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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1034
Date of Report (Date of earliest event reported): January 9, 1998
Cummins Engine Company, Inc.
(Exact Name of Registrant as Specified in its Charter)
Indiana 001-04949 35-0257090
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation) Number)
500 Jackson Street, Box 3005
Columbus, Indiana 47202-3005
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (812) 377-5000
N/A
(Former name or former address, if changed since last report)
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<PAGE>
Item 2. Acquisition
On January 9, 1998, Safari Inc. ("Safari"), a wholly owned
subsidiary of Cummins Engine Company, Inc. ("Cummins"), merged with and
into Nelson Industries, Inc. ("Nelson") pursuant to an Agreement and Plan
of Merger, dated as of December 3, 1997 (the "Merger Agreement"), among
Cummins, Safari, and Nelson. Pursuant to the Merger Agreement, Nelson
became a wholly owned subsidiary of Cummins (the "Merger"), and each share
of Nelson common stock was converted into the right to receive $172.70 in
cash. On January 9, 1998, Cummins issued a press release announcing that it
had completed the Merger and the transactions contemplated by the Merger
Agreement.
Attached and incorporated herein by reference in their entirety
as Exhibits 2.1 and 99.1, respectively, are copies of the Merger Agreement
and the Cummins press release.
Item 7(c) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger dated as
of December 3, 1997 among Cummins
Engine Company, Inc., Safari Inc. and
Nelson Industries, Inc..
99.1 Form of press release dated January 9,
1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: February 19, 1998 CUMMINS ENGINE COMPANY, INC.
By: /s/ Rick J. Mills
--------------------------
Name: Rick J. Mills
Title: Vice President-Corporate
Controller
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2.1 Agreement and Plan of Merger dated as
of December 3, 1997 among Cummins
Engine Company, Inc., Safari Inc. and
Nelson Industries, Inc.
99.1 Form of press release dated January 9,
1998
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
CUMMINS ENGINE COMPANY, INC.,
SAFARI INC.,
and
NELSON INDUSTRIES, INC.
Dated as of December 3, 1997
<PAGE>
Table of Contents
Page
ARTICLE 1 THE MERGER 1
Section 1.1. The Merger 1
Section 1.2. Closing 1
Section 1.3. Effective Date of the Merger 1
Section 1.4. Effects of Merger 1
ARTICLE 2 THE SURVIVING CORPORATION 2
Section 2.1. Articles of Incorporation 2
Section 2.2. By-laws 2
Section 2.3. Board of Directors; Officers 2
ARTICLE 3 CONVERSION OF SHARES 2
Section 3.1. Merger Consideration 2
Section 3.2. Dissenting Shares 3
Section 3.3. Payment. 3
Section 3.4. No Further Rights 4
Section 3.5. Closing of the Company's Transfer Books 4
ARTICLE 4 REPRESENTATIONS OF WARRANTIES OF PARENT AND SUB 4
Section 4.1.Organization and Qualification 4
Section 4.2.Authority Relative to this Merger Agreement 5
Section 4.3.No Conflicts; No Consents. 5
Section 4.4.Available Funds 6
Section 4.5.Financial Advisor 6
Section 4.6.Voting Requirements 6
Section 4.7.Litigation 6
Section 4.8.Ownership of Sub 6
Section 4.9.Disclosure Documents 6
<PAGE>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 6
Section 5.1. Organization And Qualification 7
Section 5.2. Articles of Incorporation and Bylaws 7
Section 5.3. Capitalization. 7
Section 5.4. Authority Relative to this Merger Agreement 8
Section 5.5. No Conflicts, No Consents. 8
Section 5.6. Financial Statements 9
Section 5.7. No Undisclosed Liabilities 9
Section 5.8. Absence of Certain Changes or Events 9
Section 5.9. Litigation 10
Section 5.10. Employee Benefit Plans, Labor. 10
Section 5.11. Business Combination Provisions Inapplicable 12
Section 5.12. Financial Advisor. 12
Section 5.13. Permits; Compliance with Legal Requirements; Orders. 12
Section 5.14. Material Contracts; No Defaults. 12
Section 5.15. Taxes. 14
Section 5.16. Environmental Matters. 15
Section 5.17. Title to Assets; Liens 15
Section 5.18. Patents, Trademarks, Copyrights 16
Section 5.19. Voting Requirements 16
Section 5.20. Insurance 16
<PAGE>
ARTICLE 6 COVENANTS AND CERTAIN MATTERS 16
Section 6.1. Conduct of Business by the Company Pending the Merger 16
Section 6.2. Notice of Breach 18
Section 6.3. Access and Information 18
Section 6.4. Employee and Other Arrangements. 18
Section 6.5. Indemnification. 20
Section 6.6. HSR Act and Related Matters 21
Section 6.7. Public Announcements 22
Section 6.8. Assistance in Consummation of the Merger 22
Section 6.9. No Solicitation of Transactions. 22
Section 6.10. Shareholder Meeting; Proxy Material. 24
Section 6.11. Settlements of Certain Claims and Other Matters. 25
ARTICLE 7 CONDITIONS PRECEDENT 25
Section 7.1. Conditions to Each Party's Obligation to Effect 25
the Merger
Section 7.2. Conditions to Obligation of the Company to Effect 26
the Merger
Section 7.3. Conditions to Obligations of Parent and Sub to 26
Effect the Merger
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER 27
Section 8.1. Termination 27
Section 8.2. Effect of Termination 28
Section 8.3. Amendment 28
Section 8.4. Waiver 28
<PAGE>
ARTICLE 9 GENERAL PROVISIONS 28
Section 9.1. Non-Survival of Representations, Warranties 28
and Agreements
Section 9.2. Notices 29
Section 9.3. Fees, Expenses and Break-up Fee 30
Section 9.4. Headings, etc. 30
Section 9.5. Entire Agreement 30
Section 9.6. Assignments; Parties in Interest 30
Section 9.7. Governing Law 31
Section 9.8. Certain Definitions 31
Section 9.9. Counterparts 33
Section 9.10. Severability 33
Section 9.11. Interpretation 34
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"), dated
as of December 3, 1997, by and among Cummins Engine Company, Inc., an
Indiana corporation ("Parent"), Safari Inc., a Wisconsin corporation and a
direct wholly-owned subsidiary of Parent ("Sub"), and Nelson Industries,
Inc., a Wisconsin corporation (the "Company")
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the Wisconsin Business Corporation Law
(the "WBCL");
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein the parties
hereto agree as follows:
1.
THE MERGER
a. The Merger
. Upon the terms and subject to the conditions hereto on the
Effective Date (as defined in Section 1.3), Sub shall be merged with and
into the Company and the separate existence of Sub shall thereupon cease,
and the name of the Company, as the surviving corporation in the Merger
(the "Surviving Corporation"), shall remain "Nelson Industries, Inc."
b. Closing
. Unless this Merger Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions
set forth in Article VIII, the closing of the Merger will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Sections 7.1(a) and
7.1(b), at the offices of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, unless another date, time or place is agreed to
in writing by the parties hereto (the "Closing Date").
c. Effective Date of the Merger
. The Merger shall become effective when properly executed
articles of merger are duly filed with the Department of Financial
Institutions of the State of Wisconsin ("Articles of Merger"), which filing
shall be made as soon as practicable on the Closing Date. When used in this
Merger Agreement, the term "Effective Date" shall mean the date and time at
which such Articles of Merger are so filed.
d. Effects of Merger
. The Merger shall have the effects set forth in Section 180.1106
of the WBCL.
2.
THE SURVIVING CORPORATION
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a. Articles of Incorporation
. The articles of incorporation of the Company as in effect
immediately prior to the Effective Date shall be the articles of
incorporation of the Surviving Corporation from and after the Effective
Date until thereafter changed or amended as provided therein or by
applicable law.
b. By-laws
. The by-laws of the Company as in effect immediately prior to
the Effective Date shall be the by-laws of the Surviving Corporation from
and after the Effective Date until thereafter changed or amended as
provided therein or by applicable law.
c. Board of Directors; Officers
. The directors of Sub immediately prior to the Effective Date
shall be the directors of the Surviving Corporation and the officers of the
Company immediately prior to the Effective Date shall be the officers of
the Surviving Corporation, in each case until their respective successors
are duly elected and qualified.
3.
CONVERSION OF SHARES
a. Merger Consideration
. As of the Effective Date, by virtue of the Merger and without
any action on the part of any shareholder of the Company:
i. All shares ("Shares") of common stock, $1 par value, of
the Company ("Company Common Stock") held by the Company or any
subsidiary of the Company shall be cancelled.
ii. Each issued and outstanding Share, other than those to
which Section 3.1(a) or 3.1(d) applies and any Dissenting Shares
(as such term is defined in Section 3.2), shall be converted into
and represent the right to receive an amount equal to $172.70 in
cash, without interest (such amount of cash being referred to
herein as the "Merger Consideration").
iii. Each issued and outstanding share of common stock of
Sub, $.01 par value, shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving
Corporation.
iv. Each issued and outstanding share of Redeemable
Cumulative Preferred Stock, $40 par value, of Company ("Preferred
Stock") shall be unaffected by the Merger.
