<PAGE> 1
As filed with the Securities and Exchange Commission on April 4, 1996.
Registration No. [__________]
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
EMERSON ELECTRIC CO.
(Exact name of Registrant as specified in its charter)
Missouri 3621 43-0259330
- ------------------------- ------------------------- -------------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification
incorporation or Code Number) Number)
organization)
8000 West Florissant Avenue
St. Louis, Missouri 63136
(314) 553-2000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
HARLEY M. SMITH, Esq.
Assistant General Counsel and Assistant Secretary
EMERSON ELECTRIC CO.
8000 West Florissant Avenue
St. Louis, Missouri 63136
(314) 553-2431
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Frederick W. Scherrer, Esq. Donald A. Denton, Esq.
Bryan Cave LLP Hancock & Estabrook, LLP
One Metropolitan Square 1500 Mony Tower I
211 North Broadway, Suite 3600 Post Office Box 4976
St. Louis, MO 63102 Syracuse, NY 13221
(314) 259-2000 (315) 471-3151
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement is declared effective
and all other conditions to the merger (the "Merger") of a subsidiary of the
Registrant with and into Lipe-Rollway Corporation pursuant to the Agreement and
Plan of Merger described in the enclosed Proxy Statement/Prospectus have been
satisfied or waived.
If any the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
<PAGE> 2
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
============================================================================================================
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered <F1> registered per share offering price registration fee
- -------------------------------- -------------- ---------------- ------------------- -------------------
<C> <C> <C> <C> <C>
Common Stock and Preferred Stock
Purchase Rights <F2> Not Applicable Not Applicable $10,500,000.00 <F3> $3,621.00
============================================================================================================
<FN>
<F1> This Registration Statement relates to securities of the Registrant issuable to holders of capital
stock of Lipe-Rollway Corporation, a New York corporation ("Rollway"), in the proposed Merger of a
wholly-owned subsidiary of the Registrant with and into Rollway.
<F2> Preferred Stock Purchase Rights are attached to and trade with the common stock, par value $1.00, of
the Registrant (the "Common Stock"). Value attributable to such Preferred Stock Purchase Right, if
any, is reflected in the market price of the Common Stock.
<F3> Estimated solely for purposes of calculating the registration fee.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE> 3
EMERSON ELECTRIC CO.
Cross Reference Sheet pursuant to Rule 404(a) of the Securities Act of 1933
and Item 501(b) of Regulation S-K showing the location or heading in the Proxy
Statement/Prospectus of information required by Part I of Form S-4.
<TABLE>
<CAPTION>
Item in Form S-4 Location or Heading in Proxy Statement/Prospectus
- ----------------------------------------------------- -----------------------------------------------------
<C> <C>
A. Information about the Transaction.
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus . . Facing Page; Cross Reference Sheet; Outside Front
Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus. . . . . . . . . . . . . . . Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information . . . . . . Summary
4. Terms of the Transaction . . . . . . . . . Summary; The Rollway Special Meeting; Information
About Emerson; Information About Rollway; The Merger;
Certain Provisions of the Merger Agreement;
Comparative Rights of Shareholders
5. Pro Forma Financial Information. . . . . . Not Applicable
6. Material Contacts With the Company Being
Acquired . . . . . . . . . . . . . . . . . Summary; The Merger; Certain Provisions of the Merger
Agreement
7. Additional Information Required For
Reoffering by Persons and Parties Deemed
to be Underwriters . . . . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities. . . . . . . . . . . . . . . . Not Applicable
B. Information About the Registrant.
10. Information With Respect to S-3
Registrants. . . . . . . . . . . . . . . . Available Information; Incorporation of Certain
Documents by Reference
11. Incorporation of Certain Information by
Reference. . . . . . . . . . . . . . . . . Available Information; Incorporation of Certain
Documents by Reference
12. Information With Respect to S-2 or S-3
Registrants. . . . . . . . . . . . . . . . Not Applicable
<PAGE> 4
13. Incorporation of Certain Information by
Reference. . . . . . . . . . . . . . . . . Not Applicable
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants. . . . . Not Applicable
C. Information About the Company Being Acquired.
15. Information With Respect to S-3
Companies. . . . . . . . . . . . . . . . . Not Applicable
16. Information With Respect to S-2 or
S-3 Companies. . . . . . . . . . . . . . . Not Applicable
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies. . . . . . Summary; Information About Rollway; Rollway Financial
Statements
D. Voting and Management Information.
18. Information if Proxies, Consents or
Authorizations Are to be Solicited . . . . Available Information; Incorporation of Certain
Documents by Reference; Summary; The Merger; The
Rollway Special Meeting; Information About Rollway;
Dissenting Shareholder Rights
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer. . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 5
Lipe-Rollway Corporation
7600 Morgan Road
Liverpool, New York 13090
[_____, 1996]
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Lipe-Rollway Corporation ("Rollway"), which will be held at the offices of
Rollway, 7600 Morgan Road, Liverpool, New York 13090, at 10:00 a.m., local
time, on [May 2, 1996] (together with all adjournments and postponements
thereof, the "Rollway Special Meeting").
At the Rollway Special Meeting holders of shares of common stock, par value
$0.50 per share ("Rollway Common Stock"), will be asked to consider and vote
upon a proposal to approve the Agreement and Plan of Merger, dated as of
April 1, 1996 (the "Merger Agreement"), by and among Emerson Electric Co.
("Emerson"), Emersub XLI, Inc., a wholly-owned subsidiary of Emerson
("Emersub"), and Rollway. Under the Merger Agreement, Emersub will be merged
with and into Rollway (the "Merger"). Under the terms of the Merger Agreement,
the consideration payable to the holders of shares of Rollway Common Stock will
be approximately $8,270,000 assuming there are no adjustments as provided in
the Merger Agreement (collectively, the "Merger Consideration"). However, it
is important to note that if the closing of the Merger had occurred at
Rollway's 1995 fiscal year end, the Merger Consideration would have been
adjusted downward by approximately $613,000 pursuant to the closing net worth
provisions set forth in Section 1.9 of the Merger Agreement. This would have
resulted in a Merger Consideration of approximately $7,657,000 subject to
further adjustments (or approximately $9.35 per share of Rollway Common Stock
based on an estimate of 819,294 outstanding shares of Rollway Common Stock on
fully-diluted basis). The consideration will be paid in shares of the common
stock, par value $1.00 per share, of Emerson ("Emerson Common Stock") which
will be valued at the average closing price of the Emerson Common Stock during
the ten consecutive trading days ending on the third business day prior to the
closing to be held pursuant to the Merger Agreement. The Emerson Common Stock
will be issuable pro rata to holders of shares of Rollway Common Stock
(including shares of Rollway Common Stock resulting from the exercise,
immediately prior to the Merger, of options for Rollway Common Stock) at the
time of the Merger. However, no fractional shares of Emerson Common Stock will
be issued, and cash will be paid in lieu thereof. As a consequence of the
Merger, Rollway will be the surviving corporation and will become a wholly-
owned subsidiary of Emerson. A copy of the Merger Agreement is annexed to the
accompanying Proxy Statement/Prospectus as Exhibit A.
Additionally, at the Rollway Special Meeting, the holders of shares of
$1.00 Cumulative Convertible Preferred Stock, par value $10.00, of Rollway
("Rollway Preferred Stock") will be asked to consider and vote upon a proposal
to approve an amendment (the "Preferred Terms Amendment") to the terms of the
Rollway Preferred Stock. The full text of the Preferred Terms Amendment is
provided in the accompanying Proxy Statement/Prospectus under the heading
"Merger -- Preferred Terms Amendment." Upon approval of the Preferred Terms
Amendment, subject to the consummation of the Merger, each outstanding share of
Rollway Preferred Stock will be converted in the Merger into the right to
receive a fraction of a share of Emerson Common Stock (valued as described
<PAGE> 6
above) equal in value to $20.00 and an amount in cash equal to the amount of
accrued and unpaid dividends owed on such share of Preferred Stock at the
effective time of the Merger. However, no fractional shares of Emerson Common
Stock will be issued, and cash will be paid in lieu thereof. If the Merger is
approved and approval of the Preferred Terms Amendment is not obtained, then
Rollway shall redeem all of the outstanding shares of Rollway Preferred Stock
for cash in an amount equal to $20.00 per share plus any accrued and unpaid
dividends thereon in accordance with their terms immediately prior to the
effective time of the Merger. Accordingly, this letter shall constitute notice
that all shares of Rollway Preferred Stock shall be redeemed for the
consideration described above on [____________, 1996], if the Merger is
approved and the Preferred Terms Amendment is not approved at the Rollway
Special Meeting.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT, THE
TRANSACTIONS CONTEMPLATED THEREBY AND THE PREFERRED TERMS AMENDMENT ARE FAIR TO
THE SHAREHOLDERS AND OPTION HOLDERS OF ROLLWAY AND UNANIMOUSLY RECOMMENDS A
VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND A VOTE FOR THE PROPOSAL
TO ADOPT THE PREFERRED TERMS AMENDMENT.
The accompanying Proxy Statement/Prospectus describes the Merger Agreement
and the Preferred Terms Amendment that the holders of Rollway Common Stock and
holders of Rollway Preferred Stock, respectively, are being asked to consider
and vote upon at the Rollway Special Meeting. The accompanying Proxy
Statement/Prospectus also constitutes a prospectus for the Emerson Common Stock
to be issued in connection with the transactions contemplated by the proposed
Merger Agreement. We urge you to carefully review and consider the
accompanying Notice of Special Meeting of Shareholders, Proxy
Statement/Prospectus and Proxy, which contain information about Rollway and
Emerson and describe the proposed Merger, the Preferred Terms Amendment and
certain related matters.
All shareholders are invited to attend the Rollway Special Meeting in
person. The affirmative vote of the holders of not less than two-thirds of the
outstanding shares of Rollway Common Stock will be necessary for approval and
adoption of the Merger Agreement and the affirmative vote of the holders of not
less than a majority of the outstanding shares of Rollway Preferred Stock will
be necessary for approval and adoption of the Preferred Terms Amendment.
If the Merger Agreement is approved and the Merger is consummated, holders
of Rollway Common Stock will be sent a letter of transmittal with instructions
for surrendering their certificates representing shares of Rollway Common
Stock. If the Merger Agreement and the Preferred Terms Amendment are approved
and the Merger is consummated, the holders of Rollway Preferred Stock will also
be sent a letter of transmittal with instructions for surrendering their
certificates representing shares of Rollway Preferred Stock (letters of
transmittal will also be available at the Rollway Special Meeting). Please do
not send any share certificates until you receive these materials.
In order that your shares may be represented at the Rollway Special
Meeting, you are urged to promptly complete, sign, date and return the
accompanying Proxy in the enclosed envelope, whether or not you plan to attend
the Rollway Special Meeting. Any shareholder returning a blank executed Proxy
will be authorizing the named proxies to vote the shares covered by the Proxy
in favor of the Merger Agreement and the Preferred Terms Amendment, as
applicable. If you attend the Rollway Special Meeting in person, you may, if
you wish, vote personally on all matters in which you are entitled to vote
<PAGE> 7
which are brought before the Rollway Special Meeting even if you have
previously returned your Proxy. Your prompt cooperation will be appreciated.
Very truly yours,
H. Follett Hodgkins, Jr.
Chairman of the Board and Chief Executive Officer
<PAGE> 8
LIPE-ROLLWAY CORPORATION
7600 Morgan Road
Liverpool, New York 13090
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be Held on [May 2, 1996]
A Special Meeting of the Shareholders of Lipe-Rollway Corporation
("Rollway") will be held at the offices of Rollway, 7600 Morgan Road,
Liverpool, New York 13090 at 10:00 a.m., local time, on [May 2, 1996] (the
"Rollway Special Meeting") for the following purposes:
1. For the holders of Rollway Common Stock to consider and vote upon
a proposal to approve an Agreement and Plan of Merger, dated as of
April 1, 1996 (the "Merger Agreement"), by and among Rollway, Emerson
Electric Co. ("Emerson") and Emersub XLI, Inc., a wholly-owned subsidiary
of Emerson ("Emersub"), and the transactions contemplated thereby. The
Merger Agreement provides for the merger of Emersub with and into Rollway
(the "Merger"), pursuant to which Rollway will be the surviving corporation
and will become a wholly-owned subsidiary of Emerson. Upon the
effectiveness of the Merger, each outstanding share of Rollway Common Stock
(including Rollway Common Stock resulting from the exercise, immediately
prior to the Merger, of options to purchase Rollway Common Stock) will be
converted into the right to receive a number of shares of Emerson Common
Stock to be determined pursuant to the provisions of the Merger Agreement.
However, no fractional shares of Emerson Common Stock will be issued, and
cash will be paid in lieu thereof. The terms of the Merger are described
in the accompanying Proxy Statement/Prospectus. The Merger Agreement is
attached to the accompanying Proxy Statement/Prospectus as Exhibit A.
2. For the holders of Rollway Preferred Stock to consider and vote
upon the Preferred Terms Amendment. The full text of the Preferred Terms
Amendment is provided in the accompanying Proxy Statement/Prospectus under
the heading "Preferred Terms Amendment." Upon the approval of the
Preferred Terms Amendment, subject to the consummation of the Merger, each
outstanding share of Rollway Preferred Stock will be converted into the
right to receive a fraction of a share of Emerson Common Stock equal in
value to $20.00 and an amount in cash equal to the amount of accrued and
unpaid dividends owed on such share of Preferred Stock at the effective
time of the Merger. However, no fractional shares of Emerson Common Stock
will be issued, and cash will be paid in lieu thereof. If the Merger is
approved and approval of the Preferred Terms Amendment is not obtained,
then Rollway shall redeem all of the outstanding shares of Rollway
Preferred Stock for cash in an amount equal to $20.00 per share plus any
accrued and unpaid dividends thereon in accordance with their terms
immediately prior to the effective time of the Merger.
3. To transact any other business properly coming before the Rollway
Special Meeting or any adjournments or postponements thereof.
The Board of Directors of Rollway has fixed the close of business on
[April 2, 1996] as the record date for the Rollway Special Meeting to determine
the Rollway shareholders entitled to notice of and to vote at the Rollway
Special Meeting and any adjournments or postponements thereof.
Please be advised that, if the Merger Agreement is approved and the Merger
is consummated, holders of Rollway Common Stock who file a written objection to
<PAGE> 9
the proposed Merger before the vote on the approval of the Merger Agreement and
who do not vote to approve the Merger Agreement, will have the right to dissent
from the proposed Merger and to receive the "fair value" of their shares of
Rollway Common Stock in cash, if the Merger is consummated and they fully
comply with the procedures set forth in Section 623 of the New York Business
Corporation Law. Additionally, please be advised that if the Preferred Terms
Amendment is approved, holders of Rollway Preferred Stock who file a written
objection to the Preferred Terms Amendment before the vote of the approval of
the Preferred Terms Amendment and who do not vote in favor of the Preferred
Terms Amendment, will have the right to dissent from the Preferred Terms
Amendment and to receive the "fair value" of their shares of Rollway Preferred
Stock in cash, if the Merger is consummated and they fully comply with the
procedures set forth in Section 623 of the New York Business Corporation Law.
See "Dissenting Shareholder Rights" and Exhibit C to the accompanying Proxy
Statement/Prospectus.
A form of Proxy and a Proxy Statement/Prospectus containing more detailed
information with respect to the matters to be considered at the Rollway Special
Meeting accompany this notice.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT, THE
TRANSACTIONS CONTEMPLATED THEREBY AND THE PREFERRED TERMS AMENDMENT ARE FAIR TO
THE SHAREHOLDERS AND OPTION HOLDERS OF ROLLWAY AND UNANIMOUSLY RECOMMENDS A
VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND A VOTE FOR THE PROPOSAL
TO ADOPT THE PREFERRED TERMS AMENDMENT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ROLLWAY SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS
BEING SOLICITED BY THE BOARD OF DIRECTORS OF ROLLWAY, WHETHER OR NOT YOU PLAN
TO ATTEND THE ROLLWAY SPECIAL MEETING. AN ADDRESSED RETURN ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT
PURPOSE. ANY SHAREHOLDER RETURNING A BLANK EXECUTED PROXY WILL BE AUTHORIZING
THE NAMED PROXIES TO VOTE THE SHARES COVERED BY THE PROXY IN FAVOR OF THE
MERGER AGREEMENT AND THE PREFERRED TERMS AMENDMENT, AS APPLICABLE. IF YOU
ATTEND THE ROLLWAY SPECIAL MEETING IN PERSON AND DESIRE TO REVOKE YOUR PROXY
AND VOTE IN PERSON, YOU MAY DO SO. IN ANY EVENT, A PROXY MAY BE REVOKED AT ANY
TIME BEFORE IT IS VOTED. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
H. Follett Hodgkins, Jr., Chairman of the Board
Liverpool, New York
[________, 1996]
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 10
EMERSON ELECTRIC CO. LIPE-ROLLWAY CORPORATION
8000 West Florissant Avenue 7600 Morgan Road
St. Louis, Missouri 63136 Liverpool, New York 13090
PROXY STATEMENT/PROSPECTUS
Shares of Emerson Common Stock
$1.00 Par Value
This Proxy Statement and Prospectus (the "Proxy Statement/Prospectus") is
being furnished to the shareholders of Lipe-Rollway Corporation, a New York
corporation ("Rollway"), in connection with a special meeting of shareholders
of Rollway to be held on [May 2, 1996] and any adjournment or postponement
thereof (the "Rollway Special Meeting"). The Board of Directors of Rollway has
fixed the close of business on [April 2, 1996] (the "Record Date") as the
record date for the Rollway Special Meeting to determine the holders of shares
of common stock, par value $0.50 per share, of Rollway (the "Rollway Common
Stock"), and holders of shares of $1.00 Cumulative Convertible Preferred Stock,
par value $10.00, of Rollway ("Rollway Preferred Stock"), entitled to notice of
and a vote at the Rollway Special Meeting and any adjournment or postponement
thereof. At the Rollway Special Meeting, holders of Rollway Common Stock will
be asked to approve and adopt the Agreement and Plan of Merger dated as of
April 1, 1996 (the "Merger Agreement"), by and among Emerson Electric Co., a
Missouri corporation ("Emerson"), Emersub XLI, Inc., a Delaware corporation and
a wholly-owned subsidiary of Emerson ("Emersub"), and Rollway. Pursuant to the
Merger Agreement, Emersub will be merged with and into Rollway (the "Merger").
Rollway will be the corporation surviving the Merger (the "Surviving
Corporation") and will become a wholly-owned subsidiary of Emerson as a result
of the Merger. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Exhibit A.
Additionally, at the Rollway Special Meeting, the holders of shares of
Rollway Preferred Stock will be asked to consider and vote upon a proposal to
approve an amendment (the "Preferred Terms Amendment") to the terms of the
Rollway Preferred Stock. The full text of the Preferred Terms Amendment is
provided herein under the heading "Preferred Terms Amendment." It is a
condition to Emerson's obligations under the Merger Agreement that Rollway
obtain the requisite shareholder approval of the Preferred Terms Amendment or
complete the redemption of the Rollway Preferred Shares prior to the Effective
Time. Therefore, if the Preferred Terms Amendment is not appropriately
approved and Rollway is unable to redeem all of the outstanding Rollway
Preferred Shares, due to an inability to raise the funds necessary for such
redemption or otherwise, the Merger may not be consummated.
H. Follett Hodgkins, Jr., Ann M. Hodgkins, H. Follett Hodgkins, III,
Cynthia H. Schallmo, two Trusts Under Last Will and Testament of H. Follett
Hodgkins and Trust Under Last Will and Testament of Ruth S. Hodgkins (the
"Group Shareholders"), who collectively own a majority of the outstanding
shares of Rollway Common Stock, each entered into Option Agreements dated as of
November 6, 1995, as amended on January 5, 1996 and March 27, 1996, with
Emerson and Rollway (the "Option Agreements"). Pursuant to the Option
Agreements, each Group Shareholder has agreed, among other things, to vote (at
the Rollway Special Meeting) such holder's shares of Rollway Common Stock in
favor of the Merger and not to take any actions which would have the effect of
preventing or hindering the Merger. In addition, the Group Shareholders have
agreed in the Option Agreements to sell their shares of Rollway Common Stock
<PAGE> 11
and Rollway Preferred Stock to Emerson in certain situations. See "The Merger
- -- Option Agreements."
At the Effective Time (as hereinafter defined) of the Merger, holders of
shares ("Rollway Common Shares") of Rollway Common Stock (including Rollway
Common Stock resulting from the exercise, immediately prior to the Merger, of
options ("Rollway Options") to purchase Rollway Common Stock) will each have
the right to receive shares ("Emerson Common Shares") of common stock, par
value $1.00 per share, of Emerson ("Emerson Common Stock"), subject to an
escrow arrangement and a holdback arrangement. See "The Merger -- Merger
Consideration," "The Merger -- Escrow and Indemnity" and "The Merger --
Holdback." Each holder of Rollway Common Shares will have the right to receive
a portion of the Merger Consideration (as hereinafter defined), payable in
Emerson Common Shares, equal in value to the Rollway Common Share Price (as
hereinafter defined) multiplied by the number of Rollway Common Shares held by
that holder. The "Rollway Common Share Price" will be based on an aggregate
purchase price for all of the Rollway Common Shares equal to approximately
$8,270,000 assuming there are no adjustments as provided in the Merger
Agreement (collectively, the "Merger Consideration"), divided by the number of
Rollway Common Shares outstanding on a fully diluted basis at the Effective
Time. However, it is important to note that if the closing of the Merger had
occurred at Rollway's 1995 fiscal year end, the Merger Consideration would have
been adjusted downward by approximately $613,000 pursuant to the closing net
worth provisions set forth in Section 1.9 of the Merger Agreement. This would
have resulted in a Merger Consideration of approximately $7,657,000 subject to
further adjustments (or approximately $9.35 per share of Rollway Common Stock
based on an estimate of 819,294 outstanding shares of Rollway Common Stock on
fully-diluted basis). See "The Merger -- Merger Consideration."
Subject to approval of the Preferred Terms Amendment by the holders of a
majority of the shares (the "Rollway Preferred Shares") of Rollway Preferred
Stock, at the Effective Time, each holder of Rollway Preferred Shares will have
the right to receive in exchange for each Rollway Preferred Share a fraction of
a share of Emerson Common Stock equal in value to $20.00 and an amount in cash
equal to the amount of accrued and unpaid dividends owed on such share of
Preferred Stock at the effective time of the Merger. If approval of the
Preferred Terms Amendment is not obtained and the Merger is consummated,
Rollway shall redeem all of the outstanding Rollway Preferred Shares for cash
in an amount equal to $20 per share plus accrued and unpaid dividends thereon
in accordance with their terms immediately prior to the Effective Time. See
"The Merger -- Merger Consideration."
The Committee (the "Option Committee") of the Board of Directors of Rollway
authorized to administer the Lipe-Rollway Corporation 1994 Stock Option Plan
(the "Rollway Option Plan") has amended the Rollway Option Plan and each
Rollway Option to provide that all Rollway Options shall become vested
immediately prior to the Effective Time and may be exercised at such time by
the holders thereof. All shares of Rollway Common Stock received upon exercise
of Rollway Options prior to the Effective Time shall be converted in the Merger
into the right to receive Emerson Common Stock, as described above. See
"Information About Rollway -- Description of Rollway Options."
Rollway has received an opinion from Rollway's counsel that, subject to
certain assumptions, the Merger will constitute a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
See "The Merger -- Certain Federal Income Tax Matters." It is a condition to
Rollway's obligations under the Merger Agreement that Rollway shall not have
received any written notification from its counsel that such tax opinion has
<PAGE> 12
been rescinded. If such tax opinion is rescinded, however, Emerson may employ
another law firm (reasonably acceptable to Rollway) to give such opinion and if
such other law firm, within 30 days after being employed by Emerson, gives
Rollway such tax opinion, then Rollway shall pay the fees and expenses of such
law firm in connection with such opinion and Rollway shall be deemed to have
waived this condition to its obligations. See "Certain Provisions of the
Merger Agreement -- Conditions to the Consummation of the Merger."
The Board of Directors of Rollway has retained the services of Management
Planning, Inc. ("MPI"), on the basis of its experience, to provide an opinion
concerning the fairness, from a financial point of view, of the terms of the
Merger and the consideration to be received by the holders of the Rollway
Common Stock and the Rollway Preferred Stock. Before approving the proposed
transactions, the Board of Directors of Rollway received a written opinion from
MPI that the consideration to be received by the holders of the Rollway Common
Stock and the Rollway Preferred Stock in connection with the transactions
contemplated by the Merger Agreement is adequate and constitutes fair
consideration from a financial point of view. A copy of MPI's opinion is
attached to this Proxy Statement/Prospectus as Exhibit B and sets forth the
procedures followed, the matters considered and the limitations on the scope of
review undertaken by MPI.
Emerson Common Stock is traded on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol "EMR." On [_______,1996] the closing
sale price for Emerson Common Stock, as reported on the New York Stock Exchange
composite tape, was [$___] per share. This Proxy Statement/Prospectus was
first mailed to the holders of Rollway securities on or about [_______, 1996].
This Proxy Statement/Prospectus also constitutes the prospectus for the
Emerson Common Shares to be issued in the Merger. Emerson has filed a
Registration Statement on Form S-4 (together with any amendments thereto, the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") of which this Proxy Statement/Prospectus is a part. All
information concerning Rollway in this Proxy Statement/Prospectus has been
furnished by Rollway, and all information concerning Emerson contained or
incorporated by reference in this Proxy Statement/Prospectus has been furnished
by Emerson.
------------------------------
THE SECURITIES TO BE ISSUED IN THE MERGER 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.
------------------------------
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given
or made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute the
solicitation of a proxy or an offer or solicitation to sell or a solicitation
of an offer to buy any securities other than the shares of Emerson Common Stock
to which it relates or an offer or solicitation to any person in any
jurisdiction where such an offer or solicitation would be unlawful. Neither
the delivery of this Proxy Statement/Prospectus nor any distribution of the
<PAGE> 13
securities offered hereby shall, under any circumstances, create any
implication that there has been no change in the affairs of Emerson or Rollway
since the date hereof.
------------------------------
The date of this Proxy Statement/Prospectus is [_______, 1996].
<PAGE> 14
AVAILABLE INFORMATION
Emerson is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by
Emerson with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and should be available at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Emerson
Common Stock is listed on the New York Stock Exchange and the Chicago Stock
Exchange under the symbol "EMR." Copies of the reports, proxy statements and
other information filed with the Commission can also be inspected and copied at
the offices of the New York Stock Exchange at 11 Wall Street, New York, New
York 10005 and at the offices of the Chicago Stock Exchange at 440 South
LaSalle Street, Chicago, Illinois 60605.
Emerson has filed with the Commission the Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities of Emerson to be issued pursuant to the Merger. This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which were
omitted as permitted by the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal office
in Washington, D.C. Statements contained in this Proxy Statement/Prospectus or
in any document incorporated in this Proxy Statement/Prospectus by reference as
to the content 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
The following documents filed with the Commission by Emerson (File
No. 1-278) are incorporated by reference in this Proxy Statement/Prospectus:
1. Emerson's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995.
2. Emerson's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1995.
3. The description of Emerson's Common Stock which is contained in
Emerson's Registration Statement on the Form 10 filed under the 1934
Act, as amended under cover of Form 8 on January 19, 1981, and
amendments to the Restated Articles of Incorporation described and set
forth in the Proxy Statement dated December 19, 1984.
4. The descriptions of Emerson's Preferred Share Purchase Rights Plan
which is contained in Emerson's Registration Statement on Form 8-A
filed under the 1934 Act, as amended under cover of Form 8 on November
3, 1988.
<PAGE> 15
All documents filed by Emerson with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the Rollway Special Meeting shall hereby be deemed to be incorporated
by reference into this Proxy Statement/Prospectus and to be part hereof from
the date of filing of such documents. See "Available Information." Any
statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference 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 other subsequently filed document incorporated or
deemed to be incorporated herein by reference, which statement is also
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Copies of these documents
(excluding exhibits unless such exhibits are specifically incorporated by
reference into the information incorporated herein) will be provided by first
class mail without charge to each person to whom this Proxy
Statement/Prospectus is delivered, upon written or oral request by such person
to H. M. Smith, Esq., Assistant General Counsel and Assistant Secretary,
Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri ((314)
553-2431). In order to ensure timely delivery of the documents, any request
should be made by [__________, 1996].
