<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 33-54099
[WHEATLEY LOGO]
July 6, 1994
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Wheatley TXT Corp. ("Wheatley") at the Four Seasons Hotel, 1300 Lamar Street,
Houston, Texas on Friday, August 5, 1994, at 9:00 a.m., Houston time.
At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of May 31, 1994, by and
among Wheatley, Dresser Industries, Inc. ("Dresser") and WTXT Acquisition
Corporation, a wholly owned subsidiary of Dresser ("WAC"), pursuant to which WAC
would merge (the "Merger") with and into Wheatley. If the Merger Agreement is
approved and adopted and the Merger becomes effective, each share of common
stock of Wheatley will be converted into the right to receive 0.7 shares of
Dresser common stock. The exchange ratio for shares of Dresser common stock to
be received by Wheatley stockholders is subject to adjustment if Dresser common
stock trades below $20 per share or above $27 per share during a specified
period prior to the approval of the Merger by Wheatley stockholders. The
adjustment is described more fully in the accompanying Proxy
Statement/Prospectus.
Your Board of Directors believes that the proposed Merger, which was
approved unanimously by the Board, is in the best interest of Wheatley and
recommends that you vote FOR adoption and approval of the Merger Agreement and
the Merger. In addition, the Board of Directors has received the opinion of
Simmons & Company International that the consideration to be received by holders
of Wheatley common stock in the Merger is fair from a financial point of view.
Approval and adoption of the Merger Agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of Wheatley common stock.
You are urged to read carefully the Proxy Statement/Prospectus and the
Appendices in their entirety for a complete description of the Merger and the
Merger Agreement. Whether or not you plan to attend the Special Meeting, please
be sure to date, sign and return the proxy card in the enclosed postage-paid
envelope as promptly as possible so that your shares may be represented at the
meeting and voted in accordance with your wishes. Your vote is important
regardless of the number of shares you own.
Sincerely,
Gary L. Rosenthal
Chairman of the Board
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WHEATLEY TXT CORP.
6750 S. 57TH W. AVENUE
TULSA, OKLAHOMA 74131
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 5, 1994
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Wheatley
TXT Corp. ("Wheatley") will be held at the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas on Friday, August 5, 1994, at 9:00 a.m., Houston time, to
vote upon adoption and approval of an Agreement and Plan of Merger (the "Merger
Agreement"), which is described in and attached as Appendix I to the attached
Proxy Statement/Prospectus, and the merger provided for therein.
Pursuant to the Merger Agreement, (a) a newly formed, wholly owned
subsidiary of Dresser Industries, Inc. ("Dresser") would merge with and into
Wheatley, (b) Wheatley would become a wholly owned subsidiary of Dresser and (c)
each issued and outstanding share of common stock of Wheatley would be converted
into 0.7 shares of Dresser common stock. The exchange ratio for shares of
Dresser common stock to be received by Wheatley stockholders is subject to
adjustment if Dresser common stock trades below $20 per share or above $27 per
share during a specified period prior to the approval of the Merger Agreement by
Wheatley stockholders. The adjustment is more fully described in the
accompanying Proxy Statement/Prospectus.
Only Wheatley stockholders of record at the close of business on June 29,
1994 are entitled to notice of and to vote at the Special Meeting. A complete
list of stockholders entitled to vote at the Special Meeting will be available
for examination during normal business hours by any Wheatley stockholder, for
purposes germane to the Special Meeting, for a period of ten days prior to the
Special Meeting at the office of Wheatley's subsidiary, Texsteam, Inc., 1020
Rankin Road, Houston, Texas 77073.
We hope you will be represented at the meeting by signing, dating and
returning the enclosed proxy card in the accompanying envelope as promptly as
possible, whether or not you expect to be present in person. Your vote is
important -- as is the vote of every stockholder -- and the Board of Directors
of Wheatley appreciates the cooperation of stockholders in directing proxies to
vote at the meeting.
Your proxy may be revoked at any time by the following procedures set forth
in the accompanying Proxy Statement/Prospectus.
By order of the Board of Directors
Michael D. Reynolds
Vice President -- Human Resources
and Secretary
Tulsa, Oklahoma
July 6, 1994
<PAGE> 3
DRESSER INDUSTRIES, INC.
WHEATLEY TXT CORP.
PROXY STATEMENT/PROSPECTUS
---------------------
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") relates to
the proposed merger (the "Merger") of WTXT Acquisition Corporation ("WAC") with
and into Wheatley TXT Corp. ("Wheatley") pursuant to an Agreement and Plan of
Merger dated as of May 31, 1994, among Dresser Industries, Inc. ("Dresser"), WAC
and Wheatley (the "Merger Agreement"). As a result of the Merger, Wheatley will
become a wholly owned subsidiary of Dresser and the stockholders of Wheatley
will receive in the aggregate up to 9,133,675 shares of Dresser common stock,
par value $.25 per share ("Dresser Common Stock"), together with a corresponding
number of associated rights ("Dresser Stock Purchase Rights") to purchase one
one-hundredth of a share of Series A Junior Preferred Stock, without par value,
of Dresser in exchange for all of the issued and outstanding shares of Wheatley
common stock, par value $.01 per share ("Wheatley Common Stock"), and shares
potentially issuable pursuant to Wheatley employee benefit plans and convertible
securities. Pursuant to the Merger, each outstanding share of Wheatley Common
Stock will be converted into 0.7 shares (the "Conversion Number" or "Exchange
Ratio") of Dresser Common Stock. The Conversion Number is subject to adjustment,
as more fully described herein, if the average trading price of the Dresser
Common Stock is below $20 per share or above $27 per share during a specified
period prior to the approval of the Merger Agreement by Wheatley stockholders.
This Proxy Statement/Prospectus serves as the Proxy Statement of Wheatley
for its special meeting of stockholders to be held on August 5, 1994 (the
"Special Meeting"). See "The Meeting." This Proxy Statement/Prospectus and the
accompanying form of proxy are first being mailed to stockholders of Wheatley on
or about July 7, 1994 in connection with the solicitation by the Board of
Directors of Wheatley (the "Wheatley Board") of proxies from the holders of
Wheatley Common Stock to be used at the Special Meeting. This Proxy
Statement/Prospectus also constitutes a prospectus of Dresser with respect to
the shares of Dresser Common Stock to be issued to stockholders of Wheatley
pursuant to the Merger Agreement.
No persons have been authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Proxy Statement/Prospectus in connection with the solicitation of proxies or
the offering of securities made hereby and, if given or made, such information
or representation should not be relied upon as having been authorized by
Dresser or Wheatley. This Proxy Statement/Prospectus does not constitute an
offer to sell, or a solicitation of an offer to purchase, any securities, or
the solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of the securities offered hereby shall, under any circumstances,
create any implication that there has been no change in the affairs of Dresser
or Wheatley since the date hereof or that the information set forth or
incorporated by reference herein is correct as of any time subsequent to its
date.
---------------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATE HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JULY 6, 1994.
<PAGE> 4
AVAILABLE INFORMATION
Dresser and Wheatley are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports and
other information may be inspected and copied or obtained by mail upon the
payment of the Commission's prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington D.C. 20549 and at the following Regional Offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, reports, proxy statements and other
information filed by Dresser can be inspected at the offices of the New York
Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005 and
at the offices of the Pacific Stock Exchange, Incorporated (the "PSE"), 301 Pine
Street, San Francisco, California 94104, on which exchanges the Dresser Common
Stock is listed.
Dresser has filed with the Commission a registration statement on Form S-4
(together with all amendments, supplements and exhibits thereto, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Dresser Common Stock to be issued
pursuant to the Merger Agreement. Except as provided in the Merger Agreement,
the information contained herein with respect to Dresser and its subsidiaries
has been provided by Dresser and the information with respect to Wheatley and
its subsidiaries has been provided by Wheatley. The Proxy Statement/Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. The Registration Statement and any
amendments hereto, including exhibits filed as a part thereof, are available for
inspection and copying as set forth above. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated in this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, UPON REQUEST FROM, IN
THE CASE OF DOCUMENTS RELATING TO DRESSER, REBECCA R. MORRIS, VICE PRESIDENT -
CORPORATE COUNSEL AND SECRETARY, DRESSER INDUSTRIES, INC., 2001 ROSS AVENUE,
DALLAS, TEXAS 75201, TELEPHONE NUMBER (214) 740-6000, AND IN THE CASE OF
DOCUMENTS RELATING TO WHEATLEY, MICHAEL D. REYNOLDS, VICE PRESIDENT - HUMAN
RESOURCES AND SECRETARY, WHEATLEY TXT CORP., 6750 S. 57TH W. AVENUE, TULSA,
OKLAHOMA 74131, TELEPHONE NUMBER (918) 446-4551. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JULY 29, 1994.
Dresser and Wheatley hereby undertake to provide, without charge, to each
person, including any beneficial owner of Wheatley Common Stock, to whom a copy
of this Proxy Statement/Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any and all of the documents referred to
below which have or may be incorporated herein by reference, other than exhibits
to such documents, unless such exhibits are specifically incorporated herein by
reference. Requests for such documents should be directed to one of the persons
indicated in the immediately preceding paragraph.
2
<PAGE> 5
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are hereby incorporated herein by reference:
(1) Dresser's Annual Report on Form 10-K for its fiscal year ended
October 31, 1993.
(2) Dresser's Quarterly Report on Form 10-Q for the period ended
January 31, 1994.
(3) Dresser's Quarterly Report on Form 10-Q for the period ended
April 30, 1994, as amended by Amendment No. 1 to such Quarterly Report on
Form 10-Q/A dated June 24, 1994.
(4) Dresser's Current Reports on Form 8-K dated December 9, 1993,
December 29, 1993 and January 28, 1994.
(5) Dresser's Current Report on Form 8-K dated January 21, 1994, as
amended by Amendment No. 1 to such Current Report on Form 8-K/A dated March
10, 1994.
(6) Annual Report of Baroid Corporation ("Baroid") on Form 10-K for
its fiscal year ended December 31, 1993.
(7) Baroid's Current Reports on Form 8-K dated January 14, 1994 and
January 18, 1994.
(8) Baroid's prospectus dated April 16, 1993, filed pursuant to Rule
424(b) under the Securities Act.
(9) The description of the Dresser Stock Purchase Rights, including a
description of the Dresser Common Stock (contained in Exhibit 1 to the
Registration Statement on Form 8-A filed by Dresser with the Commission
August 30, 1990, as amended by Amendment No. 1 on Form 8 filed with the
Commission on October 3, 1990).
(10) Wheatley's Annual Report on Form 10-K for its fiscal year ended
February 28, 1994, as amended by Amendment No. 1 on Form 10-K/A dated June
13, 1994.
(11) Wheatley's Current Report on Form 8-K dated December 3, 1993, as
amended by Wheatley's Current Report on Form 8-K/A dated January 14, 1994.
(12) Wheatley's Current Reports on Form 8-K dated December 31, 1993
and June 2, 1994.
All documents and reports filed by Dresser or Wheatley pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from the
respective dates of filing of such documents or reports. All information
appearing in this Proxy Statement/Prospectus or in any document incorporated
herein by reference is not necessarily complete and is qualified in its entirety
by the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference and should be read together
with such information and documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein (or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Proxy Statement/Prospectus except as so modified or
superseded.
3
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 2
SUMMARY............................................................................... 5
THE COMPANIES......................................................................... 12
THE MEETING........................................................................... 13
Special Meeting..................................................................... 13
Quorum.............................................................................. 13
Vote Required....................................................................... 13
Record Date; Stock Entitled to Vote................................................. 13
Voting of Proxies................................................................... 14
Revocation of Proxies............................................................... 14
Solicitation of Proxies............................................................. 14
Security Ownership of Certain Persons............................................... 14
THE MERGER............................................................................ 15
Merger Consideration................................................................ 15
Adjustments to Merger Consideration................................................. 15
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares.... 15
Stock Exchange Listing.............................................................. 16
Background of the Merger............................................................ 16
Recommendation of the Wheatley Board; Reasons for the Merger........................ 18
Opinion of Financial Advisor........................................................ 19
Effective Time of the Merger........................................................ 23
Certain Federal Income Tax Consequences............................................. 23
Anticipated Accounting Treatment.................................................... 24
Certain Regulatory Matters.......................................................... 25
Rights of Dissenting Stockholders................................................... 25
Wheatley Employee Matters........................................................... 25
Resales of Dresser Common Stock; Registration Rights................................ 26
Interests of Certain Persons in the Merger.......................................... 27
CERTAIN PROVISIONS OF THE MERGER AGREEMENT............................................ 29
Conditions to the Merger............................................................ 29
Representations and Warranties...................................................... 30
Certain Covenants; Conduct of Business of Wheatley.................................. 31
Additional Agreements............................................................... 33
Expenses and Termination Fee........................................................ 34
Indemnification..................................................................... 34
Amendment, Waiver and Termination................................................... 35
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 37
DESCRIPTION OF DRESSER CAPITAL STOCK.................................................. 54
DESCRIPTION OF DRESSER STOCK PURCHASE RIGHTS.......................................... 54
COMPARISON OF STOCKHOLDER RIGHTS...................................................... 57
Preferred Stock..................................................................... 57
No Preemptive Rights................................................................ 57
Limitations on Specified Transactions............................................... 57
Liability of Directors and Officers................................................. 58
Vacancies on the Board of Directors................................................. 58
Restriction on Payment of Greenmail................................................. 58
PROPOSALS OF STOCKHOLDERS............................................................. 59
MANAGEMENT AND OTHER INFORMATION...................................................... 59
LEGAL MATTERS......................................................................... 59
EXPERTS............................................................................... 59
APPENDIX I -- AGREEMENT AND PLAN OF MERGER............................................ I-1
APPENDIX II -- OPINION OF SIMMONS & COMPANY INTERNATIONAL............................. II-1
</TABLE>
4
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained or
incorporated by reference in this Proxy Statement/Prospectus and the Appendices
hereto. Stockholders are urged to carefully read this Proxy Statement/Prospectus
and the Appendices hereto in their entirety.
THE SPECIAL MEETING
Meeting of Stockholders.... The Special Meeting will be held on Friday, August
5, 1994 at 9:00 a.m. Houston time at the Four
Seasons Hotel, 1300 Lamar Street, Houston, Texas.
Matter to be Considered at
the Special Meeting........ At the Special Meeting, stockholders of Wheatley
will be asked to approve and adopt the Merger
Agreement and the Merger. Pursuant to the terms
of the Merger Agreement, upon consummation of the
Merger, each share of Wheatley Common Stock will
be converted into 0.7 shares of Dresser Common
Stock. The Conversion Number is subject to
certain adjustments as described under "The
Merger -- Adjustments to Merger Consideration."
For additional information relating to the
Special Meeting, see "The Meeting."
Quorum; Vote Required...... The presence, in person or by proxy, at the Special
Meeting of the holders of a majority of the
outstanding shares of Wheatley Common Stock is
necessary to constitute a quorum at the meeting.
Adoption and approval of the Merger Agreement
requires the affirmative vote of the holders of a
majority of the outstanding shares of Wheatley
Common Stock. See "The Meeting -- Vote Required"
and "Certain Provisions of the Merger
Agreement -- Conditions to the Merger."
Record Date................ Only stockholders of record of Wheatley Common
Stock at the close of business on June 29, 1994
are entitled to notice of and to vote at the
Special Meeting. On that date, there were
11,823,373 shares of Wheatley Common Stock
outstanding, with each share of Wheatley Common
Stock entitled to cast one vote with respect to
the Merger Agreement.
Security Ownership of
Management............... Directors and executive officers of Wheatley who
had the right to vote, as of the record date,
approximately 4% of the outstanding Wheatley
Common Stock as a group have indicated that they
intend to vote in favor of the proposal to
approve and adopt the Merger Agreement. See "The
Meeting -- Security Ownership of Certain
Persons."
THE MERGER
Effect of the Merger....... Pursuant to the Merger, WAC would merge with and
into Wheatley, Wheatley would continue as the
surviving corporation (sometimes referred to as
the "Surviving Corporation"), and Wheatley would
become a wholly owned subsidiary of Dresser.
Pursuant to the Merger, each issued and
outstanding share of Wheatley Common Stock would
be automatically converted into 0.7 shares of
Dresser Common Stock. The Conversion Number is
subject to adjustment in the event the Average
Daily Price (as defined herein) of Dresser Common
Stock is either less than $20 or greater than $27
during a specified period prior
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<PAGE> 8
to the Special Meeting. See "The
Merger -- Adjustments to Merger Consideration."
Recommendation of the
Wheatley Board and
Reasons
for the Merger........... The Board of Directors of Wheatley believes that
the terms of the Merger are fair to and in the
best interests of its stockholders and has
unanimously approved the Merger Agreement and the
Merger. The Board of Directors of Wheatley
unanimously recommends that Wheatley stockholders
vote to adopt and approve the Merger Agreement.
See "The Merger -- Recommendation of the Wheatley
Board; Reasons for the Merger."
Wheatley's Board of Directors believes the Merger
is an opportunity for Wheatley's stockholders to
participate in a combined enterprise that has
significantly greater business and financial
resources than Wheatley would have absent the
Merger and to receive, on a tax-deferred basis, a
premium for their Wheatley Common Stock based on
recent market prices. See "The
Merger -- Background of the Merger" and
"-- Recommendation of the Wheatley Board of
Directors; Reasons for the Merger."
Opinion of Financial
Advisor.................... Simmons & Company International ("SCI") has
delivered its written opinion to the Board of
Directors of Wheatley dated May 27, 1994, that,
as of the date of such opinion, the consideration
to be received by the holders of Wheatley Common
Stock in the Merger was fair from a financial
point of view.
For information on the assumptions made, matters
considered and limits of the review by SCI in
connection with its opinion, see "The
Merger -- Opinion of Financial Advisor."
Stockholders are urged to read in its entirety
the opinion of SCI, attached as Appendix II to
this Proxy Statement/Prospectus.
Effective Time of the
Merger..................... The Merger will become effective upon the filing of
a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State
of Delaware, or, if agreed to by the parties, at
such time thereafter as may be provided in the
Certificate of Merger (the "Effective Time"). The
filing will be made as soon as practicable after
the closing of the Merger (the "Closing"). The
Merger Agreement provides that the Closing is to
occur no later than two days after all of the
conditions to the Merger contained in the Merger
Agreement have been satisfied or waived, unless
another time is agreed to by the parties. See
"Certain Provisions of the Merger
Agreement -- Conditions to the Merger."
Conditions to the Merger... The obligations of Dresser and Wheatley to
consummate the Merger are subject to certain
conditions including: (i) obtaining the approval
of the stockholders of Wheatley; (ii) the
expiration or termination of the relevant waiting
period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR
Act"); (iii) no order being entered in any action
or proceeding or other legal restraint or
prohibition preventing the consummation of the
Merger; (iv) the receipt by each party of various
certificates, consents, reports and approvals
from the other parties to the Merger and from
third parties; (v) the accuracy in all material
respects of the representations and
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<PAGE> 9
warranties of each party and compliance with all
covenants and conditions by each party; (vi) the
effectiveness of the Registration Statement of
which this Proxy Statement/Prospectus is a part;
and (vii) approval for listing on the NYSE,
subject to official notice of issuance, of the
Dresser Common Stock to be issued in connection
with the Merger. Dresser and Wheatley anticipate
that substantially all the above conditions
(other than Wheatley stockholder approval) will
be satisfied prior to the Special Meeting. Either
Dresser or Wheatley may extend the time for
performance of any of the obligations of the
other party or may waive compliance with those
obligations. See "The Merger -- Certain
Regulatory Matters" and "Certain Provisions of
the Merger Agreement -- Conditions to the
Merger."
Amendment, Waiver and
Termination.............. The Merger Agreement may be terminated at any time
prior to the Effective Time by mutual consent of
Dresser and Wheatley, or by either party if (i)
the Merger shall not have been consummated on or
before October 31, 1994, (ii) any court or
governmental entity shall have prohibited
consummation of the Merger, (iii) the approval of
stockholders of Wheatley required for
consummation of the Merger shall not have been
obtained at the Special Meeting, or (iv) the
Board of Directors of Wheatley shall have
approved or recommended any other proposal for
the acquisition of Wheatley that is financially
superior to the Merger. The Merger Agreement may
be terminated by Wheatley if the Average Daily
Price of Dresser Common Stock is less than $18
per share, or by Dresser if the Average Daily
Price is greater than $29 per share. In addition,
either Dresser or Wheatley may extend the time
for performance of any of the obligations of the
other party or may waive conditions with respect
to those obligations. See "The Merger -- Certain
Regulatory Matters" and "Certain Provisions of
the Merger Agreement -- Conditions to the
Merger."
Appraisal Rights........... Under Delaware law, Wheatley's stockholders will
not be entitled to any appraisal or dissenter's
rights in connection with the Merger. See "The
Merger -- Rights of Dissenting Stockholders."
Certain Federal Income Tax
Consequences............. The Merger is intended to qualify as a
reorganization for federal income tax purposes so
that no gain or loss would be recognized by
Dresser, WAC or Wheatley, and no gain or loss
would be recognized by Wheatley's stockholders
(except in respect of cash received in lieu of
fractional shares). Wheatley has received an
opinion of counsel regarding the federal income
tax consequences of the Merger, including an
opinion that the Merger will constitute a
reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). See "The Merger -- Certain
Federal Income Tax Consequences."
Anticipated Accounting
Treatment................ The Merger is expected to qualify as a "pooling of
interests" for accounting and financial reporting
purposes. See "The Merger -- Anticipated
Accounting Treatment."
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PRICE RANGE OF COMMON STOCK
Dresser Common Stock is traded both on the NYSE and the PSE under the
symbol "DI." Wheatley Common Stock is quoted on the NASDAQ National Market
System under the symbol "WTXT."
The following table sets forth the closing price per share of Dresser
Common Stock and Wheatley Common Stock on the NYSE and the NASDAQ National
Market System, respectively, and the equivalent per share price (as explained
below) of Wheatley Common Stock on May 20, 1994, the business day preceding
public announcement of the Merger, and on July 1, 1994:
<TABLE>
<CAPTION>
DRESSER WHEATLEY EQUIVALENT
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK PER SHARE PRICE
------------------------------------ ------------ ------------ ---------------
<S> <C> <C> <C>
May 20, 1994........................ $23.00 $11.75 $ 16.10
July 1, 1994........................ $20.63 $14.13 $ 14.44
</TABLE>
The equivalent per share price of a share of Wheatley Common Stock
represents the closing price of a share of Dresser Common Stock on such date
multiplied by the Conversion Number of 0.7 shares of Dresser Common Stock for
each share of Wheatley Common Stock. The Conversion Number is subject to
adjustment under certain circumstances. See "The Merger -- Adjustments to Merger
Consideration."
Stockholders are advised to obtain current market quotations for Dresser
Common Stock and Wheatley Common Stock. No assurance can be given as to the
market price of Dresser Common Stock or Wheatley Common Stock at, or in the case
of Dresser Common Stock, after the effective time of the Merger.
THE COMPANIES
Dresser supplies products and services for industries involved in petroleum
and natural gas exploration and development, energy processing and conversion,
engineering services, and mining and selected industrial activities. Typically,
Dresser's products and services are technologically complex and require a high
degree
of expertise in design, manufacturing and marketing. Dresser's principal
executive offices are located at 2001 Ross Avenue, Dallas, Texas 75201, and its
telephone number is (214) 740-6000. See "The Companies -- Dresser Industries,
Inc."
Wheatley designs, manufactures, markets and distributes equipment used
primarily in the production of oil and natural gas. Wheatley's product lines
include an extensive selection of pumps, valves and measurement and control
equipment. Wheatley's brand names include Wheatley, Texsteam, Axelson, GASO,
Clif Mock and Tom Wheatley. Wheatley's principal executive offices are located
at 6750 S. 57th W. Avenue, Tulsa, Oklahoma 74131, and its telephone number is
(918) 446-4551. See "The Companies -- Wheatley TXT Corp."
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SELECTED FINANCIAL INFORMATION
The following tables set forth selected historical financial information
for Dresser for each of the five fiscal years in the period ended October 31,
1993 and the six months ended April 30, 1994 and 1993, and for Wheatley for each
of the four fiscal years in the period ended February 28, 1994 and certain prior
periods. Such data should be read in conjunction with the consolidated financial
statements of Dresser and Wheatley and the related notes thereto included in the
documents incorporated by reference in this Proxy Statement/Prospectus. Selected
unaudited financial data for the six months ended April 30, 1994 and 1993 for
Dresser include all adjustments (consisting only of normally recurring accruals)
that Dresser considers necessary for a fair presentation of consolidated
operating results for such interim periods. Results for the interim periods are
not necessarily indicative of results for the full year.
On January 21, 1994, a wholly owned subsidiary of Dresser merged (the
"Baroid Merger") with Baroid. Dresser issued 0.40 shares of Dresser Common Stock
for each share of outstanding Baroid common stock, and Baroid became a wholly
owned subsidiary of Dresser. The Baroid Merger has been accounted for as a
pooling of interests. Dresser, as used in the selected financial information,
refers to Dresser and its subsidiaries including Baroid. All Dresser financial
information has been restated to reflect the Baroid Merger.
Further information about the Baroid Merger is available from documents
incorporated by reference in this Proxy Statement/Prospectus. Dresser's Current
Report on Form 8-K dated January 21, 1994, as amended by Dresser's Form 8-K/A
dated March 10, 1994, contains supplemental consolidated financial statements
and notes reflecting the Baroid Merger.
SELECTED HISTORICAL FINANCIAL INFORMATION OF DRESSER
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
------------------ ---------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales and service revenues............... $2,636.0 $2,370.5 $5,043.8 $4,551.8 $4,681.1 $4,310.9 $3,761.8
Earnings from continuing operations before
non-recurring and extraordinary items...... 92.2 77.4 204.7 142.2 161.6 164.7 155.8
Gains on sales of interests in Western
Atlas and M-I Drilling Fluids............ 148.3 -- -- -- -- -- --
Litigation (settlement) and recoveries..... 5.6 (40.9) (41.0) -- -- -- --
Restructuring charges...................... -- (4.3) (35.5) (50.0) (24.0) -- --
--------- --------- --------- --------- --------- --------- ---------
Earnings from continuing operations before
extraordinary items........................ 246.1 32.2 128.2 92.2 137.6 164.7 155.8
Per share.................................. 1.41 0.19 0.74 0.54 0.80 0.97 0.98
Cash dividends declared...................... 55.1 49.5 100.0 96.0 95.5 85.5 70.0
Per share.................................. 0.32 0.30 0.60 0.60 0.60 0.53 0.45
Total assets (at end of period).............. 4,123.5 4,163.4 4,370.7 3,833.3 3,804.7 3,790.2 3,391.8
Long-term debt (at end of period)............ 459.9 491.1 486.7 142.5 262.0 379.1 281.5
Total shareholders' investment (at end of
period).................................... 1,425.6 1,199.6 1,213.8 1,240.2 2,066.8 2,087.9 1,782.6
</TABLE>
9
<PAGE> 12
SELECTED HISTORICAL FINANCIAL INFORMATION OF WHEATLEY
<TABLE>
<CAPTION>
WHEATLEY
----------------------------------------------------------------------------- PREDECESSOR
FROM COMPANY(1)
INCEPTION ------------
YEARS ENDED (NOVEMBER 1, JUNE 1,
------------------------------------------------------------ 1989) TO 1989 TO
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, OCTOBER 31,
1994(2) 1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------- ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net sales and service revenues.... $ 97.5 $ 73.6 $ 88.3 $ 67.0 $12.9 $ 13.5
Earnings from continuing
operations before extraordinary
item............................ 6.4 4.4 7.2 1.2 0.2 (.3)
Per Share....................... 0.72 0.50 0.90 0.26 0.03
Common dividends declared......... 0.4 0.3 0.2 -- --
Per share....................... 0.04 0.04 0.02 -- --
Total assets (at end of period)... 178.6 73.1 72.8 65.5 39.7 22.8
Long-term debt (at end of
period)......................... 77.4 6.1 7.2 26.4 15.7
Total shareholders' investment (at
end of period).................. 60.9 54.6 50.8 14.2 7.4 19.3
</TABLE>
- ---------------
(1) The predecessor company, Wheatley Pump & Valve, Inc. ("WPV"), was a wholly
owned subsidiary of Moorco International Inc. prior to its acquisition by
Wheatley. As a wholly owned subsidiary, WPV was allocated interest and
other expenses by its parent, and no dividends were paid by WPV other than
immediately prior to its sale to Wheatley.
(2) The balance sheet data of Wheatley as of February 28, 1994 does not give pro
forma effect to the public offering of Wheatley Common Stock in March 1994
(including the issuance by Wheatley of 3,000,000 shares of Wheatley Common
Stock for net proceeds of $29.8 million and the application of such net
proceeds to repay debt). On a pro forma basis, giving effect to the
offering, at February 28, 1994 long-term debt and total shareholders'
investment were $48.6 million and $90.7 million, respectively.
10
<PAGE> 13
COMPARATIVE PER SHARE DATA
The following tables present comparative per share information for Dresser
and Wheatley on a historical basis and on a pro forma basis assuming the Merger
had been effective during the periods presented. Subsequent to October 31, 1993,
Dresser sold its 29.5% interest in Western Atlas International, Inc. ("Western
Atlas") and realized a gain of $.84 per share and its 64% interest in M-I
Drilling Fluids Company ("M-I Drilling Fluids") and realized a gain of $.01 per
share. The Dresser Pro Forma per share information presented for the year ended
October 31, 1993 and the six month periods ended April 30, 1994 and 1993
reflects Dresser's per share information excluding Western Atlas and M-I
Drilling Fluids and the gains on sale of those operations. The pro forma
information has been prepared giving effect to the Merger as a pooling of
interests. The tables should be read in conjunction with the financial
statements of Dresser and Wheatley incorporated by reference in this Proxy
Statement/Prospectus and the pro forma financial statements included elsewhere
herein. See "Unaudited Pro Forma Combined Condensed Financial Statements."
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
----------------------------------------------------------------------------
1994 1993
------------------------------------- -------------------------------------
PRO FORMA PRO FORMA
DRESSER & DRESSER &
PRO FORMA EQUIVALENT PRO PRO FORMA EQUIVALENT PRO
HISTORICAL DRESSER FORMA WHEATLEY HISTORICAL DRESSER FORMA WHEATLEY
---------- --------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share of Dresser Common Stock:
Earnings from continuing operations
before extraordinary item............ $ 1.41 $0.55 $ 0.56 $ 0.19 $0.22 $ 0.23
Cash dividends......................... 0.32 0.32 0.30 0.30
Book value............................. 8.13 8.26
Per Share of Wheatley Common Stock(a):
Earnings from continuing operations
before extraordinary item............ $ 0.42 $ 0.39 $ 0.25 $ 0.16
Cash dividends......................... 0.02 0.22 0.02 0.21
Book value............................. 6.91 5.78
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------------------------------------------------------------
1993 1992 1991
---------------------------------------- -------------------------- --------------------------
PRO FORMA PRO FORMA PRO FORMA
DRESSER & DRESSER & DRESSER &
PRO FORMA EQUIVALENT PRO EQUIVALENT PRO EQUIVALENT PRO
HISTORICAL DRESSER FORMA WHEATLEY HISTORICAL FORMA WHEATLEY HISTORICAL FORMA WHEATLEY
------------- --------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share of Dresser
Common Stock:
Earnings from
continuing
operations before
extraordinary
item............... $0.74 $0.71 $ 0.74 $ 0.54 $ 0.55 $ 0.80 $ 0.80
Cash dividends....... 0.60 0.60 0.60 0.60 0.60 0.60
Per Share of Wheatley
Common Stock(a):
Earnings from
continuing
operations before
extraordinary
item............... $0.56 $ 0.52 $ 0.76 $ 0.39 $ 0.56 $ 0.56
Cash dividends....... 0.04 0.42 0.04 0.42 -- 0.42
</TABLE>
- ---------------
Notes:
(a) Equivalent pro forma information for Wheatley is presented on an equivalent
per share basis assuming an Exchange Ratio of 0.7 shares of Dresser Common
Stock for each share of Wheatley Common Stock. The equivalent pro forma per
share information for Wheatley reflecting the minimum and maximum Exchange
Ratios of .6750 and .7368, respectively, is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
----------------- -----------------------------
1994 1993 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Equivalent pro forma per share of Wheatley Common Stock:
Minimum:
Earnings from continuing operations before extraordinary
item........................................................ $0.38 $0.16 $0.50 $0.37 $0.54
Cash dividends................................................ 0.22 0.20 0.41 0.41 0.41
Book value.................................................... 5.58
Maximum:
Earnings from continuing operations before extraordinary
item........................................................ $0.41 $0.17 $0.55 $0.41 $0.59
Cash dividends................................................ 0.24 0.22 0.44 0.44 0.44
Book value.................................................... 6.09
</TABLE>
11
<PAGE> 14
THE COMPANIES
DRESSER INDUSTRIES, INC.
Dresser supplies products and services for industries involved in petroleum
and natural gas exploration and development, energy processing and conversion,
engineering services, and mining and selected industrial activities. Typically,
Dresser's products and services are technologically complex and require a high
degree of expertise in design, manufacturing and marketing.
Dresser's operations are divided into three industry segments: Oilfield
Services; Hydrocarbon Processing Industry; and Engineering Services.
Oilfield Services. This segment supplies products and services essential to
oil and gas exploration, drilling and production, including drilling fluid
systems, drilling and coring bits, directional and measurement-while-drilling
tools and services and production tools. The segment also performs pipecoating
services for oil and gas pipelines located above and below ground as well as
underwater and diving and underwater engineering services for the inspection,
construction, maintenance and repair of offshore drilling rigs, platforms,
pipelines and other subsea structures.
Hydrocarbon Processing Industry. This segment designs, manufactures and
markets highly engineered products and systems for energy producers,
transporters, processors, distributors and users throughout the world. Products
and systems of this segment include compressors, turbines, electrical generator
systems, pumps, power systems, measurement and control devices, and gasoline
dispensing systems.
Engineering Services. Dresser's wholly owned subsidiary, The M.W. Kellogg
Company, provides engineering, construction and related services, primarily to
the hydrocarbon processing industries.
WAC is a wholly owned subsidiary of Dresser incorporated in Delaware in May
1994 for purposes of the Merger. WAC engages in no other business. Dresser's
principal executive offices are located at 2001 Ross Avenue, Dallas, Texas 75201
and its telephone number is (214) 740-6000.
WHEATLEY TXT CORP.
Wheatley, headquartered in Tulsa, Oklahoma, designs, manufactures, markets
and distributes equipment used primarily in the production of oil and natural
gas. Wheatley's product lines include an extensive selection of pumps, valves
and measurement and control equipment. Wheatley's brand names include Wheatley,
Texsteam, Axelson, GASO, Clif Mock and Tom Wheatley. Wheatley's products are
distributed through a network of Company sales and service centers, third-party
supply stores, distributors, sales representatives and agents.
Wheatley has recently acquired the following well-established oil and gas
production equipment manufacturers: Axelson, Inc. ("Axelson"), Tom Wheatley
Valve Company ("Tom Wheatley") and Clif Mock Company ("Clif Mock"). The
acquisition of Axelson resulted in Wheatley's expansion into the manufacturing,
marketing, distribution and servicing of downhole rod pumps and related sucker
rods and surface safety equipment. The acquisition of Tom Wheatley expanded
Wheatley's valve line by adding a number of engineered check and ball valve
products, including products with pipeline transmission and subsea applications,
and the acquisition of Clif Mock provided Wheatley with measurement, control and
sampling products. The Axelson and Clif Mock acquisitions significantly
increased Wheatley's marketing, distribution and servicing capabilities by
adding approximately 70 sales and service centers located throughout the United
States and Canadian oilfields.
