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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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DANIEL INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
DANIEL INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.25 PER SHARE
(AND ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS SECURITIES)
236235-10-7
(CUSIP NUMBER OF CLASS OF SECURITIES)
JAMES M. TIDWELL
Executive Vice President and
Chief Financial Officer
DANIEL INDUSTRIES, INC.
9753 PINE LAKE DRIVE
HOUSTON, TEXAS 77055
(713) 467-6000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE
PERSON(S) FILING STATEMENT)
WITH COPY TO:
CHARLES H. STILL, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
(713) 651-5270
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Daniel Industries, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 9753 Pine Lake Drive, Houston, Texas 77055. The titles of the
classes of equity securities to which this statement relates are the Company's
common stock, par value $1.25 per share (the "Common Stock"), and the associated
Preferred Stock Purchase Rights (the "Rights" and together with the Common
Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the cash tender offer made by Emersub LXXIV,
Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of
Emerson Electric Co., a Missouri corporation (the "Parent"), to purchase all of
the outstanding Shares at a price of $21.25 per Share, net (subject to any
withholding taxes) to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 18, 1999 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer"). The Offer is being made pursuant to an Agreement and Plan of
Merger dated as of May 12, 1999, among the Parent, the Purchaser and the Company
(the "Merger Agreement"), a copy of which is filed as an Exhibit hereto and is
incorporated herein in its entirety by reference. The Offer is subject to
certain conditions, including the condition that 66 2/3% of the Fully Diluted
Shares (as defined in the Merger Agreement) are tendered and not withdrawn prior
to the Expiration Date. The Tender Offer Statement on Schedule 14D-1 dated May
18, 1999, filed by the Purchaser and the Parent with the Securities and Exchange
Commission (the "Commission") states that the address of the principal executive
offices of the Purchaser and the Parent is 8000 West Florissant Avenue, St.
Louis, Missouri 63136-8506.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as described herein, to the knowledge of the Company, as of the
date hereof, there exists no material contract, agreement, arrangement or
understanding and no actual or potential conflict of interest between the
Company or its affiliates and (i) the Company or its executive officers,
directors or affiliates or (ii) the Parent or the Purchaser or any of their
respective executive officers, directors or affiliates.
THE MERGER AGREEMENT AND RELATED AGREEMENTS
Information with respect to the terms of the Merger Agreement and certain
related matters, including the Merger (as defined therein), the Stock Option
Agreement dated as of May 12, 1999 between the Parent and the Company (the
"Stock Option Agreement") and the Confidentiality Agreement dated April 1, 1999,
between the Company and Parent is set forth under the headings "Introduction",
"Terms of the Offer; Expiration Date", "Background of the Offer; Past Contacts,
Transactions or Negotiations with the Company"; "Purpose of the Offer; Plans for
the Company; Merger Agreement and Other Arrangements", "Certain Conditions of
the Offer" and "Certain Legal Matters; Regulatory Approvals" in the Offer to
Purchase, a copy of which is filed as an Exhibit hereto, is incorporated herein
by reference and is enclosed herewith.
CHANGE IN CONTROL AGREEMENTS
For information as to the existence and terms of certain severance and
change in control agreements between the Company and certain officers and
employees see Annex I hereto.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) AT A MEETING OF THE BOARD OF DIRECTORS OF THE COMPANY ON MAY 12, 1999,
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND UNANIMOUSLY DETERMINED THAT THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, THE COMPANY AND ITS
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STOCKHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
A letter to stockholders communicating the Board's recommendation is filed
as an Exhibit hereto and is incorporated herein in its entirety by reference.
Information as to the background to the Offer and the Merger is set forth
under the heading "Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company" in the Offer to Purchase.
(b) In reaching its conclusions described in paragraph (a) above, the Board
of Directors of the Company considered a number of factors, including, without
limitation, the following:
(i) The presentation of Simmons & Company International ("Simmons"),
the Company's financial advisor, which involved a discussion of various
analyses, alternative transactions and the written opinion of Simmons that
the consideration to be received by stockholders of the Company pursuant to
the Offer and the Merger is fair to the stockholders from a financial point
of view, a copy of which is attached as Annex II and incorporated herein in
its entirety by reference. Such opinion sets forth the scope of the
investigation made, the procedures followed and assumptions made by Simmons
in rendering its opinion. Stockholders are urged to carefully read such
opinion in its entirety. In considering Simmons' opinion, the Board was
aware that Simmons will become entitled to the additional fees described in
Item 5 in accordance with the terms of its engagement by the Company upon
consummation of the Offer and of certain other matters described in Item 5.
(ii) Current market conditions and the relationship between the
consideration to be received by stockholders in the Offer and the Merger
and the historical and recent market prices of the Shares, and the fact
that the Offer price represented a premium of more than 65% above recent
average trading prices for the Shares.
(iii) The Company's business, the strategic direction of the Company's
businesses, the relationship of the Offer price to historical and projected
earnings, acquisition transactions involving comparable companies and the
likelihood of other possible transactions that might provide greater value
to stockholders, the latter being based in part on the Company's experience
in carrying out its previously announced effort to review strategic
alternatives which involved discussions with other potential acquirers and
gave the Board a sense of values that could be achieved in the sale of the
Company.
(iv) The terms and conditions of the transactions contemplated by the
Merger Agreement and the Stock Option Agreement, as reviewed by and
discussed with the Company's management, legal counsel and financial
advisors, including the conditions to the Purchaser's obligation to
consummate the Offer, the fact that the Offer and the Merger are not
conditioned on financing and the obligation of the Purchaser (at the
written request of the Company) to extend the Offer, assuming the other
conditions of the Offer are satisfied (other than the Minimum Tender
Condition (as defined in the Merger Agreement)), for up to a maximum of 270
days from the date of the Merger Agreement (i.e. February 6, 2000) until
the HSR Condition (as defined in the Merger Agreement) is satisfied.
(v) The right, subject to certain conditions, of the Company under the
Merger Agreement to respond to requests for nonpublic information and to
participate in substantive discussions with any person who makes a superior
proposal to the extent required by the fiduciary obligations of the Board
of Directors of the Company (determined in good faith by a majority of the
disinterested members thereof based on the advice of outside legal counsel)
and the ability of the Company to withdraw or modify its recommendation of
the Offer and the Merger and to terminate the Merger Agreement after two
business days' notice to the Parent in the event (a) the Board of Directors
of the Company receives a takeover proposal from another party that, in the
exercise of its good faith reasonable judgment (as determined in good faith
by a majority of the disinterested members thereof), it determines in its
reasonable judgment (based on the advice of its financial advisor and
taking into account all the terms and conditions of such takeover proposal,
including any break-up fees and expense reimbursement payable to Parent
under the Merger Agreement and the conditions to consummation of such
takeover proposal) to be more favorable and provide greater value to all
the Company's stockholders than the Offer and the Merger and, for which
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the financing, to the extent required, is then committed or in the judgment
of such members reasonably obtainable and the Company intends to enter into
a definitive agreement with such other party and (b) the Parent fails,
within two business days of such notice, to make an offer that the Board of
Directors of the Company determines in good faith, after consultation with
its financial advisors, by a majority of its disinterested directors, is
more favorable to the stockholders of the Company than such takeover
proposal.
(vi) The current economic and business conditions in the Company's
industry and in the United States and global economies, the effect of such
matters on the Company's current business and prospects and the general
uncertainties in the Company's industry.
(vii) The information provided to the Board of Directors of the
Company by the officers of the Company with respect to the Company's
current and prospective financial condition and results of operations and
its future prospects and likelihood of meeting its future business plan
projections, including the impact of the results of the first fiscal
quarter of 1999 thereon and generally adverse business conditions for the
Company's industry, as they currently exist and are likely to continue for
the foreseeable future.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Simmons as the Company's financial advisor on March 4,
1999, in connection with the exploration of strategic alternatives, including a
possible sale of the Company. Under the engagement letter with Simmons, the
Company agreed to pay Simmons engagement fees aggregating $250,000. In addition,
under the engagement letter, Simmons is entitled to a transaction fee of 1% of
the value of the transaction (or approximately $5 million), less the engagement
fees, payable upon consummation of the purchase of at least 50% of the Shares or
50% of the Company's assets by the Purchaser or any other person. The Company
has also agreed to reimburse Simmons for its out-of-pocket expenses, including
the reasonable fees and expenses of its legal counsel, and to indemnify Simmons
and its affiliates and their respective directors, officers, agents and
employees against certain liabilities, including liabilities involving the
Federal securities laws.
Simmons is an internationally recognized investment banking firm and
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions, particularly in the oil and gas
service and manufacturing industries. Simmons has performed various investment
banking services for the Company in the past for which it received customary
compensation.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other persons to make solicitations or
recommendations to stockholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
Based upon the Company's records and upon information provided to the
Company by its directors, executive officers and affiliates, neither the Company
nor any of its affiliates nor, to the best of the Company's knowledge, any of
the directors or executive officers of the Company or any of its subsidiaries,
has effected any transactions in the Shares during the 60 days prior to the date
hereof except for routine periodic purchases of Shares that may be attributable
to such executive officers' accounts in the Company's profit sharing and savings
plan.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as described herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would result
in:
(i) An extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
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(ii) A purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company;
(iii) A tender offer for or other acquisition of securities by or of
the Company; or
(iv) Any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described above under Items 3 and 4, there are no
transactions, resolutions of the Board of Directors of the Company, agreements
in principle or signed contracts in response to the Offer that relate to or
would result in one or more of the matters referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
As discussed under the heading in the Offer to Purchase entitled "Purpose
of the Offer -- The Merger Agreement", the Company's Board of Directors has
taken action to make inapplicable to the Offer and the Merger the Rights
Agreement dated May 31, 1990, between the Company and Equiserve Trust Company,
N.A., as rights agent, as amended. Further, the Company's Board of Directors has
taken action to make inapplicable to the Offer and the Merger certain provisions
of its Certificate of Incorporation with respect to transactions with persons
beneficially owning five percent or more of the Company's voting stock. For
information as to the possible applicability of certain state antitakeover
statutes to the Offer and the Merger reference is made to the heading in the
Offer to Purchase entitled "Certain Legal Matters; Regulatory Approvals -- State
Takeover Statutes". Section 203 of the Delaware General Corporation Law (dealing
with transactions with interested stockholders) is not applicable to the Company
because the Company opted out of such provision at the time of its incorporation
in Delaware.
The Information Statement attached as Annex I hereto is being furnished in
connection with the intended designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company following the Offer other than at a meeting of the Company's
stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
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Exhibit 1 -- Agreement and Plan of Merger dated as of May 12, 1999,
between the Purchaser, the Parent and the Company
Exhibit 2 -- Stock Option Agreement dated as of May 12, 1999 between the
Parent and the Company
Exhibit 3 -- Offer to Purchase dated May 18, 1999, filed as Exhibit
11(a)(1) to Purchaser's and Parent's Schedule 14D-1 filed
May 18, 1999, in connection with the Offer to Purchase, and
incorporated herein by reference
Exhibit 4 -- Letter to Stockholders dated May 18, 1999
Exhibit 5 -- Opinion of Simmons dated as of May 12, 1999*
Exhibit 6 -- Press Release dated May 12, 1999
Exhibit 7 -- Confidentiality Agreement between the Company and the Parent
dated April 1, 1999
Exhibit 8 -- Form of Change in Control Agreement dated as of March 15,
1995, between the Company and each of W. C. Clingman and M.
R. Yellin; dated August 30, 1996, between the Company and J.
M. Tidwell; and dated February 6, 1996, between the Company
and each of W. T. Bratton and W. M. Krenek, filed as Exhibit
10.4 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995 and incorporated herein by
reference
</TABLE>
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* Included in copies mailed to stockholders.
</TABLE>
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<TABLE>
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Exhibit 9 -- Employment Agreement dated July 30, 1996 between the Company
and James M. Tidwell, filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1996 and incorporated herein by reference
Exhibit 10 -- Employment Agreement dated June 17, 1997 between the Company
and Thomas A. Newton, Jr., filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by
reference
Exhibit 11 -- Stock Award Agreement dated June 17, 1997 between the
Company and Thomas A. Newton, Jr., filed as Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by
reference
Exhibit 12 -- Change in Control Agreement between the Company and Ronald
C. Lassiter, filed as Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and incorporated herein by reference
Exhibit 13 -- Form of Change in Control Agreement between the Company and
each of Daniel J. Sarik, Katie-Pat Bowman and Michael T.
Atkins, filed as Exhibit 10.7 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997
and incorporated herein by reference
Exhibit 14 -- Severance Agreement dated February 6, 1997 between the
Company and W. T. Bratton, filed as Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference
</TABLE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 20, 1999
DANIEL INDUSTRIES, INC.
By /s/ JAMES M. TIDWELL
------------------------------------
James M. Tidwell
Executive Vice President and
Chief Financial Officer
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ANNEX I
INFORMATION STATEMENT PROVIDED PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
GENERAL
This information statement is being mailed on or about May 18, 1999 to
holders of record of shares of Common Stock, $1.25 par value (the "Common
Stock"), of Daniel Industries, Inc., a Delaware corporation (the "Company"),
including the related right as to each share to purchase one one-hundredth of a
share of Series A Junior Participating Preferred Stock, $1.00 par value, of the
Company (singularly, a "Right" and collectively, the "Rights") (singularly, a
share of such Common Stock, including the related Right, a "Share" and
collectively, the "Shares"), in connection with the possible election of persons
designated by Emersub LXXIV, Inc. (the "Purchaser"), a wholly-owned subsidiary
of Emerson Electric Co. ("Parent"), to the Company's Board of Directors (the
"Company Board" or "Board") other than at a meeting of the stockholders of the
Company. Such election would occur pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") dated May 12, 1999 among the Company, Purchaser and
Parent. The Merger Agreement is identified under Item 2 of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
of which this Annex I is a part. Capitalized terms used and not defined in this
Annex I have the meanings assigned to them in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
18, 1999. The Offer currently is scheduled to expire at 12:00 midnight, New York
City time, on June 15, 1999, at which time, if the Offer is not extended and all
conditions to the Offer have been satisfied or waived, the Purchaser is
obligated to purchase all Shares validly tendered to the Offer and not
withdrawn.
The information contained in this information statement concerning the
Purchaser, the Parent and the Purchaser Designees has been furnished to the
Company by the Purchaser and the Parent. The Company assumes no responsibility
for the accuracy and completeness of such information. The Tender Offer
Statement on Schedule 14D-1 dated May 18, 1999 filed by the Purchaser and the
Parent with the Securities and Exchange Commission (the "Commission") states
that the principal executive offices of the Purchaser and the Parent are located
at 8000 Florissant Avenue, St. Louis, Missouri 63136-8506.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that effective upon the acceptance for
payment of, and payment by Purchaser for, any Shares pursuant to the Offer,
Purchaser shall be entitled to designate the number of directors (collectively,
the "Purchaser Designees"), rounded up to the next whole number, on the Company
Board that equals the product of (a) the total number of directors on the
Company Board (giving effect to the directors elected pursuant to this
provision) multiplied by (b) the percentage that the number of Shares owned by
the Purchaser or any other subsidiary of Parent (including the Shares accepted
for payment and paid for by the Purchaser) bears to the number of Shares
outstanding. The Merger Agreement further provides that in the event the
Purchaser Designees are appointed or elected to the Company Board, until the
Effective Time of the Merger, such Company Board shall have at least three
directors who are directors on the date hereof and who are not officers of the
Company. The Company has agreed in the Merger Agreement that it shall take all
action necessary to effect any election of the Purchaser Designees to the
Company Board, including either increasing the size of the Company Board or
obtaining the resignation of such number of its current directors as is
necessary to enable the Purchaser Designees to be elected or appointed to the
Company Board.
The election or appointment of the Purchaser Designees to the Company Board
could (and in the case of the election or appointment of a majority of directors
would) result in a change in control of the Company under the Securities and
Exchange Act of 1934 (the "Exchange Act"). The Purchaser Designees will be
subject to the Company Board's classification requirements as more fully set
forth in the Company's
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Certificate of Incorporation. No action is required by the stockholders of the
Company in connection with the election or appointment of the Purchaser
Designees to the Company Board. However, Section 14(f) of the Exchange Act
requires the mailing to the Company's stockholders of the information set forth
in this information statement prior to a change in the majority of the Company's
directors. IN THE EVENT THAT THE PURCHASER DOES NOT ACQUIRE ANY SHARES PURSUANT
TO THE OFFER, OR TERMINATES THE OFFER, OR IF THE MERGER AGREEMENT IS TERMINATED
PURSUANT TO ITS TERMS BY THE PURCHASER, THE PARENT OR THE COMPANY PRIOR TO THE
ELECTION OR APPOINTMENT OF THE PURCHASER DESIGNEES, THE PURCHASER WILL NOT HAVE
ANY RIGHT UNDER THE MERGER AGREEMENT TO HAVE THE PURCHASER DESIGNEES ELECTED OR
APPOINTED TO THE COMPANY BOARD.
It is expected that on the date that Purchaser accepts for payment and
purchases Shares pursuant to the Offer, which the Company expects to be on or
after June 16, 1999, the Company will promptly take all other action as will be
necessary to enable the Purchaser Designees (as defined below) to be elected to
the Company Board.
Set forth in the table below are the name, age, present principal
occupation or employment and business address for each of the persons who may be
designated by Purchaser as the Purchaser Designees. Unless otherwise indicated
below, the address of each individual is 8000 West Florissant Avenue, St. Louis,
Missouri 63136. All directors and officers listed below are citizens of the
United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS AGE AND FIVE-YEAR EMPLOYMENT HISTORY
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D.N. Farr............................ 44 Senior Executive Vice President and Chief Operating
Officer -- Parent since May 1999; Executive Vice
President of Parent, 1997-1999; Chief Executive Officer
of Astec (BSR) plc, a subsidiary or affiliate of
Parent, 1993-1997. President of the Purchaser since it
was founded.
J.M. Berra........................... 51 President -- Fisher-Rosemount, a subsidiary of Parent,
April
8301 Cameron Road Austin, Texas 78754 1997-present; President -- Fisher-Rosemount Systems,
Inc., a subsidiary of Parent, March 1993-April 1997;
Executive Vice President Process Control
Group -- Rosemount, Inc., a subsidiary of Parent,
October 1992-March 1993.
D.G. Perkins......................... 60 Group Vice President -- Fisher-Rosemount Flow, a
division of
7070 Winchester Circle Boulder, Fisher-Rosemount, October 1997-present;
Colorado 80301 President -- Micro Motion, a subsidiary of
Fisher-Rosemount, May 1985-October 1997.
W.J. Galvin.......................... 52 Senior Vice President, Finance and Chief Financial
Officer -- Parent for more than five years.
W.W. Withers......................... 58 Senior Vice President, Secretary and General
Counsel-- Parent for more than five years.
J.D. Switzer......................... 52 Senior Vice President -- Development of Parent since
1997; Vice President -- Development of Parent,
1990-1997. Vice President and Director of the Purchaser
since it was founded.
R.M. Cox, Jr......................... 53 Senior Vice President -- Acquisitions and Development
of Parent since October 1997; Senior Vice
President -- Administration of Parent, October
1994-October 1997; Executive Vice President and Chief
Administrative Officer of Fisher-Rosemount Systems, a
subsidiary of Parent, 1992-1994. Vice President and
Director of the Purchaser since it was founded.
</TABLE>
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<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS AGE AND FIVE-YEAR EMPLOYMENT HISTORY
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H.M. Smith........................... 56 Assistant General Counsel and Assistant Secretary of
Parent for more than five years. Secretary and Director
of the Purchaser since it was founded.
F.J. Dellaquila...................... 42 Vice President -- Treasury and Tax, and Treasurer of
Parent since October 1996; Vice President and
Treasurer, September 1991-October 1996. Treasurer of
the Purchaser since it was founded.
</TABLE>
Any other officer of Parent or Purchaser listed in Schedule I to the Offer
to Purchase dated May 18, 1999, filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 of Parent and Purchaser may also be designated by
Purchaser as a Purchaser Designee. The information with respect to the Purchaser
Designees has been supplied by Purchaser for inclusion herein.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. As of May 11, 1999, there were outstanding (i) 19,482,588 shares
and (ii) stock options to purchase an aggregate of 2,032,868 shares. Based upon
the foregoing, there were approximately 21,515,456 Fully Diluted Shares
outstanding. "Fully Diluted Shares" means all shares, on a fully diluted basis,
after giving effect to the exercise or conversion of all options, warrants,
rights and securities exercisable or convertible into common stock, other than
potential issuances attributable to the Rights unless such Rights shall be
exercisable pursuant to the Rights Agreement dated May 31, 1990, as amended,
between the Company and Equiserve Trust Company, N.A., as Rights Agent. Each
Share that is outstanding as of the close of business on any applicable record
date for any matter to be acted upon by stockholders is entitled to one vote on
such matter. The Company Board currently consists of nine (9) members.
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CURRENT MEMBERS OF THE COMPANY BOARD
To the extent that the Company Board will consist of persons who are not
among the Purchaser Designees, the Company Board is expected to consist of
persons who are currently directors of the Company who have not resigned.
The following table sets forth as to each director his age, year first
elected a director and business experience. This information was provided to the
Company by the respective director.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NAME AGE DIRECTOR AND CURRENT DIRECTORSHIP
---- --- ---------- -----------------------------------------
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Ronald C. Lassiter................... 66 1985 Chairman of the Board, President and Chief
Executive Officer of the Company.
Mr. Lassiter was elected Chairman of the
Board in March 1996. He became Acting
President and Chief Executive Officer of the
Company effective January 24, 1997, upon the
resignation of W.A. Griffin, III, and
continued as Chief Executive Officer
following the election of Alex Newton to the
office of President effective July 1, 1997.
Mr. Lassiter resumed the role of President of
the Company following Mr. Newton's
resignation on January 29, 1999. Mr. Lassiter
served as Chairman of the Board and Chief
Executive Officer of Zapata Corporation, an
oil and gas company, from August 1985 until
his retirement in June 1994, and served as
Chairman, President and Chief Executive
Officer of Zapata Protein, a producer of
marine protein, from October 1992 until June
1997.
Thomas J. Keefe...................... 66 1996 President and Chief Operating Officer of
Hensley Industries, Inc., a steel foundry.
Prior to assuming his present position with
Hensley Industries in November 1995, Mr.
Keefe served as President and Chief Operating
Officer of Lennox Industries, Inc. from July
1992 until June 1995.
Michael M. Carroll................... 62 1998 Professor in the Department of Computational
and Applied Mathematics at Rice University.
Dr. Carroll was elected a director of the
Company on January 14, 1998, to fill the
vacancy created by the resignation of W.A.
Griffin, III. Dr. Carroll has held a number
of professional leadership roles, including
Executive Committee member and Chairman of
the Applied Mechanics Division of the
American Society of Mechanical Engineers,
President of the American Academy of
Mechanics, President of the Society for
Engineering Science and Governing Board
Member of the Engineering Deans' Council of
the American Society for Engineering
Education. He has held the McMurtry Professor
of Engineering distinction at Rice University
since 1988 and has also served as Dean of the
George R. Brown School of Engineering at Rice
University.
</TABLE>
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<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NAME AGE DIRECTOR AND CURRENT DIRECTORSHIP
---- --- ---------- -----------------------------------------
<S> <C> <C> <C>
W.A. Griffin......................... 83 1951 Chairman Emeritus of the Board.
Mr. Griffin served as Chairman of the Board
from 1957, and as Chief Executive Officer of
the Company from 1985 until his retirement in
February 1995. He then served as a consultant
to the Company until February 1997.
Brian E. O'Neill..................... 63 1994 President and Chief Executive Officer of
Williams Gas Pipelines.
Prior to assuming his current position in
January 1994, Mr. O'Neill served as President
of Williams Gas Pipelines. Mr. O'Neill is a
member of the partnership policy committee of
Northern Border Partners, L.P. ("NBP") and a
member of the management committee of
Northern Border Pipeline Company of which NBP
has a 70 percent general partnership
interest.
Ralph F. Cox......................... 66 1996 Private consultant in international petroleum
activities since 1994; retired President and
Chief Executive Officer of Greenhill
Petroleum Corporation.
Mr. Cox is an independent Trustee for the
Fidelity Group of Funds and a member of the
Board of Directors of Waste Management, Inc.
and Bonneville Pacific Corporation. Mr. Cox
also serves on advisory Boards at Texas A&M
University and the University of Texas. Mr.
Cox is a former Vice Chairman of the Board of
Atlantic Richfield Company and President and
former Chief Operating Officer of Champlin
Petroleum Company (Union Pacific Resources
Company).
Leo E. Linbeck, Jr. ................. 64 1988 Chairman of the Board and Chief Executive
Officer of Linbeck Corporation, a holding
company.
Mr. Linbeck, Jr. serves as a Life Director of
the Associated General Contractors of America
and as a director of John Hancock Advisers,
Inc. and Duke Energy Corporation.