<PAGE> 16
TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Business of Emerson. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Business of Rollway. . . . . . . . . . . . . . . . . . . . . . . . . . 19
The Rollway Special Meeting. . . . . . . . . . . . . . . . . . . . . . 19
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Date, Time and Place. . . . . . . . . . . . . . . . . . . . . . . 19
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Votes Required. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Voting and Revocation of Proxies. . . . . . . . . . . . . . . . . 20
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . 20
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Form of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 20
Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . 20
Calculation of Rollway Common Share Price . . . . . . . . . . . . 21
Emerson Share Value . . . . . . . . . . . . . . . . . . . . . . . 21
Holdback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Escrow and Indemnity. . . . . . . . . . . . . . . . . . . . . . . 31
Shareholder Indemnity . . . . . . . . . . . . . . . . . . . . . . 22
Common Shareholders' Representative . . . . . . . . . . . . . . . 22
Preferred Terms Amendment . . . . . . . . . . . . . . . . . . . . 22
Preferred Stock Treatment . . . . . . . . . . . . . . . . . . . . 23
Rollway Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . 24
Recommendation of the Rollway Board of Directors. . . . . . . . . 24
Interests of Certain Persons in the Merger. . . . . . . . . . . . 24
Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . . . . 24
Conditions to Consummation of the Merger. . . . . . . . . . . . . 25
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . 25
Dissenting Shareholders' Rights . . . . . . . . . . . . . . . . . 25
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . 26
Certain Federal Income Tax Matters. . . . . . . . . . . . . . . . 26
Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . 26
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Comparison of Shareholder Rights. . . . . . . . . . . . . . . . . 27
COMPARATIVE MARKET PRICES AND DIVIDENDS. . . . . . . . . . . . . . . . . . 27
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . 28
SELECTED HISTORICAL FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . 30
ROLLWAY SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . 32
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Purpose; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . 32
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . 32
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . . . . 33
INFORMATION ABOUT EMERSON. . . . . . . . . . . . . . . . . . . . . . . . . 33
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Description of Emerson Capital Stock . . . . . . . . . . . . . . . . . 36
Certain Effects of Authorized but Unissued Stock . . . . . . . . . . . 36
Preferred Share Purchase Rights Plan . . . . . . . . . . . . . . . . . 36
Certain Charter and By-Law Provisions. . . . . . . . . . . . . . . . . 38
<PAGE> 17
INFORMATION ABOUT ROLLWAY. . . . . . . . . . . . . . . . . . . . . . . . . . 39
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Rollway Bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Lipe Automation Equipment. . . . . . . . . . . . . . . . . . . . . . . . 40
Executive Officers and Directors . . . . . . . . . . . . . . . . . . . . 42
Business Experience. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Security Ownership of Directors, Executive Officers and Principal
Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Description of Rollway Capital Stock . . . . . . . . . . . . . . . . . . 44
Description of Rollway Options . . . . . . . . . . . . . . . . . . . . . 45
Director/Officer Indemnification . . . . . . . . . . . . . . . . . . . . 46
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 47
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 48
Emerson's Reasons for the Merger . . . . . . . . . . . . . . . . . . . . 49
Rollway's Reasons for the Merger; Recommendation of Rollway's Board of
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Effective Time; Closing Date . . . . . . . . . . . . . . . . . . . . . . 52
Form of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Holdback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Escrow and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Common Shareholders' Representative. . . . . . . . . . . . . . . . . . . 58
Preferred Terms Amendment. . . . . . . . . . . . . . . . . . . . . . . . 59
Preferred Stock Treatment. . . . . . . . . . . . . . . . . . . . . . . . 60
The Rollway Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Option Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Non-Competition and Employment Agreements. . . . . . . . . . . . . . . . 62
Certain Federal Income Tax Matters . . . . . . . . . . . . . . . . . . . 62
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . 67
CERTAIN PROVISIONS OF THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . 67
Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Certain Representations and Warranties . . . . . . . . . . . . . . . . . 68
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . 70
Certain Other Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 71
No Solicitation of Transactions. . . . . . . . . . . . . . . . . . . . . 72
Conditions to the Consummation of the Merger . . . . . . . . . . . . . . 72
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . 74
Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 75
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Indemnification and Limitation of Liability of Directors and Officers. . 76
Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Action by Consent of Shareholders. . . . . . . . . . . . . . . . . . . . 79
Dividends and Repurchases of Stock . . . . . . . . . . . . . . . . . . . 79
Amendments to Charter. . . . . . . . . . . . . . . . . . . . . . . . . . 80
Amendments to By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 81
Preemptive Rights of Shareholders. . . . . . . . . . . . . . . . . . . . 81
Control Share Acquisition Provisions . . . . . . . . . . . . . . . . . . 81
<PAGE> 18
Takeover Bid Disclosure Provisions . . . . . . . . . . . . . . . . . . . 82
Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . 82
Sale, Lease or Exchange of Assets. . . . . . . . . . . . . . . . . . . . 85
Rollway Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . 85
Preferred Share Purchase Rights. . . . . . . . . . . . . . . . . . . . . 85
Rights of Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . 86
DISSENTING SHAREHOLDER RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . 86
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
LIPE-ROLLWAY CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . 89
EXHIBIT A - AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . .111
EXHIBIT B - FAIRNESS OPINION . . . . . . . . . . . . . . . . . . . . . . . .191
EXHIBIT C - NEW YORK BUSINESS CORPORATION LAW SECTIONS 623, 806(b)(6) AND
910. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .194
<PAGE> 19
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus and the Exhibits hereto, which are incorporated
herein by reference, and is qualified in its entirety by reference to the more
detailed information included in this Proxy Statement/Prospectus and the
Exhibits hereto, including, but not limited to, the Merger Agreement set forth
as Exhibit A hereto. Shareholders and option holders are urged to read
carefully this Proxy Statement/Prospectus and the Exhibits hereto in their
entirety.
Business of Emerson Emerson was incorporated in Missouri in 1890.
Originally engaged in the manufacture and sale of
electric motors and fans, Emerson's product lines
were subsequently expanded through internal growth
and acquisitions. Emerson is now engaged principally
in the design, manufacture and sale of a broad range
of electrical, electromechanical and electronic
products and systems. The mailing address of
Emerson's principal executive offices is 8000 West
Florissant Avenue, St. Louis, Missouri 63136,
telephone number (314) 553-2000. See "Information
About Emerson."
Business of Rollway Rollway was incorporated in New York in 1924.
Rollway currently has two principal lines of
business. Its bearing operations provide high
quality, high performance and precision bearings for
a number of industries including aerospace, mining,
agriculture, construction and precision
manufacturing. Rollway's automation equipment
operations manufacture and sell beltless, vibratory,
positioning, feeding and conveyor systems for the
machine tool industry. The mailing address of
Rollway's principal executive offices is 7600 Morgan
Road, Liverpool, New York 13090, telephone number
(315) 457-6211. See "Information About Rollway."
The Rollway Special Meeting
General The purpose of the Rollway Special Meeting is to
consider and vote upon the approval of the Merger and
the Preferred Terms Amendment and to consider such
other business as may be properly introduced.
Date, Time and Place The Rollway Special Meeting will be held at 7600
Morgan Road, Liverpool, New York 13090 at 10:00 a.m.,
local time on [May 2, 1996].
Record Date The Board of Directors of Rollway has set [April 2,
1996] as the Record Date for determining those
shareholders of Rollway that will be entitled to vote
at the Rollway Special Meeting.
Votes Required The affirmative vote of the holders of at least two-
thirds of the outstanding Rollway Common Shares is
required to approve the Merger. The affirmative vote
of the holders of a majority of the Rollway Preferred
<PAGE> 20
Shares is required to approve the Preferred Terms
Amendment.
Voting and Revocation Each holder of Rollway Common Shares and Rollway
of Proxies Preferred Shares as of the Record Date will be
entitled to vote at the Rollway Special Meeting.
Only the holders of Rollway Common Shares shall be
entitled to vote on the Merger. Only the holders of
Rollway Preferred Shares shall be entitled to vote on
the Preferred Terms Amendment. Votes may be cast
either in person or by proxy. Unless a contrary
indication is included therein, all proxies will be
voted in favor of the Merger and the Preferred Terms
Amendment, as applicable. At any time before they
are voted proxies may be revoked by (i) the holder
attending the Rollway Special Meeting and voting
thereat in person, (ii) the due execution of a later
dated proxy, or (iii) the due execution and delivery
of a notice of revocation to the Secretary of
Rollway. See "Rollway Special Meeting -- Voting and
Revocation of Proxies."
Solicitation of This Proxy Statement/Prospectus is being furnished in
Proxies connection with the solicitation on behalf of the
Board of Directors of Rollway of proxies for use at
the Rollway Special Meeting.
The Merger
Form of the Merger If (i) the Merger Agreement and the transactions
contemplated thereby are approved by holders of at
least two-thirds of the outstanding shares of Rollway
Common Stock and (ii) all other conditions to the
Merger are satisfied or waived, Emersub will be
merged with and into Rollway, with Rollway as the
Surviving Corporation, which will thereupon become a
wholly-owned subsidiary of Emerson.
Merger Consideration At the Effective Time of the Merger, pursuant to the
Merger, holders of Rollway Common Shares will have
the right to receive Emerson Common Shares, subject
to an escrow arrangement (see "-- Escrow and
Indemnity" below) and a holdback arrangement (see "--
Holdback" below). Each holder of Rollway Common
Shares will have the right to receive a portion of
the Merger Consideration, payable in Emerson Common
Shares valued at the Emerson Share Value (as
hereinafter defined), equal to the Rollway Common
Share Price multiplied by the number of Rollway
Common Shares held by such holder. Emerson shall
aggregate the Emerson Common Stock issuable to any
person, and since fractional shares will not be
issued, such person shall receive cash in lieu of
fractional shares remaining following such
aggregation. See "The Merger -- Merger
Consideration."
<PAGE> 21
Calculation of Rollway The "Rollway Common Share Price" will be based on an
Common Share Price aggregate purchase price for all of the Rollway
Common Shares equal to approximately $8,270,000
assuming there are no adjustments as provided in the
Merger Agreement (collectively, the "Merger
Consideration"), divided by the number of Rollway
Common Shares outstanding on a fully diluted basis at
the Effective Time. However, it is important to note
that if the closing of the Merger had occurred at
Rollway's 1995 fiscal year end, the Merger
Consideration would have been adjusted downward by
approximately $613,000 pursuant to the closing net
worth provisions set forth in Section 1.9 of the
Merger Agreement. This would have resulted in a
Merger Consideration of approximately $7,657,000
subject to further adjustments (or approximately
$9.35 per share of Rollway Common Stock based on an
estimate of 819,294 outstanding shares of Rollway
Common Stock on fully-diluted basis). See "The
Merger--Merger Consideration."
Emerson Share Value The "Emerson Share Value" will equal the average
closing price of an Emerson Common Share for the ten
consecutive trading days ending on the third business
day prior to the Closing Date, as reported in the
Wall Street Journal, New York Stock Exchange
Composite Transactions.
Holdback Emerson Common Shares valued at the Emerson Share
Value worth $1,000,000 (the "Holdback") will be
withheld from the initial distribution of the Merger
Consideration as security for the possible
adjustments to the Merger Consideration described
under "The Merger--Holdback."
Escrow and Indemnity Emerson Common Shares valued at the Emerson Share
Value worth $2,600,000 (the "Escrow Deposit") will be
held in escrow under the Escrow Agreement to be
executed in connection with the closing of the Merger
(Exhibit 1.13 to the Merger Agreement attached hereto
as Exhibit A, the "Escrow Agreement"). A portion of
the Escrow Deposit equal at the closing date to
$2,500,000 and all income thereon (collectively, the
"Indemnity Escrow Funds") will be held for 18 months
from the Closing Date as security to compensate
Emerson and the Surviving Corporation for any losses
they suffer as a result of the breach of any of
Rollway's representations, warranties or covenants in
the Merger Agreement, as a result of the assertion
against Emerson or the Surviving Corporation of
certain tax liabilities, arising out of Rollway's
agreement to indemnify MPI, arising out of the
commission payment practices of Lipe Rollway, N.V.,
Rollway's Belgian subsidiary ("LRNV"), or arising out
of certain legal proceedings pending against Rollway.
Of this amount, $1,000,000 and any income thereon
(less any amounts distributed to Emerson for claims
relating to LRNV's commission payment practices) will
<PAGE> 22
be released from escrow on January 3, 1997, unless
prior to January 1, 1997 Emerson has reasonably
reliable evidence that events have occurred which
would justify an extension of the statute of
limitations applicable to any reporting or payment
requirements applicable to the commission payment
practices of LRNV. In such an event, the remaining
portion of the $1,000,000 as of January 3, 1997 and
any income thereon will continue to be held in escrow
until January 4, 1999. The balance of the Escrow
Deposit, and all income earned thereon (collectively,
the "Representative Escrow Funds"), will be held to
pay the reasonable fees and expenses of the Common
Shareholders' Representative (described below)
incurred in resolving any dispute relating to any
claims for such losses. See "Certain Provisions of
the Merger Agreement -- Certain Representations and
Warranties" and "The Merger -- Escrow and Indemnity."
Shareholder Indemnity BY SUBMITTING CERTIFICATES FORMERLY REPRESENTING
ROLLWAY COMMON STOCK, EACH SUBMITTING COMMON
SHAREHOLDER WILL HAVE AGREED TO PERSONALLY INDEMNIFY
EMERSON, THE SURVIVING CORPORATION AND THEIR
AFFILIATES ON DEMAND AGAINST ANY AND ALL LOSSES TO
THE EXTENT ESCROW FUNDS ARE NOT AVAILABLE THEREFOR,
EITHER BECAUSE THE ESCROW FUNDS HAVE BEEN MADE
AVAILABLE TO EMERSON DUE TO THE BREACH OF ANY OF
ROLLWAY'S REPRESENTATIONS, WARRANTIES OR COVENANTS IN
THE MERGER AGREEMENT OR THE ESCROW AGREEMENT HAS
TERMINATED. SUCH PERSONAL INDEMNIFICATION
OBLIGATIONS SHALL BE SEVERAL AND ONLY IN PROPORTION
TO, AND SHALL BE LIMITED TO, EACH COMMON
SHAREHOLDER'S PORTION OF THE MERGER CONSIDERATION.
SUCH COMMON SHAREHOLDERS SHALL ALSO BE DEEMED TO HAVE
WAIVED ANY RIGHT OF CONTRIBUTION OR OTHER SIMILAR
RIGHT AGAINST THE SURVIVING CORPORATION ARISING OUT
OF ROLLWAY'S REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS CONTAINED IN THE MERGER AGREEMENT AND
SHALL BE DEEMED TO HAVE AGREED TO ALL OTHER
PROVISIONS OF THE MERGER AGREEMENT SPECIFICALLY
STATED THEREIN TO BE AN OBLIGATION OR AGREEMENT OF
SUCH COMMON SHAREHOLDERS. See "The Merger -- Escrow
and Indemnity."
Common Shareholders' BY SUBMITTING CERTIFICATES FORMERLY REPRESENTING
Representative ROLLWAY COMMON STOCK, EACH SUBMITTING COMMON
SHAREHOLDER WILL HAVE AGREED TO THE APPOINTMENT OF
HENRY FUST, A C.P.A. IN SYRACUSE, NEW YORK, AS THE
COMMON SHAREHOLDERS' REPRESENTATIVE. SUCH COMMON
SHAREHOLDERS SHALL ALSO BE DEEMED TO HAVE AGREED TO
THE WAIVER OF ANY RIGHT OR CAUSE OF ACTION FOR ANY
ACTION TAKEN OR OMITTED FROM BEING TAKEN BY THE
COMMON SHAREHOLDERS' REPRESENTATIVE. See "The Merger
-- Common Shareholders' Representative."
Preferred Terms At the Rollway Special Meeting, the holders of
Amendment Rollway Preferred Stock will be asked to approve the
Preferred Terms Amendment. If approved, this
amendment to Rollway's Certificate of Incorporation
<PAGE> 23
would provide that, upon the consummation of the
Merger, each share of Rollway Preferred Stock would
be converted into the right to receive a fraction of
a share of Emerson Common Stock, as described below
under "-- Preferred Stock Treatment." The text of
the Preferred Terms Amendment is set forth herein
under the heading "The Merger -- Preferred Terms
Amendment." The approval of the holders of a
majority of the issued and outstanding Rollway
Preferred Stock is required to approve the Preferred
Terms Amendment. It is a condition to Emerson's
obligations under the Merger Agreement that Rollway
shall have either (i) obtained appropriate
shareholder approval of the Preferred Terms Amendment
prior to the Effective Time or (ii) completed the
redemption of all Rollway Preferred Shares prior to
the Effective Time. Therefore, if the Preferred
Terms Amendment is not appropriately approved and
Rollway is unable to redeem all of the outstanding
Rollway Preferred Shares, due to an inability to
raise the funds necessary for such redemption or
otherwise, the Merger may not be consummated.
Preferred Stock Subject to approval of the Preferred Terms Amendment
Treatment by the holders of a majority of the Rollway Preferred
Shares, at the Effective Time each holder of Rollway
Preferred Shares will have the right to receive in
exchange for each Rollway Preferred Share a fraction
of a share of Emerson Common Stock equal in value to
$20.00 and an amount in cash equal to the amount of
accrued and unpaid dividends owed on such Rollway
Preferred Share at the Effective Time. Emerson shall
aggregate the Emerson Common Stock issuable to any
person, and, since fractional shares will not be
issued, such person shall receive cash in lieu of any
fractional shares remaining following such
aggregation. If approval of the Preferred Terms
Amendment is not obtained and the Merger is
consummated, Rollway will redeem all of the
outstanding shares of Rollway Preferred Stock for
$20.00 per share in cash plus accrued and unpaid
dividends in accordance with their terms immediately
prior to the Effective Time.
Rollway Options The Option Committee of the Board of Directors of
Rollway authorized to administer the Rollway Option
Plan has amended the Rollway Option Plan and each
Rollway Option to provide that all Rollway Options
shall become vested immediately prior to the
Effective Time and may be exercised at such time by
the holders thereof. All shares of Rollway Common
Stock received upon exercise of Rollway Options prior
to the Effective Time shall be converted in the
Merger into the right to receive Emerson Common
Stock, as described above. It is a condition to
Emerson's obligations under the Merger Agreement that
all Rollway Options be exercised prior to the
Effective Time. See "Information About Rollway --
<PAGE> 24
Description of Rollway Options" and "The Merger --
The Rollway Options."
Reasons for the Merger Emerson's Reasons. Numerous factors were taken into
consideration by Emerson in entering into the Merger
Agreement, including, without limitation, the
personnel, products, operations, prospects, assets,
obligations, operations and earnings of Rollway and
Emerson's judgments with respect to the prospects for
both Emerson and Rollway. See "The Merger --
Emerson's Reasons for the Merger."
Rollway's Reasons. The Rollway Board of Directors
considered a number of factors in determining to
enter into the Merger Agreement, including but not
limited to, the operating history and future
prospects of Rollway, its dividend paying history,
the need for shareholder liquidity, the
consideration to be received by Rollway's
shareholders if the transactions contemplated by the
Merger Agreement are consummated and the prospects of
Emerson being the best viable alternative.
Recommendation of THE BOARD OF DIRECTORS OF ROLLWAY HAS UNANIMOUSLY
the Rollway APPROVED THE MERGER AGREEMENT, THE TRANSACTIONS
Board of Directors CONTEMPLATED THEREBY AND THE PREFERRED TERMS
AMENDMENT AS BEING FAIR AND IN THE BEST INTEREST OF
ROLLWAY, ITS SHAREHOLDERS AND THE HOLDERS OF ROLLWAY
OPTIONS. THE ROLLWAY BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF ROLLWAY COMMON STOCK
APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND THAT HOLDERS OF ROLLWAY
PREFERRED STOCK APPROVE THE PREFERRED TERMS
AMENDMENT.
Interests of Certain At the Effective Time, Emerson and H. Follett
Persons in the Merger Hodgkins, Jr. will enter into a non-competition
agreement pursuant to which Mr. Hodgkins will agree
not to compete with Rollway for a period of five
years and to maintain certain information in
confidence. In consideration therefor, Mr. Hodgkins
will be entitled to receive $100,000 per year during
the non-compete period, $10,000 per year for life and
certain other benefits such as health insurance and
life insurance. Also at the Effective Time, Emerson
expects to enter into employment agreements with
Edmund Babiarz, Stephen Bregande and Karl Loessner,
each of whom is an officer and/or director of
Rollway. See "The Merger -- Interests of Certain
Persons in the Merger."
Fairness Opinion The Board of Directors of Rollway has retained the
services of MPI, on the basis of its experience, to
provide an opinion concerning the fairness, from a
financial point of view, of the terms of the Merger
and the consideration to be received by the holders
of the Rollway Preferred Stock. Before approving the
proposed transactions, the Board of Directors of
Rollway received a written opinion from MPI that the
<PAGE> 25
consideration to be received by the holders of the
Rollway Common Stock and the Rollway Preferred Stock
in connection with the transactions contemplated by
the Merger Agreement is adequate and constitutes fair
consideration from a financial point of view. A copy
of MPI's opinion is attached to this Proxy
Statement/Prospectus as Exhibit B and sets forth the
procedures followed, the matters considered and the
limitations on the scope of review undertaken by MPI.
Conditions to The respective obligations of Emerson and Rollway to
Consummation consummate the Merger are each subject to various
of the Merger conditions, including, without limitation,
(i) obtaining the approval of the Merger Agreement by
the holders of not less than two-thirds of the
outstanding shares of Rollway Common Stock and
(ii) obtaining the approval of the Preferred Terms
Amendment or completion of the redemption of the
Rollway Preferred Shares prior to the Effective Time.
See "Certain Provisions of the Merger Agreement --
Conditions to the Consummation of the Merger."
Termination The Merger Agreement and the transactions
contemplated thereby may be terminated prior to the
Closing Date only as follows: (a) by the mutual
written consent of the Boards of Directors of Rollway
and Emerson; or (b) by either Rollway or Emerson in
the event the Merger has not been consummated on or
before July 31, 1996, unless the failure to
consummate the Merger is a result of the breach of or
default under the Merger Agreement by such party.
See "Certain Provisions of the Merger Agreement --
Termination."
Regulatory Approvals Consummation of the Merger requires notifications to,
and/or approvals from, certain governmental
authorities, all which have been obtained, except for
clearance from the German Federal Cartel Office,
which Emerson expects to receive by April 18, 1996.
See "The Merger -- Regulatory Approvals."
Dissenting Under the New York Business Corporation Law (the
Shareholders'Rights "NYBCL"), any holder of Rollway Common Stock who
properly objects to the Merger and any holder of
Rollway Preferred Stock who properly objects to the
Preferred Terms Amendment may assert statutory
dissenters' rights by complying with the requirements
of the NYBCL. See "Dissenting Shareholders Rights."
It is a condition to the consummation of the Merger
that (i) holders of not more than 5% of the
outstanding shares of Rollway Common Stock shall have
exercised dissenting shareholder rights with respect
to the Merger and (ii) holders of not more than 5% of
the outstanding shares of Rollway Preferred Stock
shall have exercised dissenting shareholder rights
with respect to the Preferred Terms Amendment.
<PAGE> 26
Accounting Treatment The Merger will be accounted for by Emerson as a
"purchase," as such term is used under generally
accepted accounting principles, for accounting and
financial reporting purposes. See "The Merger --
Accounting Treatment."
Certain Federal Income Rollway has received an opinion from Rollway's
Tax Matters counsel that, subject to certain assumptions, the
Merger will constitute a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Based on such
opinion, no gain or loss will be recognized by the
holders of Rollway Common Stock (and Rollway
Preferred Stock, if the Preferred Terms Amendment is
approved) upon receipt of Emerson Common Stock solely
in exchange for such Rollway Common Stock (or Rollway
Preferred Stock) in the Merger (except to the extent
of cash received in lieu of fractional shares, in
payment of accrued and unpaid dividends or as a
result of exercising dissenters' rights). See "The
Merger -- Certain Federal Income Tax Matters."
It is a condition to Rollway's obligations under the
Merger Agreement that Rollway shall not have received
any written notification from its counsel that its
tax opinion has been rescinded. If such tax opinion
is rescinded, however, Emerson may employ another law
firm (reasonably acceptable to Rollway) to give such
opinion and if such other law firm, within 30 days
after being employed by Emerson, gives Rollway such
tax opinion, then Rollway shall pay the fees and
expenses of such law firm in connection with such
opinion and Rollway shall be deemed to have waived
this condition to its obligations. See "Certain
Provisions of the Merger Agreement -- Conditions to
the Consummation of the Merger."
Option Agreements H. Follett Hodgkins, Jr., Ann M. Hodgkins, H. Follett
Hodgkins, III, Cynthia H. Schallmo, two Trusts Under
Last Will and Testament of H. Follett Hodgkins and
Trust Under Last Will and Testament of Ruth S.
Hodgkins, as previously defined, the Group
Shareholders, who collectively own a majority of the
outstanding Rollway Common Stock, each entered into
an Option Agreement dated as of November 6, 1995, as
amended on January 5, 1996 and March 27, 1996, with
Emerson and Rollway. Pursuant to the Option
Agreements, each of the Group Shareholders has
agreed, among other things, to vote (at the Rollway
Special Meeting) such holder's shares of Rollway
Common Stock in favor of the Merger and not to take
any actions which would have the effect of preventing
or hindering the Merger. In addition, the Group
Shareholders have agreed in the Option Agreements to
sell their shares of Rollway Common Stock and Rollway
Preferred Stock to Emerson in certain situations.
See "The Merger -- Option Agreements."
<PAGE> 27
Expenses Each party to the Merger Agreement has agreed that it
shall be responsible for its own fees and expenses
relating to the Merger Agreement and the consummation
of the transactions contemplated therein; provided,
however, that Rollway has agreed to pay the fees and
expenses of the Group Shareholders relating to the
negotiation and execution of the Option Agreements.
See "Certain Provisions of the Merger Agreement --
Expenses." The payment of these fees and expenses
will likely decrease the Merger Consideration. See
"The Merger -- Merger Consideration."
Comparison of See "Comparative Rights of Shareholders" for a
Shareholder Rights summary of certain differences between the rights of
holders of Emerson Common Stock and Rollway Common
Stock and Rollway Preferred Stock.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Emerson Electric Co.
Emerson Common Stock is listed for trading on the New York Stock Exchange
and Chicago Stock Exchange under the symbol "EMR." The following table sets
forth the range of sale prices of Emerson Common Stock as reported on the New
York Stock Exchange composite tape and the per share quarterly dividends
declared during the periods indicated.
EMERSON COMMON STOCK
High Low Dividend
---------- ---------- ----------
Fiscal 1994
Quarter Ended 12/31........................ $61 $55 3/8 $0.39
Quarter Ended 3/31......................... 65 7/8 57 7/8 0.39
Quarter Ended 6/30......................... 61 1/8 56 1/8 0.39
Quarter Ended 9/30......................... 64 57 0.39
Fiscal 1995
Quarter Ended 12/31........................ 64 1/4 57 1/4 0.43
Quarter Ended 3/31......................... 67 1/8 61 1/2 0.43
Quarter Ended 6/30......................... 72 64 1/8 0.43
Quarter Ended 9/3.......................... 75 3/8 69 3/4 0.49
Fiscal 1996
Quarter Ended 12/31........................ 81 3/4 69 1/4 0.49
Quarter Ended 3/31......................... 86 3/4 77 3/4 0.49
Quarter Ended 6/30 (through 4/3)........... 84 3/8 81 1/8 0.49
On [______, 1996], the closing sale price for Emerson Common Stock on the
New York Stock Exchange composite tape was $[___] per share. As of
September 30, 1995, the number of holders of record of Emerson Common Stock was
approximately 31,000.
<PAGE> 28
Lipe-Rollway Corporation
The Rollway Common Stock is not now nor has it been in recent years
admitted to trading on any national stock exchange or quotation system. During
the past several years trading in Rollway Common Shares has been extremely
limited. Based on the information available to Rollway, Rollway Common Shares
have traded in brokered and other private transactions at prices ranging
between $1.00 and $12.00 during the period January 13, 1995 through
February 29, 1996 with one of the most recent trades occurring at a price of
$12.00 per share.
Rollway has never paid a cash dividend with respect to Rollway Common
Shares. No dividends have been declared or paid on the Rollway Preferred
Shares since the fourth quarter of 1993. As of March 3, 1996, Rollway had
dividends in arrears of $210,807 on its Rollway Preferred Shares representing
two and one-quarter years of unpaid dividends.