<PAGE>
b. Dissenting Shares
. Shares of Company Common Stock held by each shareholder who has
not voted such Shares in favor of the Merger and with respect to which
appraisal rights shall have been duly demanded in accordance with Section
180.1321 of the WBCL ("Dissenting Shares") shall not be converted into and
represent the right to receive the Merger Consideration; provided, however,
that if any such shareholder shall fail to perfect his appraisal rights in
accordance with the WBCL, then such holder's Dissenting Shares shall cease
to be Dissenting Shares and shall, subject to the terms of this Merger
Agreement, be converted into and represent the right to receive the Merger
Consideration.
c. Payment.
i. Pursuant to an agreement (the "Disbursing Agent
Agreement") to be entered into on or before the Effective Date
between Parent and a disbursing agent selected by Parent and
reasonably acceptable to the Company (the "Disbursing Agent"),
Parent or the Surviving Corporation shall make available to the
Disbursing Agent the aggregate Merger Consideration to which
holders of Shares of Company Common Stock shall be entitled
pursuant to Section 3.1(b).
ii. On or prior to the Effective Date, the Disbursing Agent
shall send a notice and a letter of transmittal to each holder of
certificates formerly evidencing Shares (other than certificates
formerly representing Shares to be cancelled pursuant to Section
3.1(a) and certificates representing Dissenting Shares) or
shareholders of uncertificated Shares with issued Shares under
the Dividend Reinvestment Plan advising such shareholder of the
effectiveness of the Merger and the procedure for surrendering to
the Disbursing Agent such certificates for exchange into the
applicable aggregate Merger Consideration. Each holder of
certificates theretofore evidencing Shares, upon proper surrender
thereof to the Disbursing Agent together with and in accordance
with such letter of transmittal and shareholders under the
Dividend Reinvestment Plan, shall be entitled to receive in
exchange therefor the product of the Merger Consideration and the
number of Shares formerly represented by such certificate or in
the name of such shareholder under the Dividend Reinvestment
Plan. Upon such proper surrender, the Disbursing Agent shall
promptly deliver the applicable aggregate Merger Consideration
(less any amount required to be withheld under applicable law) in
accordance with the instructions set forth in the related letter
of transmittal. For certificates and/or letters of transmittals
deliver to the Disbursing Agent prior to the Effective Date in
which the holders request disbursement by wire transfer, on the
Effective Date, the Disbursing Agent shall pay by wire transfer
of immediately available funds the Merger Consideration to the
account designated the holder. Until properly surrendered,
certificates formerly evidencing Shares (other than Dissenting
Shares) shall be deemed for all purposes to evidence only the
right to receive the Merger Consideration multiplied by the
number of Shares formerly evidenced by such certificate, or, in
the case of Dissenting Shares, the fair value of such Dissenting
Shares. No interest shall accrue or be paid on any cash payable
upon the surrender of certificates which immediately prior to the
Effective Date represented outstanding Shares. Parent shall cause
the Disbursing Agent promptly to deliver the applicable aggregate
Merger Consideration in exchange for certificates formerly
representing Shares notwithstanding any legend or transfer
restriction referring to any securities laws
<PAGE>
or imposed by or referring to any agreement between the holder
and the Company set forth on such certificate.
iii. If the Merger Consideration is to be delivered to a
person other than the person in whose name the certificates
surrendered in exchange therefor are registered, it shall be a
condition to the payment of such Merger Consideration that the
certificates so surrendered shall be properly endorsed or
accompanied by appropriate stock powers and otherwise in proper
form for transfer, that such transfer otherwise be proper and
that the person requesting such transfer pay to the Disbursing
Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Disbursing
Agent that such taxes have been paid or are not required to be
paid.
iv. Unless required otherwise by applicable law, any portion
of the Merger Consideration remaining undistributed to holders of
Shares two years after the Effective Date shall be delivered to
the party who provided such funds to the Disbursing Agent and any
holders of Shares who have not theretofore complied with the
provisions of this Article III shall thereafter look only to
Parent for payment of any Merger Consideration they are entitled
to pursuant to this Article III.
d. No Further Rights
. From and after the Effective Date, holders of certificates
theretofore evidencing Shares of Company Common Stock shall cease to have
any rights as shareholders of the Company, except as provided herein or by
law.
e. Closing of the Company's Transfer Books
. At the Effective Date, the stock transfer books of the Company
shall be closed and no transfer of Shares of Company Common Stock shall be
made thereafter. In the event that, after the Effective Date, certificates
for Shares of Company Common Stock are presented to Parent or the Surviving
Corporation, they shall be cancelled and exchanged for Merger Consideration
as provided in Section 3.3, subject to applicable law in the case of
Dissenting Shares.
4.
REPRESENTATIONS OF WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company that, except as disclosed in the Parent disclosure schedule
delivered to the Company prior to the execution of this Merger Agreement
(the "Parent Disclosure Schedule"):
a. Organization and Qualification
. Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana. Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Wisconsin. Each of Parent and each of its significant subsidiaries
(within the meaning of Regulation S-X under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the "Significant Subsidiaries,"
which in the case of references to the Significant Subsidiaries of Parent,
shall include Sub) has the requisite
<PAGE>
corporate power and authority to carry on its business as it is now being
conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be qualified or
licensed or to be in good standing would not have a Material Adverse Effect
(as defined below) on Parent.
b. Authority Relative to this Merger Agreement
. Each of Parent and Sub has all requisite corporate power and
authority to enter into this Merger Agreement and to carry out its
obligations hereunder. The execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated hereby by Parent and
Sub have been duly authorized by their respective Boards of Directors and
by Parent as the sole shareholder of Sub. Assuming the due authorization,
execution and delivery of this Merger Agreement by the Company, this Merger
Agreement constitutes a valid and binding obligation of Parent and Sub
enforceable in accordance with its terms. No other corporate proceedings on
the part of Parent or Sub are necessary to authorize the execution,
delivery or performance by Parent or Sub of this Merger Agreement and the
consummation by Parent or Sub of the transactions contemplated hereby.
c. No Conflicts; No Consents.
i. Neither the execution and delivery of this Merger
Agreement nor the consummation by Parent and Sub of the
transactions contemplated hereby or compliance by Parent and Sub
with any of the provisions hereof will (with or without notice or
lapse of time) (i) conflict with, or result in a breach of, any
provision of the articles of incorporation or by-laws of Parent,
Sub or any subsidiary of Parent, (ii) conflict with, or result in
a violation of, any statute or law or any judgment, order, writ,
injunction, decree, rule or regulation applicable to Parent, Sub
or any subsidiary of Parent, or any of the assets owned by
Parent, Sub or any subsidiary of Parent, (iii) conflict with,
result in a violation of, require any notice or consent under, or
give rise to any right of revocation, withdrawal, suspension,
cancellation, termination or modification under, any material
approval, consent, license, permit, waiver or other authorization
issued by any Governmental Entity (as defined below) to Parent,
Sub or any subsidiary of Parent, or by which any of the material
assets owned by Parent, Sub or any subsidiary of Parent is bound,
or (iv) conflict with, result in a breach or violation of,
require any notice or consent under, or constitute a default
under or give rise to any right of termination, amendment,
cancellation or acceleration under, any of the terms, conditions
or provisions of any material indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed
money or any material lease, license or other agreement or
instrument to which Parent, Sub or any subsidiary of Parent is a
party, or by which any of Parent, Sub or any subsidiary of Parent
or its material assets or properties are bound.
ii. No consent or approval of, notification to, declaration,
filing or registration with, or authorization or exemption by any
Governmental Entity is required in connection with the execution
and delivery of, and the performance by, Parent and Sub of their
respective obligations hereunder or the consummation by Parent
and Sub of the Merger or the other transactions contemplated
hereunder, other than (i) the filing of premerger notification
and report forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended
<PAGE>
(the "HSR Act"), and (ii) the filing of the Articles of Merger.
d. Available Funds
. Parent has or will have at the Effective Date sufficient funds
available to consummate the transactions contemplated hereby.
e. Financial Advisor
. Parent represents and warrants that, except for Goldman, Sachs
& Co. (whose fee will be paid by Parent), no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Merger
Agreement based upon arrangements made by or on behalf of Parent.
f. Voting Requirements
. No vote of the holders of any class or series of capital stock
of Parent or Sub is necessary to approve this Merger Agreement or the
transactions contemplated hereby (other than the vote of the shareholder of
Sub which was obtained prior to the execution and delivery hereof).
g. Litigation
. Except as disclosed in the Parent Disclosure Schedule, as of
the date hereof, there are no Proceedings (as defined below) pending or, to
the Knowledge (as defined below) of the Parent or Sub, Threatened (as
defined below), and there is no outstanding material Order (as defined
below), against or affecting Parent, Sub or any of Parent's subsidiaries
that individually or in the aggregate would have a Material Adverse Effect
on Parent or would be reasonably expected to have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the
transactions contemplated by this Merger Agreement.
h. Ownership of Sub
. Sub is a recently incorporated, direct or indirect wholly owned
subsidiary of Parent and it has conducted no activities other than in
connection with the transactions contemplated hereby.
i. Disclosure Documents
. The information with respect to Parent and Sub that Parent
furnishes to the Company specifically for use in the proxy statement to
shareholders for approval of this transaction (the "Company Proxy
Statement") will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading at the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to shareholders of the Company and at
the time the shareholders vote on adoption of this Merger Agreement.
5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE>
The Company represents and warrants to Parent and Sub that,
except as disclosed in the Company disclosure schedule delivered to Parent
prior to the execution of this Merger Agreement (the "Company Disclosure
Schedule"):
a. Organization And Qualification
. The Company Disclosure Schedule contains a complete and
accurate list for the Company and each of its subsidiaries (collectively,
the "Acquired Companies") of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business and its
capitalization (including, in the case of the subsidiaries of the Company,
the identity (as of the date hereof) of each shareholder and the number of
shares held by each). Each Acquired Company is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. Each Acquired Company has all
requisite corporate power and authority to carry on its business as it is
now being conducted. Each Acquired Company is duly qualified or licensed as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be qualified or licensed or to be in good
standing would not have a Material Adverse Effect on the Company.
b. Articles of Incorporation and Bylaws
. The Company has previously made available to Parent and Sub
complete and correct copies of the Articles of Incorporation and Bylaws, in
each case, as amended to the date hereof, of each Acquired Company.
c. Capitalization.