Nathan M. Avery...................... 64 1996 Chairman of the Board, President and Chief
Executive Officer of TransCoastal Marine
Services, Inc., a marine construction
company.
Mr. Avery was elected Chairman of the Board,
President and Chief Executive Officer of
TransCoastal Marine Services, Inc. in
November 1998 and has served as Chairman of
the Board and Chief Executive Officer of
Galveston-Houston Company, a manufacturer of
ground engaging tools for the construction
and mining industries, for a period of at
least five years. He serves as an advisory
director of Cooper Cameron Corporation.
</TABLE>
I-5
<PAGE> 13
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NAME AGE DIRECTOR AND CURRENT DIRECTORSHIP
---- --- ---------- -----------------------------------------
<S> <C> <C> <C>
Gibson Gayle, Jr. ................... 72 1985 Retired senior partner at Fulbright &
Jaworski L.L.P., a law firm.
Mr. Gayle, Jr. was a partner in the law firm
of Fulbright & Jaworski L.L.P. until his
retirement on January 1, 1997, and he served
as Chairman of that firm's Executive
Committee from 1979 until 1992. Fulbright &
Jaworski L.L.P. provides legal services to
the Company on an ongoing basis, and the
Company will continue to engage that firm
during the current fiscal year.
</TABLE>
MANAGEMENT
Set forth below is certain information regarding the executive officers of
the Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, POSITIONS WITH THE COMPANY
NAME AGE AND OTHER BUSINESS EXPERIENCE
- ---- --- ------------------------------------------------
<S> <C> <C>
Ronald C. Lassiter................... 66 Chairman of the Board, President and Chief Executive
Officer.
Ronald C. Lassiter was elected Chairman of the Board in
March 1996. He became Acting President and Chief
Executive Officer of the Company effective January 24,
1997, upon the resignation of W.A. Griffin, III, and
continued as Chief Executive Officer following the
election of Alex Newton to the office of President in
July 1997. Mr. Lassiter resumed the office of President
of the Company following Mr. Newton's resignation on
January 29, 1999.
James M. Tidwell..................... 52 Executive Vice President and Chief Financial Officer.
James M. Tidwell joined the Company in August 1996, as
Vice President, Finance and Chief Financial Officer,
and was elected Executive Vice President and Chief
Financial Officer effective December 12, 1996. Prior to
joining the Company, Mr. Tidwell served as Vice
President of Finance of Hydril Company, an oilfield
equipment company, from August 1992 through August
1996. Prior to that, Mr. Tidwell was Vice President
Finance of ABB Vetco Gray, Inc. from 1988 until 1992
and was President of Vetco Gray, Inc. from 1986 to
1988.
W. Todd Bratton...................... 54 Executive Vice President and President of Daniel
Measurement and Control.
Pursuant to the merger of Bettis Corporation with a
wholly-owned subsidiary of the Company, W. Todd Bratton
was elected an Executive Vice President of the Company
on December 12, 1996. He became President of Daniel
Measurement and Control, Inc. in February 1997, and
President of the Daniel Measurement and Control
Division in March 1998. Mr. Bratton served as President
of Bettis Corporation from 1988 and as its Chief
Executive Officer from May 1994 until February 1997.
Mr. Bratton served in varying capacities including
Executive Vice President, Operations of
Galveston-Houston Company, Bettis Corporation's
then-parent company, from 1979 to May 1994.
</TABLE>
I-6
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, POSITIONS WITH THE COMPANY
NAME AGE AND OTHER BUSINESS EXPERIENCE
- ---- --- ------------------------------------------------
<S> <C> <C>
Kenton Chickering III................ 64 President of Daniel Valve Company.
Mr. Chickering has been employed with Daniel Valve
Company for over 20 years except for a period between
1985 and 1988, when he served as a Vice President of
Daniel Measurement and Control, Inc.
Norman D. Quam....................... 65 President of Bettis Corporation.
Norman D. Quam has been employed with Bettis
Corporation since 1979. When Mr. Bratton became
President of Daniel Measurement and Control, Inc. in
February 1997, Mr. Quam was elected President of Bettis
Corporation.
J. D. Sitton, III.................... 37 President of Daniel Measurement Services.
J. D. Sitton, III joined the Company as President of
the newly formed Daniel Measurement Services Division
in May 1998. He was previously employed by Capstone
Turbine Corporation, a start-up company commercializing
Microturbine power generation technology, from October
1996 to May 1998, as Director of Sales, and PanEnergy
Corp. (predecessor to Duke Energy Corp, an interstate
pipeline company), from 1989 to September, 1996, in
various capacities, including most recently as Senior
Vice President, Retail Energy Marketing.
W. C. Clingman....................... 65 Vice President, Information Services.
W. C. Clingman has been an employee or officer of the
Company for more than thirty (30) years.
Michael R. Yellin.................... 53 Vice President, Secretary and Treasurer.
Michael R. Yellin has been an employee or officer of
the Company for more than twenty (20) years.
Daniel J. Sarik...................... 49 Vice President, Business Development.
Daniel J. Sarik joined the Company in August 1997, as
Vice President, Business Development. Prior to joining
the Company, Mr. Sarik served in various managerial
positions with Camco International Inc., including
Director of Marketing of Camco Drilling Group, from
January 1992 to August 1997, and as Director of
Marketing of the Hycalog Division, from June 1987 to
January 1992.
Michael T. Atkins.................... 45 Vice President, Human Resources.
Michael T. Atkins joined the Company as Vice President,
Human Resources, in September 1997. He was previously
employed with EOTT Energy Corp., a subsidiary of Enron
Corporation involved in crude oil trading and
transportation, as Manager, Human Relations since
February 1992.
</TABLE>
I-7
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, POSITIONS WITH THE COMPANY
NAME AGE AND OTHER BUSINESS EXPERIENCE
- ---- --- ------------------------------------------------
<S> <C> <C>
Wilfred M. Krenek.................... 46 Vice President, Controller and Chief Accounting
Officer.
Wilfred M. Krenek was elected Vice President,
Controller and Chief Accounting Officer of the Company
effective May 1997. He had served as Vice President,
Chief Financial Officer, Treasurer and Secretary of
Bettis Corporation from May 1994 until May 1997. Prior
to that, Mr. Krenek was employed by Galveston-Houston
Company in the capacity of Vice President and
Controller from May 1989 to May 1994, as Controller
from July 1987 to May 1989, and as Tax Manager from
April 1985 to July 1987.
Katie-Pat Bowman..................... 44 Vice President and General Counsel.
Katie-Pat Bowman joined the Company in September 1997
as Vice President and General Counsel. She was
previously employed by Houston law firms Haynes and
Boone LLP, from March 1997 until September 1997, and
Fulbright & Jaworski L.L.P., from August 1987 until
March 1997. Prior to that, Ms. Bowman was employed with
Daniel Industries, Inc. from 1981 to 1987 as Internal
Audit and Export Control Manager.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Shares, to file
with the Commission initial reports of beneficial ownership and reports of
changes in beneficial ownership of Shares. Such persons are required by
regulations of the Exchange Act to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the reports and representations furnished to the Company during the
last fiscal year, the Company believes that all filings were timely during the
fiscal year ended December 31, 1998.
MEETINGS AND COMMITTEES OF THE COMPANY BOARD
During the fiscal year ended December 31, 1998, the Board held five (5)
meetings, and each director, except W. A. Griffin, attended at least 75 percent
of the combined number of meetings of the Board and of the committees of the
Board of which he was a member.
The Audit Committee reviews with the Company's independent accountants the
scope and results of the annual audit of the Company's consolidated financial
statements. In addition, the Audit Committee reviews the independent
accountants' management letter containing their recommendations for improvements
to the Company's internal controls. The Audit Committee also recommends to the
Board the selection of independent accountants. The Audit Committee currently is
composed of Gibson Gayle, Jr., Ralph F. Cox, W.A. Griffin and Thomas J. Keefe.
During the fiscal year ended December 31, 1998, the Audit Committee held five
(5) meetings.
The Compensation Committee advises the Board concerning the compensation
and benefits of the executive officers and certain operating officers of the
Company. The Compensation Committee currently is composed of Brian E. O'Neill,
Leo E. Linbeck, Jr. and Thomas J. Keefe. During the fiscal year ended December
31, 1998, the Compensation Committee held one (1) meeting.
The Executive Committee acts on behalf of the Board between regularly
scheduled meetings of the Board of Directors. The Executive Committee, which is
currently composed of Ronald C. Lassiter, Brian O'Neill and Nathan M. Avery,
held one (1) meeting during the fiscal year ended December 31, 1998.
The Nominating Committee recommends to the Board the persons to nominate
for election as directors at the annual meetings of stockholders or to fill
vacancies created by the resignation of a director and currently
I-8
<PAGE> 16
is composed of W. A. Griffin, Brian E. O'Neill and Ralph F. Cox. The Nominating
Committee will not consider proposals submitted by security holders. During the
fiscal year ended December 31, 1998, the Nominating Committee held one meeting.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid for services rendered during the fiscal years ended December 31, 1998 and
1997, the three-month transition period from October 1, 1996 through December
31, 1996 resulting from the Company's change in fiscal year (designated as
"1996T"), and for the fiscal year ended September 30, 1996, to the Company's
Chief Executive Officer and four other most highly compensated executive
officers, including its former President and Chief Operating Officer and the
President of its Daniel Valve Division:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL -----------------------------------------
COMPENSATION(1) RESTRICTED SECURITIES ALL OTHER
--------------------- STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($)(2) OPTIONS(#) ($)(3)
- --------------------------- ----- --------- -------- ------------ ---------- ------------
(A) (B) (C) (D) (F) (G) (I)
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Lassiter, Chairman......... 1998 250,000 157,500 -- -- 8,305
of the Board and Chief 1997 242,730(4) 141,369 -- 250,000 625
Executive Officer 1996T -- -- -- -- --
1996 100,000(5) -- -- -- --
Alex Newton, former President........ 1998 200,000(6) 75,600 -- -- 4,266
and Chief Operating Officer 1997 103,227 75,000 706,250 200,000 --
W. Todd Bratton, Executive........... 1998 183,211 37,694 -- -- 6,923
Vice President and President 1997 170,592 73,546 -- 40,000 1,062
Daniel Measurement and 1996T 13,670(7) -- -- -- --
Control Division
James M. Tidwell, Executive.......... 1998 180,083 45,612 -- 50,000 6,619
Vice President and Chief 1997 169,942 71,857 -- 40,000 2,359
Financial Officer 1996T 42,086 -- -- -- --
1996 20,096 12,500 38,625(8) 30,000 --
Kenton Chickering III,............... 1998 151,228 66,502 -- -- 6,883
President Daniel Valve
Division(9)
</TABLE>
- ---------------
(1) The value of perquisites and other benefits for any named officer did not
exceed the lesser of $50,000 or 10 percent of that officer's total reported
annual salary and bonus.
(2) As of December 31, 1998, Messrs. Newton, Tidwell and Chickering held 40,000,
1,308 and 642 shares, respectively, subject to restriction, having a value
of $485,000, $15,860 and $7,784, respectively.
(3) For 1998, represents the Company's matching contribution to the 401(k)
portion of the Company's profit sharing and savings plan (the "Plan") that
was allocated to each employee's account. For 1997, 1996T and 1996,
represents the vested amount of the Company's contribution to the Plan
(including the Company's matching contribution under the 401(k) portion of
the Plan) that was allocated to each employee's account.
(4) Effective January 24, 1997, Mr. Lassiter became Acting President and Chief
Executive Officer of the Company and was paid a consulting fee of $20,833
per month for such services. When Alex Newton was elected President of the
Company effective July 1, 1997, Mr. Lassiter was elected Chief Executive
Officer and was awarded an annual salary of $250,000. The 1997 salary amount
in the Summary Compensation Table includes amounts paid to Mr. Lassiter in
1997 as consulting fees.
(5) Effective March 6, 1996, the Company entered into an agreement with Mr.
Lassiter pursuant to which he agreed to serve as Chairman of the Board for
$100,000, which was to be paid in Shares valued as of the beginning of the
period (or 6,558 shares), the issuance of which was deferred until March 6,
2001.
(6) Mr. Newton resigned as President and Chief Operating Officer effective
January 29, 1999.
I-9
<PAGE> 17
(7) Does not include compensation paid to Mr. Bratton by Bettis Corporation
prior to December 12, 1996, the date Bettis was acquired by Daniel and Mr.
Bratton became an executive officer of the Company.
(8) Includes an award valued at $12,500 granted in December 1996 in lieu of a
portion of the cash bonuses earned in fiscal 1996.
(9) Although Mr. Chickering was president of Daniel Valve Division prior to
1998, the Company believes that, prior to 1998, he did not participate in
policy-making functions.
OPTION GRANTS IN FISCAL 1998
The following table sets forth certain information regarding stock options
granted during fiscal 1998 to the persons named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE
OPTIONS AT ASSUMED ANNUAL
NUMBER OF GRANTED EXERCISE RATES OF
SECURITIES TO OR BASE STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES PRICE PER FOR OPTION TERMS
OPTIONS IN SHARE EXPIRATION -------------------------
NAME GRANTED(#) 1998 ($/SHARE) DATE 5%($) 10%($)
---- ---------- --------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Lassiter............. -- -- -- -- -- --
Alex Newton.................... -- -- -- -- -- --
W. Todd Bratton................ -- -- -- -- -- --
James M. Tidwell............... 50,000 39.4 16.66 1/14/08 523,751 1,327,288
Kenton Chickering III.......... -- -- -- -- -- --
</TABLE>
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND OPTION VALUES
AT DECEMBER 31, 1998
The following table sets forth the aggregate option exercises during the
fiscal year ended December 31, 1998, and the value of outstanding options at the
end of that year held by the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS VALUE OF UNEXERCISED IN-
UNEXERCISED AT YEAR THE-MONEY OPTIONS AT
SHARES ACQUIRED END(#) YEAR END($)
ON VALUE REALIZED ------------------------- -------------------------
NAME EXERCISE(%) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ronald C. Lassiter..... -- -- 93,333/171,667 0/0
Alex Newton............ -- -- 40,000/160,000 0/0
W. Todd Bratton........ 137,453/ 47,547 583,927/59,612
James M. Tidwell....... -- -- 33,333/ 86,667 0/0
Kenton Chickering
III.................. -- -- 72,500/0 0/0
</TABLE>
I-10
<PAGE> 18
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company do not receive fees for
attending meetings of the Board. Each non-employee director of the Company
receives fees of (i) $1,000 for each meeting of the Board and for each committee
meeting thereof that he attends, subject to a maximum daily fee of $1,000, and
(ii) an annual retainer of $15,000. The chairman of any committee of the Board
receives an additional annual retainer of $2,500.
Pursuant to the Company's 1997 Non-Employee Director Stock Option Plan, on
January 1, 1998 and January 1, 1999, each non-employee director serving on such
date received an option to purchase 5,000 shares of Common Stock. The options
are fully exercisable on the date of grant. The exercise price is the average of
the high and low sale prices of the Common Stock on the date of the grant. Under
the Company's 1995 Non-Employee Directors' Stock Option Plan, Dr. Michael
Carroll received an option for 15,000 shares on January 14, 1998, the date of
his election to the Board. That option vests with respect to one third of the
shares covered thereby on each of the first three anniversaries of the date of
grant.
REPORT OF THE COMPENSATION COMMITTEE WITH RESPECT TO COMPENSATION OF EXECUTIVE
OFFICERS
The Compensation Committee of the Board of Directors (the "Committee"),
which is composed of three independent outside directors, is responsible for
advising the Board concerning the compensation and benefits of the executive
officers of the Company.
Compensation Philosophy and Overall Objectives
The Company's compensation program is designed to attract, motivate and
retain management talent required to achieve corporate objectives and increase
stockholder value. It is also designed to align executive remuneration levels
both with the interests of stockholders and with overall Company performance.
The Company's executive compensation program includes a combination of base
salaries and annual and long-term incentives in the form of cash bonuses, stock
awards and stock options, which are linked to the financial and stock
performance of the Company.
The compensation programs are generally administered by or under the
direction of the Committee and are reviewed annually to ensure that remuneration
levels and benefits are competitive and reasonable in light of the overall
performance of the Company. The compensation of all executive officers,
including the Chief Executive Officer, is approved by the full Board of
Directors following recommendations by the Committee.
The Committee determines competitive levels of compensation for executive
positions based on information obtained from published and private compensation
surveys, as well as proxy statements, for companies in the Company's industry
with annual revenues comparable to Daniel's. Although some of the same companies
may be included in the S&P Oil Composite reflected in the Company's performance
graph included elsewhere in this Information Statement, the two groups are not
identical. Variable incentives, both annual and longer term, are important
components of the Company's executive compensation program and are used to link
pay and performance results.
Compensation Program Components
Base Salary. The base salary program targets the average or median of the
compensation comparison group. Salary adjustments are based on the individual's
experience, background and performance during the prior year. The Committee's
review and analysis of these matters are subjective, and no specific weight is
given to any single factor. Overall, the base salaries of the corporate officers
and division presidents during 1998 approximated both the market mean and
median. Given the long term incentives, in the form of stock options and
restricted stock, held by Ronald C. Lassiter, the Company's Chairman of the
Board and Chief Executive Officer, and Alex Newton, the Company's President and
Chief Operating Officer, at the suggestion of Mr. Lassiter, no changes were made
in the base salaries of these individuals for 1998. The salaries of the other
executive officers generally increased between 3.8 percent and 6.5 percent over
1997 levels.
I-11
<PAGE> 19
Annual Performance Incentives. In 1998, annual incentive compensation was
provided to the Company's executive officers and other key executives in the
form of cash bonuses based on overall Company operating income and, in the case
of non-corporate officers, on the individual's operating unit's operating
income. The Chief Executive Officer was eligible to receive a target bonus equal
to 100 percent of his salary, with the other named executive officers being
eligible for target bonuses of between 40 percent and 60 percent of their
respective salaries. For the fiscal year ended December 31, 1998, the Company
attained 86% of its operating income objective, which resulted in the corporate
executive officers generally earning 63% of their targeted bonuses. As
presidents of the Company's operating divisions, the bonuses for Messrs. Bratton
and Chickering are more heavily weighted toward operating performance of their
respective divisions. Total cash bonuses approved for the executive officers
named in the Summary Compensation Table were $382,908, including $157,500 paid
to the Chief Executive Officer.
Long Term Compensation. Longer term incentives, in the form of stock
options and restricted stock awards, are designed to directly link a significant
portion of the executive's compensation to the enhancement of stockholder value.
In addition, they encourage management to focus on the longer term development
and prosperity of the Company, in addition to annual operating profits.
Restricted stock grants under the Company's Stock Award Plan are designed to
increase the actual share ownership position of key executives, providing a
strong emphasis on maintaining and enhancing stockholder value and retaining
executives during different states of the business cycle. Accordingly, from time
to time, the Committee grants to the Company's executive officers restricted
stock awards and options to purchase shares of Common Stock. The number of
shares granted is determined based on the level and contribution of the employee
and may take into account the stock ownership and other options held by the
employee. Restricted stock awards and stock options are generally subject to
vesting over a number of years, and stock options generally have exercise prices
equal to the market price of the Common Stock on the date of grant. During the
year ended December 31, 1998, Mr. Tidwell was granted an option to acquire
50,000 shares of Common Stock, which was intended to bring him to a level more
in line with his position and responsibilities with the Company.
Compensation Committee of the Board of Directors
Brian E. O'Neill
Leo E. Linbeck, Jr.
Michael M. Carroll
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board during the fiscal year
ended December 31, 1998, was an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries.
During the fiscal year ended December 31, 1998, no executive officer of the
Company served as (i) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Compensation Committee, (ii) a director of
another entity, one of whose executive officers served on the Compensation
Committee, or (iii) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served as a director of the Company.
I-12
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares, as of each of the dates indicated, the
performance of the Common Stock to the Standard & Poor's 500 Stock Index ("S&P
500") and the Standard Poor's Oil Composite Index ("S&P Oil Composite") for the
Company's last five fiscal years and for the three-month transition period ended
December 31, 1996. The graph assumes that the value of the investment in the
Common Stock and each index was $100 at September 30, 1993, and that all
dividends were reinvested.
COMPARISON OF 63 MONTH CUMULATIVE TOTAL RETURN*
AMONG DANIEL INDUSTRIES, INC., THE S&P 500 INDEX
AND THE S&P OIL COMPOSITE INDEX
[COMPARISON GRAPH]
- ---------------
* $100 invested on 9/30/93 in stock or index -- including reinvestment of
dividends.
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER DECEMBER DECEMBER DECEMBER
1993 1994 1995 1996 1996 1997 1998
--------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel Industries, Inc................... $100 $ 76 $101 $ 88 $102 $135 $ 86
S & P 500................................ 100 104 135 162 175 234 301
S & P Oil Composite...................... 100 99 118 148 164 203 221
</TABLE>
The foregoing performance graph is based on historical data and is not
necessarily indicative of future performance of the Common Stock. This graph
shall not be deemed incorporated by reference by any general statement
incorporating by reference this information statement being provided pursuant to
Section 14(f) of the Exchange Act into any filings under the Securities Act or
the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
EMPLOYMENT, CHANGE OF CONTROL AND OTHER AGREEMENTS
On June 17, 1997, the Company entered into an agreement with Alex Newton
("Employment Agreement"), providing for his employment as President and Chief
Operating Officer of the Company for a minimum annual compensation of $200,000,
which was to be reviewed annually by the Compensation Committee of the Board for
possible increases (as adjusted, "Base Salary"). In addition to the Base Salary,
I-13
<PAGE> 21
the Company agreed to pay Mr. Newton a cash bonus of at least $75,000 on January
4, 1998, and, in the sole discretion of the Compensation Committee, an annual
performance bonus thereafter of between 12.5 percent and 100 percent of his Base
Salary. The term of the Employment Agreement would terminate in the event of Mr.
Newton's death, his disability, his resignation without "Good Reason" (as
defined below) or his termination of employment for "Cause" (as defined below).
If the Employment Agreement was terminated prior to June 17, 1999, by reason of
the death or disability of Mr. Newton, he or his estate would be entitled to
receive a pro rata amount of the performance bonus, if any, that he would have
received for the year of termination. If, prior to June 17, 1999, Mr. Newton
terminated his employment for Good Reason or was terminated by the Company for
other than Cause, the Company would pay him a lump sum amount equal to the
greater of the Base Salary that would have been paid through the remainder of
the term had such termination not occurred, or a full year of Base Salary. If,
on or after June 17, 1999, Mr. Newton terminated his employment for Good Reason
or was terminated by the Company for other than Cause, the Company agreed to pay
him a lump sum amount equal to the greater of a full year of Mr. Newton's (i)
Base Salary as in effect at June 17, 1999, or (ii) salary, exclusive of any
bonuses, in effect at the time of his severance of employment.
In connection with his employment, Mr. Newton was also granted an award of
50,000 shares of restricted Common Stock, which were to vest at a rate of 20
percent per year over a five-year period. The shares were subject to immediate
vesting upon the termination of Mr. Newton's employment relationship by reason
of his death or disability, his resignation for Good Reason or his termination
of employment for other than Cause.
In connection with his resignation on January 29, 1999 and agreement to
provide reasonable assistance to the Company with respect to unfinished
business, the Company and Mr. Newton entered into an agreement whereby the
Company would, among other things, pay Mr. Newton a lump sum of $200,000 and
would remove the restrictions with respect to 40,000 shares of restricted stock
and on options to acquire 160,000 shares of Common Stock.
The Company entered into severance agreements with James M. Tidwell (in
connection with his employment with Daniel) and with W. Todd Bratton, which
provide for the payment of one year's net salary if they are terminated for any
reason other than criminal misconduct.
The Company has entered into Change of Control Agreements with Ronald C.
Lassiter and each of the other executive officers named in the Summary
Compensation Table. The terms of Mr. Lassiter's and Mr. Newton's Change of
Control Agreements are their respective periods of employment with the Company.
(Mr. Newton's Change of Control Agreement terminated on January 29, 1999.) The
other Change of Control Agreements are for a term equal to the later of (i)
three years from February 6, 1997, August 23, 1996 and March 25, 1995 for
Messrs. Bratton, Tidwell and Chickering, respectively, or (ii) the last Change
in Control (hereinafter defined) of the Company, and are automatically renewable
for successive one-year terms if notice of termination is not given by the
Company. The Change of Control Agreement for each of Messrs. Bratton, Tidwell
and Chickering is subject to earlier termination upon (i) the employee's death,
disability or retirement or (ii) termination by the employee or the Company of
the employee's employment by the Company. Under each Change of Control
Agreement, a "change in control" of the Company shall have occurred if (i) a
report on Schedule 13D shall be filed with the SEC disclosing that any person
(or group of persons acting in concert), other than the Company, one of its
subsidiaries or any employee benefit plan of the Company, is the beneficial
owner of 20 percent of the outstanding securities of the Company entitled to
vote for directors ("Voting Stock"); (ii) any person (or group of persons acting
in concert), other than the Company, one of its subsidiaries or any employee
benefit plan of the Company, shall purchase securities pursuant to a tender
offer or exchange offer to acquire any Voting Stock and, immediately thereafter,
is the beneficial owner of 20 percent of the Voting Stock; (iii) the
stockholders of the Company shall approve (w) a merger or consolidation of the
Company with any other person, (x) any sale or other transfer of all or
substantially all the assets of the Company, (y) the dissolution of the Company,
or (z) a transaction immediately after the consummation of which any person (or
group of persons acting in concert) would be the beneficial owner of 50 percent
of the outstanding Voting Stock; or (iv) during any 12-month period, individuals
who at the beginning of that period constituted the Board of Directors cease to
constitute a majority of the Board.