Pump Products. Wheatley's pump products consist of three principal product
lines: downhole rod pumps and related sucker rods, high pressure reciprocating
pumps and chemical injection pumps. Wheatley's downhole (or subsurface) rod
pumps and related sucker rods are used primarily to lift oil from an underground
producing formation through the production tubing to the surface. Wheatley's
high pressure reciprocating pumps, which transfer or inject low to medium
volumes of liquids at medium to high pressures, are used in a variety of oil and
natural gas production applications, such as secondary oil recovery, produced
water reinjection, glycol circulation and well servicing. These pumps are also
used in petroleum transportation and in
12
<PAGE> 15
certain industrial applications, including salt water desalinization and power
generation. Wheatley's chemical injection pumps are small metering pumps that
precisely control the volume and pressure of chemicals delivered and are
typically used to inject small amounts of specialty chemicals (such as corrosion
inhibitors, anti-foam agents, antifreezes or emulsion breakers) into producing
wells and flowlines.
Valves and Safety Equipment. Wheatley's valve products, safety equipment
and accessories primarily include check valves, block (or shut-off) valves and
surface safety equipment. Wheatley's valve products are used primarily in oil
and natural gas production, gathering and transportation. Wheatley's check
valves allow gas or fluid flow in only one direction and prevent flow reversal
in the event of sudden pressure changes, such as from the rupture of a gathering
line or pipeline. Wheatley's block valves include plug, gate and ball valves
used to turn on and off the flow of gas and fluids. Wheatley's surface safety
products include surface safety valves, wellhead safety shut-down valves, safety
system control units and gate valve actuators, and are generally used to control
and monitor high pressures and provide emergency shut-down mechanisms. Wheatley
also manufactures valves, including engineered high-alloy specialty valves, for
use in various industrial applications.
Measurement and Control Equipment. Wheatley's other products consist
principally of flow meters, measurement equipment, sampling products, actuators
and other controllers and regulators. These products are used primarily to
control and measure the flow of, and record and sample the mixture of,
hydrocarbon gases and liquids or to open, close or position valves and other
devices, generally for valve and factory equipment automation in a variety of
industrial and process applications.
Wheatley's principal executive offices are located at 6750 S. 57th W.
Avenue, Tulsa, Oklahoma 74131, and its telephone number is (918) 446-4551.
THE MEETING
SPECIAL MEETING
The Special Meeting is to be held at the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas on Friday, August 5, 1994, at 9:00 a.m. Houston time.
At the Special Meeting, the stockholders of Wheatley will be asked to
consider and vote upon the adoption and approval of the Merger and the Merger
Agreement under which, among other things, WAC would be merged with and into
Wheatley with Wheatley surviving the Merger, Wheatley would become a wholly
owned subsidiary of Dresser and each outstanding share of Wheatley Common Stock
would be converted into 0.7 shares of Dresser Common Stock, together with the
corresponding number of Dresser Stock Purchase Rights. The Conversion Number is
subject to adjustment in certain circumstances described herein. See "The
Merger -- Adjustments to the Merger Consideration."
The Wheatley Board has unanimously approved the Merger Agreement and
recommends a vote FOR adoption and approval of the Merger Agreement.
QUORUM
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Wheatley Common Stock at the Special Meeting is necessary
to constitute a quorum at the Special Meeting.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
Wheatley Common Stock is required to adopt and approve the Merger and the Merger
Agreement.
RECORD DATE; STOCK ENTITLED TO VOTE
The Wheatley Board has established June 29, 1994 as the date to determine
those record holders of Wheatley Common Stock entitled to notice of and to vote
at the Special Meeting. On that date, there were
13
<PAGE> 16
11,823,373 shares of Wheatley Common Stock outstanding, with each share entitled
to one vote with respect to the Merger Agreement.
VOTING OF PROXIES
Shares represented by all properly executed proxies received prior to the
Special Meeting will be voted at the meeting in the manner specified by the
holders thereof. Proxies that do not contain voting instructions will be voted
FOR adoption and approval of the Merger Agreement at the Special Meeting. It is
not expected that any matter other than those referred to herein will be brought
before the Special Meeting. If, however, other matters are properly presented,
the persons named as proxies will vote in accordance with their judgment with
respect to such matters.
If a holder of Wheatley Common Stock does not return a signed proxy card,
his or her shares will not be voted and thus will have the effect of a vote
against the Merger Agreement at the Special Meeting unless such holder attends
and votes at the Special Meeting. Abstentions and broker non-votes will have the
effect of a vote against the Merger Agreement.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
REVOCATION OF PROXIES
Any holder of Wheatley Common Stock has the unconditional right to revoke
his or her proxy at any time prior to the voting thereof at the Special Meeting
by (i) filing a written revocation with the Secretary of Wheatley prior to the
voting of such proxy, (ii) giving a duly executed proxy bearing a later date, or
(iii) attending the Special Meeting and voting in person. Attendance by a
stockholder at the Special Meeting will not in and of itself revoke his or her
proxy.
SOLICITATION OF PROXIES
Solicitation of proxies for use at the Special Meeting may be made in
person or by mail, telephone, telecopy or telegram. Wheatley will bear the cost
of the solicitation of proxies. In addition to solicitation by mail, the
directors, officers and employees of Wheatley may solicit proxies from
stockholders by telephone, telecopy or telegram or in person. Wheatley has
requested banking institutions, brokerage firms, custodians, trustees, nominees
and fiduciaries to forward solicitation materials to the beneficial owners of
Wheatley Common Stock held of record by such entities, and Wheatley will, upon
the request of such record holders, reimburse reasonable forwarding expenses. In
addition, Wheatley has retained Georgeson & Company Inc. to assist in the
solicitation of proxies. Wheatley anticipates that it will incur total fees of
approximately $5,000, plus reimbursement of certain out-of-pocket expenses, for
this service.
SECURITY OWNERSHIP OF CERTAIN PERSONS
As of June 29, 1994, Wheatley's Directors and executive officers as a group
may be deemed to own beneficially (excluding shares purchasable upon exercise of
stock options) 4% of the outstanding shares of Wheatley Common Stock. Directors
and executive officers of Wheatley who had the right to vote, as of the record
date, approximately 4% of the outstanding Wheatley Common Stock have indicated
that they intend to vote in favor of the proposal to approve and adopt the
Merger Agreement.
14
<PAGE> 17
THE MERGER
MERGER CONSIDERATION
Pursuant to the Merger Agreement, at the Effective Time, WAC will merge
with and into Wheatley and each share of Wheatley Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Wheatley Common Stock owned by Wheatley as treasury stock and shares of Wheatley
Common Stock owned by Dresser, WAC or any wholly owned subsidiary of Dresser or
Wheatley, which are to be canceled in accordance with the Merger Agreement) will
be converted into 0.7 shares of Dresser Common Stock, together with the
corresponding number of Dresser Stock Purchase Rights, provided that the Average
Daily Price (as hereinafter defined) of the Dresser Common Stock is at least $20
but not more than $27. In addition, each outstanding option ("Wheatley Stock
Option") to purchase Wheatley Common Stock under Wheatley's 1990 Stock Option
Plan (the "Wheatley Stock Option Plan") shall be assumed by Dresser. See "The
Merger -- Wheatley Employee Matters." Dresser will also be bound by the
conversion provision of Wheatley's $1 million note issued in connection with the
Clif Mock acquisition (the "Wheatley Convertible Note"), such that the Wheatley
Convertible Note will be convertible into Dresser Common Stock in accordance
with the terms of the Wheatley Convertible Note.
Based upon the capitalization of Dresser and Wheatley as of May 15, 1994,
immediately after the Effective Time, the persons who are, prior to the
Effective Time, stockholders of Wheatley will hold approximately 5% of the
outstanding Dresser Common Stock.
ADJUSTMENTS TO MERGER CONSIDERATION
In the event the average of the per share Daily Prices (as hereinafter
defined) on the NYSE of Dresser Common Stock (as reported in the NYSE Composite
Transactions) during the 20 consecutive trading days ending on the fifth trading
day prior to the Special Meeting (the "Average Daily Price") is less than $20.00
but equal to or greater than $18.00, then the Conversion Number shall be deemed
to be that fraction, rounded to the nearest ten thousandth, or if there shall
not be a nearest ten thousandth, to the next higher ten thousandth, equal to the
quotient obtained by dividing (x) $14.00 by (y) the product of 0.5 times the sum
of (a) the Average Daily Price plus (b) $20.00; and in the event such Average
Daily Price is greater than $27.00 but equal to or less than $29.00, then the
Conversion Number shall be deemed to be that fraction, rounded to the nearest
ten thousandth, or if there shall not be a nearest ten thousandth, to the next
lower ten thousandth, equal to the quotient obtained by dividing (x) $18.90 by
(y) the product of 0.5 times the sum of (a) the Average Daily Price plus (b)
$27.00; provided, however, that the Conversion Number shall in no event be
greater than 0.7368 nor less than 0.6750; provided, further, that if the Average
Daily Price is less than $18.00 or greater than $29.00, then the Conversion
Number shall be 0.7368 or 0.6750, respectively. In the event the Average Daily
Price is greater than $29.00, Dresser will have the right to terminate the
Merger Agreement, and in the event the Average Daily Price is less than $18.00,
Wheatley will have the right to terminate the Merger Agreement. See "Certain
Provisions of the Merger Agreement -- Amendment, Termination and Waiver." The
term "Daily Price" shall mean the volume weighted average of the selling prices
on the day in question. All references to the Dresser Common Stock to be
received pursuant to the Merger shall be deemed to include the Dresser Stock
Purchase Rights. All such shares of Wheatley Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the shares of Dresser Common Stock and cash in lieu of fractional shares
of Dresser Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate, without interest.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Wheatley Common Stock into Dresser Common Stock will
occur automatically at the Effective Time.
As soon as practicable after the Effective Time, Harris Trust Co. of New
York or another bank or trust company designated by Dresser and reasonably
acceptable to Wheatley, in its capacity as Exchange Agent
15
<PAGE> 18
(the "Exchange Agent"), will send a transmittal form to each Wheatley
stockholder. The transmittal form will contain instructions with respect to the
surrender of certificates representing Wheatley Common Stock to be exchanged for
certificates representing Dresser Common Stock.
WHEATLEY STOCKHOLDERS SHOULD NOT FORWARD WHEATLEY STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS. WHEATLEY STOCKHOLDERS
SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Until the certificates representing Wheatley Common Stock are surrendered
for exchange after the consummation of the Merger, holders of such certificates
will not be paid dividends on the Dresser Common Stock into which such shares
have been converted. When such certificates are surrendered, any unpaid
dividends will be paid without interest. For all other purposes, however, each
certificate that represents shares of Wheatley Common Stock at the Effective
Time will be deemed to evidence ownership of the shares of Dresser Common Stock
into which those shares have been converted by virtue of the Merger.
All shares of Dresser Common Stock issued upon conversion of shares of
Wheatley Common Stock will be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Wheatley Common Stock.
No fractional shares of Dresser Common Stock will be issued to any Wheatley
stockholder upon consummation of the Merger. For each fractional share that
would otherwise be issued, Dresser will pay by check an amount equal to a pro
rata portion of the proceeds of the sale by the Exchange Agent of shares of
Dresser Common Stock representing the aggregate of all such fractional shares
and the aggregate dividends or other distributions that are payable with respect
to such shares of Dresser Common Stock. Such sale is to be executed by the
Exchange Agent as soon as practicable after the Effective Time at then
prevailing prices on the NYSE.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of Dresser Common Stock to
be issued in the Merger be authorized for listing on the NYSE, subject to
official notice of issuance.
BACKGROUND OF THE MERGER
The past few years have been marked by changes in the competitive
environment of the oil and gas industry, trending toward competitors that are
able to provide an integrated and comprehensive array of products and services
in the oilfield. Dresser and Wheatley believe several recent business
combinations within the industry have resulted from the strategy aimed at the
integration of the products and services of separate companies into a combined
company better positioned to provide integrated solutions to the needs of
customers. These transactions have included the three largest oil service
companies, Schlumberger Limited, Baker Hughes Incorporated and Halliburton Co.
During this period, both Dresser and Wheatley have reviewed their
individual strategic alternatives and have taken various actions to increase
their competitiveness by increasing their product offerings and, in Dresser's
case, by expanding its ability to provide more integrated services. With respect
to Dresser, these actions included, among others, Dresser's 1994 acquisition of
Baroid, a provider of performance drilling equipment and services, underwater
services, drilling and completion fluids and drill bits, Dresser's 1993
acquisitions of Bredero Price Holding B.V., a provider of pipe coating for both
onshore and offshore markets, and TK Valve & Manufacturing, Inc., a supplier of
ball valves for oil and gas production and transmission, and Dresser's 1992
acquisition of AVA International, Inc., a provider of tools for completion,
production and workover segments of the oil production industry. With respect to
Wheatley, these actions included, among others, Wheatley's 1993 acquisitions of
Axelson, a provider of downhole rod pumps and related sucker rods and surface
safety equipment, Tom Wheatley, a supplier of check and ball valve products, and
Clif Mock, a supplier of measurement, control and sampling products.
In late March 1994, William E. Bradford, Dresser's President and Chief
Operating Officer, contacted a representative of SCI to explore the possibility
of a business combination of Dresser and Wheatley. At that
16
<PAGE> 19
time, SCI was known to have acted as financial advisor to Wheatley on several
prior occasions. Additional meetings between representatives of Dresser and SCI
were held in April and early May 1994 to discuss further the possibility of such
a transaction.
On May 6, 1994, representatives of SCI first advised Gary L. Rosenthal, the
Chairman of the Board, President and Chief Executive Officer of Wheatley, and L.
E. Simmons, a director of Wheatley, of Dresser's interest in a possible business
combination.
On May 9, 1994, Messrs. Rosenthal and Simmons met with Mr. Bradford and
John J. Murphy, Dresser's Chairman of the Board and Chief Executive Officer, to
discuss an acquisition proposal developed by Dresser. Dresser's proposal
involved a tax-free structure that was expected to be accounted for as a pooling
of interests. Messrs. Rosenthal and Simmons responded to Dresser's presentation
by indicating that Wheatley might consider a business combination. The Dresser
and Wheatley representatives agreed that the parties should enter into a
Confidentiality Agreement, pursuant to which Dresser would be provided certain
nonpublic information regarding Wheatley to assist in its analysis for continued
discussions. No confidential information had been provided to Dresser prior to
the May 9 meeting.
On May 12, 1994, Wheatley engaged SCI to provide Wheatley with financial
advisory services with respect to various matters relating to the merger
discussions with Dresser and to review the fairness from a financial point of
view to Wheatley's stockholders of any proposed business combination of Wheatley
and Dresser.
On May 13, 1994, Wheatley and Dresser entered into a Confidentiality
Agreement in accordance with the discussions held at the May 9 meeting.
Thereafter, representatives of Dresser were provided with certain nonpublic
information concerning Wheatley and made tours of certain of Wheatley's
manufacturing facilities.
On May 18, 1994, Messrs. Rosenthal and Simmons met with Messrs. Murphy,
Bradford and James L. Bryan, Dresser's Senior Vice President - Operations, to
discuss a revised business combination proposal prepared by Dresser. The parties
arrived at an agreement in principle including a termination fee in the amount
of $5,000,000.
On May 18 and 19, 1994, Mr. Rosenthal advised Stephen V. Ardia and Gene J.
Kaefer (the directors of Wheatley other than Messrs. Rosenthal and Simmons) of
the discussions with Dresser and discussed the situation with them.
On May 19, 1994 at a regular meeting of the Board of Directors of Dresser
(the "Dresser Board"), Mr. Murphy advised the Dresser Board of discussions with
Wheatley and reviewed the proposed terms, benefits and anticipated financial
impact of a combination of the companies. After full discussion and review, the
Dresser Board authorized the execution and delivery of an agreement in
principle, proceeding with due diligence, and the negotiation of a definitive
agreement with respect to the Merger.
Representatives of Dresser and Wheatley exchanged drafts of a Letter of
Intent on May 19, 1994, and negotiated the terms of the Letter of Intent on May
20 and 21, 1994. Negotiations on the Letter of Intent concluded on May 21, 1994,
with Dresser transmitting an executed copy of the Letter of Intent to Wheatley.
On May 22, 1994, a special meeting of the Wheatley Board was convened for
the principal purpose of reviewing the status and progress of discussions with
Dresser. Prior to the meeting, materials concerning Dresser and the proposed
transaction were furnished to the Wheatley Board. At such meeting,
representatives of SCI presented an analysis of Dresser, which SCI prepared
based upon publicly available information and which it had previously circulated
to the members of the Wheatley Board, and an analysis of the valuation of
Wheatley. After a full discussion and review, the Wheatley Board authorized the
execution and delivery of the Letter of Intent and authorized negotiations to
proceed with respect to the Merger Agreement. The Letter of Intent was then
executed by Wheatley and the parties also executed another Confidentiality
Agreement, pursuant to which Wheatley would be provided certain nonpublic
information regarding Dresser for purposes of conducting a due diligence review
of Dresser.
On May 22, 1994, Wheatley's outside counsel delivered an initial draft of
the Merger Agreement to representatives of Dresser.
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On May 23, 1994, Wheatley and Dresser issued a joint press release
announcing the execution of the Letter of Intent, and Wheatley and Dresser
commenced their respective due diligence reviews.
On May 24, 1994, representatives of Wheatley and Dresser met to discuss the
proposed terms of the Merger Agreement. Negotiations with respect to the Merger
Agreement continued by telephone on May 25 through 27, 1994, and the terms of
the Merger Agreement were finalized on May 27, 1994.
On May 27, 1994, the Dresser Board held a special meeting to receive a due
diligence report on Wheatley and to consider the reasons for the Merger, the
value of the Merger consideration, and the other terms and conditions of the
Merger. The Dresser Board approved the Merger Agreement by a unanimous vote.
Also on May 27, 1994, the Wheatley Board held a special meeting to consider the
Merger. At the meeting, SCI presented its valuation analysis and its opinion as
to the fairness from a financial point of view of the proposed merger to
Wheatley's stockholders. See "The Merger -- Opinion of Financial Advisor." The
Wheatley Board also received a due diligence report on Dresser. After a full
discussion and review, the Wheatley Board unanimously approved the Merger and
the Merger Agreement.
On June 1, 1994, following completion of the schedules to the Merger
Agreement, the Merger Agreement was executed and delivered. Before the
commencement of trading on June 2, 1994, Dresser and Wheatley issued a joint
press release announcing the entering into of the definitive agreement.
RECOMMENDATION OF THE WHEATLEY BOARD; REASONS FOR THE MERGER
The Wheatley Board believes that the terms of the Merger are fair to and in
the best interests of Wheatley and its stockholders and has unanimously approved
the Merger Agreement and recommends its approval and adoption by Wheatley's
stockholders.
In reaching its conclusion, the Wheatley Board considered, among other
factors:
(i) Information concerning the financial performance and condition,
business operations and prospects of each of Wheatley and Dresser, and
Wheatley's projected future performance and prospects as a separate entity
and on a combined basis with Dresser.
(ii) Current industry, economic and market conditions, which have
encouraged business combinations and other strategic alliances in the oil
and gas industry.
(iii) Recent and prior market prices of the Wheatley Common Stock and
the Dresser Common Stock.
(iv) The structure of the transaction and terms of the Merger
Agreement and the Conversion Number, which were the result of arm's-length
negotiations between Dresser and Wheatley.
(v) The financial analyses and opinion of SCI described below.
(vi) The fact that the Merger would provide holders of Wheatley Common
Stock with the opportunity to receive a premium over prior market prices
for the Wheatley Common Stock.
(vii) Consolidation benefits that would be available to the combined
entity after the Merger, which would primarily involve non-personnel
related cost reductions.
(viii) The terms of the Merger Agreement that permit the Wheatley
Board, in the exercise of its fiduciary duties and subject to certain
conditions, to respond to inquiries regarding potential business
combination transactions, to provide information to, and negotiate with,
third parties making an unsolicited proposal to acquire Wheatley in such a
transaction and to terminate the Merger Agreement if the Wheatley Board
determines to recommend an alternative business combination transaction. In
that regard, the Wheatley Board noted that the Merger Agreement provides
that if, under certain circumstances, the Merger Agreement is terminated,
Wheatley will be obligated to pay Dresser a $5 million fee if a competing
acquisition proposal is consummated. The Wheatley Board did not view the
termination fee provision of the Merger Agreement as unreasonably impeding
any interested third party from
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proposing a superior transaction. See "Certain Provisions of the Merger
Agreement -- Expenses and Termination Fee."
(ix) The expectation that the Merger will afford Wheatley's
stockholders the opportunity to receive Dresser Common Stock in a
transaction that is nontaxable for federal income tax purposes.
(x) The likelihood that the Merger would be consummated.
(xi) Opportunities for Wheatley's employees in the Dresser
organization after the Merger.
In determining the Merger was fair to and in the best interest of
Wheatley's stockholders, the Wheatley Board considered the factors above as a
whole and did not assign specific or relative weights to such factors. The
Wheatley Board believes that the Merger is an opportunity for Wheatley's
stockholders to participate in a combined enterprise that has significantly
greater business and financial resources than Wheatley would have absent the
Merger and to receive, on a tax-deferred basis, a premium for their Wheatley
Common Stock based on recent market prices.
OPINION OF FINANCIAL ADVISOR
Wheatley retained SCI to act as its financial advisor in connection with
the Merger and to render a fairness opinion in connection with the Merger. SCI
rendered a written opinion to the Wheatley Board on May 27, 1994 that the
consideration to be received by the holders of Wheatley Common Stock in the
Merger is fair from a financial point of view.
The full text of SCI's fairness opinion, dated May 27, 1994, which sets
forth the assumptions made, general procedures followed, matters considered and
limits on the review undertaken, is attached as Appendix II to this Proxy
Statement/Prospectus. SCI's opinion is directed only to the fairness, from a
financial point of view, to the holders of Wheatley Common Stock of the
consideration to be received by such holders in the Merger and does not
constitute a recommendation to any holder of Wheatley Common Stock as to how
such stockholder should vote on the Merger Agreement. The summary of SCI's
opinion set forth below is qualified in its entirety by reference to the full
text of such opinion attached as Appendix II. STOCKHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY.
In connection with rendering its opinion, SCI reviewed and analyzed, among
other things, the following: (i) the Letter of Intent between Dresser and
Wheatley dated May 22, 1994; (ii) the proposed form of Merger Agreement; (iii)
the financial statements and other information concerning Wheatley, including
the Annual Reports on Form 10-K of Wheatley for each of the years in the three
year period ended February 28, 1994; (iv) certain other internal information,
primarily financial in nature, concerning the business and operations of
Wheatley furnished by Wheatley for purposes of SCI's analysis; (v) certain
publicly available information concerning the trading of, and the trading market
for, the Wheatley Common Stock; (vi) certain publicly available information
concerning Dresser, including the Annual Reports on Form 10-K of Dresser for
each of the years in the three year period ended October 31, 1993, the Quarterly
Report on Form 10-Q of Dresser for the quarter ended January 31, 1994 and the
Current Report on Form 8-K of Dresser dated January 21, 1994, as amended; (vii)
certain other internal information, primarily financial in nature, concerning
the business and operations of Dresser furnished by Dresser for purposes of
SCI's analysis; (viii) certain publicly available information concerning the
trading of, and the trading market for, the Dresser Common Stock; (ix) certain
publicly available information with respect to certain other companies that SCI
believes to be comparable to Wheatley or Dresser and the trading markets for
certain of such other companies' securities; (x) certain publicly available
information concerning the estimates of the future operating and financial
performance of Wheatley, Dresser and the comparable companies prepared by
industry experts unaffiliated with either Wheatley or Dresser (the "Analysts'
Estimates"); and (xi) certain publicly available information concerning the
nature and terms of certain other transactions that SCI considered relevant to
its inquiry. SCI also met with certain officers and employees of Wheatley and
Dresser to discuss the foregoing as well as other matters SCI believed relevant
to its inquiry.
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In arriving at its opinion, SCI assumed and relied upon the accuracy and
completeness of all of the financial and other information provided or publicly
available, including without limitation information with respect to liability
reserves and insurance coverages, and did not attempt independently to verify
any of such information. SCI did not conduct a physical inspection of any of the
properties or facilities of Wheatley or Dresser, nor did SCI make or obtain any
independent evaluations or appraisals of any of such properties or facilities.
In addition, although SCI discussed the prospects of Wheatley and Dresser with
certain representatives of their respective managements, SCI was provided with
only limited financial projections and other similar analyses prepared by
Wheatley's management with respect to Wheatley's future performance and by
Dresser's management with respect to Dresser.
In conducting its analysis and arriving at its opinion, SCI considered such
financial and other factors as it deemed appropriate under the circumstances
including, among others, the following: (i) the historical and current financial
position and results of operations of Wheatley and Dresser; (ii) the business
prospects of Wheatley and Dresser; (iii) the historical and current market for
Wheatley Common Stock, for Dresser Common Stock and for the equity securities of
certain other companies believed to be comparable to Wheatley or Dresser; and
(iv) the nature and terms of certain other acquisition transactions that SCI
believed to be relevant. SCI also took into account its assessment of general
economic, market and financial conditions and its experience in connection with
similar transactions and securities valuation generally. SCI's opinion was based
upon conditions as they existed and could be evaluated on the date of its
opinion.
In connection with a presentation to the Wheatley Board on May 27, 1994,
SCI advised the Wheatley Board that, in evaluating the consideration to be
received in the Merger by the holders of Wheatley Common Stock, SCI had
performed a variety of financial analyses with respect to Wheatley and Dresser.
Exchange Ratio Profile. SCI performed an analysis of the ratio of the
market price of Wheatley Common Stock to the market price of Dresser Common
Stock during the period from May 1991 through May 1994. SCI calculated the ratio
of the Wheatley Common Stock closing price for the last trading day of each week
during that period to the Dresser Common Stock closing price for such day. This
analysis implied an exchange ratio ranging from a high of 0.69 shares of Dresser
Common Stock for each share of Wheatley Common Stock to a low of 0.34 shares of
Dresser Common Stock for each share of Wheatley Common Stock, with an average
during the period of 0.48 shares of Dresser Common Stock for each share of
Wheatley Common Stock. SCI also calculated the ratio of the Wheatley Common
Stock price on May 20, 1994 ($11.75 per share) to the Dresser Common Stock price
on such day ($23.00 per share). This implied an exchange ratio of 0.51 shares of
Dresser Common Stock for each share of Wheatley Common Stock.
Premium Analysis. SCI calculated the premium to holders of Wheatley Common
Stock of the "Implied Consideration" (obtained by multiplying the closing stock
price for Dresser Common Stock on May 20, 1994 by the Conversion Number of 0.7)
to the closing stock prices for Wheatley Common Stock on such date and on the
dates one month, three months and six months prior thereto, as well as to the
daily average closing stock price for Wheatley Common Stock during the latest
twelve months ("LTM") and to each of the 52-week high and low closing prices for
Wheatley Common Stock. Based upon the closing stock price for Dresser Common
Stock of $23.00 on May 20, 1994, SCI calculated premiums to holders of Wheatley
Common Stock equal to 37.0% of the closing stock price for Wheatley Common Stock
of $11.75 on May 20, 1994; 43.1% of the closing stock price for Wheatley Common
Stock of $11.25 one month earlier; 44.7% of the closing stock price for Wheatley
Common Stock of $11.125 three months earlier; 53.3% of the closing stock price
for Wheatley Common Stock of $10.50 six months earlier; 47.4% of the LTM average
price for Wheatley Common Stock of $10.92; and 26.3% and 84.0% of the 52-week
high and low closing prices, respectively, for Wheatley Common Stock of $12.75
and $8.75.
SCI also analyzed average acquisition premiums for acquisitions of public
companies in the years 1987 through 1994, focusing on completed transactions in
the $50 to $500 million range. The average premium to last closing price prior
to announcement of such transactions during any year ranged from a low of 24.0%
to a high of 41.6%, with the weighted average being 31.5%, as compared with the
premium for the Merger of 37.0%, based on a closing price of $11.75 per share
for Wheatley Common Stock and $23.00 per share for Dresser Common Stock on May
20, 1994.
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Valuation Multiple Analysis. SCI calculated multiples of the $11.75 closing
price per share of Wheatley Common Stock and the Implied Consideration to
Wheatley's LTM earnings and cash flow per share and to its projected earnings
and cash flow per share for fiscal years 1995 and 1996 (based on the Analysts'
Estimates), and multiples of Wheatley's "Adjusted Market Capitalization"
(defined as the market value of the common equity calculated using the $11.75
closing price or the Implied Consideration plus the book value of total debt,
less excess cash and cash equivalents) to its LTM revenues, its LTM earnings
before depreciation, interest and taxes ("EBDIT") and its Adjusted Book Value
(defined as the book value of the common equity, plus the book value of total
debt, less excess cash and cash equivalents). For this purpose, cash flow per
share was defined as earnings per share plus depreciation and amortization per
share. These calculations resulted in ratios of the $11.75 closing price and the
Implied Consideration, respectively, to LTM earnings per share of 15.6x and
21.3x, respectively; to LTM cash flow per share of 8.8x and 12.0x, respectively;
to projected fiscal 1995 earnings per share of 13.1x and 17.9x, respectively; to
projected fiscal 1995 cash flow per share of 7.9x and 10.8x, respectively; to
projected fiscal 1996 earnings per share of 11.0x and 15.0x, respectively; and
to projected fiscal 1996 cash flow per share, 7.1x and 9.7x, respectively. Based
on the $11.75 closing price and the Implied Consideration, respectively, the
ratio of Adjusted Market Capitalization to revenues was 1.2x and 1.6x,
respectively, the ratio of Adjusted Market Capitalization to EBDIT was 7.8x and
9.8x, respectively, and the ratio of Adjusted Market Capitalization to Adjusted
Book Value was 1.3x and 1.7x, respectively.
Analysis of Selected Publicly-Traded Comparable Companies. SCI reviewed
certain financial information as of April 30, 1994 and for the 12 months ended
February 28, 1994 and stock market information as of May 20, 1994 for Wheatley
and certain publicly available financial information as of the most recently
reported period and stock market information as of May 20, 1994 for certain
selected publicly traded companies in each of two industry sectors -- companies
in the pump and valve industry and companies with revenues in the range of $100
to $700 million in the oil service industry. For Wheatley and each comparable
company, SCI calculated multiples of market stock price to LTM earnings and cash
flow per share, and estimated earnings and cash flow per share (derived from the
Analysts' Estimates) for 1994 and 1995 (fiscal 1995 and 1996, respectively, for
Wheatley), and multiples of Adjusted Market Value to Adjusted Book Value, LTM
revenues and EBDIT. An analysis of the multiples of market stock price to LTM
earnings per share, to estimated 1994 earnings per share and to estimated 1995
earnings per share yielded for Wheatley 15.6x, 13.1x and 11.0x, respectively
(21.3x, 17.9x and 15.0x, respectively, at the Implied Consideration), with
medians of 16.8x and 18.8x, 15.9x and 21.5x, and 13.0x and 14.6x for the pump
and valve companies and the oil service companies, respectively. An analysis of
the multiples of market stock price to LTM cash flow per share, to estimated
1994 cash flow per share and estimated 1995 cash flow per share yielded for
Wheatley 8.8x, 7.9x and 7.1x, respectively (12.0x, 10.8x and 9.7x, respectively,
at the Implied Consideration), with medians of 10.2x and 8.6x, 10.1x and 8.5x,
and 8.4x and 6.3x for the pump and valve companies and the oil service
companies, respectively. An analysis of the multiples of Adjusted Market Value
to Adjusted Book Value yielded 1.3x for Wheatley (1.7x at the Implied
Consideration), with medians of 1.9x and 1.2x for the pump and valve companies
and the oil service companies, respectively. An analysis of the multiples of
Adjusted Market Value to LTM revenues yielded 1.2x for Wheatley (1.6x at the
Implied Consideration), with a median of 1.0x for both the pump and valve
companies and the oil service companies. An analysis of the multiples of
Adjusted Market Value to LTM EBDIT yielded 7.8x for Wheatley (9.8x at the
Implied Consideration), with medians of 7.8x and 8.1x for the pump and valve
companies and the oil service companies, respectively.
SCI performed a similar analysis with respect to Dresser and certain
comparable large diversified oil service companies. For Dresser and each
comparable company, SCI calculated multiples of market stock price to LTM
earnings and cash flow per share, and estimated earnings and cash flow per share
for 1994 and 1995 (derived from the Analysts' Estimates), and multiples of
Adjusted Market Value to Adjusted Book Value, LTM revenues and EBDIT. An
analysis of the multiples of market price to LTM earnings per share, estimated
1994 earnings per share and estimated 1995 earnings per share yielded 20.1x,
18.5x and 16.2x, respectively, for Dresser, with medians of 22.1x, 27.0x and
21.3x, respectively for the large diversified oil service companies. An analysis
of the multiples of market price to LTM cash flow per share, estimated 1994 cash
flow per share and estimated 1995 cash flow per share yielded 10.7x, 10.3x and
9.5x, respectively, for Dresser, with medians of 10.6x, 9.1x and 8.3x,
respectively, for the large diversified oil service companies. An analysis of
the multiples of Adjusted Market Value to Adjusted Book Value yielded 2.5x for
Dresser, with a
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median of 1.7x for the large diversified oil service companies. An analysis of
the multiples of Adjusted Market Value to LTM revenues yielded 0.9x for Dresser,
with a median of 1.4x for the large diversified oil service companies. An
analysis of the multiples of Adjusted Market Value to LTM EBDIT yielded 8.1x for
Dresser, with a median of 10.6x for the large diversified oil service companies.
Analysis of Selected Comparable Acquisition Transactions. SCI reviewed
transactions involving the acquisition of all or part of certain pump and valve
companies (ten transactions) and certain oilfield service companies (nine
transactions). SCI calculated the multiples of acquisition price or transaction
value to LTM revenues, EBDIT, Adjusted Book Value and net income of such
companies.
For pump and valve companies, these calculations yielded a range of
acquisition price to LTM EBDIT of from 4.7x to 14.9x with a median of 6.7x, a
range of acquisition price to LTM revenues of from 0.6x to 1.5x with a median of
1.1x, a range of acquisition price to Adjusted Book Value of from 0.7x to 3.5x
with a median of 2.0x and a range of acquisition price to net income of from
9.2x to 31.6x with a median of 11.8x. SCI then compared the results of these
calculations to multiples calculated using the closing price of $11.75 and the
Implied Consideration: to Wheatley's LTM EBDIT, 7.8x and 9.8x, respectively; to
Wheatley's LTM revenues, 1.2x and 1.6x, respectively; to Wheatley's Adjusted
Book Value, 1.3x and 1.7x, respectively; and to Wheatley's net income, 15.6x and
21.3x, respectively.
For oilfield service companies, these calculations yielded a range of
transaction value to LTM EBDIT of from 4.5x to 11.6x, with a median of 7.7x, a
range of transaction value to LTM revenues of from 0.8x to 2.0x, with a median
of 1.5x, and a range of transaction value to Adjusted Book Value of from 0.8x to
2.6x, with a median of 2.0x. SCI then compared the results of these calculations
to the multiples calculated using the closing price of $11.75 and the Implied
Consideration listed above.