i. The authorized capital stock of the Company consists of
3,000,000 shares of Company Common Stock and 75,000 shares of
Preferred Stock. 2,594,845.098 shares of Company Common Stock are
issued and outstanding, 11,107 shares of Company Common Stock are
held in treasury and 46,667 shares of Preferred Stock are issued
and outstanding. The Company has no shares reserved for issuance,
except that there are 47,800 shares of Company Common Stock
reserved for issuance (of which 34,800 shares were subject to
outstanding Options (as defined herein)) pursuant to the Option
Plan (as such term is defined in Section 6.4.(c). All the
outstanding Company Common Stock are, and all Common Stock that
may be issued pursuant to the exercise of outstanding Options
will be, when issued, duly authorized, validly issued, fully paid
and nonassessable (subject to Section 180.0622(2)(b) of the
WBCL). There are no bonds, debentures, notes or other
indebtedness issued or outstanding having general voting rights
with respect to the Company under ordinary circumstances. Except
as set forth above or on the Company Disclosure Schedule, there
are not issued, reserved for issuance or outstanding (i) any
shares of capital stock or other voting securities of the
Company, (ii) any securities of the Company convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of the Company or (iii) any options, warrants, calls
or other rights, agreements or commitments presently outstanding
obligating the Company to issue, deliver or sell shares of its
capital stock, voting securities or securities convertible into
or exchangeable or exercisable for its capital stock or voting
securities, or obligating the Company to grant, extend or enter
into any such option, warrant, call or other such right,
agreement or commitment or obligating the Company to repurchase,
<PAGE>
redeem or otherwise acquire any such securities. There are no
phantom stock or similar securities issued with respect to the
capital stock of any Acquired Company.
ii. Except as set forth on the Company Disclosure Schedule,
all the outstanding shares of capital stock of each subsidiary of
the Company have been duly authorized, are validly issued, fully
paid and nonassessable (subject, in the case of any subsidiary
incorporated under the laws of the State of Wisconsin, to Section
180.0622(2) (b) of the WBCL) and owned by the Company or by a
wholly owned subsidiary of the Company, free and clear of any
liens, claims or encumbrances. There are no existing options,
warrants, calls or other rights, agreements or commitments of any
character relating to the sale, issuance, delivery or voting of
any shares of the issued or unissued capital stock of any of the
subsidiaries of the Company that have been issued, granted or
entered into by the Company or any of its subsidiaries. There are
not issued, reserved for issuance or outstanding any securities
of any such subsidiary that are convertible into or exchangeable
or exercisable for shares of capital stock of the Company or any
such subsidiary and there are no obligations of the Company or
any such subsidiary to repurchase, redeem or otherwise acquire
any such securities.
iii. Except as set forth in the Company Disclosure Schedule
and except for marketable securities, no Acquired Company
directly or indirectly owns, or has any agreement or contract to
acquire, any interest in any corporation, partnership, joint
venture or other business association or entity (other than
Acquired Companies).
d. Authority Relative to this Merger Agreement
. The Company has all requisite corporate power and authority to
enter into this Merger Agreement and, subject to approval of this Merger
Agreement by the holders of the Company Common Stock, to consummate the
transactions contemplated hereby. The execution and delivery of this Merger
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Company's Board of Directors. Assuming the due
authorization, execution and delivery of this Merger Agreement by Parent
and Sub, this Merger Agreement constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms. Except for the
approval of the holders of Company Common Stock, no other corporate
proceedings on the part of the Company are necessary to authorize the
execution, delivery or performance by the Company of this Merger Agreement
and the consummation by the Company of the transactions contemplated
hereby.
e. No Conflicts, No Consents.
i. Except as set forth in the Company Disclosure Schedule,
neither the execution and delivery of this Merger Agreement nor
the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions
hereof will (with or without notice or lapse of time) (i) subject
to approval by the Company's shareholders referred to in Section
6.10, conflict with, or result in a breach of, any provision of
the articles of incorporation or by-laws of any Acquired Company,
(ii) conflict with, or result in a violation of, any statute or
law or any judgment, order, writ, injunction, decree, rule or
regulation applicable to any Acquired Company or any of the
assets owned by any Acquired Company, (iii) conflict with, result
in a violation
<PAGE>
of, require any notice or consent under, or give rise to any
right of revocation, withdrawal, suspension, cancellation,
termination or modification under, any material approval,
consent, license, permit, waiver or other authorization issued by
any Governmental Entity to any Acquired Company or by which any
of the material assets owned by any Acquired Company is bound, or
(iv) conflict with, result in a breach or violation of, require
any notice or consent under, or constitute a default under or
give rise to any right of termination, amendment, cancellation or
acceleration under, any of the terms, conditions or provisions of
any material indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money or any material lease,
license or other agreement or instrument to which any Acquired
Company is a party, or by which any Acquired Company or its
material assets or properties are bound.
ii. Except as set forth in the Company Disclosure Schedule,
no consent or approval of, notification to, declaration, filing
or registration with, or authorization or exemption by any
Governmental Entity is required in connection with the execution
and delivery of, and the performance by, the Company of its
obligations hereunder or the consummation by the Company of the
Merger or the other transactions contemplated hereunder, other
than (i) the filing of premerger notification and report forms
under the HSR Act and (ii) the filing and recordation of the
Articles of Merger as required by the WBCL.
f. Financial Statements
. The Company has previously furnished Parent with true and
complete copies of audited consolidated balance sheets of the Acquired
Companies as of August 31, 1997, August 31, 1996, and August 31, 1995 (the
audited consolidated balance sheet as of August 31, 1997 is referred to as
the "Balance Sheet") and related audited consolidated statements of
earnings, shareholders' equity and cash flows for each of the three years
in the period ended August 31, 1997 (the "Company Financial Statements") .
The Company Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
("GAAP") (except as may be indicated therein or in the notes thereto) and
the Company Financial Statements present fairly, in all material respects,
the financial position of the Company on a consolidated basis as of the
respective dates thereof and the results of operations and changes in
financial position of the Company on a consolidated basis for the
respective periods then ended, subject to adjustments which have previously
been disclosed in writing to Parent and any other adjustments described
therein.
g. No Undisclosed Liabilities
. Except as set forth in the Company Disclosure Schedule or
liabilities incurred in connection with this Merger Agreement or the
transactions contemplated hereby, to the Knowledge of the Company, the
Acquired Companies have no liabilities or obligations of any nature
(whether absolute, accrued, contingent, unmatured, unaccrued, unliquidated,
unasserted, conditional or otherwise) which individually or in the
aggregate would have a Material Adverse Effect on the Company.
h. Absence of Certain Changes or Events
. Except as contemplated by this Merger Agreement or as disclosed
in the Company Disclosure Schedule, since the date of the Balance Sheet,
the Acquired Companies have conducted their businesses only in the ordinary
course and there has not been (i) any
<PAGE>
Material Adverse Change (as defined below) in the Company; (ii) any damage,
destruction or loss, whether or not covered by insurance, that has had, or
is reasonably expected to have, a Material Adverse Effect on the Company;
(iii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, securities or property) with respect to any
of the Company's capital stock, except for the regular quarterly dividend
paid on October 15, 1997 on the Company Common Stock at $.20 per share and
$1.95 per share on the Preferred Stock, and the regular quarterly dividend
to be paid in accordance with Section 6.1(ii), (iv) any waiver, settlement,
assignment, release or compromise of any material claims or litigation, (v)
any tax election that would reasonably be expected to have a Material
Adverse Effect on the Company, or any settlement or compromise of any
material income tax liability, (vi) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by GAAP,
(vii) any increase in the compensation payable or that would become payable
by an Acquired Company to any current or former directors, officers or
employees of such Acquired Company, other than increases in the ordinary
course consistent with past practice and except as required under any
agreements in effect on the date of the Balance Sheet, or (viii) any entry
into or adoption or amendment of any Company Benefit Plans (as defined
below) or any employment, deferred compensation, consulting, severance,
termination or indemnification agreements with any such current or former
director, officer or employee, other than in the ordinary course consistent
with past practice.
i. Litigation
. Except as disclosed in the Company Disclosure Schedule, as of
the date hereof, there are no Proceedings pending or, to the Knowledge of
the Company, Threatened, and there is no outstanding material Order,
against or affecting any Acquired Company, that individually or in the
aggregate would have a Material Adverse Effect on the Company, or would be
reasonably expected to have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the transactions contemplated
by this Merger Agreement.
j. Employee Benefit Plans, Labor.
(a) The Company Disclosure Schedule lists each employee benefit
plan (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Chapter 1 Part XIV of the
Income and Corporation Taxes Act 1988 of the United Kingdom), each
employment contract, stock option, stock appreciation right, phantom stock,
restricted stock, severance, termination or other compensation plan,
program, arrangement or understanding maintained or contributed to by the
Acquired Companies, or with respect to which any Acquired Company could
incur material liability (the "Company Benefit Plans"). The Company has
delivered or made available to Buyer a true and complete copy of each
material Company Benefit Plan and the most recent Form 5500 (including all
attached schedules) filed with respect to each Company Benefit Plan and the
most recent actuarial or financial valuation reports prepared with respect
to any Company Benefit Plan. There is no pending or, to the Knowledge of
the Company, Threatened dispute, controversy, investigation or claim
concerning the Company Benefit Plans other than that would not be
reasonably likely to have a Material Adverse Effect on the Company.
(b) The Internal Revenue Service has issued a favorable
determination letter with respect to each Company Benefit Plan, other than
a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"), that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code, and as of the date hereof, to
<PAGE>
the Knowledge of the Company, there are no circumstances nor any events
that have occurred that would materially adversely affect the qualified
status of any such plan or the related trust.
(c) The Acquired Companies and the Company Benefit Plans are in
compliance in all material respects with all provisions of ERISA, the Code,
or their foreign equivalents, and all other laws and regulations applicable
to the Company Benefit Plans. There does not now exist, nor do any
circumstances now exist that could reasonably be expected to result in, any
liability of any Acquired Company under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) section 4980B
of the Code or sections 502 or 601-608 of ERISA, or (v) any other Legal
Requirement with respect to any Company Benefit Plan, other than claims for
benefits under such plans. With respect to each Company Benefit Plan
subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the
Code, other than a Multiemployer Plan: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the
Code or Section 302 of ERISA, whether or not waived and (ii) no reportable
event within the meaning of Section 4043(c) of ERISA and no event described
in Section 4062 or 4063 of ERISA, has occurred.
(d) There has been no complete or partial withdrawal, within the
meaning of Section 4201 of ERISA, from any Multiemployer Plan that has
resulted in, or is reasonably expected to result in, any withdrawal
liability to any Acquired Company. There has been no transaction described
in Section 4069 of ERISA within the last five years that has resulted in,
or could reasonably be expected to result in, material liability to an
Acquired Company.