I-14
<PAGE> 22
Under the Change of Control Agreements, in the event the employee
terminates his employment as a result of an event of termination for Good Reason
or is terminated by the Company other than as a result of an event of
termination for Cause, in each case following a Change in Control, the Company
would pay (i) in the case of Mr. Lassiter, a cash lump sum payment equal to
three times the sum of (A) the amount of his annualized base salary for the year
of termination (prior to any reduction that constituted an event of termination
for Good Reason), and (B) the amount of any cash bonus paid or payable to Mr.
Lassiter for services rendered in the prior fiscal year, and (ii) in the case of
Messrs. Tidwell, Bratton or Chickering, a cash lump sum payment equal to two and
one-half times the sum of (A) the amount of base salary the employee would have
been paid during the fiscal year of termination, (B) the amount of any cash
bonus paid or payable to the employee for services rendered in the prior fiscal
year, and (C) the amount of any income that (1) is includable in the employee's
gross income for tax purposes and (2) is attributable to the exercise of options
exercised by the employee within the one-year period prior to the termination
date. Each agreement also obligates the Company to maintain in effect, during
the three-year period (one year period, in the case of Mr. Lassiter) following
termination (or such earlier date that the employee becomes a full-time employee
of another person), other benefit plans (including life insurance, medical and
disability) for the benefit of such employee or to provide substantially similar
benefits. In the case of Messrs. Tidwell, Bratton and Chickering, if all or any
part of a payment under a Change of Control Agreement would not be deductible
for federal income tax purposes by the Company or one of its tax affiliates, the
amount would be reduced such that no portion of any change of control payment to
such employee (whether under the Change of Control Agreement or otherwise) is
not deductible by the Company or one of its tax affiliates.
Each Change of Control Agreement provides generally that an event of
termination for Good Reason shall have occurred if the Company shall (i) assign
the employee duties inconsistent with his position in effect immediately prior
to the first Change in Control of the Company; (ii) remove or fail to re-elect
or re-appoint the employee to any position with the Company held immediately
prior to the first Change in Control; (iii) take any other action that results
in a material diminution in such position, authority, duties or
responsibilities; (iv) reduce the employee's annual base salary as in effect
immediately prior to the first Change in Control of the Company or as may be
increased thereafter; (v) relocate the employee's principal office outside of
Houston, Texas; (vi) fail to continue his participation, on substantially the
same basis, in any profit sharing, saving or retirement plan in which the
employee participated prior to the first Change in Control, unless an equitable
arrangement shall have been made; (vii) materially reduce any other benefits
that were provided to the employee by the Company prior to the first Change in
Control, including any material fringe benefits, or (viii) reduce the employee's
number of paid vacation days. An event of termination for Cause shall have
occurred if the employee willfully and continuously fails to substantially
perform his or her duties or willfully engages in conduct known to be materially
injurious to the Company.
The Company has entered into Change of Control Agreements, similar to those
of Messrs. Bratton, Tidwell and Chickering, with the other current executive
officers, as well as certain of the Company's operating officers and key
employees.
I-15
<PAGE> 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and footnotes thereto set forth information regarding
the beneficial ownership of common stock of the Company, $1.25 par value (the
"Common Stock"), as of April 15, 1999 by (a) each person known by the Company to
be the beneficial owner at that date of more than five percent of the
outstanding Shares, (b) each of the Company's directors, (c) each Named
Executive Officer (as defined in "Summary Compensation Table") and (d) all
directors and executive officers of the Company as a group. Except as otherwise
set forth, such persons have sole voting and sole investment power with respect
to the Shares beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
------------------------------------ --------------------- --------
<S> <C> <C>
Shapiro Capital Management Company, Inc. ................... 2,548,275(2) 14.4%
Samuel R. Shapiro
3060 Peachtree Road, N.W.
Suite 1555
Atlanta, Georgia 30305
David L. Babson and Company Incorporated.................... 1,955,288(3) 11.0%
One Memorial Drive
Cambridge, Massachusetts 02142-1300
FMR Corp. .................................................. 1,702,600(4) 9.6%
Edward C. Johnson III
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
W.A. Griffin................................................ 1,545,067(5) 8.7%
9753 Pine Lake Drive
Houston, Texas 77055
Ronald C. Lassiter.......................................... 109,812(6) *
W. A. Griffin............................................... 1,545,067(7) 8.7%
Thomas J. Keefe............................................. 34,956(8) *
Michael M. Carroll.......................................... 10,000(9) *
Brian E. O'Neill............................................ 40,000(9) *
Ralph F. Cox................................................ 35,000(10) *
Leo E. Linbeck, Jr. ........................................ 30,000(9) *
Nathan M. Avery............................................. 222,150(8) 1.3%
Gibson Gayle, Jr. .......................................... 40,000(10) *
Alex Newton................................................. 50,000(11) *
W. Todd Bratton............................................. 151,782(12) *
James M. Tidwell............................................ 57,698(13) *
Kenton Chickering, III...................................... 79,883(14) *
All current officers and directors as a group (20
persons).................................................. 2,617,820(15) 14.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Information with respect to beneficial ownership is based upon information
furnished by the stockholder or contained in filings made with the
Securities and Exchange Commission ("SEC").
(2) Based on a Schedule 13G filed with the SEC on June 10, 1998 and information
received directly from Shapiro Capital Management Company, Inc.
("Shapiro"), Shapiro, in its capacity as investment advisor, has sole
voting and dispositive power with respect to 2,548,275 shares that are
owned by numerous investment counseling clients. Samuel R. Shapiro is the
president, a director and majority shareholder of Shapiro and may,
therefore, be deemed to have beneficial ownership of such Shares.
I-16
<PAGE> 24
(3) Based on a Schedule 13G filed with the SEC on January 19, 1999, David L.
Babson and Company Incorporated, in its capacity as investment advisor, has
sole voting and dispositive power with respect to 1,955,288 shares that are
owned by numerous investment counseling clients.
(4) Based on a Schedule 13G filed with the SEC on February 12, 1999, certain
subsidiaries of FMR Corp. act as investment advisors or managers and, as
such, have sole voting power with respect to 920,700 shares and sole
dispositive power with respect to 1,702,600 shares held in certain Fidelity
funds. Edward C. Johnson III is the Chairman of FMR Corp., Abigail P.
Johnson is a director, and members of the Johnson family and their family
trusts own significant amounts of FMR Corp. stock; accordingly, Edward and
Abigail Johnson are each deemed to be beneficial owners, with no voting
power but sole dispositive power, with respect to the 1,702,600 shares over
which subsidiaries of FMR Corp. act as investment advisor or manager.
(5) At April 15, 1999, W. A. Griffin, Chairman Emeritus of the Board, owned
1,515,067 shares. Mr. Griffin is also considered to be the beneficial owner
of 534,275 shares held in his capacity as trustee of a trust in which he
has a vested beneficial interest. Mr. Griffin also is considered to be the
beneficial owner of 30,000 shares that may be acquired within 60 days of
April 15, 1999, through the exercise of outstanding options.
(6) Includes 98,333 shares that may be acquired within 60 days of April 15,
1999, through the exercise of outstanding options, and 1,179 shares that
are attributable to Mr. Lassiter through his participation in the Company's
profit sharing and savings plan.
(7) For further information concerning the Shares beneficially owned by Mr.
Griffin, see Note (5) above.
(8) Includes 33,700 shares that may be acquired within 60 days of April 15,
1999, through the exercise of outstanding options.
(9) Represents Shares that may be acquired within 60 days of April 15, 1999,
through the exercise of outstanding options.
(10) Includes 30,000 shares that may be acquired within 60 days of April 15,
1999, through the exercise of outstanding stock options.
(11) At January 29, 1999, Mr. Newton owned 50,000 shares.
(12) Includes 147,893 shares that may be acquired within 60 days of April 15,
1999, through the exercise of outstanding options, and 639 shares that are
attributable to Mr. Bratton through his participation in the Company's
profit sharing and savings plan with respect to which he has sole voting
power.
(13) Includes 1,308 shares granted to Mr. Tidwell pursuant to the Company's
Stock Award Plan with respect to which he has sole voting and no
dispositive power, 49,999 shares that may be acquired within 60 days of
April 15, 1999, through the exercise of outstanding options, and 2,273
shares that are attributable to him through his participation in the
Company's profit sharing and savings plan with respect to which he has sole
voting power.
(14) Includes 642 shares granted to Mr. Chickering pursuant to the Company's
Stock Award Plan with respect to which he has sole voting and no
dispositive power, 72,500 shares that may be acquired within 60 days of
April 15, 1999, through the exercise of outstanding options, and 3,416
shares that are attributable to him through his participation in the
Company's profit sharing and savings plan with respect to which he has sole
voting power.
(15) Includes 10,548 shares granted to such persons pursuant to the Company's
Stock Award Plan with respect to which they have sole voting and no
dispositive power, 828,103 shares that may be acquired by them within 60
days of April 15, 1999, through the exercise of outstanding options, and
19,925 shares that are attributable to them through their participation in
the Company's profit sharing and savings plan with respect to which they
have sole voting power (excludes Shares held by Mr. Newton).
I-17
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger dated as of May 12, 1999,
between the Purchaser, the Parent and the Company
Exhibit 2 -- Stock Option Agreement dated as of May 12, 1999 between the
Parent and the Company
Exhibit 3 -- Offer to Purchase dated May 18, 1999, filed as Exhibit
11(a)(1) to Purchaser's and Parent's Schedule 14D-1 filed
May 18, 1999, in connection with the Offer to Purchase, and
incorporated herein by reference
Exhibit 4 -- Letter to Stockholders dated May 18, 1999
Exhibit 5 -- Opinion of Simmons dated as of May 12, 1999*
Exhibit 6 -- Press Release dated May 12, 1999
Exhibit 7 -- Confidentiality Agreement between the Company and the Parent
dated April 1, 1999
Exhibit 8 -- Form of Change in Control Agreement dated as of March 15,
1995, between the Company and each of W. C. Clingman and M.
R. Yellin; dated August 30, 1996, between the Company and J.
M. Tidwell; and dated February 6, 1996, between the Company
and each of W. T. Bratton and W. M. Krenek, filed as Exhibit
10.4 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995 and incorporated herein by
reference
Exhibit 9 -- Employment Agreement dated July 30, 1996 between the Company
and James M. Tidwell, filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1996 and incorporated herein by reference
Exhibit 10 -- Employment Agreement dated June 17, 1997 between the Company
and Thomas A. Newton, Jr., filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by
reference
Exhibit 11 -- Stock Award Agreement dated June 17, 1997 between the
Company and Thomas A. Newton, Jr., filed as Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by
reference
Exhibit 12 -- Change in Control Agreement between the Company and Ronald
C. Lassiter, filed as Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and incorporated herein by reference
Exhibit 13 -- Form of Change in Control Agreement between the Company and
each of Daniel J. Sarik, Katie-Pat Bowman and Michael T.
Atkins, filed as Exhibit 10.7 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997
and incorporated herein by reference
Exhibit 14 -- Severance Agreement dated February 6, 1997 between the
Company and W. T. Bratton, filed as Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* Included in copies mailed to stockholders.
</TABLE>
<PAGE> 1
EXHIBIT 1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
By and Among
EMERSON ELECTRIC CO.
EMERSUB LXXIV, INC.
and
DANIEL INDUSTRIES, INC.
MAY 12, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE OFFER................................................................................................1
SECTION 1.1. The Offer...................................................................................1
SECTION 1.2. Company Actions.............................................................................3
ARTICLE II
THE MERGER...............................................................................................4
SECTION 2.1. The Merger..................................................................................4
SECTION 2.2. Effective Time..............................................................................4
SECTION 2.3. Effects of the Merger.......................................................................4
SECTION 2.4. Certificate of Incorporation and By-laws....................................................5
SECTION 2.5. Directors...................................................................................5
SECTION 2.6. Officers....................................................................................5
SECTION 2.7. Effect on Capital Stock.....................................................................5
(a) Capital Stock of Sub........................................................................5
(b) Cancellation of Treasury Stock and Parent Owned Stock.......................................5
(c) Conversion of Shares........................................................................5
(d) Shares of Dissenting Stockholders...........................................................5
SECTION 2.8. Exchange of Certificates....................................................................6
(a) Paying Agent................................................................................6
(b) Parent to Provide Funds.....................................................................6
(c) Exchange Procedure..........................................................................6
(d) No Further Ownership Rights in Shares.......................................................7
SECTION 2.9. Withholding Rights..........................................................................7
SECTION 2.10. Lost Certificates..........................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES...........................................................................7
SECTION 3.1. Representations and Warranties of the Company...............................................7
(a) Organization, Standing and Power............................................................8
(b) Subsidiaries. ..........................................................................8
(c) Capital Structure...........................................................................8
(d) Authority; Non-contravention................................................................9
(e) SEC Documents. .........................................................................10
(f) Information Supplied.......................................................................11
(g) Absence of Certain Changes or Events.......................................................11
(h) State Takeover Statutes; Absence of Supermajority Provision................................12
(i) Brokers....................................................................................12
(j) Litigation.................................................................................12
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
(k) Employee Benefit Matters...................................................................12
(l) Taxes......................................................................................15
(m) No Excess Parachute Payments...............................................................16
(n) Environmental Matters......................................................................16
(o) Compliance with Laws.......................................................................17
(p) Material Contracts and Agreements..........................................................17
(q) Title to Properties........................................................................17
(r) Intellectual Property......................................................................17
(s) Labor Matters..............................................................................18
(t) Undisclosed Liabilities....................................................................18
(u) Board Recommendation.......................................................................18
SECTION 3.2. Representations and Warranties of Parent and Sub..........................................18
(a) Organization; Standing and Power...........................................................19
(b) Authority; Non-contravention...............................................................19
(c) Information Supplied.......................................................................20
(d) Brokers....................................................................................20
(e) Litigation.................................................................................20
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................20
SECTION 4.1. Conduct of Business of the Company........................................................20
(a) Ordinary Course............................................................................20
(b) Changes in Employment Arrangements.........................................................23
(c) Severance..................................................................................23
(d) Other Actions..............................................................................23
ARTICLE V
ADDITIONAL AGREEMENTS...................................................................................23
SECTION 5.1. Stockholder Approval; Preparation of Proxy Statement......................................23
SECTION 5.2. Access to Information.....................................................................24
SECTION 5.3. Reasonable Efforts; Notification..........................................................26
SECTION 5.4. Employee Benefit Matters..................................................................27
SECTION 5.5. Indemnification...........................................................................29
SECTION 5.6. Fees and Expenses.........................................................................29
SECTION 5.7. Public Announcements......................................................................30
SECTION 5.8. Stockholder Litigation....................................................................30
SECTION 5.9. Directors.................................................................................30
SECTION 5.10. Tax Certification........................................................................31
ARTICLE VI
CONDITIONS PRECEDENT....................................................................................31
SECTION 6.1. Conditions to Each Party's Obligation to Effect the Merger................................31
(a) Stockholder Approval.......................................................................31
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
(b) Other Approvals. .........................................................................31
(c) No Injunctions or Restraints...............................................................31
SECTION 6.2. Conditions to Obligation of Parent and Sub.................................................31
SECTION 6.3. Condition to Obligation of the Company.....................................................32
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.......................................................................32
SECTION 7.1. Termination................................................................................32
SECTION 7.2. Procedure for Termination, Amendment, Extension or Waiver..................................33
SECTION 7.3. Effect of Termination......................................................................34
SECTION 7.4. Amendment..................................................................................34
SECTION 7.5. Extension; Waiver..........................................................................34
ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS................................................................34
SECTION 8.1. Takeover Defenses of the Company and Standstill Agreements.................................34
SECTION 8.2. No Solicitation............................................................................34
SECTION 8.3. Fee and Expense Reimbursements.............................................................37
ARTICLE IX
GENERAL PROVISIONS......................................................................................38
SECTION 9.1. Nonsurvival of Representations and Warranties..............................................38
SECTION 9.2. Notices....................................................................................38
SECTION 9.3. Definitions................................................................................39
SECTION 9.4. Interpretation.............................................................................40
SECTION 9.5. Counterparts...............................................................................40
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries.............................................40
SECTION 9.7. Governing Law..............................................................................40
SECTION 9.8. Assignment.................................................................................40
SECTION 9.9. Enforcement of the Agreement...............................................................41
SECTION 9.10. WAIVER OF JURY TRIAL......................................................................41
SECTION 9.11. Performance by Sub........................................................................41
SECTION 9.12. Severability..............................................................................41
</TABLE>
(iii)
<PAGE> 5
AGREEMENT AND PLAN OF MERGER dated as of May 12, 1999, among EMERSON
ELECTRIC CO., a Missouri corporation ("Parent"), EMERSUB LXXIV, INC., a
Delaware corporation ("Sub") and a wholly owned subsidiary of Parent, and
DANIEL INDUSTRIES, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent on the terms and
subject to the conditions of this Agreement and Plan of Merger (this
"Agreement");
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Sub to make a tender offer (as it may be amended from time to time as permitted
hereunder, the "Offer") to purchase all the issued and outstanding shares of
Common Stock, par value $1.25 per share, of the Company, including the related
right as to each Share to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock, $1.00 par value, of the Company
(singularly a "Right" and collectively, the "Rights") (singularly, a share of
such Common Stock including the related Right, a "Share" and collectively, the
"Shares"), at a price per Share of $21.25 net to the seller in cash, upon the
terms and subject to the conditions of this Agreement; and the Board of
Directors of the Company has adopted resolutions approving the Offer and the
Merger (as hereinafter defined) and recommending that the Company's
stockholders accept the Offer;
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 of this Agreement,
whereby each issued and outstanding Share not owned directly or indirectly by
Parent or the Company, except Shares held by persons who object to the Merger
and comply with all the provisions of Delaware law concerning the right of
holders of Shares to dissent from the Merger and require appraisal of their
Shares ("Dissenting Stockholders"), will be converted into the right to receive
the per share consideration paid to holders of Shares pursuant to the Offer;
and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Offer and the
Merger and also to prescribe various conditions to the Offer and the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreement herein contained, the parties agree
as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than the fifth
business day from and including the date of public announcement of the terms of
this Agreement, Sub shall, and Parent shall cause Sub to,
<PAGE> 6
commence the Offer. Unless earlier terminated in accordance with the provisions
of this Agreement, the Offer shall not expire before 12:00 midnight on the date
that is 20 business days from and including the date the Offer is commenced.
The obligation of Sub to, and of Parent to cause Sub to, commence the Offer
shall be subject to the conditions set forth in clauses (a) through (h) set
forth in Exhibit A (any of which may be waived by Sub in its sole discretion,
and it being understood for all purposes of this Agreement that the fact that
any condition specified in the first paragraph of Exhibit A shall not have been
satisfied shall not, without more, constitute a failure of any other condition
set forth in Exhibit A) and to the terms and conditions of this Agreement. The
obligation of Sub to accept for payment, and pay for, any Shares tendered
pursuant to the Offer shall be subject to the conditions set forth in Exhibit A
(any of which may be waived by Sub in its sole discretion, provided that,
without the consent of the Company, Sub shall not waive the Minimum Tender
Condition (as defined in Exhibit A)) and to the terms and conditions of this
Agreement. Sub expressly reserves the right to modify the terms of the Offer,
except that, without the consent of the Company, Sub shall not (i) reduce the
number of Shares subject to the Offer, (ii) reduce the price per Share to be
paid pursuant to the Offer, (iii) modify or add to the conditions set forth in
Exhibit A, (iv) except as provided in the next two sentences, extend the Offer,
(v) change the form of consideration payable in the Offer or (vi) otherwise
amend the Offer in any manner materially adverse to the Company's stockholders.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (i)
extend the Offer if at the scheduled expiration date of the Offer any of the
conditions to Sub's obligation to purchase Shares (as set forth in Exhibit A)
shall not be satisfied, (ii) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer or for any
period required by applicable law and (iii) extend the Offer on one or more
occasions for an aggregate period of not more than 10 business days beyond the
latest expiration date that would otherwise be permitted under clause (i) or
(ii) of this sentence, if, on such expiration date, the number of Shares
tendered (and not withdrawn) pursuant to the Offer represents less than 90% of
the Fully Diluted Shares (as defined in Exhibit A). Sub and Parent agree that
if at any scheduled expiration date of the Offer the HSR Condition (as defined
in Exhibit A) has not been satisfied, but at such scheduled expiration date all
the other conditions set forth in Exhibit A shall have been satisfied (other
than the Minimum Tender Condition), Sub may (and at the request of the Company
(confirmed in writing) shall) extend the Offer (a "Special Extension") from
time to time until the HSR Condition has been satisfied. In no event may the
Company or Sub require that the Offer be extended to a date later than 270 days
following the date hereof by Special Extensions or to a date later than 180
days following the date hereof for any other reason. Subject to the terms and
conditions of the Offer and this Agreement, Sub shall, and Parent shall cause
Sub to, pay for all Shares validly tendered and not withdrawn pursuant to the
Offer that Sub becomes obligated to purchase pursuant to the Offer as promptly
as practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to
the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, the "Offer Documents"). The Offer Documents shall comply
as to form in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder and the Offer Documents, on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue
-2-
<PAGE> 7
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company for inclusion in the Offer Documents. Each of Parent, Sub and the
Company agrees promptly to amend or supplement any information provided by it
for use in the Offer Documents if and to the extent that such information shall
have become false or misleading in any material respect, and each of Parent and
Sub further agrees to take all steps necessary to amend or supplement the Offer
Documents and to cause the Offer Documents as so amended or supplemented to be
filed with the SEC and to be disseminated to the Company's stockholders, in
each case as and to the extent required by applicable Federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on the Offer Documents and all amendments and supplements thereto
prior to their filing with the SEC or dissemination to stockholders of the
Company. Parent and Sub agree to provide the Company and its counsel with any
comments Parent, Sub or their counsel may have received from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to purchase any Shares that Sub becomes obligated to
purchase pursuant to the Offer.
SECTION 1.2. Company Actions. (a)The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the
Company, at a meeting duly called and held, has duly adopted resolutions
approving this Agreement, the Offer and the Merger, determining that the terms
of the Agreement, the Offer and the Merger are fair to, and in the best
interests of, the Company's stockholders and recommending that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer and
approve and adopt this Agreement and the Merger. The Company represents that
its Board of Directors has received the written opinion of Simmons & Company
International ("Simmons") that the proposed consideration to be received by the
holders of Shares pursuant to the Offer and in the Merger is fair to such
holders from a financial point of view, and a complete and correct copy of such
opinion has been delivered by the Company to Parent.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendations described in
paragraph (a) above and shall mail the Schedule 14D-9 to the stockholders of
the Company. The Schedule 14D-9 shall comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Sub for inclusion in the Schedule
14D-9. Each of the Company, Parent and Sub agrees promptly to amend or
supplement any information provided by it for use in the Schedule 14D-9 if and
to the extent that such information shall have become false or misleading in
any material respect, and the Company further agrees to take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated
to the Company's
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<PAGE> 8
stockholders, in each case as and to the extent required by applicable Federal
securities laws. Parent and its counsel shall be given a reasonable opportunity
to review and comment on the Schedule 14D-9 and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. The Company agrees to provide Parent and its counsel in writing
with any comments the Company or its counsel may have received from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Sub promptly with mailing labels containing the names and
addresses of the record holders of Shares as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies
of all lists of stockholders, security position listings and computer files and
all other information in the Company's possession or control regarding the
beneficial owners of Shares, in each case true and correct as of the most
recent practicable date, and shall furnish to Sub such information and
assistance (including updated lists of stockholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the Company's stockholders. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Merger, Parent and Sub
shall hold in confidence the information contained in any such labels, listings
and files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request, deliver
to the Company all copies of such information then in their possession or
control.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the conditions
hereof and in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at the Effective Time of
the Merger (as hereinafter defined). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub and the Company in accordance with
the DGCL.
SECTION 2.2. Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions to the Merger, the parties shall file
a certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such other
time as Sub and the Company shall agree should be specified in the Certificate
of Merger (the time the Merger becomes effective being the "Effective Time of
the Merger").
SECTION 2.3. Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
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<PAGE> 9
SECTION 2.4. Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of Sub, as in effect at the Effective Time of the
Merger, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
(b) The By-laws of Sub as in effect at the Effective Time of the
Merger shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 2.5. Directors. The directors of Sub at the Effective Time of
the Merger shall be the directors of the Surviving Corporation and shall hold
office until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified in accordance with
applicable law, as the case may be.