Relative Contribution Analysis. SCI analyzed the relative contributions of
Wheatley and Dresser to the combined revenues, EBDIT, earnings before interest
and taxes ("EBIT"), net income, total assets and stockholders' equity of the two
companies, assuming completion of the Merger, based on LTM results (without
giving effect to any transaction adjustments). SCI calculated contributions by
Wheatley of approximately 3.3% of combined revenues; 4.5% of combined EBDIT;
4.9% of combined EBIT; 4.3% of combined net income; 4.1% of combined total
assets; and 6.1% of combined stockholders' equity. Additionally, SCI calculated
contributions by Wheatley of approximately 4.7% of projected fiscal 1995 net
income, 4.9% of fiscal 1996 net income, 4.2% of total market capitalization and
3.4% of the market value of equity. SCI also calculated the percentage of the
combined companies' equity that would be held by former Wheatley stockholders
assuming completion of the Merger as 4.6% (using the Conversion Number of 0.7)
and compared such percentage with the foregoing contribution percentages.
Discounted Cash Flow Analyses. SCI used Wheatley projections to calculate
projected future cash flows for Wheatley through fiscal 1999. SCI then performed
discounted cash flow analyses employing two methodologies: the first based on
the free cash flow of the entire firm and an estimated terminal value derived as
a multiple of six times EBDIT ("Firm Value Approach"); the second based on free
cash flow to equity and an estimated terminal value derived as a multiple of six
times EBDIT, less debt ("Equity Value Approach").
The Firm Value Approach discounted to present value the future cash flows
of the firm and the terminal value of six times EBDIT by applying discount rates
ranging from 12% to 15%. Based on these calculations, SCI then derived present
values per share ranging from $12.43 to $10.65 for the Wheatley Common Stock.
The Equity Value Approach discounted to present value the future cash flows
to equity and the terminal value of six times EBDIT, less debt by applying
discount rates ranging from 15% to 20%. Based on these calculations, SCI then
derived present values per share ranging from $11.28 to $9.18 for the Wheatley
Common Stock.
The foregoing summary does not purport to be a complete description of the
analyses performed by SCI or of its presentations to the Wheatley Board. The
preparation of financial analyses and fairness opinions is a complex process and
is not necessarily susceptible to partial analysis or summary description. SCI
believes that its analyses (and the summary set forth above) must be considered
as a whole, and that selecting portions of such analyses and of the factors
considered by SCI, without considering all of such analyses and factors,
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could create an incomplete view of the processes underlying the analyses
conducted by SCI and its opinion. SCI made no attempt to assign specific weights
to particular analyses. Any estimates contained in SCI's analyses are not
necessarily indicative of actual values, which may be significantly more or less
favorable than as set forth therein. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the prices at which companies
may actually be sold. Because such estimates are inherently subject to
uncertainty, SCI does not assume responsibility for their accuracy.
SCI is a specialized energy-related investment banking firm engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, private placements of debt and equity and the management and
underwriting of sales of equity and debt to the public. SCI has previously
rendered investment banking services to Wheatley and to Dresser in connection
with a number of transactions for which SCI received customary compensation. In
addition, in the ordinary course of business, SCI may actively trade the
securities of Wheatley and Dresser for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Mr. L. E. Simmons, a director of the Company, was an officer and a director
of SCI until September 1993 and continues to be a less than 4% shareholder of
SCI. See "-- Interests of Certain Persons in the Merger." Mr. Matthew R.
Simmons, brother of Mr. L. E. Simmons, is the president and principal
shareholder of SCI.
Pursuant to the engagement letter with SCI, Wheatley has agreed to pay SCI
a fee of 1% of the transaction value of the Merger (the value of the Dresser
Common Stock received by Wheatley stockholders plus debt for borrowed money
assumed). Wheatley has also agreed to reimburse SCI for certain expenses
incurred in connection with its engagement and to indemnify SCI and certain
related persons against certain liabilities and expenses relating to or arising
out of its engagement, including certain liabilities under the federal
securities laws. See also "-- Interests of Certain Persons in the Merger."
EFFECTIVE TIME OF THE MERGER
Upon the terms and conditions of the Merger Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), WAC shall be merged with
and into Wheatley at the Effective Time. The Merger shall become effective
immediately when the Certificate of Merger, prepared and executed in accordance
with the relevant provisions of the DGCL, is filed with the Secretary of State
of the State of Delaware or, if agreed to by the parties, at such time
thereafter as may be provided in the Certificate of Merger. The filing of the
Certificate of Merger will be made as soon as practicable on or after the
Closing.
The Merger Agreement provides that the Closing of the Merger (the
"Closing") shall take place at 10:00 a.m. on a date to be specified by the
parties, which date shall be no later than the second business day after
satisfaction of (or waiver in accordance with the Merger Agreement) the latest
to occur of the conditions set forth in Article VI of the Merger Agreement (the
"Closing Date"), at the offices of Dresser, unless another date or place is
agreed to in writing by the parties. See "Certain Provisions of the Merger
Agreement -- Conditions to the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Wheatley has received an opinion from Baker & Botts, L.L.P., counsel to
Wheatley, to the effect that, if the Merger is consummated in accordance with
the terms of the Merger Agreement, (i) the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a)(1)(A) and (2)(E) of the Code, (ii) Dresser, WAC and Wheatley will each be
a party to that reorganization within the meaning of Section 368(b) of the Code
and (iii) no gain or loss will be recognized by a stockholder of Wheatley as a
result of the Merger upon the conversion of shares of Wheatley Common Stock into
shares of Dresser Common Stock. Such opinion was based upon such counsel's
review of those documents and materials that it considered to be relevant,
including this Proxy Statement/Prospectus, the Merger Agreement and the rights
agreement relating to the Dresser Stock Purchase Rights. In addition, in
rendering such opinion, such counsel received and relied upon representations of
fact contained in certificates of Dresser and Wheatley (including, in the case
of Wheatley, a representation to the effect that a sufficient number of
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Wheatley stockholders do not intend to dispose of the shares of Dresser Common
Stock to be received as a result of the Merger so as to satisfy a "continuity of
interest" requirement).
Assuming qualification of the Merger as a reorganization under the Code,
(i) no gain or loss will be recognized by Wheatley, WAC, Dresser or its
stockholders as a result of the Merger, (ii) no gain or loss will be recognized
by a Wheatley stockholder upon the receipt of Dresser Common Stock (together
with the corresponding Dresser Stock Purchase Rights) in the Merger in exchange
for shares of Wheatley Common Stock (except for cash received in lieu of a
fractional share), (iii) the basis of the shares of Dresser Common Stock
(including a fractional share) to be received by a Wheatley stockholder in the
Merger will be the same as the basis of the shares of Wheatley Common Stock
surrendered in exchange therefor and (iv) the holding period of the shares of
Dresser Common Stock (including a fractional share) to be received by a Wheatley
stockholder in the Merger will include the holding period of the shares of
Wheatley Common Stock exchanged therefor, provided that such Wheatley Common
Stock was held as a capital asset by such stockholder as of the Effective Time.
A Wheatley stockholder who receives cash in lieu of a fractional share of
Dresser Common Stock in connection with the Merger will recognize gain or loss
for federal income tax purposes equal to the difference between the cash
received in lieu of such fractional share and the basis of such fractional
share. Such gain or loss will be capital gain or loss, provided that the
Wheatley Common Stock was held as a capital asset. Any such capital gain or loss
will be long-term capital gain or loss if the stockholder's holding period for
such Wheatley Common Stock exceeds one year as of the Effective Time.
An opinion of counsel is not binding on the Internal Revenue Service
("IRS") or on the courts. Therefore, there can be no assurance that the Merger
will constitute a reorganization or that any of the tax consequences of a
reorganization that are described above will be available to the Wheatley
stockholders. Because of the complexity of the tax laws and because the tax
consequences to any particular stockholder may be affected by matters not
discussed herein, each Wheatley stockholder is advised to consult his or her own
tax advisor concerning the applicable federal, foreign, state and local income
tax consequences of the Merger.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE DISCUSSION IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER AND DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE
MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE,
EXISTING AND PROPOSED TREASURY REGULATIONS UNDER THE CODE, THE LEGISLATIVE
HISTORY OF THE CODE, CURRENT RULINGS AND PRONOUNCEMENTS OF THE IRS AND COURT
DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD
AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. THE DISCUSSION MAY NOT BE
APPLICABLE TO CERTAIN WHEATLEY STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED
THEIR SHARES THROUGH THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION FOR EMPLOYMENT. EACH WHEATLEY STOCKHOLDER SHOULD CONSULT HIS OR HER
OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO
HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX
LAWS AND OF ANY POSSIBLE FUTURE CHANGES IN THE TAX LAWS.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is intended to be treated as a pooling of interests transaction
for accounting and financial reporting purposes. Under the pooling of interests
method of accounting, the recorded assets and liabilities of Dresser and
Wheatley will be carried forward to Dresser's consolidated financial statements
at their recorded amounts, the consolidated earnings of Dresser will include
earnings of Dresser and Wheatley for the entire fiscal year in which the Merger
occurs and the reported retained earnings of Dresser and Wheatley for prior
periods will be combined and restated as consolidated retained earnings of
Dresser. See "Certain Provisions of the Merger Agreement -- Conditions to the
Merger" and "Unaudited Pro Forma Combined Condensed Financial Statements."
Dresser, WAC and Wheatley have agreed that during the period from the date
of the Merger Agreement through the Effective Time, unless the parties shall
have otherwise agreed in writing, none of Dresser, WAC, any other subsidiary of
Dresser, Wheatley or any subsidiary of Wheatley shall knowingly take or fail to
take any reasonable action which action or failure to act would jeopardize the
treatment of the Merger as a pooling
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of interests for accounting purposes; provided, however, that pooling treatment
is not a condition to Closing. See "Certain Provisions of the Merger
Agreement -- Additional Agreements."
CERTAIN REGULATORY MATTERS
The HSR Act and the rules and regulations thereunder provide that certain
transactions may not be consummated until required information and materials
have been furnished to the Department of Justice and the Federal Trade
Commission and certain waiting periods have expired or been terminated. The
respective obligations of Dresser and Wheatley to consummate the Merger are
conditioned upon all waiting periods (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act having expired or been
terminated. See "Certain Provisions of the Merger Agreement -- Conditions to the
Merger." Wheatley and Dresser made filings under the HSR Act on June 3, 1994 in
connection with the Merger, and the waiting period has terminated.
At any time before or after the Effective Time, and notwithstanding that
the HSR Act waiting period has expired or terminated, any state could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the consummation of the
Merger or seeking divestiture of Wheatley or businesses of Dresser or Wheatley.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances.
Based on information available to them, Dresser and Wheatley believe that
the Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, Dresser and Wheatley would prevail or would not be required to accept
certain conditions, possibly including certain divestitures in order to
consummate the Merger.
RIGHTS OF DISSENTING STOCKHOLDERS
Under Delaware law, Wheatley's stockholders will not be entitled to any
appraisal or dissenter's rights in connection with the Merger.
WHEATLEY EMPLOYEE MATTERS
Pursuant to the Merger Agreement, certain officers and employees of
Wheatley will receive certain benefits in connection with the Merger. See
"-- Interests of Certain Persons in the Merger" for a description of such
arrangements.
Benefits and pension plans of Wheatley in effect at the date of the Merger
Agreement will generally, to the extent practicable and except as described
below, remain in effect until otherwise determined by Dresser after the
Effective Time. To the extent such benefit plans are not continued, Dresser will
maintain benefit plans that are not less favorable, in the aggregate, for the
employees covered by such Wheatley benefit plans for a period of one year after
the Effective Time, except to the extent that continuation of such plans would
be unduly burdensome, or would materially increase the cost of providing such
plans in the aggregate, due to changes in national health care policy or
regulation. However, Dresser is not required to continue any specific plans
other than as described herein. In case of benefit plans under which Wheatley's
employees' interests are based upon Wheatley Common Stock, such interests will
be based on Dresser Common Stock in an equitable manner (and in the case of any
such interests existing at the Effective Time, on the basis of the Conversion
Number).
At the Effective Time, each outstanding Wheatley Stock Option granted
pursuant to the Wheatley Stock Option Plan, whether vested or unvested, will be
assumed by Dresser. Each Wheatley Stock Option will be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Wheatley Stock Option, the number of shares of Dresser Common Stock equal
to the number of shares of Wheatley Common Stock purchasable pursuant to such
Wheatley Stock Option, multiplied by the Conversion Number, at a price per share
equal to (i) the per-share exercise price for the shares of Wheatley Common
Stock subject to such Wheatley Stock Option divided by (ii) the Conversion
Number; provided, however, that
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the conversion with respect to any incentive stock option will be determined in
order to comply with applicable provisions of the Code; provided, further, that
the number of shares of Dresser Common Stock that may be purchased upon exercise
of any Wheatley Stock Option will not include any fractional share and, upon
exercise of such Wheatley Stock Options, a cash payment will be made for any
fractional share based upon the closing price of a share of Dresser Common Stock
on the NYSE on the last trading day of the calendar month immediately preceding
the date of exercise.
Dresser has agreed to take all corporate action necessary to reserve for
issuance a sufficient number of shares of Dresser Common Stock for delivery upon
exercise of the Wheatley Stock Options. Dresser has also agreed to register such
shares under the Securities Act.
Pursuant to the Wheatley Stock Option Plan, provision has been made so that
after the Effective Time an optionee who either (i) is involuntarily terminated
without "Cause" (as defined) or (ii) terminates his employment for "Good Reason"
(as defined) shall be entitled to exercise an option held by him (x) if fully
vested at date of termination, for one year thereafter and (y) if not then fully
vested, for one year after the date the option becomes fully vested (and such
vesting shall continue as scheduled and shall not be affected by the termination
of employment or the fact that the optionee is not employed). Approval and
adoption of the Merger Agreement by the stockholders of Wheatley will also
constitute approval of the treatment of outstanding Wheatley Stock Options as
described herein. The foregoing shall not adversely affect any options
previously granted to Gene J. Kaefer, which may provide for a longer period of
exercisability. For purposes of this treatment of options, Mr. Rosenthal will be
treated as though he had been involuntarily terminated without Cause at the
conclusion of his four-month employment period with the Surviving Corporation
after the Effective Time. See "-- Interests of Certain Persons in the
Merger -- Arrangements with Certain Officers."
Employees of Wheatley and its subsidiaries will receive service credit (for
purposes of all employee benefit plans, programs or practices (other than for
purposes of benefit accrual under any tax-qualified defined benefit plan)
maintained for such employees after the Effective Time) for prior service with
Wheatley or any of its subsidiaries or predecessors. The Wheatley Profit Sharing
Plan will be continued in effect through the end of Wheatley's February 28, 1995
fiscal year, and the plan will be appropriately adjusted pursuant to the terms
of the plan to reflect the Merger.
RESALES OF DRESSER COMMON STOCK; REGISTRATION RIGHTS
The shares of Dresser Common Stock to be issued to the stockholders of
Wheatley pursuant to the Merger Agreement are being registered under the
Securities Act pursuant to the Registration Statement. However, because some
stockholders of Wheatley are or may be affiliates of Wheatley, such persons will
not be able to resell the Dresser Common Stock received by them in the Merger
unless the Dresser Common Stock is registered for resale under the Securities
Act, is sold in compliance with an exemption from the registration requirements
of the Securities Act or is sold in compliance with Rule 145 under the
Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Dresser Common
Stock acquired by such Wheatley stockholders pursuant to the Merger will be
subject to certain restrictions. Such persons may sell Dresser Common Stock
under Rule 145 only if (i) Dresser has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding twelve months, (ii)
the Dresser Common Stock is sold in a "broker's transaction," which is defined
in Rule 144 under the Securities Act as a sale in which (a) the seller does not
solicit or arrange for orders to buy the securities, (b) the seller does not
make any payment other than to the broker, (c) the broker does no more than
execute the order and receive a nominal commission and (d) the broker does not
solicit customer orders to buy the securities, and (iii) such sale and all other
sales made by such person within the preceding three months do not collectively
exceed the greater of (x) 1% of the outstanding shares of Dresser Common Stock
and (y) the average weekly trading volume of Dresser Common Stock on all
national securities exchanges during the four-week period preceding the sale.
Wheatley entered into a registration rights agreement dated as of August
23, 1990 with certain of its stockholders (the "Registration Rights Agreement"),
pursuant to which such stockholders were granted
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certain rights, subject to the terms and conditions of the Registration Rights
Agreement, to register for resale shares of Wheatley Common Stock. Pursuant to
the Registration Rights Agreement, if Wheatley proposes to file a registration
statement under the Securities Act with respect to an offering for its own
account or for the account of any other person of any class of equity security,
Wheatley is required to offer the stockholders the opportunity to register such
number of shares of common stock held by the stockholders as each such
stockholder requests. Wheatley is not required to offer the stockholders the
opportunity for registration if the proposed registration statement is a
registration of securities to be offered in connection with or pursuant to (i) a
stock option or employee benefit plan, or relating to warrants, options or
shares to be granted or sold primarily to employees, directors or officers of
Wheatley, (ii) stockholder reinvestment plans, (iii) an exchange for any
securities or assets of, or in connection with a merger, (iv) a shareholder
"rights" plan, (v) Rule 145 of Securities Act or (vi) preferred stock issued in
connection with debt financing. Expenses of registration are to be borne by
Wheatley, even if the registration statement is not declared effective. Pursuant
to the terms of the Merger Agreement, Dresser has agreed to assume all of
Wheatley's obligations under the Registration Rights Agreement, and all such
registration rights previously granted thereunder with respect to Wheatley
Common Stock will be deemed to apply to the Dresser Common Stock received in
exchange for such Wheatley Common Stock pursuant to the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Wheatley Board with respect to the
Merger, stockholders should be aware that certain members of Wheatley's
management and the Wheatley Board have certain interests in the Merger that are
in addition to the interests of the stockholders of Wheatley generally. The
Wheatley Board and (in the case of arrangements involving officers or employees)
the Compensation Committee thereof was aware of, and approved, these interests
and considered them in connection with its consideration of the Merger, the
Merger Agreement and the transactions contemplated thereby.
Arrangements with Certain Officers. In May 1994 and in connection with the
Merger, Wheatley entered into Severance Allowance Agreements with six of its
employees who are not directors, including David A. Moore, Ronald J. Foster and
Michael D. Reynolds. Under the terms of these agreements, if the employee is
"involuntarily terminated" (as defined therein, which excludes a termination for
"due cause") within two years following the Merger, the employee will receive a
lump-sum severance payment of twice the employee's annual salary and maximum
bonus amount (reduced in 25% increments for each six months that passes after
the Effective Time). Such arrangements were determined by the Wheatley Board to
be reasonable and necessary to retain the services of these employees during the
pendency of the Merger.
Immediately prior to the Effective Time, Wheatley will pay Gary L.
Rosenthal, Wheatley's Chairman of the Board, President and Chief Executive
Officer, $195,000 as an estimated amount of his maximum bonus for the period
prior to the Effective Time. Mr. Rosenthal, the Surviving Corporation and
Dresser will also enter into an employment, consulting and noncompetition
agreement. Pursuant to the agreement, Mr. Rosenthal will be employed by the
Surviving Corporation for four months after the Effective Time at a salary of
$45,000 per month, which is equivalent to his pro rata monthly salary and
maximum bonus. The agreement will also provide for noncompetition and consulting
arrangements for an 18-month period thereafter for which Mr. Rosenthal will be
paid (i) an initial payment of $375,000 at the commencement of his employment
period and (ii) $22,500 per month for each of the 18 months of the
noncompetition and consulting period. The Compensation Committee of the Wheatley
Board has determined that these arrangements are reasonable and appropriate in
the circumstances.
See "Certain Provisions of the Merger Agreement -- Indemnification" for
information concerning indemnification of directors and executive officers. See
"-- Wheatley Employee Matters" for information concerning the treatment of the
options previously granted employees of Wheatley and other employee benefit
matters.
Engagement of SCI. Wheatley has retained SCI as its financial advisor in
connection with the Merger and to render a fairness opinion regarding the
Merger. Upon consummation of the Merger, SCI will receive a fee in this
connection in an amount equal to 1% of the transaction value (as defined) of the
Merger. Based on
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market prices as of May 20, 1994, the amount of such fee would have been
approximately $2.5 million. L.E. Simmons, a director of Wheatley, is also a
shareholder of SCI (owning less than 4% of its outstanding stock) and, until
September 1993, was an officer and director of SCI. See "-- Opinion of Financial
Advisor." SCI is also the beneficial owner of shares of Wheatley Common Stock.
See "-- Other Arrangements Involving Mr. Simmons."
Other Arrangements Involving Mr. Simmons. L.E. Simmons is the president, a
director and the sole shareholder of the general partner of SCF Partners, L.P.,
which is the general partner of WPV Partners, L.P., Wheatley's largest
stockholder. Mr. Simmons is also a limited partner of WPV Partners, L.P. SCI is
a limited partner of SCF Partners, L.P. As of May 31, 1994, WPV Partners, L.P.
owned 3,151,513 shares of Wheatley Common Stock. WPV Partners, L.P. has
distributed these shares of Wheatley Common Stock to its partners, including
366,175 shares distributed to SCF Partners, L.P. (of which 226,827 are being
distributed to Mr. Simmons and 66,113 are being distributed to SCI) and 33,245
shares distributed directly to Mr. Simmons. The partnership agreement for WPV
Partners, L.P. provides for an increase in the sharing ratio attributable to SCF
Partners, L.P.'s general partner interest after payout of the partnership.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached as Appendix I to this Proxy Statement/Prospectus and is incorporated by
reference herein.
CONDITIONS TO THE MERGER
Conditions to Obligation of Each Party to Effect the Merger
The respective obligation of each party to effect the Merger is subject to
the satisfaction prior to the Closing of the following conditions:
Wheatley Stockholder Approval. The Merger Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Wheatley Common Stock entitled to vote
thereon.
NYSE Listing. The shares of Dresser Common Stock issuable to Wheatley
stockholders pursuant to the Merger Agreement and such other shares of Dresser
Common Stock required to be reserved for issuance in connection with the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance.
Other Approvals. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and all filings
required to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from any governmental entity in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby by Wheatley, Dresser and WAC shall have been made or
obtained (as the case may be), except where the failure to obtain such consents,
approvals, permits, and authorizations would not be reasonably likely to result
in a Material Adverse Effect on Dresser (assuming the Merger has taken place) or
to materially adversely affect the consummation of the Merger.
The Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceeding seeking a stop order.
No Injunctions or Restraints. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect; provided, however, that prior to invoking this
condition, each party shall have complied fully with its obligations to provide
information and obtain such consents and approvals from governmental entities or
courts in connection with the Merger and, in addition, shall use all reasonable
efforts to have any such decree, ruling, injunction or order vacated, except as
otherwise contemplated by the Merger Agreement.
Additional Conditions to Obligation of Dresser and WAC
The obligations of Dresser and WAC to effect the Merger are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Dresser and WAC:
Representations and Warranties. Each of the representations and warranties
of Wheatley set forth in the Merger Agreement shall be true and correct in all
material respects as of the date of the Merger Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except where the
failure to be so true and correct (without giving effect to the individual
materiality thresholds otherwise contained in the Merger Agreement) could not
reasonably be expected to have a Material Adverse Effect on Wheatley or as
otherwise contemplated by the Merger Agreement.
Performance of Obligations of Wheatley. Wheatley shall have performed in
all material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date.
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Letters from Wheatley Affiliates. Wheatley shall cause to be prepared and
delivered to Dresser a list identifying all persons who, at the time of the
Special Meeting, may be deemed to be "affiliates" of Wheatley as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Affiliates"). Wheatley shall use its best efforts to cause each person who is
identified as an Affiliate in such list to deliver to Dresser at or prior to the
Effective Time, a written agreement that such Affiliate will not sell, pledge,
transfer or otherwise dispose of any shares of Dresser Common Stock issued to
such Affiliate pursuant to the Merger, except pursuant to an effective
registration statement or in compliance with Rule 145 or an exemption from the
registration requirements of the Securities Act. Wheatley shall also use its
best efforts to cause each person who is identified as an Affiliate in such list
to sign, on or prior to the thirtieth day prior to the Effective Time, a written
agreement, in the form to be approved by Dresser and Wheatley, that, with
certain exceptions, such party will not sell or in any other way reduce such
party's risk relative to any shares of Dresser Common Stock to be received in
the Merger until such time as financial results covering at least 30 days of
post-merger operations have been published. As a condition to its obligations,
Dresser shall have received signed copies of such agreements from all parties
deemed to be Affiliates of Wheatley.
Additional Conditions to Obligation of Wheatley
The obligation of Wheatley to effect the Merger is subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Wheatley:
Representations and Warranties. Each of the representations and warranties
of Dresser and WAC set forth in the Merger Agreement shall be true and correct
in all material respects as of the date of the Merger Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except where
the failure to be so true and correct (without giving effect to the individual
materiality thresholds otherwise contained in the Merger Agreement) could not
reasonably be expected to have a Material Adverse Effect on Dresser or as
otherwise contemplated by the Merger Agreement.
Performance of Obligations of Dresser and WAC. Dresser and WAC shall have
performed in all material respects all obligations required to be performed by
them under the Merger Agreement at or prior to the Closing Date.
Tax Opinion. Wheatley shall have received an opinion, satisfactory to
Wheatley, a copy of which shall be furnished to Dresser, of Baker & Botts,
L.L.P., counsel to Wheatley, to the effect that, if the Merger is consummated in
accordance with the terms of the Merger Agreement, the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, that Dresser, WAC and Wheatley will each be a party
to that reorganization within the meaning of Section 368(b) of the Code and that
no gain or loss will be recognized by a stockholder of Wheatley as a result of
the Merger upon the conversion of shares of Wheatley Common Stock into shares of
Dresser Common Stock, which opinion shall not have been withdrawn or modified in
any material respect. In rendering such opinion, such counsel may receive and
rely upon representations of fact contained in certificates of Dresser, WAC and
Wheatley. See "The Merger -- Certain Federal Income Tax Consequences."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of Dresser, WAC and Wheatley relating to, among other things, (i) each of
their and certain of their respective subsidiaries' organization and similar
corporate matters, (ii) each of their capital structures, (iii) authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
related matters, and the absence of conflicts, violations of or defaults under
the Restated Certificates of Incorporation, as amended or By-Laws, as amended,
of each of Dresser and Wheatley, or any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Dresser or Wheatley or any of their respective
subsidiaries or any of their respective properties or assets, (iv) the documents
and reports filed by each of them with the Commission and the accuracy of the
information contained therein, (v) the accuracy of the information
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provided by each of them with respect to the Registration Statement and this
Proxy Statement/Prospectus, (vi) the absence of certain events, changes or
effects, (vii) the absence of undisclosed material liabilities, (viii)
compliance with certain laws, (ix) litigation, (x) taxes, (xi) retirement and
other employee plans and matters relating to the Employee Retirement Income
Security Act of 1974, as amended, (xii) employee representation by labor unions
or employee involvement in any other organizational activity, (xiii) authority
to use all patents and trademarks, (xiv) compliance with all environmental laws,
(xv) the stockholder vote required to approve the Merger Agreement, (xvi)
certain accounting matters, (xvii) beneficial ownership of the other party's
common stock, (xviii) maintenance of insurance, (xix) broker's or similar fees,
and (xx) certain tax matters. The Merger Agreement also contains representations
and warranties by Wheatley relating to SCI's fairness opinion, and
representations and warranties by Dresser and WAC regarding the rights agreement
relating to the Dresser Stock Purchase Rights and the interim operations of WAC.
CERTAIN COVENANTS; CONDUCT OF BUSINESS OF WHEATLEY
During the period from the date of the Merger Agreement and continuing
until the Effective Time, Wheatley has agreed as to itself and its subsidiaries
that (except as expressly contemplated or permitted by the Merger Agreement, or
to the extent that Dresser has otherwise consented in writing):
Ordinary Course. Except as specifically disclosed to Dresser, each of
Wheatley and its subsidiaries shall carry on its businesses in the ordinary
course in substantially the same manner as heretofore conducted and shall use
all reasonable efforts to preserve intact its present business organizations,
keep available the services of its current officers and employees, subject to
certain Wheatley employee matters, and endeavor to preserve its relationships
with customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall not be impaired in any material
respect at the Effective Time.
Dividends; Changes in Stock. Except as specifically disclosed to Dresser,
Wheatley shall not and it shall not permit any of its subsidiaries to: (i)
declare or pay any dividends on or make other distributions in respect of any of
its capital stock, except for the declaration and payment of regular quarterly
cash dividends not in excess of $.01 per share of Wheatley Common Stock and
dividends from a subsidiary of Wheatley to Wheatley or another subsidiary of
Wheatley and except for cash dividends or distributions paid on or with respect
to the capital stock of a subsidiary of Wheatley; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Wheatley capital stock; or (iii) repurchase, redeem or otherwise
acquire, or permit any of its subsidiaries to purchase, redeem or otherwise
acquire, any shares of its capital stock, except as required by the terms of its
securities outstanding on the date of the Merger Agreement or as contemplated by
any existing employee benefit plan.
Issuance of Securities. Except as specifically disclosed to Dresser,
Wheatley shall not and it shall not permit any of its subsidiaries to issue,
deliver or sell, or authorize or propose to issue, deliver or sell, any shares
of its capital stock of any class, any Voting Debt (as defined in the Merger
Agreement) or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, Voting Debt or convertible securities,
other than: (i) the issuance of Wheatley Common Stock upon the exercise of stock
options granted under the Wheatley Stock Option Plan that are outstanding on the
date of the Merger Agreement, or in satisfaction of stock grants or stock based
awards made prior to the date of the Merger Agreement pursuant to the Wheatley
Stock Option Plan or upon conversion of the Wheatley Convertible Note; and (ii)
issuances by a wholly owned subsidiary of its capital stock to its parent.
Governing Documents. Except as contemplated by the Merger Agreement,
Wheatley shall not amend or propose to amend its Restated Certificate of
Incorporation or By-Laws.
No Acquisitions. Other than acquisitions previously disclosed to Dresser or
acquisitions as to which the aggregate purchase price is not in excess of $1.5
million, Wheatley shall not, and it shall not permit any of its subsidiaries to
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof.
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No Dispositions. Other than: (i) dispositions or proposed dispositions
previously disclosed to Dresser; (ii) as may be necessary or required by law to
consummate the transactions contemplated by the Merger Agreement; or (iii)
dispositions in the ordinary course of business consistent with past practice
that are not material, individually or in the aggregate, to Wheatley and its
subsidiaries taken as a whole, Wheatley shall not, and it shall not permit any
of its subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree
to sell, lease (whether such lease is an operating or capital lease), encumber
or otherwise dispose of, any of its assets.
No Dissolution, Etc. Except as otherwise permitted or contemplated by the
Merger Agreement, Wheatley shall not authorize, recommend, propose or announce
an intention to adopt a plan of complete or partial liquidation or dissolution
of such party or any of its Significant Subsidiaries (as defined in the Merger
Agreement).
Certain Employee Matters. With the exception of certain employee matters
specifically disclosed to Dresser, Wheatley shall not and it shall not permit
any of its subsidiaries to: (i) grant any increases in the compensation of any
of its directors, officers or employees, except increases in the ordinary course
of business and in accordance with past practice; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
contemplated by any of the existing Wheatley Employee Benefit Plans or Wheatley
Pension Plans (as each are defined in the Merger Agreement) as in effect on the
date of the Merger Agreement to any such director, officer or employee, whether
past or present; (iii) enter into any new, or amend any existing, employment or
severance or termination agreement with any such director, officer or key
employee; or (iv) become obligated under any new Wheatley Employee Benefit Plan
or Wheatley Pension Plan, which was not in existence or approved by the Wheatley
Board prior to or on the date of the Merger Agreement, or amend any such plan or
arrangement in existence on the date of the Merger Agreement if such amendment
would have the effect of materially enhancing any benefits thereunder.
Indebtedness; Leases; Capital Expenditures. With the exception of certain
previously disclosed matters, Wheatley shall not, nor shall Wheatley permit any
of its subsidiaries to, (i) incur any indebtedness for borrowed money (except
for working capital under Wheatley's existing credit facilities, and
refinancings of existing debt that permit prepayment of such debt without
penalty (other than LIBOR breakage costs)) or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities of such party or any of its subsidiaries or guarantee any debt
securities of others, (ii) except in the ordinary course of business, enter into
any lease (whether such lease is an operating or capital lease) or create any
mortgages, liens, security interests or other encumbrances on the property of
Wheatley or any of its subsidiaries in connection with any indebtedness thereof,
except for those securing purchase money indebtedness or (iii) commit to
aggregate capital expenditures in excess of $250,000 outside the capital budget,
as amended and approved by Wheatley prior to the date of the Merger Agreement.
No Solicitation. From and after the date of the Merger Agreement, Wheatley
will not, and will not authorize or permit any of its officers, directors,
employees, agents and other representatives or those of any of its subsidiaries
(collectively, "Wheatley Representatives") to, directly or indirectly, solicit
or initiate any prospective buyer or make any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal (as defined herein)
from any person; provided, however, that, notwithstanding any other provision of
the Merger Agreement, (i) Wheatley may engage in discussions or negotiations
with a third party who (without any solicitation or initiation, directly or
indirectly, by or with Wheatley or any Wheatley Representatives after the date
of the Merger Agreement) seeks to initiate such discussions or negotiations and
may furnish such third party information concerning Wheatley and its business,
properties and assets, (ii) the Wheatley Board may take and disclose to
Wheatley's stockholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act and (iii) following receipt of an Acquisition Proposal
that is financially superior to the Merger and reasonably capable of being
financed (as determined in each case in good faith by the Wheatley Board after
consultation with Wheatley's financial advisors), the Wheatley Board may
withdraw, modify or not make its recommendation to approve the Merger or
terminate the Merger Agreement in accordance with the Merger Agreement, but in
each case referred to in the foregoing clauses (i) through (iii) only to the
extent that the Wheatley Board shall conclude in good faith that such action is
necessary in order for the Wheatley Board to act in a manner that is consistent
with its fiduciary obligations
32
<PAGE> 35
under applicable law. Wheatley will promptly notify Dresser of any such requests
for such information or the receipt of any Acquisition Proposal, including the
identity of the person or group engaging in such discussions or negotiations,
requesting such information or making such Acquisition Proposal, and (unless the
Wheatley Board concludes such disclosure is inconsistent with its fiduciary
obligations under applicable law) the material terms and conditions of any
Acquisition Proposal. As used in the Merger Agreement, "Acquisition Proposal"
means any proposal or offer, other than a proposal or offer by Dresser or any of
its affiliates, for a tender or exchange offer, a merger, consolidation or other
business combination involving Wheatley or any Significant Subsidiary of
Wheatley or any proposal to acquire in any manner a substantial equity interest
in, or substantially all of the assets of, Wheatley or any of its Significant
Subsidiaries.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, Dresser and Wheatley have agreed that (i)
they will prepare and file the Proxy Statement/Prospectus and have it mailed to
stockholders of Wheatley at the earliest practicable date, Dresser will prepare
and file with the Commission the Registration Statement, and each will use its
best efforts to have the Registration Statement declared effective, (ii) they
will use their best efforts to have timely delivered to the other "comfort"
letters from their respective independent public accountants, (iii) they will
each afford to the other access to their respective officers, properties and
other information as the other party may reasonably request, (iv) Wheatley will
call a meeting of its stockholders to be held as promptly as practicable, (v)
they will comply with all legal requirements imposed on each other with respect
to the Merger and furnish information to the other in connection with such legal
requirements, (vi) Dresser will take action necessary to permit it to issue
shares of Dresser Common Stock pursuant to the Merger and will use all
reasonable efforts to have approved for listing on the NYSE, subject to official
notice of issuance, the shares of Dresser Common Stock to be issued in the
Merger and shares of Dresser Common Stock issued or reserved for issuance under
the Wheatley Stock Option Plan, (vii) they each agree to certain employee
matters (see "The Merger -- Wheatley Employee Matters" and "-- Interests of
Certain Persons in the Merger"), (viii) Dresser will assume outstanding stock
options to purchase Wheatley Common Stock, which will become options to purchase
Dresser Common Stock at the Conversion Number (see "The Merger -- Merger
Consideration") and file a registration statement with respect to the Dresser
Common Stock subject to the options, (ix) Dresser will, subject to certain
limits, maintain directors and officers liability insurance for officers and
directors of Wheatley and its subsidiaries, (x) Dresser will assume the
Registration Rights Agreement, (xi) Dresser will take certain actions with
respect to Wheatley's bank credit agreement, (xii) they will cooperate and use
reasonable best efforts to defend any claim arising from or in connection with
the Merger, (xiii) they will not take any action that would affect the
accounting treatment of the Merger as a "pooling of interests," (xiv) they will
cooperate and consult with the other regarding press releases and changes that
may have a Material Adverse Effect (as defined in the Merger Agreement) and (xv)
they will not take any action that would affect the qualification of the Merger
as a reorganization described in Section 368(a) of the Code.
