and (vii) the
terms of other business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the management of
the Company with respect to certain aspects of the Merger, the past and current
business operations of the Company, the financial condition and future prospects
and operations of the Company, and certain other matters we believed necessary
or appropriate to our inquiry. We have reviewed other financial studies and
analyses and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or otherwise reviewed by us, and
we have not assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor have any
such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts
B-1
<PAGE>
[JP MORGAN LOGO]
provided to us, we have assumed that they have been reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of the Company to which such analyses or forecasts relate. We have
also assumed that the Merger and the other transactions contemplated by the
Agreement will be consummated as described in the Agreement. We have relied as
to all legal matters relevant to rendering our opinion upon the advice of
counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We have acted as financial advisor to the Company with respect to the proposed
Merger and will receive a fee from the Company for our services if the proposed
Merger is consummated. As you are aware, we have acted as financial advisor to
the Company in connection with its acquisition of the Dearborn division of W.R.
Grace & Co. in 1996 and in connection with its shareholders' rights plan in
1998. Please be advised that we and our affiliates maintain customary banking,
capital markets and advisory relationships with the Buyer, including acting as
an agent bank for the Buyer's current credit facilities. In the ordinary course
of their businesses, our affiliates may actively trade the debt and equity
securities of the Company or the Buyer for their own account or for the accounts
of customers and, accordingly, they may at any time hold long or short positions
in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the consideration to be paid to the Company's shareholders in the
proposed Merger is fair, from a financial point of view, to such shareholders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Merger. This opinion does not
constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote with respect to the Merger. This opinion may be
reproduced in full in any proxy or information statement mailed to shareholders
of the Company.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ JAMES R. ELLIOTT III
------------------------
Name: James R. Elliott III
Title: Managing Director
B-2
<PAGE>
ANNEX C
PENNSYLVANIA BUSINESS CORPORATION LAW
SUBCHAPTER D. DISSENTERS RIGHTS
1571 APPLICATION AND EFFECT OF SUBCHAPTER
(a) GENERAL RULE. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
<TABLE>
<S> <C>
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on transfer of a
security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying conditions).
Section 7104(b)(3) (relating to procedure).
</TABLE>
(b) EXCEPTIONS.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any
such shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other
corporation or solely into such shares and money in lieu of
fractional shares.
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the
adoption of the plan or the effectuation of the transaction the
affirmative vote of a majority of the votes cast by all shareholders
of the class.
C-1
<PAGE>
(iii) Shares entitled to dissenters rights under section
1906(c) (relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) GRANT OF OPTIONAL DISSENTERS RIGHTS. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholder to dissenters rights.
(d) NOTICE OF DISSENTERS RIGHTS. Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) OTHER STATUTES. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE. This subchapter may not be
relaxed by any provision of the articles.
(g) CROSS REFERENCES. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
1572 DEFINITIONS
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"CORPORATION." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"DISSENTER." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
C-2
<PAGE>
"FAIR VALUE." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"INTEREST." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
1573 RECORD AND BENEFICIAL HOLDERS AND OWNERS
(a) RECORD HOLDERS OF SHARES. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) BENEFICIAL OWNERS OF SHARES. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
1574 NOTICE OF INTENTION TO DISSENT
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
1575 NOTICE TO DEMAND PAYMENT
(a) GENERAL RULE. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporation action.
In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the tine that demand for payment is
received.
C-3
<PAGE>
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) TIME FOR RECEIPT OF DEMAND FOR PAYMENT. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
1576 FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.
(a) EFFECT OF FAILURE OF SHAREHOLDER TO ACT. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) RESTRICTION ON UNCERTIFICATED SHARES. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) RIGHTS RETAINED BY SHAREHOLDER. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
1577 RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES
(a) FAILURE TO EFFECTUATE CORPORATION ACTION. Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) RENEWAL OF NOTICE TO DEMAND PAYMENT. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) PAYMENT OF FAIR VALUE OF SHARES. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) FAILURE TO MAKE PAYMENT. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
C-4
<PAGE>
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
1578 ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES
(a) GENERAL RULE. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) EFFECT OF FAILURE TO FILE ESTIMATE. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
1579 VALUATION PROCEEDINGS GENERALLY
(a) GENERAL RULE. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
If any demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value of the
shares be determined by the court.
(b) MANDATORY JOINDER OF DISSENTERS. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) JURISDICTION OF THE COURT. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) MEASURE OF RECOVERY. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
C-5
<PAGE>
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
1580 COSTS AND EXPENSES OF VALUATION PROCEEDINGS
(a) GENERAL RULE. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH
APPEARS. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
(c) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS. If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
1930 DISSENTERS RIGHTS
(a) GENERAL RULE. If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
(b) PLANS ADOPTED BY DIRECTORS ONLY. Except as otherwise provided pursuant
to section 1571(c) (relating to grant of optional dissenters rights), Subchapter
D of Chapter 15 shall not apply to any of the shares of a corporation that is a
party to a merger or consolidation pursuant to section 1924(b)(1)(i) (relating
to adoption by board of directors).
(c) CROSS REFERENCES. See sections 1571(b) (relating to exceptions) and
1904 (relating to de facto transaction doctrine abolished).