SECTION 2.6. Officers. The officers of the Company at the Effective
Time of the Merger shall be the officers of the Surviving Corporation and shall
hold office until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, in accordance with
applicable law, as the case may be.
SECTION 2.7. Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the
holder of any Shares:
(a) Capital Stock of Sub. Subject to Section 2.7(b) below, each issued
and outstanding share of the capital stock of Sub shall be converted into
and become one fully paid and nonassessable share of Common Stock, par
value $1.00 per share, of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. All Shares
that are owned directly or indirectly by the Company as treasury stock or
by any wholly owned subsidiary of the Company and any Shares owned by
Parent, Sub or any other wholly owned subsidiary of Parent shall be
canceled, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 2.7(d), each issued and
outstanding Share (other than Shares to be canceled in accordance with
Section 2.7(b)) shall be converted into the right to receive from the
Surviving Corporation in cash, without interest, the price per Share paid
pursuant to the Offer (the "Merger Consideration").
(d) Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding Shares held by
a Dissenting Stockholder shall not be converted as described in Section
2.7(c) but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the DGCL;
provided, however, that Shares outstanding
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<PAGE> 10
immediately prior to the Effective Time of the Merger and held by a
Dissenting Stockholder who shall, after the Effective Time of the Merger,
withdraw his demand for appraisal or lose his right of appraisal, in
either case pursuant to the DGCL, shall be deemed to be converted, as of
the Effective Time of the Merger, into the right to receive the Merger
Consideration. The Company shall give Parent (i) prompt notice of any
written demands for appraisal of Shares received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
any such demands. The Company shall not, without the prior written consent
of Parent, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
SECTION 2.8. Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time of the Merger, Parent shall select a bank or trust company to
act as paying agent (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of certificates representing Shares.
(b) Parent to Provide Funds. Parent shall take all steps necessary to
enable and cause the Surviving Corporation to provide the Paying Agent on a
timely basis, as and when needed after the Effective Time of the Merger, funds
necessary to pay for the Shares pursuant to Section 2.7.
(c) Exchange Procedure. Promptly after the Effective Time of the
Merger, the Paying Agent shall mail to each holder of record of a certificate
or certificates that immediately prior to the Effective Time of the Merger
represented outstanding Shares (the "Certificates"), other than the Company,
Parent and any subsidiary of the Company or Parent, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Paying Agent and which shall be in a form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by the Surviving Corporation,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 2.7, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or will
accrue on the Merger Consideration payable upon the surrender of any
Certificate. If payment is to be made to a person other than the person in
whose name the Certificate so surrendered is registered, it shall be a
condition of payment that such Certificate shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.8, each Certificate shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive upon such
surrender the Merger Consideration, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.7(c). Any portion of the Merger Consideration made available to
the Paying Agent pursuant to Section 2.8(b) (and any interest or other income
earned thereon) that remains unclaimed by the holders of Shares six months
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<PAGE> 11
after the Effective Time of the Merger shall be returned to Parent, upon
demand, and any such holder who has not exchanged them for the Merger
Consideration in accordance with this Section prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of such Shares without any interest thereon. Notwithstanding the
foregoing, neither the Paying Agent nor any party shall be liable to a former
stockholder of the Company for any cash or interest delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws. If
any Certificates shall not have been surrendered prior to seven years after the
Effective Time of the Merger (or immediately prior to such earlier date on
which any payment pursuant to this Section 2.8 would otherwise escheat to or
become the property of any governmental body or agency) the payment in respect
of such Certificate shall, to the extent permitted by applicable law, become
the property of Parent, free and clear of all claims or interest of any person
previously entitled thereto.
(d) No Further Ownership Rights in Shares. All Merger Consideration
paid upon the surrender of Certificates in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the Shares that were outstanding immediately prior
to the Effective Time of the Merger. If, after the Effective Time of the
Merger, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
SECTION 2.9. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable to any person pursuant to this Article such amounts as it is
required to deduct and withhold with respect to the making of such payment
under any provision of federal, state, local or foreign tax law. If the
Surviving Corporation or Parent, as the case may be, so withholds amounts, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which the Surviving Corporation or
Parent, as the case may be, made such deduction and withholding.
SECTION 2.10. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Paying Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, Parent and Sub as follows,
subject to any exceptions specified in the Company Disclosure Document in the
form attached hereto as Schedule I:
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<PAGE> 12
(a) Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the law of the
jurisdiction in which it is incorporated and has the requisite corporate power
and governmental licenses, authorizations, permits, consents and approvals
(except where the failure to have such licenses, authorizations, permits,
consents and approvals, individually or in the aggregate, would not have a
material adverse effect on the Company and its subsidiaries taken as a whole)
to carry on its business as now being conducted. The Company is duly qualified
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified to do business or in good standing (individually or in the
aggregate) would not have a material adverse effect (as defined in Section 9.3)
on the Company and its subsidiaries, taken as a whole.
(b) Subsidiaries. The Company's subsidiaries that are corporations are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation and have the requisite
corporate power and authority to carry on their respective businesses as they
are now being conducted and to own, operate and lease the assets they now own,
operate or hold under lease. The Company's subsidiaries are duly qualified to
do business and are in good standing in each jurisdiction in which the nature
of their respective businesses or the ownership or leasing of their respective
properties makes such qualification necessary, other than in such jurisdictions
where the failure to be so qualified or in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
All subsidiaries of the Company and their respective jurisdictions of
incorporation are identified in the Company 10-K. All the outstanding shares of
capital stock of the Company's subsidiaries that are corporations have been
duly authorized and validly issued and are fully paid and non-assessable and
were not issued in violation of any preemptive rights or other preferential
rights of subscription or purchase of any person. Except as disclosed in the
SEC Documents (as defined in Section 3.1(e)) filed on or prior to the date
hereof, all such stock and ownership interests are owned of record and
beneficially by the Company or by a wholly owned subsidiary of the Company,
free and clear of all liens, pledges, security interests, charges, claims and
other encumbrances of any kind or nature ("Liens"). Except for the capital
stock of, or ownership interests in, its subsidiaries, the Company does not
own, directly or indirectly, any capital stock, equity interest or other
ownership interest in any corporation, partnership, association, joint venture,
limited liability company or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 40,000,000 shares of common stock, $1.25 par value ("Company Common
Stock"), and 1,000,000 shares of preferred stock, $1 par value ("Preferred
Stock"), of which 150,000 shares have been designated Series A Junior
Participating Preferred Stock and reserved for issuance pursuant to the Rights
Agreement dated May 31, 1990 (as amended) between the Company and Equiserve
Trust Company, N.A., as rights agent (the "Company Rights Agreement"). At the
close of business on May 11, 1999, (i) 19,482,588 Shares were issued and
outstanding; (ii) 10,000, 10,956, 20,000 and 18,368 shares were reserved for
issuance pursuant to options not yet granted under the Company's 1997
Non-Employee Directors' Stock Option Plan, 1997 Stock Option Plan, 1995
Non-Employee Directors' Stock Plan and 1977 Stock Option Plan, respectively,
(iii) 9,416 Shares were reserved for issuance under the Company's Stock Award
Plan, (iv) 110,000, 716,857, 135,000, 33,000, 567,543, 385,468 and 10,000
Shares were reserved for issuance pursuant to outstanding options granted under
the Company's 1997 Non-Employee Director Stock Option Plan, 1997 Stock Option
Plan, 1995
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<PAGE> 13
Non-Employee Directors' Stock Option Plan, 1981 Stock Option Plan, 1977 Stock
Option Plan, options assumed in connection with the acquisition of Bettis
Corporation and a stock option agreement with a director of the Company and (v)
75,000 Shares were reserved for issuance pursuant to stock options granted in
connection with the acquisition of Hytork International Plc. Except as set
forth above, no shares of capital stock or other equity or voting securities of
the Company are reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are, and all such shares issuable upon the
exercise of stock options will be when issued thereunder, validly issued, fully
paid and nonassessable and not subject to preemptive rights. No capital stock
has been issued by the Company since May 11, 1999, other than Shares issued
pursuant to options, referred to in (iv) and (v) above, outstanding on or prior
to such date in accordance with their terms at such date. Except for options
referred to in (iv) and (v) above, there are no outstanding or authorized
securities, options, warrants, calls, rights, commitments, preemptive rights,
agreements, arrangements or undertakings of any kind to which the Company or
any of its subsidiaries is a party, or by which any of them is bound,
obligating the Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of capital stock or other
equity or voting securities of, or other ownership interests in, the Company or
of any of its subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking.
(d) Authority; Non-contravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
Company Stockholder Approval (as defined in Section 3.1(h)), to consummate the
transactions contemplated hereby and to take such actions, if any, as shall
have been taken with respect to the matters referred to in Section 3.1(h). The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to Company Stockholder Approval. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
judicial decisions now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The execution, delivery and
performance of this Agreement by the Company do not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties
or assets of the Company or any of its subsidiaries under, any provision of (i)
the Certificate of Incorporation or By-laws of the Company or any provision of
the comparable organizational documents of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its subsidiaries or their respective properties or assets or (iii)
subject to governmental filing and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation or
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arbitration award applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clause (ii), any
such conflicts, violations, defaults, rights or liens, security interests,
charges or encumbrances that individually or in the aggregate would not have a
material adverse effect on the Company or would not materially impair the
ability of the Company to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or agency, domestic or foreign, including local authorities (a
"Governmental Entity"), is required by or with respect to the Company or any of
its subsidiaries in connection with the execution, delivery and performance of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (i) the filing of a premerger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and any required
filings or approvals under applicable foreign antitrust laws and regulations,
(ii) the filing with the Securities and Exchange Commission (the "SEC") of (A)
a proxy statement relating to the Company Stockholder Approval (such proxy
statement as amended or supplemented from time to time, the "Proxy Statement")
and (B) the Schedule 14D-9; and (C) such reports under Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
filed in connection with this Agreement and the transactions contemplated
hereby, and (iii) the filing of the Certificate of Merger with the Delaware
Secretary of State with respect to the Merger as provided in the DGCL and
appropriate documents with the relevant authorities of other jurisdictions in
which the Company is qualified to do business and such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not have a material adverse
effect on the Company.
(e) SEC Documents. The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1996 (such documents, together with all exhibits and schedules thereto and
documents incorporated by reference therein, collectively referred to herein as
the "SEC Documents"). No subsidiary of the Company is required to file any
reports, schedules, forms, statements or other documents with the SEC. As of
their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC Documents,
and none of such SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and other adjustments described therein).
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(f) Information Supplied. (i) None of the information
supplied or to be supplied by the Company or its subsidiaries for inclusion or
incorporation by reference in the Offer Documents, the Schedule 14D-9 or the
Information Statement referred to in Section 5.9 will, at the time they are
filed with the SEC, at any time they are amended or supplemented, at the time
of any distribution or dissemination thereof and at the time of the
consummation of the Offer, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and (ii) the Proxy Statement will
not, at the date the Proxy Statement is first mailed to the Company's
stockholders, at the time of the Company Stockholders Meeting and at the
Effective Time of the Merger, and each document required to be filed by the
Company with the SEC or required to be distributed or otherwise disseminated to
the Company's stockholders in connection with the transactions contemplated by
this Agreement (the "Company Disclosure Documents") will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement, as it relates to the Company Stockholders Meeting, and the Company
Disclosure Documents, when filed, distributed or disseminated, as applicable,
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty contained in this Section 3.1(f)(ii) is made by the
Company with respect to statements made or incorporated by reference in the
Company Disclosure Documents based on information supplied by Parent or Sub for
inclusion or incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed on or prior to the date hereof, since December 31, 1998,
the Company has conducted its business only in the ordinary course consistent
with past practice, and there has not been (i) any material adverse change with
respect to the Company, (ii) any declaration, setting aside or payment of any
dividend (whether in cash, stock or property) with respect to any of the
Company's capital stock other than the regular quarterly dividends on Shares in
the amount of $.045 per Share (the "Company's regular dividend"), (iii) (A) any
granting by the Company or any of its subsidiaries to any officer, director or
employee of the Company or any of its subsidiaries of any increase in
compensation, bonus or other benefits, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of December 31, 1998, (B) any granting by the Company
or any of its subsidiaries to any such officer, director or employee of, or any
increase in, severance or termination pay, except as was required under
employment, severance or termination agreements in effect as of December 31,
1998, or any amendment to any existing arrangement with such officer, director
or employee, (C) except in accordance with past practice as to officers,
directors or employees of the Company or any of its subsidiaries, any entry by
the Company or any of its subsidiaries into any employment, deferred
compensation, severance, termination or other similar agreement (or any
amendment to such existing agreement) with any such officer, director or
employee, or (D) any establishment, adoption or amendment (except as required
by applicable law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any director,
officer or employee of the Company or any of its subsidiaries, (iv) any damage,
destruction or loss, whether or not covered by insurance, affecting the
business or assets of the Company or any of its subsidiaries that has or
reasonably could be expected to have a material adverse effect on the Company,
(v) any change in accounting methods, principles or practices or any change in
any method of tax accounting by the Company materially
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<PAGE> 16
affecting the assets, liabilities or business of the Company and its
subsidiaries, taken as a whole, except insofar as may have been required by a
change in generally accepted accounting principles, or (vi) any event which, if
it had taken place following the execution of this Agreement, would not have
been permitted by Section 4.1.
(h) State Takeover Statutes; Absence of Supermajority Provision. The
Company has taken all action to assure that no state takeover statute or
similar statute or regulation, including, without limitation Section 203 of the
DGCL, shall apply to the Offer or the Merger or any of the other transactions
contemplated hereby. Except for the approval of the Merger by the holders of
two-thirds of the outstanding Shares ("Company Stockholder Approval"), no other
stockholder action on the part of the Company is required for approval of the
Merger and the transactions contemplated hereby. The Company has taken all
action necessary to (i) render the rights issued pursuant to the terms of the
Company Rights Agreement inapplicable to the Offer, the Merger, this Agreement
and the transactions contemplated hereby and (ii) ensure that (A) neither
Parent, Sub nor any of their affiliates is an Acquiring Person (as defined in
the Company Rights Agreement) and (B) no Distribution Date (as defined in the
Company's Rights Agreement dated May 31, 1990, as amended and supplemented to
the date hereof (the "Company Rights Agreement")) shall occur by reason of the
approval or execution of this Agreement, the announcement or consummation of
the Offer or Merger or the consummation of any of the other transactions
contemplated hereby.
(i) Brokers. Except for Simmons, which has rendered the opinion
referred to in Section 1.2 and whose fees are to be paid by the Company, no
broker, investment banker or other person is entitled to receive from the
Company or any of its subsidiaries any investment banking, brokerage or
finder's fees in connection with this Agreement or the transactions
contemplated hereby, including any fee for any opinion rendered by any
investment banker. The engagement letter between the Company and Simmons
provided to Parent on or prior to the date of this Agreement constitutes the
entire understanding of the Company and Simmons with respect to the matters
referred to therein, and has not been amended or modified, nor will it be
amended or modified prior to the Effective Time of the Merger.
(j) Litigation. Except as disclosed in the SEC Documents filed on or
prior to the date hereof, there is no suit, action, proceeding or investigation
(or any basis therefor as to which the Company has knowledge) pending or, to
the best of the Company's knowledge, threatened against or affecting the
Company or any of its subsidiaries (or any present or former officer, director
or employee of the Company or any of its subsidiaries or any other person, in
each case for whom the Company or any of such subsidiaries may be liable)
before any court or arbitrator or before or by any governmental body, agency or
official, domestic or foreign, as of the date hereof and after the date hereof
there will be no such suits, actions, proceedings or investigations or any such
bases that could reasonably be expected to have a material adverse effect on
the Company or prevent, hinder or materially delay the ability of the Company
to consummate the transactions contemplated by this Agreement; nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its subsidiaries having,
or which, insofar as reasonably can be foreseen, in the future could have, any
such effect.
(k) Employee Benefit Matters. As used in this Section 3.1(l), the term
"Employer" shall mean the Company as defined in the preamble of this Agreement
and any member of a controlled
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group or affiliated service group, as defined in sections 414(b), (c), (m) and
(o) of the Internal Revenue Code of 1986, as amended ("Code") of which the
Company is a member.
(i) Except for the terminated Shafer Valve Company Pension Plan and
Trust, all liabilities (including administrative responsibilities) with
respect to which were retained by Shiloh Industries, Inc., with respect to
each employee welfare benefit plan, employee pension benefit plan and
employee benefit plan as defined in sections 3(1), 3(2), and 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which have been or are sponsored by, participated in, or contributed to by
the Employer at any time during the three-year period ending on the date
of this Agreement, or with respect to which the Employer may have any
liability, and except for any matter that would not individually or in the
aggregate have a material adverse effect on the Company, to the extent
applicable: (A) the plan is in substantial compliance with the Code and
ERISA, including all reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA; (B) the appropriate Form 5500 has been
timely filed for each year of its existence; (C) there has been no
transaction described in section 406 or section 407 of ERISA or section
4975 of the Code unless exempt under section 408 of ERISA or section 4975
of the Code, as applicable; (D) the bonding requirements of section 412 of
ERISA have been satisfied; (E) there is no issue pending nor any issue
resolved adversely to the Employer which may subject the Company to the
payment of a penalty, interest, tax or other amount, (F) the plan can be
unilaterally terminated or amended on no more than 90 days notice; (G) all
contributions or other amounts payable by the Employer as of the Effective
Time of the Merger with respect to the plan have either been paid or
accrued in the Employer's most recent financial statements included in the
SEC Documents and (H) no notice has been received by the Employer of an
increase or proposed increase in the cost of any such plan or any other
employee benefit agreement or arrangement, including deferred compensation
plans, incentive plans, bonus plans or arrangements, stock option plans,
stock purchase plans, golden parachute agreements, severance pay plans or
agreements, dependent care plans, cafeteria plans, employee assistance
programs, scholarship programs, employment contracts and other similar
plans, agreements and arrangements that are currently in effect or were
maintained within three years of the date hereof, or have been approved
before this date but are not yet effective, for the benefit of directors,
officers or employees, or former directors, officers or employees (or
their beneficiaries) of the Employer (each, a "Company Benefit Plan").
There are no pending or, to the Company's knowledge, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf
of or against any Company Benefit Plan or their related trusts. A complete
list of all material Company Benefit Plans that are currently in
existence, or with respect to which the Company or any of its subsidiaries
may have any liability (other than Foreign Plans, as defined below) is set
forth in Schedule I. Copies of all Company Benefit Plans have been
furnished or made available to Parent.
(ii) Except for the terminated Shafer Valve Company Pension Plan and
Trust, all liabilities (including administrative responsibilities) with
respect to which were retained by Shiloh Industries, Inc., neither the
Company nor any entity (whether or not incorporated) that was at any time
during the six years before the date of this Agreement treated as a single
employer together with the Company under section 414 of the Code has ever
maintained, had any obligation to contribute to or incurred any liability
with respect to a pension plan that is
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<PAGE> 18
or was subject to the provisions of Title IV of ERISA or section 412 of
the Code. Neither the Company nor any entity (whether or not incorporated)
that was at any time during the six years before the date of this
Agreement treated as a single employer together with the Company under
section 414 of the Code has ever maintained, had an obligation to
contribute to, or incurred any liability with respect to a multiemployer
pension plan as defined in section 3(37) of ERISA. During the last six
years, the Company has not maintained, had an obligation to contribute to
or incurred any liability with respect to a voluntary employees
beneficiary association that is or was intended to satisfy the
requirements of section 501(c)(9) of the Code. No plan, arrangement or
agreement with any one or more employees will cause the Employer to have
liability for severance pay as a result of the Merger, except as otherwise
set forth in the Change-in-Control Agreements and Severance Agreements
between the Company and each of the persons named on Schedule II hereto
(the "Severance Agreements"). The Employer does not provide employee
benefits, including without limitation, death, post-retirement medical or
health coverage (whether or not insured) or contribute to or maintain any
employee benefit plan which provides for benefit coverage following
termination of employment except (A) as is required by section 4980B(f) of
the Code or other applicable statute, (B) death benefits or retirement
benefits under any employee pension benefit plan as defined in section
3(2) of ERISA, (C) benefits the full cost of which is borne by the current
or former employee (or his beneficiary), nor has it made any
representations, agreements, covenants or commitments to provide that
coverage, or (D) deferred compensation benefits which have been accrued as
liabilities on the books of the Employer and disclosed on its financial
statements included in the SEC Documents. All group health plans
maintained by the Employer have been operated in material compliance with
section 4980B(f) of the Code.
(iii) All Company Benefit Plans that are intended to qualify under
section 401(a) of the Code have been submitted to and approved as
qualifying under section 401(a) of the Code by the Internal Revenue
Service ("IRS") or the applicable remedial amendment period will not have
ended prior to the Effective Time of the Merger. Except for the terminated
Shafer Valve Company Pension Plan and Trust, all liabilities (including
administrative responsibilities) with respect to which were retained by
Shiloh Industries, Inc., the Company knows of no fact or circumstance
giving rise to a material likelihood that any such Company Benefit Plan
would not be treated as qualified by the IRS.
(iv) Except as expressly provided in this Agreement or the Severance
Agreements and except pursuant to certain options described in section
3.1(c), the transactions contemplated by this Agreement will not
accelerate the time of payment or vesting, or increase the amount, of
compensation due any director, officer or employee or former director,
officer or employee (including any beneficiary) from the Company.
(v) Schedule I separately identifies each material Company Benefit
Plan that is primarily intended to benefit individuals whose principal
place of employment is located outside the United States (each, a "Foreign
Plan"). With respect to each Foreign Plan, the Company has either made
available to Parent a copy of the Foreign Plan or there are no material
liabilities associated with the Foreign Plan that are not disclosed on the
SEC Documents. Each Foreign Plan has been maintained in substantial
compliance with its terms
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<PAGE> 19
and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations (including any special provisions that the
Plan was intended to so satisfy) and has been maintained in good standing
with applicable regulatory authorities.
(l) Taxes. Each of the Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which the Company or any of its subsidiaries is or has been a
member, has timely filed all Tax Returns (as defined below) required to be
filed by it on or before the Effective Time of the Merger and has timely paid
or deposited (or the Company has paid or deposited on its behalf) all Taxes
which are required to be paid or deposited on or before the Effective Time of
the Merger. Each of the Tax Returns filed by the Company or any of its
subsidiaries is accurate and complete in all material respects. The most recent
consolidated financial statements of the Company contained in the filed SEC
Documents reflect an adequate reserve for all Taxes payable by the Company and
its subsidiaries for all taxable periods and portions thereof through the date
of such financial statements. The books and records of the Company and its
subsidiaries reflect adequate reserves for Taxes. No deficiencies for any Taxes
have been proposed, asserted or assessed against the Company or any of its
subsidiaries. No unexpired requests for waivers of the time to assess any Taxes
have been granted or are pending and there are no tax liens upon any assets of
the Company or any of its subsidiaries other than liens for Taxes which are not
yet delinquent. The Federal income Tax Returns of the Company and its
subsidiaries consolidated in such Tax Returns have been examined by and settled
with the IRS through the year ended September 30, 1990. There are no current
examinations of any Tax Return of the Company or any of its subsidiaries being
conducted. There are no settlements of any prior examinations that could
reasonably be expected to adversely affect any taxable period for which the
statute of limitations has not run or have not been paid in full. Since January
1, 1995, neither the Company nor any of its subsidiaries has been a member of
an affiliated, consolidated, combined or unitary group other than one of which
the Company was the common parent. Neither the Company nor any of its
subsidiaries has any obligation under any Tax sharing agreement, Tax allocation
agreement, Tax indemnification agreement or any other agreement or arrangement
pursuant to which the Company or any subsidiary is or might be required to make
any payment in respect of any Tax of any person (other than the Company or any
of its subsidiaries). Neither the Company nor any of its subsidiaries has
entered into any agreement or arrangement with any governmental authority with
regard to liabilities for Taxes other than settlements or compromises with
respect to asserted Tax liabilities for prior taxable years. There are no
requests for rulings or determinations in respect of any tax or tax asset
pending between the Company or any subsidiary and any taxing authority. Neither
the Company nor any subsidiary will be required to include any adjustment in
taxable income for any post-closing tax period under Section 481(c) of the Code
(or any similar provision of the tax laws of any jurisdiction) as a result of a
change in method of accounting for a pre-closing tax period or pursuant to the
provisions of any agreement entered into with any taxing authority with regard
to the Tax liability of the Company or any subsidiary for any pre-closing tax
period that has continuing effect. Other than the acquisition of Bettis
Corporation, since January 1, 1995, neither the Company nor any of its
subsidiaries is a party to a transaction intended to be treated as a
reorganization under Section 368 or a distribution under Section 355 of the
Code. As used herein, "Tax" or "Taxes" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as
income, gross receipts, unemployment, sales, use, ad valorem, franchise,
capital, earned surplus, profits, license, withholding, payroll, employment,
estimated, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments
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or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any Governmental
Entity, domestic or foreign. As used herein, "Tax Return" shall mean any
return, report, statement or information required to be filed with any
governmental authority with respect to Taxes.