As of [April 2, 1996], there were 227 record holders of Rollway Common
Stock and 196 record holders of Rollway Preferred Stock.
Holders of Rollway securities are urged to obtain current market quotations
for Emerson Common Stock. No assurance can be given as to the Emerson Share
Value or as to the market price of Emerson Common Stock at the Effective Time
of the Merger or thereafter.
COMPARATIVE PER SHARE DATA*
The following table sets forth earnings, dividends and book values per
share of Emerson Common Stock and Rollway Common Stock on a historical basis
and on an equivalent basis for Rollway. The equivalent information presented
is based on an assumed exchange ratio ("Assumed Common Exchange Ratio") of
0.1126 of a share of Emerson Common Stock for each share of Rollway Common
Stock. The actual Common Exchange Ratio will be based on the Merger
Consideration which is approximately $8,270,000 assuming there are no
adjustments as provided in the Merger Agreement. However, it is important to
note that if the closing of the Merger had occurred at Rollway's 1995 fiscal
year end (December 3, 1995), the Merger Consideration would have been adjusted
downward by approximately $613,000 pursuant to the closing net worth provisions
set forth in Section 1.9 of the Merger Agreement. This would have resulted in
a Merger Consideration of approximately $7,657,000 subject to further
adjustments (or approximately $9.35 per share of Rollway Common Stock based on
an estimate of 819,294 outstanding shares of Rollway Common Stock on a fully-
diluted basis). Thus in calculating the Assumed Common Exchange Ratio of
0.1126 shown above, the $9.35 estimated Merger Consideration per share of
Rollway Common Stock was used in making such calculation. In addition, in
calculating the Assumed Common Exchange Ratio an assumed price per share of
Emerson Common Stock of $83.00 was used, which was the closing price per share
of Emerson Common Stock on February 16, 1996. No assurance can be given that
the Assumed Common Exchange Ratio will approximate the actual exchange ratio.
The actual exchange ratio will be based on the Emerson Share Value, which will
not be determined until the end of the third business day prior to the Closing,
and the Rollway Common Share Price, which will not finally be determined until
immediately after the approval of the Closing Balance Sheet (as hereinafter
defined). See "The Merger--Merger Consideration." Pro forma combined
information is not required to be presented as it would not have been
materially different from Emerson historical information. The table should be
read in conjunction with the selected financial data and respective
<PAGE> 29
consolidated financial statements and notes thereto of Emerson and Rollway
included elsewhere or incorporated by reference in this Proxy
Statement/Prospectus.
Emerson Rollway Equivalent of
Common Share Common Share One Rollway
Historical Historical Common Share (2)
------------ ------------ ----------------
Most Recent Fiscal Year (1):
Net Earnings $4.06 $ .81 $ .46
Cash Dividends 1.78 -- .20
Book Value at Fiscal Year End 21.75 8.24 2.45
Emerson Equivalent of
Common Share One Rollway
Historical Common Share (2)
------------ -----------------
Three Months Ended December 31, 1995:
Net Earnings $1.03 $ .12
Cash Dividends .49 .06
Book Value at End of Period 22.28 2.51
(1) Information presented for Emerson fiscal year ended September 30, 1995 and
Rollway fiscal year ended December 3, 1995.
(2) Based on an Assumed Common Exchange Ratio of 0.1126 which was calculated as
if the Closing occurred on February 16, 1996, without giving effect to any
possible post-closing Merger Consideration adjustments (other than the
$613,000 described above).
- ---------------
* To be updated before mailing to Shareholders.
<PAGE> 30
SELECTED HISTORICAL FINANCIAL DATA
Set forth below are selected historical financial data of Emerson and
Rollway. This information is based upon and should be read in conjunction with
the other financial information of Emerson and Rollway presented or
incorporated by reference elsewhere in this Proxy Statement/Prospectus.
<TABLE>
EMERSON ELECTRIC CO.
(Millions of Dollars, Except Per Share Data)
<CAPTION>
Three
Months Ended
December 31, Fiscal Year Ended September 30,
-------------------- -----------------------------------------------------
1995 1994 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Statement Data:
Net sales $2,565.8 2,284.6 10,012.9 8,607.2 8,173.8 7,706.0 7,427.0
Net earnings 230.5 203.4 907.7 788.5 708.1 662.9 631.9
Per Share of Emerson
common stock:
Net earnings 1.03 .91 4.06 3.52 3.15 2.96 2.83
Cash dividends .49 .43 1.78 1.56 1.44 1.38 1.32
Balance Sheet Data
(At End of Period)
Total assets $9,733.2 8,728.3 9,399.0 8,215.0 7,814.5 6,627.0 6,364.4
Long-term debt 455.7 278.0 208.6 279.9 438.0 448.0 450.2
</TABLE>
Income before cumulative effect of change in accounting for postemployment
benefits ($21.3 million; $.10 per share) was $224.7 million in the three months
ended December 31, 1994 and $929.0 million in fiscal 1995, respectively. Net
earnings in the three months ended December 31, 1994 includes non-recurring
items which were substantially offset by the accounting change.
Income before cumulative effect of change in accounting for postretirement
benefits ($115.9 million; $.52 per share) was $904.4 million in fiscal 1994.
Net earnings in fiscal 1994 includes non-recurring items which were
substantially offset by the accounting change. See Notes 2 and 7 of Notes to
Consolidated Financial Statements of the 1995 Annual Report on Form 10-K for
information regarding these items and Emerson's acquisition and divestiture
activities.
<PAGE> 31
<TABLE>
LIPE-ROLLWAY CORPORATION
(Thousands of Dollars, Except Per Share Data)
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------
Dec. 3, Nov. 27, Nov. 28, Nov. 29, Dec. 1,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings Statement Data:
Net sales $ 46,493 $ 32,904 $ 32,453 $ 32,700 $ 35,639
Net earnings (loss) 707<F1> 102 (146) (1,167) (926)
Net earnings (loss per
common share outstanding)<F2> 0.81 0.01 (0.32) (1.69) (1.37)
Weighted Average Number of Shares 752,628 752,628 752,628 752,628 752,628
Balance Sheet Data (At End of Period)
Total assets 34,155 27,762 22,521 22,695 25,485
Long-term debt and redeemable
preferred stock 6,767 10,165 3,768 4,682 2,780
- ---------------
<FN>
<F1> After deduction of one time administrative expenses totaling $1,488,108. See "Information About
Rollway -- Management Discussion and Analysis of Financial Condition and Results of Operations."
<F2> Net earnings (loss) per common share outstanding are after unpaid dividends on cumulative preferred
stock.
</TABLE>
<PAGE> 32
ROLLWAY SPECIAL MEETING
General
This Proxy Statement and Prospectus is being furnished to Rollway
Shareholders for use at the Rollway Special Meeting to be held at 10:00 a.m. on
[May 2, 1996], at Rollway's offices, 7600 Morgan Road, Liverpool, New York
13088.
At the close of business on [April 2, 1996], the Record Date for the
determination of the Rollway shareholders entitled to vote at the Rollway
Special Meeting, there were 1,500,000 authorized shares of Rollway Common Stock
of which 752,628 shares were issued and outstanding, as well as options to
purchase 66,666 shares of Rollway Common Stock, and 250,000 authorized shares
of Rollway Preferred Stock of which 93,692 shares were issued and outstanding.
Each share of Rollway Common Stock and each share of Rollway Preferred Stock
shall be entitled to one vote on the respective matters set forth below.
Purpose; Vote Required
The purpose of the Rollway Special Meeting is to vote on the approval of
the Merger and the Preferred Stock Amendment. Only the holders of Rollway
Common Stock shall be entitled to vote on the approval of the Merger at the
Rollway Special Meeting. Similarly, only the holders of Rollway Preferred
Stock shall be entitled to vote on the approval of the Preferred Terms
Amendment.
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of the Rollway Common Stock is required to approve the
Merger. The affirmative vote of the holders of a majority of the shares of the
Rollway Preferred Stock outstanding is required to approve the Preferred Terms
Amendment.
Pursuant to certain Option Agreements dated November 6, 1995, as amended on
January 5, 1996 and March 27, 1996, the Group Shareholders of Rollway Common
Stock have agreed to vote in favor of the Merger. These shareholders include
H. Follett Hodgkins, Jr., Cynthia Hodgkins Schallmo, Ann M. Hodgkins, H.
Follett Hodgkins, III, Key Trust Company and H. Follett Hodgkins, Jr. as
Co-Trustees U/W Ruth S. Hodgkins and Key Trust Company and H. Follett Hodgkins,
Jr. as Co-Trustees U/W H. Follett Hodgkins. Collectively, these individuals
and entities have the right to vote 57.5% of the issued and outstanding Rollway
Common Stock entitled to vote on the Merger. It is also anticipated that these
individuals and entities will vote their shares of Rollway Preferred Stock
(totalling 18,248 shares or 19.5%) in favor of the Preferred Terms Amendment.
Voting and Revocation of Proxies
All shares of Rollway Stock (Common or Preferred) that are represented by a
properly executed proxy and received prior to the vote at the Rollway Special
Meeting will be voted at such meeting in the manner directed on the proxy
unless such proxy is revoked in advance of such vote. If no direction is
indicated on the proxy, the proxy will be voted in favor of the Merger or the
Preferred Terms Amendment, as applicable.
At any time before it is voted any proxy given by a holder of Rollway Stock
may be revoked by (i) the holder attending the Rollway Special Meeting and
voting in person, (ii) the due execution and delivery of a later dated proxy,
<PAGE> 33
or (iii) the due execution and delivery of a written notice of revocation to
Donald M. Mawhinney, Jr., Secretary, Lipe-Rollway Corporation, 7600 Morgan
Road, Liverpool, New York 13090. Attendance at the Rollway Special Meeting
will not in itself constitute the revocation of a proxy.
Solicitation of Proxies
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation on behalf of the Board of Directors of Rollway of proxies for use
at the Rollway Special Meeting. The costs of solicitation will be borne by
Rollway. In addition to the use of mails, some of the officers, directors and
regular employees of Rollway may solicit proxies in person and by telephone and
may solicit brokers and other persons holding shares beneficially owned by
others to procure from the beneficial owners consents to the execution of
proxies. Rollway will reimburse such brokers and other persons for their
expenses incurred in sending proxy forms and other materials to their
principals.
INFORMATION ABOUT EMERSON
Business
Emerson was incorporated in Missouri in 1890. Originally engaged in the
manufacture and sale of electric motors and fans, Emerson's product lines were
subsequently expanded through internal growth and acquisitions. Emerson is now
engaged principally in the design, manufacture and sale of a broad range of
electrical, electromechanical and electronic products and systems.
The products manufactured by Emerson are classified into the following
industry segments: Commercial and Industrial Components and Systems; and
Appliance and Construction-Related Components. Net sales, income before income
taxes and accounting changes and total assets attributable to each industry
segment for the three years ended September 30, 1995 are set forth in Note 12
of Notes to Consolidated Financial Statements on page 39 of Emerson's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995 (the "1995
Annual Report"), which note is hereby incorporated by reference. Information
with respect to acquisition and divestiture activities by Emerson is set forth
in Note 2 of Notes to Consolidated Financial Statements on page 33 of the 1995
Annual Report, which note is hereby incorporated by reference.
Commercial and Industrial Components and Systems
The Commercial and Industrial segment includes process control
instrumentation, valves and systems; industrial motors and drives; industrial
machinery, equipment and components; and electronic products. These products
are generally highly engineered, both in product design and manufacturing
process. Products of this segment are sold to commercial and industrial
distributors and end-users for manufacturing and commercial applications.
Products used in process industries include various types of
instrumentation, valves and control systems for measurement and control of
fluid flow. Included are various types of meters such as rotometers, positive
displacement meters, magnetic flow meters, turbine meters, direct mass flow
meters and laboratory instruments to measure water quality. Other products
include solid state telemetering equipment, various types of pressure and
<PAGE> 34
vacuum relief valves and personal computer-based software used for industrial
automation applications. In addition, Emerson manufactures and sells
temperature sensors, pressure sensors and transmitters used to measure and/or
control temperature, pressure, level and rate and amount of flow. Also
produced are process gas chromatographs, in-situ absorptive oxygen analyzers,
infrared gas and trace moisture analyzers, combustion analyzers and systems,
and other analyzers which measure pH and conductivity. Emerson also
manufactures and sells sliding stem valves, rotary valves, plastic-lined plug
valves, butterfly valves, pressure regulators, and related actuators and
controllers.
Emerson also manufactures electronic measurement and data acquisition
equipment for use in industrial processing. In addition, Emerson produces
vibratory separating equipment used primarily in the chemical, mining,
pharmaceutical, food processing, pulp and paper, ceramic and metal-working
markets.
Beginning with a line of electric motors for industrial and heavy
commercial applications, Emerson's products for industrial automation include
certain kinds of integral horsepower motors, gear drives, pump motors,
alternators, electronic variable speed drives and diesel generator sets.
Emerson also produces electronic uninterruptible power supplies, power
conditioning and distribution equipment, modular power systems and
environmental control systems used in communications and information processing
applications.
Emerson manufactures and sells components for the transmission and
regulation of mechanical power, such as certain kinds of chains, sprockets,
sheaves, gears, bearings, couplings and speed reducers, and a line of cam-
operated index drives, programmable motion controllers and automation
accessories. These products are used primarily in industrial and commercial
applications requiring the transmission of mechanical motion or drive systems
of various types.
Emerson also manufactures a line of multi-purpose pressure and solenoid
valves, pressure, vacuum and temperature switches, automatic transfer switches,
remote control switches and electric power control systems. These products are
widely used in the automation of equipment and industrial processes and for the
control of emergency electric power.
Emerson also produces a variety of industrial and commercial ultrasonic
products for applications such as cleaning, sealing, welding and flaw
detection. Other products include material preparation and microstructure
analysis equipment. Emerson also manufactures electric circulation heaters,
fluid heat transfer systems and component heating elements.
Emerson manufactures a broad line of components for current-and noncurrent-
carrying electrical distribution devices such as panelboards, receptacles,
fittings, cable handling reels and lighting products for use in hazardous and
nonhazardous environments.
Appliance and Construction-Related Components
The Appliance and Construction-Related segment consists of fractional
horsepower motors; appliance components; heating, ventilating and air
conditioning components; and tools. This segment includes components sold to
distributors and original equipment manufacturers for inclusion in end-products
<PAGE> 35
and systems (ultimately sold through commercial and residential building
construction channels); and construction-related products which retain their
identity and are sold through distributors to consumers and the professional
trades.
Emerson manufactures and sells a variety of components and systems for
refrigeration and comfort control applications, including hermetic and semi-
hermetic compressors; hermetic motors and terminals for hermetically sealed
compressors; and fractional and sub-fractional horsepower motors for selected
appliance, office equipment, ventilating equipment, pump, heater and other
motor-driven machine applications. Automatic temperature controls, timers,
switches, and thermo-protective devices are manufactured for gas and electric
heating systems, refrigeration and air conditioning equipment and various large
and small appliances. Emerson also manufactures and sells a variety of
electric heating elements and electrostatic air cleaners.
Emerson manufactures and sells a line of electrical products primarily for
the residential markets, including humidifiers, electric waste disposers, hot
water dispensers, ventilating equipment and exhaust fans.
Emerson is a producer of selected professional and hardware tools and
service equipment. These products include certain kinds of wrenches, thread
cutters, pipe cutters, reamers, vises, pipe and bolt threading machines and
sewer and drain cleaning equipment. The principal markets for these
professional tools and service equipment include plumbing, heating and air
conditioning contractors, construction and maintenance companies, petroleum and
gas producers, refiners and processors, and farm and home consumers.
Emerson also produces a specialized line of light-duty industrial bench
power tools, ladders and scaffolding and related accessories. Also produced by
Emerson for marketing by a major retailer are shop vacuum cleaners, a line of
bench tools for home workshop use and a line of hand tools including adjustable
wrenches, screwdrivers, pliers and chisels.
Description of Emerson Capital Stock
The authorized capital stock of Emerson consists of 400,000,000 shares of
Emerson Common Stock and 5,400,000 shares of preferred stock, par value $2.50
per share (the "Emerson Preferred Stock"). As of December 31, 1995, there were
224,036,674 shares of Emerson Common Stock outstanding and no shares of Emerson
Preferred Stock outstanding.
Common Stock
Subject to the rights of any Emerson Preferred Stock which may be issued in
the future, each holder of Emerson Common Stock on the applicable record date
is entitled to receive such dividends as may be declared by the board of
directors of Emerson out of funds legally available therefor, and in the event
of liquidation, to share pro rata in any distribution of Emerson's assets
remaining after payment of liabilities. Generally, the vote of the holders of
a majority of shares of voting stock shall decide all matters presented to a
vote of shareholders of Emerson, unless, by express provision of law, Emerson's
Restated Articles of Incorporation or Emerson's By-laws, a different vote is
required. All shares of Emerson Common Stock and Emerson Preferred Stock are
deemed to be voting stock of Emerson, and all holders thereof shall be entitled
to one vote for each share of stock standing in their names, respectively.
<PAGE> 36
Holders of Emerson Common Stock have no pre-emptive rights to purchase or
subscribe for any stock or other securities of Emerson. The outstanding
Emerson Common Stock is, and the Emerson Common Shares offered hereby when sold
and delivered will be, fully paid and non-assessable.
Preferred Stock
The Board of Directors of Emerson has the authority to issue the shares of
Emerson Preferred Stock in one or more series and to fix, by resolution, the
number of shares constituting any such series, the designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including the dividend
rights, dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, conversion rights, amounts payable on
liquidation and liquidation preferences of the shares constituting any series,
without any further vote or action by the shareholders. Each holder of Emerson
Preferred Stock will be entitled to one vote per share on all matters presented
to a vote of shareholders of Emerson. No shares of Emerson Preferred Stock are
outstanding. Any shares of Emerson Preferred Stock so authorized and issued
would have priority over the Emerson Common Stock with respect to dividend and
liquidation rights.
At the November 1, 1988 meeting of the Emerson Board of Directors,
2,500,000 shares of Emerson Preferred Stock were designated by the Board of
Directors as Series A Junior Participating Preferred Stock, par value $2.50 per
share, in connection with the adoption at such meeting of the Preferred Share
Purchase Rights Plan (described below), but no shares of Series A Junior
Participating Preferred Stock have been issued as of the date hereof.
Certain Effects of Authorized but Unissued Stock
Emerson's authorized but unissued shares, as well as treasury shares, are
available for future issuance without shareholder approval. These additional
shares may be utilized for a variety of proper corporate purposes, including
future public offerings to raise additional capital, to facilitate corporate
acquisitions and for employee benefit plans.
One of the effects of the existence of unissued and unreserved Emerson
Preferred Stock and Emerson Common Stock may be to enable Emerson's Board of
Directors to issue shares to persons friendly to current management which could
render more difficult or discourage an attempt to obtain control of Emerson
means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of Emerson's management. Issuance of Emerson Preferred
Stock might, under certain circumstances, deter the acquisition of Emerson or
its securities by a person concerned about the terms or effect of such Emerson
Preferred Stock.
Preferred Share Purchase Rights Plan
In November, 1988, Emerson's Board of Directors approved and implemented a
Preferred Share Purchase Rights Plan (the "Rights Plan"), designed to assure
that all of Emerson's shareholders receive fair and equal treatment in the
event of any proposed takeover and to guard against abusive takeover tactics.
Pursuant to the Rights Plan, the Board of Directors declared a dividend
distribution of one Preferred Share Purchase Right (a "Right") for each
<PAGE> 37
outstanding share of Emerson Common Stock as of the record date of November 14,
1988. Initially, the Rights are evidenced by and trade with the Emerson Common
Stock certificates and no separate Rights certificates exist. Until the Rights
become separable as described below, a Right will accompany every share of
Emerson Common Stock, whether initially issued or issued from Emerson's
treasury.
The Rights would become exercisable and separate from Emerson Common Stock
on the earlier to occur of (i) ten days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired 20% or more of the outstanding shares of Emerson Common Stock, or (ii)
ten business days (or such later date as determined by the Board of Directors
prior to such time as any person becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make a tender offer or
exchange offer, the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of the outstanding shares of
Emerson Common Stock. The 20% thresholds may be reduced to not less than 10%
or the highest percentage known by Emerson to be owned by any person or group,
by the Board of Directors.
When exercisable, each Right would entitle the registered holder to
purchase one-hundredth of a share of Series A Junior Participating Preferred
Stock, par value $2.50 per share, at an exercise price of $120 per one-
hundredth of a share, subject to certain adjustments. Each share of Series A
Junior Participating Preferred Stock is entitled to one vote on all matters
submitted to a vote of shareholders. Emerson has reserved for issuance the
number of shares of the Series A Junior Participating Preferred Stock issuable
upon exercise of the Rights.
If any person or group of affiliated or associated persons acquires 20% or
more but less than 50% of Emerson Common Stock outstanding, each Right, except
those held by such persons which have become void, may be exchanged by the
Board of Directors for one share of Emerson Common Stock or one-hundredth of a
share of the Series A Junior Participating Preferred Stock, subject to certain
adjustments.
In the event that Emerson is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power is sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
In the event that (i) any person becomes an Acquiring Person (unless such
person first acquires 20% or more of the outstanding shares of Emerson Common
Stock by a purchase pursuant to a tender offer for all of the shares of Emerson
Common Stock for cash, which purchase increases such person's beneficial
ownership to 80% or more of the outstanding shares of Emerson Common Stock) or
(ii) during such time as there is an Acquiring Person, there will be a
reclassification of securities or a recapitalization or reorganization of
Emerson or other transaction or series of transactions involving Emerson which
has the effect of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of Emerson or any of its
subsidiaries beneficially owned by the Acquiring Person, proper provision will
be made so that each holder of a Right, other than Rights beneficially owned by
the Acquiring Person (which will thereafter be void), will thereafter have the
<PAGE> 38
right to receive upon exercise that number of shares of Emerson Common Stock
having a market value of two times the exercise price of the Right.
The Rights can be redeemed, in whole but not in part, by the Board of
Directors for one cent per Right (the "Redemption Price") at any time prior to
the acquisition by a person or group of affiliated or associated persons of
beneficial ownership of 20% or more of the Emerson Common Stock. In addition,
if a bidder who does not beneficially own more than 1% of the Emerson Common
Stock (and who has not within the past year owned in excess of 1% of the
Emerson Common Stock and, at a time he held such greater than 1% stake,
disclosed, or caused the disclosure of, an intention which relates to or would
result in the acquisition or influence of control of Emerson) proposes to
acquire all of the Emerson Common Stock (and all other shares of capital stock
of Emerson entitled to vote with the Emerson Common Stock in the election of
directors or on mergers, consolidations, sales of all or substantially all of
Emerson's assets, liquidations, dissolutions or windings up) for cash at a
price which a nationally recognized investment banker selected by such bidder
states in writing is fair, and such bidder has obtained written financing
commitments (or otherwise has financing) and complies with certain procedural
requirements, then Emerson, upon the request of such bidder, will hold a
special shareholders meeting to vote on a resolution requesting the Board of
Directors to accept the bidder's proposal. If a majority vote in favor of such
resolution, then for a period of 60 days after such meeting the Rights will be
automatically redeemed at the Redemption Price immediately prior to the
consummation of any tender offer for all of such shares at a price per share in
cash equal to or greater than the price offered by such bidder; provided,
however, that no redemption will be permitted or required after the acquisition
by any person or group of affiliated or associated persons of beneficial
ownership of 20% or more of the outstanding shares of Emerson Common Stock.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders will be to receive the
Redemption Price. The Rights, which do not have voting privileges, expire on
November 1, 1998, unless such date is extended or the Rights are earlier
redeemed.
The Rights have certain anti-takeover effects. The rights could cause
substantial dilution to a person or group that attempts to acquire Emerson
without conditioning the offer on redemption of the Rights or on substantially
all of the Rights also being acquired. The Rights should not, however,
interfere with any merger or other business combination approved by the Board
of Directors since the Rights may be redeemed by Emerson as described above.
Certain Charter and By-Law Provisions
The charter and by-laws of Emerson contain certain provisions, among other
things, establishing a classified board, limiting changes in the size of the
board, the removal of directors and the filling of vacancies, limiting the
calling of shareholder meetings, and restricting certain business combinations.
See "Comparative Rights of Shareholders." These provisions may have anti-
takeover effects.
<PAGE> 39
INFORMATION ABOUT ROLLWAY
General
Rollway's history began 116 years ago in 1880 with the opening of the C. E.
Lipe shop. Since then Rollway has designed and manufactured a myriad of
products and has become recognized as a premier bearing and material handling
manufacturer.
Rollway currently has two domestic divisions - Rollway Bearing and Lipe
Automation Equipment, both manufacturing in Syracuse, New York - and an
international subsidiary, Lipe-Rollway N.V. ("LRNV") with offices and a
warehouse in Kontich, Belgium. Rollway currently employs a total of
approximately 290 people.
Rollway Bearing Division provides high quality, high performance, precision
bearings for a wide variety of industries that include aerospace, mining,
agriculture, construction and precision manufacturing. Lipe Automation
Equipment manufactures beltless, vibratory, positioning, feeding and conveyor
systems under the trademark Dyna-Slide and the Lipe Bar Feed line of equipment,
which serves the machine tool industry. LRNV has responsibility for Rollway's
international operations, providing an international distribution channel in 85
countries outside the United States. Much of the product sold by LRNV is
manufactured to Rollway quality specifications with the Rollway label and is
produced by a variety of different Eastern European and other manufacturers.
Rollway Bearing
Rollway Bearing manufactures high quality cylindrical roller bearings,
cylindrical thrust bearings, tapered thrust bearings and angular contact ball
bearings up to 42 inch outside diameters.
Industry and Market Overview
American Bearing Manufacturers Association statistics for the first two
quarters of 1995 show positive industry growth compared to the prior year.
Bearing shipments (except tapered roller bearings) were up 17%. Rollway
shipments for fiscal year 1995 were up 21%, incoming orders 17% and backlog
16%, in each case over fiscal 1994. Rollway has recently seen strength in the
Original Equipment Manufacturing ("OEM") marketplace, and an increase in
government sales. During the past year Rollway has taken a far more selective
approach with respect to aerospace marketing resulting in a decrease in
aerospace business. Government sales have been strong in non-aerospace
bearings.
Market Size and Potential
The US cylindrical bearing market is estimated at $250 million per year for
products which can be manufactured by Rollway. This does not include
automotive applications. Rollway has the potential to gain market share
specifically in the steel and oil field equipment industries. Aftermarket
sales through distribution also offer substantial growth opportunities for
Rollway.
<PAGE> 40
Sales and Distribution
Rollway's primary OEM customers produce off-highway equipment, machinery,
hydraulic pumps, industrial gear boxes and oil field equipment. Rollway
maintains a small but important position with all major distributors due to a
long history of quality products. Aerospace sales are for helicopter
transmissions and hydraulic pumps.
Competition and Technology
The Rollway Bearing Division has a number of very large multi-national
competitors and several smaller domestic producers of cylindrical and thrust
bearings.
Rollway has an ongoing program with Crucible Steel and Syracuse University
to develop a hot, isostatically pressed material to be used as a bearing steel.
This material exhibits excellent hardness, fine, uniform distribution of
carbides and few non-metallic inclusions. Rollway's largest aerospace customer
has shown interest in this program and testing will begin in 1996.
Lipe Automation Equipment
Lipe Automation Equipment ("LAE") is a value-added, engineer to-order,
supplier of parts handling equipment, serving both the assembly automation and
screw machine industries for over 25 years. With 1995 revenues of
approximately $3.1 million and approximately 28 employees, LAE has developed a
reputation for delivering quality products and service.
Industry & Market Overview
The Dyna-Slide product line is one of the most respected names in the parts
handling business, with a customer base that includes many of the Fortune 1000.
By focusing the majority of its efforts in the automotive, bearing, glass,
powdered metal and ceramic, plastic injection molding, metal stamping, and
machining industries, LAE has, in many cases, become the de facto standard for
supporting the gentle handling and difficult part orientation requirements of
many major American manufacturers. The Lipe Bar Feed is a mature product that
has significant name recognition in the machine tool industry. LAE's Single
Spindle bar feed units have a reputation of uncompromised reliability and
quality. With over 14,000 Lipe Bar Feed units sold and delivered, a strong
spare parts business has evolved in support of the maintenance and repair needs
of customers.