(e) No Company Benefit Plan provides material benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees of any Acquired
Company beyond their retirement or other termination of service, other than
(i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension benefit plan" as defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities
on the books of an Acquired Company, or (iv) benefits the full cost of
which is borne by the current or former employee (or his beneficiary).
(f) Except as set forth on the Company Disclosure Schedule, the
deduction of any amount payable by an Acquired Company shall not be subject
to disallowance under Section 162(m) or 280G of the Code.
(g) Except as set forth on the Company Disclosure Schedule, no
Acquired Company is subject to any collective bargaining agreement. There
are no material Proceedings against or affecting any Acquired Company of
which there is a reasonable likelihood of an adverse determination relating
to the alleged violation of any law, ordinance, regulation, statute or
order pertaining to labor relations or employment matters. Except as set
forth on the Company Disclosure Schedule, since August 31, 1995, to the
Knowledge of the Company, there have been no strikes, lockouts, work
stoppages or slowdowns, or jurisdictional disputes or organizing activity
occurring or Threatened with respect to the business or operations of any
Acquired Company. k. Business Combination Provisions Inapplicable . As of
the date hereof and at all times on or prior to the Effective Date,
Sections 180.1140 through 180.1144 of the WBCL are, and shall be,
inapplicable to the Merger and the transactions contemplated by this Merger
Agreement.
l. Financial Advisor.
i. The Company represents and warrants that except for
Robert W. Baird & Co. Incorporated ("Baird") (whose fee will be
paid by the Company at
<PAGE>
the Closing), no broker, finder or investment banker is entitled
to any brokerage, finder's or similar fee or commission in
connection with the Merger or the transactions contemplated by
this Merger Agreement based upon arrangements made by or on
behalf of any Acquired Company. The Company has furnished to
Parent true and complete copies of all agreements under which any
such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the persons to whom
such fees are payable.
ii. The Company has received the opinion of Baird, dated the
date hereof, to the effect that, as of such date, the Merger
Consideration is fair from a financial point of view to holders
of Shares, a copy of which has been or will be delivered to
Parent.
m. Permits; Compliance with Legal Requirements; Orders.
i. To the Knowledge of the Company, the Acquired Companies
hold all material permits, licenses, variances, exemptions,
orders and approvals of all courts, administrative agencies or
commissions or other governmental authorities or
instrumentalities, domestic or foreign (each, a "Governmental
Entity"), necessary to permit the Acquired Companies lawfully to
conduct and operate their businesses in all material respects in
the manner they currently conduct and operate such businesses and
to permit the Acquired Companies to own and use their material
assets in the manner in which they currently own and use such
assets (the "Company Permits"). Except as disclosed in the
Company Disclosure Schedule, to the Knowledge of the Company, the
Acquired Companies are in compliance in all material respects
with the terms of each material Company Permit, and each material
Company Permit is valid and in full force and effect.
ii. To the Knowledge of the Company, the Acquired Companies
are in compliance with all applicable statutes, laws, ordinances,
rules and regulations, except where the failure to so comply
individually or in the aggregate would not have a Material
Adverse Effect on the Company. The paragraph does not relate to
environmental matters, which are exclusively the subject of
Section 5.16.
n. Material Contracts; No Defaults.
i. The Company has delivered or made available to Parent
true and complete copies of the following Contracts (as defined
below) under which any Acquired Company has any rights, under
which any Acquired Company has or is reasonably likely to become
subject to any obligation or liability, or by which any Acquired
Company or any of the assets owned by it is or is reasonably
likely to become bound:
(1) each Contract involving performance of services or
delivery of goods or materials by one or more Acquired
Companies of an amount or value in excess of $500,000 or its
foreign currency equivalent annually;
(2) each Contract involving expenditures or receipts of
one or more Acquired Companies in excess of $500,000 or its
foreign currency equivalent annually;
(3) each collective bargaining agreement and other
Contract to or with any labor union or other employee
representative of a group of employees;
(4) each employment and consulting Contract with any
employee of any Acquired Company;
(5) each joint venture, partnership and other Contract
(however named) involving a sharing of profits, losses,
costs, or liabilities by any Acquired Company with any other
Person;
(6) each Contract containing covenants that materially
restrict the
<PAGE>
business activity of any Acquired Company or any affiliate
of any Acquired Company or limit the freedom of any Acquired
Company or any affiliate of an Acquired Company to engage in
any line of business or to compete with any Person;
(7) each Contract relating to the borrowing of money in
excess of $500,000 or its foreign currency equivalent;
(8) each real property lease to which any Acquired
Company is subject;
(9) all Contracts described in (i) through (viii) are
collectively referred to as the "Material Contracts".
ii. Except as set forth in the Company Disclosure Schedule,
each Material Contract is in full force and effect and is valid
and enforceable in accordance with its terms. Except as set forth
in the Company Disclosure Schedule, each Acquired Company is, to
the Knowledge of the Company, in compliance in all material
respects with all applicable terms and requirements of each
Material Contract.
o. Taxes.
i. Except as set forth on the Company Disclosure Schedule,
the Acquired Companies have duly filed all foreign, federal,
state and local income, franchise, sales and use, excise, real
and personal property and other tax returns and reports
(including, but not limited to, those filed on a consolidated,
combined or unitary basis) required to have been filed ("Filed
Returns"), except for such returns or reports for which requests
for extensions have been timely filed, granted and have not
expired. The Company has delivered or made available to Parent
complete copies of the Filed Returns described on the Company
Disclosure Schedule and will make available to Parent on request
any other Filed Returns. All Filed Returns are true, correct and
complete and accurately report all items reported or required to
be reported thereon, and the Acquired Companies have paid, or
have established reserves in accordance with GAAP in the Balance
Sheet for the payment of, all taxes, interest and penalties shown
on Filed Returns filed on or prior to the date of the Balance
Sheet as being due or (except to the extent the same are
contested in good faith and listed on the Company Disclosure
Schedule) claimed on or prior to the date of the Balance Sheet to
be due to any federal, state, local or other taxing authority.
The Company has paid or made adequate provision in accordance
with GAAP in the financial statements of the Company for all
taxes payable in respect of all periods ending on or prior to
August 31, 1997.
ii. The Acquired Companies shall not be required to include
in a taxable period ending after the Effective Date any taxable
income attributable to income that economically accrued in a
prior taxable period as a result of Section 481 of the Code, the
installment method of accounting or any comparable provision of
state or local tax law.
iii. (i) No material amount of property of the Acquired
Companies is "tax exempt property" within the meaning of Section
168(h) of the Code, (ii) no material amount of assets of the
Acquired Companies are subject to a lease under Section 7701(h)
of the Code, (iii) the Acquired Companies are not a party to any
material lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect prior to the date
of enactment of the Tax Equity and Fiscal Responsibility Act of
1982, and (iv) no Acquired Company has filed a consent under
Section 341(f) of the Code.
iv. Immediately following the Merger, the Acquired Companies
will
<PAGE>
not have any material amount of income or gain that has been
deferred under Treasury Regulation Section 1.1502-13, or any
material excess loss account in a subsidiary under Treasury
Regulation Section 1.1502-19.
v. To the Knowledge of the Company, as of the date hereof,
there exists no proposed tax assessment or pending audit against
any Acquired Company except as disclosed in the Balance Sheet or
the Company Disclosure Schedule. For all taxable years through
1993, all Filed Returns have been examined and settled with the
Internal Revenue Service or the Federal statute of limitations
has run thereon.
vi. No representation or warranty contained in this Section
5.15 (each a "Relevant Tax Representation") shall be deemed to be
inaccurate unless all inaccuracies of Relevant Tax
Representations cumulatively would reasonably be expected to have
a Company Material Adverse Effect.
p. Environmental Matters.
i. Except as disclosed in the Company Disclosure Schedule,
to the Knowledge of each Acquired Company, each Acquired Company
is, and has been, in compliance in all material respects with and
is not in material violation of or is not otherwise subject to
actual or potential material liabilities under any applicable
Environmental Law, including liability for the off-site disposal
or arranging for disposal of Hazardous Materials. Except as
disclosed in the Company Disclosure Schedule, no Acquired Company
has received any actual or Threatened Order, notice or other
written communication from any Governmental Entity or Person,
alleging any actual or potential material violation or material
failure to comply with, or any actual or potential liability
under, any Environmental Law. Except as disclosed in the Company
Disclosure Schedule, no material capital expenditures are
required at the Facilities to comply with any Environmental Laws
or any pending regulations with respect thereto.
ii. Except as disclosed in the Company Disclosure Schedule,
to the Knowledge of each Acquired Company, there are no Hazardous
Materials present on or in the environment at the Facilities,
including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps,
equipment (whether movable or fixed) or other containers, either
temporary or permanent, and deposited or located in land, water,
sumps, or any other part of the Facilities, or incorporated into
any structure therein or thereon or otherwise located on or at
any geologically or hydrologically adjoining property, except in
material compliance with, and as would not reasonably be expected
to result in material liability under, Environmental Laws. Except
as disclosed in the Company Disclosure Schedule, no Acquired
Company, has permitted or conducted any Hazardous Activity except
in compliance in all material respects with Environmental Laws.
iii. Except as disclosed in the Company Disclosure Schedule,
to the Knowledge of the Acquired Companies, there has been no
Release or, Threat of Release, of any Hazardous Materials at or
from the Facilities and assets or any other locations where any
Hazardous Materials were generated, manufactured, refined,
transferred, transported, produced, imported, used or processed
from or by the Facilities, the Acquired Companies, except in
material compliance with, and as would not reasonably be expected
to result in material liability under, Environmental Laws.
q. Title to Assets; Liens
. Except as disclosed in the Company Disclosure Schedule, the
Acquired Companies own (with good and marketable title in the case of real
property) all of the material
<PAGE>
properties and assets reflected in the Balance Sheet (except as reflected
in the Company Financial Statements, including the notes thereto and except
for property and assets sold since the date of the Balance Sheet in the
ordinary course of business consistent with past practice). Except as
disclosed in the Company Disclosure Schedule or as reflected on the Balance
Sheet (including the notes thereto), such assets are held free and clear of
any mortgages, liens, charges or encumbrances of any nature whatsoever
("Liens"), except for Liens which individually or in the aggregate do not
materially detract from the value, or impair in any significant manner the
use, of the property or assets subject thereto or the operations of the
Company. Except as disclosed in the Company Disclosure Schedule, the
Acquired Companies have valid and enforceable leases for the material
premises purported to be leased by them.
r. Patents, Trademarks, Copyrights .