(m) No Excess Parachute Payments. Except with respect to remuneration
that could be received by Ronald C. Lassiter under his deferred compensation
arrangement relating to Shares granted under the Company's Stock Award Plan,
and his change in control agreement, and in connection with the acceleration of
any unvested options, any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of the
Company or any of its affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Company Benefit Plan currently in effect would not be characterized as an
"excess parachute payment" (as such term is defined in section 280G(b)(1) of
the Code).
(n) Environmental Matters. Except as would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, (i) the business
operations of the Company and its subsidiaries have been and are being
conducted in compliance with all limitations, restrictions, standards and
requirements established under Environmental Laws, (ii) no facts or
circumstances exist that impose or could reasonably be expected to impose on
the Company or any of its subsidiaries an obligation under Environmental Laws
to conduct any removal, remediation, or similar response action, or to pay any
fines, penalties or other expenses, (iii) there is no obligation, undertaking
or liability arising out of or relating to Environmental Laws that the Company
or any of its subsidiaries has agreed to, assumed or retained, by contract or
otherwise, or that has been or could reasonably be expected to be imposed on
the Company or any of its subsidiaries by any Environmental Law, writ,
injunction, decree, order or judgment, and (iv) there are no lawsuits, claims
or proceedings and no notice, notification, demand, request for information,
citations, summons, complaint or order has been received by, or, to the
knowledge of the Company or any of its subsidiaries, is threatened or pending
against the Company or any of its subsidiaries that arise out of or relate to
Environmental Laws. There has been no environmental investigation, study,
audit, test, review or other analysis conducted by or on behalf of or in the
possession of the Company or any of its subsidiaries that discusses, reveals,
or discloses any material liabilities (whether accrued, absolute, contingent or
otherwise) in relation to the current or prior business of the Company or any
of its subsidiaries or any property or facility now or previously owned, leased
or operated by the Company or any of its subsidiaries which has not been
delivered to Parent at least five days prior to the date hereof. Neither the
Company nor any of its subsidiaries owns or leases or, to the Company's
knowledge, has owned or leased any real property in New Jersey or Connecticut.
For purposes of this section 3.1(n), "Environmental Laws" means any applicable
federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, licenses, agreements or governmental restrictions
relating to human health, the environment or to the use, manufacture,
treatment, storage, transport, clean-up or other remediation of pollutants,
contaminants or other hazardous substances or wastes or to the emissions,
discharges or releases of pollutants, contaminants or other hazardous
substances or wastes into the environment.
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(o) Compliance with Laws. The Company and its subsidiaries hold all
required, necessary or applicable permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities, except where the
failure to so hold would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole (the "Company Permits"). The Company and its
subsidiaries are in compliance with the terms of the Company Permits except
where the failure to so comply would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole. Neither the Company nor any of
its subsidiaries has violated or failed to comply with any statute, law,
ordinance, regulation, rule, permit or order of any Federal, state or local
government, domestic or foreign, or any Governmental Entity, any arbitration
award or any judgment, decree or order of any court or other Governmental
Entity, applicable to the Company or any of its subsidiaries or their
respective business, assets or operations, except for violations and failures
to comply that could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(p) Material Contracts and Agreements. All material contracts of the
Company or its subsidiaries have been included in the SEC Documents filed on or
prior to the date hereof, except for those contracts not required to be filed
pursuant to the rules and regulations of the SEC. Neither the Company nor any
subsidiary is a party to any joint venture agreement or agreement to form any
joint venture nor does the Company or any of its subsidiaries have any
liability if it fails to pursue any contemplated joint ventures.
(q) Title to Properties.
(i) Each of the Company and each of its subsidiaries has good and
defensible title to, or valid leasehold interests in, all its material
assets and properties purported to be owned by it in the SEC Documents,
except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business
and except for defects in title, easements, restrictive covenants and
similar encumbrances or impediments that, in the aggregate, do not and
will not materially interfere with its ability to conduct its business as
currently conducted or as reasonably expected to be conducted. All such
assets and properties, other than assets and properties in which the
Company or any of the subsidiaries has leasehold interests, are free and
clear of all Liens, other than those set forth in the SEC Documents filed
on or prior to the date hereof, and except for Liens, that, in the
aggregate, do not and will not materially interfere with the ability of
the Company or any of its subsidiaries to conduct business as currently
conducted or as reasonably expected to be conducted.
(ii) Except as would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, each of the Company and each of
its subsidiaries has complied in all material respects with the terms of
all leases to which it is a party and under which it is in occupancy, and
all such leases are in full force and effect. Each of the Company and each
of its subsidiaries enjoys peaceful and undisturbed possession under all
such leases.
(r) Intellectual Property. The Company and its subsidiaries own, or
are licensed or otherwise have the right to use, all Intellectual Property that
is material to the condition (financial or otherwise) or conduct of the
business and operations of the Company and its subsidiaries taken
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as a whole. The Company and its subsidiaries have not infringed or
misappropriated and do not infringe or misappropriate any item of Intellectual
Property of any person, except for infringement or misappropriation that could
not, in the aggregate, have a material adverse effect with respect to the
Company and its subsidiaries, taken as a whole. No person has infringed or
misappropriated, or is infringing or misappropriating, any item of Intellectual
Property that is owned by or licensed to the Company or its subsidiaries,
except for infringement or misappropriation that could not have a material
adverse effect with respect to the Company and its subsidiaries taken as a
whole. There are no pending or, to the knowledge of the Company, threatened
claims relating to infringement, misappropriation, unenforceability,
invalidity, misuse, ownership, right to use, or other violation asserted by or
against the Company or its subsidiaries relating to any item of Intellectual
Property. For purposes of this Section 3.1(r), "Intellectual Property" means
domestic and foreign patents, trademarks, service marks, trade names,
copyrights, trade secrets, know-how, utility models, mask works, rights in
inventions, discoveries, processes, formulae, and registrations and
applications for any of the foregoing, and any other intellectual property and
proprietary information, including rights in software, firmware, computer
programs and data.
(s) Labor Matters. There are no collective bargaining agreements or
other labor union agreements or understandings to which the Company or any of
its subsidiaries is a party or by which any of them is bound, nor is it or any
of its subsidiaries the subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions. To the Company's
knowledge, since December 31, 1997, neither the Company nor any of its
subsidiaries has encountered any labor union organizing activity, or had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts.
(t) Undisclosed Liabilities. Except as set forth in the SEC Documents
filed on or prior to the date hereof, at the date of the most recent audited
financial statements of the Company included in such SEC Documents, neither the
Company nor any of its subsidiaries had, and since such date neither the
Company nor any of such subsidiaries has incurred, any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise
other than those attributable to purchase orders issued, accounts payable
incurred or contracts entered into with customers in each case in the ordinary
course of the Company's business consistent with past practices), and there is
no existing condition, situation or set of circumstances that could reasonably
be expected to result in such a liability or obligation, which liabilities or
obligations in all such cases, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(u) Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has by vote of those directors present (i)
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger and the transactions contemplated thereby,
are fair to and in the best interests of the stockholders of the Company, and
(ii) resolved to recommend to the holders of the Shares that they tender their
Shares pursuant to the Offer and/or approve the Merger and the transactions
contemplated thereby.
SECTION 3.2. Representations and Warranties of Parent and Sub. Parent
and Sub represent and warrant to, and agree with, the Company as follows:
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(a) Organization; Standing and Power. Parent and Sub are corporations
duly organized, validly existing and in good standing under laws of their
states of incorporation and have the requisite corporate power and governmental
licenses, authorizations, permits, consents and approvals (except where the
failure to have such licenses, authorizations, permits, consents and approvals,
individually or in the aggregate, would not have a material adverse effect on
Parent and its subsidiaries taken as a whole) to carry on their business as now
being conducted. Parent and Sub are duly qualified to do business and in good
standing in each jurisdiction in which the nature of their business or the
ownership or leasing of their properties makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified to do
business (individually or in the aggregate) would not have a material adverse
effect on Parent and its subsidiaries, taken as a whole.
(b) Authority; Non-contravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement by Parent and Sub and the consummation by Parent and Sub of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes a valid and binding
obligation of Parent and Sub, enforceable against Parent and Sub in accordance
with its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The execution, delivery and performance
of this Agreement by Parent and Sub do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties
or assets of Parent or Sub or any of their subsidiaries under, any provision of
(i) the Certificate of Incorporation or By-laws of Sub or of Parent or any
comparable organizational documents of their subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or
Sub or any of their subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation or arbitration account applicable to Parent or Sub or any of
their subsidiaries or their respective properties or assets, other than, in the
case of clause (ii), any such conflicts, violations or defaults that
individually or in the aggregate would not be reasonably expected to have,
individually or in the aggregate, a material adverse effect on Parent or
materially impair the ability of Parent and Sub to perform their respective
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to Parent or Sub or any of their subsidiaries in connection
with the execution, delivery and performance of this Agreement by Parent and
Sub or the consummation by Parent and Sub of the transactions contemplated
hereby, except for (i) the filing by Parent of a premerger notification and
report form under the HSR Act and any filings or approvals required under
applicable foreign antitrust laws and regulations, (ii) the filing with the SEC
of the Offer Documents and such reports under Sections 13 and 16 of the
Exchange Act as may
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<PAGE> 24
be required in connection with this Agreement and the transactions contemplated
hereby and (iii) filings in Delaware by Sub in connection with the Merger.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent in writing for inclusion or incorporation by reference in
(i) the Offer Documents, the Schedule 14D-9, the Information Statement referred
to in Section 5.9, or the Proxy Statement will, in the case of the Offer
Documents and the Schedule 14D-9 and the Information Statement at the
respective times they are filed with the SEC or first published, sent or given
to the Company's stockholders, and at any time they are amended or
supplemented, or in the case of the Proxy Statement at the date the Proxy
Statement is first mailed to the Company's stockholders and at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
(d) Brokers. No broker, investment banker or other person, is entitled
to any broker's, finder's or other similar fee or commission from the Company
or any of its subsidiaries in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub,
including any fee for any opinion rendered by any investment banker, and the
Company shall have no liability for any fees to any such broker, investment
banker or other person.
(e) Litigation. There is no suit, action, proceeding or investigation
pending or, to the knowledge of Parent, threatened against or affecting Parent
or any of its subsidiaries that could reasonably be expected to prevent, hinder
or materially delay the ability of Parent to consummate the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Parent or any of its subsidiaries having, or which, insofar as reasonably can
be foreseen, in the future could have, any such effect.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business of the Company.
(a) Ordinary Course. During the period from the date of this Agreement
to the Effective Time of the Merger (except as otherwise specifically
contemplated by the terms of this Agreement or as described in the Company
Disclosure Document), the Company shall and shall cause its subsidiaries to
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them, in each case consistent with past practice, to the end that
their goodwill and ongoing businesses shall be unimpaired to the fullest extent
possible at the Effective Time of the Merger. Without limiting the
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<PAGE> 25
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, the Company shall not, and shall not permit any of its
subsidiaries to:
(i) (A) declare, set aside or pay any dividends (other than the
Company's regular quarterly dividends payable to stockholders on or after
August 14, 1999, and quarterly thereafter) on, or make any other
distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned
subsidiary of the Company to the Company or a wholly owned subsidiary of
the Company, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or (C)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities; provided, however, with respect to clause (A) above after the
consummation of the Offer the Company will make no further dividends or
distributions;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than, in the
case of the Company, the issuance of Shares upon the exercise of options
outstanding on the date of this Agreement (as identified and described in
Section 3.1(c)(iv) and (v)) in accordance with their current terms),
purchase, redeem or otherwise acquire or agree to acquire any shares of
capital stock or other securities of the Company or any of its
subsidiaries;
(iii) amend any material term of any of its outstanding securities;
(iv) amend its Certificate of Incorporation, By-laws or other
comparable charter or organizational document;
(v) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by
any other manner, any business or any corporation, partnership,
association, joint venture, limited liability company or other entity or
division thereof or (B) any assets that would be material, individually or
in the aggregate, to the Company and its subsidiaries taken as a whole,
except purchases of supplies and inventory in the ordinary course of
business consistent with past practice;
(vi) form any joint venture with any other person under circumstances
wherein the Company and its subsidiaries would have any liability or
obligation for a contribution to be evidenced by debt or equity of such
venture in excess of $100,000;
(vii) sell, lease, mortgage, pledge, grant a Lien on or otherwise
encumber or dispose of any of its properties or assets, except (A) sales
of inventory in the ordinary course of business consistent with past
practice and (B) other transactions involving not in excess of $1,000,000
in the aggregate;
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(viii) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for working capital
borrowings under currently existing revolving credit facilities incurred
in the ordinary course of business and except for indebtedness incurred to
refund, refinance or replace indebtedness for borrowed money outstanding
on the date hereof, or (B) make any loans, advances or capital
contributions to, or investments in, any other person, other than to the
Company or any direct or indirect wholly owned subsidiary of the Company;
(ix) make or incur any new capital expenditure not included in the
Company's approved capital expenditure budget for 1999, which, singly or
in the aggregate with all other expenditures, would exceed $1,000,000;
(x) make or change any Tax election not required by law, other than
consistent with past practice, make any change in any method of Tax
accounting, except as described in the Company Disclosure Document, enter
into any settlement or compromise with respect to any Tax liability, or
make any material change in reserves for Tax items other than any change
in such reserves relating to the ordinary course operation of the
respective businesses of the Company and its subsidiaries during current
taxable periods;
(xi) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction, in the ordinary course
of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the SEC Documents or incurred in the
ordinary course of business consistent with past practice;
(xii) waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or
any of its subsidiaries is a party;
(xiii) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(xiv) enter into any new collective bargaining agreement;
(xv) change any material accounting principle used by it, except as
required by regulations promulgated by the SEC or the Financial Accounting
Standards Board;
(xvi) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or
compromises: (A) of litigation where the amount paid in settlement or
compromise does not exceed $250,000, or (B) in consultation
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and cooperation with Parent, and, with respect to any such settlement,
with the prior written consent of Parent;
(xvii) make any transaction or commitment, or enter into any contract
or agreement relating to its assets or business (including the acquisition
or disposition of any assets) or relinquish any contract or other right,
in either case, material to the Company and its subsidiaries, taken as a
whole, other than transactions and commitments made or entered into in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Changes in Employment Arrangements. Neither the Company nor any of
its subsidiaries shall adopt or amend (except as may be required by law) any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement (including any Company Benefit Plan) for the
benefit of any employee, director or former director or employee, increase the
compensation or fringe benefits of any officer of the Company or any of its
subsidiaries, or, except as provided in an existing Company Benefit Plan or in
the ordinary course of business consistent with past practice, increase the
compensation or fringe benefits of any employee or former employee or pay any
benefit not required by any existing plan, arrangement or agreement.
(c) Severance. Neither the Company nor any of its subsidiaries shall
grant any new or modified severance or termination arrangement or increase or,
except as required under the existing terms of a Company Benefit Plan,
accelerate any benefits payable under its severance or termination pay policies
in effect on the date hereof.
(d) Other Actions. The Company shall not, and shall not permit any of
its subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the representations and warranties of the Company
set forth in this Agreement becoming untrue.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Stockholder Approval; Preparation of Proxy Statement. (a)
The Company will, as soon as practicable following the consummation of the
Offer, duly call, give notice of, convene and hold a meeting of its
stockholders for the purpose of approving and adopting this Agreement and the
Merger and approving related matters, unless the DGCL does not require a vote
of stockholders of the Company for the consummation of the Merger. The Company
will, through its Board of Directors, recommend to its stockholders approval
and adoption of this Agreement and the Merger, except to the extent that the
Board of Directors of the Company shall have withdrawn its approval or
recommendation of this Agreement or the Merger as permitted by Section 8.2.
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(b) If required by applicable law, the Company will, as soon as
practicable following the consummation of the Offer, prepare and file a
preliminary Proxy Statement with the SEC and will use its best efforts to
respond to any comments of the SEC or its staff and to cause the Proxy
Statement and all other proxy materials to be mailed to the Company's
stockholders. The Company will notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or for additional
information and will supply Parent with copies of all correspondence between
the Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger. If
at any time prior to the approval of this Agreement and the Merger by the
Company's stockholders there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Company will promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company will not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer
and all other Shares owned by Sub or any other subsidiary of Parent to be voted
in favor of the approval and adoption of this Agreement.
SECTION 5.2. Access to Information.
(a) During the period from the date hereof to the Effective Time of
the Merger, except to the extent otherwise required by applicable law,
(i) the Company shall, and shall cause each of its subsidiaries,
officers, employees, counsel, financial advisors and other representatives
to, afford to Parent, and to Parent's accountants, counsel, financial
advisors and other representatives, reasonable access to the Company's and
its subsidiaries' respective offices, officers, employees, properties,
books, Tax Returns and related documents and work papers, contracts,
commitments and records and, during such period, the Company shall, and
shall cause each of its subsidiaries, officers, employees, counsel,
financial advisors and other representatives to, furnish promptly to
Parent:
(A) a copy of each report, schedule, registration statement and
other document filed by the Company during such period pursuant to the
requirements of Federal or state securities laws and
(B) all other information concerning its business, properties,
financial condition, operations and personnel as Parent may from time
to time reasonably request so as to afford Parent a reasonable
opportunity to make such review, examination and investigation of the
Company and its subsidiaries as Parent may reasonably desire to make.
The Company agrees to advise Parent of all material developments with
respect to the Company, its subsidiaries and their respective assets
and liabilities.
(ii) the Company agrees to request PricewaterhouseCoopers to permit
KPMG Peat Marwick to review and examine the work papers of
PricewaterhouseCoopers with
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respect to the Company and its subsidiaries, and the officers of the
Company will furnish to Parent such financial and operating data and other
information with respect to the business and properties of the Company and
its subsidiaries as Parent shall from time to time reasonably request,
(iii) the Company shall instruct the officers, employees, counsel,
financial advisors and other representatives of the Company and its
subsidiaries to cooperate with Parent in its investigation of the Company
and its subsidiaries. Any investigation pursuant to this Section shall be
conducted in such a manner as not to interfere unreasonably with the
conduct of the business of the Company and its subsidiaries,
(iv) the Company shall promptly notify Parent of any notices from or
investigations by Governmental Entities that could, to the knowledge of
the Company, affect the Company's business or assets or the consummation
of the Merger. Parent will promptly notify the Company of any notices from
or investigations by Governmental Entities that could materially affect
Parent's consummation of the Merger; and
(v) the Company shall promptly notify Parent of any notice or other
communication from any person alleging that the consent of such person is
or may be required in connection with the transactions contemplated by
this Agreement.
(b) Except as required by law and without limiting in any way the
continued efficacy of the Confidentiality and Standstill Agreement referred to
in Section 8.1, prior to the Effective Time of the Merger and after any
termination of this Agreement, each of the Company and Parent shall, and shall
cause its respective directors, officers, employees, accountants, counsel,
financial advisors and representatives and affiliates to, (i) hold in
confidence, unless compelled to disclose by judicial or administrative process,
or, in the opinion of its counsel, by other requirements of law, all nonpublic
information concerning the other party furnished in connection with the
transactions contemplated by this Agreement except to the extent that such
information can be shown to have been previously known on a nonconfidential
basis by Parent or later lawfully acquired by Parent from sources other than
the Company, or until such time as such information becomes publicly available
(otherwise than through the wrongful act of such person), (ii) not release or
disclose such information to any other person, except in connection with this
Agreement to its auditors, attorneys, financial advisors, other consultants and
advisors, and (iii) not use such information for any competitive or other
purpose other than with respect to its consideration and evaluation of the
transactions contemplated by this Agreement. Any investigation by any party of
the assets and business of the other party and its subsidiaries shall not
affect any representations and warranties hereunder or either party's right to
terminate this Agreement as provided in Article VII.
(c) In the event of the termination of this Agreement, each party
promptly will deliver to the other party (and destroy all electronic data
reflecting the same) all documents, work papers and other material (and any
reproductions or extracts thereof and any notes or summaries thereto) obtained
by such party or on its behalf from such other party or its subsidiaries as a
result of this Agreement or in connection therewith so obtained before or after
the execution hereof.
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SECTION 5.3. Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, except to the extent
otherwise required by applicable law and otherwise provided in this Section
5.3, each of the parties agrees to use reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger, and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of
all necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, and (iii) the execution and delivery of any
additional instruments (including any required supplemental indentures)
necessary to consummate the transactions contemplated by this 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, the Offer, this Agreement and the other transactions contemplated by
this Agreement, (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Merger, the Offer, this Agreement and the
other transactions contemplated by this Agreement, take all action necessary to
ensure that the Merger, the Offer and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger, the Offer, this Agreement and the other
transactions contemplated by this Agreement.
(b) The Company shall give prompt notice to Parent, and Parent or Sub
shall give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement becoming untrue or inaccurate in any
respect or (ii) the failure by it to comply with or satisfy in any respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations or warranties or covenants or agreements of the parties or the
conditions to the obligations of the parties hereunder.
(c) (i) Each of the parties hereto shall file a premerger notification
and report form under the HSR Act (and any other applicable foreign
antitrust law or regulation) with respect to the Merger as promptly as
reasonably possible following execution and delivery of this Agreement.
Each of the parties agrees to use reasonable efforts to promptly respond
to any request for additional information that may be received from any
Governmental Entity in connection with the HSR filing or any filings under
applicable foreign antitrust laws and regulations.
(ii) The Company will furnish to Parent and Sub copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof (collectively, "Company HSR Documents")) between the
Company, or any of its respective representatives, on the one hand, and
any Governmental Entity, or members of the staff of such agency or
authority, on the other hand, with respect to this Agreement or the
Merger; provided, however, that (x) with respect to documents and other
materials filed by or on behalf of the
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Company with the Antitrust Division of the Department of Justice, the
Federal Trade Commission, or any state attorneys general that are
available for review by Parent and Sub, copies will not be required to be
provided to Parent and Sub and (y) with respect to any Company HSR
Documents (1) that contain any information which, in the reasonable
judgment of Fulbright & Jaworski L.L.P., should not be furnished to Parent
or Sub because of antitrust considerations or (2) relating to a request
for additional information pursuant to Section (e)(1) of the HSR Act, the
obligation of the Company to furnish any such Company HSR Documents to
Parent and Sub shall be satisfied by the delivery of such Company HSR
Documents on a confidential basis to Davis Polk & Wardwell pursuant to a
confidentiality agreement in form and substance reasonably satisfactory to
Parent. Except as otherwise required by United States regulatory
considerations, Parent and Sub will furnish to the Company copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof (collectively, "Parent HSR Documents")) between Parent,
Sub or any of their respective representatives, on the one hand, and any
Governmental Entity, or member of the staff of such agency or authority,
on the other hand, with respect to this Agreement or the Merger; provided,
however, that (x) with respect to documents and other materials filed by
or on behalf of Parent or Sub with the Antitrust Division of the
Department of Justice, the Federal Trade Commission, or any state
attorneys general that are available for review by the Company, copies
will not be required to be provided to the Company, and (y) with respect
to any Parent HSR Documents (1) that contain information which, in the
reasonable judgment of Davis Polk & Wardwell, should not be furnished to
the Company because of antitrust considerations or (2) relating to a
request for additional information pursuant to Section (e)(1) of the HSR
Act, the obligation of Parent and Sub to furnish any such Parent HSR
Documents to the Company shall be satisfied by the delivery of such Parent
HSR Documents on a confidential basis to Fulbright & Jaworski L.L.P.
pursuant to a confidentiality agreement in form and substance reasonably
satisfactory to the Company.
(iii) Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed so as to require Parent, Sub or the Company,
or any of their respective subsidiaries or affiliates, to sell, license,
dispose of, or hold separate, or to operate in any specified manner, any
assets or businesses of Parent, Sub, the Company or the Surviving
Corporation or to defend any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation
of the transactions contemplated hereby, or to seek and to have any stay
or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed (or to require Parent, Sub, the Company or any
of their respective subsidiaries or affiliates to agree to any of the
foregoing). The obligations of each party under Section 5.3(a) to use
reasonable efforts with respect to antitrust matters shall be limited to
compliance with the reporting provisions of the HSR Act and with its
obligations under this Section 5.3(c).
SECTION 5.4. Employee Benefit Matters.