C-6
<PAGE>
BETZDEARBORN INC.
PROXY
4636 SOMERTON ROAD
Trevose, Pennsylvania 19053-6783
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints LARRY V. RANKIN, LINDA R. HANSEN and
PETER HEINZ, or any of them, the attorneys and proxies with full power of
substitution in each of them, in the name, place and stead of the undersigned to
vote as proxy all of the shares of common stock of BetzDearborn Inc., a
Pennsylvania corporation ("BetzDearborn"), held by the undersigned at the
special meeting (the "Special Meeting") of shareholders of BetzDearborn to be
held at BetzDearborn's headquarters, 4636 Somerton Road, Trevose, Pennsylvania
19053, on October 8, 1998 and at any adjournment or postponement thereof.
(Continued and to be signed on reverse side)
<PAGE>
[X] Please mark your
votes as in this
example
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
SHAREHOLDER. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED FOR EACH OF
THE FOLLOWING PROPOSALS, AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY POSTPONEMENTS OR
ADJOURNMENTS THEREOF.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Proposal to approve and adopt the Agreement and Plan [ ] [ ] [ ]
of Merger, dated as of July 30, 1998, by and among
Hercules Incorporated, Water Acquisition Co. and
BetzDearborn
2. Proposal to adjourn the Special Meeting, if [ ] [ ] [ ]
necessary, to permit further solicitation of proxies
in the event that there are not sufficient votes at
the time of the Special Meeting to approve Proposal 1.
3. In their discretion, to vote upon such other business
as may properly come before the meeting.
</TABLE>
Receipt of Notice of Special Meeting of Shareholders and the related Proxy
Statement dated September 4, 1998 is hereby acknowledged.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s) of Shareholder(s)________________________ Dated _____________, 1998
NOTE: PLEASE SIGN AS YOUR NAME APPEARS HEREIN. IF SHARES ARE HELD JOINTLY, A
JOINT OWNER OR A MAJORITY OF THEM MUST SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL
TITLE. IF A CORPORATION, PLEASE SIGN IN CORPORATE NAME AND INDICATE THE
TITLE OR CAPACITY OF THE SIGNING OFFICER OR AGENT. IF A PARTNERSHIP OR
OTHER ENTITY, PLEASE SIGN IN PARTNERSHIP OR OTHER ENTITY NAME BY
AUTHORIZED PERSON, INDICATING OFFICIAL POSITION OR REPRESENTATIVE
CAPACITY.
<PAGE>
BETZDEARBORN INC.
INSTRUCTION CARD
4636 SOMERTON ROAD
Trevose, Pennsylvania 19053-6783
This card serves to instruct Putnam Fiduciary Trust Company (the
"Trustee"), as trustee under BetzDearborn Inc. Employee Stock Ownership and
401(k) Plan (the "Plan"), to vote as designated all of the shares of preferred
and common stock of BetzDearborn Inc., a Pennsylvania corporation
("BetzDearborn"), entitled to be voted by the undersigned participant (the
"Participant") under the terms of such Plan with respect to the special meeting
(the "Special Meeting") of shareholders of BetzDearborn to be held at
BetzDearborn's headquarters, 4636 Somerton Road, Trevose, Pennsylvania 19053, on
October 8, 1998 and at any adjournment or postponement thereof. The undersigned,
in giving such instructions, will act as named fiduciary for (i) such shares
that have been allocated to the account of the undersigned, (ii) a proportionate
share of such shares that have been allocated to the accounts of other
Participants in the Plan as to which the Trustee receives no instructions and
(iii) a proportionate share of such shares held in the Plan that have not been
allocated to any Participants in the Plan.
(Continued and to be signed on reverse side)
<PAGE>
[X] Please mark your
votes as in this
example
THIS CARD WHEN PROPERLY EXECUTED WILL BE VOTED AS INSTRUCTED BY THE
UNDERSIGNED PARTICIPANT SUBJECT TO APPLICABLE LAW. IF NO INSTRUCTIONS ARE MADE,
THE SHARES ALLOCATED TO THE UNDERSIGNED PARTICIPANT WILL BE VOTED BY THE TRUSTEE
IN ACCORDANCE WITH THE TERMS OF THE PLAN AND APPLICABLE LAW.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Proposal to approve and adopt the Agreement and Plan [ ] [ ] [ ]
of Merger, dated as of July 30, 1998, by and among
Hercules Incorporated, Water Acquisition Co. and
BetzDearborn.
2. Proposal to adjourn the Special Meeting, if [ ] [ ] [ ]
necessary, to permit further solicitation of proxies
in the event that there are not sufficient votes at
the time of the Special Meeting to approve Proposal 1.
3. In their discretion, to vote upon such other business as
may properly come before the meeting.
</TABLE>
Receipt of Notice of Special Meeting of Shareholders and the related Proxy
Statement dated September 4, 1998 is hereby acknowledged.
PLEASE SIGN, DATE AND RETURN THE INSTRUCTION CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature of Participant__________________________ Dated ________________, 1998
NOTE: PLEASE SIGN AS YOUR NAME APPEARS HEREIN.