Market Size and Potential
The Dyna-Slide and Bar Feed products service many industries. Because of
Dyna-Slide's careful handling capability, its markets include glass, powdered
metals, powdered ceramics, plastic injection moldings, bearings and other
finished or fragile parts. Bar Feed has its main application as a complement
to automatic screw machines. It also adds value to centerless grinder, thread
rollers, automatic lathes, punch presses, cut off machines and production
automatics. The automatic positioning of each new bar brings more productivity
as well as a fast and easy set up. The market potential for both of these
products within their current industries can be extended with more
<PAGE> 41
representation of the product through increased marketing and sales efforts.
The potential also exists for new markets with the new technology enhancements
and engineering expertise currently available within LAE.
Sales and Distribution
The business outlook for both the Dyna-Slide and Bar Feed lines of business
remains positive with expectations of annual growth over the next 5 years. Use
of sales representative organizations to market and support LAE's products
provides increased territory coverage and exposure for the high quality
manufacturing solutions offered by LAE. A heightened commitment towards
stocking programs will promote an increase in the spare parts business. This
augments LAE's distribution network by supporting customers with the proper
solutions at the time they are needed.
Competition and Technology
The introduction of the new Lipe Short Bar Feed system in the first half of
1996 should enhance LAE's competitive edge. The ability to modify a proven
product to adapt to new applications such as this, assists LAE in penetrating
more markets and becoming more competitive. In addition, the focus on
providing more turnkey solutions with Dyna-Slide, through integration of other
automation components, like pick-n-place and rotary index tables, makes Dyna-
Slide a more versatile product. The addition of PLC (programmable logic
controllers) technology to products adds a broader market potential through the
computer programming versatility of this application. This technology enhances
LAE's presence in the competitive marketplace of complete, automated equipment
solutions. The introduction of the Flexible Feeder as a part of the LAE
equipment line should enhance LAE's market presence. The advantage of the
Flexible Feeder is the multi-use capability to adapt to different tooling needs
for application with more types of equipment. The competitive advantage lies
in the need for only one piece of adaptable equipment as opposed to multiple,
single use pieces. The continued development of engineering capability and new
technology together with LAE's reputation is enabling LAE to compete with
established machine builders in becoming a premier supplier of automated
systems.
A critical success factor will be the development of an engineering
competency that provides for not only the conceptual development of LAE's
solutions, but also the credibility needed in order to compete with the more
established specialty machine builders. In order to be successful, LAE must
leverage its reputation and expertise in the parts handling business, and
deliver quality products on time. If LAE is successful in making the
transition from being strictly a product supplier to more of a systems
integrator, the long term growth potential is significant.
European sales as a percentage of total sales turnover are increasing.
Germany and Eastern Europe have been recent growth areas. Part of this growth
has stemmed from a new authorized Rollway distributor in Slovania. This will
help become a basis for expansion into other countries. Growth will continue
in this market with the settling of political situations in this area. South
East Asia and North Africa are two new target areas. With the fastest growing
economic center in the world in South East Asia, there are many opportunities
for expansion in this market. The experience of LRNV's sales people should be
beneficial in penetrating the North African area. LRNV is currently developing
new selling techniques for the local Antwerp market as well.
<PAGE> 42
Properties
Rollway owns and maintains office and manufacturing facilities in one
location in the Syracuse, New York metropolitan area. This facility has an
aggregate floor space of approximately 222,000 square feet. LRNV owns an
office and distribution facility in Kontich, Belgium with an aggregate floor
space of approximately 59,500 square feet.
Legal Proceedings and Administrative Matters
Rollway is a party from time to time to legal proceedings in the ordinary
course of its business. Rollway in not engaged at the present time in any
legal proceeding of a material nature.
During the course of the due diligence process, Emerson and Rollway noted
several environmental issues with respect to Rollway's Syracuse, New York
facility. These issues, which involve primarily the discharge of materials,
have been reported as required to the appropriate governmental authorities.
Without further site characterization studies, it is difficult to determine the
actual costs of remediating the underlying problems. The estimated range of
costs is $900,000 to $2,300,000. The lower of these amounts has been reflected
in Rollway's year end December 3, 1995 financial statements. No proceeding has
been instituted or threatened to be instituted by any governmental authority as
of the date of this Proxy Statement/Prospectus with respect to any of these
environmental issues.
Also during the due diligence process it was noted that Rollway has not
complied with certain requirements set forth in the Emergency Planning and
Community Right to Know Act and certain foreign reporting requirements.
Failure to comply with these requirements can result in the imposition of civil
penalties against Rollway. As of the date of this Proxy Statement/Prospectus,
no such penalties have been imposed or threatened by any governmental
authority.
Executive Officers and Directors
The executive officers and directors of Rollway, their respective ages and
positions held are as follows:
Name Age Position
- ------------------------ ---- -----------------------------------------------
H. Follett Hodgkins, Jr. 68 Chairman of the Board, Chief Executive Officer
and Director
Stephen M. Bregande 48 Director, President and Chief Operating Officer
William Eames 50 Chief Financial Officer
D. M. Mawhinney, Jr. 69 Director, General Counsel and Secretary
Donald F. Dew 71 Director
L. Richard Oliker 62 Director
Edward F. Reynolds 60 Director
Edmund J. Babiarz 42 Vice President
Karl Loessner 59 Vice President, Managing Director LRNV
<PAGE> 43
Business Experience
H. Follett Hodgkins, Jr., Chairman of the Board and Chief Executive
Officer. Mr. Hodgkins has served as a director of Rollway since 1963 and has
been Chief Executive Officer since 1973. Mr. Hodgkins has over 45 years with
Rollway.
Stephen M. Bregande, Director, President and Chief Operating Officer.
Mr. Bregande has served as a director and as Chief Operating Officer of Rollway
since 1994. Prior to joining the company, he was Vice-President and General
Manager of Data Net Inc. and Vice-President and General Manager at Dun &
Bradstreet Software. Mr. Bregande has also held other positions with Xerox
Corporation.
William J. Eames, Chief Financial Officer and Treasurer. Mr. Eames has
served as Chief Financial Officer of Rollway since 1992 and as Treasurer since
1991. His prior financial experience was with General Electric.
D. M. Mawhinney, Jr., Director, General Counsel and Secretary.
Mr. Mawhinney has served as a director of Rollway since 1976 and as General
Counsel and Secretary since 1988. He is a partner in the law firm of Hiscock &
Barclay, LLP, Syracuse, New York.
Donald F. Dew, Director. Mr. Dew has served as a director of Rollway since
1988. He is currently retired. Mr. Dew is the Chairman of the Board of
Diemolding Corporation, a plastic molding firm located in Syracuse, New York
and is a director of Fleet Bank of NY, Regional Board.
L. Richard Oliker, Director. Mr. Oliker has served as a director of
Rollway since 1981. He is a Professor Emeritus from Syracuse University and
currently serves as a Director of American General Life Insurance Company of
NY, Diemolding Corporation and Fleet Bank of NY, Regional Board.
Edward F. Reynolds, Director. Mr. Reynolds has served as a director of
Rollway since 1988. He is retired and is the former President and Chief
Executive Officer of R.E. Dietz Company, Syracuse, New York (lighting equipment
manufacturer).
Edmund J. Babiarz, Vice President. Mr. Babiarz has served as Vice-
President of Rollway since May, 1995. Prior to joining Rollway, he was
employed by Dun & Bradstreet Software and was involved in management strategy
and sales direction. Mr. Babiarz also has had experience with Baan
International (software company) and Xerox Corporation.
Karl Loessner, Vice-President, Managing Director of Lipe-Rollway N.V.
Mr. Loessner has been a Vice-President of Rollway since May, 1995. He became
Managing Director of Lipe-Rollway N.V. in 1986. Mr. Loessner has over 35 years
experience in the bearing industry and has been responsible for developing an
international distribution channel for Rollway's products in over 85 countries.
He was previously employed by Torrington (bearing manufacturer).
Security Ownership of Directors, Executive Officers and Principal Shareholders
The following table sets forth certain information regarding the beneficial
ownership of Rollway Common Stock and Rollway Preferred Stock as of [April 2,
1996] by (i) each current director and executive officer of Rollway, (ii) all
current directors and executive officers of Rollway as a group and (iii) each
<PAGE> 44
person or group of persons known by Rollway to beneficially own more than 5% of
the outstanding shares of Rollway Common Stock.
<TABLE>
<CAPTION>
Shares of % of Shares of % of
Common Stock Common Stock Preferred Stock Preferred Stock
Beneficially Beneficially Beneficially Beneficially
Owned Owned Owned Owned
------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Directors and Executive Officers
- --------------------------------
H. Follett Hodgkins, Jr. <F1>, <F2> 209,425 25.56 6,662 7.11
Stephen M. Bregande <F3> 60,984 7.44 126 .13
D. M. Mawhinney, Jr. 3,837 .47 182 .19
Edward F. Reynolds 260 .03 -- --
Edmund J. Babiarz <F4> 6,666 .81 -- --
All current directors and executive officers
as a group (9 in group) 281,172 34.32 6,970 7.44
5% Shareholders
- ---------------
Key Trust Company and H. Follett Hodgkins, Jr.
as Co-Trustees U/W H. Follett Hodgkins 20,082 2.45 4,593 4.90
Key Trust Company and H. Follett Hodgkins, Jr.
as Co-Trustees U/W Ruth S. Hodgkins 106,762 13.03 5,688 6.07
Cynthia Hodgkins Schallmo 47,838 5.84 297 3.17
H. Follett Hodgkins, III 44,361 5.41 146 .16
- ---------------
<FN>
<F1> Does not include 4,368 shares of Common Stock and 862 shares of Preferred Stock owned by Mr.
Hodgkins' wife, Ann Hodgkins. Mr. Hodgkins disclaims beneficial ownership of such shares.
<F2> Does not include shares with respect to which Mr. Hodgkins is a Co-Trustee with Key Trust Company
(see "5% Shareholders").
<F3> Includes 60,000 shares of Common Stock, which is the number of shares Mr. Bregande will be entitled
to acquire pursuant to Rollway's existing option plan if the Merger is approved. (See "The Merger - The
Rollway Options.")
<F4> Includes 6,666 shares of Common Stock, which is the number of shares Mr. Babiarz will be entitled to
acquire pursuant to Rollway's existing option plan if the Merger is approved. (See "The Merger - The
Rollway Options.")
</TABLE>
Description of Rollway Capital Stock
The authorized capital stock of Rollway consists of 1,500,000 shares of
Rollway Common Stock and 250,000 shares of Rollway Preferred Stock. As of
[April 2, 1996] there were 752,628 shares of Rollway Common Stock outstanding
and 93,692 shares of Rollway Preferred Stock outstanding.
<PAGE> 45
Rollway Common Stock
Subject to the rights of the Rollway Preferred Stock described below, each
holder of Rollway Common Stock on the applicable record date is entitled to
receive such dividends as may be declared by the Board of Directors of Rollway
out of funds legally available therefore, and in the event of liquidation, to
share pro rata in any distribution of Rollway's assets remaining after the
payment of liabilities and the payment of any amounts due the holders of
Rollway Preferred Stock. Each share of Rollway Common Stock entitles the
holder thereof to one vote on all matters properly submitted to Rollway's
shareholders. Except as otherwise required by law or by Rollway's Certificate
of Incorporation, the vote of the holders of a majority of the shares of
Rollway Common Stock is required to approve a matter presented to a vote of the
shareholders of Rollway. Holders of Rollway Common Stock have no pre-emptive
rights to purchase or subscribe for any stock or other securities of Rollway.
The outstanding stock of Rollway is fully paid and non-assessable.
Rollway Preferred Stock
Each share of Rollway Preferred Stock entitles the holder thereof to a
dividend of $1.00 per share when declared by the Board of Directors of Rollway
and to a preference of $10.00 per share in the event of the liquidation of
Rollway. Dividends on the Rollway Preferred Stock are cumulative and are
required to be paid prior to the payment of any dividends on the Rollway Common
Stock. Holders of Rollway Preferred Stock generally are not entitled to vote
on matters presented to Rollway shareholders; provided, however, if Rollway
shall have failed to pay the stated dividend on the Rollway Preferred Stock for
a period of three or more years, the holders of the Rollway Preferred Stock,
voting as a class, shall be entitled to elect two of Rollway's directors. No
dividends have been declared or paid on Rollway Preferred Stock since the
fourth quarter of 1993. Rollway has the right to redeem the Rollway Preferred
Stock at any time for a price of $20.00 per share plus any accrued but unpaid
dividends thereon to the redemption date.
Description of Rollway Options
On January 5, 1995, the Rollway shareholders approved a performance stock
option plan pursuant to which a total of 80,000 shares of Rollway Common Stock
were reserved for issuance. As of [April 2, 1996], a total of 66,666 Rollway
Options were outstanding pursuant to the plan. Of this amount, 60,000 were
held by Stephen M. Bregande and 6,666 were held by Edmund J. Babiarz pursuant
to separate Incentive Stock Option Agreements (the "Incentive Agreements").
The option exercise price is established in the Incentive Agreements at $1.80
per share.
<PAGE> 46
The Incentive Agreements initially set forth the following vesting
schedules for Messrs. Bregande and Babiarz:
Total No. of Shares Vested
--------------------------
Year Bregande Babiarz
- --------------------------------------------------- ------------ ------------
1994............................................... 20,000 1,667
1995............................................... 35,000 3,333
1996............................................... 50,000 5,000
1997............................................... 60,000 6,666
1998............................................... 60,000 6,666
Vesting was to occur, however, only if certain defined performance goals were
satisfied. These goals were satisfied for fiscal years' 1994 and 1995.
Notwithstanding the vesting schedule, the Incentive Agreements each provide
that the Rollway Options granted thereunder shall immediately vest and become
fully exercisable upon a "Change in Control". Change in Control is defined to
include: (i) any one or more persons other than an existing affiliate becoming
the beneficial owner of at least 50% of the combined voting power of Rollway's
securities; (ii) the sale of more than 50% (based on book value) of Rollway's
assets; or (iii) Rollway being merged or consolidated with any other person
other than an affiliate.
On February 8, 1996, the Option Committee of Rollway's Board of Directors
amended the Rollway Option Plan and each Rollway Option to provide that all
Rollway Options shall become vested immediately prior to the Effective Time and
shall be exercised at such time by the holders thereof. All shares of Rollway
Common Stock received upon exercise of the Rollway Options prior to the
Effective Time shall be converted in the Merger into the right to receive
Emerson Common Stock. See "The Merger - The Rollway Options."
Director/Officer Indemnification
Over the past several years, Rollway made certain indemnification payments
to certain of its officers and employees in connection with a lawsuit
instituted by the United States Government. These payments were made pursuant
to certain agreements which provided for indemnification of certain expenses by
Rollway if the individuals were acquitted. The payments totaled approximately
$370,000, of which approximately $65,000 related to Robert Wiehl, a former
officer of Rollway.
At its March 13, 1996 special meeting, the Board of Directors of Rollway
passed a resolution authorizing the procurement of continuing coverage for
Rollway's existing officers and directors after the Merger. A policy was
obtained in March 1996 at a one-time cost of approximately $65,000, which
provides for an aggregate of $3,000,000 of such coverage for a period of six
years.
<PAGE> 47
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Operating Results
Net sales for fiscal 1995 amounted to $46,493,462 representing an increase
of 41.3% above 1994 net sales. The net sales for 1994 were $32,903,821 or an
increase of 1.4% from 1993 net sales of $32,453,081. The increase in sales for
fiscal 1995 was primarily attributable to increased sales in the Rollway
international bearing markets. The backlog of sales orders, as of the end of
fiscal 1995 amounted to $17,065,164 which represented an increase of $6,128,164
or 56.0% compared to 1994. The largest share of the sales order backlog
increase in 1995 over 1994 came from an improvement in Rollway's domestic and
international bearing markets. The domestic backlog increased 16.4% and
international 57.2% over 1994.
Costs of product sold expressed as a percent of sales were 70.9% in 1995,
72.4% in 1994 and 75.4% in 1993. The percentage decrease in 1995 was primarily
due to greater efficiencies in manufacturing and increases in international
sales volume which carries a higher margin contribution.
Selling, general and administrative expenses amounted to $8,728,829 in
1995, $7,453,184 in 1994 and $6,957,418 in 1993. The major increases in 1995
were the result of increased operating expenses in the international division
due to increased sales volume. Overall selling, general and administrative
expenses as a percentage of sales are 18.8%, 22.7% and 21.4% for 1995, 1994 and
1993 respectively. The decline in the 1995 percentage is primarily the result
of increased sales volume.
Other administrative expenses incurred in 1995 totaled $1,488,108. These
expenses were composed of one time expenses. They include merger related
professional fees ($318,000), defense of former employees ($270,000) and
potential environmental clean up issues ($900,000). The environmental issues
were noted as part of the due diligence process. These issues, which primarily
involve the discharge of materials at Rollway's Syracuse, New York facility,
have been reported as required to the appropriate governmental authorities.
Preliminary estimates of the potential costs of remediation associated with
these matters indicate a range of costs between $900,000 and $2,300,000.
Significantly more site characterization will have to be performed, however, in
order to arrive at a reliable estimate. Because it cannot determine what
amount within the estimated range represents a better estimate, Rollway has
recorded a $900,000 liability at December 3, 1995. Management of Rollway, in
conjunction with its environmental advisors, has estimated that $70,000 of this
liability will be incurred during the ensuing fiscal year and consequently, the
remainder of the liability has been classified as long-term.
Interest expense increased in 1995 from 1994. The increase of $537,537 is
attributable to increased levels of borrowing and increased interest rates.
The unusual relationship of income tax expense to pre-tax income results
generally from foreign income being taxed at higher than U.S. statutory rates
and from domestic losses for which no tax benefits have been recognized. See
note 5 to the Rollway financial statements for more information concerning
Rollway's tax position.
1995 net income of $707,074 increased 596% over 1994 despite other
administrative expenses incurred. 1994 net income was $101,588 versus a loss
of $146,132 in 1993.
<PAGE> 48
Rollway continues to compensate for inflationary cost increases through its
efforts to control costs in the area of operating expenses, procedures designed
to maximize volume efficiencies, and offsetting price increases to customers.
Liquidity and Capital Resources
Rollway had domestic and foreign lines of credit, which provide for short-
term borrowings up to approximately $10,020,000 at December 3, 1995.
Borrowings against these lines of credit aggregated $8,686,818 at December 3,
1995. Rollway also had at December 3, 1995 checks outstanding in excess of
bank balances in the amount of $501,671 and $995,224 of current portion of long
term debt. Such amounts were $433,405 and $880,697, respectively, at
November 27, 1994. Interest on the borrowings are set as a function of the
prime rate. The domestic portion of the lines of credit were refinanced on
March 21, 1995.
At December 3, 1995, November 27, 1994 and November 28, 1993, long-term
debt consisted of $6,766,808, $10,165,439 and $3,702,688 respectively.
Rollway refinanced its domestic debt on March 21, 1995 creating additional
funds availability. On February 27, 1996, Rollway increased its domestic line
of credit by $1,500,000. This additional availability has given Rollway
sufficient cash resources to meet its foreseeable future needs.
In accordance with Financial Accounting Standards Board Statement No. 52,
all balance sheet accounts of foreign subsidiaries are translated at current
exchange rates and income statement items are translated at an average exchange
rate for the year. Foreign subsidiary currencies include the Belgian Franc and
the German Deutschmark. The gain or loss resulting from translating subsidiary
financial statements is recorded as a separate component of shareholders'
equity. Translation gains and losses are recorded in operations. Fluctuations
in current exchange rates have not and are not expected to have a material
impact on revenues, costs and business practices and plans in the future.
THE MERGER
General
The discussion in this Proxy Statement/Prospectus of the Merger and the
description of the principal terms of the Merger Agreement are subject to and
qualified in their entirety by reference to the Merger Agreement, a copy of
which is attached to this Proxy Statement/Prospectus as Exhibit A and which is
incorporated herein by reference.
Background of the Merger
In May, 1993, Emerson and Rollway engaged in preliminary discussions
regarding a possible merger. As a result of these discussions, a
confidentiality agreement was signed on June 23, 1993. After an analysis of
information provided by Rollway, Emerson made a proposal to acquire Rollway in
October, 1993. This was followed by meetings of Emerson representatives with
H. Follet Hodgkins, Jr., Rollway's Chairman and Chief Executive Officer, in
October, 1993, and subsequently with the Rollway Board of Directors in
December, 1993. These discussions terminated in July, 1994.
<PAGE> 49
Discussions resumed in July, 1995, leading to Emerson's submission of a
merger proposal in August, 1995. The merger proposal was documented in a
letter of intent dated November 2, 1995, which was amended on November 10,
1995, January 5, 1996 and March 27, 1996. Rollway, Emerson, and their
respective representatives then negotiated the terms of the Merger Agreement
which was tentatively approved, subject to a review of the final documents, by
Rollway's Board of Directors on February 8, 1996. Subsequent to such approval
of Rollway's Board of Directors, Emerson noted as part of its due diligence
process with respect to Rollway's European operations that it believes Rollway
may be subject to certain claims arising out of LRNV's commission payment
practices. Accordingly, the Escrow Deposit was increased by $1,000,000 to
provide additional security to Emerson in the event these claims are
successfully made. See "-- Escrow and Indemnity" and Sections 1.13 and 7.7
of the Merger Agreement, which is attached to this Proxy Statement/Prospectus
as Exhibit A. Rollway's Board of Directors approved this increase in the
Escrow Deposit and approved the Merger Agreement on March 28, 1996. The Merger
Agreement is the result of arms' length negotiations.
Emerson and Rollway signed the Merger Agreement on April 1, 1996.
Emerson's Reasons for the Merger
Numerous factors were taken into consideration by Emerson in entering into
the Merger Agreement, including, without limitation, the personnel, products,
operations, prospects, assets, obligations, and earnings of Rollway and
judgments with respect to the prospects for both Emerson and Rollway as well as
Emerson's belief that combining Rollway with Emerson's existing bearing
operations will enhance the presence of both companies in the bearing market,
thereby enabling them to offer their customers a broader and more varied array
of products.
In view of the wide variety of factors considered by Emerson, Emerson did
not find it practicable to quantify or otherwise attempt to assign relative
weights to the specific factors considered in making its determination.
Consequently, the Emerson Board did not quantify the assumptions and results of
its analysis in reaching its decision to enter into the Merger Agreement.
Rollway's Reasons for the Merger; Recommendation of Rollway's Board of
Directors
As a result of significant operating losses, in 1992, the Board of
Directors of Rollway began considering the various alternatives available to
Rollway (e.g., remaining independent, seeking a strategic partner, selling to
or merging with a third party). Three potential candidates were identified.
Over the course of the next two years, Rollway was in contact with each of
the candidates, including Emerson. Unfortunately, none of these potential
transactions came to fruition. This was due in large part to the belief of
Rollway's management that suitors were considering Rollway on the basis of a
significant undervaluation which did not take into account the improvement in
Rollway's financial and business condition.
In July 1995, Rollway reinstituted its discussions with Emerson. Over the
course of the next several months, several negotiations and discussions took
place between Rollway and Emerson. During that period, the parties discussed
at length a multitude of issues including the valuation of Rollway. On
<PAGE> 50
November 2, 1995, the parties executed a letter of intent, which was amended on
January 5, 1996 and March 27, 1996.
In January and February, 1996, the Board of Directors of Rollway held
several special meetings to consider the initial drafts of the Merger Agreement
and the issues raised by Emerson as a result of its due diligence. At the
special meetings, the Rollway Board of Directors considered in detail the terms
and conditions of the proposed Merger and the Preferred Terms Amendment.
On March 21 and March 28, 1996, the Board of Directors met again in special
session to consider the final Merger Agreement and the terms of the proposed
Merger and Preferred Terms Amendment. See "--Background of the Merger." After
giving the matter extensive consideration, the Board of Directors of Rollway
unanimously approved each of the proposals.
In reaching its conclusions, the Board of Directors of Rollway considered,
among other things, the following factors:
1. Operating History and Future Prospects. Over the past two years,
Rollway has demonstrated a return to profitability. For the fiscal year ending
November 27, 1994, Rollway had net income of $101,588. For the year ended
December 3, 1995, its net income was $707,074.
Unfortunately, this recent success has not been sufficient to offset
Rollway's losses over the past several years. These losses have been
substantial - i.e., $146,132, $1,167,091 and $926,103 for fiscal years ending
November 28, 1993, November 29, 1992 and December 1, 1991, respectively, As a
result, it has been extremely difficult for Rollway to finance any form of long
term growth.
Although the Directors of Rollway are hopeful that Rollway's recent
profitable performance can be sustained, they do not believe that this
improvement will be sufficient to allow Rollway to grow competitively without a
significant infusion of capital.
2. Dividend Paying History. Rollway has never paid a cash dividend on
its Common Stock. In recent years, Rollway has been in arrears on its
Preferred Stock dividends. The lack of dividend paying ability has been due,
in part, to the restrictions contained in certain debt arrangements to which
Rollway is a party. It has also been due, in part, to Rollway's inability to
generate surplus operating funds. Based on recent operating results and
Rollway's cash requirements, the Directors do not believe that dividends can be
paid on Rollway's Common Stock in the foreseeable future if Rollway remains
independently owned.
3. Shareholder Liquidity. Rollway's Common Stock is not traded on any
national securities exchange. As a result, trading has been extremely limited.
The effect of this inactivity has been a significant lack of shareholder
liquidity. The Merger offers Rollway shareholders the opportunity to receive
Emerson Common Stock which is listed on a national securities exchange and
actively traded.
4. Merger Consideration/Fairness Opinion. Absent any indemnification
claims or other adjustments (see "--Escrow and Indemnity" and "-- Holdback"),
the total Merger Consideration will be approximately $8,270,000 (see "-- Merger
Consideration") and will be divided on a pro rata basis among the holders of
Rollway Common Stock. However, it is important to note that if the closing of
the Merger had occurred at Rollway's 1995 fiscal year end, the Merger
<PAGE> 51
Consideration would have been adjusted downward by approximately $613,000
pursuant to the closing net worth provisions set forth in Section 1.9 of the
Merger Agreement. This would have resulted in a Merger Consideration of
approximately $7,657,000 subject to further adjustments (or approximately $9.35
per share of Rollway Common Stock based on an estimate of 819,294 outstanding
shares of Rollway Common Stock on a fully-diluted basis). If the Preferred
Terms Amendment is approved, each share of Rollway Preferred Stock will receive
a fraction of a share of Emerson Common Stock equal in value to $20.00 and an
amount in cash equal to the amount of accrued dividends owed on such Share at
the Effective Time. Thus the total dollar value of Emerson Common Stock to be
received in the Merger in exchange for Rollway Preferred Stock will be
$1,873,840.
The Directors believe that the Merger Consideration is fair. This belief
is based on the Directors' assessment of Rollway's future prospects and on
previous offers to acquire Rollway. It is also based on the fairness opinion
of Rollway's valuation advisor, MPI. MPI is a nationally recognized valuation
firm and is continually engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, leveraged buy-outs, private
transactions and other financial transactions. The Board of Directors of
Rollway decided to retain MPI on the basis of this experience.
On February 2, 1996, MPI delivered its written opinion to the Board of
Directors of Rollway that the transactions contemplated in the Merger Agreement
are fair from a financial point of view to the holders of the Rollway Common
Shares and the Rollway Preferred Shares. At the February 8, 1996 special
meeting of the Rollway Board, MPI made a detailed presentation of the basis of
its opinion and confirmed its February 2, 1996 opinion. This opinion was again
confirmed on March 25, 1996.
In connection with rendering its opinion, MPI: (i) considered the terms
and conditions of the proposed Merger and Preferred Terms Amendment; (ii)
reviewed and analyzed financial data regarding Rollway, including its audited
and unaudited consolidated financial statements for the fiscal years ended
approximately November 30, 1985 through 1995; (iii) reviewed and analyzed the
other relevant financial and operating data supplied by Rollway; (iv) discussed
past and current operations, financial condition and future prospects of
Rollway with members of its senior management; (v) prepared a comparative
analysis of Rollway and certain publicly held companies deemed by MPI to be
reasonably similar to Rollway with respect to financial and operating results
and investment characteristics; (vi) compared the financial terms of the Merger
with the financial terms of certain other mergers and acquisitions which MPI
deemed relevant; (vii) reviewed the premiums in value paid for control in
certain recent business combinations of companies in a variety of industries;
(viii) prepared a discounted net cash flow analysis; and (ix) reviewed
historical prices and trading activity of Rollway Common Stock.