(a) Replacement Plans. Parent may cause any Company Benefit Plan to be
terminated or discontinued at or after the Effective Time of the Merger,
provided that, to the extent Parent or its affiliates maintain a Parent Benefit
Plan of the same type for employees of Parent or any of its affiliates, Parent
shall use its best efforts to permit the Company Employees participating in
such
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Company Benefit Plan (other than any stock option or other stock based
incentive plan) to immediately thereafter participate in a Parent Benefit Plan
of the same type maintained by Parent or any of its affiliates for their
employees generally (a "Replacement Plan"); provided, however, that if the
Company Benefit Plan that is so terminated or discontinued is a group health
plan, then Parent shall permit each Company Employee participating in such
group health plan and his or her eligible dependents to be covered under a
Replacement Plan under the terms and conditions of the Replacement Plan as
modified to the extent necessary to (i) provide medical and dental benefits to
each such Company Employee and such eligible dependents effective immediately
upon the cessation of coverage of such individuals under such group health
plan, (ii) credit to such Company Employee, for the year during which such
coverage under such Replacement Plan begins, with any deductibles and
copayments already incurred during such year under such group health plan, and
(iii) waive any preexisting condition restrictions to the extent that the
preexisting condition restrictions were satisfied under such group health plan.
Parent, the Surviving Corporation, their affiliates, and the Parent Benefit
Plans (including, without limitation, the Replacement Plans) shall recognize
each Company Employee's years of service and level of seniority with the
Company and its subsidiaries for purposes of terms of employment, eligibility
and vesting under the Parent Benefit Plans. Nothing in this Agreement shall be
construed to require Parent to provide any particular type or amount of
benefits for any person under any Parent Benefit Plan.
(b) Stock Options and Stock Awards. (1) At or immediately prior to the
Effective Time of the Merger, each outstanding stock option to purchase Shares
and award of Shares granted under any stock option or compensation plan or
arrangement of the Company, whether or not vested or exercisable, shall be
canceled, and promptly after the Effective Time of the Merger the Company shall
pay (i) each holder of any such option for each such option an amount in cash
(net of applicable withholding taxes) determined by multiplying the excess, if
any, of $21.25 per Share over the applicable exercise price of such Share under
such option by the number of Shares subject to such option (whether or not
vested or exercisable), and (ii) each holder of any such award of Shares an
amount in cash (net of applicable withholding taxes) determined by multiplying
$21.25 times the number of Shares subject to such award (whether or not
vested). Notwithstanding the foregoing, the amount of any payment pursuant to
this Section 5.4(b) shall be subject to any relevant limit or cap under any
employment or change in control agreement between the Company and the
applicable individual.
(2) Prior to the Effective Time of the Merger, the Company shall
(i) use its best efforts to obtain any consents from holders of options to
purchase Shares and awards of Shares granted under the Company's employee stock
option or compensation plans or arrangements and (ii) make any amendments to
the terms of such stock option or compensation plans or arrangements that, in
the case of either clauses (i) or (ii), are necessary to give effect to the
transactions contemplated by Section 5.4(b)(1). Notwithstanding any other
provision of this Section 5.4(b), payment may be withheld in respect of an
employee stock option or award of Shares until such necessary consents are
obtained with respect to such option or award of Shares.
(3) The parties hereto expressly acknowledge and agree that for
purposes of the change of control agreements listed on Schedule II, such
payment of consideration upon the cancellation of a stock option pursuant to
this Section 5.4(b) shall be treated as attributable to the exercise of such
stock options.
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SECTION 5.5. Indemnification. (a) The Company shall, and from and
after the Effective Time of the Merger, Parent and the Surviving Corporation
shall, indemnify, defend and hold harmless each person who is now, or has been
at any time prior to the date hereof or who becomes prior to the Effective Time
of the Merger, an officer or director of the Company or any of its subsidiaries
or an employee of the Company or any of its subsidiaries who acts as a
fiduciary under any Company Benefit Plans (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or such employee of the Company or any subsidiary whether pertaining to any
matter existing or occurring at or prior to the Effective Time of the Merger
and whether asserted or claimed prior to, or at or after, the Effective Time of
the Merger (including arising out of or relating to the Merger, the
consummation of the transactions contemplated herein, and any action taken in
connection therewith) ("Indemnified Liabilities"). Any Indemnified Party
wishing to claim indemnification under this Section 5.5, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the Company
(or after the Effective Time of the Merger, Parent and the Surviving
Corporation), but the failure so to notify shall not relieve a party from any
liability that it may have under this Section 5.5, except to the extent such
failure materially prejudices such party. The Indemnified Parties as a group
may retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
between the positions of any two or more Indemnified Parties.
(b) Parent shall purchase and maintain in effect, or the Company shall
be permitted to purchase and maintain in effect, for the benefit of the
Indemnified Parties for a period of six years after the Effective Time,
directors' and officers' liability insurance of at least the same coverage and
amounts containing terms and conditions that are no less advantageous in any
material respect to the Indemnified Parties than that maintained by the Company
and its Subsidiaries as of the date of this Merger Agreement with respect to
matters arising before the Effective Time, provided that Parent shall not be
required to pay an annual premium of such insurance in excess of two times the
last annual premium paid by the Company prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amounts.
(c) All rights to indemnification for acts or omissions occurring
prior to the Effective Time of the Merger now existing in favor of the
Indemnified Parties as provided in the Certificate of Incorporation or by-laws
of the Company or its subsidiaries and in any indemnification agreements
existing as of the date hereof to which they are parties shall survive the
Merger, and the Surviving Corporation shall continue such indemnification
rights for acts or omissions occurring prior to the Effective Time of the
Merger in full force and effect in accordance with their terms and Parent shall
be financially responsible therefor.
(d) The provisions of this Section 5.5 are intended to be for the
benefit of, and shall be enforceable by, each indemnified party, his heirs and
representatives.
SECTION 5.6. Fees and Expenses. Except as provided in Article VIII,
all fees and expenses incurred in connection with the Offer, the Merger, this
Agreement and the other transactions
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contemplated hereby shall be paid by the party incurring such fees or expenses,
whether or not the Offer or the Merger is consummated.
SECTION 5.7. Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will consult with each other before issuing
any press release or otherwise making any public statements with respect to
this Agreement and the transactions contemplated by this Agreement and shall
not issue any such press release or make any such public statement prior to
such consultation, except that each party may respond to questions from
stockholders and Parent may respond to inquiries from financial analysts and
media representatives in a manner consistent with its past practice and each
party may make such disclosure as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange without prior consultation to the extent such consultation is not
reasonably practicable. The parties agree that the initial press release or
releases to be issued in connection with the execution of this Agreement shall
be mutually agreed upon prior to the issuance thereof.
SECTION 5.8. Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors as of the date hereof or as of
immediately prior to the Effective Time of the Merger relating to the
transactions contemplated by this Agreement until the Effective Time of the
Merger, and thereafter, shall give Parent the opportunity to control the
defense of such litigation and, if Parent so chooses to control such
litigation, Parent shall give the Company and such directors an opportunity to
participate in such litigation; provided, however, that no settlement of such
litigation shall be agreed to without the consent of Parent, the Company and
such directors, which consent shall not be unreasonably withheld.
SECTION 5.9. Directors. Effective upon the acceptance for payment of,
and payment by Sub for, any Shares pursuant to the Offer, Sub shall be entitled
to designate such number of directors on the Board of Directors of the Company
as will give Sub, subject to compliance with Section 14(f) of the Exchange Act,
representation on such Board of Directors equal to at least that number of
directors, rounded up to the next whole number, which is the product of (a) the
total number of directors on such Board of Directors (giving effect to the
directors elected pursuant to this sentence) multiplied by (b) the percentage
that (i) such number of Shares so accepted for payment and paid for by Sub plus
the number of Shares otherwise owned by Sub or any other subsidiary of Parent
bears to (ii) the number of Shares outstanding, and the Company shall, at such
time, cause Sub's designees to be so elected; provided, however, that in the
event that Sub's designees are appointed or elected to the Board of Directors
of the Company, until the Effective Time of the Merger such Board of Directors
shall have at least three directors who are directors on the date hereof and
who are not officers of the Company (the "Independent Directors") and provided
further that, in such event, if the number of Independent Directors shall be
reduced below three for any reason whatsoever, any remaining Independent
Directors (or Independent Director, if there shall be only one remaining) shall
be entitled to designate persons to fill such vacancies who shall be deemed to
be Independent Directors for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate three persons to
fill such vacancies who shall not be officers, stockholders or affiliates of
the Company, Parent or Sub, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Subject to applicable law, the
Company shall promptly take all action necessary to effect any such election,
including mailing to its stockholders the
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Information Statement (the "Information Statement") containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing with the mailing of
Schedule 14D-9 (provided that Sub shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Sub's designees). In connection with the foregoing,
the Company will promptly, at the option of Sub, either increase the size of
the Company's Board of Directors or obtain the resignation of such number of
its current directors as is necessary to enable Sub's designees to be elected
or appointed to the Company's Board of Directors as provided above.
SECTION 5.10. Tax Certification. At any time during the period
beginning on the date hereof and ending on the Effective Time of the Merger, the
Company shall provide to Parent, within two business days of a request by
Parent, a certificate meeting the requirements of Treas. Reg. Section 1.897-2(h)
to the effect that the Company is not, nor has it been within 5 years of the
date thereof, a "United States real property holding corporation" as defined in
Section 897 of the Code.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction prior to the Effective Time of the Merger of the following
conditions:
(a) Stockholder Approval. If required by the DGCL, this Agreement
shall have been approved and adopted by the affirmative vote or consent of
the stockholders of the Company by the requisite vote in accordance with
the DGCL and the Company's Certificate of Incorporation.
(b) Other Approvals. All authorizations, consents, orders or approvals
of, or declarations or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have
been filed, shall have occurred or shall have been obtained.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any
Governmental Entity or court of competent jurisdiction or statute, rule or
regulation restraining or prohibiting the consummation of the Merger shall
be in effect; provided, however, that each of the parties shall have used
reasonable efforts, subject to the limitations set forth in Section 5.3
hereof, to prevent the entry of any such injunction or other order.
SECTION 6.2. Conditions to Obligation of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are subject to the condition
that (i) the Company shall have performed in all material respects all
obligations to be performed by it under this Agreement at or
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prior to the Effective Time of the Merger and (ii) the representations and
warranties of the Company contained in this Agreement and in any certificate or
other writing delivered by the Company pursuant hereto, disregarding all
qualifications and exceptions contained herein and therein relating to
materiality or material adverse effect or any similar standard or
qualification, shall be true in all material respects at and as of the
Effective Time of the Merger as if made at and as of such time.
SECTION 6.3. Condition to Obligation of the Company. The obligation of
the Company to effect the Merger is subject to the condition that (i) Parent
and Sub shall have performed in all material respects all obligations to be
performed by them under this Agreement at or prior to the Effective Time of the
Merger and (ii) the representations and warranties of Parent and Sub contained
in this Agreement and in any certificate or other writing delivered by Parent
or Sub pursuant hereto, disregarding all qualifications and exceptions
contained herein and therein relating to materiality or material adverse effect
or any similar standard or qualification, shall be true in all material
respects at and as of the Effective Time of the Merger as if made at and as of
such time.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time of the Merger, whether before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the stockholders of the Company fail to give any required
approval of the Merger and the transactions contemplated hereby upon a
vote at a duly held meeting of stockholders of the Company or at any
adjournment thereof;
(ii) if (w) as a result of the failure of any of the conditions set
forth in paragraphs (a) through (h) of Exhibit A hereto, Sub shall
have failed to commence the Offer within 5 business days of the date
hereof or (x) as a result of the failure of any of the conditions set
forth in Exhibit A hereto the Offer shall have been terminated or
expired in accordance with its terms without Sub having purchased any
Shares pursuant to the Offer or (y) Sub shall not have purchased any
Shares pursuant to the Offer within 180 days following the date
hereof; provided, however, that the passage of the period referred to
in clause (y) shall be tolled for any part thereof during which the
Offer shall have been extended pursuant to one or more Special
Extensions but in no event shall such period be tolled for more than
90 days; and provided further that the right to terminate this
Agreement pursuant to this Section 7.1(b)(ii) shall not be available
to any party whose failure to perform any of its obligations under
this Agreement results in the failure of any such condition;
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(iii) if the Merger shall not have been consummated on or before
the date one year following the purchase of Shares pursuant to the
Offer, unless the failure to consummate the Merger is the result of a
material breach of this Agreement by the party seeking to terminate
this Agreement; provided, however, that the passage of such period
shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree or ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or
the calling or holding of a meeting of the stockholders of the Company
called to approve, inter alia, the Merger; or
(iv) if any court of competent jurisdiction or any Governmental
Entity shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
purchase of Shares pursuant to the Offer or the Merger and such order,
decree, ruling or other action shall have become final and
nonappealable.
(c) by the Company in accordance with the provisions of Section 8.2;
(d) by Parent in accordance with the provisions of Section 8.2;
(e) by Parent, if the Company breaches in any material respect any of
its representations or warranties herein or fails to perform in any material
respect any of its covenants, agreements or obligations under this Agreement;
(f) by the Company, if Parent or Sub breaches in any material respect
any of its representations or warranties herein or fails to perform in any
material respect any of its covenants, agreements or obligations under this
Agreement; or
(g) by Parent, if Parent shall have received any communication from
the Department of Justice or Federal Trade Commission (each an "HSR Authority")
(which communication shall be confirmed to the Company by the HSR Authority)
that causes Parent to reasonably believe that any HSR Authority has authorized
the institution of litigation challenging the transactions contemplated by this
Agreement under the U.S. antitrust laws, which litigation will include a motion
seeking an order or injunction prohibiting the consummation of any of the
transactions contemplated by this Agreement.
The party desiring to terminate this Agreement pursuant to this
Section 7.1 (other than pursuant to Section 7.1(a)) shall give notice of such
termination to the other party.
SECTION 7.2. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.1, an amendment
of this Agreement pursuant to Section 7.4 or an extension or waiver pursuant to
Section 7.5 shall, in order to be effective, require action by a majority of
the members of the Board of Directors of the Company who were members thereof
on the date of this Agreement and remain as such hereafter or the duly
authorized designees of such members; provided, however, that in the event that
Sub's designees are appointed or elected to the Board of Directors of the
Company as provided in Section 5.9, after the acceptance for payment of Shares
pursuant to the Offer and prior to the Effective Time of the Merger, the
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affirmative vote of a majority of the Independent Directors, in lieu of the
vote required pursuant to this Section, shall be required to (i) amend or
terminate this Agreement by the Company, (ii) exercise or waive any of the
Company's rights or remedies under this Agreement or (iii) extend the time for
performance of Parent's and Sub's respective obligations under this Agreement.
SECTION 7.3. Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, except that no such
termination shall relieve any party of any liability or damages resulting from
any willful breach by such party of this Agreement. The confidentiality
provisions of Sections 5.2(b) and (c) and the provisions of Sections 3.1(h),
3.1(i), 3.2(d), 5.6, 7.3, 8.1, 8.2, 8.3 and Article IX shall survive any
termination hereof.
SECTION 7.4. Amendment. This Agreement may be amended by the parties
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties hereto.
SECTION 7.5. Extension; Waiver. At any time prior to the Effective
Time of the Merger, the parties may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or the other acts of the
other parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) subject to
the proviso of Section 7.4, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS
SECTION 8.1. Takeover Defenses of the Company and Standstill
Agreements. The Company shall take such action with respect to any
anti-takeover provisions in its charter or afforded it by statute to the extent
necessary to facilitate the Offer and consummate the Merger on the terms set
forth in this Agreement. The Company hereby waives the provisions of the letter
agreement dated April 1, 1999 (the "Confidentiality and Standstill Agreement"),
between the Company and Parent, prohibiting the purchase of Shares or acting to
influence or control the Company.
SECTION 8.2. No Solicitation. (a) From the date hereof until the
termination hereof, the Company will not, and will cause its subsidiaries and
the officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents or advisors of the Company and its
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<PAGE> 39
subsidiaries not to, directly or indirectly, (i) take any action to solicit,
initiate, facilitate or encourage the submission of any takeover proposal, (ii)
engage in discussions or negotiations with, or disclose any nonpublic
information relating to the Company or any of its subsidiaries or afford access
to the properties, books or records of the Company or any of its subsidiaries
to, any person who may be considering making, or has made, a takeover proposal,
(iii) grant any waiver or release under any standstill or similar agreement
with respect to any class of equity securities of the Company, (iv) to the
fullest extent permitted by the DGCL, amend or grant any waiver or release or
approve any transaction or redeem rights under the Company Rights Agreement or
(v) enter into any agreement with respect to a takeover proposal (other than
the confidentiality and standstill agreement described in (c)(iii) below).
(b) The Company will notify Parent promptly (but in no event later
than 24 hours) after receipt by the Company (or any of its advisors) of any
takeover proposal or any request for nonpublic information relating to the
Company or any of its subsidiaries or for access to the properties, books or
records of the Company or any of its subsidiaries by any person who may be
considering making, or has made, a takeover proposal. The Company shall provide
such notice orally and in writing and shall identify the person making, and the
price, terms and conditions of, any such takeover proposal or request. The
Company shall keep Parent fully informed, on a current basis, of the status and
details of any such takeover proposal or request. The Company shall, and shall
cause its subsidiaries and the directors, employees and other agents of the
Company and its subsidiaries to, (i) cease immediately and cause to be
terminated all activities, discussions and negotiations, if any, with any
persons conducted prior to the date hereof with respect to any takeover
proposal and (ii) require all such persons to return to the Company all
confidential information provided by or on behalf of the Company and to destroy
any materials prepared by such persons based upon such confidential
information. Nothing contained in this Agreement shall prevent the Board of
Directors of the Company from complying with Rule 14e-2 under the Exchange Act
with respect to any takeover proposal. For purposes of this Agreement,
"takeover proposal" means (i) any offer or proposal for, other than a proposal
by Parent or any of its affiliates, a merger or other business combination
involving the Company or any of its subsidiaries, (ii) any proposal or offer,
other than a proposal or offer by Parent or any of its affiliates, to acquire
from the Company or any of its affiliates in any manner, directly or
indirectly, an equity interest in the Company or any subsidiary, any voting
securities of the Company or any subsidiary or a material amount of the assets
of the Company and its subsidiaries, taken as a whole, or (iii) any proposal or
offer, other than a proposal or offer by Parent or any of its affiliates, to
acquire from the stockholders of the Company by tender offer, exchange offer or
otherwise more than 20% of the outstanding Shares.
(c) Notwithstanding the foregoing, the Company may negotiate or
otherwise engage in substantive discussions with, and furnish nonpublic
information to, any person who delivers a superior proposal if (i) the Company
has complied with the terms of this Section 8.2, including, without limitation,
the requirement in Section 8.2(b) that it notify Parent promptly after its
receipt of any takeover proposal, (ii) the Board of Directors of the Company
determines in good faith by a majority of the disinterested members thereof, on
the basis of advice from outside legal counsel to the Company, that it should
take such action to comply with its fiduciary duties under applicable law,
(iii) such person executes a confidentiality and standstill agreement with
terms no less favorable to the Company than those contained in the
Confidentiality and Standstill Agreement, and (iv) the Company shall have
delivered to Parent a prior written notice advising Parent that it intends to
take
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such action. In furtherance and not in limitation of the foregoing, the Company
shall give Parent at least 24 hours' advance notice of any information to be
supplied to any person making such superior proposal. For purposes of this
Agreement, "superior proposal" means any bona fide, written takeover proposal
to acquire, directly or indirectly, for consideration consisting of cash,
securities or a combination thereof, at least a majority of the Shares then
outstanding or all or substantially all the assets of the Company, and
otherwise on terms which a majority of disinterested members of the Board of
Directors of the Company determines in its good faith reasonable judgment
(based on the written advice of its financial advisor, a copy of which shall be
provided to Parent, and taking into account all the terms and conditions of the
takeover proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation) to be more favorable and provide
greater value to all the Company's stockholders than the Offer, the Merger and
the transactions contemplated hereby and for which the financing, to the extent
required, is then committed or in the judgment of such majority of
disinterested members of the Board of Directors of the Company is reasonably
obtainable.
(d) Except as provided in the next sentence, the Board of Directors of
the Company shall recommend approval and adoption of this Agreement and that
the holders of the Shares tender their Shares pursuant to the Offer and vote to
approve the Merger and the transactions contemplated hereby and shall advise
the stockholders of the determination by the Board of Directors that the
transactions contemplated hereby, including the Offer and the Merger, are fair
to and in the best interests of the stockholders of the Company. The Board of
Directors of the Company shall be permitted to withdraw, or modify in a manner
adverse to Parent or Sub, its recommendation to its stockholders, but only if
(x) the Company has complied with the terms of this Section 8.2, including,
without limitation, the requirement in Section 8.2(b) that it notify Parent
promptly after its receipt of any takeover proposal and in Section 8.2(e) that
it provide Parent with an opportunity to respond to any superior proposal, (y)
a superior proposal is pending at the time the Company's Board of Directors
determines to take any such action and (z) the Company's Board of Directors
determines in good faith by a majority of the disinterested members thereof, on
the basis of consultations with its financial advisors and the advice of
outside legal counsel to the Company, that it should take such action to comply
with its fiduciary duties under applicable law.
(e) Prior to exercising the right of the Company's Board of Directors
pursuant to Section 8.2(d) to withdraw or modify its recommendation, the
Company shall (i) notify Parent in writing that it intends to enter into a
binding written agreement concerning a transaction that constitutes a superior
proposal, attaching the most current version of such agreement to such notice
(which version shall be updated on a current basis) and (ii) provide Parent
with an opportunity to respond to such superior proposal within two business
days of receipt of such written notice by making an offer that the Company's
Board of Directors determines in good faith, after consultation with its
financial advisors, by a majority of the disinterested members thereof, is more
favorable to the stockholders of the Company than the superior proposal. The
Company agrees to notify Parent promptly if its intention to enter into a
written agreement referred to in its notification shall change at any time
after giving such notification.
(f) In the event that Parent shall not make an offer described in
(e)(ii) above, the Company may terminate this Agreement; provided that the
Company shall pay to Parent the Termination Fee (as defined below) prior to
such termination.
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(g) In the event that (i) the Board of Directors of the Company or any
committee thereof shall (A) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Sub the approval or recommendation by
the Board of Directors of the Company or any such committee of this Agreement,
the transactions contemplated hereby, and the Offer or the Merger, or take any
action having such effect or (B) approve or recommend, or propose to approve or
recommend, any takeover proposal; (ii) the Company shall provide Parent with
any notice described in (e)(i) above; or (iii) the Company shall have entered
into any agreement (other than any confidentiality and standstill agreement
entered into in accordance with this Section 8.2) with respect to any takeover
proposal, Parent may terminate this Agreement immediately.
(h) Any breach of the provisions of this Section 8.2 shall be deemed a
material breach of this Agreement.
SECTION 8.3. Fee and Expense Reimbursements.
(a) If this Agreement is terminated pursuant to Section 7.1(c),
7.1(d), 8.2(f) or 8.2(g), the Company shall pay to Parent a termination fee in
immediately available funds of $15 million in cash (the "Termination Fee"). The
Company shall pay to Parent the Termination Fee (i) immediately prior to the
termination of this Agreement in the event this Agreement is terminated
pursuant to Section 7.1(c) or 8.2(f) or (ii) promptly upon termination of this
Agreement in the event this Agreement is terminated pursuant to Section 7.1(d)
or 8.2(g).
(b) In the event that (i) a takeover proposal is made by any person
during the pendency of the Offer, other than by Parent or Sub, (ii) the Offer
shall have terminated or expired without the Minimum Tender Condition being
satisfied and (iii) within one year after the Offer shall have terminated or
expired, either (A) the Company enters into an agreement (which is subsequently
consummated, whether before or after the expiration of such one year period)
with any person, other than Parent or Sub, with respect to a takeover proposal
which provides for (1) the transfer or issuance of securities representing more
than 50% of the equity or voting interests in the Company, or (2) transfer of
assets, securities or ownership interests representing more than 50% of the
consolidated assets or earning power of the Company, or (B) any person acquires
a majority of the Shares, then the Company shall pay to Parent the Termination
Fee (as defined above). Any payment of such Termination Fee shall be paid
within one business day after it becomes payable.
(c) In the event (i) this Agreement is terminated by Parent or the
Company pursuant to Sections 7.1(b)(i) 7.1(c), 7.1(d), 7.1(e), 8.2(f) or 8.2(g)
or (ii) the Company shall be required to pay the Termination Fee pursuant to
Section 8.3(b), the Company shall assume and pay, or reimburse Parent for, all
reasonable fees and expenses incurred by Parent or Sub (including the fees and
expenses of its counsel, accountants and financial advisors) through the date
of termination of this Agreement or, in the case of clause (ii) above, the
Offer, and which are specifically related to the Offer, the Merger, this
Agreement and the matters contemplated by this Agreement, but not to exceed
$2,500,000 in the aggregate, promptly, but in no event later than five business
days after submission of a request for payment of the same.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Nonsurvival of Representations and Warranties. None of
the representations, warranties, covenants or agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time of the Merger. This Section 9.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 9.2. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile or sent by overnight courier to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, Missouri 63136
Telephone: (314) 553-2000
Facsimile: (314) 553-3527
Attention: Robert M. Cox, Jr.