Each of Wheatley, Dresser and WAC have agreed to take all reasonable
actions necessary to comply promptly with all legal requirements that may be
imposed on any of them with respect to the Merger (including, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other governmental entity) and
to promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their subsidiaries
in connection with the Merger. Wheatley, Dresser and WAC will, and will cause
their respective subsidiaries to, take all actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, acquiescence,
authorization, order or approval of, or any exemption or nonopposition by, any
governmental entity or court required to be obtained or made by Wheatley,
Dresser or any of their subsidiaries in connection with the Merger or the taking
of any action contemplated thereby or by the Merger Agreement, including
complying with any requests or orders made by the Justice Department or the
Federal Trade Commission in connection with the Merger.
33
<PAGE> 36
EXPENSES AND TERMINATION FEE
Each of Dresser and Wheatley is required to pay all costs and expenses
incurred by it in connection with the Merger Agreement and all the transactions
contemplated thereby, whether or not the Merger is consummated, except that the
filing fee for registering shares of Dresser Common Stock pursuant to the
Registration Statement and with respect to the Proxy Statement/Prospectus will
be paid by Dresser.
The Merger Agreement also provides that Wheatley will pay to Dresser a fee
equal to $5,000,000 (the "Termination Fee") upon consummation of an Acquisition
Proposal following termination of the Merger Agreement if (i) the Wheatley Board
shall have approved or recommended any Acquisition Proposal that is financially
superior to the Merger and reasonably capable of being financed (as determined
in each case in good faith by the Wheatley Board after consultation with
Wheatley's financial advisors), and the Wheatley Board concludes that its
fiduciary duties require acceptance or recommendation of such Acquisition
Proposal; or (ii) the Wheatley Board withdraws, modifies or changes its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Dresser or WAC or shall have resolved to do any of the foregoing.
INDEMNIFICATION
Wheatley shall, and from and after the Effective Time, Dresser 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 of the Merger Agreement or who
becomes prior to the Effective Time, an officer or director of Wheatley or any
of its subsidiaries or an employee of Wheatley or any of its subsidiaries who
acts as a fiduciary under any Wheatley Employee Benefit Plans or Wheatley
Pension 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 Wheatley or any
subsidiary whether pertaining to any matter existing or occurring at or prior to
the Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to the Merger Agreement or the transactions contemplated thereby,
in each case to the full extent permitted under applicable Delaware law (and
Dresser and the Surviving Corporation, as the case may be, will pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law). Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any of the Indemnified Parties (whether arising
before or after the Effective Time), (i) the Indemnified Parties may retain
counsel satisfactory to them and Wheatley (or to them and Dresser and the
Surviving Corporation after the Effective Time) and Wheatley (or after the
Effective Time, Dresser and the Surviving Corporation) shall pay all fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; and (ii) Wheatley (or after the Effective Time, Dresser
and the Surviving Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that neither Wheatley, Dresser nor
the Surviving Corporation shall be liable for any settlement effected without
its written consent, which consent, however, shall not be unreasonably withheld.
Any Indemnified Party wishing to claim indemnification, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify Wheatley (or
after the Effective Time, Dresser and the Surviving Corporation), but the
failure so to notify shall not relieve a party from any liability that it may
have under the Merger Agreement 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 on any
significant issue between the positions of any two or more Indemnified Parties.
Wheatley, Dresser and WAC agree that all rights to indemnification, including
provisions relating to advances of expenses incurred in defense of any action or
suit, existing in favor of the Indemnified Parties (including in Wheatley's
Restated Certificate of Incorporation or By-Laws or in the indemnification
agreements with Wheatley's directors made available to Dresser) with respect to
matters occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time; provided, however, that all
34
<PAGE> 37
rights to indemnification in respect of any Indemnified Liabilities asserted or
made within such period shall continue until the disposition of such Indemnified
Liabilities.
AMENDMENT, WAIVER AND TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of Wheatley:
(1) by mutual written consent of Wheatley and Dresser, or by mutual
action of their respective Boards of Directors;
(2) by either Wheatley or Dresser if (i) the Merger shall not have
been consummated by October 31, 1994 (provided that the right to terminate
the Merger Agreement shall not be available to any party whose breach of
any representation or warranty or failure to fulfill any covenant or
agreement under the Merger Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date); (ii) any court
of competent jurisdiction, or some other governmental body or regulatory
authority shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and nonappealable; (iii) any required approval of Wheatley's
stockholders shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof; or (iv) the Wheatley Board
shall have approved or recommended any Acquisition Proposal that is
financially superior to the Merger and reasonably capable of being financed
(as determined in each case in good faith by Wheatley Board after
consultation with Wheatley's financial advisors), and the Board of
Directors of Wheatley is advised by its outside counsel that the fiduciary
duties of the Wheatley Board require acceptance or recommendation of such
Acquisition Proposal;
(3) by Dresser if (i) for any reason Wheatley fails to call and hold a
stockholders meeting for the purpose of voting upon the Merger Agreement
and the Merger by October 31, 1994 (provided that this right to terminate
the Merger Agreement shall not be available to Dresser if Wheatley would be
entitled to terminate the Merger Agreement); (ii) Wheatley shall have
failed to comply in any material respect with any of the covenants or
agreements contained in the Merger Agreement to be complied with or
performed by Wheatley at or prior to such date of termination (provided
such breach has not been cured within 30 days following receipt by Wheatley
of notice of such breach and is existing at the time of termination of the
Merger Agreement); (iii) any representation or warranty of Wheatley
contained in the Merger Agreement shall not be true in all material
respects when made (provided such breach has not been cured within 30 days
following receipt by Wheatley of notice of such breach and is existing at
the time of termination of the Merger Agreement) or on and as of the
Effective Time as if made on and as of the Effective Time (except to the
extent it relates to a particular date), except where the failure to be so
true and correct (without giving effect to the individual materiality
thresholds otherwise contained in the Merger Agreement) could not
reasonably be expected to have a Material Adverse Effect; (iv) the Wheatley
Board withdraws, modifies or changes its recommendation of the Merger
Agreement or the Merger in a manner adverse to Dresser or WAC or shall have
resolved to do any of the foregoing; (v) after the date of the Merger
Agreement there has been any Material Adverse Change with respect to
Wheatley, except for general economic changes or changes that may affect
the industries of Wheatley or any of its subsidiaries generally; or (vi)
the Average Daily Price of Dresser Common Stock is greater than $29.00; or
(4) by Wheatley if (i) Dresser or WAC shall have failed to comply in
any material respect with any of the covenants or agreements contained in
the Merger Agreement to be complied with or performed by it at or prior to
such date of termination (provided such breach has not been cured within 30
days following receipt by Dresser of notice of such breach and is existing
at the time of termination of the Merger Agreement); (ii) any
representation or warranty of Dresser or WAC contained in the Merger
Agreement shall not be true in all material respects when made (provided
such breach has not been
35
<PAGE> 38
cured within 30 days following receipt by Dresser of notice of such
breach and is existing at the time of termination of the Merger
Agreement) or on and as of the Effective Time as if made on and as of
the Effective Time (except to the extent it relates to a particular
date), except where the failure to be so true and correct (without
giving effect to the individual materiality thresholds otherwise
contained in the Merger Agreement) could not reasonably be expected to
have a Material Adverse Effect; (iii) after the date of the Merger
Agreement there has been any Material Adverse Change with respect to
Dresser, except for general economic changes or changes that may affect
the industries of Dresser or any of its subsidiaries generally; or (iv)
if the Average Daily Price of Dresser Common Stock is less than $18.00.
36
<PAGE> 39
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed financial statements appearing
on pages 39-44 give effect to the Merger pursuant to the Merger Agreement. The
Merger is reflected in the pro forma combined condensed financial statements
under the pooling of interests method of accounting.
The unaudited pro forma combined condensed statements of earnings assume
that the Merger had occurred on November 1, 1990. The unaudited pro forma
combined condensed statements of earnings for each of the three years in the
period ended October 31, 1993 combine the Dresser results for the years ended
October 31 with the Wheatley results for the twelve month periods ended August
31. The unaudited pro forma combined condensed statements of earnings for the
six months ended April 30, 1994 and 1993 combine the Dresser results for the six
months ended April 30 with the Wheatley results for the six months ended
February 28. The unaudited pro forma combined condensed balance sheet assumes
that the Merger had occurred on April 30, 1994 and combines the balance sheets
of Dresser as of April 30, 1994 and of Wheatley as of February 28, 1994.
On January 21, 1994, a wholly owned subsidiary of Dresser merged with
Baroid. Dresser issued 0.40 shares of Dresser Common Stock for each share of
outstanding Baroid common stock, and Baroid became a wholly owned subsidiary of
Dresser. The Baroid Merger has been accounted for as a pooling of interests.
Dresser, as used in these unaudited pro forma combined condensed financial
statements, refers to Dresser and its subsidiaries including Baroid.
Further information about the Baroid Merger is available from documents
incorporated by reference in this Proxy Statement/Prospectus. Dresser's Current
Report on Form 8-K dated January 21, 1994, as amended by Dresser's Form 8-K/A
dated March 10, 1994, contains supplemental consolidated financial statements
and notes reflecting the Baroid Merger. For the following pro forma information,
the Dresser information for the six months ended April 30, 1994 and 1993 and for
the year ended October 31, 1993 is based on other pro forma information
appearing on pages 45-48 of this Proxy Statement/Prospectus; the Dresser
information for the years ended October 31, 1992 and 1991 is based on the
supplemental consolidated financial statements in Dresser's Form 8-K dated
January 21, 1994, as amended by Dresser's Form 8-K/A dated March 10, 1994.
On March 7, 1994, Wheatley completed the sale of 3 million shares of
Wheatley Common Stock in a public offering. Wheatley used the net proceeds of
approximately $29.8 million to reduce debt. Further information about the stock
offering is available in Wheatley's Annual Report on Form 10-K for the fiscal
year ended February 28, 1994, which is incorporated by reference in this Proxy
Statement/Prospectus. Such Form 10-K contains a pro forma balance sheet as of
February 28, 1994 giving effect to the stock offering. The Wheatley information
in the following unaudited pro forma combined condensed balance sheet is based
on the pro forma balance sheet in the Form 10-K.
For the following unaudited pro forma combined condensed statements of
earnings, the Wheatley information for the six months ended February 28, 1994
and 1993 and for the twelve months ended August 31, 1993, is based on other pro
forma information appearing on pages 49-53 of this Proxy Statement/Prospectus.
The pro forma financial information is provided for comparative purposes
only and does not purport to be indicative of the results that would have been
obtained if the Merger had been effected on the date indicated or of those
results that may be obtained in the future.
MERGER AGREEMENT
The terms of the Merger Agreement call for the exchange of 0.7 shares of
Dresser Common Stock for each share of Wheatley Common Stock, provided that the
Average Daily Price is between $20 and $27 per share during a specified period
prior to the Special Meeting. If the Average Daily Price is above or below the
specified range during the period, the Conversion Number will be adjusted, but
will not be greater than .7368 nor less than .6750.
The unaudited pro forma combined condensed financial statements have been
prepared assuming issuance of 8,275,000 shares of Dresser Common Stock based on
an Exchange Ratio of 0.7 shares of Dresser
37
<PAGE> 40
Common Stock for each of the approximately 11,821,000 shares of Wheatley Common
Stock outstanding as of February 28, 1994, which assumes that the Average Daily
Price is between $20 and $27 during the specified period referred to above.
NON-RECURRING CHARGES
Non-recurring charges directly attributable to the Merger are not included
in the unaudited pro forma combined condensed financial statements. Such
non-recurring charges include severance and termination benefits, legal and
other professional fees, and costs of integrating the operations of the
companies. As the non-recurring charges are incurred, they will be included in
the expenses of the combined operations.
38
<PAGE> 41
DRESSER AND WHEATLEY
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF APRIL 30, 1994
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
DRESSER WHEATLEY
HISTORICAL PRO FORMA
APRIL 30, FEBRUARY 28,
1994 1994 ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 398.6 $ 2.4 $ (57.2)(a) $ 343.8
Notes and accounts receivable............................. 788.0 25.0 813.0
Inventories............................................... 610.8 41.4 652.2
Deferred income taxes..................................... 98.0 .5 98.5
Other current assets...................................... 38.9 .9 39.8
-------- ------ ------- --------
Total Current Assets................................ 1,934.3 70.2 (57.2) 1,947.3
Notes receivable from sale of Western Atlas................. 200.0 200.0
Investment in and receivables from major unconsolidated
joint ventures............................................ 145.8 145.8
Intangibles................................................. 606.3 63.7 670.0
Deferred income taxes....................................... 202.2 (6.2) 196.0
Other assets................................................ 176.7 176.7
Property, plant and equipment -- at cost.................... 2,099.5 57.9 2,157.4
Accumulated depreciation and amortization................... 1,241.3 13.2 1,254.5
-------- ------ --------
Total Properties -- Net............................. 858.2 44.7 902.9
-------- ------ ------- --------
Total Assets.................................... $4,123.5 $172.4 $ (57.2) $4,238.7
======== ====== ======= ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Short-term debt and current portion of long-term debt..... $ 42.2 $ 8.6 $ (8.6)(a) $ 42.2
Accounts payable.......................................... 318.4 11.9 330.3
Advances from customers on contracts...................... 251.9 251.9
Accrued compensation and benefits......................... 214.5 214.5
Income taxes.............................................. 189.7 189.7
Other accrued liabilities................................. 366.0 8.5 374.5
-------- ------ ------- --------
Total Current Liabilities........................... 1,382.7 29.0 (8.6) 1,403.1
Employee retirement obligations............................. 674.8 674.8
Long-term debt.............................................. 459.9 48.6 (48.6)(a) 459.9
Deferred compensation and other liabilities................. 96.9 4.1 101.0
Minority interest........................................... 83.6 83.6
Shareholders' Investment
Common shares............................................. 43.9 .1 2.0(b) 46.0
Capital in excess of par value............................ 374.2 72.5 (2.0)(b) 444.7
Retained earnings......................................... 1,142.0 18.5 1,160.5
Cumulative translation adjustments........................ (116.6) (.4) (117.0)
Pension liability adjustment.............................. (13.8) (13.8)
-------- ------ --------
1,429.7 90.7 1,520.4
Treasury shares, at cost.................................. 4.1 4.1
-------- ------ --------
Total Shareholders' Investment...................... 1,425.6 90.7 1,516.3
-------- ------ ------- --------
Total Liabilities and Shareholders'
Investment.................................... $4,123.5 $172.4 $ (57.2) $4,238.7
======== ====== ======= ========
</TABLE>
Adjustments:
(a) Repayment of Wheatley long-term debt, including current portion.
(b) Issuance of 0.7 shares of Dresser Common Stock for each share of Wheatley
Common Stock.
39
<PAGE> 42
DRESSER AND WHEATLEY
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
SIX MONTHS ENDED APRIL 30, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DRESSER WHEATLEY
PRO FORMA PRO FORMA
SIX MONTHS SIX MONTHS
ENDED ENDED
APRIL 30, FEBRUARY 28,
1994 1994 ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Sales and service revenues.....................$ 2,489.9 $ 80.8 $ $ 2,570.7
Cost of sales and services..................... (1,941.6) (51.4) (1,993.0)
--------- -------- ----- ---------
Gross earnings............................... 548.3 29.4 577.7
Earnings from major unconsolidated joint
ventures..................................... 8.6 8.6
Selling, engineering, administrative and
general expenses............................. (410.1) (19.4) (429.5)
Special credits (charges)...................... 8.9 8.9
--------- -------- ----- ---------
Earnings from operations..................... 155.7 10.0 165.7
--------- -------- ----- ---------
Other income (deductions)
Interest earned (expense), net............... (.2) (1.8) 1.9(a) (0.1)
Other, net................................... 21.8 (0.3) 21.5
--------- -------- ----- ---------
Total................................ 21.6 (2.1) 1.9 21.4
--------- -------- ----- ---------
Earnings before income taxes and minority
interest..................................... 177.3 7.9 1.9 187.1
Income taxes................................... (66.6) (3.4) (.7)(b) (70.7)
Minority interest.............................. (13.8) (13.8)
--------- -------- ----- ---------
Earnings from continuing
operations......................... $ 96.9 $ 4.5 $ 1.2 $ 102.6
========= ======== ===== =========
Per share............................ $ .55 $ .38 $ .56
========= ======== =========
Average common shares outstanding.............. 175.1 11.8 183.4
========= ======== =========
</TABLE>
Adjustments:
(a) Reduction in net interest expense due to repayment of Wheatley long-term
debt.
(b) Income tax on (a) above at 35 percent.
40
<PAGE> 43
DRESSER AND WHEATLEY
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
SIX MONTHS ENDED APRIL 30, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DRESSER WHEATLEY
PRO FORMA PRO FORMA
SIX MONTHS SIX MONTHS
ENDED ENDED
APRIL 30, FEBRUARY 28,
1993 1993 ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Sales and service revenues................... $ 2,271.8 $ 76.2 $ $ 2.348.0
Cost of sales and services................... (1,765.2) (50.4) (1,815.6)
--------- ------ ----- ---------
Gross earnings............................. 506.6 25.8 532.4
Earnings from major unconsolidated joint
ventures................................... 20.7 20.7
Selling, engineering, administrative and
general expenses........................... (409.6) (18.5) (428.1)
Special credits (charges).................... (72.2) (72.2)
--------- ------ ----- ---------
Earnings from operations................... 45.5 7.3 52.8
--------- ------ ----- ---------
Other income (deductions)
Interest earned (expense), net............. (3.0) (1.6) 1.9 (a) (2.7)
Retiree benefit curtailment................ 12.8 12.8
Other, net................................. 12.8 12.8
--------- ------ ----- ---------
Total.............................. 22.6 (1.6) 1.9 22.9
--------- ------ ----- ---------
Earnings before income taxes and minority
interest................................... 68.1 5.7 1.9 75.7
Income taxes................................. (20.6) (2.5) (.7)(b) (23.8)
Minority interest............................ (9.9) (9.9)
--------- ------ ----- ---------
Earnings from continuing
operations....................... $ 37.6 $ 3.2 $ 1.2 $ 42.0
========= ====== ===== =========
Per share.......................... $ .22 $ .27 $ .23
========= ====== =========
Average common shares outstanding............ 174.1 11.7 182.3
========= ====== =========
</TABLE>
Adjustments:
(a) Reduction in net interest expense due to repayment of Wheatley long-term
debt.
(b) Income tax on (a) above at 35 percent.
41
<PAGE> 44
DRESSER AND WHEATLEY
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED OCTOBER 31, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WHEATLEY
PRO FORMA
DRESSER PRO TWELVE
FORMA MONTHS
YEAR ENDED ENDED
OCTOBER 31, AUGUST 31,
1993 1993 ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and service revenues..................... $ 4,734.9 $ 157.6 $ $ 4,892.5
Cost of sales and services..................... (3,623.2) (103.5) (3,726.7)
---------- -------- ----- ---------
Gross earnings............................... 1,111.7 54.1 1,165.8
Earnings from major unconsolidated joint
ventures..................................... 21.4 21.4
Selling, engineering, administrative and
general expenses............................. (815.7) (38.0) (853.7)
Special credits (charges)...................... (105.1) (105.1)
---------- -------- ----- ---------
Earnings from operations..................... 212.3 16.1 228.4
---------- -------- ----- ---------
Other income (deductions)......................
Interest earned (expense), net............... (6.9) (3.3) 3.8(a) (6.4)
Retiree benefit curtailment.................. 12.8 12.8
Other, net................................... 26.6 0.2 26.8
---------- -------- ----- ---------
Total................................ 32.5 (3.1) 3.8 33.2
---------- -------- ----- ---------
Earnings before income taxes and minority
interest..................................... 244.8 13.0 3.8 261.6
Income taxes................................... (83.6) (5.6) (1.3)(b) (90.5)
Minority interest.............................. (36.6) (36.6)
---------- -------- ----- ---------
Earnings from continuing
operations......................... $ 124.6 $ 7.4 $ 2.5 $ 134.5
========== ======== ===== =========
Per share............................ $ .71 $ .63 $ .74
========== ======== =========
Average common shares outstanding.............. 174.3 11.8 182.6
========== ======== =========
</TABLE>
Adjustments:
(a) Reduction in net interest expense due to repayment of Wheatley long-term
debt.
(b) Income tax on (a) above at 35 percent.
42
<PAGE> 45
DRESSER AND WHEATLEY
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED OCTOBER 31, 1992
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WHEATLEY
HISTORICAL
DRESSER TWELVE
SUPPLEMENTAL MONTHS
YEAR ENDED ENDED
OCTOBER 31, AUGUST 31,
1992 1992 COMBINED
------------ ---------- --------
<S> <C> <C> <C>
Sales and service revenues................................... $ 4,551.8 $ 80.7 $ 4,632.5
Cost of sales and services................................... (3,480.9) (57.6) (3,538.5)
--------- ------ --------
Gross earnings............................................. 1,070.9 23.1 1,094.0
Earnings from major unconsolidated joint ventures............ 80.6 80.6
Selling, engineering, administrative and general
expenses................................................... (910.9) (12.7) (923.6)
Special credits (charges).................................... (70.0) (70.0)
--------- ------ --------
Earnings from operations................................... 170.6 10.4 181.0
--------- ------ --------
Other income (deductions)
Interest earned (expense), net............................. (26.7) (.2) (26.9)
Other, net................................................. 34.8 34.8
--------- ------ --------
Total.............................................. 8.1 (.2) 7.9
--------- ------ --------
Earnings before income taxes and minority interest........... 178.7 10.2 188.9
Income taxes................................................. (76.2) (3.6) (79.8)
Minority interest............................................ (10.3) (10.3)
--------- ------ --------
Earnings from continuing operations................ $ 92.2 $ 6.6 $ 98.8
========= ====== ========
Per share.......................................... $ .54 $ .76 $ .55
========= ====== ========
Average common shares outstanding............................ 172.3 8.7 178.4
========= ====== ========
</TABLE>
43
<PAGE> 46
DRESSER AND WHEATLEY
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED OCTOBER 31, 1991
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WHEATLEY
HISTORICAL
DRESSER TWELVE
SUPPLEMENTAL MONTHS
YEAR ENDED ENDED
OCTOBER 31, AUGUST 31,
1991 1991 COMBINED
------------ ---------- --------
<S> <C> <C> <C>
Sales and service revenues............................... $ 4,681.1 $ 88.0 $ 4,769.1
Cost of sales and services............................... (3,560.0) (61.9) (3,621.9)
--------- ------ ---------
Gross earnings......................................... 1,121.1 26.1 1,147.2
Earnings from major unconsolidated joint ventures........ 79.8 79.8
Selling, engineering, administrative and general
expenses............................................... (904.5) (14.7) (919.2)
Special charges.......................................... (26.2) (26.2)
--------- ------ ---------
Earnings from operations............................... 270.2 11.4 281.6
--------- ------ ---------
Other income (deductions)
Interest earned (expense), net......................... (36.8) (3.9) (40.7)
Other, net............................................. 22.9 22.9
--------- ------ ---------
Total.......................................... (13.9) (3.9) (17.8)
--------- ------ ---------
Earnings before income taxes and minority interest....... 256.3 7.5 263.8
Income taxes............................................. (102.8) (2.6) (105.4)
Minority interest........................................ (15.9) (15.9)
--------- ------ ---------
Earnings from continuing operations............ $ 137.6 $ 4.9 $ 142.5
========= ====== ========
Per share...................................... $ .80 $ .56 $ .80
========= ====== ========
Average common shares outstanding........................ 171.0 8.7 177.1
========= ====== ========
</TABLE>
44
<PAGE> 47
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
On January 21, 1994, a wholly owned subsidiary of Dresser merged with
Baroid. Dresser issued 0.40 shares of Dresser Common Stock for each share of
outstanding Baroid common stock, and Baroid became a wholly owned subsidiary of
Dresser. The Baroid Merger has been accounted for as a pooling of interests.
Dresser, as used in these unaudited pro forma combined condensed financial
statements, refers to Dresser and its subsidiaries including Baroid. Further
information about the Baroid Merger is available from documents incorporated by
reference in this Proxy Statement/Prospectus. Dresser's Current Report on Form
8-K dated January 21, 1994, as amended by Dresser's Form 8-K/A dated March 10,
1994, contains supplemental consolidated financial statements and notes
reflecting the Baroid Merger. These supplemental consolidated financial
statements have been used in preparing the following annual pro forma
information.
During February and March 1993, Dresser acquired two corporations, Bredero
Price Holding B. V. ("Bredero Price") and TK Valve & Manufacturing, Inc. ("TK
Valve").
On January 28, 1994, Dresser sold its 29.5% interest in Western Atlas to a
wholly owned subsidiary of Litton Industries, Inc. for $358 million in cash and
$200 million in 7 1/2% notes due over seven years.
In connection with the Baroid Merger, the Antitrust Division of United
States Department of Justice ordered Dresser to dispose of either its 64%
general partnership interest in M-I Drilling Fluids or its 100% Interest in
Baroid Drilling Fluids Inc. by June 1, 1994. Dresser completed the sale of its
64% interest in M-I Drilling Fluids to Smith International, Inc. for $160
million effective February 28, 1994.
The following unaudited pro forma combined condensed statements of earnings
assume that the acquisitions of Bredero Price and TK Valve and the sales of
interests in M-I Drilling Fluids and Western Atlas had occurred on November 1,
1992. The pro forma financial data is provided for comparative purposes only and
does not purport to be indicative of the results that would have been obtained
if the acquisitions and the sales had been effected on the date indicated or of
those results that may be obtained in the future. The pro forma financial
information is based on the purchase method of accounting for the acquisitions.
The pro forma adjustments are described in footnotes to the unaudited pro forma
combined condensed statements of earnings.
45
<PAGE> 48
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
SIX MONTHS ENDED APRIL 30, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ELIMINATE
ELIMINATE M-I
WESTERN DRILLING
DRESSER ATLAS FLUIDS ADJUSTMENTS PRO FORMA
--------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and service revenues........... $ 2,636.0 $ $(146.1) $ $ 2,489.9
Cost of sales and services........... (2,029.7) 88.1 (1,941.6)
--------- ------- ------- ----- ---------
Gross earnings..................... 606.3 (58.0) 548.3
Earnings from major unconsolidated
joint ventures..................... 8.6 8.6
Selling, engineering, administrative
and general expenses............... (457.1) 47.0 (410.1)
Special credits (charges)............ 8.9 8.9
--------- ------- ------- ----- ---------
Earnings from operations........... 166.7 (11.0) 155.7
--------- ------- ------- ----- ---------
Other income (deductions)
Interest earned (expense), net..... (7.1) (.4) 7.3(a) (.2)
Gain on sale of interests in
Western Atlas and M-I Drilling
Fluids.......................... 278.7 (275.7) (3.0)
Other, net......................... 20.8 1.0 21.8
--------- ------- ------- ----- ---------
Total...................... 292.4 (275.7) (2.4) 7.3 21.6
--------- ------- ------- ----- ---------
Earnings before income taxes and
minority interest............... 459.1 (275.7) (13.4) 7.3 177.3
Income taxes....................... (197.1) 129.3 3.8 (2.6)(b) (66.6)
Minority interest.................. (15.9) 2.1 (13.8)
--------- ------- ------- ----- ---------
Earnings from continuing
operations............... $ 246.1 $(146.4) $ (7.5) $ 4.7 $ 96.9
========= ======= ======= ====== =========
Per share.................. $ 1.41 $ .55
========= =========
Average common shares outstanding.... 175.1 175.1
========= =========
</TABLE>
Adjustments:
<TABLE>
<S> <C>
(a) Interest on $200 million note received as part of proceeds from sale
of Western Atlas.................................................... $ 3.8
Reduction in interest expense due to use of proceeds to reduce debt... 3.5
-----
$ 7.3
=====
(b) Income tax at 35% on (a) above.
</TABLE>
46
<PAGE> 49
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
SIX MONTHS ENDED APRIL 30, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BREDERO ELIMINATE
PRICE ELIMINATE M-I
AND WESTERN DRILLING ADJUST- PRO
DRESSER TK VALVE ATLAS FLUIDS MENTS FORMA
-------- ---------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales and service revenues...... $2,370.5 $ 89.7 $ $(188.4) $ $2,271.8
Cost of sales and services...... (1,811.1) (65.1) 111.0 (1,765.2)
-------- ---------- --------- --------- ------- --------
Gross earnings................ 559.4 24.6 (77.4) 506.6
Earnings from major
unconsolidated joint
ventures...................... 42.1 (21.4) 20.7
Selling, engineering,
administrative and general
expenses...................... (477.8) (10.4) 73.8 4.8(a) (409.6)
Special credits (charges)....... (72.2) (72.2)
-------- ---------- --------- --------- ------- --------
Earnings from operations...... 51.5 14.2 (21.4) (3.6) 4.8 45.5
-------- ---------- --------- --------- ------- --------
Other income (deductions)
Interest earned (expense),
net........................ (10.2) .4 .1 6.7(b) (3.0)
Retiree benefit curtailment... 12.8 12.8
Other, net.................... 16.8 (2.2) (1.8) 12.8
-------- ---------- --------- --------- ------- --------
Total................. 19.4 (1.8) (1.7) 6.7 22.6
-------- ---------- --------- --------- ------- --------
Earnings before income taxes
and minority interest...... 70.9 12.4 (21.4) (5.3) 11.5 68.1
Income taxes.................... (27.3) (3.5) 8.3 5.9 (4.0)(c) (20.6)
Minority interest............... (11.4) 1.5 (9.9)
-------- ---------- --------- --------- ------- --------
Earnings from
continuing
operations.......... $ 32.2 $ 8.9 $ (13.1) $ 2.1 $ 7.5 $ 37.6
======== ========= ======= ======= ===== ========
Per share............. $ .19 $ .22
======== ========
Average common shares
outstanding................... 174.1 174.1
======== ========
</TABLE>
Adjustments:
<TABLE>
<S> <C>
(a) Amortization of Bredero Price and TK Valve goodwill.......................... $(1.7)
Anticipated reduction in Baroid corporate expense............................ 6.5
-----
$ 4.8
=====
(b) Interest on $200 million note received as part of proceeds from sale of
Western Atlas.............................................................. $ 7.5
Reduction of interest expense due to use of proceeds to reduce debt......... 7.0
Interest expense on borrowings to finance acquisitions of Bredero Price
and TK Valve.............................................................. (7.8)
-----
$ 6.7
=====
(c) Income tax at 35% on (a) and (b) above.
</TABLE>
47
<PAGE> 50
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED OCTOBER 31, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BREDERO ELIMINATE
PRICE ELIMINATE M-I
DRESSER AND WESTERN DRILLING ADJUST- PRO
SUPPLEMENTAL TK VALVE ATLAS FLUIDS MENTS FORMA
------------ -------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales and service revenues........... $5,043.8 $ 89.7 $ $(398.6) $ $4,734.9
Cost of sales and services........... (3,792.9) (65.1) 234.8 (3,623.2)
-------- ------ ------- ------- ----- --------
Gross earnings..................... 1,250.9 24.6 (163.8) 1,111.7
Earnings from major unconsolidated
joint ventures..................... 60.6 (39.2) 21.4
Selling, engineering, administrative
and general expenses............... (961.9) (10.4) 145.3 11.3(a) (815.7)
Special credits (charges)............ (105.1) (105.1)
-------- ------ ------- ------- ----- --------
Earnings from operations........... 244.5 14.2 (39.2) (18.5) 11.3 212.3
-------- ------ ------- ------- ----- --------
Other income (deductions)
Interest earned (expense), net..... (24.8) .4 (.3) 17.8(b) (6.9)
Retiree benefit curtailment........ 12.8 12.8
Other, net......................... 35.4 (2.2) (6.6) 26.6
-------- ------ ------- ------- ----- --------
Total...................... 23.4 (1.8) (6.9) 17.8 32.5
-------- ------ ------- ------- ----- --------
Earnings before income taxes and
minority interest............... 267.9 12.4 (39.2) (25.4) 29.1 244.8
Income taxes......................... (95.5) (3.5) 15.7 9.9 (10.2)(c) (83.6)
Minority interest.................... (44.2) 7.6 (36.6)
-------- ------ ------- ------- ----- --------
Earnings from continuing
operations............... $ 128.2 $ 8.9 $ (23.5) $ (7.9) $ 18.9 $ 124.6
======== ====== ======= ======= ======= ========
Per share.................. $ .74 $ .71
======== ========
Average common shares outstanding.... 174.3 174.3
======== ========
</TABLE>
Adjustments:
<TABLE>
<S> <C>
(a) Amortization of Bredero Price and TK Valve goodwill..................................... $ (1.7)
Anticipated reduction in Baroid corporate expense...................................... 13.0
------
$ 11.3
======
(b) Interest on $200 million note received as part of proceeds from sale of
Western Atlas........................................................................ $ 15.0
Reduction in interest expense due to use of proceeds to reduce debt.................... 11.4
Interest expense on borrowings to finance acquisitions of Bredero Price and TK Valve... (8.6)
------
$ 17.8
======
(c) Income tax at 35% on (a) and (b) above.
</TABLE>
48
<PAGE> 51
WHEATLEY TXT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENTS OF EARNINGS
On December 31, 1993, Wheatley acquired Axelson from a subsidiary of Hanson
plc (collectively, "Hanson Industries") for approximately $80 million. On
December 3, 1993, Wheatley acquired Tom Wheatley in an asset purchase
transaction with a purchase price of approximately $9 million. On July 8, 1993,
Wheatley acquired Clif Mock in an asset purchase transaction with a purchase
price of approximately $6 million.