Except as set forth in the Company Disclosure Schedule, the
Acquired Companies own or possess adequate licenses or other valid rights
to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, know-how, software and other
proprietary information used or held for use in connection with the
business of the Acquired Companies as currently being conducted (the
"Intellectual Property Rights"). Except as set forth in the Company
Disclosure Schedule, to the Knowledge of the Company, as of the date
hereof, (a) no material Intellectual Property Right of the Acquired
Companies is being infringed by any third party, and (b) none of the
material Intellectual Property Rights of the Acquired Companies infringes
any intellectual property right of any third party.
s. Voting Requirements
. The affirmative vote of the holders of at least two-thirds of
the total number of votes entitled to be cast by the holders of the Common
Shares outstanding as of the record date for the Company Shareholder
Meeting (as defined herein) is the only vote of the holders of any class or
series of the Company's capital stock necessary to adopt and approve this
Agreement and the transactions contemplated by this Agreement (including
the Merger).
t. Insurance
. Each of the Acquired Companies maintains such policies of
maritime, property, casualty, worker's compensation, general liability and
other insurance, or has self insured and established reserves, as are
appropriate and as are comparable in amounts and scope to such policies
maintained by similarly situated businesses or as required by applicable
law.
6.
COVENANTS AND CERTAIN MATTERS
a. Conduct of Business by the Company Pending the Merger
. After the date hereof and prior to the Effective Date, except
as contemplated by this Merger Agreement and except for the matters set
forth in the Company Disclosure Schedule or unless Parent shall otherwise
agree in writing:
(1) The Company shall, and shall cause each other
Acquired Company to, carry on its respective businesses in
the usual and ordinary course in substantially the same
manner as heretofore conducted, and shall, and shall cause
each other Acquired Company to, use its respective Best
Efforts to preserve intact their present business
organizations, keep available the services of their
employees and preserve their relationships with customers,
suppliers and others having business dealings with them.
(2) The Company shall not and shall not propose to, and
shall cause each other Acquired Company not to, (A) sell or
pledge or agree to
<PAGE>
sell or pledge any capital stock owned by it in any of the
other Acquired Companies, (B) amend its articles of
incorporation or by-laws, (C) split, combine or reclassify
its outstanding capital stock or issue or authorize or
propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital
stock, (D) declare, set aside, or pay any dividends on, or
make any other distribution in respect of any of its capital
stock, except that the Company shall pay on or before the
Closing Date its regular quarterly dividend, and provided
that such dividend shall not exceed $.20 per share on
Company Common Stock and $1.50 per share on Preferred Stock,
or (E) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire
any Shares or other shares of its capital stock or any other
securities thereof or any rights, warrants or options to
acquire any of the foregoing, other than, in the case of
clauses (C), (D) and (E), dividends and distributions
(including liquidating distributions) by a direct or
indirect wholly owned subsidiary of the Company to its
parent, except for the redemption of Preferred Stock at the
redemption price specified in the terms thereof as in effect
on the date hereof.
(3) The Company shall not, nor shall it permit any
other Acquired Company to, (A) issue, deliver or sell or
agree to issue, deliver or sell any additional shares of, or
rights of any kind to acquire any shares of, their
respective capital stock of any class, or any option, rights
or warrants to acquire, or securities convertible into,
shares of Company Common Stock other than in accordance with
the terms of currently outstanding stock options or in
accordance with the terms of the instruments governing the
Dividend Reinvestment Plan; (B) acquire, lease or dispose or
agree to acquire, lease or dispose any capital assets or any
other assets other than in the ordinary course of business
consistent with past practice; (C) incur indebtedness for
borrowed money in excess of $5 million or, other than in the
ordinary course of business consistent with past practice,
guarantee any such indebtedness of another person; (D)
encumber or grant a security interest in any asset other
than in the ordinary course of business consistent with past
practice; (E) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion
of the assets of or equity interest in, or by any other
manner, any business or any corporation, partnership, joint
venture, association or other business organization or
division thereof, except for purchases of inventory,
supplies and other similar items in the ordinary course of
business consistent with past practice, and except for
transactions between a wholly owned subsidiary of the
Company and the Company or another wholly owned subsidiary
of the Company; or (F) enter into any contract, agreement,
commitment or arrangement with respect to any of the
foregoing.
(4) The Company shall not, nor shall it permit any
other Acquired Company to, (A) increase the compensation of
any director, officer or employee of the Company or any
other Acquired Company other than in the ordinary course of
business consistent with past practice, (B) adopt or amend
any Company Benefit Plan other than as required by law, (C)
enter into or amend any employment or termination of
employment contract or
<PAGE>
(D) agree to do any of the foregoing.
(5) The Company shall not, nor shall it permit any
other Acquired Company to, (A) pay, discharge, settle or
satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business
consistent with past practice with respect to liabilities
which do not individually or in the aggregate have a
Material Adverse Effect on the Company, (B) make any capital
expenditures in excess of $2 million or (C) agree to do any
of the foregoing.
b. Notice of Breach
. Each party shall promptly give written notice to the other
party upon becoming aware of the occurrence or, to its Knowledge, impending
or threatened occurrence, of any event which would cause or constitute a
breach of any of its representations, warranties or covenants contained in
this Merger Agreement and will use its Best Efforts to prevent or promptly
remedy the same.
c. Access and Information
. The Company shall, and shall cause the other Acquired Companies
to afford to Parent and to Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) throughout the period prior
to the Effective Date to its properties, books, contracts, commitments,
records and personnel and, during such period, shall furnish promptly to
Parent information concerning its business, properties and personnel as
Parent may reasonably request. Parent shall hold, and shall cause its
directors, officers, employees and advisors to hold, in confidence all such
information in accordance with the terms of the confidentiality letter
dated September 15, 1997 between Parent and the Company ("Parent
Confidentiality Letter") which shall remain in full force and effect in
accordance with the terms thereof, including, without limitation, in the
event of termination of this Merger Agreement. Parent and its accountants,
counsel and other representatives shall, in the exercise of the rights
described in this Section 6.3, not unduly interfere with the operation of
the business of the Company or any other Acquired Company.
d. Employee and Other Arrangements.
i. From and after the Effective Date, to the extent
permitted by applicable Legal Requirements, Parent shall honor,
and shall cause the Surviving Corporation to honor, in accordance
with their terms, all employment, severance, consulting,
indemnification and other compensation contracts, including
deferred compensation arrangements, in effect on the date hereof,
between any Acquired Company and any current or former director,
officer or employee thereof as listed on the Company Disclosure
Schedule, and all provisions for benefits or other amounts earned
or accrued through the Effective Date under any Company Benefit
Plan. For a period of not less than three (3) years following the
Effective Date, Parent shall cause to be provided to those
employees of the Acquired Companies on the Effective Date (the
"Employees") Employee Benefits that are determined to be no less
favorable in the aggregate than those provided to the Employees
immediately prior to the Effective Date, with such determination
being subject to the prior approval of Rockne G. Flowers or his
successor or designee. Notwithstanding the foregoing, the
Surviving Corporation shall honor
<PAGE>
the Company's accrued vacation policy until all pre-Effective
Date accrued vacation has been used or the Employee has been
otherwise compensated. To the extent permitted by applicable
Legal Requirements and solely for purposes of eligibility for and
vesting of Employee Benefits provided after the Effective Date to
any individual who is, as of the Effective Date, an employee of
the Acquired Companies (including without limitation, plans or
programs of Parent and its affiliates after the Effective Date,
to the extent Employee Benefits are provided to any such
individual thereunder by Parent in its sole discretion), all
service with the Acquired Companies prior to the Effective Date
shall be treated as service with Parent and its affiliates. For
purposes of this Section 6.4, "Employee Benefits" means all
medical, health, dental, life insurance, short-term and long-term
disability, sick leave, vacation, severance, retirement, pension,
and savings plans, policies or arrangements. Notwithstanding the
foregoing, for a period of not less than three (3) years
following the Effective Date, Parent shall prevent the Surviving
Corporation from amending or terminating, in whole or in part,
the Profit Sharing Plan, including without limitation the
appointment or removal of trustees, unless such action consented
to in writing by Mr. Flowers or his successor or designee. For
purposes of this Section 6.4, Mr. Flowers successor or designee
shall be selected by Mr. Flowers as evidenced in writing and
signed by Mr. Flowers and delivered to the parties in accordance
with the notice provisions of Section 9.2.
ii. The Company shall take all actions necessary to provide
that, immediately prior to the Effective Date, (i) each
outstanding option to purchase Common Stock (an "Option") granted
under the Company's 1990 Non-qualified Stock Option Plan (the
"Option Plan"), whether or not then exercisable or vested, shall
become fully exercisable and vested, (ii) each Option that is
then outstanding shall be cancelled, (iii) in consideration of
such cancellation, and except to the extent that Parent or the
Sub and the holder of any such Option otherwise agree, the
Company shall pay to such holders of Options an amount in respect
thereof equal to the product of (A) the excess, if any, of the
Merger Consideration over the per share exercise price thereof
and (B) the number of Common Stock subject thereto (such payment
to be net of applicable withholding taxes) and (iv) all Common
Stock granted under any Option Plan whether or not then vested or
subject to restrictions, shall become fully vested and free of
restrictions of the Merger Consideration.
iii. The parties acknowledge that Company does not have a
formal severance plan for the Employees. Parent agree that, after
the Effective Date, the Employees shall be eligible for severance
benefits on the same basis as similarly situated employees of
Fleetguard, Inc., a subsidiary of Parent ("Fleetguard");
provided, that the Employees eligible for severance or
termination pay under the terms of an individual contract with an
Acquired Company shall not receive additional severance benefits
under this Section 6.4.
iv. From and after the Effective Date and for a period of
three (3) years, Parent will take all necessary action to ensure
that the combination of Parent and its affiliates and Company is
completed in a manner consistent with that certain letter dated
October 31, 1997 from Parent to Company and signed by M. David
Jones and addressed to Rockne G. Flowers (the "Letter"). In order
to implement the terms of this Section 6.4(d), the parties agree
that the management
<PAGE>
board referred to in the Letter shall be entitled to make all
decisions relating to the implementation of the combination,
including with respect to any workforce reductions. The parties
also acknowledge that the synergies referred to in the Letter are
more fully described in the Parent Disclosure Schedule. In the
event an opportunity for improved operating performance or
financial results of Parent and the Surviving Corporation is
identified that could result in workforce reductions, the
opportunity and implementation plan will be reviewed by the
management board to determine that the intended benefits are
achievable and the planned approach is the best alternative for
Parent and the Surviving Corporation. Opportunities for each
person affected by the implementation of the plan will be
explored within the Surviving Corporation, Parent and its other
affiliates to determine possible matches between such person's
skills and interests and the business needs of such entities.