Senior Vice President
with a copy to
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, Missouri 63136
Telephone: (314) 553-2000
Facsimile: (314) 553-3527
Attention: W. Wayne Withers
Senior Vice President, General
Counsel and Secretary
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telephone: (212) 450-4000
Facsimile: (212) 450-4800
Attention: Phillip R. Mills, Esq.
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(b) if to the Company, to
Daniel Industries, Inc.
9753 Pine Lake Drive
Houston, Texas 77055
Telephone: (713) 467-6000
Facsimile: (713 827-4805
Confirmation: (713) 827-4870
Attention: R. C. Lassiter
Chairman, President and Chief Executive Officer
with a copy to
Daniel Industries, Inc.
9753 Pine Lake Drive
Houston, Texas 77055
Telephone: (713) 467-6000
Facsimile: (713) 827-4805
Confirmation: (713) 827-4870
Attention: Katie-Pat Bowman
General Counsel
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Telephone: (713) 651-5151
Facsimile: (713) 651-5246
Confirm: (713) 651-5496
Attention: Charles H. Still, Esq.
SECTION 9.3. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "knowledge" means, with respect to any matter stated herein to be
"to the Company's knowledge," or similar language, the actual knowledge
(including without limitation, any matter which a person holding the office and
performing the functions of such person, should reasonably be expected to know)
of the Chairman of the Board, the Chief Executive Officer, President, any Vice
President or Chief Financial Officer of the Company or the president at each
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division of the Company, and with respect to any matter stated herein to be "to
Parent's knowledge," or similar language, the actual knowledge of the Chairman
of the Board, the Chief Executive Officer, President, any Vice President, Chief
Financial Officer or General Counsel of Parent.
(c) "material adverse effect" or "material adverse change" means, when
used in connection with any person, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that is materially adverse to the business, properties, assets,
condition (financial or otherwise) or results of operations of that person and
its subsidiaries, taken as a whole.
(d) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
entity; and
(e) a "subsidiary" of any person means any corporation, partnership,
association, joint venture, limited liability company or other entity in which
such person owns over 50% of the stock or other equity interests, the holders
of which are generally entitled to vote for the election of directors or other
governing body of such other legal entity.
SECTION 9.4. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 9.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein), the
Stock Option Agreement dated the date hereof between Parent and the Company and
the Confidentiality and Standstill Agreement (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and (b)
except for the provisions of Section 5.5, are not intended to confer upon any
person other than the parties any rights or remedies hereunder.
SECTION 9.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
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SECTION 9.9. Enforcement of the Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any district court of
the United States located in the State of Delaware or in any Delaware state
court, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any Federal or state court
sitting in the State of Delaware in the event any dispute between the parties
hereto arises out of this Agreement solely in connection with such a suit
between the parties, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement in
any court other than such a Federal or state court.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 9.11. Performance by Sub. Parent hereby agrees to cause Sub to
comply with its obligations under this Agreement and the Offer.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
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<PAGE> 46
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
EMERSON ELECTRIC CO.
By /s/ R. M. Cox, Jr.
--------------------------------------
Name: R. M. Cox, Jr.
-----------------------------------
Title: Sr. Vice President-Acquisitions &
----------------------------------
Development
-----------
EMERSUB LXXIV, INC.
By /s/ R. M. Cox, Jr.
--------------------------------------
Name: R. M. Cox, Jr.
-----------------------------------
Title: Vice President
----------------------------------
DANIEL INDUSTRIES, INC.
By /s/ James M. Tidwell
--------------------------------------
Name James M. Tidwell
------------------------------------
Title: Executive Vice President
----------------------------------
<PAGE> 47
EXHIBIT A
CONDITIONS TO THE OFFER
Notwithstanding any other term of the Offer or this Agreement, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer, and may terminate the Offer, unless (i) there shall have
been validly tendered and not withdrawn prior to the expiration date of the
Offer that number of Shares which would represent at least 66-2/3% of the Fully
Diluted Shares (the "Minimum Tender Condition"), (ii) any waiting period under
the HSR Act applicable to the purchase of Shares pursuant to the Offer shall
have expired or been terminated (the "HSR Condition") and (iii) any filings or
approvals under applicable foreign antitrust laws and regulations shall have
been made and obtained and any related waiting periods shall have expired. The
term "Fully Diluted Shares" means all Shares, on a fully diluted basis, after
giving effect to the exercise or conversion of all options, warrants, rights
and securities exercisable or convertible into Shares, other than potential
issuances attributable to the Rights unless such Rights shall be exercisable
pursuant to the Company's Rights Agreement. Furthermore, notwithstanding any
other term of the Offer or this Agreement, Sub shall not be required to accept
for payment or, subject as aforesaid, to pay for any Shares not theretofore
accepted for payment or paid for, and may terminate or amend the Offer, with
the consent of the Company (except as otherwise provided in this Agreement) or
if, at any time on or after the date of this Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions exists:
(a) there shall be any action taken, or any statute, rule, regulation,
decree, order or injunction enacted, enforced, promulgated, issued or
deemed applicable to the Offer or the Merger, by any court, government or
governmental authority or agency, domestic or foreign, other than the
application of the waiting period provisions of the HSR Act to the Offer
or the Merger, that is likely to (i) make illegal, delay materially or
restrain or prohibit the making or consummation of the Offer or the Merger
or restrains or prohibits the performance of this Agreement and the
transactions contemplated hereby, (ii) in connection with the transactions
contemplated by this Agreement, prohibit or limit the ownership or
operation by Parent or Sub of all or any material portion of the business
or assets of the Company, Parent or any of their respective subsidiaries,
or compel Parent or any of its subsidiaries to dispose of or to hold
separate all or any material portion of the business or assets of the
Company, Parent or any of their subsidiaries (taken as a whole for
purposes of materiality), or imposes any material limitation on the
ability of the Company, Parent or any of their respective subsidiaries to
conduct such business or own such assets, (iii) impose material
limitations on the ability of Parent or Sub (or any other affiliate of
Parent or Sub) to acquire or hold or to exercise full rights of ownership
of the Shares, including, but not limited to, the right to vote the Shares
purchased by Sub on all matters properly presented to the stockholders of
the Company , or (iv) require divestiture by Parent, Sub or any of
Parent's other subsidiaries or affiliates of any Shares;
<PAGE> 48
(b) there shall be instituted or pending any action or any
investigation or other inquiry by any Governmental Entity that is likely
to result in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above;
(c) it shall have been publicly disclosed or Parent shall have
otherwise learned that (i) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have acquired beneficial ownership of
more than 25% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the formation of
a group or otherwise, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 25% of any class or series of capital stock of the Company (including
the Shares); or (ii) any person or group shall have entered into a
definitive agreement or an agreement in principle with the Company
regarding an acquisition of 25% or more of the Shares or a merger,
consolidation or other business combination;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any takeover proposal, (ii) the Company shall have
recommended or entered into any agreement (other than any confidentiality
and standstill agreement entered into in accordance with Section 8.2) with
respect to any takeover proposal, (iii) the Company shall have delivered
to Parent a notice of superior proposal, or (iv) the Board of Directors of
the Company or any committee thereof shall have resolved to do any of the
foregoing;
(e) there shall have occurred a material adverse change in the Company
and its subsidiaries, taken as a whole, or a material adverse effect on
the Company and its subsidiaries, taken as a whole, it being understood ,
however, that no such change or effect shall be deemed to have occurred to
the extent such change or effect arises from conditions generally
affecting the Company's industry or from the United States or global
economies.
(f) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case (i) as of the date of this Agreement or any other date as of which
such representations and warranties expressly speak or (ii) at any time
prior to the consummation of the Offer as if made at and as of such time,
it being understood, however, that with respect to clause (ii) no
representation or warranty shall be deemed to be not true and correct to
the extent that the failure to be so arises from conditions generally
affecting the Company's industry or from the United States or global
economies and further that the consequence of such failure to be true and
correct (disregarding all references to materiality or material adverse
effect therein) is a material adverse change or effect on the Company and
its subsidiaries, taken as a whole;
<PAGE> 49
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement which failure has not been cured; or
(h) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Sub and Parent and,
subject to the terms and conditions of this Agreement, may be waived by Sub and
Parent in whole or in part at any time and from time to time in their sole
discretion.
<PAGE> 1
EXHIBIT 2
CONFORMED COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of May 12, 1999 between Daniel
Industries, Inc., a Delaware corporation (the "COMPANY"), and Emerson Electric
Co., a Missouri corporation (the "PURCHASER").
W I T N E S S E T H :
WHEREAS, the Company, EMERSUB LXXIV, Inc., a Delaware corporation and
a wholly owned subsidiary of the Purchaser ("SUB"), and the Purchaser are
simultaneously with the execution and delivery of this Agreement entering into
a Merger Agreement (the "MERGER AGREEMENT") pursuant to which (i) the Purchaser
has agreed, upon the terms and subject to the conditions stated therein, to
make a tender offer (the "OFFER") for shares of the common stock of the Company
at a price per share in cash of $21.25 and (ii) the Company will, upon the
terms and subject to the conditions stated therein, merge with Sub; and
WHEREAS, in order to induce the Purchaser and Sub to enter into the
Merger Agreement, the Company has agreed to grant to the Purchaser the Company
Stock Option (as hereinafter defined), upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and in the Merger Agreement, and for other good and
valuable consideration, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1. Grant of Company Stock Option. The Company hereby grants to the
Purchaser an irrevocable option (the "COMPANY STOCK OPTION") to purchase for
$21.25 per share in cash (the "OPTION PRICE") up to 3,877,035 shares (the
shares purchased hereunder being referred to herein as the "SHARES") of its
Common Stock, $1.25 par value per share (the "COMMON STOCK"); provided,
however, that in no event shall the number of shares of Common Stock for which
this Company Stock Option is exercisable exceed 19.9% of the Company's issued
and outstanding shares of Common Stock without giving effect to any shares
subject to or issued pursuant to the Company Stock Option. The number of shares
of Common Stock that may be received upon the exercise of the Company Stock
Option and the Option Price are subject to adjustment as herein set forth.
2. Exercise of Stock Option. (a) The Purchaser may exercise the
Company Stock Option, in whole or in part, at any time or from time to time,
following (but not prior to) the occurrence of one of the events set forth in
Section
<PAGE> 2
3(c) hereof, and prior to the termination of the Company Stock Option in
accordance with the terms of this Agreement.
(b) In the event the Purchaser wishes to exercise the Company Stock
Option, the Purchaser shall send a written notice to the Company (the "STOCK
EXERCISE NOTICE") specifying a date, which shall not be later than 10 business
days and not earlier than three business days following the date such notice is
given, for the closing of such purchase. Such notice shall specify the number
of Shares to be purchased and a place for the closing of the purchase.
(c) At any time the Company Stock Option is then exercisable pursuant
to the terms of Section 2(a) hereof, the Purchaser may elect, in lieu of
exercising the Company Stock Option to purchase Shares as provided in Section
2(a) hereof, to send a written notice to the Company (the "CASH EXERCISE
NOTICE") specifying a date, not later than 10 business days and not earlier
than 3 business days following the date such notice is given, on which date the
Company shall pay to the Purchaser an amount in cash equal to the Spread (as
hereinafter defined) multiplied by all or such portion of the Shares subject to
the Company Stock Option as Purchaser shall specify. As used herein "SPREAD"
shall mean the excess, if any, over the Option Price of the higher of (x) if
applicable, the highest price per share of Common Stock (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid or
proposed to be paid by any person pursuant to any takeover proposal (as defined
in the Merger Agreement) (the "ALTERNATIVE PURCHASE PRICE") or (y) the closing
price of the shares of Common Stock on the NYSE Composite Tape on the last
trading day immediately prior to the date of the Cash Exercise Notice (the
"CLOSING PRICE"). If the Alternative Purchase Price includes any property other
than cash, the Alternative Purchase Price shall be the sum of (i) the fixed
cash amount, if any, included in the Alternative Purchase Price plus (ii) the
fair market value of such other property. If such other property consists of
securities with an existing public trading market, the average of the closing
prices (or the average of the closing bid and asked prices if closing prices
are unavailable) for such securities in their principal public trading market
on the five trading days ending five days prior to the date of the Cash
Exercise Notice shall be deemed to equal the fair market value of such
property. If such other property consists of something other than cash or
securities with an existing public trading market and, as of the payment date
for the Spread, agreement on the value of such other property has not been
reached, the Alternative Purchase Price shall be deemed to equal the Closing
Price. Upon exercise of its right to receive cash pursuant to this Section
2(c), the obligations of the Company to deliver Shares pursuant to Section 3
shall be terminated with respect to such number of Shares for which the
Purchaser shall have elected to be paid the Spread.
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<PAGE> 3
(d) In the event of any change in the number of issued and outstanding
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, merger or other change in the corporate or capital structure
of the Company, the number of Shares subject to the Company Stock Option and
the Option Price shall be appropriately adjusted to restore the Purchaser to
its rights hereunder, including its right to purchase Shares representing 19.9%
of the capital stock of the Company entitled to vote generally for the election
of the directors of the Company which are issued and outstanding immediately
prior to the exercise of the Company Stock Option.
(e) If the Company shall merge or consolidate with or into any other
entity, thereafter upon the exercise of the Company Stock Option, for each
Share in respect of which the Company Stock Option is thereafter exercised, the
Purchaser shall be entitled to receive the kind and amount of consideration per
share it would have received in such merger or consolidation had the Company
Stock Option been exercised immediately prior to such merger or consolidation.
3. Conditions to Delivery of Shares. The Company's obligation to
deliver Shares upon exercise of the Company Stock Option is subject only to the
conditions that:
(a) No preliminary or permanent injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction in the
United States prohibiting the sale or delivery of the Shares shall be in
effect;
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR ACT") shall have expired or been
terminated and any applicable filings or approvals under foreign antitrust laws
shall have been made or obtained and any related waiting periods shall have
expired; and
(c) (i) any person (other than Purchaser or any of its subsidiaries)
shall have acquired beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire beneficial ownership of, or any
"GROUP" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
shares of Common Stock aggregating 25 percent or more of the then outstanding
Common Stock; (ii) in the event (A) at any time during the pendency of the
Offer, a takeover proposal (as defined in the Merger Agreement) shall have been
made to the Company or any of its subsidiaries or any of its stockholders or
any person shall have publicly announced an intention to make a takeover
proposal with respect to the Company or any of its subsidiaries, (B) the Offer
shall have terminated or expired without the Minimum Tender Condition (as
defined in the
3
<PAGE> 4
Merger Agreement) being satisfied and (C) within one year after the Offer shall
have terminated or expired, either (x) the Company enters into an agreement
(which is subsequently consummated, whether before or after the expiration of
such one-year period) with any person, other than Purchaser or Sub, with
respect to a takeover proposal which provides for (1) transfer or issuance of
securities representing more than 50% of the equity or voting interests in the
Company, or (2) transfer of assets, securities or ownership interests
representing more than 50% of the consolidated assets or earning power of the
Company, or (y) any person acquires a majority of the Shares; (iii) the
Purchaser or the Company shall have terminated (or shall have the right to
terminate) the Merger Agreement pursuant to Section 7.1(c) or (d) or Section
8.2(f) or (g) of the Merger Agreement; or (iv) the Company shall have delivered
to Purchaser the written notification pursuant to Section 8.2(e)(i) of the
Merger Agreement and Purchaser shall have notified the Company in writing that
Purchaser does not intend to match the superior proposal (as defined in the
Merger Agreement) referred to in such notification. As used in this Agreement,
"PERSON" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act.
4. Closing. (a) Any closing hereunder shall take place on the date and
at the place specified by the Purchaser in its Stock Exercise Notice or Cash
Exercise Notice, as the case may be, or if the conditions set forth in Section
3(a) or (b) have not then been satisfied, on the second business day following
the satisfaction of such conditions, or at such other time and place as the
parties hereto may agree (the "CLOSING DATE"). On the Closing Date, (i) in the
event of a closing pursuant to Section 2(b) hereof, the Company shall deliver
to the Purchaser a certificate or certificates, representing the Shares in the
denominations designated by the Purchaser in its Stock Exercise Notice and the
Purchaser will purchase such Shares from the Company at the price per Share
equal to the Option Price or (ii) in the event of a closing pursuant to Section
2(c) hereof, the Company will deliver to the Purchaser cash in an amount
determined pursuant to Section 2(c) hereof. Any payment made by the Purchaser
to the Company, or by the Company to the Purchaser, pursuant to this Agreement
shall be made by certified, cashier's or bank check or, if mutually agreed, by
wire transfer of funds to an account designated by the party receiving such
funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
4
<PAGE> 5
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby (i) are within the Company's corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
require no action by or in respect of, or filing with, any governmental body,
agency or official, except for any filings required to be made under the HSR
Act and applicable foreign antitrust laws, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Company or of any judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
and (v) will not require any consent, approval or notice under and will not
conflict with, or result in the breach or termination of any provision of or
constitute a default (with or without the giving of notice or the lapse of time
or both) under, or allow the acceleration of the performance of, any material
obligation of the Company or any of its subsidiaries under, or result in the
creation of a lien, charge or encumbrance upon, any of the properties, assets
or business of the Company or any of its subsidiaries under any indenture,
mortgage, deed of trust, lease, licensing agreement, contract, instrument or
other agreement to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their respective
assets or properties is subject or bound. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company.
(b) Except for any filings required to be made under the HSR Act, the
Company has taken all necessary corporate and other action to authorize and
reserve and to permit it to issue, and at all times from the date hereof until
such time as the obligation to deliver Shares upon the exercise of the Company
Stock Option terminates, will have reserved for issuance, upon any exercise of
the Company Stock Option, the number of Shares subject to the Company Stock
Option (less the number of Shares previously issued upon any partial exercise
of the Company Stock Option or as to which the Company Stock Option may no
longer be exercised). All of the Shares to be issued pursuant to the Company
Stock Option are duly authorized and, upon issuance and delivery thereof
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, and free and clear of all claims, liens, charges,
encumbrances and security interests, and not subject to any preemptive rights.
(c) The Company has taken all action so that the entering into of this
Agreement, the acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the grant of any
rights to any person under the Company Rights Agreement (as defined in the
5
<PAGE> 6
Merger Agreement) or enable or require the Rights (as defined in the Merger
Agreement) to be exercised, distributed or triggered.
(d) The representations and warranties of the Company contained in the
Merger Agreement are true and correct.
6. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Missouri. The execution,
delivery and performance by the Purchaser of this Agreement are within the
Purchaser's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official, except for any filings required to be
made under the HSR Act and applicable foreign antitrust laws, and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Purchaser
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Purchaser. This Agreement has been duly executed and delivered
by the Purchaser and constitutes a valid and binding agreement of the
Purchaser.
(b) The Purchaser will acquire the Shares for investment purposes only
and not with a view to any distribution thereof, and will not sell any Shares
purchased pursuant to the Company Stock Option except in compliance with the
Securities Act.
(c) The representations and warranties of the Purchaser contained in
the Merger Agreement are true and correct.
7. Further Assurances; Remedies. (a) The Company agrees to execute and
deliver such other documents and instruments and take such further actions as
may be necessary or appropriate or as the Purchaser may reasonably request in
order to ensure that the Purchaser receives the full benefits of this
Agreement. Prior to the termination of the Company Stock Option, the Company
will refrain from taking any action which would have the effect of preventing
or disabling the Company from delivering the Shares to the Purchaser upon any
exercise of the Company Stock Option or from otherwise performing its
obligations under this Agreement.
(b) The parties agree that the Purchaser would be irreparably damaged
if for any reason the Company failed to issue any of the Shares upon exercise
of the Company Stock Option or to perform any of its other obligations under
this
6
<PAGE> 7
Agreement, and that the Purchaser would not have an adequate remedy at law for
money damages in such event. Accordingly, the Purchaser shall be entitled to
specific performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Company. This provision is without
prejudice to any other rights that the Purchaser may have against the Company
for any failure to perform its obligations under this Agreement.
8. HSR Filing; Listing of Shares; Notification of Record Dates. (a)
Promptly after the date hereof, and from time to time thereafter if necessary,
the Purchaser and the Company shall each file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice all
required pre-merger notification and report forms and other documents and
exhibits required to be filed under the HSR Act and applicable foreign
antitrust laws, to permit the purchase of the Shares pursuant hereto.
(b) Subject to the rules and regulations of the New York Stock
Exchange, Inc. (the "NYSE"), after the Company Stock Option becomes exercisable
hereunder, the Company will promptly file an application to list the Shares on
the NYSE and will use its reasonable best efforts to obtain approval of such
listing; provided, however, that if the Company is unable to effect such
listing on the NYSE by the Closing Date, the Company will nevertheless be
obligated to deliver the Shares upon the Closing Date.
(c) The Company shall give the Purchaser at least ten days' prior
written notice before setting the record date for determining the holders of
record of shares of Common Stock entitled to notice of, or to vote on, any
matter, to receive any dividend or distribution or to participate in any rights
offering or other matter, or to receive any other benefit or right, with
respect to shares of Common Stock. Further, if the Company Stock Option is
exercisable and during such notice period Purchaser elects to exercise the
Company Stock Option, in whole or in part, the Company shall defer setting such
record date until after the Closing Date in respect of such exercise.
9. Sales of Shares. (a) At any time prior to the first anniversary of
the Closing Date with respect to the first Stock Exercise Notice, the Purchaser
shall have the right to sell (the "SALE RIGHT") to the Company all or any, of
the Shares acquired upon exercise of the Company Stock Option at the greater of
(i) the Option Price, or (ii) the average of the last sales prices for shares
of Common Stock on the five trading days ending five days prior to the date the
Purchaser gives written notice of its intention to exercise the Sale Right. If
the Purchaser does not exercise the Sale Right prior to such first anniversary,
the Sale Right terminates. In the event the Purchaser wishes to exercise the
Sale Right, the Purchaser shall send a written notice to the Company specifying
a date, not later
7
<PAGE> 8
than 10 business days and not earlier than 3 business days following the date
such notice is given, for the closing of such sale.
(b) If at any time after the first anniversary of the Closing Date
with respect to the first Stock Exercise Notice, neither the Purchaser nor any
other person or group shall have acquired more than 50% of the shares
(excluding any Shares owned by Purchaser and its affiliate) of outstanding
Common Stock, then the Company shall have the right to purchase all, but not
less than all, Shares then owned by the Purchaser and its subsidiaries for a
total cash price such that following such purchase the Purchaser's Total Profit
(as defined below) is the Maximum Total Profit.
10. Registration of the Shares. (a) If the Purchaser requests the
Company in writing to register under the Securities Act, any of the Shares
purchased by the Purchaser hereunder, the Company will use its best efforts to
cause the offering of the Shares so specified in such request to be registered
as soon as practicable so as to permit the sale or other distribution by the
Purchaser of the Shares specified in its request (and to keep such registration
in effect for a period of at least 90 days), and in connection therewith
prepare and file as promptly as reasonably possible (but in no event later than
60 days from receipt of the Purchaser's request) a registration statement under
the Securities Act to effect such registration on an appropriate form, which
would permit the sale of the Shares by the Purchaser in the manner specified by
the Purchaser in its request. The Company shall not be obligated to make
effective more than two registration statements pursuant to the foregoing
sentence.
(b) The Company shall notify the Purchaser in writing not less than
ten days prior to filing a registration statement under the Securities Act
(other than a filing on Form S-4 or S-8) with respect to any Common Stock of
the Company's intention so to file. If the Purchaser wishes to have any portion
of its Shares included in such registration statement, it shall advise the
Company in writing to that effect within five business days following receipt
of such notice, and the Company will thereupon include the number of Shares
indicated by the Purchaser under such Registration Statement.
(c) The Company shall pay all fees and expenses in connection with any
registration pursuant to this Section other than underwriting discounts and
commissions to brokers or dealers and shall indemnify the Purchaser, its
affiliates, its officers, directors, agents, other controlling persons and any
underwriters retained by the Purchaser in connection with such sale of such
Shares in the customary way, and agree to customary contribution provisions
with such persons, with respect to claims, damages, losses and liabilities (and
any expenses relating thereto) arising (or to which the Purchaser, its
affiliates, its officers, directors,
8
<PAGE> 9
agents, other controlling persons or underwriters may be subject) in connection
with any such offer or sale under the federal securities laws or otherwise,
except for information furnished in writing by the Purchaser or its
underwriters to the Company. The Purchaser and its underwriters, respectively,
shall indemnify the Company to the same extent with respect to information
furnished in writing to the Company by the Purchaser and such underwriters.
11. Termination. The right to exercise the Company Stock Option
granted pursuant to this Agreement shall terminate at the earliest of (i) the
Effective Time of the Merger (as defined in the Merger Agreement), (ii) if the
Company Stock Option is not exercised within one year after termination of the
Merger Agreement in accordance with its terms; provided that, if at the time
the Merger Agreement is terminated the conditions in Section 3(c)(ii)(A) and
(B) have been satisfied, the Company Stock Option shall not terminate until two
years after the termination of the Merger Agreement (the date referred to in
clause (ii) being hereinafter referred to as the "TERMINATION DATE"); provided
further that, if on the Termination Date the Company Stock Option cannot be
exercised or the Shares cannot be delivered to Purchaser upon such exercise
because the conditions set forth in Section 3(a) or (b) hereof have not yet
been satisfied, the date referred to in clause (ii) shall be extended until
thirty days after such impediment to exercise or delivery has been removed.