The indebtedness incurred to finance the Axelson acquisition was borrowed
under a bank credit agreement (the "Credit Agreement"), consisting of a $40
million revolving credit facility (the "Revolving Credit Facility") and a $40
million term loan (the "Term Loan"). On March 7, 1994, Wheatley completed the
sale of 3 million shares of Wheatley Common Stock in a public offering with a
price to the public of $10.75 per share. Wheatley used the net proceeds of
approximately $29.8 million to prepay $15 million of the Term Loan debt and to
repay $14.8 million of the Revolving Credit Facility Borrowings.
The unaudited pro forma statements of earnings give effect to (i) the Clif
Mock, Tom Wheatley and Axelson acquisitions under the purchase method of
accounting and the related assumptions and adjustments described in the
accompanying notes, (ii) the establishment of the Credit Agreement providing for
the Term Loan and Revolving Credit Facility and the borrowing by Wheatley of $40
million under the Term Loan and $27 million under the Revolving Credit Facility
to finance the Axelson acquisition, including transaction costs and costs to
establish the Credit Agreement and (iii) the issuance and sale of 3 million
shares of Wheatley Common Stock and the application of the net proceeds
therefrom to prepay $15 million of the Term Loan and to repay $14.8 million of
the Revolving Credit Facility.
Wheatley's historical results of operations are derived from unaudited
consolidated statements of operations for the 12 months ended August 31, 1993,
and the six months ended February 28, 1993 and 1994.
The historical results of operations for Axelson included in the unaudited
pro forma statement of earnings for the 12 months ended August 31, 1993, are
from the audited combined statements of operations for the year ended October 2,
1993. The historical results of operations for Axelson included in the unaudited
pro forma statement of earnings for the six months ended February 28, 1993, are
from unaudited combined statements of operations for the six months ended March
31, 1993. The historical results of operations for Axelson included in the
unaudited pro forma statement of earnings for the six months ended February 28,
1994, are derived from unaudited combined statements of operations for the
period from September 1, 1993 to December 31, 1993. The results of operations
for Axelson are included in Wheatley's historical results of operations since
the acquisition date (December 31, 1993). Axelson revenues for the period from
December 31, 1993 through February 28, 1994, represented approximately $9.7
million of Wheatley's sales.
The historical results of operations of Tom Wheatley are derived from
unaudited statements of operations for the year ended August 31, 1993, the six
months ended February 28, 1993, and the period from September 1, 1993 to
December 3, 1993. The results of operations of Tom Wheatley are included in
Wheatley's historical results of operations since the acquisition date (December
3, 1993). Tom Wheatley revenues for the period from December 3, 1993 through
February 28, 1994, represented approximately $1.7 million of Wheatley's sales.
The historical results of operations of Clif Mock are derived from
unaudited statements of operations for the six months ended February 28, 1993,
and the period from September 1, 1992 to July 8, 1993. The results of operations
of Clif Mock are included in Wheatley's historical results of operations since
the acquisition date (July 8, 1993). Clif Mock revenues for the period from July
8, 1993 through August 31, 1993, and for the six months ended February 28, 1994
represented approximately $2.2 million and $6.5 million, respectively, of
Wheatley's sales.
The unaudited pro forma statements of earnings for the year ended August
31, 1993, and for the six months ended February 28, 1993 and 1994, have been
prepared assuming the transactions described above were consummated as of
September 1, 1992. The pro forma statements of earnings and the pro forma
49
<PAGE> 52
adjustments are based upon available information and certain assumptions that
management of Wheatley believes are reasonable. The pro forma financial
statements do not purport to represent what Wheatley's financial position or
results of operations actually would have been had such transactions in fact
occurred on the dates indicated or to project Wheatley's financial position or
results of operations for any future date or period. Wheatley has not completed
the evaluations necessary for the final purchase price allocation related to the
acquisitions; accordingly, actual adjustments that reflect other evaluations of
the purchased assets and assumed liabilities may differ from the pro forma
adjustments. If there is an adjustment to the amounts assigned to assets with
different estimated lives, depreciation and amortization expense will change.
These pro forma statements of earnings and the notes thereto should be read
in conjunction with the consolidated financial statements of Wheatley, including
the notes thereto, and the historical financial statements of Axelson and Tom
Wheatley, all of which are incorporated by reference in this Proxy
Statement/Prospectus.
50
<PAGE> 53
WHEATLEY TXT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
SIX MONTHS ENDED FEBRUARY 28, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
TOM PRO
WHEATLEY AXELSON WHEATLEY ADJUSTMENTS FORMA
------ ----- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
Sales and service revenues................ $ 58.0 $20.6 $ 2.2 $ $80.8
Cost of sales and services................ (38.2) (11.3) (1.9) (51.4)
------- ----- ----- ----- ------
Gross earnings.......................... 19.8 9.3 0.3 29.4
Selling, engineering, administrative and
general expenses........................ (12.2) (6.2) (0.6) (0.4)(a) (19.4)
------- ----- ----- ----- ------
Earnings from operations.................. 7.6 3.1 (0.3) (0.4) 10.0
------- ----- ----- ----- ------
Other income (deductions)
Interest expense, net................... (1.0) (0.8)(b) (1.8)
Other, net.............................. (0.3) (0.2) 0.2 (c) (0.3)
------- ----- ----- ----- -----
Total........................... (1.3) (0.2) (0.6) (2.1)
------- ----- ----- ----- ------
Earnings before income taxes............ 6.3 2.9 (0.3) (1.0) 7.9
Income taxes.............................. (2.6) (1.2) 0.4 (d) (3.4)
------- ----- ----- ----- ------
Earnings from continuing
operations.................... $ 3.7 $ 1.7 $(0.3) $(0.6) $ 4.5
======= ===== ===== ===== ======
Per share....................... $ 0.42 $0.38
======= ======
Average common shares outstanding......... 8.8 3.0 11.8
======= ===== ======
</TABLE>
Adjustments:
<TABLE>
<C> <S> <C>
(a) Adjustment to depreciation and amortization expense
resulting from the Axelson acquisition.................................. $(0.2)
Adjustment to reflect accounting for Axelson postretirement
benefits in accordance with SFAS No. 106................................ (0.1)
Noncompetition agreement with Hanson Industries........................... (0.1)
-----
$(0.4)
=====
(b) Interest on net borrowings used to finance the Axelson acquisition,
including amortization of deferred financing costs incurred.
(c) Exclusion of corporate management fees charged to Axelson by Hanson
Industries.
(d) Adjustment to income taxes to reflect Wheatley's historical effective
rate, giving effect to the nondeductible amortization of goodwill.
</TABLE>
51
<PAGE> 54
WHEATLEY TXT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
SIX MONTHS ENDED FEBRUARY 28, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------
TOM CLIF PRO
WHEATLEY AXELSON WHEATLEY MOCK ADJUSTMENTS FORMA
-------- ------- -------- ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Sales and service revenues......... $ 36.4 $ 28.1 $ 4.7 $ 7.0 $ $ 76.2
Cost of sales and services......... (26.6) (15.2) (3.5) (5.1) (50.4)
------- ------ ----- ----- ----- -------
Gross earnings................... 9.8 12.9 1.2 1.9 25.8
Selling, engineering,
administrative
and general expenses............. (6.2) (8.7) (1.4) (1.4) (0.8)(a) (18.5)
------- ------ ----- ----- ----- -------
Earnings from operations........... 3.6 4.2 (0.2) 0.5 (0.8) 7.3
------- ------ ----- ----- ----- -------
Other income (deductions)
Interest expense, net............ (0.1) (0.1) (1.4)(b) (1.6)
Other, net....................... (0.3) 0.3 (c)
------- ------ ----- ----- ----- -------
Total.................... (0.1) (0.3) (0.1) (1.1) (1.6)
------- ------ ----- ----- ----- -------
Earnings before income taxes..... 3.5 3.9 (0.3) 0.5 (1.9) 5.7
Income taxes....................... (1.3) (1.6) 0.4 (d) (2.5)
------- ------ ----- ----- ----- -------
Earnings from continuing
operations............. $ 2.2 $ 2.3 $(0.3) $ 0.5 $(1.5) $ 3.2
======= ====== ===== ===== ===== =======
Per share................ $ 0.25 $ 0.27
======= =======
Average common shares
outstanding...................... 8.7 3.0 11.7
====== ===== =======
</TABLE>
Adjustments:
<TABLE>
<S> <C> <C>
(a) Adjustment to depreciation and amortization expense resulting from
the Axelson acquisition................................................... $(0.6)
Adjustment to reflect accounting for Axelson postretirement benefits
in accordance with SFAS No. 106........................................... (0.1)
Noncompetition agreement with Hanson Industries........................... (0.1)
-----
$(0.8)
=====
(b) Interest on net borrowings used to finance the Axelson acquisition,
including amortization of deferred financing costs incurred.
(c) Exclusion of corporation management fees charged to Axelson by Hanson
Industries.
(d) Adjustment to income taxes to reflect Wheatley's historical effective
rate, giving effect to the nondeductible amortization of goodwill.
</TABLE>
52
<PAGE> 55
WHEATLEY TXT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
TWELVE MONTHS ENDED AUGUST 31, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------
TOM CLIF PRO
WHEATLEY AXELSON WHEATLEY MOCK ADJUSTMENTS FORMA
------ ------ ----- ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Sales and service revenues..... $ 75.9 $ 58.9 $10.7 $12.1 $ $157.6
Cost of sales and services..... (54.3) (32.2) (8.1) (8.8) (0.1)(a) (103.5)
------- ------ ----- ----- ----- -------
Gross earnings............... 21.6 26.7 2.6 3.3 (0.1) 54.1
Selling, engineering,
administrative and general
expenses..................... (13.6) (18.1) (2.8) (2.4) (1.1)(b) (38.0)
------- ------ ----- ----- ----- -------
Earnings from operations....... 8.0 8.6 (0.2) 0.9 (1.2) 16.1
------- ------ ----- ----- ----- -------
Other income (deductions)
Interest expense, net........ (0.1) (0.1) (0.2) (2.9)(c) (3.3)
Other, net................... (0.4) 0.6 (d) 0.2
------- ------ ----- ----- ----- -------
Total................ (0.1) (0.5) (0.2) (2.3) (3.1)
------- ------ ----- ----- ----- -------
Earnings before income
taxes..................... 7.9 8.1 (0.4) 0.9 (3.5) 13.0
Income taxes................... (3.0) (3.1) .5 (e) (5.6)
------- ------ ----- ----- ----- -------
Earnings from
continuing
operations......... $ 4.9 $ 5.0 $(0.4) $ 0.9 $(3.0) $ 7.4
======= ====== ===== ===== ===== =======
Per share............ $ 0.56 $ 0.63
======= =======
Average common shares
outstanding.................. 8.8 3.0 11.8
======= ===== =======
</TABLE>
Adjustments:
<TABLE>
<S> <C>
(a) Adjustment to reflect accounting for Axelson postretirement benefits in
accordance with SFAS No. 106.
(b) Adjustment to depreciation and amortization expense resulting from the
Axelson acquisition.................................................. $(0.8)
Adjustment to reflect accounting for Axelson postretirement benefits
in accordance with SFAS No. 106...................................... (0.1)
Noncompetition agreement with Hanson Industries....................... (0.2)
-----
$(1.1)
=====
(c) Interest on net borrowings used to finance the Axelson acquisition,
including amortization of deferred financing costs incurred.
(d) Exclusion of corporate management fees charged to Axelson by Hanson
Industries.
(e) Adjustment to income taxes to reflect Wheatley's historical effective
rate, giving effect to the nondeductible amortization of goodwill.
</TABLE>
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<PAGE> 56
DESCRIPTION OF DRESSER CAPITAL STOCK
Dresser is authorized by its Restated Certificate of Incorporation, as
amended (the "Dresser Certificate"), to issue 400,000,000 shares of Dresser
Common Stock and 10,000,000 shares of Preferred Stock (without par value)
("Preferred Stock"), issuable in series. At the close of business on May 15,
1994, 175,401,976 shares of Dresser Common Stock (exclusive of 193,130 shares
held in treasury), and no shares of Preferred Stock were outstanding.
Preferred Stock. The shares of Preferred Stock may be issued from time to
time in one or more series. The Dresser Board of Directors is authorized, within
the limitations contained in the Dresser Certificate, to fix before issue with
respect to each series, among other things, the designation and number of shares
to constitute such series, the dividend rate, whether such dividends will be
cumulative, the time and price of redemption and the liquidation preference
applicable to the series, whether or not the series shall be subject to the
operation of a sinking fund and, if so, the terms and conditions thereof,
whether or not the shares of such series shall be convertible into shares of
stock of any other class or classes and the terms and provisions of such
conversion rights, the voting powers, if any, of the shares of such series and
other optional or special rights, privileges and powers.
Common Stock. Attached to each share of Dresser Common Stock is a Dresser
Stock Purchase Right, described below and more fully described in the
Registration Statement on Form 8-A, as amended by Amendment No. 1 to such
Registration Statement, incorporated herein by reference. See "Incorporation of
Certain Documents by Reference."
Dividend Rights. Subject to the dividend preferences of any Preferred Stock
which may be outstanding and to restrictions contained in certain agreements to
which Dresser is a party, holders of Dresser Common Stock are entitled to
receive dividends when, as and if declared by the Dresser Board of Directors out
of funds legally available therefor.
Voting Rights. Except as otherwise required by law or the Dresser
Certificate, holders of Dresser Common Stock are entitled to one vote in respect
of each share of Dresser Common Stock on all matters voted upon by the
stockholders. Holders of Dresser Common Stock are not entitled to cumulative
voting in the election of Directors. Accordingly, the holders of a majority of
the outstanding shares of Dresser Common Stock are entitled to elect all the
Directors.
Liquidation Rights. In the event of a liquidation, dissolution or winding
up of Dresser, after any required distribution to holders of any Preferred Stock
that may then be outstanding, the holders of Dresser Common Stock will be
entitled pro rata to all the remaining assets available for distribution to
stockholders.
Miscellaneous. Holders of the Dresser Common Stock are not entitled to
preemptive rights. The outstanding shares of Dresser Common Stock are fully paid
and non-assessable. Outstanding shares of Dresser Common Stock are listed on the
NYSE and PSE.
DESCRIPTION OF DRESSER STOCK PURCHASE RIGHTS
On August 16, 1990, the Board of Directors of Dresser declared a dividend
of one right (each a "Right") for each outstanding share of Dresser Common
Stock. The distribution was made as of October 3, 1990 to stockholders of record
on that date.
Each Right entitles the registered holder to purchase from Dresser one
one-hundredth ( 1/100) of a share of Series A Junior Preferred Stock ("Series A
Preferred Stock") at a price of $90 per one one-hundredth ( 1/100) of a share
(the "Exercise Price"). The description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") between Dresser and Harris Trust
Company of New York, as Rights Agent ("Rights Agent"), dated as of August 16,
1990, which is incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
Currently, the Rights are not exercisable, certificates have not been sent
to stockholders, and the Rights automatically trade with the Dresser Common
Stock.
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<PAGE> 57
Until the close of business on the tenth day (or such later date as may be
determined by a majority of the Continuing Directors (as defined in the Rights
Agreement)) after the earlier to occur of (i) the public announcement that a
person or group of affiliated or associated persons has acquired beneficial
ownership of 15% or more of Dresser's voting stock ("Acquiring Person"), except
that Acquiring Person shall not include (A) Dresser, (B) any subsidiary of
Dresser, (C) any employee benefit plan or employee stock plan of Dresser or any
subsidiary of Dresser, (D) any person whose ownership of 15% or more of the
shares of voting stock of Dresser then outstanding results from a transaction or
transactions approved by the Continuing Directors and effected before such
person acquires such 15% beneficial ownership (provided that such person shall
become an Acquiring Person upon his acquisition of an additional 1% of Dresser's
voting stock), (E) any person whose beneficial ownership of shares of voting
stock of Dresser is increased to 15% or more of the shares of voting stock of
Dresser pursuant to a transaction or transactions approved by the Continuing
Directors (provided that such person shall become an Acquiring Person upon his
acquisition of an additional 1% of Dresser's voting stock) or (F) any person
whose ownership of 15% or more of the shares of voting stock of Dresser then
outstanding results from any action or transaction deemed by a resolution of the
Continuing Directors not to cause such person to become an Acquiring Person,
which resolution is passed prior to such person otherwise becoming an Acquiring
Person (provided such person shall become an Acquiring Person upon his
acquisition of an additional 1% of Dresser's voting stock) or (ii) the date of
the commencement of, or public announcement of an intention to make, a tender or
exchange offer (other than a tender or exchange offer by Dresser, any subsidiary
of Dresser or any employee benefit plan or employee stock plan of Dresser or any
subsidiary of Dresser) the consummation of which would result in the ownership
of 30% or more of the outstanding shares of Dresser Common Stock, even if no
purchases actually occur pursuant to such offer (the earlier of such dates being
called the "Distribution Date"), the Rights will be evidenced, with respect to
any of Dresser Common Stock certificate outstanding as of October 3, 1990, by
such certificate with a copy of a Summary of Rights ("Summary of Rights")
attached. The Rights Agreement provides that, until the Distribution Date, the
Rights will be represented by and transferred with, and only with, Dresser's
Common Stock. Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Dresser Common Stock certificates issued after October 3,
1990 will contain a legend incorporating the Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
the surrender for transfer of any of Dresser's Common Stock certificates
outstanding as of October 3, 1990, with or without a copy of the Summary of
Rights attached, will also continue the transfer of the Rights associated with
the Dresser Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of Dresser Common
Stock as of the close of business on the Distribution Date and such separate
certificates alone will evidence the Rights from and after the Distribution
Date.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on October 3, 2000, unless earlier redeemed by
Dresser as described below.
The Series A Preferred Stock is non-redeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, subordinate to any other series of Dresser's Preferred Stock. The Series
A Preferred Stock may not be issued except upon exercise of Rights. Each share
of Series A Preferred Stock will be entitled to receive when, as and if
declared, a quarterly divided in an amount equal to the greater of $10 per share
or 100 times the cash dividends declared on Dresser Common Stock. In addition,
the Series A Preferred Stock is entitled to 100 times any non-cash dividends or
other non-cash distributions (other than dividends payable in equity securities)
declared on the Dresser Common Stock, in like kind. In the event of liquidation,
the holders of the Series A Preferred Stock will be entitled to receive a
liquidation payment in an amount equal to the greater of $100 per share or 100
times the payment made per share of Dresser Common Stock. Each share of Series A
Preferred Stock will have 100 votes, voting together with the Dresser Common
Stock. In the event of any merger, consolidation or other transaction in which
shares of Dresser Common Stock are exchanged, each share of Series A Preferred
Stock will be entitled to receive 100 times the amount received per share of
Dresser Common Stock. The rights of the Series A Preferred Stock as to
dividends, liquidation and voting are protected by anti-dilution provisions.
55
<PAGE> 58
The number of shares of Series A Preferred Stock issuable upon exercise of
the Rights are subject to certain adjustments from time to time in the event of
a stock dividend on, or a subdivision or combination of, the Dresser Common
Stock. The Exercise Price is subject to adjustment in the event of extraordinary
distributions of cash or other property to the holders of Dresser Common Stock.
Unless the Rights are earlier redeemed or the transaction is approved by
the Continuing Directors, in the event that, after the Rights have become
exercisable, Dresser were to be acquired in a merger or other business
combination (in which any shares of the Dresser Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of Dresser and its subsidiaries (taken as a whole) were to be sold
or transferred in one or a series of related transactions, the Rights Agreement
provides that proper provision will be made so that each holder of record of a
Right will from and after such date have the right to receive, upon payment of
the Exercise Price, that number of shares of common stock of the acquiring
company having a market value (as defined in the Rights Agreement) at the time
of such transaction equal to two times the Exercise Price. In addition, unless
the Rights are earlier redeemed, if a person or group becomes the beneficial
owner of 15% or more of Dresser's voting stock (other than pursuant to a tender
or exchange offer for all outstanding shares of Dresser Common Stock that is
approved by the Continuing Directors, after taking into account the long-term
value of Dresser and all other factors that they consider relevant in the
circumstances) the Rights Agreement provides that proper provision will be made
so that each holder of record of a Right, other than the Acquiring Person (whose
Rights will thereupon become null and void), will thereafter have the right to
receive, upon payment of the Exercise Price, that number of shares of Series A
Preferred Stock having a market value (as defined in the Rights Agreement) at
the time of the transaction equal to two times the Exercise Price. In lieu of
issuing shares of Series A Preferred Stock in accordance with the foregoing,
Dresser may, if the Continuing Directors determine that such action is necessary
or appropriate and not contrary to the interests of holders of Rights, elect to
issue or pay, upon payment of the Purchase Price, cash, property, shares of
Preferred Stock or Dresser Common Stock, or any combination thereof, having an
aggregate fair market value (as determined in accordance with the provisions of
the Rights Agreement) equal to the fair market value of the shares of Series A
Preferred Stock that otherwise would have been issuable.
Fractions of shares of Series A Preferred Stock may, at the election of
Dresser, be evidenced by depositary receipts. Dresser may also issue cash in
lieu of fractional shares which are not integral multiples of one-hundredth of a
share.
At any time on or prior to the close of business on the tenth day after a
public announcement that a person has become an Acquiring Person (or at such
later date as the Continuing Directors may determine), Dresser may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). Immediately upon the action of the Board of Directors of Dresser
authorizing redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of Dresser, including, without limitation, the right to vote or to
receive dividends.
The Rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group who attempts to acquire Dresser on
terms not approved by Dresser's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board
since the Rights may be redeemed by Dresser at $.01 per Right at any time until
the close of business on the tenth day after a person or group has obtained
beneficial ownership of 15% or more of the voting stock (or such later date as
the Continuing Directors may determine).
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<PAGE> 59
COMPARISON OF STOCKHOLDER RIGHTS
If the Merger is consummated, the stockholders of Wheatley will become
stockholders of Dresser. The rights of the stockholders of both Dresser and
Wheatley are governed by and subject to the provisions of the DGCL. The rights
of current Wheatley stockholders following the Merger will be governed by the
Dresser Certificate and the By-Laws, as amended, of Dresser, rather than the
provisions of the Restated Certificate of Incorporation, as amended, of Wheatley
(the "Wheatley Certificate of Incorporation") and the By-Laws of Wheatley. The
following is a brief summary of certain differences between the rights of
stockholders of Dresser and the rights of stockholders of Wheatley, and is
qualified in its entirety by reference to the relevant provisions of the DGCL,
the Dresser Certificate, Dresser's By-Laws, the Wheatley Restated Certificate of
Incorporation, and Wheatley's By-Laws.
PREFERRED STOCK
The Boards of Directors of Dresser and Wheatley are authorized to provide
for the issuance of shares of preferred stock, in one or more series, and to fix
for each such series such voting powers, designations, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations or restrictions, as are stated in the resolution adopted by the
Board of Directors providing for the issuance of such series and as permitted by
the DGCL. Neither Dresser nor Wheatley currently has any shares of preferred
stock issued or outstanding.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of Dresser or Wheatley has a preemptive
right to subscribe to any or all additional issues of the stock of Dresser or
Wheatley of any or all classes or series thereof.
LIMITATIONS ON SPECIFIED TRANSACTIONS
Article VI of the Dresser Certificate provides that in order to effect
certain specified transactions ("Business Combinations") involving an
"Interested Stockholder" (as defined herein) and Dresser or any subsidiary of
Dresser, in addition to any affirmative vote required by law or the Dresser
Certificate, Dresser must obtain the affirmative vote of at least 70% of the
then outstanding shares of capital stock voting as a single class. Such
provisions shall not apply if the Business Combination (i) shall have been
approved by a majority of Directors not affiliated with or a nominee of an
Interested Stockholder or (ii) certain price and procedure requirements are met.
An "Interested Stockholder" is defined as any individual, group,
corporation or other entity who is (i) the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then outstanding stock
entitled to vote generally on the election of Directors (the "Voting Stock"),
(ii) is an "Affiliate" of Dresser and within two years immediately prior to the
date in question was the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then outstanding Voting Stock or (iii) is an
assignee or has otherwise succeeded in one or more transactions not involving a
public offering to beneficial ownership of Voting Stock which were at any time
within the two year period immediately prior to the date in question owned by an
Interested Stockholder. A person is considered a "beneficial owner" of any
Voting Stock that such person or any "Affiliates" or "Associates" (as defined
herein) beneficially owns, directly or indirectly, has the right to acquire or
to direct the voting of or to vote or that is beneficially owned by any other
person with which such person or its Affiliates or Associates has any agreement
or arrangement for the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock.
Article VI defines "Affiliate" and "Associate" by reference to Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect on
January 1, 1985.
The specified "Business Combinations" to which the provisions of Article VI
would apply include merger or consolidation with an Interested Stockholder or
its Affiliate, sale, lease, mortgage, pledge, transfer, dividend or distribution
(other than on a pro rata basis to all stockholders) of Dresser or a subsidiary,
in one transaction or a series of transactions of assets having a fair market
value of $100 million or more to, with or from an
57
<PAGE> 60
Interested Stockholder, issuance or transfer of securities to an Interested
Stockholder or its Affiliate, for consideration of $100 million or more,
adoption of a plan of liquidation proposed by an Interested Stockholder or its
Affiliate, any transaction which has the effect of increasing the proportionate
share of Dresser securities held by an Interested Stockholder or its Affiliate,
or any series or combination of transactions having the same effect as any of
the foregoing.
Finally, the degree of protection provided by Dresser's Article VI may as a
practical matter make the consummation of any transaction within its scope
impossible because of the vote required. This could be disadvantageous to
stockholders who may desire such a transaction. The provisions of the Article
are not intended to constitute "anti-takeover" provisions. Such provisions may,
however, have the effect of discouraging offers by third parties to acquire the
respective companies.
There is no similar provision in the Wheatley Certificate of Incorporation
or Wheatley's By-Laws. Wheatley is, however, subject to the provisions of
Section 203 of the DGCL, as is Dresser.
LIABILITY OF DIRECTORS AND OFFICERS
The DGCL permits corporations to (i) include provisions in their
certificates of incorporation that limit the personal liability of directors for
monetary damages resulting from breaches of the duty of care, subject to certain
exceptions, and (ii) indemnify directors and officers, among others, in certain
circumstances for their expenses and liabilities incurred in connection with
defending pending or threatened suits.
The Dresser Certificate includes a provision that eliminates the personal
liability of a director to Dresser and its stockholders for monetary damages
resulting from breaches of the duty of care to the full extent currently
permitted by the DGCL and further provides that any amendment or repeal of that
provision will not affect the elimination of liability accorded to any director
for acts or omissions occurring prior to such amendment.
The Wheatley Certificate of Incorporation also includes a provision that
eliminates the personal liability of a director to Wheatley and its stockholders
for monetary damages resulting from breaches of the duty of care to the full
extent currently permitted by the DGCL and further provides that any amendment
or repeal of that provision will not affect the elimination of liability
accorded to any director for acts or omissions occurring prior to such
amendment.
Wheatley's By-Laws contain a provision granting its directors, officers,
employees and agents indemnification to the fullest extent permitted under the
DGCL. The Dresser Certificate contains a similar provision. Wheatley has also
entered into indemnification agreements with its directors.
VACANCIES ON THE BOARD OF DIRECTORS
Dresser's By-Laws provide that any vacancy of the Dresser Board of
Directors from any cause whatsoever may be filled by a majority of the Directors
then in office, even if less than a quorum.
Wheatley's By-Laws provide that vacancies and newly created directorships
on the Wheatley Board resulting from an increase in the authorized number of
directors may be filled by a majority of the Directors then in office, even if
less than a quorum, or by a sole remaining director.
RESTRICTION ON PAYMENT OF GREENMAIL
The Dresser Certificate restricts Dresser's repurchase of any class of its
equity securities from any person or group that holds 5% or more of such class
of securities, where such repurchase would be at a price in excess of the
highest closing sale price of such securities during the immediately preceding
30-day period. Excluded are repurchases that are approved by the holders of a
majority of the voting power of the then outstanding shares of equity securities
entitled to vote generally in the election of directors excluding shares held by
the selling securityholder and repurchases made as part of a tender or exchange
offer by Dresser to purchase securities of the same class on the same terms made
to all holders of such securities.
There is no similar provision in the Wheatley Certificate of Incorporation
or Wheatley's By-Laws.
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PROPOSALS OF STOCKHOLDERS
Wheatley will not hold a 1994 annual meeting of stockholders unless the
Merger is not consummated. In the event that such a meeting is held, any
proposals were required to have been submitted to the Secretary of Wheatley no
later than February 10, 1994, in order to be considered for inclusion in
Wheatley's 1994 proxy materials.
MANAGEMENT AND OTHER INFORMATION
Certain information relating to the management, executive compensation,
voting securities and the principal holders thereof, certain relationships and
related transactions and other related matters pertaining to Dresser and
Wheatley is set forth in or incorporated by reference in their respective Annual
Reports on Form 10-K for the years ended October 31, 1993 and February 28, 1994,
respectively. Such Annual Reports are incorporated in this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents By Reference."
Stockholders who wish to obtain copies of these documents may contact Dresser or
Wheatley at their respective addresses or telephone numbers as set forth under
"Incorporation of Certain Documents By Reference."
LEGAL MATTERS
The validity of the shares of Dresser Common Stock offered by this Proxy
Statement/Prospectus will be passed upon by Rebecca R. Morris, Vice
President -- Corporate Counsel and Secretary of Dresser. Mrs. Morris owns 3,960
shares of Dresser Common Stock.
EXPERTS
The consolidated financial statements of Dresser Industries, Inc.
("Dresser") and Dresser-Rand Company, included in Dresser's Annual Report on
Form 10-K for its fiscal year ended October 31, 1993, and the supplemental
consolidated financial statements of Dresser and its subsidiaries included in
Dresser's Current Report on Form 8-K dated January 21, 1994, as amended by
Dresser's Form 8-K/A dated March 10, 1994, have been incorporated by reference
in this Proxy Statement/Prospectus in reliance on the reports of Price
Waterhouse, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of Baroid Corporation and
Subsidiaries appearing in Baroid Corporation's Annual Report (Form 10-K) at
December 31, 1993 and 1992, and for each of the two years in the period ended
December 31, 1993, incorporated by reference in this Proxy Statement/Prospectus
and the Registration Statement, have been audited by Ernst & Young, independent
auditors, as set forth in their reports included therein which, as to the year
1992, is based in part on the report of Arthur Andersen & Co. The year ended
December 31, 1991 was audited by Coopers & Lybrand, independent auditors, as set
forth in their report thereon appearing elsewhere therein. Such consolidated
financial statements are incorporated by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
The supplemental consolidated financial statements of Baroid Corporation
and Subsidiaries appearing in Baroid Corporation's prospectus dated April 16,
1993 have been audited by Ernst & Young, independent auditors, as set forth in
their report included therein and incorporated herein by reference, and are
based in part on the reports of Arthur Andersen & Co. and Coopers & Lybrand,
independent auditors. Such supplemental consolidated financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The audited historical consolidated financial statements and schedules of
Wheatley TXT Corp. and Subsidiaries appearing in Wheatley's Annual Report on
Form 10-K for the year ended February 28, 1994 have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their report
with respect thereto, and are incorporated herein by reference in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
59
<PAGE> 62
The combined financial statements and schedules of Axelson as of October 3,
1992 and October 2, 1993 and for each of the three years in the period ended
October 2, 1993 incorporated by reference in the Proxy Statement/Prospectus and
the Registration Statement have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in auditing and accounting in giving said reports.
The financial statements and schedules of Tom Wheatley as of March 31, 1993
and for the year then ended incorporated by reference in this Proxy
Statement/Prospectus and Registration Statement have been audited by Havard +
Batte, LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated herein by reference in reliance upon the
authority of said firm as experts in auditing and accounting in giving said
reports.
60
<PAGE> 63
APPENDIX I
AGREEMENT AND PLAN OF MERGER
AMONG
DRESSER INDUSTRIES, INC., WTXT ACQUISITION CORPORATION
AND
WHEATLEY TXT CORP.