Where no matches are found, severance benefits will apply in
accordance with Parent's severance plan as described in Section
6.4(c). To further ensure that decisions regarding workforce
reductions will be made in a manner consistent with the Letter
and synergies discussed, in the event of disagreement between Mr.
Flowers and the other members of the management board as a group
in connection with such decisions, no action will be taken
without the consent of the Chairman of the Parent, who shall
become informed of the issue and who shall participate with the
management board and attempt to resolve the matter through
consensus.
v. For a period of three (3) years following the Effective
Date, Parent shall cause the Surviving Corporation to contribute
to NMC Projects, Inc., as renamed Nelson Foundation, Inc. (the
"Foundation") at an annual contribution level not less than
$186,000 (which is the average annual contribution level of the
Company to the Foundation for the preceding three years). Parent
acknowledges and agrees that the Foundation will remain a
separate legal entity and the trustees shall continue to cause
the Foundation to serve the communities in which the Company has
facilities or offices.
e. Indemnification.
i. Parent agrees that (i) all rights to indemnification
existing in favor of the directors, officers or employees of the
Company and its subsidiaries (the "Indemnified Parties") as
provided in the Company's articles of incorporation or by-laws or
comparable documents or in indemnification agreements with the
Company or any of its subsidiaries, or otherwise in effect as of
the date hereof, shall survive the Merger and (ii) Parent shall
guarantee the performance by the Surviving Corporation of its
obligations referred to in clause (i). Parent also agrees to
indemnify all Indemnified Parties to the fullest extent permitted
by applicable law with respect to all acts and omissions arising
out of such individuals' services as officers, directors,
employees or agents of the Company or 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, any
Acquired Company, occurring prior to the Effective Date
including, without limitation, the transactions contemplated by
this Merger 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, without
limitation, the transactions contemplated by this Merger
Agreement, occurring prior to or at the Effective
<PAGE>
Date, Parent shall pay as incurred such Indemnified Party's legal
and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. From and after the
Effective Date, Parent shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in
this Section 6.5.
ii. In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into
any other person and is not the continuing or surviving
corporation or (ii) transfers or conveys all or substantially all
its properties and assets to any person, then, and in each such
case, proper provision will be made so that the successors and
assigns of the Surviving Corporation assume the obligations set
forth in this Section 6.5.
iii. Parent agrees that, from and after the Effective Date,
the Surviving Corporation shall cause to be maintained in effect
for not less than six years from the Effective Date the current
policies of directors' and officers' liability insurance
maintained by the Company; provided that the Surviving
Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less
advantageous to the Indemnified Parties and provided that such
substitution shall not result in any gaps or lapses in coverage
with respect to matters occurring prior to the Effective Date;
and provided, further, that in satisfying its obligation under
this Section 6.5(c) the Surviving Corporation shall not be
obligated to pay premiums in excess of 200% of the amount per
annum the Company paid in its last full fiscal year, but shall in
such case be obligated to provide such coverage as may be
obtained for such 200% premium.
iv. In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated
by this Merger Agreement is commenced, whether before or after
the Effective Date, the parties hereto agree to cooperate and use
their respective Best Efforts to vigorously defend against and
respond thereto. No such matter in which any officer, employee or
director of the Company is a named party may be settled without
the consent of such officer or director, unless such consent is
being unreasonably withheld or delayed.
f. HSR Act and Related Matters
. The Company and Parent shall use their Best Efforts to file as
soon as practicable notifications under the HSR Act in connection with the
Merger and the transactions contemplated hereby, and to respond as promptly
as practicable to any inquiries received from the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division") for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received
from any State Attorney General or other governmental authority in
connection with antitrust matters. Parent and the Company shall use their
respective Best Efforts to obtain timely governmental or regulatory action
or nonaction, consent or approval of the Merger by the FTC, the Antitrust
Division and any other Governmental Entity in connection with antitrust
matters.
g. Public Announcements
. The Company, Parent and Sub shall consult with each other
before issuing any
<PAGE>
press release or otherwise making any public statements with respect to
this Merger Agreement or any transaction contemplated hereby and shall not
issue any such press release or make any such public statement without
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that any party hereto may, without the prior
consent of the other party, issue such press release or make such public
statement as may be required by law if it has used all reasonable efforts
to consult with the other party and to obtain such party's consent but has
been unable to do so in a timely manner.
h. Assistance in Consummation of the Merger
. Subject to the terms and conditions of this Merger Agreement
(including without limitation, in the case of the Company, the limitations
set forth in Section 6.10), each of Parent, Sub and the Company shall use
its Best Efforts to, and shall cooperate with, each other to bring about
the consummation of the Merger as soon as possible in accordance with the
terms and conditions hereof. Parent shall cause Sub to perform all of its
obligations in connection with this Merger Agreement. In connection with
and without limiting the foregoing, each of the Company, and Parent shall
(i) take all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Merger or
this Merger Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Merger or this Merger
Agreement, take all action necessary to ensure that the Merger and the
other transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on the Merger and the other
transactions contemplated hereby.
i. No Solicitation of Transactions.
i. The Company will not, directly or indirectly, and will
cause its subsidiaries, and its and their officers, directors,
employees, affiliates, agents or advisors or other
representatives (including, without limitation, any investment
banker, attorney or accountant retained by its Board of
Directors) not to, directly or indirectly, take any action to (i)
solicit, initiate or encourage, or take any other action designed
to facilitate, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limitation,
any proposal or offer to its shareholders) that constitutes, or
may reasonably be expected to lead to, any Competing Transaction
(as defined below), (ii) enter into to maintain or participate in
any way in discussions or negotiations with any person or entity
in furtherance of such inquiries or to obtain a Competing
Transaction, (iii) agree to or approve, recommend or endorse any
Competing Transaction, or publicly propose to do so, (iv)
withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to Parent, the approval or recommendation by the
Company's Board of Directors of the Merger or this Merger
Agreement or (v) enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement
related to any Competing Transaction. The Company shall notify
Parent promptly if any proposal or offer, or any inquiry or
contact with any person with respect thereto, regarding a
Competing Transaction is made, including notifying Parent of the
material terms and conditions of any such proposal, offer,
inquiry or contact regarding any such Competing Transaction. The
Company will keep Parent reasonably informed of the status and
details (including amendments) of any such proposal, offer,
inquiry or contact regarding any such Competing Transaction.
<PAGE>
ii. Notwithstanding anything to the contrary in Section
6.9(a), the Board of Directors of the Company may cause the
Company to furnish, pursuant to a confidentiality agreement with
terms substantially similar to those contained in the Parent
Confidentiality Letter, the financial and business information
attached to Section 6.9(b) of the Company Disclosure Schedule
(the "Specified Information") to any person that requests such
information in order to submit a proposal relating to a Competing
Transaction, provided such person was not solicited by the
Company, the Company has not otherwise breached Section 6.9(a)
and the management of the Company, after consultation with its
financial advisors and outside counsel, has determined that such
person could reasonably be expected to make a Superior Proposal
(as defined below) following receipt of the Specified
Information. The Board of Directors may also cause the Company to
furnish, pursuant a confidentiality agreement as discussed above,
information to, and may participate in discussions or
negotiations with, any person that has submitted a written
proposal or indication of interest to the Company relating to a
Competing Transaction which was not solicited by the Company or
which did not otherwise result from a breach of Section 6.9(a),
if and only to the extent that (i) the Board of the Company
determines in good faith after consultation with outside counsel
that it is necessary to do so to avoid a breach of its fiduciary
duties to the Company or its shareholders under applicable Laws,
(ii) the Board of Directors of the Company determines in good
faith, after consultation with its financial advisors and outside
counsel, that such written proposal or indication of interest
constitutes a Superior Proposal, (iii) the Company Shareholder
Meeting (defined below) shall not have occurred and (iv) the
Board of Directors of the Company provides prior written notice
to Parent of the information referred to in the last sentence of
Section 6.9(a). Nothing in this Section 6.9 shall (x) permit
either Parent or the Company to terminate this Merger Agreement
(except as specifically provided in Article VIII hereof) or (y)
affect any other obligation of Parent or the Company under this
Merger Agreement.
iii. Nothing contained in this Section 6.9 shall prohibit
either party hereto from taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act or from making any disclosure to its
shareholders if, in the good faith judgment of its Board of
Directors, after consultation with outside counsel, failure to so
disclose would result in a violation of applicable Law; provided,
however, that neither the Company nor its Board of Directors nor
any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the
Merger or this Merger Agreement or approve or recommend, or
propose publicly to approve or recommend, a Competing
Transaction, unless and until the conditions set forth in Section
6.9(b)(i), (b)(ii), (b)(iii) and (b)(iv) are satisfied.