12. Profit Limitation. Notwithstanding any other provision of this
Agreement or the Merger Agreement, in no event shall the Purchaser's Total
Profit (as hereinafter defined) exceed $20,000,000 (the "MAXIMUM TOTAL PROFIT")
and, if it otherwise would exceed such amount, the Purchaser shall repay such
excess amount to the Company in cash (or the purchase price for purpose of
Section 9, as applicable, shall be reduced) so that Purchaser's Total Profit
shall not exceed the Maximum Total Profit after taking into account the
foregoing actions.
As used herein, the term "TOTAL PROFIT" shall mean the aggregate
amount (before taxes) of the following (i) (x) the amount of cash received by
Purchaser pursuant to Section 8.3(a) or (b) of the Merger Agreement and Section
2(c) hereof, less (y) any repayment of such cash to the Company, (ii)(x) the
amount received by Purchaser pursuant to the Company's repurchase of Shares
pursuant to Section 9 hereof, less (y) the Purchaser's purchase price for such
Shares, and (iii) (x) the net cash amounts received by Purchaser pursuant to
the sale of Shares (or any other securities into or for which such Shares are
converted or exchanged) to any unaffiliated party on arms-length terms, less
(y) the Purchaser's purchase price for such Shares.
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<PAGE> 10
13. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein or in the Merger Agreement.
14. Entire Agreement. This Agreement, together with the Merger
Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings,
oral or written, with respect to such transactions.
15. Miscellaneous. (a) Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
(b) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person or by
cable, telegram or telex (with copies by registered or certified mail, postage
prepaid, return receipt requested), to the respective parties as follows:
To the Company:
Daniel Industries, Inc.
9753 Pine Lake Drive
Houston, Texas 77055
Telephone: (713) 467-6000
Facsimile: (713) 827-4805
Confirmation: (713) 827-4870
Attention: R. C. Lassiter
Chairman, President and Chief Executive Officer
with a copy to:
Daniel Industries, Inc.
9753 Pine Lake Drive
Houston, Texas 77055
Telephone: (713) 467-6000
Facsimile: (713) 827-4805
Confirmation: (713) 827-4870
Attention: Katie-Pat Bowman, Esq.
General Counsel
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<PAGE> 11
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Telephone: (713) 651-5151
Facsimile: (713) 651-5246
Confirmation: (713) 651-5496
Attention: Charles H. Still, Esq.
To the Purchaser:
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, Missouri 63136-8506
Telephone: (314) 553-2000
Facsimile: (314) 553-3527
Confirmation: (314) 553-2015
Attention: Robert M. Cox, Jr.
Senior Vice President - Acquisitions and Development
with a copy to:
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, Missouri 63136-8506
Telephone: (314) 553-2000
Facsimile: (314) 553-3527
Confirmation: (314) 553-2015
Attention: W. Wayne Withers
Senior Vice President, General Counsel and Secretary
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<PAGE> 12
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telephone: (212) 450-4000
Facsimile: (212) 450-4800
Confirmation: (212) 450-4618
Attention: Phillip R. Mills, Esq.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(c) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflicts of law rules of such state.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(f) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective successors
and assigns; provided, however, that such successors in interest or assigns
shall agree to be bound by the provisions of this Agreement; provided further
that no such assignment shall relieve the assignor of its obligations
hereunder. Nothing in this Agreement, express or implied, is intended to confer
upon any person other than the Company or the Purchaser, or their successors or
assigns, any rights or remedies under or by reason of this Agreement.
(h) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
12
<PAGE> 13
consummation of the transactions contemplated hereby, except as otherwise
provided herein.
(i) Time of the Essence. The parties agree that time shall be of the
essence in the performance of obligations hereunder.
13
<PAGE> 14
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be duly executed as of the day and year first above written.
DANIEL INDUSTRIES, INC.
By: /s/ James M. Tidwell
-------------------------------------
Name: James M. Tidwell
Title: Executive Vice President
EMERSON ELECTRIC CO.
By: /s/ R. M. Cox, Jr.
-------------------------------------
Name: Robert M. Cox, Jr.
Title: Senior Vice President-
Acquisitions & Development
14
<PAGE> 1
EXHIBIT 4
DANIEL LETTERHEAD
May 20, 1999
To Our Stockholders:
I am pleased to inform you that on May 12, 1999, Daniel Industries, Inc.
("Daniel") entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Emerson Electric Co. and its wholly owned subsidiary, Emersub LXXIV, Inc.
(the "Purchaser"), providing for the acquisition of Daniel for $21.25 per
outstanding share of common stock of the Company. Pursuant to the Merger
Agreement, on May 18, 1999, the Purchaser commenced a cash tender offer for all
shares of Daniel's Common Stock, par value $1.25 per share (the "Common Stock"),
including the associated Common Stock Purchase Rights (the "Rights" and together
with the Common Stock, the "Shares"), at a price of $21.25 per Share (the
"Offer"). The Merger Agreement provides that each Share not acquired by the
Purchaser in the Offer will be converted into the right to receive cash in an
amount equal to the price per Share paid pursuant to the Offer in the subsequent
merger of Purchaser into Daniel (the "Merger").
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, DANIEL AND ITS STOCKHOLDERS.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF DANIEL ACCEPT
THE OFFER AND TENDER THEIR SHARES.
In arriving at its recommendation, your Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9,
including the opinion of Simmons & Company International, financial advisor to
Daniel, that the consideration to be received by stockholders pursuant to the
Offer and the Merger is fair from a financial point of view.
Additional information with respect to the Offer is contained in the
enclosed Schedule 14D-9. Also enclosed is the Purchaser's Offer to Purchase and
related materials, including a Letter of Transmittal to be used for tendering
your Shares. I urge you to read the enclosed materials carefully before making
any decision with respect to tendering your Shares.
On behalf of the Board of Directors and management of Daniel, I thank you
for your support throughout the years.
On behalf of the Board of Directors,
/s/ R. C. LASSITER
R. C. Lassiter
Chairman of the Board,
President
and Chief Executive
Officer
<PAGE> 1
EXHIBIT 5
[SIMMONS & COMPANY INTERNATIONAL LETTERHEAD]
CONFIDENTIAL
May 12, 1999
Board of Directors
Daniel Industries, Inc.
9753 Pine Lake Drive
Houston, TX 77055
Members of the Board:
We understand that Daniel Industries, Inc. ("Daniel" or the "Company"), Emerson
Electric Co. ("Emerson"), and a wholly owned subsidiary of Emerson
("Subsidiary") propose to enter into an Agreement and Plan of Merger
substantially in the form of the latest draft dated May 12, 1999 (the "Merger
Agreement") which provides, among other things, for: (i) the commencement by
Subsidiary of a tender offer (the "Tender Offer") for all the outstanding shares
of common stock, par value $1.25 per share, of Daniel (the "Daniel Common
Stock") for $21.25 per share net to the seller in cash, and (ii) the subsequent
merger (the "Merger") of Subsidiary with and into Daniel. Pursuant to the
Merger, Daniel will become a wholly owned subsidiary of Emerson, and each
outstanding share of Daniel Common Stock, other than the shares held in treasury
or held by Emerson or its affiliates or as to which dissenters' rights have been
perfected, will be converted into the right to receive $21.25 per share in cash.
For reference, the full terms and conditions of the Tender Offer and the Merger
are set forth in the Merger Agreement. Unless the context otherwise requires,
references in this letter to "Daniel" or "Company" include Daniel and its
subsidiaries.
You have requested the opinion of Simmons & Company International ("Simmons") as
investment bankers as to the fairness, from a financial point of view, of the
consideration to be received by the holders of Daniel Common Stock (other than
Emerson and its affiliates) pursuant to the terms of the Merger Agreement.
<PAGE> 2
[SIMMONS & COMPANY INTERNATIONAL LETTERHEAD]
May 12, 1999
Page 2
In conducting our analysis and arriving at our opinion expressed herein, we
have considered such financial and other factors as we deemed appropriate under
the circumstances including, without limitation, the following: (i) the Merger
Agreement; (ii) certain publicly available financial statements and other
information concerning the Company; (iii) certain internal business and
financial information relating to the Company, including certain financial
forecasts prepared by management of the Company and provided to Simmons by the
Company; (iv) discussions of the past and current operations and the financial
condition and prospects of the Company with senior executives of the Company;
(v) certain publicly available information concerning the trading of, and the
trading market for, Daniel Common Stock; (vi) the financial performance of the
Company and the trading prices and activity of Daniel Common Stock as compared
to those of certain other comparable publicly-traded companies; and (vii) the
terms and consideration of certain other acquisition transactions that we
believe to be relevant. We also took into account our assessment of general
economic, market and financial conditions and our experience in connection with
similar transactions and securities' valuations generally. The opinion expressed
herein is necessarily based upon conditions as they exist and can be evaluated
on, and on the information made available at, the date hereof.
In arriving at this opinion, we, with your consent, assumed and relied upon the
accuracy and completeness of all the foregoing information and did not
independently verify any of such information. With respect to financial
forecasts, we utilized certain information set forth therein and assumed that
such information was reasonably prepared on bases reflecting the best estimates
and judgments of the management of the Company as to the future financial
performance of the Company, as available at the time of preparation. We did not
conduct a physical inspection of any of the assets, operations or facilities of
the Company and did not make or receive any independent evaluation or appraisal
of any assets or liabilities (contingent or otherwise) of the Company.
We are serving as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. As a
specialized energy-related investment banking firm, we are engaged, among other
things, in the valuation of businesses and their securities in connection with
mergers and acquisitions, in the management and underwriting of sales of equity
and debt to the public and in private placements of equity and debt. In
addition, in the ordinary course of business, we may actively trade the
securities of Daniel and Emerson for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities. We also have from time to time been engaged by the Company to
provide general corporate financial advisory services.
<PAGE> 3
[SIMMONS & COMPANY INTERNATIONAL LETTERHEAD]
May 12, 1999
Page 3
You agree that this opinion letter is for the use and benefit of the Board of
Directors of the Company, and may not be used for any other purpose without our
prior written consent. This opinion does not address the merits of the
underlying decision by the Company to enter into the Merger Agreement and does
not constitute a recommendation to any Daniel stockholder as to how such
stockholder should respond to the Tender Offer or vote on the Merger Agreement
or Merger or on any matter related thereto. We are not expressing any opinion
herein as to the prices at which Daniel Common Stock will trade following
announcement of the Tender Offer or the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of Daniel Common
Stock (other than Emerson and its affiliates) pursuant to the terms of the
Merger Agreement is fair, from a financial point of view, to such holders.
Sincerely,
/s/ JOHN R. RUTHERFORD
SIMMONS & COMPANY INTERNATIONAL
<PAGE> 1
EXHIBIT 6
Emerson contact:
William K. Anderson
or Carter L. Dunkin
314-982-1700
Daniel contact:
Sean P. O'Neill
713-827-3892
EMERSON ELECTRIC CO. REACHES AGREEMENT
TO ACQUIRE DANIEL INDUSTRIES, INC.
COMBINATION STRENGTHENS BOTH COMPANIES' PRESENCE
IN OIL AND GAS INDUSTRY
ST. LOUIS, May 13, 1999 - Emerson Electric Co. (NYSE:EMR) and Daniel
Industries, Inc. (NYSE:DAN), have reached agreement for Emerson to acquire
Daniel for approximately $460 million, the two companies announced today.
Daniel's board unanimously supported the agreement, under which Emerson
will make a cash tender offer of $21.25 a share for each outstanding share of
Daniel's common stock. The transaction is subject to regulatory and other
customary conditions and is expected to be completed within the current
quarter, with Daniel ultimately becoming a wholly owned subsidiary of Emerson.
Charles F. Knight, Emerson's chairman and chief executive officer, said,
"Daniel's leading market position and advanced technology in the oil and gas
industry will expand Emerson's product leadership and strengthen our ability to
provide services and solutions in this important market segment, especially
natural gas. In addition, Daniel's excellent reputation, strong customer
relationships and broad distribution network present the opportunity to sell
more products, systems and services from other Emerson divisions."
Ronald C. Lassiter, chairman and chief executive officer of Daniel
Industries, said the combination with Emerson will strengthen Daniel's
competitive position. "Emerson is a leading provider of process control
instrumentation, and our product lines fit hand-in-glove with theirs. In
addition to building a stronger base in our primary market, oil and
- more -
<PAGE> 2
Add One
gas, we expect the innovative technologies of Emerson's Fisher-Rosemount
companies will accelerate our own product development. Emerson's expanding
services and solutions business also provides a valuable foundation for the
continued growth of Daniel's measurement service business."
Based in Houston, Texas, Daniel is leading provider of measurement and
control equipment, systems and services for the oil and gas industry:
o Daniel's measurement and control products, comprising the company's
largest segment, include flowmeters, metering systems and gas
chromatographs. Daniel is one of the world's largest producers of
measurement products for custody transfer of natural gas flows delivered
via pipeline.
o Daniel's Bettis actuation business is a worldwide leader in pneumatic and
hydraulic actuators for valves in oil and gas production, pipelines,
refining and other industrial applications.
o The company also is a leader in the production of large-diameter gate
valves, which are used primarily in pipelines transporting crude oil and
refined products.
o Daniel Measurement Services builds on Daniel's reputation for providing
metering solutions with unsurpassed accuracy, quality and reliability.
This business has grown rapidly as more oil and gas companies have
outsourced the management of custody transfer.
David N. Farr, senior executive vice president with responsibility for
Emerson's process business, said, "Daniel's long-standing reputation and
strength in the oil and gas industry, particularly in natural gas, will greatly
enhance the leadership of Emerson and our Fisher-Rosemount companies. Daniel
broadens the market penetration of our process business and provides
significant potential for increased sales of our existing products and systems
into this important segment. For our flow business, Daniel complements our
traditional strength in liquids with an increased presence in gas; in
actuators, Daniel substantially broadens the range of applications we can offer
our customers; and the addition of Daniel's services business expands Emerson's
growing services and solutions capability."
-more-
<PAGE> 3
Add Two
Emerson Electric, based in St. Louis, Mo., is a global manufacturer with
market and technology leadership in the areas of process control, industrial
automation, electronics, HVAC, appliance components, electric motors, tools and
storage products. Fiscal 1998 sales totaled $13.4 billion.
Daniel Industries is an international leader in fluid measurement and flow
control products and services for the oil and gas industry. Daniel provides a
wide variety of flowmeters, valves, actuators, control systems and engineered
solutions, primarily for producers, transporters, refiners and processors of oil
and natural gas. The company reported revenues of $283.2 million in 1998.
###
<PAGE> 1
EXHIBIT 7
[DANIEL LETTERHEAD]
CONFIDENTIAL
April 1, 1999
Mr. James D. Switzer
Senior Vice President of Development
Emerson Electric Company
8000 W. Florissant
PO Box 4100
St. Louis, Missouri
Gentlemen:
You have requested information (which is either non-public, confidential or
proprietary in nature) from Daniel Industries, Inc. (the "Company"), in
connection with your consideration of a possible transaction between the
Company or its stockholders and you or your affiliated companies (collectively,
"you"). In consideration for, and as a condition to, your being furnished such
information, you agree to treat any information (whether prepared by the
Company, its advisors or otherwise, and whether oral or written and regardless
of the form in which such information may be initially or subsequently
reflected) that is furnished to you or your representatives (which term shall
include your parents, subsidiaries, other affiliates, directors, officers,
partners, employees, agents, advisors and others brought into the matter by you)
by or on behalf of the Company (herein collectively referred to as the
"Evaluation Material") in accordance with the provisions of this letter and to
take or abstain from taking certain other actions herein set forth. The term
"Evaluation Material" does not include information that (i) is already in your
possession, provided that such information is not known by you to be subject to
another confidentiality agreement with or other obligation of secrecy, or
fiduciary duty of confidentiality, to the Company or another party, or (ii)
becomes generally available to the public other than as a result of a
disclosure by you or your representatives, or (iii) becomes available to you on
a non-confidential basis from a source other than the Company or its advisors,
provided that such source is not known by you to be bound by a confidentiality
agreement with or other obligation of secrecy, or fiduciary duty of
confidentiality, to the Company or another party.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company or its
stockholders and you, will not be used in any way detrimental or
disadvantageous to the Company or its stockholders, including competing in any
way with activities carried on by the Company, and will not be disclosed but
will be kept confidential by you and your representatives; provided, however,
that (i) any of such information may be disclosed to your representatives who
need to know such information for the purpose of evaluating any such possible
transaction between the Company or its stockholders and who shall be required
by you to keep such information confidential and to be bound by the
confidentiality provisions of this agreement to the same extent as if they were
parties hereto and the names of whom
<PAGE> 2
April 1, 1999
Page 2
shall be recorded by you and identified to the Company upon its request and
(ii) any of such information may be disclosed if required by any United
States or foreign law, including the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), if and to the extent, in the written opinion of your
counsel, who shall be reasonably satisfactory to the Company ("Counsel"), you
are required to make such disclosure pursuant to any such law, provided that
prior to any such disclosure pursuant to this clause (ii), you shall first give
the Company a reasonable opportunity to review the proposed disclosure and to
comment thereon. You will be responsible for any breach of this agreement by
your representatives, but the Company shall be entitled to directly enforce the
agreements of your representatives who are bound hereby and to cause you to
enforce such agreements. You shall restrict the photocopying or other
reproduction of the Evaluation Material to that which is necessary to provide
copies to those persons authorized to have access to the Evaluation Material
pursuant hereto and for those purposes authorized herein. You and your
representatives shall use all reasonable and prudent efforts to protect and
safeguard the Evaluation Material from misuse, loss, theft, publication or the
like to at least the same extent as you protect and safeguard your own similar
proprietary information and to ensure that your representatives who receive any
of the Evaluation Material shall do likewise.
You hereby acknowledge that your are aware, and that you will advise your
representatives who are informed as to the matters which are the subject of
this letter, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information concerning matters
which are of the nature of those covered by this letter from, so long as such
material information is non-public, (i) purchasing or selling securities of
such issuer or (ii) communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person may
purchase or sell such securities.
In the event that you or your representatives receive a request to
disclose all or any part of the information contained in the Evaluation
Material under the terms of a valid and effective subpoena or order issued by a
court of competent jurisdiction or by a governmental body or by deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar process, you agree to (i) promptly notify the Company of the
existence, terms and circumstances surrounding such a request, so that it may
seek an appropriate protective order and/or waive your compliance with the
provisions of this agreement (and, if the Company seeks such an order, to
provide such cooperation as the Company shall reasonably request) and (ii) if
disclosure of such information is required in the written opinion of Counsel,
exercise your best efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such of the disclosed information
which the Company so designates.
In addition, without the prior written consent of the Company, you will
not, and will cause your representatives not to, disclose to any person either
the fact that the Evaluation Material has been made available or the fact that
discussions or negotiations are taking place concerning a possible transaction
between the Company or its stockholders and you or any of the terms, conditions
or other facts with respect to any such possible transaction, including the
status thereof, except that disclosure of such information may be made if
required by any United States or foreign
<PAGE> 3
April 1, 1999
Page 3
law, including the Exchange Act, if and to the extent, in the written opinion
of Counsel, you are required to make such disclosure pursuant to any such law,
provided that prior to any such disclosure pursuant to this paragraph, you
shall first give the Company a reasonable opportunity to review the proposed
disclosure and to comment thereon.
You hereby acknowledge that the Evaluation Material is being furnished to
you in consideration of your agreement that, until April 15, 2000, you and your
affiliates (as defined in Rule 12b-2 under the Exchange Act) will not (and you
and they will not assist, provide or arrange financing to or for others or
encourage others to), directly or indirectly, acting alone or in concert with
others, unless specifically requested in writing in advance by the Board of
Directors of the Company,
(i) acquire, or agree to acquire, offer, seek or propose to acquire
(or request permission to do so or to make any proposal in such regards),
ownership (including, but not limited to, beneficial ownership as defined
in Rule 13d-3 under the Exchange Act) of the Company or any of the assets
or businesses of the Company (except in transactions in the ordinary
course of business) or any securities issued by the Company or any rights
or options to acquire such ownership (including from a third party), or
make any public announcement (or request permission to make any such
announcement) with respect to any of the foregoing, or
(ii) seek or purpose to influence or control in any manner the
management or the policies of the Company or to obtain representation on
the Company's Board of Directors, or solicit, or encourage or in any way
participate in, directly or indirectly, the solicitation of, any proxies or
consents with respect to any securities of the Company, or make any
proposal or any public announcement with respect to any of the foregoing or
request permission to do any of the foregoing with or without conditions,
or
(iii) seek or propose any recapitalization, restructuring or other
extraordinary transaction with respect to the Company or any of its
businesses, or
(iv) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing,
or
(v) take any action which might force the Company to make a public
announcement regarding any of the foregoing.
You will be responsible for any breach of this agreement by your
representatives, but the Company shall be entitled to directly enforce the
agreements of your representatives, whom you agree you will cause to be bound
hereby to the same extent as if they were parties hereto, and to cause you to
enforce such agreements.
<PAGE> 4
April 1, 1999
Page 4
Although the Company has endeavored to include in the Evaluation Material
information which it believes to be relevant for the purpose of your
consideration, you understand that neither the Company nor any of its
representatives or advisors have made or make any representation or warranty as
to the accuracy or completeness of the Evaluation Material. You agree that
neither the Company nor its representatives or advisors shall have any
liability to you or any of your representatives resulting from the use or
contents of the Evaluation Material or from any action taken or any inaction
occurring in reliance on the Evaluation Material.
At the request of the Company or in the event that you do not proceed with
a transaction which is the subject of this letter, you and your representatives
shall promptly redeliver to the Company all written Evaluation Material and,
except for the materials referred to in the next succeeding sentence of this
paragraph, any other written material containing or reflecting any information
in the Evaluation Material (whether prepared by the Company, its advisors,
agents or otherwise) and will not retain any copies, extracts or other
reproductions (including any computer tapes or discs or oral reproductions) in
whole or in part of such written material. All documents, memoranda, notes and
other writings or materials whatsoever prepared by you or your representatives
based on information in the Evaluation Material shall be destroyed, and such
destruction shall be certified in writing to the Company by an authorized
officer supervising such destruction; provided that such certification as to
destruction of materials prepared by your representatives (other than your
affiliates, directors, officers or employees) may be based on a certification
to such effects from your representatives.
Without the prior written consent of the Company, you further agree (i)
that, prior to April 15, 2001, you and your representatives will not, directly
or indirectly, solicit for employment any Employee who is now, and at the time
of such solicitation is, employed by the Company or any affiliate of the
Company, and (ii) that you and your representatives will not, directly or
indirectly, solicit for employment any Employee who is now employed by the
Company or any affiliate of the Company while any discussions or negotiations
are pending between you and the Company with respect to a possible transaction
contemplated hereby; provided that this restriction shall not prohibit any
general solicitation of employment published in the newspaper or other public
media. For purposes of the foregoing, an "Employee" shall mean any person with
whom you had contact or who was otherwise identified directly or indirectly in
the course of your review of the Company.
It is further understood and agreed that no failure or delay by the
Company 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 right, power or
privilege hereunder.
You agree that unless and until a definitive agreement between the Company
and you with respect to any transaction referred to in the first paragraph of
this letter has been executed and delivered, neither the Company nor you will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by any of the Company's or your directors, officers,
employees, agents, or any
<PAGE> 5
April 1, 1999
Page 5
other representatives or advisors except for the matters specifically agreed to
in this letter. You further agree that the Company shall have no obligation to
authorize or pursue with you or any other party any transaction referred to in
the first paragraph of this letter and you understand that the Company has not,
as of the date hereof, authorized any such transaction. The agreements set
forth in this letter may be modified or waived only by a separate writing by
the Company and you expressly so modifying or waiving such agreements.
The parties hereto acknowledge that money damages are an inadequate remedy
for breach of this letter agreement because of the difficulty of ascertaining
the amount of damage that will be suffered by the Company in the event that
this agreement is breached. Therefore, you agree that the Company may, in
addition to any other available remedy, obtain specific performance of this
agreement and injunctive relief against any breach hereof. If any term,
provision, covenant or restriction of this letter agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS AND THE PARTIES HERETO CONSENT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS FOR ANY SUITS,
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATED TO THIS LETTER AGREEMENT AND
WAIVE ALL OBJECTIONS TO SUCH JURISDICTION.
Very truly yours,
DANIEL INDUSTRIES, INC.
By /s/ R.C. LASSITER
---------------------------------
R.C. Lassiter
Chairman of the Board and
Chief Executive Officer
Confirmed and Agreed to:
EMERSON ELECTRIC COMPANY
By /s/ JAMES D. SWITZER
-------------------------------------
James D. Switzer
Senior Vice President of Development