DATED AS OF MAY 31, 1994
<PAGE> 64
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger........................................ I-1
1.2 Closing......................................................................... I-1
1.3 Effects of the Merger........................................................... I-1
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock......................................................... I-2
(a) Capital Stock of Sub....................................................... I-2
(b) Cancellation of Treasury Stock and Dresser-Owned Stock..................... I-2
(c) Exchange Ratio for Wheatley Common Stock................................... I-2
(d) Assumption of Stock Options................................................ I-3
(e) Wheatley Convertible Note.................................................. I-3
2.2 Exchange of Certificates........................................................ I-3
(a) Exchange Agent............................................................. I-3
(b) Exchange Procedures........................................................ I-3
(c) Distributions with Respect to Unexchanged Shares........................... I-4
(d) No Further Ownership Rights in Wheatley Common Stock....................... I-4
(e) No Fractional Shares....................................................... I-4
(f) Termination of Exchange Fund............................................... I-5
(g) No Liability............................................................... I-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Wheatley...................................... I-5
(a) Organization, Standing and Power........................................... I-5
(b) Capital Structure.......................................................... I-6
(c) Authority; No Violations; Consents and Approvals........................... I-6
(d) SEC Documents.............................................................. I-7
(e) Information Supplied....................................................... I-8
(f) Absence of Certain Changes or Events....................................... I-8
(g) No Undisclosed Material Liabilities........................................ I-9
(h) No Default................................................................. I-9
(i) Compliance with Applicable Laws............................................ I-9
(j) Litigation................................................................. I-9
(k) Taxes...................................................................... I-9
(l) Pension and Benefit Plans; ERISA........................................... I-10
(m) Labor Matters.............................................................. I-11
(n) Intangible Property........................................................ I-12
(o) Environmental Matters...................................................... I-12
(p) Opinion of Financial Advisor............................................... I-13
(q) Vote Required.............................................................. I-14
(r) Accounting Matters......................................................... I-14
(s) Beneficial Ownership of Dresser Common Stock............................... I-14
(t) Insurance.................................................................. I-14
(u) Brokers.................................................................... I-14
(v) Tax Matters................................................................ I-14
</TABLE>
I-i
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<TABLE>
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PAGE
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<S> <C> <C>
3.2 Representations and Warranties of Dresser and Sub............................... I-14
(a) Organization, Standing and Power........................................... I-14
(b) Capital Structure.......................................................... I-15
(c) Authority; No Violations, Consents and Approvals........................... I-15
(d) SEC Documents.............................................................. I-16
(e) Information Supplied....................................................... I-17
(f) Absence of Certain Changes or Events....................................... I-17
(g) No Undisclosed Material Liabilities........................................ I-17
(h) No Default................................................................. I-17
(i) Compliance with Applicable Laws............................................ I-18
(j) Litigation................................................................. I-18
(k) Taxes...................................................................... I-18
(l) Pension and Benefit Plans; ERISA........................................... I-19
(m) Labor Matters.............................................................. I-20
(n) Intangible Property........................................................ I-20
(o) Environmental Matters...................................................... I-20
(p) No Vote Required........................................................... I-21
(q) Accounting Matters......................................................... I-21
(r) Beneficial Ownership of Wheatley Common Stock.............................. I-21
(s) Dresser Rights Agreement................................................... I-21
(t) Brokers.................................................................... I-21
(u) Interim Operations of Sub.................................................. I-21
(v) Tax Matters................................................................ I-21
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS OF WHEATLEY
4.1 Conduct of Business by Wheatley Pending the Merger.............................. I-22
(a) Ordinary Course............................................................ I-22
(b) Dividends; Changes in Stock................................................ I-22
(c) Issuance of Securities..................................................... I-22
(d) Governing Documents........................................................ I-22
(e) No Acquisitions............................................................ I-22
(f) No Dispositions............................................................ I-22
(g) No Dissolution, Etc........................................................ I-23
(h) Certain Employee Matters................................................... I-23
(i) Indebtedness; Leases; Capital Expenditures................................. I-23
4.2 No Solicitation................................................................. I-23
4.3 Pooling of Interests............................................................ I-24
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Proxy Statement...................................... I-24
5.2 Letter of Wheatley's Accountants................................................ I-24
5.3 Letter of Dresser's Accountants................................................. I-24
5.4 Access to Information........................................................... I-24
5.5 Wheatley Stockholders Meeting................................................... I-25
5.6 Legal Conditions to Merger...................................................... I-25
5.7 Agreements of Others............................................................ I-25
5.8 Authorization for Shares and Stock Exchange Listing............................. I-25
5.9 Employee Matters................................................................ I-25
5.10 Stock Options................................................................... I-26
5.11 Indemnification; Directors' and Officers' Insurance............................. I-26
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.12 Assumption of Registration Rights............................................... I-27
5.13 Wheatley Credit Agreement....................................................... I-27
5.14 Agreement to Defend............................................................. I-27
5.15 Accounting Matters.............................................................. I-27
5.16 Public Announcements............................................................ I-27
5.17 Other Actions................................................................... I-28
5.18 Advice of Changes; SEC Filings.................................................. I-28
5.19 Reorganization.................................................................. I-28
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger...................... I-28
(a) Wheatley Stockholder Approval.............................................. I-28
(b) NYSE Listing............................................................... I-28
(c) Other Approvals............................................................ I-28
(d) S-4........................................................................ I-28
(e) No Injunctions or Restraints............................................... I-28
6.2 Conditions of Obligations of Dresser and Sub.................................... I-29
(a) Representations and Warranties............................................. I-29
(b) Performance of Obligations of Wheatley..................................... I-29
(c) Letters from Wheatley Affiliates........................................... I-29
6.3 Conditions of Obligations of Wheatley........................................... I-29
(a) Representations and Warranties............................................. I-29
(b) Performance of Obligations of Dresser and Sub.............................. I-29
(c) Tax Opinion................................................................ I-29
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination..................................................................... I-30
7.2 Effect of Termination........................................................... I-31
7.3 Amendment....................................................................... I-31
7.4 Extension; Waiver............................................................... I-31
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses............................................................. I-31
8.2 Nonsurvival of Representations, Warranties and Agreements....................... I-32
8.3 Notices......................................................................... I-32
8.4 Interpretation.................................................................. I-32
8.5 Counterparts.................................................................... I-33
8.6 Entire Agreement; No Third Party Beneficiaries.................................. I-33
8.7 Governing Law................................................................... I-33
8.8 No Remedy in Certain Circumstances.............................................. I-33
8.9 Assignment...................................................................... I-33
8.10 Schedules....................................................................... I-33
</TABLE>
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<PAGE> 67
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED IN
DEFINED TERM SECTION
- ------------ ----------
<S> <C>
Acquisition Proposal............................................................ 4.2
Affiliates...................................................................... 5.7
Agreement....................................................................... Preamble
Average Daily Price............................................................. 2.1(c)
Bank Credit Facility............................................................ 5.13
CERCLA.......................................................................... 3.1(o)(A)
Certificate of Merger........................................................... 1.1
Certificates.................................................................... 2.2(b)
Closing......................................................................... 1.1
Closing Date.................................................................... 1.2
Code............................................................................ Recitals
Confidentiality Agreements...................................................... 5.4
Constituent Corporations........................................................ 1.3(a)
Conversion Number............................................................... 2.1(c)
Daily Price..................................................................... 2.1(c)
DGCL............................................................................ 1.1
Dresser......................................................................... Preamble
Dresser Common Stock............................................................ 2.1(c)
Dresser ERISA Affiliate......................................................... 3.2(l)1
Dresser Litigation.............................................................. 3.2(j)
Dresser Option Plans............................................................ 3.2(b)
Dresser Order................................................................... 3.2(j)
Dresser Employee Benefit Plans.................................................. 3.2(l)(iii)
Dresser ERISA Affiliate......................................................... 3.2(l)(i)
Dresser Intangible Property..................................................... 3.2(n)
Dresser Pension Plans........................................................... 3.2(l)(i)
Dresser Permits................................................................. 3.2(i)
Dresser Preferred Stock......................................................... 3.2(b)
Dresser Rights Agreement........................................................ 2.1(c)
Dresser SEC Documents........................................................... 3.2(d)
Dresser Series A Preferred Stock................................................ 2.1(c)
Dresser Stock Purchase Rights................................................... 2.1(c)
Effective Time.................................................................. 1.1
Environmental Laws.............................................................. 3.1(o)
ERISA........................................................................... 3.1(l)(i)
Excess Securities............................................................... 2.2(e)
Exchange Act.................................................................... 3.1(c)(iii)
Exchange Agent.................................................................. 2.2(a)
Exchange Fund................................................................... 2.2(a)
Fractional Dividends............................................................ 2.2(e)
GAAP............................................................................ 3.1(d)
Governmental Entity............................................................. 3.1(c)(iii)
Hazardous Materials............................................................. 3.1(o)(B)
HSR Act......................................................................... 3.1(c)(iii)
Indemnified Liabilities......................................................... 5.11
Indemnified Parties............................................................. 5.11
Injunction...................................................................... 6.1(e)
IRS............................................................................. 3.1(k)(ii)
Material Adverse Change......................................................... 3.1(a)
</TABLE>
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<PAGE> 68
<TABLE>
<CAPTION>
DEFINED IN
DEFINED TERM SECTION
- ------------ ----------
<S> <C>
Material Adverse Effect......................................................... 3.1(a)
Merger.......................................................................... Recitals
NYSE............................................................................ 2.1(c)
OSHA............................................................................ 3.1(o)(A)
Proxy Statement................................................................. 3.1(c)(iii)
Release......................................................................... 3.1(o)(C)
Remedial Action................................................................. 3.1(o)(D)
Returns......................................................................... 3.1(k)(i)
S-4............................................................................. 3.1(e)
SEC............................................................................. 3.1(a)
Securities Act.................................................................. 3.1(d)
Significant Subsidiary.......................................................... 3.1(a)
Surviving Corporation........................................................... 1.3(a)
Sub............................................................................. Preamble
Subsidiary...................................................................... 2.1(b)
Taxes........................................................................... 3.1(k)
Voting Debt..................................................................... 3.1(b)
Wheatley........................................................................ Preamble
Wheatley Common Stock........................................................... 2.1
Wheatley Convertible Note....................................................... 3.1(b)
Wheatley Employee Benefit Plans................................................. 3.1(l)(iii)
Wheatley ERISA Affiliate........................................................ 3.1(l)(i)
Wheatley Intangible Property.................................................... 3.1(n)
Wheatley Litigation............................................................. 3.1(j)
Wheatley Order.................................................................. 3.1(j)
Wheatley Pension Plans.......................................................... 3.1(l)(i)
Wheatley Permits................................................................ 3.1(i)
Wheatley Preferred Stock........................................................ 3.1(b)
Wheatley Representatives........................................................ 4.2
Wheatley SEC Documents.......................................................... 3.1(d)
Wheatley Stock Option........................................................... 5.10
Wheatley Stock Plan............................................................. 3.1(b)
</TABLE>
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<PAGE> 69
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 31, 1994 (this "Agreement"),
among Dresser Industries, Inc., a Delaware corporation ("Dresser"), WTXT
Acquisition Corporation, a Delaware corporation and a direct wholly owned
subsidiary of Dresser ("Sub"), and Wheatley TXT Corp., a Delaware corporation
("Wheatley").
WHEREAS, the Boards of Directors of Dresser, Sub and Wheatley each have
determined that it is in the best interests of their respective stockholders for
Sub to merge with and into Wheatley (the "Merger") upon the terms and subject to
the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests; and
WHEREAS, Dresser, Sub and Wheatley desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and
conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into Wheatley at the
Effective Time (as hereinafter defined). The Merger shall become effective
immediately when a certificate of merger (the "Certificate of Merger"), prepared
and executed in accordance with the relevant provisions of the DGCL, is filed
with the Secretary of State of the State of Delaware or, if agreed to by the
parties, at such time thereafter as is provided in the Certificate of Merger
(the "Effective Time"). The filing of the Certificate of Merger shall be made as
soon as practicable on or after the closing of the Merger (the "Closing").
1.2 Closing. The Closing shall take place at 10:00 a.m. on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver in accordance with this Agreement) of the latest
to occur of the conditions set forth in Article VI (the "Closing Date"), at the
offices of Dresser, unless another date or place is agreed to in writing by the
parties.
1.3 Effects of the Merger. (a) At the Effective Time: (i) Sub shall be
merged with and into Wheatley, the separate existence of Sub shall cease and
Wheatley shall continue as the surviving corporation (Sub and Wheatley are
sometimes referred to herein as the "Constituent Corporations" and Wheatley is
sometimes referred to herein as the "Surviving Corporation"); (ii) the Restated
Certificate of Incorporation of Wheatley shall be amended so that Article Fourth
of such Restated Certificate of Incorporation reads in its entirety as follows:
"The total number of shares of capital stock which the Corporation shall have
authority to issue is 1,000, all of which shall consist of Common Stock, par
value $0.01 per share" and, as so amended, such Restated Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation; and (iii) the Bylaws of Wheatley as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation.
(b) The directors and officers of Sub at the Effective Time shall, from and
after the Effective Time, be the initial directors and officers of the Surviving
Corporation and shall serve until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Restated Certificate of
Incorporation and Bylaws.
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(c) At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Constituent Corporations; and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired; and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts and liabilities had been
incurred by it.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of common
stock, par value $0.01 per share, of Wheatley ("Wheatley Common Stock") or
capital stock of Sub:
(a) Capital Stock of Sub. 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 $0.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Dresser-Owned Stock. Each share
of Wheatley Common Stock and all other shares of capital stock of Wheatley
that are owned by Wheatley as treasury stock and any shares of Wheatley
Common Stock and all other shares of capital stock of Wheatley owned by
Dresser, Sub or any other wholly owned Subsidiary (as hereinafter defined)
of Dresser or Wheatley shall be canceled and retired and shall cease to
exist and no stock of Dresser or other consideration shall be delivered or
deliverable in exchange therefor. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which: (i) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which are held by such
party or any Subsidiary of such party that do not have a majority of the
voting interest in such partnership); or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and any one or more of its
Subsidiaries.
(c) Exchange Ratio for Wheatley Common Stock. Subject to the
provisions of Section 2.2(e) hereof, each share of Wheatley Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted
into 0.7 (the "Conversion Number") shares of common stock, par value $0.25
per share, of Dresser ("Dresser Common Stock"), together with the
corresponding number of associated rights ("Dresser Stock Purchase Rights")
to purchase one one-hundredth of a share of Series A Junior Preferred
Stock, without par value, of Dresser ("Dresser Series A Preferred Stock")
pursuant to the Rights Agreement dated as of August 16, 1990, between
Dresser and Harris Trust Co. of New York, as Rights Agent, as amended (the
"Dresser Rights Agreement"), provided that the Average Daily Price (as
hereinafter defined) of the Dresser Common Stock is at least $20.00 but not
more than $27.00; provided, however, that in the event the average of the
per share Daily Prices (as hereinafter defined) on the New York Stock
Exchange, Inc. (the "NYSE") of Dresser Common Stock (as reported in the New
York Stock Exchange Composite Transactions) during the 20 consecutive
trading days ending on the fifth
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<PAGE> 71
trading day prior to the stockholders meeting of Wheatley at which the
stockholders of Wheatley will have voted upon this Agreement and the
Merger (the "Average Daily Price") is less than $20.00 but equal to or
greater than $18.00, then the Conversion Number shall be deemed to be that
fraction, rounded to the nearest ten thousandths, or if there shall not be
a nearest ten thousandth, to the next higher ten thousandth, equal to the
quotient obtained by dividing (x) $14.00 by (y) the product of 0.5 times
the sum of (a) the Average Daily Price plus (b) $20.00; and in the event
such Average Daily Price is greater than $27.00 but equal to or less than
$29.00, then the Conversion Number shall be deemed to be that fraction,
rounded to the nearest ten thousandth, or if there shall not be a nearest
ten thousandth, to the next lower ten thousandth, equal to the quotient
obtained by dividing (x) $18.90 by (y) the product of 0.5 times the sum of
(a) the Average Daily Price plus (b) $27.00; provided, further, that the
Conversion Number shall in no event be greater than 0.7368 nor less than
0.6750; and provided, further, that if the Average Daily Price is less
than $18.00 or greater than $29.00, then the Conversion Number shall be
0.7368 or 0.6750, respectively. As used herein, the term "Daily Price"
shall mean the volume weighted average of the selling prices on the day in
question. All references in this Agreement to the Dresser Common Stock to
be received pursuant to the Merger shall be deemed to include the Dresser
Stock Purchase Rights. All such shares of Wheatley Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Dresser
Common Stock and cash in lieu of fractional shares of Dresser Common Stock
as contemplated by Section 2.2(e), to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with Section
2.2, without interest.
(d) Assumption of Stock Options. Each outstanding Wheatley Stock
Option (as defined in Section 5.10) shall be assumed by Dresser as provided
in Section 5.10.
(e) Wheatley Convertible Note. Dresser shall agree to be bound by the
conversion provisions of the Wheatley Convertible Note (as defined in
Section 3.1(b)), such that the Wheatley Convertible Note shall be
convertible into Dresser Common Stock in accordance with the terms of
Wheatley Convertible Note.
2.2 Exchange of Certificates
(a) Exchange Agent. As of the Effective Time, Dresser shall deposit with
Harris Trust Co. of New York or such other bank or trust company designated by
Dresser and reasonably acceptable to Wheatley (the "Exchange Agent"), for the
benefit of the holders of shares of Wheatley Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Dresser Common Stock (such shares of Dresser Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section 2.1
in exchange for outstanding shares of Wheatley Common Stock. The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the Dresser Common Stock
contemplated to be issued pursuant to Section 2.1 out of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which, immediately prior to the Effective Time,
represented outstanding shares of Wheatley Common Stock (the "Certificates"),
which holder's shares of Wheatley Common Stock were converted into the right to
receive shares of Dresser Common Stock pursuant to Section 2.1: (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 Exchange Agent, and shall be in such form and have such
other provisions as Dresser may reasonably specify); and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing shares of Dresser Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Dresser, together with such letter of transmittal, duly executed,
and any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Dresser Common
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<PAGE> 72
Stock which such holder has the right to receive pursuant to the provisions of
this Article II and cash in lieu of fractional shares of Dresser Common Stock as
contemplated by Section 2.2(e), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Wheatley
Common Stock which is not registered in the transfer records of Wheatley, a
certificate representing the appropriate number of shares of Dresser Common
Stock may be issued to a transferee if the Certificate representing such
Wheatley Common Stock is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Dresser Common Stock and cash
in lieu of any fractional shares of Dresser Common Stock as contemplated by this
Section 2.2. The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the Dresser Common Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect thereto for the account of
persons entitled thereto.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Dresser Common Stock declared or made after the
Effective Time with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the right to receive
shares of Dresser Common Stock represented thereby and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section 2.2(e)
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder thereof, without interest: (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Dresser Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Dresser
Common Stock; and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Dresser Common Stock.
(d) No Further Ownership Rights in Wheatley Common Stock. All shares of
Dresser Common Stock issued upon the surrender for exchange of shares of
Wheatley Common Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Wheatley Common
Stock, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time that may have been declared or made by Wheatley on such shares of
Wheatley Common Stock in accordance with the terms of this Agreement or prior to
the date hereof and which remain unpaid at the Effective Time, and after the
Effective Time there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Wheatley Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Dresser Common Stock shall be issued upon the surrender for exchange
of Certificates pursuant to this Article II, and, except as provided in this
Section 2.2(e), no dividend or other distribution, stock split or interest shall
relate to any such fractional security, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder of
Dresser. In lieu of any fractional security, each holder of shares of Wheatley
Common Stock who would otherwise have been entitled to a fraction of a share of
Dresser Common Stock upon surrender of Certificates for exchange pursuant to
this Article II will be paid an amount in cash (without interest) equal to such
holder's proportionate interest in the sum of (i) the net proceeds from the sale
or sales by the Exchange Agent in accordance with the provisions of this Section
2.2(e), on behalf of all such holders, of the aggregate fractional shares of
Dresser Common Stock issued pursuant to this Article II and (ii) the aggregate
dividends or other distributions that are payable with respect to such shares of
Dresser Common Stock pursuant to Section 2.2(c) (such dividends and
distributions being herein called the "Fractional Dividends"). As soon as
practicable following the Effective Time, the Exchange Agent shall determine the
excess of (x) the number of
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<PAGE> 73
full shares of Dresser Common Stock delivered to the Exchange Agent by Dresser
pursuant to Section 2.2(a) over (y) the aggregate number of full shares of
Dresser Common Stock to be distributed to holders of Common Stock pursuant to
Section 2.2(b) (such excess being herein called the "Excess Securities") and the
Exchange Agent, as agent for the former holders of Common Stock, shall sell the
Excess Securities at the prevailing prices on the NYSE. The sale of the Excess
Securities by the Exchange Agent shall be executed on the NYSE through one or
more member firms of the NYSE and shall be executed in round lots to the extent
practicable. Dresser shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Securities.
Until the net proceeds of such sale of Excess Securities and the Fractional
Dividends have been distributed to the former stockholders of Wheatley, the
Exchange Agent will hold such proceeds and dividends in trust for such former
stockholders. As soon as practicable after the determination of the amount of
cash to be paid to former stockholders of Wheatley in lieu of any fractional
interests, the Exchange Agent shall make available in accordance with this
Agreement such amounts to such former stockholders.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and any
cash in lieu of fractional shares of Dresser Common Stock made available to the
Exchange Agent that remain undistributed to the former stockholders of Wheatley
for one year after the Effective Time shall be delivered to Dresser, upon
demand, and any stockholders of Wheatley who have not theretofore complied with
this Article II shall thereafter look only to Dresser for payment of their claim
for Dresser Common Stock, any cash in lieu of fractional shares of Dresser
Common Stock and any dividends or distributions with respect to Dresser Common
Stock.
(g) No Liability. Neither Dresser nor Wheatley shall be liable to any
holder of shares of Wheatley Common Stock or Dresser Common Stock, as the case
may be, for such shares (or dividends or distributions with respect thereto) or
cash in lieu of fractional shares of Dresser Common Stock delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Any amounts remaining unclaimed by holders of any such shares two years after
the Effective Time (or such earlier date immediately prior to the time at which
such amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
Dresser free and clear of any claims or interest of any such holders or their
successors, assigns or personal representatives previously entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Wheatley. Wheatley represents and
warrants to Dresser and Sub as follows:
(a) Organization, Standing and Power. Each of Wheatley and its
Significant Subsidiaries (as defined below) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
state of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure
so to qualify would not have a Material Adverse Effect (as defined below).
Wheatley has heretofore delivered to Dresser complete and correct copies of
its Restated Certificate of Incorporation and Bylaws. All Significant
Subsidiaries of Wheatley and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.1(a). As used in
this Agreement: (i) a "Significant Subsidiary" means any Subsidiary of
Wheatley or Dresser, as the case may be, that would constitute a
Significant Subsidiary of such party within the meaning of Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the "SEC"); and
(ii) a "Material Adverse Effect" or "Material Adverse Change" shall mean,
in respect of Wheatley or Dresser, as the case may be, any effect or change
that is or, as far as can be reasonably determined, may be, materially
adverse to the business, operations, assets, condition (financial or
otherwise) or results of operation of such party and its Subsidiaries taken
as a
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whole; provided, however, that any such effect or change which,
individually or in the aggregate, relate to an amount (which, in any case,
shall be measured net of any related insurance, indemnity, reimbursement,
contribution, compensation or similar right that would operate to reduce,
offset, compensate or otherwise limit the impact thereof) in excess of
$7,500,000 in the case of Wheatley, or $70,000,000 in the case of Dresser,
shall be deemed to constitute a Material Adverse Effect or Material
Adverse Change.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Wheatley consists of 14,500,000 shares of Wheatley Common Stock
and 2,500,000 shares of preferred stock, par value $0.01 per share
("Wheatley Preferred Stock"). At the close of business on May 15, 1994: (i)
11,823,405 shares of Wheatley Common Stock and no shares of Wheatley
Preferred Stock were issued and outstanding, and 496,726 shares of Wheatley
Common Stock and no shares of Wheatley Preferred Stock were reserved for
issuance pursuant to Wheatley's 1990 Stock Option Plan (the "Wheatley Stock
Plan"); (ii) 32 shares of Wheatley Common Stock were held by Wheatley in
its treasury; and (iii) except for the $1,000,000 principal amount
convertible note of Wheatley issued in connection with Wheatley's
acquisition of the assets of Clif Mock Company (the "Wheatley Convertible
Note"), which is convertible into Wheatley Common Stock at the conversion
price of $13.11 per share, no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into securities
having the right to vote) on any matters on which Wheatley stockholders may
vote ("Voting Debt") were issued or outstanding. Except as set forth on
Schedule 3.1(b), all outstanding shares of Wheatley Common Stock are
validly issued, fully paid and nonassessable and are not subject to
preemptive rights. Except as set forth on Schedule 3.1(b), all outstanding
shares of capital stock of the Subsidiaries of Wheatley are owned by
Wheatley, or a direct or indirect wholly owned Subsidiary of Wheatley, free
and clear of all liens, charges, encumbrances, claims and options of any
nature. Except as set forth in this Section 3.1(b) or on Schedule 3.1(b)
and except for changes since May 15, 1994 resulting from the exercise of
employee stock options granted pursuant to, or from issuances or purchases
under, the Wheatley Stock Plan, the conversion of the Wheatley Convertible
Note or as contemplated by this Agreement, there are outstanding: (i) no
shares of capital stock, Voting Debt or other voting securities of
Wheatley; (ii) no securities of Wheatley or any Subsidiary of Wheatley
convertible into or exchangeable for shares of capital stock, Voting Debt
or other voting securities of Wheatley or any Subsidiary of Wheatley; and
(iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which Wheatley or any Subsidiary of Wheatley
is a party or by which it is bound in any case obligating Wheatley or any
Subsidiary of Wheatley to issue, deliver, sell, purchase, redeem or
acquire, or cause to be issued, delivered, sold, purchased, redeemed or
acquired, additional shares of capital stock or any Voting Debt or other
voting securities of Wheatley or of any Subsidiary of Wheatley, or
obligating Wheatley or any Subsidiary of Wheatley to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement. There
are not as of the date hereof and there will not be at the Effective Time
any stockholder agreements, voting trusts or other agreements or
understandings to which Wheatley is a party or by which it is bound
relating to the voting of any shares of the capital stock of Wheatley that
will limit in any way the solicitation of proxies by or on behalf of
Wheatley from, or the casting of votes by, the stockholders of Wheatley
with respect to the Merger. There are no restrictions on Wheatley to vote
the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of Wheatley has approved the Merger and the
Merger Agreement, by vote of the directors with no negative vote, and
declared the Merger and the Merger Agreement to be in the best interests of
the stockholders of Wheatley. The directors have advised Wheatley and
Dresser that they intend to vote or cause to be voted all of the shares
beneficially owned by them and their affiliates in favor of approval of the
Merger and the Merger Agreement. Wheatley has all requisite corporate power
and authority to enter into this Agreement and, subject, with respect to
consummation of the Merger, to approval of this Agreement and the Merger by
the stockholders of Wheatley in accordance with the DGCL, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Wheatley, subject, with respect to consummation of the
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Merger, to approval of this Agreement and the Merger by the
stockholders of Wheatley in accordance with the DGCL. This Agreement has
been duly executed and delivered by Wheatley and, subject, with respect to
consummation of the Merger, to approval of this Agreement and the Merger
by the stockholders of Wheatley in accordance with the DGCL, and assuming
this Agreement constitutes the valid and binding obligation of Dresser and
Sub, constitutes a valid and binding obligation of Wheatley enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity.
(ii) Except as set forth on Schedule 3.1(c), the execution and
delivery of this Agreement does 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 any obligation or to the 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 Wheatley or any of its Subsidiaries under, any provision of (i)
the Restated Certificate of Incorporation or Bylaws of Wheatley or any
provision of the comparable charter or organizational documents of any 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 Wheatley or any of its Subsidiaries or
(iii) assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in Section 3.1(c)(iii) are duly and
timely obtained or made and the approval of the Merger and this Agreement
by the stockholders of Wheatley has been obtained, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Wheatley
or any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on Wheatley, materially impair the ability of
Wheatley to perform its obligations hereunder or prevent the consummation
of any of the transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required
by or with respect to Wheatley or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Wheatley or the
consummation by Wheatley of the transactions contemplated hereby, as to
which the failure to obtain or make would have a Material Adverse Effect,
except for: (A) the filing of a premerger notification report by Wheatley
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the expiration or termination of the applicable
waiting period with respect thereto; (B) the appropriate filings or
notifications as may be required by comparable Canadian or European laws;
(C) the filing with the SEC of (x) a proxy statement in preliminary and
definitive form relating to the meeting of Wheatley's stockholders to be
held in connection with the Merger (the "Proxy Statement") and (y) such
reports under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and such other compliance with the Exchange
Act and the rules and regulations thereunder, as may be required in
connection with this Agreement and the transactions contemplated hereby;
(D) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware; (E) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws, or
environmental laws; and (F) such filings and approvals as may be required
by any foreign premerger notification, securities, corporate or other law,
rule or regulation.
(d) SEC Documents. Wheatley has made available to Dresser a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Wheatley with the SEC since February
28, 1991 and prior to the date of this Agreement (the "Wheatley SEC
Documents") which are all the documents that Wheatley was required to file
with the SEC since such date. As of their respective dates, the Wheatley
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
thereunder applicable to such Wheatley SEC Documents,
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and none of the Wheatley SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Wheatley included in the Wheatley SEC Documents complied as
to form in all material respects with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which are material)
the consolidated financial position of Wheatley and its consolidated
Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of Wheatley and its consolidated
Subsidiaries for the periods presented therein. Except as disclosed in the
Wheatley SEC Documents or in Schedule 3.1(d), there are no agreements,
arrangements or understandings between Wheatley and any party who is at the
date of this Agreement or was at any time prior to the date hereof but
after February 28, 1991 an Affiliate of Wheatley that are required to be
disclosed in the Wheatley SEC Documents.
(e) Information Supplied. None of the information supplied or to be
supplied by Wheatley for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Dresser in
connection with the issuance of shares of Dresser Common Stock in the
Merger (the "S-4") will, at the time the S-4 becomes effective under the
Securities Act or at the Effective Time, 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
none of the information supplied or to be supplied by Wheatley and included
or incorporated by reference in the Proxy Statement will, at the date
mailed to stockholders of Wheatley or at the time of the meeting of such
stockholders to be held in connection with the Merger or at the Effective
Time, 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. If at any time prior to the Effective Time any event
with respect to Wheatley or any of its Subsidiaries, or with respect to
other information supplied by Wheatley for inclusion in the Proxy Statement
or S-4, shall occur which is required to be described in an amendment of,
or a supplement to, the Proxy Statement or the S-4, such event shall be so
described, and such amendment or supplement shall be promptly filed with
the SEC and, as required by law, disseminated to the stockholders of
Wheatley. The Proxy Statement, insofar as it relates to Wheatley or its
Subsidiaries or other information supplied by Wheatley for inclusion
therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the Wheatley SEC
Documents or on Schedule 3.1(f), or except as contemplated by this
Agreement, since February 28, 1994, there has not been: (i) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Wheatley's
capital stock, except for regular quarterly cash dividends of $.01 per
share on Wheatley Common Stock (or a pro rata amount for any dividend less
than a full quarter) with usual record and payment dates for such
dividends; (ii) any amendment of any material term of any outstanding
equity security of Wheatley or any Significant Subsidiary; (iii) any
repurchase, redemption or other acquisition by Wheatley or any Subsidiary
of any outstanding shares of capital stock or other equity securities of,
or other ownership interests in, Wheatley or any Subsidiary, except as
contemplated by Wheatley Benefit Plans; (iv) any material change in any
method of accounting or accounting practice by Wheatley or any Significant
Subsidiary; or (v) any other transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) that could have a Material Adverse
Effect on Wheatley, except for general economic changes and changes that
may affect the industries of Wheatley or any of its Subsidiaries generally.
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(g) No Undisclosed Material Liabilities. Except as disclosed in the
Wheatley SEC Documents or on Schedule 3.1(g), as of the date hereof, there
are no liabilities of Wheatley or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, that are reasonably likely to have a Material Adverse Effect
on Wheatley, other than: (i) liabilities adequately provided for on the
balance sheet of Wheatley dated as of February 28, 1994 (including the
notes thereto) contained in Wheatley's Annual Report on Form 10-K for the
year ended February 28, 1994; and (ii) liabilities under this Agreement.
(h) No Default. Neither Wheatley nor any of its Subsidiaries is in
default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any
term, condition or provision of (i) in the case of Wheatley and its
Significant Subsidiaries, their respective charter and by-laws, (ii) except
as disclosed in Schedule 3.1(h), any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which Wheatley or
any of its Subsidiaries is now a party or by which Wheatley or any of its
Subsidiaries or any of their respective properties or assets may be bound
or (iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to Wheatley or any of its Subsidiaries, except in the case of
(ii) and (iii) for defaults or violations which in the aggregate would not
have a Material Adverse Effect on Wheatley.
(i) Compliance with Applicable Laws. Wheatley and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Wheatley Permits"), except where the
failure so to hold would not have a Material Adverse Effect on Wheatley.
Wheatley and its Subsidiaries are in compliance with the terms of the
Wheatley Permits, except where the failure so to comply would not have a
Material Adverse Effect on Wheatley. Except as disclosed in the Wheatley
SEC Documents or as set forth on Schedule 3.1(i), 3.1(j), 3.1(k), 3.1(l),
3.1(m) or 3.1(o), the businesses of Wheatley and its Subsidiaries are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on Wheatley. Except as set forth on Schedule
3.1(i), as of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to Wheatley or any of its Subsidiaries is
pending or, to the best knowledge of Wheatley as of the date hereof,
threatened, other than those the outcome of which would not have a Material
Adverse Effect on Wheatley. Schedule 3.1(i) sets forth each such failure to
hold or comply with the terms of Wheatley Permits, each such violation of
law, ordinance or regulation of any governmental entity and each such
pending or threatened investigation or review by any governmental entity
existing on the date hereof that involves amounts in excess of $250,000.
(j) Litigation. Except as disclosed in the Wheatley SEC Documents or
on Schedule 3.1(j) hereto, there is no suit, action or proceeding pending,
or, to the best knowledge of Wheatley, threatened against or affecting
Wheatley or any Subsidiary of Wheatley ("Wheatley Litigation"), and
Wheatley and its Subsidiaries have no knowledge of any facts that are
likely to give rise to any Wheatley Litigation, that (in any case) is
reasonably likely to have a Material Adverse Effect on Wheatley, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Wheatley or any Subsidiary of
Wheatley ("Wheatley Order") that is reasonably likely to have a Material
Adverse Effect on Wheatley or its ability to consummate the transactions
contemplated by this Agreement. In addition, the aggregate reasonable
estimate of uninsured exposures or losses under all claims and judgments
pending, or to the best knowledge of Wheatley as of the date hereof,
threatened, pursuant to all Wheatley Litigation and Wheatley Orders,
existing on the date hereof, excluding individual, unrelated claims or
judgments of less than $250,000 each, does not exceed $7,500,000.
(k) Taxes.
(i) Except as set forth on Schedule 3.1(k)(i), each of Wheatley, each
of its Subsidiaries and any affiliated, combined or unitary group of which
any such corporation is or was a member has (A) timely (taking into account
any extensions) filed all federal and all material state, local and foreign
returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed or sent by or with respect to
it in respect of any Taxes (as hereinafter defined), (B) timely paid all
Taxes
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that are due and payable (except for audit adjustments not material in
the aggregate or to the extent that liability therefor is reserved for in
Wheatley's most recent audited financial statements) for which Wheatley or
any of its Subsidiaries may be liable, (C) established reserves that are
adequate for the payment of all Taxes not yet due and payable with respect
to the results of operations of Wheatley and its Subsidiaries through the
date hereof, and (D) complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of
Taxes and has in all material respects timely withheld from employee wages
and paid over to the proper governmental authorities all amounts required
to be so withheld and paid over.
(ii) Schedule 3.1(k)(ii) sets forth the last taxable period through
which the federal income Tax Returns of Wheatley and any of its
Subsidiaries have been examined by the Internal Revenue Service ("IRS") or
otherwise closed. Except to the extent being contested in good faith, all
material deficiencies asserted as a result of such examinations and any
examination by any applicable state or local taxing authority have been
paid, fully settled or adequately provided for in Wheatley's most recent
audited financial statements. Except as adequately provided for in the
Wheatley SEC Documents, no material federal, state or local income or
franchise tax audits or other administrative proceedings or court
proceedings are presently pending with regard to any federal, state or
local income or franchise Taxes for which Wheatley or any of its
Subsidiaries would be liable, and no material deficiency for any such
income or franchise Taxes has been proposed, asserted or assessed pursuant
to such examination against Wheatley or any of its Subsidiaries by any
federal, state or local taxing authority with respect to any period other
than as set forth in Schedule 3.1(k)(ii).
(iii) Except as disclosed on Schedule 3.1(k)(iii), neither Wheatley
nor any of its Subsidiaries has executed or entered into (or prior to the
close of business on the Closing Date will execute or enter into) with the
IRS or any taxing authority (i) any agreement or other document extending
or having the effect of extending the period for assessments or collection
of any federal, state or local income or franchise Taxes for which Wheatley
or any of its Subsidiaries would be liable or (ii) a closing agreement
pursuant to Section 7121 of the Code, or any predecessor provision thereof
or any similar provision of state or local income tax law that relates to
the assets or operations of Wheatley or any of its Subsidiaries.
(iv) Except as to the matters described in Schedule 5.9, neither
Wheatley nor any of its Subsidiaries is a party to an agreement that
provides for the payment of any amount that would constitute a "parachute
payment" within the meaning of Section 280G of the Code.
(v) Neither Wheatley nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Wheatley or any of its
Subsidiaries.
(vi) Except as set forth in Wheatley SEC Documents or as disclosed on
Schedule 3.1(k)(vi), neither Wheatley nor any of its Subsidiaries is a
party to, is bound by or has any obligation under any tax sharing agreement
or similar agreement or arrangement.
For purposes of this Agreement, "Taxes" shall mean all federal, state,
local, foreign and other taxes, charges, fees, levies, imposts, duties,
licenses or other assessments, together with any interest, penalties,
additions to tax or additional amounts imposed by any taxing authority.
(l) Pension and Benefit Plans; ERISA.
(i) All "employee pension plans," as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by Wheatley or any of its Subsidiaries or any trade or business
(whether or not incorporated) which is under common control, or which is
treated as a single employer, with Wheatley under Section 414(b), (c), (m)
or (o) of the Code ("Wheatley ERISA Affiliate") or to which Wheatley or any
of its Subsidiaries or any Wheatley ERISA Affiliate contributed or is
obligated to contribute thereunder (the "Wheatley Pension Plans") intended
to qualify under Section 401 of the Code so qualify and the trusts
maintained pursuant thereto have been determined by the IRS to be exempt
from federal income taxation under Section 501 of the Code, and, to the
best
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knowledge of Wheatley as of the date hereof, nothing has occurred with
respect to the operation of the Wheatley Pension Plans that could
reasonably be expected to cause the loss of such qualification or
exemption or the imposition of any material liability, penalty, or tax
under ERISA or the Code.