iv. A "Competing Transaction" means any of the following
involving the Company other than the Merger: any proposed (i)
merger, consolidation, share exchange, business combination or
other similar transaction involving the Company or its
subsidiaries, (ii) sale, lease, exchange, transfer or other
disposition directly or indirectly of 15% or more of the
consolidated assets of the Company and its subsidiaries, taken as
a whole, or (iii) transaction (including a tender offer or
exchange offer) in which any person would acquire beneficial
ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) of, or the right to acquire beneficial ownership,
of (whether itself, as a member of any
<PAGE>
"group" (as such term is defined under the Exchange Act) or
otherwise), 15% or more of any class of equity securities of the
Company or any subsidiary of the Company.
v. A "Superior Proposal" means a bona fide written proposal
for a Competing Transaction which the Board of Directors of the
Company concludes in good faith (after consultation with its
financial advisors and outside counsel), taking into account all
legal, financial, regulatory and other aspects of the proposal
and the person making the proposal, (i) would, if consummated,
result in a transaction that is more favorable than the
transactions contemplated by this Merger Agreement and (ii) is
reasonably capable of being completed (provided that for purposes
of this definition, the term Competing Transaction shall have the
meaning assigned to such term in Section 6.9(d) except that the
references to "15%" in such definition shall be deemed to be
references to "50%", and Competing Proposal shall only be deemed
to refer to a transaction involving the Company, or with respect
to assets (including the shares of any subsidiary of the Company)
of the Company and its subsidiaries, taken as a whole, and not
any of its subsidiaries alone).
j. Shareholder Meeting; Proxy Material.
i. The Company shall take all action necessary, in
accordance with applicable law and its Articles of Incorporation
and By-laws, to convene a meeting of its shareholders (the
"Company Shareholder Meeting") as promptly as reasonably
practicable after the date on which the Company Proxy Statement
has been mailed to the Company's shareholders for the purpose of
considering and taking action upon the Merger and this Agreement.
Subject to the rights of the Company under Sections 6.9 and 8.1,
the Company Board will recommend that holders of Common Shares
vote in favor of the approval of this Agreement at the Company
Shareholder Meeting.
ii. In connection with such meeting, the Company (i) will
prepare and mail to its shareholders as promptly as practicable
after the date hereof the Company Proxy Statement and all other
proxy materials for such meeting, (ii) subject to the rights of
the Company under Sections 6.9 and 8.1, will use its Best Efforts
to obtain the necessary approvals by its shareholders of this
Agreement and the transactions contemplated hereby and (iii) will
otherwise comply with all legal requirements applicable to such
meeting. The Company will provide Parent with a copy of the
Company Proxy Statement and all modifications thereto prior to
sending such to shareholders, and will provide Parent the
opportunity to review prior to any distribution. If at any time
prior to the Company Shareholder Meeting there shall occur any
event that should be set forth in an amendment or supplement to
the Company Proxy Statement, the Company will promptly prepare
and mail to its shareholders such an amendment or supplement.
k. Settlements of Certain Claims and Other Matters.
(a) On or prior to the Closing, the Company shall satisfy all of
the Company's obligations in respect of the following (i) the Company shall
pay in cash to each employee an amount equal to any accrued vacation in
excess of four (4) weeks as of December 31, 1997, provided such payment to
the individual Employee would exceed $1,000, and (ii) all out-of-pocket
costs and expenses relating to the Merger and the transactions contemplated
by this
<PAGE>
Agreement (including without limitation legal, accounting, investment
banking and consulting fees).
i. On or prior to the Closing, the Board of Directors of the
Company (after consultation with Parent) will establish the bonus
amounts under the Executive Incentive Compensation Plan of the
Company and the cash bonus program for the period from September
1, 1997 through the Closing Date, both as established in
accordance with past practice and at the rate of current accruals
for such payments, and the Company shall pay such amount to the
executives on or before the Closing Date in accordance with the
Plan and past practices.
ii. Parent shall cause the Board of Directors of the
Surviving Corporation to establish the contribution level under
the Company's Profit Sharing Plan for the current plan year
commencing September 1, 1997, at a level not less than 10% of
total Compensation of all participants entitled to share in the
employer contribution under the Profit Sharing Plan (as defined
in the Profit Sharing Plan) ("Covered Compensation") if the
Surviving Corporation meets its internal forecasts for fiscal
year 1998 (which have been provided to Parent), and not less than
8% of Covered Compensation if the Surviving Corporation fails to
meet such internal forecasts for fiscal year 1998.
7.
CONDITIONS PRECEDENT
<PAGE>
a. 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 Date of
the following conditions:
i. This Merger Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the
holders of Shares.
ii. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
iii. The consummation of the Merger shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction
or ruling of a court of competent jurisdiction; provided,
however, that the parties shall use their Best Efforts to cause
any such order, judgment, decree, injunction or ruling to be
vacated or lifted.
b. Conditions to Obligation of the Company to Effect the Merger
. The obligation of the Company to effect the Merger shall be
subject, unless waived by the Company, to the fulfillment at or prior to
the Effective Date of the following additional conditions:
i. Parent and Sub shall each have performed in all material
respects their agreements contained in this Merger Agreement
required to be performed on or prior to the Effective Date;
ii. the representations and warranties of each of Parent and
Sub contained in this Merger Agreement, without regard to
materiality qualifiers, shall be true and correct, in each case
as of the date hereof and (except for representations and
warranties made as of a specified date) on and as of the
Effective Date as if made on and as of such date, except for
inaccuracies that would not reasonably be expected individually
or in the aggregate to have a Material Adverse Effect on Parent;
iii. the Company shall receive a certificate of the Chief
Executive Officer of each of Parent and Sub to the effect
specified in Sections 7.2(a) and (b).
c. Conditions to Obligations of Parent and Sub to Effect the
Merger
. The obligation of Parent and Sub to effect the Merger shall be
subject, unless waived by Parent and Sub, to the fulfillment at or prior to
the Effective Date of the following additional conditions:
i. the Company shall have performed in all material respects
its agreements contained in this Merger Agreement required to be
performed on or prior to the Effective Date;
ii. the representations and warranties of the Company
contained in this Merger Agreement, without regard to materiality
qualifiers, shall be true and correct in each case as of the date
hereof and shall be true when made (except for representations
and warranties made as of a specified date) on and as of the
<PAGE>
Effective Date as if made on and as of such date, except for
inaccuracies that would not reasonably be expected individually
or in the aggregate to have a Material Adverse Effect on Company;
iii. Parent and Sub shall have received a certificate of the
Chief Executive Officer of the Company to the effect specified in
Sections 7.3 (a) and (b); and
iv. there shall not be pending or Threatened by any
Governmental Entity any Proceeding, that has a reasonable
likelihood of success, challenging the acquisition by Parent or
Sub of any Shares, or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions
contemplated hereby.
8.
TERMINATION, AMENDMENT AND WAIVER
a. Termination
. This Merger Agreement may be terminated at any time prior to
the Effective Date, whether before or after approval by the shareholders of
the Company:
i. by mutual written consent of the Board of Directors of
Parent and the Board of Directors of the Company;
ii. by either Parent or the Company if the Merger shall not
have been consummated on or before February 28, 1998; provided,
however, that the right to terminate this Merger Agreement under
this Section 8.1(b) shall not be available to any party whose
failure to fulfill any obligation hereunder has been the cause
of, or resulted in, the failure of the closing to occur on or
before such date;
iii. by the Company, at any time prior to the Company
Shareholder Meeting, upon three business days' prior notice to
Parent, if the Board of Directors of the Company shall approve a
Superior Proposal; provided, however, that (i) the Company shall
have complied with Section 6.9, (ii) the Board of Directors of
the Company shall have determined in good faith, on the basis of
the advice of its outside counsel and financial advisors, that a
Competing Transaction proposal is a Superior Proposal and (iii)
prior to any such termination, Company shall, and shall cause its
financial and legal advisors to, negotiate with Parent to make
such adjustments in the terms and conditions of this Merger
Agreement as would enable Parent to proceed with the transactions
contemplated hereby; provided, however, that it shall be a
condition to termination by the Company pursuant to this Section
8.1(c) that the Company shall have made all payments to Parent
required by Section 9.3(b).
iv. by Parent or the Company if any court of competent
jurisdiction shall have issued, enacted, entered, promulgated or
enforced any order, judgment, decree, injunction or ruling which
restrains, enjoins or otherwise prohibits the Merger and such
order, judgment, decree, injunction or ruling shall have become
final and nonappealable;
<PAGE>
v. by either Parent or the Company, if the Company
Shareholders Meeting shall have been concluded without having
obtained votes of the Company's shareholders sufficient for the
requisite shareholder approval of this Merger Agreement (provided
the terminating party is not otherwise in material breach of its
obligations under this Merger Agreement);
vi. by the Company, upon a material breach of this Merger
Agreement on the part of Parent or Sub that cannot be cured and
which would cause any of the conditions set forth in Section 7.2
to be incapable of being satisfied by the Termination Date;
vii. by Parent, upon a material breach of this Merger
Agreement on the part of the Company that cannot be cured and
that would cause any of the conditions set forth in Section 7.3
to be incapable of being satisfied by the Termination Date; or
viii. by Parent if the Board of Directors of the Company,
prior to the Company Shareholder Meeting, (i) shall withdraw or
modify, or publicly propose to withdraw or modify, in any adverse
manner its approval or recommendation of the Merger or this
Merger Agreement, (ii) shall approve or recommend, or publicly
propose to approve or recommend, a Superior Proposal pursuant to
Section 6.9 or (iii) shall resolve to take any of the actions
specified in clause (i) or (ii) above.
b. Effect of Termination
. In the event of termination of this Merger Agreement by either
Parent or the Company, as provided above, this Merger Agreement shall
forthwith become void and there shall be no liability on the part of either
the Company, Parent or Sub or their respective officers, directors or
employees; provided that Sections 8.2, 9.3 and 9.7 and the second sentence
of Section 6.3 shall survive the termination.
c. Amendment
. This Merger Agreement may be amended by the parties hereto, by
or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval hereof by the shareholders of the Company;
provided that after such approval, no amendment shall be made that alters
or changes the amount or kind of consideration to be received by such
shareholders or that in any way materially adversely affects the rights of
such shareholders, without the further approval of such shareholders. This
Merger Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein shall be
cumulative and not exclusive of any rights or remedies provided by law,
except where expressly stated otherwise.
d. Waiver
. At any time prior to the Effective Date, the parties may, to
the extent permitted by applicable law, (i) extend the time for the
performance of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any
other
<PAGE>
party contained herein or in any documents delivered by any other party
pursuant hereto and (iii) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations contained
herein. 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.