A copy of MPI's opinion is attached to this Proxy Statement/Prospectus as
Exhibit B and sets forth the procedures followed, the matters considered and
the limitations on the scope of review undertaken by MPI. In preparing its
opinion, MPI relied, without independent verification, on the accuracy and
completeness of all financial and other information that was publicly available
or furnished by Rollway. MPI did not make any independent valuation or
appraisal of any of the assets or liabilities of Rollway.
Shareholders of Rollway should note that the preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In arriving at their fairness determination,
<PAGE> 52
MPI considered the results of all of its analyses and did not assign relative
weights thereto.
MPI is being paid a fee of $72,500 for acting as a financial advisor and
rendering its opinion to Rollway. In addition, Rollway has agreed to reimburse
MPI for out-of-pocket expenses and to indemnify MPI and certain persons against
certain liabilities under the federal securities laws arising out of its
engagement.
Based on all of the above and a number of other factors, the Board of
Directors of Rollway have unanimously determined that the transactions
contemplated with Emerson present the best opportunity for Rollway to succeed
in the future and for Rollway's shareholders to achieve an acceptable return on
their investment.
THE BOARD OF DIRECTORS OF ROLLWAY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AS BEING FAIR AND IN THE
BEST INTEREST OF ROLLWAY, ITS SHAREHOLDERS AND THE HOLDERS OF ROLLWAY OPTIONS.
THE ROLLWAY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF ROLLWAY
COMMON STOCK APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND THAT HOLDERS OF ROLLWAY PREFERRED STOCK APPROVE THE PREFERRED TERMS
AMENDMENT.
Effective Time; Closing Date
If the Merger Agreement and the transactions contemplated thereby are
approved by shareholders holding at least two-thirds of the outstanding shares
of Rollway Common Stock, the Merger will be consummated and effected at the
time a Certificate of Merger is filed with the Secretary of State of New York
and a Certificate of Merger is filed with the Secretary of State of Delaware.
The time at which the Merger becomes effective is referred to herein as the
"Effective Time." The Merger Agreement provides that Emerson and Rollway will
cause Certificates of Merger to be filed and recorded on the Closing Date in
accordance with the applicable provisions of the NYBCL and the Delaware General
Corporation Law. The Merger Agreement may be terminated prior to the Effective
Time by either Emerson or Rollway in certain circumstances, whether before or
after the approval of the Merger Agreement by the shareholders of Rollway. See
"Certain Provisions of the Merger Agreement -- Termination." The closing (the
"Closing") of the Merger will occur on the last day of the fiscal month in
which the Rollway shareholders approve the Merger or on another mutually
agreeable date (the "Closing Date"), as soon as practicable after the
satisfaction or waiver of all conditions to the Merger.
Form of the Merger
If (i) the Merger Agreement and the transactions contemplated thereby are
approved by holders of at least two-thirds of the outstanding shares of Rollway
Common Stock, and (ii) all other conditions to the Merger are satisfied or
waived (see "Certain Provisions of the Merger -- Conditions to the Consummation
of the Merger"), Emersub will be merged with and into Rollway, with Rollway as
the Surviving Corporation, which will thereupon become a wholly-owned
subsidiary of Emerson.
<PAGE> 53
Merger Consideration
At the Effective Time of the Merger, holders of Rollway Common Shares will
have the right to receive Emerson Common Shares, subject to an escrow
arrangement (see "-- Escrow and Indemnity" below) and a holdback arrangement
(see "--Holdback" below). Each holder of Rollway Common Shares will have the
right to receive a portion of the Merger Consideration, payable in Emerson
Common Shares valued at the Emerson Share Value, equal to the Rollway Common
Share Price multiplied by the number of Rollway Common Shares held by that
holder. Emerson shall aggregate the Emerson Common Stock issuable to any
person, and since fractional shares will not be issued, such person shall
receive cash in lieu of fractional shares remaining following the aggregation.
The "Rollway Common Share Price" will be based on an aggregate purchase price
for all of the Rollway Common Shares equal to approximately $8,270,000 adjusted
up or down as described below (as previously defined, the "Merger
Consideration," divided by the number of Rollway Common Shares outstanding on a
fully diluted basis at the Effective Time. However, it is important to note
that if the closing of the Merger had occurred at Rollway's 1995 fiscal year
end, the Merger Consideration would have been adjusted downward by
approximately $613,000 through the application of the closing net worth
provisions set forth in Section 1.9 of the Merger Agreement and using a Closing
Book Value Benchmark (as hereinafter defined) of $7,772,000. This would have
resulted in a Merger Consideration of approximately $7,657,000 subject to
further adjustments (or approximately $9.35 per share of Rollway Common Stock
based on an estimate of 819,294 outstanding shares of Rollway Common Stock on a
fully-diluted basis). The "Emerson Share Value" will equal the average closing
price of an Emerson Common Share for the ten consecutive trading days ending on
the third business day prior to the Closing Date, as reported in the Wall
Street Journal, New York Stock Exchange Composite Transactions.
The Merger Consideration ultimately payable to the former holders of
Rollway Common Shares will equal $8,269,936 minus the Closing Book Value
Adjustment (as hereinafter defined), if any, and plus or minus the Pension
Liability Adjustment (as hereinafter defined), if any. The "Closing Book Value
Adjustment" shall equal the amount, if any, by which the Closing Book Value
Benchmark (as hereinafter defined) exceeds the actual Rollway Closing Book
Value (as hereinafter defined). The "Closing Book Value Benchmark" shall equal
one of the following amounts, depending upon when the Closing Date occurs:
If the Closing Occurs Between Then the Closing Book Value Benchmark Will Be
- -------------------------------- ---------------------------------------------
March 4 and April 8 $8.650 million
April 9 and May 6 $8.830 million
May 7 and June 4 $9.040 million
June 5 and July 8 $9.214 million
July 9 and August 5 $9.338 million
The amounts set forth above were provided by Rollway's management to
Emerson as estimates of the book value of Rollway as of the ends of the months
indicated, calculated in the same manner as the Rollway Closing Book Value will
be calculated. These estimates were prepared by Rollway's management for
internal purposes only, and were not prepared with a view to public disclosure
or compliance with published guidelines of the Commission or guidelines
established by the American Institute of Certified Public Accountants for the
preparation and presentation of financial forecasts. Rollway does not as a
matter of course make public its internal estimates.
<PAGE> 54
The starting point in preparing the above estimates was Rollway's actual
September 1995 balance sheet. Rollway's management then made a number of
assumptions regarding Rollway's projected performance. These assumptions
included that revenues would remain at a constant level with no growth, that
the backlog would increase by approximately 1%, that cost of goods sold would
increase approximately 1% and that selling, general and administrative expenses
would increase approximately 2%. As of December 3, 1995, Rollway's performance
was approximately 8% below its projections for the fiscal month ending on such
date (approximately a $.75 reduction per Rollway Common Share) primarily as a
results of costs and expenses associated with the transactions contemplated in
the Merger Agreement. Management of Rollway does not anticipate that the
shortfall will be lessened significantly prior to the Effective Time.
These estimates were of necessity based on numerous complex assumptions
that are inherently subject to significant economic and competitive
uncertainties, which are difficult to predict and in many cases are beyond
Rollway's control. Some or all of such assumptions may not be realized. Given
the uncertainties inherent in the process of making such estimates, there can
be no assurance that the projected results will be achieved, thereby avoiding a
Closing Book Value Adjustment or that any of the projected results would be
achieved were Rollway to remain an independent company. Actual results for
projected periods may be significantly higher or lower than the projected
results. The fact that the estimates were shared by Rollway with Emerson
should not be regarded as an indication that Rollway or Emerson considers the
estimates to be an accurate prediction of future events. Neither Rollway nor
Emerson assumes any responsibility for such estimates or the assumptions
underlying them and such estimates are speculative and should not be regarded
as representations by Rollway or Emerson that such projected results will be
achieved. Rollway does not intend to update or otherwise revise these
estimates prior to consummation of the Merger.
The "Rollway Closing Book Value" will be determined based on a balance
sheet of Rollway as of the Closing Date (the "Closing Balance Sheet") to be
prepared by the Surviving Corporation during the 60 days following the Closing
Date. The Closing Balance Sheet will be prepared based on Rollway's historical
accounting practices to the extent such practices are in conformity with
generally accepted accounting principles consistently applied (except for the
adjustments to be made to the Closing Balance Sheet as described in the next
paragraph). The Closing Balance Sheet will include accruals for Closing Fees
(as hereinafter defined) payable by Rollway but not actually paid by Rollway as
of the Closing Date. Any disputes relating to the preparation of the Closing
Balance Sheet may be resolved on behalf of the Rollway shareholders by the
Common Shareholders' Representative. See "--Escrow and Indemnity" and "--
Common Shareholders' Representative." Expenses incurred by the Common
Shareholders' Representative in any such disputes will be reimbursed from the
Holdback. See "--Holdback." The holders of Rollway Common Stock shall
automatically be deemed to have waived any right or cause of action for any
action taken or omitted from being taken by the Common Shareholders'
Representative absent a showing of gross error or fraud.
For purposes of calculating the Closing Book Value, the following
principles shall apply: (i) there will be no adjustment for currency
translation, (ii) the line items for "intangible pension asset," "pension
accrual" and "long term pension liability" will be reversed, (iii) up to
$236,000 of the legal fees and expenses of the former Rollway employees Wiehl,
Connor and Cramp, if paid by Rollway prior to the Closing Date, will be added
to assets on the Closing Balance Sheet, or, if such legal fees and expenses are
accrued on the books of Rollway as a liability on the Closing Date, then such
<PAGE> 55
accrual (up to $236,000) will be disregarded in calculating the liabilities of
Rollway on the Closing Balance Sheet, (iv) the costs and expenses associated
with the remediation (but not the costs or expenses of Rollway in connection
with the discovery or assessment thereof) of the environmental issues described
on Schedule 1.16 to the Merger Agreement, if approved in writing by Emerson in
advance and paid by Rollway prior to the Closing Date, will be added to the
Closing Balance Sheet, or if such costs and expenses are accrued on the books
of Rollway as a liability on the Closing Date, then such accruals will be
disregarded in calculating the liabilities of Rollway on the Closing Balance
Sheet, (v) deferred taxes will be fixed at zero, (vi) severance payments, if
any, triggered by the Merger made prior to the Closing Date to Stephen Bregande
or Edmund Babiarz pursuant to their respective employment agreements with
Rollway will be added to the Closing Balance Sheet, or, if such payments are
accrued on the books of Rollway as a liability on the Closing Date, such
accruals will be disregarded in calculating the liabilities of Rollway on the
Closing Balance Sheet, and (vii) an amount equal to 40% of the taxable gain
realized by Rollway as a result of the transfer of life insurance policies to
H. Follett Hodgkins, Jr. will be subtracted from the Rollway Closing Book
Value. The foregoing adjustments are illustrated on Schedule 1.9 to the Merger
Agreement (a copy of which is attached to this Proxy Statement/Prospectus as
part of Exhibit A). The Merger Agreement provides that in the event of a
conflict between the provision and the Merger Agreement that describes these
adjustments and Schedule 1.9 to the Merger Agreement, Schedule 1.9 will govern.
Additionally, in an effort to resolve certain specified items of concern which
are expressly stated in the Merger Agreement regarding Rollway, the parties to
the Merger Agreement have agreed to a financial settlement with respect to such
items which has been reflected in the Merger Consideration. Accordingly, the
parties have agreed in the Merger Agreement that the Merger Consideration shall
not be further reduced nor shall any claim for indemnification be made with
respect to any of these specified items regardless of any representations or
warranties of Rollway contained in the Merger Agreement.
Concurrent with the delivery of the Closing Balance Sheet, Emerson will
deliver to the Common Shareholders' Representative a calculation of the
"Rollway Closing Pension Liability," which shall be equal the underfunded
pension liability of Rollway as of the Closing Date, defined as the amount by
which the projected benefit obligation of the Rollway pension plans exceeds the
fair market value of plan assets, calculated using the following assumptions:
Discount rate: 8.00%
Mortality: 1983 GAM
Termination: 125% of Sarason's T-5
Retirement: Age Rate
----- ----
55-61 2%
62 15%
63 10%
64 10%
65 100%
The "Pension Liability Adjustment" will equal the amount by which the Rollway
Closing Pension Liability is greater than or less than $1,953,000.
For purposes of issuing Emerson Common Stock to shareholders of Rollway who
surrender their certificates formerly representing Rollway Common Shares after
the Effective Time but prior to the final determination of the Merger
Consideration, the consideration initially payable to such shareholders will be
calculated based on the balance sheet of Rollway as of the month-end
<PAGE> 56
immediately preceding the Closing Date (the "Pre-Closing Balance Sheet"). Such
initial amount of consideration is referred to herein as the "Estimated Merger
Consideration" and is subject to an Escrow and Holdback. See "-- Escrow and
Indemnity" and "--Holdback."
Holdback
Emerson Common Shares valued at the Emerson Share Value worth $1,000,000,
the "Holdback," shall be withheld from the payment of the Estimated Merger
Consideration as security for any adjustments to the Estimated Merger
Consideration following completion of the Closing Balance Sheet, determination
of the Rollway Closing Pension Liability, and to fund any reasonable expenses
incurred by the Common Shareholders' Representative in resolving any dispute
relating to the Closing Balance Sheet and/or the determination of the Rollway
Closing Pension Liability (the "Representative's Expenses"). After the Merger
Consideration has been finally determined, and if it is greater than the
Estimated Merger Consideration (less the Holdback, net of the Representative's
Expenses, if any (the "Net Holdback")), such excess shall be promptly issued to
the former holders of Rollway Common Shares on a pro rata basis in proportion
to each such holder's portion of the Merger Consideration. If the Estimated
Merger Consideration (less the Net Holdback) is greater than the Merger
Consideration, Emerson shall be entitled to retain the Holdback and withdraw
from the Escrow Funds the amount, if any, by which the Estimated Merger
Consideration (less the Net Holdback) exceeds the Merger Consideration. To the
extent the Escrow Funds are insufficient to reimburse Emerson for the amount by
which the Estimated Merger Consideration (less the Net Holdback) exceeds the
Merger Consideration, each former holder of shares of Rollway Common Stock
shall be obligated to return to Emerson such holder's pro rata portion of such
excess consideration by either: (a) tendering to Emerson his or her
certificate representing Emerson Shares issued in the Merger in exchange for
new certificates representing the number of Emerson Shares to which such holder
is actually entitled; or (b) paying Emerson cash equal to such holder's pro
rata portion of such excess consideration.
Escrow and Indemnity
Emerson Common Shares valued at the Emerson Share Value worth $2,600,000,
the "Escrow Deposit," will be held in Escrow under an Escrow Agreement to be
executed in connection with the closing of the Merger (Exhibit 1.13 to the
Merger Agreement attached hereto as Exhibit A, the "Escrow Agreement"). The
Escrow Deposit shall be funded from the Merger Consideration otherwise payable
to the holders of Rollway Common Shares. The Indemnity Escrow Funds
($2,500,000 of the Escrow Deposit) will be held as security to compensate
Emerson, the Surviving Corporation and their affiliates if they suffer losses
as a result of a breach of any of Rollway's representations, warranties or
covenants in the Merger Agreement, as a result of the assertion against Emerson
or the Surviving Corporation of certain tax liabilities, arising out of
Rollway's agreement to indemnify MPI, arising out of the commission payment
practices of LRNV or arising out of certain legal proceedings pending against
Rollway ("Indemnifiable Claims"). Emerson may not, however, withdraw Escrow
Funds until undisputed Indemnifiable Claims exceed $100,000 in the aggregate,
at which point Emerson will be entitled to withdraw Escrow Funds in payment of
all undisputed Indemnifiable Claims, including the first $100,000 worth of
Indemnifiable Claims. Indemnifiable Claims arising out of Rollway's agreement
to indemnify MPI are not subject to such $100,000 threshold. The
Representative Escrow Funds ($100,000 of the Escrow Deposit) will be held to
<PAGE> 57
pay the reasonable fees and expenses of the Common Shareholders' Representative
incurred in resolving any dispute relating to Indemnifiable Claims. The Escrow
Agreement shall be executed by Emerson, the Common Shareholders'
Representative, and Boatmen's Trust Company of St. Louis (the "Escrow Agent").
The Escrow Agent will distribute the Escrow Deposit and all income earned
thereon to the former holders of the Rollway Common Stock in accordance with
the Escrow Agreement as follows:
(a) on January 3, 1997, the Escrow Agent will distribute a portion of
the Indemnity Escrow Funds (valued at the Emerson Share Value) equal to the
lesser of (i) $1,000,000, together with all income earned thereon, less any
amounts distributed to Emerson under the Escrow Agreement in respect of claims
arising from or relating to the commission payment practices of LRNV, or (ii)
the Indemnity Escrow Funds, to the former holders of the Rollway Common Stock;
and
(b) eighteen months after the Closing Date, the Escrow Agent will
distribute the balance of the Indemnity Escrow Funds and the Representative
Escrow Funds to the former holders of the Rollway Common Stock;
except in each case to the extent some or all of such Escrow Funds have been
distributed to Emerson or to the Common Shareholders' Representative pursuant
to the terms of the Escrow Agreement.
Notwithstanding the foregoing, in the event Emerson discovers, prior to
January 1, 1997, reasonably reliable evidence that, in connection with the
commission payment practices of LRNV, LRNV and/or Rollway committed acts that
justify or might justify an extension to 5 years of the statute of limitations
applicable to any tax-reporting or tax-payment statute applicable to such
commission payment practices, the Escrow Agent will not make the distribution
described in paragraph (a) above and will, upon the expiration of eighteen
months after the Closing Date, retain from the distribution described in
paragraph (b) above Emerson Shares (valued at the Emerson Share Value) equal to
the lesser of (i) $1,000,000, together with all income earned thereon, less any
amounts distributed to Emerson under the Escrow Agreement in respect of claims
arising from or relating to the commission payment practices of LRNV, or (ii)
the Escrow Funds, until January 4, 1999, at which time such retained Escrow
Funds, to the extent not distributed to Emerson, shall be distributed to the
former holders of the Rollway Common Stock pursuant to the Escrow Agreement.
See Section 1.13 of the Merger Agreement, which is attached to this Proxy
Statement/Prospectus as Exhibit A.
TO THE EXTENT THE ESCROW FUNDS ARE INSUFFICIENT TO REIMBURSE EMERSON FOR
THE AMOUNT OF INDEMNIFIABLE CLAIMS, IF ANY, EACH FORMER HOLDER OF SHARES OF
ROLLWAY COMMON STOCK SHALL BE PERSONALLY OBLIGATED TO PROMPTLY RETURN TO
EMERSON SUCH HOLDER'S PRO RATA PORTION OF SUCH EXCESS CONSIDERATION BY
TENDERING TO EMERSON HIS OR HER CERTIFICATE REPRESENTING EMERSON SHARES ISSUED
IN THE MERGER IN EXCHANGE FOR NEW CERTIFICATES REPRESENTING THE NUMBER OF
EMERSON SHARES TO WHICH SUCH HOLDER IS ACTUALLY ENTITLED OR BY PAYING EMERSON
THE CASH EQUIVALENT OF SUCH EXCESS CONSIDERATION. THIS INDEMNIFICATION
OBLIGATION WILL BE THE OBLIGATION OF THE FORMER ROLLWAY COMMON STOCK HOLDER WHO
SUBMITTED HIS OR HER ROLLWAY COMMON STOCK CERTIFICATE FOR EXCHANGE IN THE
MERGER AND WILL NOT AFFECT SUCH PERSON'S ABILITY TO TRANSFER THE EMERSON SHARES
RECEIVED IN THE MERGER AND SHALL BE LIMITED TO SUCH FORMER COMMON SHAREHOLDER'S
PORTION OF THE MERGER CONSIDERATION. HOLDERS WHO PROPERLY CLAIM DISSENTING
SHAREHOLDER RIGHTS WILL NOT BE SUBJECT TO THIS INDEMNIFICATION OBLIGATION.
<PAGE> 58
BY SUBMITTING CERTIFICATES FORMERLY REPRESENTING ROLLWAY COMMON STOCK, EACH
SUBMITTING COMMON SHAREHOLDER WILL HAVE AGREED TO PERSONALLY INDEMNIFY EMERSON,
THE SURVIVING CORPORATION AND THEIR AFFILIATES ON DEMAND AGAINST ANY AND ALL
LOSSES TO THE EXTENT ESCROW FUNDS ARE NOT AVAILABLE THEREFOR, EITHER BECAUSE
THE ESCROW FUNDS HAVE BEEN MADE AVAILABLE TO EMERSON DUE TO THE BREACH OF ANY
OF ROLLWAY'S REPRESENTATIONS, WARRANTIES OR COVENANTS IN THE MERGER AGREEMENT
OR THE ESCROW AGREEMENT HAS TERMINATED. SUCH PERSONAL INDEMNIFICATION
OBLIGATIONS SHALL BE SEVERAL AND ONLY IN PROPORTION TO, AND SHALL BE LIMITED
TO, EACH COMMON SHAREHOLDER'S PORTION OF THE MERGER CONSIDERATION. SUCH COMMON
SHAREHOLDERS SHALL ALSO BE DEEMED TO HAVE WAIVED ANY RIGHT OF CONTRIBUTION OR
OTHER SIMILAR RIGHT AGAINST THE SURVIVING CORPORATION ARISING OUT OF ROLLWAY'S
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS CONTAINED IN THE MERGER
AGREEMENT AND SHALL BE DEEMED TO HAVE AGREED TO ALL OTHER PROVISIONS OF THE
MERGER AGREEMENT SPECIFICALLY STATED THEREIN TO BE AN OBLIGATION OR AGREEMENT
OF SUCH COMMON SHAREHOLDERS.
Common Shareholders' Representative
As described below, by submitting certificates formerly representing shares
of Rollway Common Stock for exchange in the Merger, the holders of such
certificates will have agreed to the appointment of Henry Fust, a C.P.A. in
Syracuse, New York, as the Common Shareholders' Representative. Mr. Fust is a
partner in Fust, Charles, Chambers & Harfosh LLP. The Common Shareholders'
Representative will be responsible for protecting the interests of the former
holders of Rollway Common Stock in connection with the calculation of the
Closing Balance Sheet, the Rollway Closing Pension Liability and the assertion
of any Indemnifiable Claims and for voting all Emerson Common Shares held in
Escrow. The Merger Agreement provides that the Common Shareholders'
Representative will have full power to act on behalf of the former holders of
Rollway Common Shares in connection with such matters, and that Emerson agrees
to grant the Common Shareholders' Representative and his agents access to such
books, records and other information as may be reasonably necessary to respond
to any claim for indemnification. The Common Shareholders' Representative will
be entitled to reimbursement from the former holders of Rollway Common Shares
of all reasonable expenses included in the performance of his duties as Common
Shareholders' Representative, including, but not limited to, the right to
employ financial advisors and other agents to undertake or assist in such
duties. The Common Shareholders' Representative is expressly authorized to
rely upon the advice of such consultants and agents. Payment of the fees and
expenses of the Common Shareholders' Representative and his advisors and agents
in connection with the preparation of the Closing Balance Sheet and the
determination of the Rollway Closing Pension Liability will be made from the
Holdback. Payment of such fees and expenses in connection with the Common
Shareholders' Representative's duties in connection with any claim for
indemnification by Emerson will be made from the Representative Escrow Funds,
to the extent available. The Common Shareholders' Representative is not
required to perform any services on behalf of the former holders of the Rollway
Common Stock unless he is reasonably assured that adequate funds are available
to pay his fees and expenses. Emerson will have no obligation to pay, and the
Indemnity Escrow Funds will not be available to pay, any such fees and
expenses.
The Common Shareholders' Representative's address is: Henry Fust, C.P.A.,
Fust, Chambers, Charles & Harfosh LLP, 5786 Widewater Parkway, DeWitt, New York
13214 (telephone: (315) 446-3600). If for any reason Henry Fust is unable to
serve as the Common Shareholders' Representative, then a partner in the firm of
<PAGE> 59
Fust, Chambers, Charles & Harfosh LLP chosen by such firm will serve as the
substitute Common Shareholders' Representative.
BY SUBMITTING CERTIFICATES FORMERLY REPRESENTING ROLLWAY COMMON STOCK, EACH
SUBMITTING COMMON SHAREHOLDER WILL HAVE AGREED TO THE APPOINTMENT OF HENRY
FUST, A C.P.A. IN SYRACUSE, NEW YORK, AS THE COMMON SHAREHOLDERS'
REPRESENTATIVE. SUCH COMMON SHAREHOLDERS SHALL ALSO BE DEEMED TO HAVE AGREED
TO WAIVE ANY RIGHT OR CAUSE OF ACTION FOR ANY ACTION TAKEN OR OMITTED FROM
BEING TAKEN BY THE COMMON SHAREHOLDERS' REPRESENTATIVE.
Preferred Terms Amendment
At the Rollway Special Meeting, the holders of Rollway Preferred Stock will
be asked to approve the Preferred Terms Amendment. If approved, this amendment
to Rollway's Certificate of Incorporation would provide that, upon the
consummation of the Merger, shares of Rollway Preferred Stock would be
converted into the right to receive shares of Emerson Common Stock, as
described below under "-- Preferred Stock Treatment." If the Preferred Terms
Amendment is approved but the Merger is not consummated, the Preferred Terms
Amendment will have no effect on the rights of the holders of Rollway Preferred
Stock. The Preferred Terms Amendment is as follows:
Article FOURTH of the Certificate of Amendment to the Certificate of
Incorporation filed in the office of the Department of State on June 21,
1967, relating to the designations, preferences, privileges and voting
powers and restrictions and qualifications of authorized shares, is hereby
amended to insert the following new paragraph (A)(k):
(k) Upon the effective time (the "Effective Time") of the merger (the
"Merger"), if it shall occur, of the corporation with Emersub XLI, Inc., a
Delaware corporation wholly-owned by Emerson Electric Co., a Missouri
corporation ("Emerson"), each issued and outstanding share of the
corporation's $1.00 Cumulative Convertible Preferred Stock (the "Preferred
Stock") shall be converted into the right to receive (a) a fraction of a
share of the common stock of Emerson ("Emerson Common Stock") equal in
value to $20.00, and (b) an amount in cash equal to the amount of accrued
and unpaid dividends owed on such share of Preferred Stock at the Effective
Time. For purposes of valuing the Emerson Common Stock into which the
Preferred Stock shall be converted, each share of Emerson Common Stock
shall be valued at the "Emerson Share Value," as such term is defined in
the Agreement and Plan of Merger, dated April 1, 1996 (the "Merger
Agreement") governing the Merger. Fractional shares of Emerson Common
Stock will not be issued. Instead, Emerson shall aggregate the shares of
Emerson Common Stock issuable to any person, and, if following such
aggregation, any person would be entitled to receive a fractional share of
Emerson Common Stock but for this paragraph, such person will, in lieu of
such fractional share and after surrender of such person's certificate or
certificates formerly evidencing Preferred Stock, be entitled to receive an
amount in cash equal to the Emerson Share Value multiplied by the fraction
of the share of Emerson Common Stock to which such person would otherwise
be entitled. The procedure for the exchange of certificates formerly
evidencing shares of the Preferred Stock for cash and certificates
evidencing Emerson Common Stock shall be as provided in the Merger
Agreement.
The approval of the holders of a majority of the issued and outstanding
Rollway Preferred Stock is required to approve the Preferred Terms Amendment.
<PAGE> 60
It is a condition to Emerson's obligations under the Merger Agreement that
Rollway shall have either (i) obtained appropriate shareholder approval of the
Preferred Terms Amendment prior to the Effective Time or (ii) completed the
redemption of all Rollway Preferred Shares prior to the Effective Time.
Therefore, if the Preferred Terms Amendment is not appropriately approved and
Rollway is unable to redeem all of the outstanding Rollway Preferred Shares due
to an inability to raise the funds necessary for such redemption or otherwise,
the Merger may not be consummated.
Preferred Stock Treatment
Subject to approval of the Preferred Terms Amendment by the holders of a
majority of the Rollway Preferred Shares, at the Effective Time, each holder of
Rollway Preferred Shares will have the right to receive in exchange for each
Rollway Preferred Share a fraction of a share of Emerson Common Stock equal in
value to $20.00 and an amount in cash equal to the amount of accrued and unpaid
dividends owed on such Rollway Preferred Share at the Effective Time. Emerson
shall aggregate the Emerson Common Stock issuable to any person, and, since
fractional shares will not be issued, such person shall receive cash in lieu of
any fractional share remaining following such aggregation. The Emerson Common
Stock and cash payable to former holders of Rollway Preferred Stock will not be
subject to the Escrow and Holdback described above. If approval of the
Preferred Terms Amendment is not obtained and the Merger is consummated,
Rollway will redeem for $20.00 per share (plus any accrued and unpaid
dividends) in cash all of the outstanding shares of Rollway Preferred Stock in
accordance with their terms immediately prior to the Effective Time. See "--
Certain Federal Income Tax Matters--Tax Consequences to Holders of Rollway
Preferred Stock."