(ii) Except as disclosed in Schedule 3.1(l)(ii), there has been no
"reportable event" as that term is defined in Section 4043 of ERISA and the
regulations thereunder with respect to the Wheatley Pension Plans subject
to Title IV of ERISA that would require the giving of notice or any event
requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(iii) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notices regarding all the
"employee benefit plans," as defined in Section 3(3) of the ERISA and all
other material employee compensation and benefit arrangements or payroll
practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase, hospitalization, medical
insurance, life insurance and scholarship programs maintained by Wheatley
or any of its Subsidiaries or to which Wheatley or any of its Subsidiaries
contributed or is obligated to contribute thereunder (all such plans, other
than the Wheatley Pension Plans, being hereinafter referred to as the
"Wheatley Employee Benefit Plans"), or Wheatley Pension Plans with the
Secretary of Labor and the Secretary of the Treasury or the furnishing of
such documents to the participants or beneficiaries of the Wheatley
Employee Benefit Plans or Wheatley Pension Plans.
(iv) The Wheatley Employee Benefit Plans and Wheatley Pension Plans
have been maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable Federal and state law, and neither
Wheatley nor any of its Subsidiaries or any "party in interest" or
"disqualified person" with respect to the Wheatley Employee Benefit Plans
and Wheatley Pension Plans has engaged in a "prohibited transaction" within
the meaning of Section 4975 of the Code or Section 406 of ERISA.
(v) Except as disclosed on Schedule 3.1(l)(v) or Schedule 5.9, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming
due to any employee or group of employees of Wheatley or any of its
Subsidiaries; (ii) increase any benefits otherwise payable under any
Wheatley Employee Benefit Plan or Wheatley Pension Plan or the profit
sharing plan of Wheatley or (iii) result in the acceleration of the time of
payment or vesting of any such benefits. Except as disclosed on Schedule
3.1(l)(v), on Schedule 5.9 or in the Wheatley SEC Documents, there are no
severance agreements or employment agreements between Wheatley or any of
its Subsidiaries and any employee of Wheatley or such Subsidiary.
True and correct copies of all such severance agreements and
employment agreements have been provided to Dresser. Except as set forth on
Schedule 3.1(l)(v), neither Wheatley nor any of its Subsidiaries has any
consulting agreement or arrangement with any person involving compensation
in excess of $50,000, except as are terminable upon one month's notice or
less.
(vi) Except as disclosed on Schedule 3.1(l)(vi) hereto, no stock or
other security issued by Wheatley or any of its subsidiaries forms or has
formed a material part of the assets of any Wheatley Employee Benefit Plan
or Wheatley Pension Plan.
(m) Labor Matters.
(i) Except as set forth in Schedule 3.1(m)(i) hereto, as of the date
of this Agreement, (1) no employees of Wheatley or any of its Subsidiaries
are represented by any labor organization; (2) no labor organization or
group of employees of Wheatley or any of its Subsidiaries has made a
pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority; and (3) to the
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knowledge of Wheatley, there are no organizing activities involving
Wheatley or any of its Subsidiaries pending with any labor organization or
group of employees of Wheatley or any of its Subsidiaries.
(ii) Except as set forth on Schedule 3.1(m)(ii) hereto, Wheatley and
each of its Subsidiaries is in compliance with all laws and orders relating
to the employment of labor, including all such laws and orders relating to
wages, hours, collective bargaining, discrimination, civil rights, safety
and health, workers' compensation and the collection and payment of
withholding and/or Social Security Taxes and similar Taxes, except where
the failure to comply would not have a Material Adverse Effect on Wheatley.
(n) Intangible Property. Wheatley and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, database,
industrial designs and copyrights necessary for the operation of the
businesses of each of Wheatley and its Subsidiaries (collectively, the
"Wheatley Intangible Property"), except where the failure to possess or
have adequate rights to use such properties would not reasonably be
expected to have a Material Adverse Effect on Wheatley. Except as set forth
on Schedule 3.1(n), all of the Wheatley Intangible Property is owned by
Wheatley or its Subsidiaries free and clear of any and all liens, claims or
encumbrances, except those that are not reasonably likely to have a
Material Adverse Effect on Wheatley, and neither Wheatley nor any such
Subsidiary has forfeited or otherwise relinquished any Wheatley Intangible
Property which forfeiture would result in a Material Adverse Effect. To the
knowledge of Wheatley, except as disclosed to patent counsel for Dresser,
the use of the Wheatley Intangible Property by Wheatley or its Subsidiaries
does not, in any material respect, conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest
or goodwill, including, without limitation, any intellectual property
right, trademark, trade name, patent, service mark, brand mark, brand name,
computer program, database, industrial design, copyright or any pending
application therefor of any other person and there have been no claims made
and neither Wheatley nor any of its Subsidiaries has received any notice of
any claim or otherwise knows that any of the Wheatley Intangible Property
is invalid or conflicts with the asserted rights of any other person or has
not been used or enforced or has been failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any of the Wheatley Intangible Property, except for any
such conflict, infringement, violation, interference, claim, invalidity,
abandonment, cancellation or unenforceability that would not reasonably be
expected to have a Material Adverse Effect.
(o) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Law" means any applicable law regulating or
prohibiting Releases into any part of the natural environment, or
pertaining to the protection of natural resources, the environment and
public and employee health and safety including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (33
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 7401 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. Section 651 et seq.) ("OSHA") and the
regulations promulgated pursuant thereto, and any such applicable state
or local statutes, and the regulations promulgated pursuant thereto, as
such laws have been and may be amended or supplemented through the
Closing Date.
(B) "Hazardous Material" means any substance, material or waste
which is regulated pursuant to any Environmental Law by any public or
governmental authority in the jurisdictions in which the applicable
party or its Subsidiaries conducts business, or the United States,
including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law;
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(C) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or
out of any property owned, operated or leased by the applicable party or
its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity
or required under any Environmental Law, or voluntarily undertaken to
(I) clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor
environment; (II) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger or
threaten to endanger the public health or welfare of the indoor or
outdoor environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (IV) bring the applicable party into
compliance with any Environmental Law.
(i) Except as disclosed on Schedule 3.1(o), the operations of
Wheatley and its Subsidiaries have been and, as of the Closing Date,
will be, in compliance with all Environmental Laws, except where the
failure to so comply would not reasonably be expected to have a Material
Adverse Effect on Wheatley;
(ii) Except as disclosed on Schedule 3.1(o), Wheatley and its
Subsidiaries have obtained and will, as of the Closing Date, maintain
all permits required under applicable Environmental Laws for the
continued operations of their respective businesses, except such permits
the lack of which would not reasonably be expected to lead to a Material
Adverse Effect on Wheatley;
(iii) Except as disclosed on Schedule 3.1(o), as of the date hereof
Wheatley and its Subsidiaries are not subject to any material
(individually or in the aggregate) outstanding written orders or
material contracts with any Governmental Entity or other person
respecting (A) Environmental Laws, (B) Remedial Action or (C) any
Release or threatened Release of a Hazardous Material;
(iv) Except as disclosed on Schedule 3.1(o), Wheatley and its
Subsidiaries have not received any written communication alleging, with
respect to any such party, the violation of or liability under any
Environmental Law, which violation or liability would reasonably be
expected to have a Material Adverse Effect on Wheatley;
(v) Except as disclosed on Schedule 3.1(o), neither Wheatley nor
any of its Subsidiaries has any contingent liability in connection with
the Release of any Hazardous Material into the indoor or outdoor
environment (whether on-site or off-site) that would reasonably be
expected to lead to a Material Adverse Effect on Wheatley;
(vi) Except as disclosed on Schedule 3.1(o), the operations of
Wheatley or its Subsidiaries involving the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined and
regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of
this Agreement) or any state equivalent, are in compliance with
applicable Environmental Laws, except where the failure to so comply
would not reasonably be expected to have a Material Adverse Effect on
Wheatley; and
(vii) Except as disclosed on Schedule 3.1(o), to the knowledge of
Wheatley as of the date hereof, there is not now on or in any property
of Wheatley or its Subsidiaries any of the following: (A) any
underground storage tanks or surface impoundments, (B) any
asbestos-containing materials, or (C) any polychlorinated biphenyls, any
of which ((A), (B), or (C) preceding) could reasonably be expected to
have a Material Adverse Effect on Wheatley.
(p) Opinion of Financial Advisor. Wheatley has received the opinion of
Simmons & Company International (a copy of which has been delivered to
Dresser) to the effect that, as of the date hereof, the consideration to be
received by the holders of Wheatley Common Stock pursuant to this Agreement
is fair from a financial point of view to such holders.
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(q) Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Wheatley Common Stock is the only vote of the
holders of any class or series of Wheatley capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
(r) Accounting Matters. To the best knowledge of Wheatley as of the
date hereof, prior to the date hereof, neither Wheatley nor any of its
Affiliates has taken any action that (without giving effect to any action
taken or agreed to be taken by Dresser or any of its affiliates) would
jeopardize the treatment of the business combination to be effected by the
Merger as a pooling of interests for accounting purposes.
(s) Beneficial Ownership of Dresser Common Stock. As of the date
hereof, assuming the accuracy of the representation set forth in Section
3.2(b), neither Wheatley nor its Subsidiaries "beneficially owns" (as
defined in Rule 13d-3 under the Exchange Act) in the aggregate one percent
(1%) or more of the outstanding Dresser Common Stock.
(t) Insurance. Wheatley has delivered to Dresser an insurance schedule
of Wheatley's and each of its Subsidiaries' directors' and officers'
liability insurance, primary and excess casualty insurance policies,
providing coverage for bodily injury and property damage to third parties,
including products liability and completed operations coverage, and
worker's compensation, in effect as of the date hereof. Wheatley maintains
insurance coverage reasonably adequate for the operation of the business of
Wheatley and each of its Subsidiaries (taking into account the cost and
availability of such insurance), and the transactions contemplated hereby
will not materially adversely affect such coverage.
(u) Brokers. Except as disclosed on Schedules 3.1(u) or 5.9 hereof, no
broker, investment banker, or other person is entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Wheatley.
(v) Tax Matters. As of the date hereof, to the knowledge of Wheatley,
the representations set forth in the numbered paragraphs of the form of
Certificate of Wheatley included as Schedule 3.1(v) are true and correct in
all material respects, assuming for purposes of this representation and
warranty that the Merger referred to in such form had been consummated on
the date hereof.
3.2 Representations and Warranties of Dresser and Sub. Dresser and Sub
jointly and severally represent and warrant to Wheatley as follows:
(a) Organization, Standing and Power. Each of Dresser, Sub and
Dresser's Significant Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
state of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure
so to qualify would not have a Material Adverse Effect on Dresser. Dresser
and Sub have heretofore delivered to Wheatley complete and correct copies
of their respective Certificates of Incorporation and Bylaws.
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<PAGE> 83
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Dresser consists of 400,000,000 shares of Dresser Common Stock and
10,000,000 shares of preferred stock, without par value, of Dresser (the
"Dresser Preferred Stock"). At the close of business on May 15, 1994 (i)
175,401,976 shares of Dresser Common Stock were issued and outstanding and
21,831,973 shares of Dresser Common Stock were reserved for issuance
pursuant to Dresser's:
<TABLE>
<S> <C>
1992 Stock Compensation Plan................................. 9,860,273
1989 Directors Retirement Plan............................... 155,437
1982 Stock Option Plan....................................... 4,641,197
Automatic Dividend Reinvestment Plan......................... 180,639
1986 Performance Stock Units................................. 440,829
Baroid Plans................................................. 3,030,164
Stock Purchase Plan.......................................... 1,765,098
Deferred Compensation Plan................................... 1,758,356
</TABLE>
(collectively, the "Dresser Option Plans"); (ii) 193,130 shares of Dresser
Common Stock were held by Dresser in its treasury or by its wholly owned
Subsidiaries; (iii) no shares of Dresser Preferred Stock are issued and
outstanding and 2,000,000 shares of Dresser Series A Preferred Stock were
reserved for issuance in connection with the Dresser Rights Agreement; and
(iv) no Voting Debt was outstanding. All outstanding shares of Dresser
capital stock are, and the shares of Dresser Common Stock when issued in
accordance with this Agreement, and upon exercise of the Wheatley Stock
Options (as defined in Section 5.10) to be assumed pursuant to the Merger,
will be, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth on Schedule 3.2(b), all outstanding
shares of capital stock of the Subsidiaries of Dresser are owned by Dresser
or a direct or indirect wholly owned Subsidiary of Dresser, free and clear
of all liens, charges, encumbrances, claims and options of any nature.
Except as set forth in this Section 3.2(b) or on Schedule 3.2(b) and except
for changes since May 15, 1994 resulting from the exercise of employee
stock options granted pursuant to, or from issuances or purchases under,
Dresser Option Plans, or as contemplated by this Agreement, there are
outstanding: (i) no shares of capital stock, Voting Debt or other voting
securities of Dresser; (ii) no securities of Dresser or any Subsidiary of
Dresser convertible into or exchangeable for shares of capital stock,
Voting Debt or other voting securities of Dresser or any Subsidiary of
Dresser; and (iii) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which Dresser or any
Subsidiary of Dresser is a party or by which it is bound in any case
obligating Dresser or any Subsidiary of Dresser to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Voting Debt or other voting securities of Dresser or of any Subsidiary of
Dresser or obligating Dresser or any Subsidiary of Dresser to grant, extend
or enter into any such option, warrant, call, right, commitment or
agreement. There are not as of the date hereof and there will not be at the
Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which Dresser is a party or by which it is
bound relating to the voting of any shares of the capital stock of Dresser.
As of the date hereof, the authorized capital stock of Sub consists of
1,000 shares of common stock, par value $0.01 per share, 100 shares of
which are validly issued, fully paid and nonassessable and are owned by
Dresser and the balance of which are not issued or outstanding.
(c) Authority; No Violations, Consents and Approvals.
(i) Each of Dresser and Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including but not
limited to the issuance of the Dresser Common Stock pursuant to the Merger,
have been duly authorized by all necessary corporate action on the part of
Dresser and Sub. This Agreement has been duly executed and delivered by
Dresser and Sub and, assuming this Agreement constitutes the valid and
binding obligation of Wheatley, constitutes a valid and binding obligation
of each of Dresser and Sub enforceable in accordance with its terms.
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<PAGE> 84
(ii) The execution and delivery of this Agreement does 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 any
obligation or to the 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 Dresser or any of its Subsidiaries under, any
provision of (i) the Certificate of Incorporation or Bylaws of Dresser or
any provision of the comparable charter or organizational documents of any
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 Dresser or any of its
Subsidiaries or (iii) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 3.2(c)(iii) are
duly and timely obtained or made and the approval of the Merger and this
Agreement by the stockholders of Dresser has been obtained, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Dresser or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such
conflicts, violations, defaults, rights, liens, security interests, charges
or encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on Dresser, materially impair the ability of
Dresser to perform its obligations hereunder or thereunder or prevent the
consummation of any of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental
Entity is required by or with respect to Dresser or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by Dresser
and Sub or the consummation by Dresser and Sub of the transactions
contemplated hereby, as to which the failure to obtain or make would have a
Material Adverse Effect, except for: (A) the filing of a premerger
notification report by Dresser under the HSR Act and the expiration or
termination of the applicable waiting period with respect thereto; (B) the
filing with the SEC of the Proxy Statement, the S-4, such reports under
Section 13(a) of the Exchange Act and such other compliance with the
Securities Act and the Exchange Act and the rules and regulations
thereunder as may be required in connection with this Agreement and the
transactions contemplated hereby, and the obtaining from the SEC of such
orders as may be so required; (C) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware; (D) filings with, and
approval of, the NYSE; (E) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws or
environmental laws; and (F) such filings and approvals as may be required
by any foreign premerger notification, securities, corporate or other law,
rule or regulation.
(d) SEC Documents. Dresser has made available to Wheatley a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Dresser with the SEC since January 1,
1991 and prior to the date of this Agreement (the "Dresser SEC Documents"),
which are all the documents (other than preliminary material) that Dresser
was required to file with the SEC since such date. As of their respective
dates, the Dresser SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such
Dresser SEC Documents, and none of the Dresser SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of Dresser included in the Dresser SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and
fairly present in accordance with applicable requirements of GAAP (subject,
in the case of the unaudited statements, to normal, recurring adjustments,
none of which will be material) the consolidated financial position of
Dresser and its consolidated Subsidiaries as of their respective dates and
the consolidated results of operations and the consolidated cash flows of
Dresser and its consolidated Subsidiaries for the periods presented
therein.
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<PAGE> 85
(e) Information Supplied. None of the information supplied or to be
supplied by Dresser or Sub for inclusion or incorporation by reference in
the S-4 will, at the time the S-4 becomes effective under the Securities
Act or at the Effective Time, 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 none of the
information supplied or to be supplied by Dresser or Dresser Sub and
included or incorporated by reference in the Proxy Statement will, at the
date mailed to stockholders of Wheatley or at the time of the meeting of
such stockholders to be held in connection with the Merger or at the
Effective Time, 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. If at any time prior to the Effective Time
any event with respect to Dresser or any of its Subsidiaries, or with
respect to other information supplied by Dresser or Sub for inclusion in
the Proxy Statement or S-4, shall occur which is required to be described
in an amendment of, or a supplement to, the Proxy Statement or the S-4,
such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC. The Proxy Statement, insofar as it relates to
Dresser, Sub or other Subsidiaries of Dresser or other information supplied
by Dresser or Sub for inclusion therein, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the Dresser SEC
Documents or on Schedule 3.2(f), or except as contemplated by this
Agreement, since January 31, 1994, there has not been: (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of Dresser's capital stock,
except for regular quarterly cash dividends of $.17 per share on Dresser
Common Stock (or a pro rata amount for any dividend less than a full
quarter) with usual record and payment dates for such dividends; (ii) any
amendment of any material term of any outstanding equity security of
Dresser or any Significant Subsidiary; (iii) any repurchase, redemption or
other acquisition by Dresser or any Subsidiary of any outstanding shares of
capital stock or other equity securities of, or other ownership interests
in, Dresser or any Subsidiary, except as contemplated by Dresser Benefit
Plans; (iv) any material change in any method of accounting or accounting
practice by Dresser or any Significant Subsidiary; or (v) any other
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) that could have a Material Adverse Effect on Dresser, except for
general economic changes and changes that may affect the industries of
Dresser or any of its Subsidiaries generally.
(g) No Undisclosed Material Liabilities. Except as specifically and
individually set forth on Schedule 3.2(g), as of the date hereof, there are
no liabilities of Dresser or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, that are reasonably likely to have a Material Adverse Effect
on Dresser, other than: (i) liabilities adequately provided for on the
balance sheet of Dresser dated as of January 31, 1994 (including the notes
thereto) contained in Dresser's Annual Report on Form 10-Q for the quarter
ended January 31, 1994; and (ii) liabilities under this Agreement.
(h) No Default. Neither Dresser nor any of its Subsidiaries is in
default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any
term, condition or provision of (i) in the case of Dresser and its
Significant Subsidiaries, their respective charter and by-laws, (ii) except
as disclosed in Schedule 3.2(h), any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which Dresser or
any of its Subsidiaries is now a party or by which Dresser or any of its
Subsidiaries or any of their respective properties or assets may be bound
(except for the requirement under certain of such instruments to file
supplemental indentures as a result of the transactions contemplated
hereby) or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to Dresser or any of its Subsidiaries, except in the
case of (ii) and (iii) for defaults or violations which in the aggregate
would not have a Material Adverse Effect on Dresser.
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<PAGE> 86
(i) Compliance with Applicable Laws. Dresser and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Dresser Permits"), except where the
failure so to hold would not have a Material Adverse Effect on Dresser.
Dresser and its Subsidiaries are in compliance with the terms of the
Dresser Permits, except where the failure so to comply would not have a
Material Adverse Effect on Dresser. Except as disclosed in the Dresser SEC
Documents or as set forth in Schedules 3.2(i), 3.2(j), 3.2(k), 3.2(l),
3.2(m) or 3.2(o), the businesses of Dresser and its Subsidiaries are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on Dresser. Except as set forth on Schedule 3.2(i),
as of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to Dresser or any of its Subsidiaries is
pending or, to the best knowledge of Dresser as of the date hereof,
threatened, other than those the outcome of which would not have a Material
Adverse Effect on Dresser. Schedule 3.2(i) sets forth each such failure to
hold or comply with the terms of Dresser Permits, each such violation of
law, ordinance or regulation of any governmental entity and each such
pending or threatened investigation or review by any governmental entity
existing on the date hereof that involves amounts in excess of $1,500,000.
(j) Litigation. Except as disclosed in the Dresser SEC Documents or on
Schedule 3.2(j) hereto, there is no suit, action or proceeding pending, or,
to the best knowledge of Dresser, threatened against or affecting Dresser
or any Subsidiary of Dresser ("Dresser Litigation"), and Dresser and its
Subsidiaries have no knowledge of any facts that are likely to give rise to
any Dresser Litigation, that (in any case) is reasonably likely to have a
Material Adverse Effect on Dresser, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Dresser or any Subsidiary of Dresser ("Dresser Order")
that is reasonably likely to have a Material Adverse Effect on Dresser or
its ability to consummate the transactions contemplated by this Agreement.
In addition, the aggregate reasonable estimate of uninsured exposures or
losses under all claims and judgments pending, or to the best knowledge of
Dresser, threatened, pursuant to all Dresser Litigation and Dresser Orders,
existing on the date hereof, excluding individual, unrelated claims or
judgments of less than $1,500,000 each, does not exceed $70,000,000.
(k) Taxes.
(i) Except as set forth on Schedule 3.2(k)(i), each of Dresser, each
of its Subsidiaries and any affiliated, combined or unitary group of which
any such corporation is or was a member has (A) timely filed all federal
and all material state, local and foreign Returns, required to be filed or
sent by or with respect to it in respect of any Taxes, (B) timely paid all
Taxes that are due and payable (except for audit adjustments not material
in the aggregate or to the extent that liability therefor is reserved for
in Dresser's most recent audited financial statements) for which Dresser or
any of its Subsidiaries may be liable, (C) established reserves that are
adequate for the payment of all Taxes not yet due and payable with respect
to the results of operations of Dresser and its Subsidiaries through the
date hereof, and (D) complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of
Taxes and has in all material respects timely withheld from employee wages
and paid over to the proper governmental authorities all amounts required
to be so withheld and paid over.
(ii) Schedule 3.2(k)(ii) sets forth the last taxable period through
which the federal income Tax Returns of Dresser and any of its Subsidiaries
have been examined by the IRS or otherwise closed. Except to the extent
being contested in good faith, all deficiencies asserted as a result of
such examinations and any examination by any applicable state or local
taxing authority have been paid, fully settled or adequately provided for
in Dresser's most recent audited financial statements. Except as adequately
provided for in the Dresser SEC Documents, no material federal, state or
local income or franchise tax audits or other administrative proceedings or
court proceedings are presently pending with regard to any federal, state
or local income or franchise Taxes for which Dresser or any of its
Subsidiaries would be liable, and no material deficiency for any such
income or franchise Taxes has been proposed, asserted or assessed pursuant
to such examination against Dresser or any of its Subsidiaries by any
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federal, state or local taxing authority with respect to any period
other than as set forth in Schedule 3.2(k)(ii).
(iii) Except as disclosed on Schedule 3.2(k)(iii), neither Dresser nor
any of its Subsidiaries has executed or entered into (or prior to the close
of business on the Closing Date will execute or enter into) with the IRS or
any taxing authority (i) any agreement or other document extending or
having the effect of extending the period for assessments or collection of
any federal, state or local income or franchise Taxes for which Dresser or
any of its Subsidiaries would be liable or (ii) a closing agreement
pursuant to Section 7121 of the Code, or any predecessor provision thereof
or any similar provision of state or local income tax law that relates to
the assets or operations of Dresser or any of its Subsidiaries.
(iv) Neither Dresser nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would constitute
a "parachute payment" within the meaning of Section 280G of the Code.
(v) Neither Dresser nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Dresser or any of its
Subsidiaries.
(vi) Except as set forth on Schedule 3.2(k)(vi), and except as set
forth in Dresser SEC Documents, neither Dresser nor any of its Subsidiaries
is a party to, is bound by or has any obligation under any tax sharing
agreement or similar agreement or arrangement.
(l) Pension and Benefit Plans; ERISA.
(i) All "employee pension plans," as defined in Section 3(2) of ERISA,
maintained by Dresser or any of its Subsidiaries or any trade or business
(whether or not incorporated) which is under common control, or which is
treated as a single employer, with Dresser under Section 414(b), (c), (m)
or (o) of the Code ("Dresser ERISA Affiliate") or to which Dresser or any
of its Subsidiaries or any Dresser ERISA Affiliate contributed or is
obligated to contribute thereunder (the "Dresser Pension Plans") intended
to qualify under Section 401 of the Code so qualify and the trusts
maintained pursuant thereto are exempt from federal income taxation under
Section 501 of the Code, and nothing has occurred with respect to the
operation of the Dresser Pension Plans that could cause the loss of such
qualification or exemption or the imposition of any liability, penalty, or
tax under ERISA or the Code that is reasonably likely to have a Material
Adverse Effect on Dresser.
(ii) There has been no "reportable event" as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to the
Dresser Pension Plans subject to Title IV of ERISA that would require the
giving of notice or any event requiring disclosure under Section
4041(c)(3)(C) or 4063(a) of ERISA.
(iii) There is no violation of ERISA with respect to the filing of
applicable reports, documents, and notices regarding the "employee benefit
plans," as defined in Section 3(3) of ERISA and all other material employee
compensation and benefit arrangements or payroll practices including,
without limitation, severance pay, sick leave, vacation pay, salary
continuation for disability, consulting or other compensation agreements,
retirement, deferred compensation, bonus, long-term incentive, stock
option, stock purchase, hospitalization, medical insurance, life insurance
and scholarship programs maintained by Dresser or any of its Subsidiaries
or to which Dresser or any of its Subsidiaries contributed or is obligated
to contribute thereunder (all such plans, other than the Dresser Pension
Plans, being hereinafter referred to as the "Dresser Employee Benefit
Plans") or Dresser Pension Plans with the Secretary of Labor and the
Secretary of the Treasury or the furnishing of such documents to the
participants or beneficiaries of the Dresser Employee Benefit Plans or
Dresser Pension Plans, which violation is reasonably likely to have a
Material Adverse Effect on Dresser.
(iv) The Dresser Employee Benefit Plans and Dresser Pension Plans have
been maintained, in all material respects, in accordance with their terms
and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable Federal and state law, and neither Dresser
nor any of its
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Subsidiaries or any "party in interest" or "disqualified person" with
respect to the Dresser Employee Benefit Plans and Dresser Pension Plans
has engaged in a "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA.
(v) Except as disclosed on Schedule 3.2(l)(v), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment becoming due to any
employee or group of employees of Dresser or any of its Subsidiaries; (ii)
increase any benefits otherwise payable under any Dresser Employee Benefit
Plan or Dresser Pension Plan or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
(vi) Except as disclosed on Schedule 3.2(l)(vi) hereto, no stock or
other security issued by Dresser or any of its subsidiaries forms or has
formed a material part of the assets of any Dresser Employee Benefit Plan
or Dresser Pension Plan.
(m) Labor Matters. Except as set forth on Schedule 3.2(m) hereto,
Dresser and each of its Subsidiaries is in compliance with all laws and
orders relating to the employment of labor, including all such laws and
orders relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health workers' compensation and the collection
and payment of withholding and or Social Security Taxes and similar Taxes,
except where the failure to comply would not have a Material Adverse Effect
on Dresser.
(n) Intangible Property. Dresser and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, database,
industrial designs and copyrights necessary for the operation of the
businesses of each of Dresser and its Subsidiaries (collectively, the
"Dresser Intangible Property"), except where the failure to possess or have
adequate rights to use such properties would not reasonably be expected to
have a Material Adverse Effect on Dresser. Except as set forth on Schedule
3.2(n), all of the Dresser Intangible Property is owned by Dresser or its
Subsidiaries free and clear of any and all liens, claims or encumbrances,
except those that are not reasonably likely to have a Material Adverse
Effect on Dresser and neither Dresser nor any such Subsidiary has forfeited
or otherwise relinquished any Dresser Intangible Property which forfeiture
would result in a Material Adverse Effect. To the knowledge of Dresser, the
use of the Dresser Intangible Property by Dresser or its Subsidiaries does
not, in any material respect, conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest
or goodwill, including, without limitation, any intellectual property
right, trademark, trade name, patent, service mark, brand mark, brand name,
computer program, database, industrial design, copyright or any pending
application therefor of any other person and there have been no claims made
and neither Dresser nor any of its Subsidiaries has received any notice of
any claim or otherwise knows that any of the Dresser Intangible Property is
invalid or conflicts with the asserted rights of any other person or has
not been used or enforced or has been failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any of the Dresser Intangible Property, except for any
such conflict, infringement, violation, interference, claim, invalidity,
abandonment, cancellation or unenforceability that would not reasonably be
expected to have a Material Adverse Effect.
(o) Environmental Matters.
(i) Except as disclosed on Schedule 3.2(o), the operations of Dresser
and its Subsidiaries have been and, as of the Closing Date, will be, in
compliance with all Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect
on Dresser;
(ii) Except as disclosed on Schedule 3.2(o), Dresser and its
Subsidiaries have obtained and will, as of the Closing Date, maintain all
permits required under applicable Environmental Laws for the continued
operations of their respective businesses, except such permits the lack of
which would not reasonably be expected to lead to a Material Adverse Effect
on Dresser;
(iii) Except as disclosed on Schedule 3.2(o), Dresser and its
Subsidiaries are not subject to any outstanding written orders or material
contracts with any Governmental Entity or other person respecting
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(A) Environmental Laws, (B) Remedial Action or (C) any Release or
threatened Release of a Hazardous Material, except such orders or
contracts the compliance with which would not reasonably be expected
to have a Material Adverse Effect;
(iv) Except as disclosed on Schedule 3.2(o), Dresser and its
Subsidiaries have not received any written communication alleging, with
respect to any such party, the violation of or liability under any
Environmental Law, which violation or liability would reasonably be
expected to have a Material Adverse Effect on Dresser;
(v) Except as disclosed on Schedule 3.2(o), neither Dresser nor any of
its Subsidiaries has any contingent liability in connection with the
Release of any Hazardous Material into the indoor or outdoor environment
(whether on-site or off-site) that would reasonably be expected to lead to
a Material Adverse Effect on Dresser;
(vi) Except as disclosed on Schedule 3.2(o), none of the operations of
Dresser or its Subsidiaries involving the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined and regulated
under 40 C.F.R. Parts 260-270 (in effect as of the date of this Agreement)
or any state equivalent are in compliance with applicable Environmental
Laws, except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect on Dresser; and
(vii) Except as disclosed on Schedule 3.2(o), to the knowledge of
Dresser as of the date hereof, there is not now on or in any property of
Dresser or its Subsidiaries any of the following: (A) any underground
storage tanks or surface impoundments, (B) any asbestos-containing
materials, or (C) any polychlorinated biphenyls, which ((A), (B), or (C)
preceding) could reasonably be expected to have a Material Adverse Effect
on Dresser.
(p) No Vote Required. No vote of the holders of any class or series of
Dresser capital stock is necessary to approve the issuance of Dresser
Common Stock pursuant to this Agreement and the transactions contemplated
hereby.
(q) Accounting Matters. To the best knowledge of Dresser as of the
date hereof, prior to the date hereof, neither Dresser nor any of its
Affiliates has taken any action that (without giving effect to any action
taken or agreed to be taken by Wheatley or any of its affiliates) would
jeopardize the treatment of the business combination to be effected by the
Merger as a pooling of interests for accounting purposes.
(r) Beneficial Ownership of Wheatley Common Stock. As of the date
hereof, assuming the accuracy of the representation set forth in Section
3.1(b), neither Dresser nor its Subsidiaries "beneficially owns" (as
defined in Rule 13d-3 under the Exchange Act) any of the outstanding
Wheatley Common Stock.
(s) Dresser Rights Agreement. Dresser will, prior to the Effective
Time, take or cause to be taken all action so that each issued and
outstanding share of Wheatley Common Stock (other than shares to be
canceled in accordance with Section 2.1(b)), upon conversion of such shares
into Dresser Common Stock in accordance with Section 2.1(c), shall have
associated rights to purchase the appropriate number of shares of Dresser
Series A Junior Preferred Stock pursuant to the Dresser Rights Agreement.
(t) Brokers. No broker, investment banker or other person is entitled
to any broker's, finder's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Dresser.
(u) Interim Operations of Sub. Sub was formed by Dresser solely for
the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business or activities, has incurred no other
obligations or liabilities, has no other assets and has conducted its
operations only as contemplated hereby. All of the outstanding capital
stock of Sub is owned directly by Dresser.
(v) Tax Matters. As of the date hereof, to the knowledge of Dresser,
the representations in the numbered paragraphs set forth in the form of
Certificate of Purchaser included as Schedule 3.2(v) are
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true and correct in all material respects, assuming for purposes of this
representation and warranty that the Merger referred to in such form had
been consummated on the date hereof.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS OF WHEATLEY
4.1 Conduct of Business by Wheatley Pending the Merger. During the period
from the date of this Agreement and continuing until the Effective Time,
Wheatley agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Dresser shall
otherwise consent in writing):
(a) Ordinary Course. Except as provided on Schedule 4.1(a), each of
Wheatley and its Subsidiaries shall carry on its businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and shall use all reasonable efforts to preserve intact its
present business organizations, keep available the services of its current
officers and employees, subject to Section 5.9, and endeavor to preserve
its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall
not be impaired in any material respect at the Effective Time.
(b) Dividends; Changes in Stock. Except as provided on Schedule
4.1(b), Wheatley shall not and it shall not permit any of its Subsidiaries
to: (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock or partnership interests, except for
the declaration and payment of regular quarterly cash dividends not in
excess of $.01 per share of Wheatley Common Stock and dividends from a
Subsidiary of Wheatley to Wheatley or another Subsidiary of Wheatley and
except for cash dividends or distributions paid on or with respect to the
capital stock or partnership interests of a Subsidiary of Wheatley; (ii)
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of
or in substitution for shares of Wheatley capital stock; or (iii)
repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries
to purchase, redeem or otherwise acquire, any shares of its capital stock,
except as required by the terms of its securities outstanding on the date
hereof or as contemplated by any existing employee benefit plan.
(c) Issuance of Securities. Except as provided on Schedule 4.1(c),
Wheatley shall not and it shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose to issue, deliver or sell,
any shares of its capital stock of any class, any Voting Debt or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, Voting Debt or convertible securities, other than: (i) the
issuance of Wheatley Common Stock upon the exercise of stock options
granted under the Wheatley Stock Plan that are outstanding on the date
hereof, or in satisfaction of stock grants or stock based awards made prior
to the date hereof pursuant to the Wheatley Stock Plan or upon conversion
of the Wheatley Convertible Note; and (ii) issuances by a wholly owned
Subsidiary of its capital stock to its parent.
(d) Governing Documents. Except as contemplated hereby or in
connection herewith, Wheatley shall not amend or propose to amend its
Restated Certificate of Incorporation or Bylaws.