9.
GENERAL PROVISIONS
a. Non-Survival of Representations, Warranties and Agreements
. No representations, warranties or agreements in this Merger
Agreement, and no certificate delivered pursuant to this Merger Agreement,
shall survive the Merger, except for the agreements contained in Sections
3.1, 3.2, 3.3, and 3.5 and the agreements of Parent and the Surviving
Corporation referred to in Sections 6.4, 6.5, 6.7, 9.1, 9.3, 9.6 and 9.7.
b. Notices
. All notices or other communications under this Merger Agreement
shall be in writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by facsimile, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company:
Nelson Industries, Inc.
3039 Shadyside Drive
P.O. Box 600
Stoughton, WI 53589
Attention: Rockne G. Flowers
Fax: (608) 877-3096
With a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Benjamin F. Garmer, III
Fax: 414-297-4900
If to Parent or Sub:
Cummins Engine Company, Inc.
500 Jackson Street
M/C 60701
Columbus, Indiana 47202
Attention: Secretary
Fax: (812) 377-3272
With a copy to:
<PAGE>
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Robert I. Townsend, III
Fax: (212) 474-3700
or to such other address as any party may hereafter specify for the purpose
of notice to the other parties in writing.
c. Fees and Expenses.
i. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Merger Agreement and
the transactions contemplated by this Merger Agreement shall be
paid by the party incurring such expenses.
ii. Parent and the Company agree that (i) if the Company
shall terminate this Merger Agreement pursuant to Section 8.1(c)
or (ii) if (x) Parent or the Company shall terminate this
Agreement pursuant to Section 8.1(b), 8.1(e) or 8.1(h), (y) at
the time of the event giving rise to such termination there shall
exist an offer or proposal with respect to a Competing
Transaction with respect to the Company and (z) within 12 months
of the termination of this Merger Agreement, the Company enters
into a definitive agreement with respect to a Competing
Transaction or consummates a Competing Transaction with any third
party, then Company shall pay to an account designated by Parent
immediately available funds, an amount equal to $8,055,000 (the
"Termination Fee"). The Termination Fee shall be paid prior to,
and shall be a condition to the effectiveness of, any termination
referred to in clause (i) above. Any other payment required to be
made pursuant to this Section 9.3(b) shall be made on the next
business day after such a Competing Transaction is consummated.
d. Headings, etc.
The headings contained in this Merger Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Merger Agreement. Whenever the words "include", "includes" or
"including" are used in this Merger Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Merger
Agreement shall refer to this Merger Agreement as a whole and not to any
particular provision of this Agreement. References to a person are also to
its permitted successors and assigns. Any disclosure by the Company or
Parent in any portion of its respective disclosure schedule shall be deemed
disclosure in each other portion of such disclosure schedule.
e. Entire Agreement
. This Merger Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof (other
than as provided in the Parent Confidentiality Letter).
f. Assignments; Parties in Interest
<PAGE>
. Neither this Merger Agreement nor any of the rights, interests
or obligations hereunder may 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
Merger Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Merger Agreement, express or
implied, is intended to or shall confer upon any person not a party hereto
any right, benefit or remedy of any nature whatsoever under or by reason of
this Merger Agreement, including to confer third party beneficiary rights,
except for the provisions of Article III and Sections 6.4 and 6.5 (which
are intended to and shall confer third party beneficiary rights), and shall
not be assigned by operation of law or otherwise.
g. Governing Law
. This Merger Agreement shall be governed in all respects by the
laws of the State of Wisconsin (without giving effect to the provisions
thereof relating to conflicts of law)
h. Certain Definitions
. As used in this Merger Agreement, the following terms have the
respective meanings specified or referred to in this Section 9.8:
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible, provided however that an
obligation to use Best Efforts under this Merger Agreement does not require
the Person subject to that obligation (a) to take any actions that would,
in such Person's good faith judgment, result in a material change in the
benefits to such Person of this Merger Agreement and the transactions
contemplated hereby, or (b) to incur any significant obligation or make any
significant payment.
"Contract" -- any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that
is legally binding.
"Environmental Law" -- any Legal Requirement that relates to the
regulation of, exposure to or emission of noise, odor, or Hazardous
Materials or the preservation of natural resources.
"Facilities" -- any real property, leaseholds or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures or equipment currently or formerly owned or
operated by any Acquired Company.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, use of (including
any withdrawal or other use of groundwater) or any other activity related
to Hazardous Materials in, on, under, about or from the Facilities or any
part thereof into the environment.
"Hazardous Materials" -- any waste or other substance that is
listed, defined, designated or classified as, or is otherwise determined to
be, hazardous, radioactive, or toxic or a pollutant or a contaminant under
or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof
or synthetic substitutes thereof and asbestos or asbestos-containing
materials.
"Knowledge" -- an individual will be deemed to have "Knowledge"
of a particular
<PAGE>
fact or other matter if such individual is actually aware of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director or executive officer of such Person (or in any
similar capacity) has Knowledge of such fact or other matter.
"Legal Requirement" -- any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute
or treaty.
"Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company or Parent, any change, effect,
event, occurrence or state of facts that is, or would reasonably be
expected to be, individually or in the aggregate, materially adverse to the
business, financial condition or results of operations of such party and
its subsidiaries taken as a whole.
"Order" -- any award, decision, injunction, judgment, order,
ruling or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Entity or by any arbitrator.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union or
other entity or Governmental Entity.
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Entity or arbitrator.
"Related Person" -- with respect to a particular individual:
(1) each other member of such individual's Family;
(2) any person that is directly or indirectly
controlled by such individual or one or more members of such
individual's Family;
(3) any Person in which such individual or members of
such individual's Family hold (individually or in the
aggregate) a Material Interest; and
(4) any Person with respect to which such individual or
one or more members of such individual's Family serves as a
director, executive officer, partner, executor, or trustee
(or in a similar capacity)
With respect to a specified Person other than an individual: (A)
any person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified person; (B) any person that holds a Material Interest in such
specified Person; (C) each person that serves as a director, executive
officer, partner, executor, or trustee of such specified person (or in a
similar capacity); (D) any person in which such specified person holds a
Material Interest; (E) any person with respect to which such specified
person serves as a general partner or a trustee (or in a similar capacity);
and (F) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an
individual means (i) the
<PAGE>
individual, (ii) the individual's spouse, (iii) any other natural
person who is a member of the immediate family of the individual, and
(iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least 40% of the outstanding
voting power of a Person or equity securities or other equity
interests representing at least 40% of the outstanding equity
securities or equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing or migrating
into or through the environment, whether intentional or unintentional.
"Subsidiary" or "Subsidiaries" means, with respect to Parent, the
Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Parent, the Company or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests
the holders of which are generally entitled to more than 50% of the vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
"Threat of Release" -- a substantial likelihood of a Release that
is reasonably likely to require action in order to prevent or mitigate
damage to the environment that may result from such Release.
"Threatened"-- a claim, Proceeding, dispute, action or other
matter will be deemed to have been "Threatened" if any demand or statement
has been made in writing or any notice has been given in writing and not
withdrawn.
i. Counterparts
. This Merger Agreement may be executed in two or more
counterparts that together shall constitute a single agreement.
j. Severability
. If any term or other provision of this Merger Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Merger Agreement
shall nevertheless remain in full force and effect so long as the economics
or legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon determination that any
term or other provision hereof is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Merger Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
k. Interpretation
. Nothing in this Merger Agreement shall be deemed to require any
person or entity to take any action or refrain from taking any action (or
shall require the Company to cause or to use its Best Efforts to cause any
other person or entity to take any or refrain from taking any action) that
would constitute a breach of any duty or obligation of such person or
entity as a trustee of any trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be signed by their respective officers thereunder duly
authorized all as of the date first written above.
NELSON INDUSTRIES, INC.
By: /s/ Rockne G. Flowers
Rockne G. Flowers
Chairman of the Board,
Chief Executive Officer
and President
CUMMINS ENGINE COMPANY, INC.
By: /s/ James A. Henderson
James A. Henderson
Chairman of the Board
and Chief Executive Officer
SAFARI INC.
By: /s/ James A. Henderson
James A. Henderson
President
EXHIBIT 99.1
N E W S R E L E A S E
- ---------------------------------------------------------------------------
CONTACT: Ann C. Smith
Public Relations Director
Cummins Engine Co. Inc.
812-377-3524
FOR IMMEDIATE RELEASE
Friday, January 9, 1998
CUMMINS ENGINE COMPLETES ACQUISITION OF NELSON INDUSTRIES
COLUMBUS, Ind...Cummins Engine Co. Inc. (NYSE:CUM) today
announced that it has completed its planned acquisition of Nelson
Industries Inc. Cummins announced on Dec. 4 that it would acquire the
company for $450 million. Nelson is a major supplier of air and liquid
filtration products, exhaust and emissions control systems, industrial
silencers, and electronic sound and vibration control technology.
Cummins Chairman and Chief Executive Officer James A. Henderson
said, "We are excited about this major acquisition and believe the combined
product offering of Nelson and that of Fleetguard, our very successful
filtration company, will create one of the leading competitors in the
industry and will generate profitable growth for Cummins."
Cummins, headquartered in Columbus, Ind., is the world's largest
producer of diesel engines above 200 horsepower. The company provides
products for customers in its key markets: automotive, power generation,
industrial and filtration. Cummins reported record sales of $5.3 billion in
1996. The company's press releases by FAX may be requested by calling News
on Demand at 888-329-2305. Cummins' home page on the Internet can be found
at http://www.cummins.com.