The Rollway Options
The Committee overseeing the Rollway Option Plan has amended the Rollway
Option Plan and each Rollway Option to provide that such options shall become
fully vested immediately prior to the Effective Time and shall be exercisable
at such time upon payment of the applicable exercise price. It is a condition
to Emerson's obligations under the Merger Agreement that all Rollway Options be
exercised prior to the Effective Time.
Any Rollway Options not exercised prior to the Effective Time shall
automatically become, by virtue of the Merger and the terms of the Rollway
Option Plan, options to acquire the number of Emerson Common Shares that would
have been issuable to the holders of such options had they been exercised to
the Effective Time, with appropriate adjustments to the exercise price of such
options; provided, however, that the vesting schedule of each such option shall
revert to the vesting schedule applicable to such option prior to the
amendments by the Committee described above.
Option Agreements
H. Follett Hodgkins, Jr., Ann M. Hodgkins, H. Follett Hodgkins, III,
Cynthia H. Schallmo, two Trusts Under Last Will and Testament of H. Follett
Hodgkins and Trust Under Last Will and Testament of Ruth S. Hodgkins, the Group
Shareholders, who collectively own a majority of the outstanding Rollway Common
Stock, each entered into an Option Agreement with Emerson and Rollway.
Pursuant to the Option Agreements, as amended, each of the Group Shareholders
<PAGE> 61
has agreed, among other things, to vote (at the Rollway Special Meeting) such
holder's shares of Rollway Common Stock in favor of the Merger and the Merger
Agreement and not to take any actions which would have the effect of preventing
or hindering the Merger. In addition, the Group Shareholders have agreed in
the Option Agreements to sell their shares of Rollway Common Stock and Rollway
Preferred Stock to Emerson in certain situations. See "--Interests of Certain
Persons in the Merger."
Each Option Agreement grants Emerson an irrevocable option ("Emerson
Option") to purchase from the Group Shareholders their shares of Rollway Common
Stock and Rollway Preferred Stock under certain circumstances. The Emerson
Options are exercisable, in whole but not in part: (a) between on and after
May 11, 1996 and June 14, 1996 in the event the Merger Agreement is not
executed on or before May 10, 1996 AND if on or before May 10, 1996 (i) any
person, firm, corporation, business entity or group (other than Emerson)
(collectively a "Competing Buyer") announces its intention to acquire or
acquires 5% or more of the capital stock of Rollway or (ii) any Competing Buyer
and Rollway or its Board of Directors or any member of the Group Shareholders
executes a letter of intent, agreement in principle or definitive agreement
providing for a merger or other business combination involving Rollway or the
sale of a substantial portion of the assets of Rollway or the sale of any
capital stock of Rollway or any similar transaction involving Rollway (other
than to Emerson) or (iii) there is any written or oral proposal to Rollway or
any of its shareholders or its Board of Directors offering or proposing any of
the foregoing (other than any such communications from Emerson), (b) in the
event Rollway or any member of the Group Shareholders breaches the Merger
Agreement or the "no-shop agreement" dated September 18, 1995, then until
June 15, 1996 Emerson can exercise the Emerson Option, (c) in the event any
member of the Group Shareholders breaches the Merger Agreement, the Option
Agreements and any other agreement similar to the Option Agreements
(collectively, the "Group Agreements"), then until June 15, 1996 Emerson can
exercise the Emerson Option, (d) in the event on or before May 10, 1996 any
member of the Group Shareholders (i) elects for any reason to sell any Rollway
Shares to any third party (excluding transfers among the Group Shareholders
where such Rollway Shares remain subject to a Group Agreement) or (ii) grants a
proxy to vote any shares of the capital stock of Rollway to any Competing Buyer
(excluding a proxy to vote for the Merger and any proxy approved in writing by
Emerson), then until June 15, 1996 Emerson can exercise the Emerson Option, or
(e) if the Merger Agreement is executed but the Merger is not consummated, then
at any time during the 15 day period following the termination of the Merger
Agreement pursuant to its terms, unless the Merger Agreement is terminated due
solely to a breach of its terms by Emerson. If Emerson exercises the Emerson
Options, it agrees to promptly offer to all other holders of Rollway capital
stock (and options therefor) the opportunity to sell their shares (and options)
to Emerson upon comparable terms and conditions, provided that Emerson is not
obligated to consummate any purchase of Rollway capital stock pursuant to the
exercise of an Emerson Option unless it is simultaneously able to consummate
the acquisition of all Rollway capital stock owned by the Group Shareholders
(which shall include not less than 52% of the Rollway Common Shares on a fully
diluted basis).
The price per Rollway Common Share will be determined pursuant to a Letter
of Intent dated November 2, 1995 between Rollway and Emerson, as amended on
November 10, 1995, January 5, 1996 and March 27, 1996, which contains basically
the same pricing mechanism as is provided in the Merger Agreement. The price
per Rollway Preferred Share under the Emerson Options is $20.00 in value of
Emerson Common Stock per share of Rollway Preferred Stock (plus a cash payment
equal to unpaid dividends). The purchase price for the Rollway capital stock is
<PAGE> 62
payable in shares of Emerson Common Stock, except that if the Merger is not
considered to be part of a tax-free reorganization, Emerson must make an
additional 10% cash payment to the Group Shareholders.
For 90 days following the purchase of a Group Shareholder's Rollway shares
under the Emerson Options, Emerson is required to purchase upon any Group
Shareholder's request, on a first requested, first purchased basis, up to an
aggregate of $500,000 of the Emerson Common Stock issued to each Group
Shareholder under the Option Agreement. At the expiration of the 90-day
period, Emerson is required to purchase Emerson Common Stock from the Group
Shareholders only if the Group Shareholder cannot legally sell the shares in
the open market. Emerson's obligation to purchase Emerson Common Stock that
cannot be sold by the Group Shareholders on the open market expires two years
after the closing of the Emerson Option exercise.
In the event the Emerson Options are exercised, $750,000 of the aggregate
Emerson Common Stock issuable under all Emerson Options will be paid into
escrow for 18 months as security for certain representations, warranties and
covenants of the Group Shareholders in the Option Agreements. Emerson is also
permitted to seek reimbursement for certain losses directly from the Group
Shareholders and/or Rollway. Each Group Shareholder's indemnification
obligation is limited to the total consideration received by such Group
Shareholder from Emerson pursuant to his or her Option Agreement.
If Emerson exercises its Emerson Option with respect to H. Follett
Hodgkins, Jr.'s Rollway capital stock, it must enter into a non-competition
agreement with Mr. Hodgkins with the same terms described below under the
heading "--Non-Competition Agreement."
The Emerson Options terminate if Emerson hasn't exercised the Emerson
Options by June 15, 1996.
Non-Competition and Employment Agreements
At the Closing of the Merger, Emerson and H.F. Hodgkins, Jr., Chairman of
the Board and Chief Executive Officer of Rollway, are expected to enter into a
non-competition agreement (the "Non-Competition Agreement"). Under the
Agreement, Mr. Hodgkins will agree not to compete with the business of Rollway
for a five-year period. Mr. Hodgkins will also agree not to use or disclose
confidential information concerning Rollway. Mr. Hodgkins will be paid
$100,000 per year for the five-year term of the Non-Competition Agreement. In
addition, two life insurance policies with an aggregate death benefit of
$1,358,925 and a cash surrender value of approximately $567,202 at February 22,
1996 (subject to approximately $552,125 of debt at February 22, 1996) will be
transferred by Rollway to Mr. Hodgkins, Mr. Hodgkins and his wife will
participate in Emerson's retiree medical program, and Emerson will pay Mr.
Hodgkins $10,000 per year for life. Execution of the Non-Competition Agreement
is a condition to the consummation of the Merger. The execution of employment
agreements between Emerson and each of Stephen Bregande and Karl Loessner are
also conditions to the consummation of the Merger. See "Interests of Certain
Persons in the Merger."
Certain Federal Income Tax Matters
The following discussion summarizes certain material federal income tax
considerations of the Merger that are generally applicable to holders of
<PAGE> 63
Rollway securities. This discussion is based on currently existing provisions
of the Code, existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Rollway's shareholders as described herein.
Rollway shareholders should be aware that this discussion does not deal
with all federal income tax considerations that may be relevant to particular
Rollway shareholders in light of their particular circumstances, such as
shareholders who are subject to the alternative minimum tax provisions of the
Code or who acquired their shares in connection with stock option plans or in
other compensatory transactions. In addition, the following discussion does
not address the tax consequences of the Merger under foreign, state or local
tax laws or the tax consequences of transactions effectuated prior to or after
the Merger (whether or not such transactions are in connection with the
Merger). ACCORDINGLY, ROLLWAY SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
Neither Emerson nor Rollway has requested a ruling from the Internal
Revenue Service (the "IRS") with regard to any of the federal income tax
consequences of the Merger. Hancock & Estabrook, LLP, counsel to Rollway, has
rendered an opinion dated April 1, 1996, (the "Tax Opinion"), that the Merger
will constitute a reorganization under Sections 368(a) of the Code (a
"Reorganization"). Such Tax Opinion is based on the assumption that all
documents, agreements and representations to be signed and delivered in
connection with the Merger will be duly signed and delivered in substantially
the form in which they currently exist or currently are expected to exist, that
such documents, agreements and representations are accurate in all material
respects, and that the transactions will proceed as contemplated in this Proxy
Statement/Prospectus and such documents and upon certain representations and
agreements of Rollway, Emerson and certain shareholders of Rollway.
Consummation of the Merger is conditioned upon the Tax Opinion or a
substantially equivalent other tax opinion being in effect at Closing. The Tax
Opinion is not binding on the IRS and does not preclude the IRS from adopting a
contrary position.
Emerson makes no representations with respect to the federal income tax
consequences of the Merger.
Tax Consequences to Holders of Rollway Common Stock
Subject to the limitations and qualifications referred to herein, and
assuming the Merger qualifies as a Reorganization, the following federal income
tax consequences should result:
(a) No gain or loss will be recognized by the holders of Rollway Common
Stock upon the receipt of Emerson Common Stock solely in exchange for such
Rollway Common Stock in the Merger (except to the extent of cash received in
lieu of fractional shares or as a result of exercising dissenters rights).
(b) The aggregate tax basis of the Emerson Common Stock so received by
Rollway shareholders in the Merger (reduced by any amount allocable to
fractional shares for which cash is received) will be the same as the aggregate
tax basis of the Rollway Common Stock surrendered in exchange therefor,
decreased by the amount of cash and the fair market value of any other
<PAGE> 64
consideration received in the Merger and increased by the amount of gain, if
any, recognized by the Rollway shareholder on the exchange.
(c) The holding period of the Emerson Common Stock so received by each
Rollway shareholder in the Merger will include the period for which the Rollway
Common Stock surrendered in exchange therefor was considered to be held,
provided that the Rollway Common Stock so surrendered is held as a capital
asset at the time of the Merger.
(d) Cash payments received by holders of Rollway Common Stock in lieu of a
fractional share will be treated as if such fractional share of Emerson Common
Stock has been issued in the Merger and then redeemed by Emerson. A Rollway
shareholder receiving such cash will recognize gain or loss upon such payment,
measured by the difference (if any) between the amount of cash received and the
basis in such fractional share. The gain or loss should be capital gain or
loss provided that such share of Rollway Common Stock was held as a capital
asset at the time of the Merger.
(e) Until such time, if ever, as a claim is made against the Escrow
Deposit by Emerson or the Surviving Corporation, the holders of Rollway Common
Stock will be deemed for all purposes to be the owners of the Emerson Common
Shares held in escrow pursuant to the Escrow Agreement. Accordingly, each
holder of Rollway Common Stock participating in the Merger will be required to
report and include in income for federal tax purposes his or her proportionate
share of any earnings on the Escrow Deposit, including but not limited to any
dividends paid on the Emerson Common Shares.
(f) A shareholder of Rollway who exercises dissenters' rights under any
applicable law with respect to a share of Rollway Common Stock and receives
payments for such stock in cash will recognize capital gain or loss (if such
stock was held as a capital asset at the Effective Time) measured by the
difference between the amount of cash received and the shareholder's basis in
such share, provided such payment is neither essentially equivalent to a
dividend within the meaning of Section 302 of the Code nor has the effect of a
distribution of a dividend within the meaning of Section 356(a)(2) of the Code
(collectively, a "Dividend Equivalent Transaction").
A sale of Rollway Common Shares incident to an exercise of dissenters'
rights will generally not be a Dividend Equivalent Transaction if, as a result
of such exercise, the dissenting shareholder owns no shares of Emerson Common
Stock (either actually or constructively within the meaning of Section 318 of
the Code).
The Tax Opinion is subject to the terms and conditions of the Merger
Agreement and certain representations and covenants received from Rollway,
Emerson, Emersub and certain shareholders of Rollway, including representations
in certain certificates delivered to counsel by certain shareholders of
Rollway, by Emerson and by Emersub, the truth and accuracy of which are assumed
for purposes of rendering the Tax Opinion. In particular, certain of these
representations are qualified as to the knowledge of the relevant party. If
the facts as represented are not accurate, the Merger may fail to qualify as a
tax-free reorganization. In such case, a shareholder would recognize gain or
loss equal to the fair market value of the Rollway Common Stock surrendered
less such shareholder's basis in these shares.
The Merger should constitute a Reorganization either (1) under
Sections 368(a)(1)(A) and (a)(2)(E) of the Code if the Preferred Terms
Agreement is approved by a majority of the holders of Rollway Preferred Stock
<PAGE> 65
and such shareholders receive Emerson common stock or (ii) under
Section 368(a)(1)(B) if the Preferred Terms Agreement is not approved by a
majority of the holders of the Rollway Preferred Stock and such shareholders
are redeemed with Rollway funds (or a Rollway borrowing). Qualification as a
Reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) requires that
Emerson acquire "control" of Rollway solely for Emerson voting stock. Control
is defined for these purposes as 80% of the combined voting power of all
Rollway stock entitled to vote and 80%of each other class of outstanding
Rollway stock. Stock which is redeemed by Rollway with its own funds in
connection with the Merger will not be considered outstanding for this purpose.
Emerson will acquire at least 80% of the Rollway Common Stock for Emerson
Common stock, taking into account the exercise of the Emerson Options under the
Option Agreements, if exercised. The Rollway Preferred Stock will either be
converted into Emerson Common Stock pursuant to the Merger or redeemed by
Rollway with its own funds in connection with the Merger. Thus, the "control"
requirement should be satisfied. If Emerson were considered to acquire more
than 20% of either the Rollway Common Stock or Rollway Preferred Stock for
other than Emerson Common Stock the Merger would not qualify as a
Reorganization. Qualification as a Reorganization under Sections 368(a)(1)(A)
and 368(a)(2)(E) also requires that the Merger satisfy a "substantially all"
properties requirement. This requirement is satisfied if following the Merger
Rollway holds "substantially all" the properties it held prior to the Merger
taking into account any extraordinary dividends or redemptions that are part of
the Reorganization. The IRS for advance ruling purposes requires that the
merged entity hold at least 90% of the fair market value of the "net assets" it
held prior to the Merger and 70% of the fair market value of the "gross assets"
it held prior to the Merger. Thus, if the Rollway Preferred Stock is redeemed
by Rollway in connection with the Merger and the consideration constitutes more
than 10% of the combined value of the Rollway Common Stock and Rollway
Preferred Stock outstanding prior to the Merger, the IRS advance ruling
position would not be met. Such advance ruling position is not a rule of law
and case law would support a lower threshold based on an examination of all the
facts and circumstances.
If the "substantially all" properties requirement, set forth above, were
not satisfied as a result of the redemption of the Preferred Stock, the Merger,
nevertheless, should qualify as a Reorganization under Section 368(a)(1)(B).
Such a Reorganization requires that Emerson "control" Rollway immediately
following the Merger, and that the sole consideration provided by Emerson to
the Rollway shareholders (excluding cash received in lieu of fractional shares)
be Emerson voting stock. Emerson will "control" Rollway following the Merger.
Thus, the control requirement should be satisfied. Further, since any
consideration paid to redeem the Preferred Stock or pay dissenters will come
from Rollway funds (or a Rollway borrowing) and will not be paid by Emerson or
any of its affiliates, the solely for voting stock requirement should be met.
In such case, the Merger would qualify as a Reorganization pursuant to Section
368(a)(1)(B).
A successful IRS challenge to the Reorganization status of the Merger (as a
result of a failure of the "control" requirement, "substantially all"
requirement, the solely voting stock requirement (in the case of a
Reorganization pursuant to Section 368(a)(1)(B)), or otherwise) would result in
significant tax consequences. Each Rollway shareholder would recognize gain or
loss with respect to each share of Rollway Common Stock surrendered equal to
the difference between the shareholder's basis in such share and the fair
market value, as of the Effective Time, of the Emerson Common Stock received in
exchange therefor. In such event, a shareholder's aggregate basis in the
Emerson Common Stock so received would equal its fair market value, and the
<PAGE> 66
shareholder's holding period for such stock would begin the day after the
Merger.
Even if the Merger qualifies as a Reorganization, a recipient of shares of
Emerson Common Stock would recognize gain to the extent that such shares were
considered to be received in exchange for services or property (other than
solely Rollway Common Stock). Gain would also have to be recognized to the
extent that an Rollway shareholder was treated as receiving (directly or
indirectly) consideration other than Emerson Common Stock. All or a portion of
such gain amounts may be taxable as ordinary income.
Tax Consequences to Holders of Rollway Preferred Stock
If the Preferred Terms Amendment is approved, the exchange of Rollway
Preferred Stock for Emerson Common Stock and cash should have the same federal
income tax consequences as described above under the heading "--Tax
Consequences to Holders of Rollway Common Stock." Cash payments received in
payment of accrued and unpaid dividends on the Rollway Preferred Stock will be
taxable as ordinary income.
If the Preferred Terms Amendment is not approved and Rollway redeems the
Rollway Preferred Stock for $20.00 in cash per share immediately prior to the
Merger, as required by the Merger Agreement, holders of Rollway Preferred Stock
would recognize gain or loss with respect to each share of Rollway Preferred
Stock surrendered equal to the difference between the $20.00 redemption price
to be paid by Rollway and the holder's basis in each such share. Cash payments
received in payment of accrued and unpaid dividends on the Rollway Preferred
Stock will be taxable as ordinary income.
Because of the complexity of the tax laws, and because the tax consequences
of the Merger to any particular shareholder may be affected by matters not
discussed herein, it is recommended that each holder of Rollway securities
consult his or her personal tax advisor concerning the applicable foreign and
United States federal, state and local income tax consequences of the Merger.
Accounting Treatment
The Merger will be accounted for by Emerson as a "purchase," as such term
is used under generally accepted accounting principles, for accounting and
financial reporting purposes. Accordingly, from and after the Effective Time,
Rollway's results of operations will be included in Emerson's consolidated
results of operations. For purposes thereof, Emerson will establish a new
accounting basis for Rollway's assets and liabilities based upon the fair
market values thereof and Emerson's purchase price, including the cost of the
acquisition.
Regulatory Approvals
Under the Hart-Scott-Rodino Act ("H-S-R Act") and the rules promulgated
thereunder by the Federal Trade Commission (the "FTC"), the Merger may not be
consummated until notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and specified waiting period requirements
have been satisfied. Emerson and Rollway filed notification and report forms
under the H-S-R Act with the FTC and the Antitrust Division on December 7,
<PAGE> 67
1995, and the required waiting periods for such filings under the H-S-R Act
were terminated on December 15, 1995. However, at any time before or after the
Effective Time of the Merger, and notwithstanding that the H-S-R Act waiting
periods have been terminated, the FTC, the Antitrust Division or any state
government 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 Merger or seeking divestiture of Rollway by Emerson, in
whole or in part, or the divestiture of substantial assets of Emerson, Rollway
or their respective subsidiaries. In addition to approvals under the H-S-R
Act, consummation of the Merger is conditioned upon the receipt of all
necessary governmental and regulatory approvals and requirements in connection
with the transactions contemplated hereby, all of which have been obtained,
except for clearance from the German Federal Cartel Office, which Emerson
expects to receive by April 18, 1996.
Interests of Certain Persons in the Merger
Pursuant to the Merger Agreement, at the Effective Time, Emerson and
H. Follett Hodgkins, Jr. are expected to enter into the Non-Competition
Agreement described above under the heading "--Non-Competition Agreement."
Execution of the Non-Competition Agreement is a condition of the closing of the
Merger. Pursuant to the Option Agreement (see "The Merger - Option
Agreements"), Mr. Hodgkins has agreed to vote all of his Rollway Common Shares
in favor of the Merger.
Also at the Effective Time, Emerson expects to enter into employment
agreements with Edmund Babiarz, Stephen Bregande and Karl Loessner. Each of
these individuals is an officer and/or director of Rollway. Mr. Loessner and
Mr. Bregande's employment agreements are attached to the Merger Agreement
(Exhibit A to this Proxy Statement/Prospectus) as Exhibits 5.13(a) and 5.13(b),
respectively. Mr. Loessner will be employed as Managing Director of LRNV. Mr.
Loessner's employment agreement is of indefinite duration, subject to
termination in accordance with Belgian law. Mr. Loessner's base salary will be
250,000 Deutsche Marks per year. Mr. Loessner will also be eligible for
certain bonus payments yet to be determined. Mr. Bregande will be employed as
President of the Surviving Corporation. His employment agreement has a term of
one year and provides for an annual base salary of $200,000. In addition, Mr.
Bregande will be eligible to receive an incentive bonus based on achieving
certain financial targets, with a maximum bonus payment of $120,000. If Mr.
Bregande's employment is terminated without cause, he will receive severance
payments equal to twelve months of his base salary. Mr. Babiarz's employment
agreement contains substantially the same terms as Mr. Bregande's employment
agreement, except that Mr. Babiarz will be employed as a Vice President of the
Surviving Corporation, will have a base salary of $105,000, will be eligible to
receive a maximum incentive bonus of $100,000, and will receive twelve months
of severance pay if terminated without cause.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement not summarized elsewhere in this Proxy Statement/Prospectus. The
Merger Agreement is attached as Exhibit A to this Proxy Statement/Prospectus
and is incorporated herein by reference. Such summary is qualified in its
entirety by reference to the Merger Agreement.
<PAGE> 68
Exchange Procedures
If the Merger is approved at the Rollway Special Meeting, each holder of
Rollway Common Stock (and each holder of Rollway Preferred Stock, if the
Preferred Terms Amendment is approved) will be mailed a letter of transmittal
with which each holder of a certificate or certificates representing
outstanding shares of Rollway Stock ("Certificates") may tender such
Certificates in exchange for the applicable consideration. (Letters of
transmittal will also be available at the Rollway Special Meeting.) The
letters of transmittal specify that delivery will be effected, and risk of loss
and title to the Certificates will pass, only upon proper delivery of the
Certificates to Boatmen's Trust Company of St. Louis (the "Exchange Agent") as
exchange agent and contain instructions for effecting the surrender of the
Certificates in exchange for certificates representing shares of Emerson Common
Stock and cash in lieu of any fractional shares. In the case of lost or
destroyed certificates, Emerson will accept documentation acceptable to it in
lieu thereof and may also require the holder of a lost or destroyed certificate
to post an insurance bond acceptable to Emerson. Upon the consummation of the
Merger, each holder of Certificates, subject to the surrender of such
Certificates together with the transmittal letter duly completed and executed
by such holder, will receive (i) certificates evidencing that number of whole
shares of Emerson Common Stock to which such holder is entitled to receive in
exchange therefor (less any amounts to be retained in the Escrow and the
Holdback), (ii) any dividends or other distributions to which such holder is
entitled in respect of Rollway Preferred Shares and as described below and
(iii) cash in lieu of fractional shares of Emerson Common Stock; and the
Certificates so surrendered will be cancelled. Until surrendered, each
Certificate will be deemed at any time after the Effective Time to evidence
only the right to receive upon such surrender the applicable portion of the
consideration described above.
No fractional shares of Emerson Stock will be issued in connection with the
Merger. Where the Merger would otherwise require the issuance of a fractional
share, cash equal to such fractional interest multiplied by the Emerson Share
Value will be paid to the holder of such interest in lieu of a fractional
share.
No dividends or other distributions will be paid to a former shareholder of
Rollway with respect to shares of Emerson Common Stock until such shareholder's
Certificate(s) are transmitted to the Exchange Agent. Any dividends declared
on Emerson Common Stock between the Effective Time and the date of the
surrender of such Certificate(s) will be held by Emerson for the benefit of the
holder and will be paid to the holder, without interest thereon, upon the
surrender of such Certificate(s). Holders of any unsurrendered Certificates
will not be entitled to vote the Emerson Common Stock to which they are
entitled until such Certificates are exchanged for certificates representing
Emerson Common Stock.
At the Effective Time, the stock transfer books of Rollway will be closed,
and there will be no further registration of transfer of shares thereafter on
the records of Rollway.
Certain Representations and Warranties
The Merger Agreement contains various representations and warranties of
Rollway and its subsidiaries concerning, among other things, the following
matters: (i) due organization and qualification of Rollway and its
<PAGE> 69
subsidiaries and their power and authority to use their assets and properties
and conduct their businesses; (ii) the capital structure of Rollway and its
subsidiaries; (iii) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement by and against Rollway and its
subsidiaries; (iv) the absence of any agreement or obligation, including but
not limited to, notes, mortgages, indentures, deeds of trust and liens or any
statute, regulation or order that either would be breached or accelerated by
the execution of the Merger Agreement or would prevent the effectuation of the
transactions contemplated therein; (v) third-party consents; (vi) receipt by
the directors of Rollway of a "fairness opinion" and the adoption of
resolutions approving the Merger Agreement and transactions contemplated
therein and determination of the fairness of the Merger and recommendation of
the Merger by the directors of Rollway; (vii) the accuracy of the financial
statements of Rollway; (viii) the usability, salability and condition of
Rollway's inventory; (ix) the validity and enforceability of the accounts and
notes receivables of Rollway; (x) the absence of any undisclosed liability of
Rollway; (xi) certain tax matters relating to, and payment of taxes by,
Rollway; (xii) disclosure of certain events in the operation of Rollway's
business or relating to its properties; (xiii) ownership status and use of real
property owned or leased by Rollway; (xiv) Rollway's legal and marketable title
to its assets; (xv) the maintenance of Rollway's tangible assets; (xvi) the
validity and enforceability of all intangible assets, rights, items and
documents necessary or desirable to carry on the business of Rollway; (xvii)
the compliance with, and absence of default or violation of, any statute,
regulation, order, license or charter document; (xviii) the possession and
validity of all licenses or permits required to conduct Rollway's business;
(xix) disclosure of certain contractual obligations of Rollway; (xx) the
validity of certain contracts; (xxi) the status of Rollway's relationship with
certain of its customers and suppliers; (xxii) disclosure of pending or
threatened litigation; (xxiii) an accurate listing of Rollway's officers,
directors, employees and consultants; (xxiv) disclosure of indebtedness to or
from Rollway's shareholders, directors, officers, employees or agents beyond
normal salaries and employee benefits; (xxv) disclosure of certain affiliations
and outside financial interests of Rollway's directors and officers; (xxvi) the
absence of bribes or other illegal or improper payments, by Rollway to certain
individuals; (xxvii) the nature of Rollway's labor agreements, employee benefit
plans and employment agreements and related ERISA matters; (xxviii) claims for
overtime, back wages, vacation and minimum wages and the absence of claims
related to discrimination, workers compensation or occupation, safety and
health standards; (xxix) alien employment eligibility; (xxx) the absence of
pending or threatened labor disputes, strikes or work stoppages that may
reasonably be expected to affect the business condition of Rollway and the
absence of any unfair labor practices by Rollway or any of its employees,
representatives or agents; (xxxi) disclosure of pending or threatened charges
or complaints against Rollway by the National Labor Relations Board or any
state or local labor or employment agency or representative thereof; (xxxii)
the status of insurance policies; (xxxiii) the status of certain financial
guarantees and product warranties, product liability, product safety or similar
claims against Rollway; (xxxiv) certain environmental matters regarding
Rollway; (xxxv) the absence of any brokerage, finder's or agent's fees due in
connection with the Merger; (xxxvi) disclosure of foreign assets and compliance
with foreign laws and regulations; (xxxvii) the status, accuracy and
completeness of Rollway's bank accounts, books and records; and (xxxviii) full
disclosure.