(e) No Acquisitions. Other than acquisitions listed on Schedule 4.1(e)
or acquisitions as to which the aggregate purchase price is not in excess
of $1.5 million, Wheatley shall not and it shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof.
(f) No Dispositions. Other than: (i) dispositions or proposed
dispositions listed on Schedule 4.1(f); (ii) as may be necessary or
required by law to consummate the transactions contemplated hereby; or
(iii) dispositions in the ordinary course of business consistent with past
practice that are not material, individually or in the aggregate, to
Wheatley and its Subsidiaries taken as a whole, Wheatley shall not and it
shall not permit any of its Subsidiaries to sell, lease, encumber or
otherwise dispose of, or agree to
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sell, lease (whether such lease is an operating or capital lease),
encumber or otherwise dispose of, any of its assets.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated
by this Agreement, Wheatley shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of Wheatley or any of its Significant Subsidiaries.
(h) Certain Employee Matters. Except as set forth on Schedule 4.1(h)
or pursuant to Section 5.9, Wheatley shall not and it shall not permit any
of its Subsidiaries to: (i) grant any increases in the compensation of any
of its directors, officers or employees, except increases in the ordinary
course of business and in accordance with past practice; (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit not
required or contemplated by any of the existing Wheatley Employee Benefit
Plans or Wheatley Pension Plans as in effect on the date hereof to any such
director, officer or employee, whether past or present; (iii) enter into
any new, or amend any existing, employment or severance or termination
agreement with any such director, officer or key employee; or (iv) become
obligated under any new Wheatley Employee Benefit Plan or Wheatley Pension
Plan, which was not in existence or approved by the Board of Directors of
Wheatley prior to or on the date hereof, or amend any such plan or
arrangement in existence on the date hereof if such amendment would have
the effect of materially enhancing any benefits thereunder.
(i) Indebtedness; Leases; Capital Expenditures. Except as set forth on
Schedule 4.1(i), Wheatley shall not, nor shall Wheatley permit any of its
Subsidiaries to, (i) incur any indebtedness for borrowed money (except for
working capital under Wheatley's existing credit facilities, and
refinancings of existing debt that permit prepayment of such debt without
penalty (other than LIBOR breakage costs)) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of such party or any of its Subsidiaries or
guarantee any debt securities of others, (ii) except in the ordinary course
of business, enter into any lease (whether such lease is an operating or
capital lease) or create any mortgages, liens, security interests or other
encumbrances on the property of Wheatley or any of its Subsidiaries in
connection with any indebtedness thereof, except for those securing
purchase money indebtedness or (iii) commit to aggregate capital
expenditures in excess of $250,000 outside the capital budget, as amended
and approved by Wheatley prior to the date hereof and disclosed to Dresser
on Schedule 4.1(i).
4.2 No Solicitation. From and after the date hereof, Wheatley will not,
and will not authorize or permit any of its officers, directors, employees,
agents and other representatives or those of any of its Subsidiaries
(collectively, "Wheatley Representatives") to, directly or indirectly, solicit
or initiate any prospective buyer or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal
(as defined herein) from any person; provided, however, that, notwithstanding
any other provision of this Agreement, (i) Wheatley may engage in discussions or
negotiations with a third party who (without any solicitation or initiation,
directly or indirectly, by or with Wheatley or any Wheatley Representatives
after the date of this Agreement) seeks to initiate such discussions or
negotiations and may furnish such third party information concerning Wheatley
and its business, properties and assets, (ii) Wheatley's Board of Directors may
take and disclose to Wheatley's stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act and (iii) following receipt of an
Acquisition Proposal that is financially superior to the Merger and reasonably
capable of being financed (as determined in each case in good faith by
Wheatley's Board of Directors after consultation with Wheatley's financial
advisors), the Board of Directors of Wheatley may withdraw, modify or not make
its recommendation referred to in Section 5.5 or terminate this Agreement in
accordance with Section 7.1(b), but in each case referred to in the foregoing
clauses (i) through (iii) only to the extent that the Board of Directors of
Wheatley shall conclude in good faith that such action is necessary in order for
the Board of Directors of Wheatley to act in a manner that is consistent with
its fiduciary obligations under applicable law. Wheatley shall immediately cease
and cause to be terminated any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted heretofore by
Wheatley or any Wheatley Representatives with respect to any Acquisition
Proposal existing on the date hereof. Wheatley will promptly notify Dresser of
any such requests for such information or the receipt of any
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Acquisition Proposal, including the identity of the person or group engaging in
such discussions or negotiations, requesting such information or making such
Acquisition Proposal, and (unless the Board of Directors of Wheatley concludes
such disclosure is inconsistent with its fiduciary obligations under applicable
law) the material terms and conditions of any Acquisition Proposal. As used in
this Agreement, "Acquisition Proposal" shall mean any proposal or offer, other
than a proposal or offer by Dresser or any of its affiliates, for a tender or
exchange offer, a merger, consolidation or other business combination involving
Wheatley or any Significant Subsidiary of Wheatley or any proposal to acquire in
any manner a substantial equity interest in, or substantially all of the assets
of, Wheatley or any of its Significant Subsidiaries.
4.3 Pooling of Interests. Wheatley shall, and shall cause its independent
accountants and other representatives to, fully cooperate with Dresser, its
independent accountants and other representatives in seeking to obtain
confirmation from the SEC that the combination of Wheatley and Dresser should be
accounted for as a "pooling of interests."
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Proxy Statement. Dresser and Wheatley shall
promptly prepare and file with the SEC the Proxy Statement and Dresser shall
prepare and file with the SEC the S-4, in which the Proxy Statement will be
included as a prospectus. Each of Dresser and Wheatley shall use its best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing. Each of Wheatley and Dresser shall use its
best efforts to cause the Proxy Statement to be mailed to stockholders of
Wheatley at the earliest practicable date. Dresser shall use its best efforts to
obtain all necessary state securities laws or "blue sky" permits, approvals and
registrations in connection with the issuance of Dresser Common Stock in the
Merger and upon the exercise of Wheatley Stock Options (as defined in Section
5.10) and Wheatley shall furnish all information concerning Wheatley and the
holders of Wheatley Common Stock as may be reasonably requested in connection
with obtaining such permits, approvals and registrations.
5.2 Letter of Wheatley's Accountants. Wheatley shall use its best efforts
to cause to be delivered to Dresser a letter of Arthur Andersen & Co.,
Wheatley's independent public accountants, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to Dresser
and Wheatley, in form and substance reasonably satisfactory to Dresser and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4.
5.3 Letter of Dresser's Accountants. Dresser shall use its best efforts to
cause to be delivered to Wheatley a letter of Price Waterhouse, Dresser's
independent public accountants, dated a date within two business days before the
date on which the S-4 shall become effective and addressed to Wheatley and
Dresser, in form and substance reasonably satisfactory to Wheatley and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice, Wheatley and Dresser
shall each (and shall cause each of their respective Subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, each of Wheatley and Dresser shall (and shall cause
each of their respective Subsidiaries to) furnish promptly to the other (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to SEC requirements and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Each of Wheatley and Dresser agrees that it
will not, and will cause its respective representatives not to, use any
information obtained pursuant to this Section 5.4 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. The
Confidentiality Agreements dated as of May 11, 1994 and May 22, 1994 between
Dresser and Wheatley (the "Confidentiality Agreements") shall apply with respect
to information furnished thereunder or hereunder and any other activities
contemplated thereby.
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5.5 Wheatley Stockholders Meeting. Wheatley shall call a meeting of its
stockholders to be held as promptly as practicable after the date hereof for the
purpose of voting upon this Agreement and the Merger. Subject only to the
proviso of the first sentence of Section 4.2, Wheatley will, through its Board
of Directors, recommend to its stockholders approval of such matters and not
rescind such recommendation and shall use its best efforts to obtain approval
and adoption of this Agreement and the Merger by its stockholders. Wheatley
shall use all reasonable efforts to hold such meeting as soon as practicable
after the date upon which the S-4 becomes effective.
5.6 Legal Conditions to Merger. Each of Wheatley, Dresser and Sub will
take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on such party with respect to the Merger
(including, without limitation, furnishing all information required under the
HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger. Each of Wheatley,
Dresser and Sub will, and will cause its Subsidiaries to, take all actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity or court required to be obtained or
made by Wheatley, Dresser or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement,
including complying with any requests or orders made by the Justice Department
or the Federal Trade Commission in connection with the Merger.
5.7 Agreements of Others. Prior to the Effective Time, Wheatley shall
cause to be prepared and delivered to Dresser a list identifying all persons
who, at the time of the Stockholder Meeting, may be deemed to be "affiliates" of
Wheatley as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates"). Wheatley shall use its best efforts to cause
each person who is identified as an Affiliate in such list to deliver to
Dresser, at or prior to the Effective Time, a written agreement, in the form to
be approved by the parties hereto, that such Affiliate will not sell, pledge,
transfer or otherwise dispose of any shares of Dresser Common Stock issued to
such Affiliate pursuant to the Merger, except pursuant to an effective
registration statement or in compliance with Rule 145 or an exemption from the
registration requirements of the Securities Act. Wheatley shall use its best
efforts to cause each person who is identified as an Affiliate in such list to
sign on or prior to the thirtieth day prior to the Effective Time, a written
agreement, in the form to be approved by Dresser and Wheatley, that such party
will not sell or in any other way reduce such party's risk relative to any
shares of Dresser Common Stock received in the Merger (within the meaning of
Section 201.01 of the SEC's Financial Reporting Release No. 1), until such time
as financial results (including combined sales and net income) covering at least
30 days of post-merger operations have been published, except as permitted by
Staff Accounting Bulletin No. 76 (or any successor thereto) issued by the SEC.
5.8 Authorization for Shares and Stock Exchange Listing. Prior to the
Effective Time, Dresser shall have taken all action necessary to permit it to
issue the number of shares of Dresser Common Stock required to be issued
pursuant to Section 2.1. Dresser shall use all reasonable efforts to cause the
shares of Dresser Common Stock to be issued in the Merger and the shares of
Dresser Common Stock to be reserved for issuance upon exercise of Wheatley Stock
Options and issuances under the Wheatley Stock Plan to be approved for listing
on the NYSE, subject to official notice of issuance, prior to the Closing Date.
5.9 Employee Matters. Dresser and Wheatley agree to the matters described
on Schedule 5.9. Dresser and Wheatley agree that all employees of Wheatley
immediately prior to the Effective Time shall be employed by the Surviving
Corporation immediately after the Effective Time, it being understood that
Dresser shall not have any obligations to continue employing such employees for
any length of time thereafter. Dresser and Wheatley further agree that the
Wheatley Employee Benefit Plans and Wheatley Pension Plans in effect at the date
of this Agreement shall, to the extent practicable, remain in effect until
otherwise determined after the Effective Time. To the extent such Wheatley
Employee Benefit Plans and Wheatley Pension plans are not continued, Dresser
will maintain for a period of one year after the Effective Time benefit plans
that are not less favorable, in the aggregate, to the employees covered by
Wheatley Employee Benefit Plans and Wheatley Pension Plans, except to the extent
compliance with this sentence would be unduly burdensome, or would
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materially increase the cost thereof in the aggregate, due to changes in
national policy, plan or regulation governing health care. In the case of
Wheatley Employee Benefit Plans and Wheatley Pension Plans that are continued
and under which the employees' interests are based upon Wheatley Common Stock,
Dresser and Wheatley agree that such interests shall be based on Dresser Common
Stock in an equitable manner (and in the case of any such interests existing at
the Effective Time, on the basis of the Conversion Number); provided, however,
that nothing contained herein shall be construed as requiring Dresser or the
Surviving Corporation to continue any specific Wheatley Employee Benefit Plan or
Wheatley Pension Plan.
5.10 Stock Options. (a) At the Effective Time, each outstanding option to
purchase Wheatley Common Stock and any stock appreciation rights related thereto
that has been granted pursuant to the Wheatley Stock Plan ("Wheatley Stock
Option"), whether vested or unvested, shall be assumed by Dresser. Each such
option shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Wheatley Stock Option (except as set
forth on Schedule 5.9), a number of shares of Dresser Common Stock equal to the
number of shares of Wheatley Common Stock purchasable pursuant to such Wheatley
Stock Option multiplied by the Conversion Number, at a price per share equal to
the per-share exercise price for the shares of Wheatley Common Stock purchasable
pursuant to such Wheatley Stock Option divided by the Conversion Number;
provided, however, that in the case of any option to which Section 421 of the
Code applies by reason of its qualification under any of sections 422-424 of the
Code, the option price, the number of shares purchasable pursuant to such option
and the terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code; and provided further, that the
number of shares of Dresser Common Stock that may be purchased upon exercise of
such Wheatley Stock Option shall not include any fractional share and, upon
exercise of such Wheatley Stock Option, a cash payment shall be made for any
fractional share based upon the closing price of a share of Dresser Common Stock
on the NYSE on the last trading day of the calendar month immediately preceding
the date of exercise.
(b) Dresser shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Dresser Common Stock for delivery upon
exercise of the Wheatley Stock Options assumed in accordance with this Section
5.10. As soon as practicable after the Effective Time, Dresser shall file with
the SEC a registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Dresser Common Stock subject to
the Wheatley Stock Options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as Wheatley Stock Options remain outstanding.
5.11 Indemnification; Directors' and Officers' Insurance. (a) Wheatley
shall, and from and after the Effective Time, Dresser 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, an officer or director of Wheatley or any of its Subsidiaries or
an employee of Wheatley or any of its Subsidiaries who acts as a fiduciary under
any Wheatley Employee Benefit Plans or Wheatley Pension 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 Wheatley or any Subsidiary whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the full
extent permitted under applicable Delaware law (and Dresser and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law). Without limiting the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them and Wheatley (or
them and Dresser and the Surviving
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Corporation after the Effective Time) and Wheatley (or after the Effective Time,
Dresser and the Surviving Corporation) shall pay all fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; and (ii) Wheatley (or after the Effective Time, Dresser and the
Surviving Corporation) will use all reasonable efforts to assist in the vigorous
defense of any such matter, provided that neither Wheatley, Dresser nor the
Surviving Corporation shall be liable for any settlement effected without its
written consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 5.11, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Wheatley (or after the Effective Time, Dresser 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 5.11, 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
on any significant issue between the positions of any two or more Indemnified
Parties. Wheatley, Dresser and Sub agree that all rights to indemnification,
including provisions relating to advances of expenses incurred in defense of any
action or suit, existing in favor of the Indemnified Parties (including in the
Restated Certificate of Incorporation or Bylaws or in the indemnification
agreements previously provided to Dresser) with respect to matters occurring
through the Effective Time, shall survive the Merger and shall continue in full
force and effect for a period of six years from the Effective Time; provided,
however, that all rights to indemnification in respect of any Indemnified
Liabilities asserted or made within such period shall continue until the
disposition of such Indemnified Liabilities.
(b) For a period of six years after the Effective Time, Dresser shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by Wheatley and its Subsidiaries (provided that
Dresser may substitute therefor policies 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) with respect to matters arising
before the Effective Time, provided that Dresser shall not be required to pay an
annual premium for such insurance in excess of two times the last annual premium
paid by Wheatley prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount.
5.12 Assumption of Registration Rights. Dresser agrees that at the
Effective Time, all rights, and obligations of Wheatley under that certain
Registration Rights Agreement dated August 23, 1990 by and among Wheatley and
the stockholders of Wheatley appearing on the signature pages thereof, as
amended, shall be assumed by Dresser and all such registration rights previously
granted thereunder with respect to Wheatley Common Stock shall be deemed to
apply to the Dresser Common Stock received in exchange for such Wheatley Common
Stock pursuant to the Merger.
5.13 Wheatley Credit Agreement. At or prior to the Closing, Dresser shall
refinance (or arrange for the continuation of) or repay all Wheatley's debt
under its $80 million bank credit facility with Chase Manhattan Bank, N.A. and
the other lenders thereunder (the "Bank Credit Facility"). Dresser acknowledges
that the Merger may constitute an "Event of Default" as a result of a change of
control under the Bank Credit Facility. Notwithstanding the foregoing, Dresser
acknowledges that the receipt of the consent or waiver of the lenders under the
Bank Credit Facility shall not be a condition to Dresser's obligation to effect
the Merger.
5.14 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
5.15 Accounting Matters. During the period from the date of this Agreement
through the Effective Time, unless the parties shall otherwise agree in writing,
none of Dresser, Sub, any other Subsidiary of Dresser, Wheatley or any
Subsidiary of Wheatley shall knowingly take or fail to take any reasonable
action which action or failure to act would jeopardize the treatment of Sub's
combination with Wheatley as a pooling of interests for accounting purposes;
provided, however, that pooling shall not be a condition to Closing.
5.16 Public Announcements. Dresser and Sub, on the one hand, and Wheatley,
on the other hand, will consult with each other before issuing any press release
or otherwise making any public statements with
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respect to 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 as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange or
transaction reporting system.
5.17 Other Actions. Except as contemplated by this Agreement, neither
Dresser nor Wheatley shall, and shall not permit any of its Subsidiaries to,
take or agree or commit to take any action that is reasonably likely to result
in any of its respective representations or warranties hereunder being untrue in
any material respect or in any of the conditions to the Merger set forth in
Article VI not being satisfied.
5.18 Advice of Changes; SEC Filings. Dresser and Wheatley shall confer on
a regular basis with each other, report on operational matters and promptly
advise each other orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, could have, a Material Adverse Effect on
Dresser or Wheatley, as the case may be. Wheatley and Dresser shall promptly
provide each other (or their respective counsel) copies of all filings made by
such party with the SEC or any other state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
5.19 Reorganization. It is the intention of Dresser and Wheatley that the
Merger will qualify as a reorganization described in Section 368(a) of the Code
(and any comparable provisions of applicable state law). Neither Dresser nor
Wheatley (nor any of their respective Subsidiaries) will take or omit to take
any action (whether before, on or after the Closing Date) that would cause the
Merger not to be so treated. The parties will characterize the Merger as such a
reorganization for purposes of all Returns and other filings.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Wheatley Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Wheatley Common Stock entitled to
vote thereon.
(b) NYSE Listing. The shares of Dresser Common Stock issuable to
Wheatley stockholders pursuant to this Agreement and such other shares of
Dresser Common Stock required to be reserved for issuance in connection
with the Merger shall have been authorized for listing on the NYSE upon
official notice of issuance.
(c) Other Approvals. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated and
all filings required to be made prior to the Effective Time with, and all
consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from any Governmental Entity in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Wheatley, Dresser and Sub shall have
been made or obtained (as the case may be), except where the failure to
obtain such consents, approvals, permits, and authorizations would not be
reasonably likely to result in a Material Adverse Effect on Dresser
(assuming the Merger has taken place) or to materially adversely affect the
consummation of the Merger.
(d) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect;
provided, however, that prior to invoking this condition, each party shall
have complied fully with its obligations
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under Section 5.6 hereof and, in addition, shall use all reasonable
efforts to have any such decree, ruling, injunction or order vacated,
except as otherwise contemplated by this Agreement.
6.2 Conditions of Obligations of Dresser and Sub. The obligations of
Dresser and Sub to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Dresser and Sub.
(a) Representations and Warranties. Each of the representations and
warranties of Wheatley set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality thresholds otherwise contained
in Section 3.1 hereof) could not reasonably be expected to have a Material
Adverse Effect on Wheatley or as otherwise contemplated by this Agreement.
(b) Performance of Obligations of Wheatley. Wheatley shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Letters from Wheatley Affiliates. Dresser shall have received from
each person named in the letter referred to in Section 5.7 an executed copy
of an agreement as provided in Section 5.7.
6.3 Conditions of Obligations of Wheatley. The obligation of Wheatley to
effect the Merger is subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by Wheatley:
(a) Representations and Warranties. Each of the representations and
warranties of Dresser and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality thresholds otherwise contained
in Section 3.2 hereof) could not reasonably be expected to have a Material
Adverse Effect on Dresser or as otherwise contemplated by this Agreement.
(b) Performance of Obligations of Dresser and Sub. Dresser and Sub
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Wheatley shall have received an opinion, satisfactory
to Wheatley, dated on or about the date that is two days prior to the date
the Proxy Statement is first mailed to stockholders of Wheatley, a copy of
which will be furnished to Dresser, of Baker & Botts, L.L.P., counsel to
Wheatley, to the effect that, if the Merger is consummated in accordance
with the terms of this Agreement, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, Dresser, Sub and Wheatley will each be a party to that
reorganization within the meaning of Section 368(b) of the Code and no gain
or loss will be recognized by a stockholder of Wheatley as a result of the
Merger upon the conversion of shares of Wheatley Common Stock into shares
of Dresser Common Stock, which opinion shall not have been withdrawn or
modified in any material respect. In rendering such opinion, such counsel
may receive and rely upon representations of fact contained in certificates
of Dresser, Sub and Wheatley.
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ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of Wheatley:
(a) by mutual written consent of Wheatley and Dresser, or by mutual
action of their respective Boards of Directors;
(b) by either Wheatley or Dresser if (i) the Merger shall not have
been consummated by October 31, 1994 (provided that the right to terminate
this Agreement under this clause (i) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date);
(ii) any court of competent jurisdiction, or some other governmental body
or regulatory authority shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; (iii) any required approval of the
stockholders of the other shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held meeting
of stockholders or at any adjournment thereof; or (iv) the Board of
Directors of Wheatley shall have approved or recommended any Acquisition
Proposal which is financially superior to the Merger and reasonably capable
of being financed (as determined in each case in good faith by Wheatley's
Board of Directors after consultation with Wheatley's financial advisors),
and the Board of Directors of Wheatley is advised by its outside counsel
that the fiduciary duties of the Board of Directors require acceptance or
recommendation of such Acquisition Proposal.
(c) by Dresser if (i) for any reason Wheatley fails to call and hold a
stockholders meeting for the purpose of voting upon this Agreement and the
Merger by October 31, 1994 (provided that the right to terminate this
Agreement under this Section 7.1(d) shall not be available to Dresser if
Wheatley would be entitled to terminate this Agreement under Section
7.1(d)); (ii) Wheatley shall have failed to comply in any material respect
with any of the covenants or agreements contained in this Agreement to be
complied with or performed by Wheatley at or prior to such date of
termination (provided such breach has not been cured within 30 days
following receipt by Wheatley of notice of such breach and is existing at
the time of termination of this Agreement); (iii) any representation or
warranty of Wheatley contained in this Agreement shall not be true in all
material respects when made (provided such breach has not been cured within
30 days following receipt by Wheatley of notice of such breach and is
existing at the time of termination of this Agreement) or on and as of the
Effective Time as if made on and as of the Effective Time (except to the
extent it relates to a particular date), except where the failure to be so
true and correct (without giving effect to the individual materiality
thresholds otherwise contained in Section 3.1 hereof) could not reasonably
be expected to have a Material Adverse Effect; (iv) the Board of Directors
of Wheatley withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Dresser or Sub or shall have
resolved to do any of the foregoing; (v) after the date hereof there has
been any Material Adverse Change with respect to Wheatley, except for
general economic changes or changes that may affect the industries of
Wheatley or any of its Subsidiaries generally; or (vi) the Average Daily
Price of Dresser Common Stock is greater than $29.00.
(d) by Wheatley if (i) Dresser or Sub shall have failed to comply in
any material respect with any of the covenants or agreements contained in
this Agreement to be complied with or performed by it at or prior to such
date of termination (provided such breach has not been cured within 30 days
following receipt by Dresser of notice of such breach and is existing at
the time of termination of this Agreement); (ii) any representation or
warranty of Dresser or Sub contained in this Agreement shall not be true in
all material respects when made (provided such breach has not been cured
within 30 days following receipt by Dresser of notice of such breach and is
existing at the time of termination of this Agreement) or on and as of the
Effective Time as if made on and as of the Effective Time (except to the
extent it relates to a particular date), except where the failure to be so
true and correct (without giving effect to the
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individual materiality thresholds otherwise contained in Section 3.2
hereof) could not reasonably be expected to have a Material Adverse
Effect; (iii) after the date hereof there has been any Material Adverse
Change with respect to Dresser, except for general economic changes or
changes that may affect the industries of Dresser or any of its
Subsidiaries generally; or (iv) the Average Daily Price of Dresser Common
Stock is less than $18.00.
(e) Due Diligence. Wheatley and Dresser have substantially completed
the due diligence review of each other by the date hereof, except on-site
facilities and environmental inspections of manufacturing plants and other
assets. The parties agree to conduct all such reviews and inspections on or
before June 13, 1994. If, as a result of such reviews and inspections,
either party in good faith determines that (i) undisclosed liabilities of
the other party at the date of this Agreement, after deducting the reserves
therefor on the most recent balance sheet of such other party included in
the Wheatley SEC Documents or the Dresser SEC Documents, as applicable,
would exceed an amount that constitutes, or could reasonably be foreseen to
constitute, a Material Adverse Change with respect to such other party or
that (ii) the assets of the other party as of the date of this Agreement
are deficient by an amount that constitutes, or could reasonably be
foreseen to constitute, a Material Adverse Change with respect to such
other party as compared to the assets disclosed on the most recent balance
sheet of such other party included in the Wheatley SEC Documents or the
Dresser SEC Documents, as applicable, then such party may terminate this
Agreement by notice on or before June 16, 1994.
7.2 Effect of Termination. (a) In the event of termination of this
Agreement by either Wheatley or Dresser as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Dresser, Sub or Wheatley except (i) with respect to
this Section 7.2, the second and third sentences of Section 5.4, Section 5.11
and Section 8.1, and (ii) to the extent that such termination results from the
willful breach by a party hereto of any of its representations or warranties or
of any of its covenants or agreements, in each case, as set forth in this
Agreement except as provided in Section 8.8.
(b) If Dresser or Wheatley terminates this Agreement pursuant to Sections
7.1(b)(iv) or 7.1(c)(iv) and the Acquisition Proposal is consummated, Wheatley
shall, on the day of such consummation, pay Dresser a fee of $5,000,000 in cash
by wire transfer of immediately available funds to an account designated by
Dresser.
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Wheatley, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Each party hereto shall pay its own expenses
incident to preparing for entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Merger
shall be consummated, except that the filing fees with respect to the Proxy
Statement and the S-4 shall be paid by Dresser.
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8.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
and any liability for breach or violation thereof shall terminate absolutely and
be of no further force and effect at and as of the Effective Time, except for
the agreements contained in Sections 2.1, 2.2, 5.9 through 5.13 and 7.2 and
Article VIII, the agreements delivered pursuant to Section 5.7 and the
representations, covenants and agreements contained in Section 5.19. The
Confidentiality Agreements shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreements shall apply to
all information and material delivered hereunder.
8.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
(a) if to Dresser or Sub, to:
Dresser Industries, Inc.
2001 Ross Avenue
P.O. Box 718
Dallas, TX 75221-0718
Attention: W. E. Bradford
President and Chief Operating Officer
with a copy to:
Dresser Industries, Inc.
2001 Ross Avenue
P.O. Box 718
Dallas, TX 75221-0718
Attention: Clint E. Ables
Vice President -- General Counsel
and
(b) if to Wheatley, to:
Wheatley TXT Corp.
700 Louisiana, Suite 3900
Houston, TX 77002
Attention: Gary L. Rosenthal
Chairman and Chief Executive Officer
with a copy to:
Baker & Botts, L.L.P.
3000 One Shell Plaza
Houston, TX 77002
Attention: J. David Kirkland, Jr.
8.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms 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 word "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The phrase
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<PAGE> 101
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. Unless the context otherwise requires, "or" is disjunctive
but not necessarily exclusive, and words in the singular include the plural and
in the plural include the singular. Any representations and warranties of
Wheatley that are qualified by the phrase "to the best knowledge of Wheatley" or
phrases with similar wording shall be interpreted to refer to the knowledge,
after reasonable investigation, of Messrs. Stuart M. Brightman, John W.H.
Geddes, Ronald J. Foster, M. J. Keady, Jim B. McMichael, David A. Moore, C.
Lance Poulsen, Michael D. Reynolds and Gary L. Rosenthal.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreements and any other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereto and (b) except as provided
in Sections 5.7, 5.9, 5.11 and 5.19, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
8.8 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes the
Agreement impossible to perform in which case this Agreement shall terminate
pursuant to Article VII hereof. Except as otherwise contemplated by this
Agreement, to the extent that a party hereto took an action inconsistent
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent authority, such
party shall not incur any liability or obligation unless such party breached its
obligations under Section 5.6 hereof or did not in good faith seek to resist or
object to the imposition or entering of such order or judgment.
8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Sub may assign, in its sole discretion, any or all of its
rights, interests and obligations hereunder to any newly-formed direct wholly
owned Subsidiary of Dresser. 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.
8.10 Schedules. For purposes of this Agreement, Schedules shall mean the
Schedules contained in the Confidential Disclosure Schedule, dated the date
hereof, delivered in connection with this Agreement and initialed by the parties
hereto.
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IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
DRESSER INDUSTRIES, INC.
By: CLINT E. ABLES
------------------------------------
Clint E. Ables
Vice President -- General Counsel
WTXT ACQUISITION CORPORATION
By: CLINT E. ABLES
--------------------------------------
Clint E. Ables
Vice President
WHEATLEY TXT CORP.
By: GARY L. ROSENTHAL
--------------------------------------
Gary L. Rosenthal
President and Chief
Executive Officer
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APPENDIX II
SIMMONS & COMPANY
INTERNATIONAL
- --------------------------------------------------------------------------------
May 27, 1994
Board of Directors
Wheatley TXT Corp.
700 Louisiana Street
Suite 3900
Houston, Texas 77002
Members of the Board:
You have requested the opinion of Simmons & Company International
("Simmons") as investment bankers as to the fairness, from a financial point of
view, to the holders of shares of common stock par value $0.01 per share (the
"Company Common Stock"), of Wheatley TXT Corp. (the "Company") of the
consideration to be received by such stockholders in the proposed merger of the
Company with a wholly owned subsidiary (the "Dresser Sub") of Dresser
Industries, Inc. ("Dresser"), pursuant to the Agreement and Plan of Merger (the
"Agreement"), to be executed by Dresser, the Dresser Sub and the Company (the
"Proposed Merger").
As more specifically set forth in the Agreement, in the Proposed Merger
each issued and outstanding share of the Company Common Stock will be converted
into 0.7 (the "Conversion Number") of a share of common stock, par value $0.25
per share, of Dresser (the "Dresser Common Stock"), provided that the Average
Daily Price (as defined below) of the Dresser Common Stock is at least $20 but
not more than $27 and subject to adjustment in the event that such Average Daily
Price of the Dresser Common Stock is less than $20 but equal to or greater than
$18 or greater than $27 but equal to or less than $29. Simmons understands that,
pursuant to the Agreement, the Conversion Number shall in no event be greater
than 0.7368 nor less than 0.6750 and that, in the Proposed Merger, cash will be
exchanged in lieu of fractional shares of the Dresser Common Stock. As set forth
in the Agreement, the "Average Daily Price" of the Dresser Common Stock shall
mean the average of the per share weighted average selling price of the Dresser
Common Stock as reported on the New York Stock Exchange Composite Tape during
the 20 consecutive trading days ending on the fifth trading day prior to the
meeting of the stockholders of the Company at which the stockholders of the
Company will vote upon the Agreement and the Proposed Merger.
Simmons, as a specialized energy-related investment banking firm, is
continuously engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, private placements of debt and equity,
and the management and underwriting of sales of equity and debt to the public.
Simmons has previously rendered investment banking services to the Company and
Dresser in connection with a number of transactions for which Simmons received
customary compensation. In addition, in the ordinary course of business, Simmons
may actively trade the securities of the Company and Dresser for its own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
In connection with rendering its opinion, Simmons has reviewed and
analyzed, among other things, the following: (i) the Letter of Intent between
Dresser and the Company dated May 22, 1994; (ii) the Agreement; (iii) the
financial statements and other information concerning the Company, including the
Annual Reports on Form 10-K of the Company for the years ended February 28, 1992
through 1994; (iv) certain other internal information, primarily financial in
nature, concerning the business and operations of the Company furnished by the
Company for purposes of Simmons' analysis; (v) certain publicly available
information concerning the trading of, and the trading market for, the Company
Common Stock; (vi) certain publicly available information concerning Dresser,
including the Annual Reports on Form 10-K of Dresser for each of the years ended
October 31, 1991 through 1993 and the Quarterly Report on Form 10-Q of Dresser
for
700 LOUISIANA, SUITE 5000 HOUSTON, TEXAS 77002-2753 (713) 236-9999
FAX: (713) 223-7800
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<PAGE> 104
the quarter ended January 31, 1994 and the current report on Form 8-K dated
January 21, 1994 as amended; (vii) certain other internal information, primarily
financial in nature, concerning the business and operations of Dresser furnished
by Dresser for purposes of Simmons' analysis; (viii) certain publicly available
information concerning the trading of, and the trading market for, Dresser
Common Stock; (ix) certain publicly available information concerning the
estimates of the future operating and financial performance of the Company and
Dresser prepared by industry experts unaffiliated with either the Company or
Dresser (the "Analysts' Estimates"); (x) certain publicly available information
with respect to certain other companies that Simmons believes to be comparable
to the Company or Dresser and the trading markets for certain of such other
companies' securities; and (xi) certain publicly available information
concerning the nature and terms of certain other transactions considered
relevant to the inquiry. Simmons has also met with certain officers and
employees of the Company and Dresser to discuss the foregoing as well as other
matters believed relevant to the inquiry.
In arriving at its opinion, Simmons has assumed and relied upon the
accuracy and completeness of all of the financial and other information provided
or publicly available, including without limitation information with respect to
liability reserves and insurance coverages, and has not attempted independently
to verify any of such information. Simmons has not conducted a physical
inspection of any of the properties or facilities of the Company, nor has
Simmons made or obtained any independent evaluations or appraisals of any of
such properties or facilities. In addition, although Simmons has discussed the
prospects of the Company and Dresser with certain representatives of their
respective managements, Simmons has been provided with only limited financial
projections and other similar analyses prepared by the Company's management with
respect to the Company's future performance and by Dresser's management with
respect to Dresser.
In conducting its analysis and arriving at its opinion as expressed herein,
Simmons has considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company and Dresser; (ii) the business prospects of the Company and Dresser;
(iii) the historical and current market for the Company Common Stock, for
Dresser Common Stock and for the equity securities of certain other companies
believed to be comparable to the Company or Dresser; and (iv) the nature and
terms of certain other acquisition transactions that Simmons believes to be
relevant. Simmons has also taken into account its assessment of general
economic, market and financial conditions and its experience in connection with
similar transactions and securities' valuation generally. Simmons' opinion
necessarily is based upon conditions as they exist and can be evaluated on, and
on the information made available at, the date hereof.
Simmons is acting as financial advisor to the Company in this transaction
and will receive a customary fee for its services. Simmons was not authorized to
solicit, nor did Simmons solicit from others, indications of interest with
respect to acquiring the Company. Simmons is not expressing any opinion
regarding the value that would be realized upon the liquidation or sale of the
Company.
Based upon and subject to the foregoing, Simmons is of the opinion, as
investment bankers, that the consideration to be received by the holders of the
Company Common Stock in the Proposed Merger is fair from a financial point of
view.
Sincerely,
SIMMONS & COMPANY INTERNATIONAL, INC.
Ben A. Guill
Managing Director
700 LOUISIANA, SUITE 5000 HOUSTON, TEXAS 77002-2753
(713) 236-9999 FAX: (713) 223-7800
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