Emerson may make a claim for indemnification for breach of any of the
foregoing representations and warranties until the end of the eighteenth month
after the Closing Date, except that (i) claims for indemnification relating to
<PAGE> 70
breaches of the representations and warranties pertaining to tax matters may be
brought until the later of the final resolution of any proceeding involving any
such tax matter or expiration of any applicable statute of limitations, and
(ii) claims for indemnification relating to breaches of the representations and
warranties pertaining to Rollway's title to its property and assets may be
brought until May 14, 2006.
The Merger Agreement contains various representations and warranties of
Emerson and Emersub concerning, among other things, the following matters:
(i) due organization and qualification of Emerson and Emersub and their power
and authority to use their assets and properties and conduct its businesses;
(ii) the capital structure of Emerson and Emersub; (iii) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement by
and against Emerson and Emersub; (iv) the absence of any agreement or
obligation, including but not limited to notes, mortgages, indentures, deeds of
trust and liens or any statute, regulation or order that either would be
breached or accelerated by the execution of the Merger Agreement or that would
prevent the effectuation of the transaction(s) contemplated therein; (v) third-
party consents; (vi) the status of the Emerson Shares; (vii) the filing by
Emerson of all reports and other documents required by the Exchange Act or the
Securities Act; and (viii) the absence of any brokerage, finder's or agent's
fees in connection with the Merger.
Conduct of Business Pending the Merger
Rollway has agreed that unless otherwise consented to by Emerson, the
business of Rollway and its subsidiaries will be conducted in the ordinary
course of business and consistent with past practice, subject to certain
exceptions. By way of amplification and not limitation, Rollway has agreed
that neither Rollway nor any of its subsidiaries will do, or agree to do, any
of the following: (i) grant any increase in the rate of pay of any of its
employees, grant any increase in the salaries of any officer, employee or
agent, grant any additional Rollway Options or otherwise modify the terms
thereof (except as specifically contemplated in the Merger Agreement), enter
into or increase the benefits provided under any bonus, profit-sharing,
incentive compensation, pension, retirement, medical, hospitalization, life
insurance or other insurance plan or plans, or other contracts or commitments,
or in any other way increase in any amount the benefits or compensation of any
such officer, employee or agent, except, however, ordinary increases in
compensation not unusual in character or amount made in the ordinary course of
business to employees who are not directors or officers, and except that
Rollway may continue in place benefit, bonus or incentive plans which were
scheduled by their terms to terminate or lapse as of the end of fiscal year
1995 and proceed with such plan(s) through the Closing Date; (ii) enter into
any employment contract or collective bargaining agreement; (iii) sell, dispose
of, or encumber any assets (except pursuant to existing contracts); (iv) make,
or enter into any contract for, any capital expenditure or enter into any
material lease of capital equipment or real estate involving more than $50,000
individually (except pursuant to existing contracts); (v) enter into any
contract or commitment (other than for the purchase or sale of inventory,
supplies, other products or services in the ordinary course of business)
involving more than $25,000, or enter into any series of such contracts with
one party or known affiliated group of parties involving more than $25,000 in
the aggregate; (vi) create, assume, incur or guarantee any indebtedness other
than (a) in the usual and ordinary course of business and with a maturity date
of less than one year or (b) that incurred pursuant to existing contracts;
(vii) declare or pay any dividend on, issue or make any sale of, or
<PAGE> 71
distribution in respect of, its capital stock or directly or indirectly redeem,
purchase or otherwise acquire any of its capital stock, except for issuances of
Rollway Stock under existing Rollway Options; (viii) conduct or transact
business other than in a manner consistent with its past practices or change
any accounting procedures or practices or its financial structure, except as
required to conform to generally accepted accounting principles, in which case
Rollway must give Emerson prior notice thereof; (ix) except as contemplated by
the Merger Agreement, make any amendments to or changes in its Certificate of
Incorporation or By-Laws, or with respect to Rollway's subsidiaries, any of
their respective constituent documents; (x) perform any act, or attempt to do
any act, or permit any act or omission, which will or may reasonably be
expected to cause a breach by Rollway of any contract to which it is a party,
including the Merger Agreement; or (xi) fail to conduct its existing activities
substantially in the same manner as previously conducted, fail to use its
reasonable best efforts to keep its business organization intact, including its
present employees and present relationships with suppliers and customers and
others having advantageous business relations with it, fail to maintain its
existing insurance policies on property owned or leased by it in full force and
effect, or fail to operate, maintain and repair all of such property in a
manner consistent with past practice.
Certain Other Covenants
In addition to the covenants described above and elsewhere in this Proxy
Statement/Prospectus, the following is a description of certain other principal
covenants of the parties to the Merger Agreement. Both Rollway and Emerson
have agreed, among other things: (i) to cooperate and use their best efforts to
prepare and file Emerson's registration statement on Form S-4 (the
"Registration Statement") and all appropriate state securities or "blue sky
filings" with respect to the Emerson Shares to be issued in the Merger and to
use their reasonable best efforts to cause the Registration Statement to be
declared effective; (ii) that any event that should be set forth in an
amendment of, or a supplement to, the Proxy Statement, will be promptly so
disclosed; (iii) to use their respective reasonable best efforts to consummate
and make effective as promptly as practicable the transactions contemplated by
the Merger Agreement and to assist each other in their respective efforts to
obtain all necessary waivers, consents and approvals from other parties to
material loan agreements, leases and other contracts; (iv) to use their
respective reasonable best efforts to obtain all necessary consents, approvals
and authorizations, to effect all necessary registrations and filings and to
meet all other conditions to closing set forth in the Merger Agreement; (v) to
refrain from issuing any press release or otherwise making any public
statements with respect to the Merger Agreement, the Merger or any of their
respective terms without the prior written consent of the other; and (vi) to
execute and deliver, or cause to be executed and delivered, all such documents
and instruments, and to take, or cause to be taken, all such further or other
actions as they may reasonably deem necessary to consummate the transactions
contemplated by the Merger Agreement.
In addition, Rollway has agreed: (i) to promptly deliver or mail this Proxy
Statement, and any amendment of, or supplement to, this Proxy Statement, to its
shareholders ; (ii) that the Board of Directors of Rollway will recommend that
holders of Rollway Common Shares vote to adopt and approve the Merger and that
the holders of Rollway Preferred Shares vote to adopt and approve the Preferred
Terms Amendment, and that this Proxy Statement and the documents sent to the
shareholders of Rollway and the holders of Rollway Options will contain such
recommendations; (iii) to indemnify and hold harmless Emerson and its
<PAGE> 72
directors, officers, control persons, employees, agents and representatives
from and against any liability relating to or arising out of information
provided by them for inclusion in the Registration Statement or any federal or
state filing; (iv) to take all action necessary in accordance with applicable
law and its Certificate of Incorporation and By-Laws to convene the Rollway
Special Meeting as promptly as practicable to consider and vote upon the Merger
and the Preferred Terms Amendment and that the Board of Directors of Rollway
will use their best efforts to obtain necessary approvals of its shareholders
and take all other actions necessary or helpful to secure the vote or consent
of such shareholders; (v) to redeem all of the issued and outstanding Rollway
Preferred Shares immediately prior to the Effective Time, using borrowed funds,
if necessary, if the holders of a majority of the Rollway Preferred Shares do
not approve the Preferred Terms Amendment; (vi) that its committee shall amend
the Rollway Option Plan and each option agreement issued thereunder to provide
that all Rollway Options shall be exercisable immediately prior to the
Effective Time; (vii) to provide Emerson with full access at all reasonable
times to all its premises, properties, books, records, contracts, tax records
and documents relating to its business condition, and furnish to Emerson any
such information as Emerson may reasonably request from time to time; (viii) to
maintain its books and financial records in accordance with generally accepted
accounting principles consistently applied and on a basis consistent with its
past practices, ensure that such books and financial records fairly and
accurately reflect the operations, results and condition, financial and
otherwise, of Rollway, and furnish to Emerson promptly, as available, financial
statements and operating reports applicable to Rollway; (ix) that neither
Emerson nor the Surviving Corporation will be liable for or deemed to have
assumed any Rollway pension or employee benefit plans or arrangements other
than those disclosed in the Merger Agreement; and (x) to deliver to Emerson at
Closing certain tax information and (xi) to indemnify Emerson for any expenses
or losses incurred by Emerson or the Surviving Corporation arising out of the
assertion of certain tax liabilities, Rollway's agreement to indemnify MPI, the
commission payment practices of LRNV, or certain legal proceedings pending
against Rollway.
No Solicitation of Transactions
Pursuant to the Merger Agreement, Rollway has agreed not to, directly or
indirectly, through its agents or representatives or otherwise, solicit or
cause the solicitation of, or in any way encourage the making of, or negotiate,
respond to, cooperate with, or to furnish or cause to be furnished any
information with respect to, any offer, proposal or indication of interest from
any person, entity or group (other than Emerson) involving the purchase, sale,
transfer, merger or recapitalization of all or a portion of the securities,
business or assets of Rollway. Rollway has agreed to notify Emerson
immediately of any such offer, proposal or indication of interests received by
Rollway or any of their agents or representatives and describe the terms
thereof, unless advised in writing by its counsel that the fiduciary duties of
the Board of Directors of Rollway requires otherwise.
Conditions to the Consummation of the Merger
The obligations of Emerson, Emersub and Rollway to consummate the Merger
are subject to the satisfaction, or where legally permissible, waiver, of
various conditions, including but not limited to the following: (i) no
preliminary or permanent injunction or other order, decree or ruling issued by
a court of competent jurisdiction or by a governmental agency concerning the
<PAGE> 73
Merger Agreement, being in effect, or having been recommended by the staff of a
governmental agency and approved by such agency, which would make illegal or
otherwise prevent consummation of the Merger; (ii) compliance with the
requirements of any applicable law relating to the consummation of the Merger;
(iii) the satisfaction or receipt of all necessary governmental and regulatory
approvals and requirements in connection with the Merger, including, without
limitation, expiration of the waiting period(s) under the H-S-R Act; (iv) the
due approval by the shareholders of Rollway of the Merger Agreement and the
Merger in accordance with NYBCL and Rollway's Certificate of Incorporation and
By-Laws; and (v) the declaration of effectiveness of the Registration Statement
and the absence of any stop order suspending such effectiveness and the
attainment of all other clearances or approvals necessary under applicable
state securities or blue sky laws relative to the issuance of Emerson Shares
pursuant to the Merger.
The obligations of Emerson and Emersub to effect the Merger and the
transactions contemplated by the Merger Agreement are also subject to
satisfaction or waiver of certain additional conditions, including but not
limited to the following: (i) each of the representations and warranties of
Rollway contained in the Merger Agreement being true and correct in all
material respects on the date of the Merger Agreement and on the Closing Date;
(ii) Rollway performing or complying in all material respects with all of the
covenants and obligations to be performed or complied with by it under the
terms of the Merger Agreement on or prior to the Closing Date; (iii) there
having been no material adverse change, actual or threatened, in the business,
assets, results of operations or condition, financial or otherwise, of Rollway,
whether or not covered by insurance; (iv) the receipt of all consents and
approvals necessary to ensure that the Surviving Corporation will continue to
have the same full rights with respect to Rollway's property and assets as
existed immediately prior to the Merger; (v) no more than 5% of the holders of
the outstanding Rollway Common Shares and no more than 5% of the holders of the
outstanding Rollway Preferred Shares having exercised or claimed appraisal or
dissenting shareholders rights; (vi) the approval of the Preferred Terms
Amendment or the redemption of the Rollway Preferred Shares; (vii) the exercise
of all Rollway Options; (viii) Mr. Hodgkins having relinquished and transferred
to the Surviving Corporation his rights under a split-dollar insurance
arrangement with Rollway; (ix) Rollway obtaining certain easements and an
owner's title policy with respect to certain of its real property; and (x)
Emerson having received: (a) a certificate signed by a duly authorized officer
of Rollway, dated as of the Closing Date and subject to no qualification,
certifying that the conditions set forth in clauses (i), (ii), (iii) and (v) of
this paragraph and clauses (i) and (iv) of the paragraph preceding this
paragraph have been satisfied, (b) an opinion of Hancock & Estabrook, LLP,
counsel to Rollway, dated the Closing Date, (c) employment agreements duly
executed by Karl L. Loessner and Stephen M. Bregande, (d) the Non-Competition
Agreement executed by H. Follett Hodgkins, Jr., (e) the written resignation of
certain officers and directors of Rollway, (f) certificates relating to
compliance with the Foreign Corrupt Practices Act executed by H. Follett
Hodgkins, Jr., Stephen M. Bregande, Karl L. Loessner and William Eames, and (g)
all documentation necessary to transfer ownership of Rollway's foreign
subsidiaries.
The obligation of Rollway to consummate the Merger is subject to the
satisfaction or waiver of certain additional conditions, including but not
limited to, the following: (i) the representations and warranties of Emerson
and Emersub contained in the Merger Agreement being true and correct in all
material respects on the date of the Merger Agreement and on the Closing Date;
(ii) Emerson and Emersub duly performing or complying in all material respects
<PAGE> 74
with all of the covenants and obligations to be performed or complied with by
them under the terms of the Merger Agreement on or prior to the Closing Date;
(iii) Rollway not having received written notice that the tax opinion of its
counsel has been rescinded; and (iv) Rollway having received: (a) a
certificate signed by duly authorized officers of Emerson and Emersub, dated as
of the Closing Date and subject to no qualification, certifying that the
conditions set forth in clauses (i) and (ii) of this paragraph and clause (i)
of the paragraph before the preceding paragraph have been satisfied, (b)
opinions of Bryan Cave LLP and Harley M. Smith, counsel to Emerson and Emersub,
and (c) the Non-Competition Agreement executed by Emerson.
Termination
The Merger Agreement and the transactions contemplated thereby may be
terminated prior to the Closing Date only as follows: (a) by the mutual
written consent of the Boards of Directors of Rollway and Emerson; or (b) by
either Rollway or Emerson in the event the Merger has not been consummated on
or before July 31, 1996, unless the failure to consummate the Merger is a
result of the breach of or default under the Merger Agreement by such party.
Upon termination of the Merger Agreement, the Merger will be abandoned and
all obligations under the Merger Agreement of the parties to the Merger
Agreement will terminate without liability of any party to another party,
except for certain provisions relating to expenses, as described below under
"-- Expenses," and except for certain confidentiality obligations of the
parties set forth in a previously executed confidentiality agreement. The
termination and abandonment of the Merger will not, however, impair or restrict
the rights of any party to any and all remedies at law or in equity in the
event of a breach of or default under the Merger Agreement by another party
thereto.
Expenses
Emerson and Emersub has agreed that they will pay all fees and expenses of
their counsel, accountants and other experts and all other expenses incurred by
them incident to the negotiation, preparation and execution of the Merger
Agreement, the Registration Statement and the consummation of the transactions
contemplated in the Merger Agreement, including the costs and fees of filing
under the H-S-R Act. Rollway has agreed that it will pay (or accrue on its
books prior to the preparation of the Closing Balance Sheet) all fees and
expenses of its counsel, accountants and other experts and all other expenses
incurred by Rollway incident to the negotiation, preparation and execution of
the Merger Agreement, the Registration Statement, and the consummation of the
transactions contemplated by the Merger Agreement (collectively, the "Closing
Fees"), including, without limitation, the fees and expenses of any finder's or
brokerage fees.
COMPARATIVE RIGHTS OF SHAREHOLDERS
As a result of the Merger, the shareholders of Rollway, whose rights are
currently governed by New York law, will become shareholders of Emerson, whose
rights are governed by Missouri law. The following discussion is intended only
to highlight certain differences between the rights of corporate shareholders
under New York and Missouri law generally and specifically with respect to
shareholders of Rollway and Emerson. The discussion does not purport to
<PAGE> 75
constitute a detailed comparison of the provisions of New York and Missouri
law, and shareholders of Rollway are referred to those laws for a definitive
treatment of the subject matter as well as the Charters and By-Laws of Emerson
and Rollway (see "Available Information").
Election of Directors
New York law permits a New York corporation's Certificate of Incorporation
or By-Laws to provide for classification of a corporation's board of directors
into two, three or four classes. A corporation must have at least three
directors where there are more than two shareholders. The board of directors,
even if less than a quorum, may elect persons to newly created directorships
and vacancies occurring for any reason other than removal without cause, unless
the corporation's governing documents require the shareholders to fill such
vacancies. Unless the Certificate of Incorporation or a shareholder-approved
By-Law provide otherwise, vacancies due to removal without cause must be filled
by a vote of shareholders. A director elected to fill a vacancy, unless
elected by the shareholders, holds office until the next meeting of
shareholders at which the election of directors is in the regular course of
business. Rollway's Certificate of Incorporation provides that the board of
directors should be classified into three classes, or, if fewer than nine
directors, into two classes. Rollway's By-Laws, provides that the number of
directors will not be less than six, which number is within the maximum limit
of 15 and minimum limit of five specified in the Certificate of Incorporation,
and shall be elected by a plurality vote of shareholders. Rollway currently
has six directors divided into two equal classes, serving a three-year term
that are staggered by one year. New York law also provides that the
Certificate of Incorporation may provide for cumulative voting, however,
Rollway's Certificate of Incorporation does not provide for cumulative voting.
Additionally, Rollway's By-Laws provided that if Rollway fails to pay
cumulative dividends on outstanding shares of Rollway Preferred Stock for a
period of three or more years, the holders of Rollway Preferred Stock, voting
as a class, are entitled to elect two directors chosen by plurality vote of
holders of Rollway Preferred Stock. Rollway's By-Laws also provide that
vacancies on the Board of Directors shall be filled by the remaining directors
until the next annual meeting of shareholders, provided, however, if such
vacancy is due to an increase in the board, there shall be no classification of
the additional director until the next annual meeting of shareholders.
Pursuant to Missouri law, directors of Missouri corporations, unless their
terms are staggered, are elected at each annual shareholder meeting, and
vacancies on the Board of Directors may be filled by the Board of Directors,
unless the Articles of Incorporation or By-Laws provide otherwise. The
Articles of Incorporation or the By-Laws may authorize the election of
directors by one or more classes or series of shares, and under Missouri law,
shareholders have cumulative voting rights unless the Articles of Incorporation
or By-Laws provide otherwise. Moreover, a corporation must have at least three
directors, unless the Articles of Incorporation provide that one or more
directors shall constitute the Board of Directors. Emerson's Restated Articles
of Incorporation provide that there shall be three classes of directors who
will each serve for three years, and the By-Laws of Emerson preclude cumulative
voting in the election of directors. Emerson's By-Laws also provide that
vacancies on the Board of Directors shall be filled by the remaining directors.
Further, Emerson's By-Laws restrict the times during which and prescribes the
procedures under which shareholders may nominate directors at a meeting of
shareholders. The Board of Directors of Emerson has set the number of
directors at 15.
<PAGE> 76
Removal of Directors
New York law permits shareholders to remove any or all directors for cause,
and, if the Certificate of Incorporation or By-Laws permits, without cause. In
addition, if allowed by the Certificate of Incorporation or by a shareholder-
approved By-Law, the board of directors may remove any director for cause.
When a class or series of stock is entitled to elect one or more directors, any
director so elected may be removed only by the applicable vote of that class or
series. The state attorney general or holders of 10% of all outstanding
shares may bring legal action to remove a director for cause. Rollway's By-
Laws provide that a decrease in the number of directors shall not be effective
to remove any director prior to the expiration of his term of office.
Missouri law provides that, unless a Missouri corporation's Articles of
Incorporation or By-Laws provide otherwise, directors may be removed with or
without cause by a majority vote of the shareholders entitled to vote at an
election of such directors. Pursuant to Emerson's By-Laws and Restated
Articles of Incorporation, a director of Emerson may be removed with or without
cause either by a majority of the whole Board of Directors if such director
fails to meet certain qualifications or by a vote of holders of eighty-five
percent of the shares entitled to vote at an election of directors, voting as a
single class.
Indemnification and Limitation of Liability of Directors and Officers
New York law authorizes the indemnification of officers and directors if
such person (1) acted in good faith; (2) in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation; and
(3) in a criminal proceeding, without reasonable cause to believe his or her
conduct was unlawful. An officer or director who successfully defends a
proceeding is entitled to indemnification. In certain other circumstances, the
corporation must find that the director or officer met the appropriate standard
of conduct. The corporation may make this finding through (1) the board,
acting by a quorum of directors not parties to the action; (2) in certain
circumstances, the board acting upon written opinion of independent legal
counsel; or (3) in certain circumstances the shareholders. In some situations,
a court may award indemnification. Indemnification rights granted in the NYBCL
are not exclusive of other indemnification rights as long as those other rights
do not attach when a judgment or other final adjudication establishes that a
director or officer (1) acted in bad faith or with active and deliberate
dishonesty and that such acts were material to the cause of action adjudicated
or (2) gained a personal financial or other advantage to which the director or
officer was not legally entitled.
Rollway's By-Laws provide that Rollway shall indemnify any person made, or
threatened to be made, a party to an action or proceeding (including one by or
in the right of Rollway to procure a judgment in its favor), whether civil or
criminal, including an action by or in the right of any other corporation of
any type or kind, domestic or foreign, or any partnership, joint venture,
trust, employee benefit plan or other enterprise, which any director or officer
of Rollway served in any capacity at the request of Rollway, by reason of the
fact that such individual, is or was a director or officer of Rollway, or is or
was serving such other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein. In addition, Rollway may, in the discretion of the Board
<PAGE> 77
of Directors, indemnify all corporate personnel of Rollway, other than
directors and officers, in the same manner and to the same extent as any
director or officer shall be indemnified as described above by reason of his
being, or having been, a director or officer of Rollway or having served any
other company.
Rollway's Certificate of Incorporation provides that Rollway will indemnify
and hold harmless each director and officer of Rollway from and against any and
all claims and liabilities to which he may be or become subject by reason of
his being or having been a director and/or officer or by reason of his alleged
acts or omissions as a director and/or officer, and indemnify against, and
reimburse each officer and director for, any and all expenses reasonably
incurred by him in connection with any pending or threatened action, suit or
proceeding, to which he may be or become subject by reason of his being or
having been a director and/or officer or by reason of his alleged acts or
omissions as a director and/or officer; provided, however, that no director or
officer shall be indemnified against any claim or liability or indemnified
against or reimbursed for any expenses incurred in any action suit or
proceeding which shall be finally adjudged to have arisen out of his own
negligence or wilful misconduct, or indemnified against any compromise of any
such alleged claim or liability unless said compromise be approved by a
majority of the shareholders present at the meeting discussing such compromise.
The foregoing right of indemnification is specifically stated to be
nonexclusive of any other rights to which any director or officer may otherwise
be entitled as a matter of law.
Missouri law authorizes a Missouri corporation to indemnify a director,
officer, employee or agent for actually and reasonably incurred expenses, if
(1) such person acted in good faith, (2) such person acted in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, (3) with respect to any criminal action or proceeding, such person
had no reasonable cause to believe his conduct was unlawful, and (4) such
person acted in a manner such that he is not adjudged to be liable for
negligence or misconduct in the performance of his duties to the corporation,
provided, however, that a corporation may indemnify a person who is adjudged to
be liable for negligence or misconduct to the extent that the court in which
the applicable action or suit was brought determines upon application that,
despite the adjudication of liability and in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for the
expenses which the court deems proper. Further, a corporation shall indemnify
any such person against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the action, suit or proceeding if
he has been successful in defense of such action, suit or proceeding and if
such action, suit or proceeding is one for which the corporation may indemnify
him as provided above. A corporation also possesses the power to give any
further indemnity to any such person, if such further indemnity is either (1)
authorized, directed or provided for in the articles of incorporation of the
corporation or any duly adopted amendment thereof or (2) is authorized,
directed or provided for in any By-Law or agreement of the corporation which
has been adopted by a vote of the shareholders of the corporation; provided
that no such indemnity shall indemnify any person from or on account of such
person's conduct which was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct.
At the Annual Meeting of Shareholders held on February 10, 1987, Emerson's
shareholders approved indemnification agreements with the directors of Emerson
and amendments to the By-Laws of Emerson which incorporate indemnity provisions
as described above. The amended By-Laws provide that Emerson will indemnify
<PAGE> 78
its directors and officers against all expenses (including attorneys' fees),
judgments, fines and settlement amounts, paid or incurred in any action or
proceeding, including any action by or on behalf of Emerson, on account of
their service as a director or officer of Emerson, any subsidiary of Emerson or
any other company or enterprise when they are serving in such capacities at the
request of Emerson, excepting only cases where (1) the conduct of such person
is adjudged to be knowingly fraudulent, deliberately dishonest or willful
misconduct, (2) a final court adjudication shall determine that such
indemnification is not lawful, (3) judgment is rendered against such person for
an accounting of profits made from a purchase or sale of securities of Emerson
in violation of Section 16(b) of the Exchange Act or of any similar statutory
law, and (4) any remuneration paid to such person is adjudicated to have been
paid in violation of law. Such person shall be indemnified only to the extent
that the aggregate of losses to be indemnified exceeds the amount of such
losses for which the director or officer is insured pursuant to any directors'
or officers' liability insurance policy maintained by Emerson. Emerson
maintains directors' and officers' liability insurance. Missouri law does not
contain any provisions allowing the limitation of liability of a director or
officer.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Emerson
pursuant to the foregoing provisions, or otherwise, Emerson has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
Shareholder Meetings
New York law provides that special meetings of shareholders may be called
by the board of directors and by such other person or persons as may be
authorized to do so by the corporation's Certificate of Incorporation or By-
Laws. Rollway's By-Laws provide that special meeting of shareholders may be
called at any time by the Chairman of the Board, the President or Secretary of
the corporation on the order of the Board of Directors. Additionally, the
Secretary of Rollway will call a special meeting upon the written request of
the shareholders of record of a majority of shares of Rollway entitled to vote
at such special meeting.
Missouri law provides that a special meeting of the shareholders may be
called by the Board of Directors or as otherwise specified in a corporation's
Articles of Incorporation or By-Laws. Pursuant to Emerson's Restated Articles
of Incorporation and By-Laws, special meetings of Emerson shareholders may be
convened only by the Board of Directors, by the holders of at least eighty-five
percent of all outstanding shares entitled to vote at such a meeting, and by
the Chairman of the Board, Vice Chairman of the Board, President, or Secretary.
Further, Emerson's By-Laws restrict the times during which, and prescribe
procedures under which, a shareholder may propose business at any meeting of
shareholders.
Inspection Rights
Under New York law, a corporation is required to maintain complete books
and records of account, including minutes of the meetings of its shareholders,
board of directors and executive committee, if any, and a shareholder record.
A shareholder who has been a shareholder of record for at least six months or
who holds at least 5% of any class of outstanding shares, (1) upon written
<PAGE> 79
request of such shareholder, has the right to receive an annual balance sheet
and profit and loss statement for the preceding fiscal year, and, if already
distributed to its shareholders or otherwise made available to the public, the
most recent interim balance sheet or profit and loss statement and (2) has the
right, during usual business hours, to examine (and make extracts from) the
shareholder minutes and record of shareholders, provided, however, that such
inspection may be denied if such shareholder refuses to furnish an affidavit
that such inspection is not for an improper purpose and that he or she has not
sold or offered for sale any list of shareholders of any corporation within the
last five years. Additionally, a person may always apply to the proper court
for an order compelling such inspection.
Under Missouri law, a corporation is required to maintain books and
records, including minutes of the meetings of its shareholders and Board of
Directors and lists of its assets and liabilities, and the names and addresses
of its officers and its shareholders. The shareholders of a Missouri
corporation are entitled to inspect (and make copies of) certain of such books
and records under appropriate circumstances and at proper times, if such
inspection is for a proper purpose.
Action by Consent of Shareholders
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting upon written consent of the holders
of all outstanding shares (or less then all outstanding shares if so permitted
by the Certificate of Incorporation or in special provisions of the NYBCL).
Any action that may be taken at a meeting of a Missouri corporation's
shareholders may be taken without a meeting if all of the shareholders entitled
to vote at such a meeting consent in writing to such action. These written
consents have the same effect as a unanimous vote of the shareholders at a
meeting duly held.
Dividends and Repurchases of Stock
New York law permits a solvent New York corporation to declare and pay
dividends or make other distributions on its outstanding shares in cash or in
its bonds or its property, except when such declaration, payment or
distribution would be contrary to the Certificate of Incorporation. No
dividend, however, may be declared or paid when the net assets of the
corporation are below its stated capital or such payment would cause the net
assets of the corporation to be below its stated capital.
Additionally, a solvent New York corporation, subject to its Certificate of
Incorporation, may purchase or redeem its own securities out of surplus. A
solvent New York corporation may purchase, under certain circumstances, or
redeem its securities out of stated capital, provided, however, that such
purchase or redemption shall not reduce net assets below the stated capital.
Rollway's ability to declare and pay dividends on Rollway Common Shares is
restricted by the terms of the Rollway Preferred Stock. See "Information about
Rollway--Description of Preferred Stock."
The Board of Directors of a Missouri corporation is empowered to declare
dividends on its outstanding shares. Unless the Articles of Incorporation
provide otherwise, a dividend may be declared in the form of cash, property or
a corporation's own shares. No dividend, however, may be declared or paid when
<PAGE> 80
the net assets of the corporation are below its stated capital or such payment
would cause the net assets of the corporation to be below its stated capital.
Moreover, no dividends may be paid to any class of shares unless all cumulative
dividends accrued on preferred or special classes of shares entitled to
preferred dividends are fully paid.
In addition, a Missouri corporation has the express power to provide for
the purchase, acquisition or redemption its own securities in its Articles of
Incorporation. A corporation, however, may not purchase or redeem its own
securities when the net assets of the corporation are (or would be caused to
be) below its stated capital, or in the case of preferred stock, (1) when the
price paid for purchasing or redeeming such securities exceeds their stated
redemption price or (2) when the assets after such redemption or purchase are
insufficient to pay any debts of the corporation not otherwise satisfied.
Moreover, when the funds used to redeem or purchase preferred stock come out of
a corporation's stated capital, such amount of stated capital may not exceed
the stated capital represented by such shares, and such shares will be deemed
retired. Emerson's Restated Articles of Incorporation provide for the
redemption of any series of preferred shares in certain circumstances, but
currently Emerson has no outstanding preferred shares.
Amendments to Charter
New York law provides that a New York corporation may amend its Certificate
of Incorporation in any respect provided the amendment contains only provisions
that would be lawful if the certificate were an original certificate filed at
the time of the amendment. To enact an amendment, the board of the corporation
must authorize the amendment followed by the authorization of a majority of the
outstanding shares entitled to vote. The board acting alone can amend the
corporation's address or registered agent for service of process. When an
amendment of the certificate would affect certain substantial rights of the
holders of a class of stock, the NYBCL provides that the enactment of the
amendment requires the approval of a majority of the outstanding shares of the
affected class voting as a separate class in addition to a majority of all
outstanding voting shares. If only one or more series of any class, but not
the entire class, are adversely affected by a proposed amendment, then only the
holders of each series whose rights would be adversely affected shall be
entitled to participate in the vote as a separate class.
Missouri law provides that, unless otherwise specified in a corporation's
Articles of Incorporation or By-Laws, the Articles of Incorporation may be
amended by a vote of a majority of outstanding shares entitled to vote on the
proposed amendment; provided, however, that (1) where the Articles of
Incorporation or By-Laws provide for cumulative voting, the Articles of
Incorporation may not be amended to decrease the number of directors to less
than three when the number of votes against a proposal for such a decrease
would be sufficient to elect a director in an election of directors and (2) an
amendment proposing to remove control share acquisitions (as hereinafter
defined) from the ambit of Missouri's control share acquisitions statute,
R.S.Mo. Section 351.407 (as discussed hereafter), may only be adopted by the
vote of two-thirds of all outstanding shares entitled to vote upon such
amendment. Emerson's Restated Articles of Incorporation provide that an
affirmative vote of eighty-five percent of all outstanding shares, voting as a
single class, is required to change certain provisions regarding the number and
classes of directors, the removal of directors, the ability of the Board of
Directors to amend the By-Laws and the convening of special shareholders'
meetings.
<PAGE> 81
Amendments to By-Laws
New York law grants shareholders entitled to elect directors the power to
adopt, amend or repeal By-Laws. If permitted in the Certificate of
Incorporation or by a shareholder-approved By-Law, the board of directors may
also adopt, amend or repeal By-Laws by such vote may be therein specified,
which may be greater than the vote otherwise prescribed by the NYBCL.
Shareholders of a New York corporation retain the right to amend or repeal any
By-Laws adopted by the board of directors. Rollway's By-Laws provide that such
By-Laws may be altered, amended or added to, (1) at any annual or special
meeting called for such purpose by the majority vote of the shareholders at
such meeting and (2) at any regular or special meeting of the Board of
Directors by a majority of the total number of directors, provided, however,
that any alteration, amendment or addition may be altered or repealed by the
shareholders at any meeting.
Missouri law provides that shareholders possess the power to alter or amend
the By-Laws of the corporation, unless and to the extent that such power may be
vested in the board of directors by the Articles of Incorporation. Emerson's
Restated Articles of Incorporation provide that only the Board of Directors
possesses the power to alter or amend the By-Laws, and a vote of the majority
of directors present at a meeting at which a quorum is present constitutes the
act of the Board.
Preemptive Rights of Shareholders
Under New York law, unless a Certificate of Incorporation provides
otherwise, shareholders possess certain preemptive rights by operation of law.
In general, these rights allow shareholders whose unlimited dividend rights or
voting rights would be adversely affected by the issuance of additional shares
of stock to purchase, on terms and conditions set by the board of directors,
that proportion of such new issue of stock necessary to preserve the relative
dividend or voting rights of such shareholders. Unless otherwise provided in
the Certificate of Incorporation, certain types of stock are not subject to
preemptive rights. Rollway's Certificate of Incorporation provides for the
waiver of such preemptive rights. Additionally, Rollway's Certificate of
Incorporation provides that any unissued stock or additional authorized issue
of stock may be issued and disposed of pursuant to resolutions of the Board of
Directors of Rollway to such person and on such terms as is advisable by the
Board of Directors in the exercise of its discretion.
Missouri law allows a shareholder's preemptive rights to be limited or
abrogated in the Articles of Incorporation. Emerson's Restated Articles of
Incorporation precludes a shareholder's preemptive rights in respect of both
preferred and common stock.
Control Share Acquisition Provisions
New York law does not contain a statute comparable to Missouri's control
share acquisition statute discussed below.
Under Missouri law, a "control share acquisition" means the acquisition,
directly or indirectly, of either ownership or the power to direct the exercise
of voting power with respect to "control shares," which are defined as shares,
when added to all other shares of the issuing corporation owned by the
acquiring person, that would entitle such person to exercise certain degrees of
<PAGE> 82
voting power with respect to stock of the issuing corporation. Under the
Missouri control share acquisition statute, shareholders who acquire enough
shares to give them (1) one-fifth to one-third, (2) one-third to a majority, or
(3) a majority or more of the outstanding stock of Emerson will not be able to
vote those shares unless certain disclosure requirements are satisfied and the
retention of voting rights by the acquiror is approved by at least a majority
of shares entitled to vote and a majority of all non-interested shares entitled
to vote. A corporation's Articles of Incorporation or By-Laws may provide that
a corporation will not be subject to Missouri's control share acquisition
statute. The Articles of Incorporation and By-Laws of Emerson do not exempt
Emerson from Missouri's control share acquisition statute (but see "-- Business
Combinations" below).
Takeover Bid Disclosure Provisions
New York by statute regulates take-over bids. A "take-over bid" means the
acquisition of or offer to acquire, pursuant to a tender offer or request or
invitation for tenders, any equity security of a target company, if after the
acquisition the offeror would, directly or indirectly, be a beneficial owner of
more than five percent of any class of the issued and outstanding equity
securities of such target company. A "take-over bid" does not include an offer
to acquire such equity security solely in exchange for other securities, or the
acquisition of such equity security pursuant to such offer, for the sole
account of the offeror, in good faith and not to avoid New York's statutory
regulation of take-over bids, and not involving any public offering within the
meaning of the Securities Act. The Merger will not constitute a takeover bid
under New York law.
Missouri also regulates take-over bids, which are defined as the
acquisition of or offer to acquire any equity security of a domestic target
company, if after acquisition thereof the offeror would, directly or
indirectly, be a beneficial owner of more than five percent of any class of the
issued and outstanding equity securities of such target company. A "take-over
bid" does not include an offer to acquire such equity security solely in
exchange for other securities, or the acquisition of such equity security
pursuant to such offer, for the sole account of the offeror, in good faith and
not to avoid Missouri's statutory regulation of take-over bids, and not
involving any public offering within the meaning of the Securities Act. Unless
the offeror, prior to making a take-over bid, files with the Commissioner of
Securities and delivers to the target company certain materials, including
copies of all offering information, certain information regarding the offeror,
the source of funds financing the offer, the number of shares to be acquired
and whether the offeror intends to sell the assets of the company, the offeror
will be subject to civil monetary and criminal penalties. The Merger will not
constitute a takeover bid under Missouri law because neither Emersub nor
Rollway is a Missouri corporation. (but see "-- Business Combinations" below).
Business Combinations
New York law provides that, generally, for a merger between two or more New
York corporations upon the approval of the holders of two-thirds of all
outstanding shares entitled to vote on the merger and, in certain
circumstances, of the holders of a majority of all outstanding shares of each
class or series, is required. However, where the merger is between one or more
New York corporations and one or more foreign corporations, the foregoing two-
thirds vote (and the majority vote if applicable) is required only for the
<PAGE> 83
domestic corporation. The foreign corporation must comply with the applicable
provisions of the jurisdiction where it is incorporated.
Furthermore, under New York law, there are additional restrictions with
respect to "business combinations" involving an "interested shareholder" of a
New York corporation. A "business combination" is (1) any merger or
consolidation of a resident domestic corporation or any of its subsidiaries
with (i) an interested shareholder or (ii) any other corporation (whether or
not itself an interested shareholder) which is, or after the merger or
consolidation would be, an affiliate or associate of an interested shareholder
(each an "Interested Affiliate"); (2) any sale, lease, exchange or other
disposition with an interested shareholder or any Interested Affiliate of
assets of a resident domestic corporation or any of its subsidiaries equal to
(i) 10% or more of the aggregate market value of all the assets of such
corporation, (ii) 10% or more of the aggregate market value of all the
outstanding stock of such corporation or (iii) 10% or more of the earning power
or net income of such corporation; (3) the issuance or transfer by a resident
domestic corporation or any of its subsidiaries of any of its stock or of any
of its subsidiaries stock equal to 5% or more of the aggregate market value of
all the outstanding stock of such corporation to an interested shareholder or
Interested Affiliate, except pursuant to the exercise of warrants or rights to
purchase stock offered, or a dividend or distribution paid pro rata to all
shareholders; (4) the adoption of any plan or proposal for the liquidation or
dissolution of a resident domestic corporation pursuant to any agreement,
arrangement or understanding (whether or not in writing) with, an interested
shareholder or Interested Affiliate; (5) any reclassification of securities, or
recapitalization of a resident domestic corporation, or any merger or
consolidation of such corporation with any of its subsidiaries, or any other
transaction (whether or not involving an interested shareholder), pursuant to
any agreement, arrangement or understanding (whether or not in writing) with,
an interested shareholder or Interested Affiliate, which has the effect, of
increasing the proportionate share of outstanding shares of voting stock (or
securities convertible into voting stock) of such corporation or subsidiary,
which is owned by an interested shareholder or Interested Affiliate, except as
a result of immaterial changes due to fractional share adjustments or (6) any
receipt by an interested shareholder or Interested Affiliate of the benefit of
any loans, advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantages provided by or through a resident domestic
corporation. An "interested shareholder" is one that owns at least 20% of the
outstanding voting shares of a corporation. A New York corporation cannot
engage in a business combination with an interested shareholder for five years
following the acquisition date of an interested shareholder's shares unless the
directors approve the business combination or stock acquisition before the
shareholder's stock acquisition date. Following the five-year period, a
corporation cannot enter a business combination with an interested shareholder
unless (1) the directors approve the business combination or the shareholder's
stock acquisition before the shareholder's stock acquisition date; (2) at a
meeting called for such purpose, the holders of a majority of the outstanding
shares not beneficially owned by an interested shareholder or an associate or
affiliate of an interested shareholder approve the business combination; or (3)
the business combination satisfies certain price and procedural requirements.
Such restrictions do not apply to certain specified corporations, including,
without limitation, a corporation that (1) does not have a class of voting
stock registered with the Securities and Exchange Commission pursuant to
Section 12 of the Exchange Act, with some exceptions, and (2) has exempted
itself (a) in its original certificate of incorporation, (b) in an amendment to
its By-Laws prior to March, 1986 or (c) in an amendment to its By-Laws approved
by a vote of the holders of a majority of the outstanding voting stock,
<PAGE> 84
excluding the voting stock of an interested shareholder or an associate or
affiliate of an interested shareholder, provided, however, that such amendment
will not become effective for 18 months following its adoption and will not
apply to a business combination with an interested shareholder whose stock
acquisition date is on or before the effective date of such amendment.
Missouri law provides, generally, that in the case of a merger or
consolidation, at least two-thirds of the shares entitled to vote must approve
such merger or consolidation, unless the Articles of Incorporation provide
otherwise. Where the merger is between one or more Missouri corporations and
one or more foreign corporations, the foregoing two-thirds vote is required
only for the Missouri corporation. The foreign corporation must comply with
the applicable provisions of the jurisdiction where it is incorporated.
However, under Missouri law, there are also additional restrictions with
respect to business combinations involving an "interested shareholder" of a
Missouri corporation which, for the most part, are nearly identical to those
described above for a New York corporation.
Additionally, Emerson's Restated Articles of Incorporation mandate that all
"business combinations" (as hereinafter defined) must be approved by an
affirmative vote of eighty-five percent of all outstanding shares of Emerson,
voting as a single class. A "business combination" is (1) any merger,
consolidation, or exchange of Emerson's capital shares with an "interested
person" (as hereinafter defined), (2) any sale, lease, exchange, or other
similar disposition, including partial liquidation or dissolution of Emerson,
of a substantial part of the assets of Emerson (or any of its subsidiaries),
other than in the ordinary course of business, with an interested person, (3)
the issuance or transfer of securities of Emerson or a subsidiary to an
interested person or the issuance or transfer of securities of an interested
person to Emerson or any of its subsidiaries, (iv) any sale, lease, exchange,
or other similar disposition of a substantial part of the assets of an
interested person, other than in the ordinary course of business, with Emerson
or any of its subsidiaries, (v) any recapitalization or reclassification of
securities of Emerson or any merger or consolidation of Emerson with any of its
subsidiaries which would effect an increase in the proportionate ownership of
an interested person in Emerson, or (vi) any merger or consolidation of Emerson
with any of its subsidiaries after which the Articles of Incorporation of the
surviving entity would not contain the any of the above provisions.
"Interested person" means any individual or other entity that, at any time
during the two year period prior to and including the date of consummation of
the proposed business combination, owns or owned, directly or indirectly
through a subsidiary or associate, ten percent of the total voting power of all
outstanding shares of Emerson's voting stock.
Furthermore, Emerson's Restated Articles of Incorporation also provide that
a business combination need not be approved by eighty-five percent of all the
outstanding shares of Emerson, voting as a single class, if (1) such business
combination is approved by a majority of directors who are not affiliated or
associated with an interested person and who held office prior to such person
or entity becoming an interested person, or (2) if all of the following
conditions are met: (a) the amount of cash and property received as
consideration for such business combination is equal to or greater than the
highest of (i) the highest per share price paid by the interested party for any
of Emerson's capital stock in the two years preceding the consummation of the
business combination; (ii) the highest preferential amount per share to which
the holders of any class or series of preferred stock are entitled; or (iii)
the fair market value of such shares on the date that the business combination
<PAGE> 85
is announced; (b) the consideration received by the holders of Emerson's
capital stock is in cash or the same form as that used by the interested person
to acquire capital stock in Emerson; (c) certain changes in the payment of
dividends do not occur; (d) the interested person does not receive the benefit
of any loans or tax advantages provided by Emerson; and (e) a proxy statement
meeting the requirements of the Exchange Act is sent to the shareholders at
least 30 days before such business combination is consummated.
Sale, Lease or Exchange of Assets
New York law provides that a sale, lease, exchange or other disposition of
all or substantially all of the assets of a corporation, if not made in the
usual or regular course of business actually conducted by such corporation,
shall be authorized only as follows: (1) the board shall authorize the proposed
sale, lease, exchange or other disposition and direct its submission to a vote
of shareholders, (2) notice of a shareholders meeting shall be given to each
shareholder or record, whether or not entitled to vote, and (3) the
shareholders shall approve such sale, lease, exchange or other disposition and
may fix, or may authorize the board to fix, any of the terms and conditions
thereof. Notwithstanding shareholder approval, the board may abandon the
proposed sale, lease, exchange or other disposition without further action by
the shareholders, subject to the rights, if any, of third parties under any
contract relating thereto.
Missouri law provides that a vote of at least two-thirds of the shares
entitled to vote is required to authorize the sale, lease or exchange of all or
substantially all of the assets of a corporation, except that the Articles of
Incorporation or the By-Laws may provide that a greater proportion is required
to authorize such a sale, lease or exchange. See " -- Business Combinations"
above for discussion of sales, leases or exchanges of assets with an
"interested person."
Rollway Preferred Stock
The holders of Rollway Preferred Stock are entitled to various rights and
priorities regarding the management and assets of Rollway. For a discussion of
those rights and priorities, see "Information about Rollway -- Description of
Preferred Stock."
Subject to the approval of the Preferred Terms Amendment by the holders of
a majority of Rollway Preferred Stock, upon consummation of the proposed
Merger, the holders of Rollway Preferred Stock will possess shares of Emerson
Common Stock (as described in "Information about Emerson -- Description of
Capital Stock") which will have certain rights under Missouri law and under the
Restated Articles of Incorporation and By-Laws of Emerson as described herein.
Preferred Share Purchase Rights
The holders of Rollway Common Stock, Rollway Preferred Stock and/or Rollway
Options, as of the date hereof, do not own any rights with respect to Rollway's
securities which are similar to Emerson's Preferred Share Purchase Rights.
Upon consummation of the Proposed Merger, holders of Rollway Common Stock
(and Rollway Preferred Stock, subject to the approval of the Preferred Terms
Amendment), will receive with their Emerson Common Stock received in the Merger
<PAGE> 86
the Preferred Share Purchase Rights which are currently attached to and trade
with the Emerson Common Shares and which have certain rights as described under
"Information about Emerson -- Preferred Share Purchase Rights Plan."
Rights of Dissenting Shareholders
Pursuant to New York law, a shareholder of a New York corporation who is
entitled to vote with respect to certain transactions (including, without
limitation, a merger or consolidation, a disposition of all or substantially
all of the assets of a corporation, or a share exchange) and who complies with
the applicable statutory procedures is entitled to receive in cash the fair
value of his or her shares if the shareholder does not consent to such
transactions. Additionally, shareholders have dissenters' rights in the case
of certain types of amendments of the Certificate of Incorporation. For a more
complete description of the rights of dissenting shareholders under New York
law, see "Dissenting Shareholder Rights."
Similarly, Missouri law provides that a shareholder of a Missouri
corporation who complies with applicable statutory procedures is entitled to
receive fair value for his or her shares if the shareholder votes against
certain transactions, including, without limitation, a merger or consolidation,
a disposition of all or substantially all of the assets of a corporation, or a
share exchange. Also, shareholders have dissenters' rights with respect to
certain amendments that materially and adversely affect rights in respect of a
dissenter's shares as well as any corporate action taken pursuant to a
shareholder vote to the extent that the Articles of Incorporation or By-Laws or
a resolution of the board provides that voting or non-voting shareholders are
entitled to dissent and obtain payment for their shares.
DISSENTING SHAREHOLDER RIGHTS
It is a condition to the consummation of the Merger that (i) holders of not
more than 5% of the outstanding shares of Rollway Common Stock shall have
exercised dissenting shareholder rights with respect to the Merger and
(ii) holders of not more than 5% of the outstanding shares of Rollway Preferred
Stock shall have exercised dissenting shareholder rights with respect to the
Preferred Terms Amendment. However, if this condition is waived by Emerson and
Emersub in their sole discretion and the Merger is consummated, any holder of
Rollway Common Stock who elects to exercise his, her or its rights of dissent
from the Merger and who complies with the procedures set forth in Sections 623,
inclusive, of the NYBCL shall be entitled to receive cash for the fair value of
his, her or its shares of Rollway Common Stock owned at the time of the Merger.
Additionally, if the Preferred Terms Amendment is approved, any holder of
Rollway Preferred Stock who elects to exercise his, her or its right to dissent
from the Preferred Terms Amendment and who complies with the procedures set
forth in Section 623, inclusive, of the NYBCL shall be entitled to receive the
"fair value" of his, her or its shares of Rollway Preferred Stock.
Shareholders contemplating the exercise of dissenters' rights should review
carefully Sections 623, 806(b)(6) and 910 of the NYBCL. A copy of the complete
text of such Sections is attached as Exhibit B hereto. The following,
qualified in its entirety by such provisions, is a summary of the steps which
must be taken for the effective exercise of dissenters' rights:
(i) Written Objection. Any shareholder electing to exercise the right of
dissent shall file with Rollway prior to or at the Rollway Special
<PAGE> 87
Meeting and prior to the taking of the vote on the approval of the
applicable action of a written objection stating said shareholder's
intention to demand payment for his, her or its shares if the action
is approved. Such written objection is not required from any
shareholder to whom Rollway did not give notice of such Rollway
Special Meeting in accordance with the NYBCL.
(ii) Voting at the Rollway Special Meeting. In addition to the filing of
the written objection, shares for which dissenters' rights are sought
must not be voted in favor of approval of the applicable action.
(iii) Notice of Effectiveness of Action. If the action is approved by the
vote (or written consent) of the requisite number of Rollway's
shareholders, Rollway is required, within ten days of such vote (or
written consent), to send to each dissenting shareholder of Rollway
who properly filed a written objection thereto (or from whom written
objection was not required) and whose shares were not voted in favor
of the approval of the action a notice (the "Company Notice") of such
authorization (or consent).
(iv) Written Demand. Within twenty days after the giving of the Company
Notice, any shareholder from whom written objection was not required
and who elects to dissent shall deliver to Rollway a written notice
(an "Election Notice") of such election.
(v) Delivery of Certificates. Within one month after filing of the
Election Notice (the "Delivery Period"), the shareholder must submit
the certificates representing his shares.
(vi) Offer. Within fifteen days after the later of the expiration of the
Delivery Period or the consummation of the applicable action (the
"Offer Period"), Rollway, as the Surviving Corporation, must make a
written offer (the "Offer") to each dissenting shareholder to pay for
his, her or its shares at a specified price which Rollway considers to
be fair value.
(vii) Payment. If within thirty days after the making of the Offer (the
"Agreement Period"), Rollway and a dissenting shareholder agree upon
the fair value to be paid for the dissenting shares, payment by
Rollway shall be made to the dissenting shareholder within sixty days
after the later of the making of such Offer or the consummation of the
applicable action. If Rollway fails to make the Offer or Rollway and
a dissenting shareholder do not agree on the fair value of the
dissenting shares within the Offer Period or Agreement Period, as the
case may be, Rollway shall institute a special proceeding in the
appropriate state supreme court within twenty days after the Offer
Period or Agreement Period, as the case may be (the "Proceeding
Period"). If Rollway fails to institute such proceeding, the
dissenting shareholder must institute such proceeding within thirty
days after the expiration of the Proceeding Period or lose all
dissenter's rights (unless otherwise directed by the court). Rollway
shall be required to pay the fair value of the dissenting shares as
established by the court. Each party to such proceeding shall bear
its own costs and expenses, although the court may, in its discretion,
assess all or any part of Rollway's costs against any or all
dissenting shareholders and all or any part of any dissenting
shareholder costs against Rollway.
<PAGE> 88
(viii) Cessation of Rights. Upon consummation of the applicable action, any
dissenting shareholder shall cease to have any of the rights of a
shareholder except the right to be paid the fair value of his shares
and any other rights under Section 623 of the NYBCL.
ONCE DISSENTERS RIGHTS ARISE, UNLESS THE AFOREMENTIONED REQUIREMENTS
ARE STRICTLY MET, SHARES OF ROLLWAY STOCK WILL AUTOMATICALLY LOSE ANY
DISSENTERS' RIGHTS.
LEGAL MATTERS
Hancock & Estabrook, LLP has rendered the opinion referred to under "The
Merger -- Certain Federal Income Tax Matters." Hancock & Estabrook, LLP
represents Rollway in this Merger. Hancock & Estabrook, LLP does not represent
the individual shareholders, option holders and employees of Rollway in
connection with the Merger and the transactions contemplated thereby, and such
persons are advised to seek the advice of their own counsel.
H. M. Smith, Esq., Assistant General Counsel and Assistant Secretary of
Emerson, has rendered his opinion that the shares of Emerson Common Stock to be
issued in the Merger, when issued pursuant to the terms of the Merger
Agreement, will be validly issued, fully paid and non-assessable. As of
December 31, 1995, H. M. Smith owned 1,436 shares of Emerson Common Stock and
options to purchase 7,902 additional shares of Emerson Common Stock.
EXPERTS
The consolidated financial statements of Emerson Electric Co. and
subsidiaries as of September 30, 1995 and 1994, and for each of the years in
the three-year period ended September 30, 1995 incorporated by reference
herein, have been incorporated herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accounts, incorporated by reference
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Lipe-Rollway Corporation at
December 3, 1995 and November 27, 1994, and for each of the three years in the
period ended December 3, 1995 included in this Proxy Statement/Prospectus,
which is referred to and made a part of the Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
<PAGE> 89
LIPE-ROLLWAY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . 90
Consolidated Balance Sheets as of December 3, 1995 and
November 27, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 91
Consolidated Statements of Operations for the fiscal years ended
December 3, 1995, November 27, 1994 and November 28, 1993 . . . . . 93
Consolidated Statements of Shareholders' Equity for the fiscal years
ended December 3, 1995, November 27, 1994 and November 28, 1993 . . 94
Consolidated Statements of Cash Flows for the fiscal years ended
December 3, 1995, November 27, 1994 and November 28, 1993 . . . . . 96
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 97
<PAGE> 90
Report of Independent Auditors
Shareholders and Board of Directors
Lipe-Rollway Corporation
We have audited the accompanying consolidated balance sheets of Lipe-Rollway
Corporation and subsidiaries as of December 3, 1995 and November 27, 1994, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 3, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Lipe-Rollway
Corporation and subsidiaries at December 3, 1995 and November 27, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 3, 1995, in conformity with generally
accepted accounting principles.
As described in Note 1, in 1994 the Company changed its method of accounting
for income taxes.
/s/ Ernst & Young LLP
Syracuse, New York
January 19, 1996
<PAGE> 91
<TABLE>
Lipe-Rollway Corporation and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 3, November 27,
1995 1994
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 381,479 $ 59,649
Trade receivables, less allowances of
$588,884 and $403,687 10,694,372 8,211,030
Inventories:
Finished goods 8,467,618 6,579,056
Work-in-process 3,018,778 2,432,428
Materials and supplies 1,084,214 942,980
------------ ------------
12,570,610 9,954,464
Due from officer 152,336 139,319
Foreign income, VAT and other taxes refundable 250,573 308,964
Prepaid and other current assets 783,490 746,138
------------ ------------
Total current assets 24,832,860 19,419,564
Other assets 265,104 169,206
Deferred pension cost 562,165 870,782
Deferred financing costs, net of amortization
of $12,154 183,646 --
Property, plant, and equipment:
Land ($509,480 and $475,593) and improvements 618,004 604,615
Buildings and improvements 6,084,736 5,859,262
Machinery and equipment 9,639,888 16,005,362
------------ ------------
16,342,628 22,469,239
Less allowances for amortization and
depreciation 8,031,681 15,166,632
------------ ------------
8,310,947 7,302,607
------------ ------------
$34,154,722 $27,762,159
============ ============
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
December 3, November 27,
1995 1994
------------ ------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 8,686,818 $ 2,482,893
Checks outstanding at end of period 501,671 433,405
Trade accounts payable 6,098,269 5,161,985
Accrued expenses 2,505,154 1,364,801
Environmental remediation liability (Note 8) 70,000 --
Income taxes currently payable 10,168 115,480
Current portion of long-term debt 995,224 880,697
------------ ------------
Total current liabilities 18,867,304 10,439,261
Long-term debt, less current portion 6,766,808 10,165,439
Deferred taxes 353,502 338,847
Long-term environmental remediation liability
(Note 8) 830,000 --
Long-term pension liability 1,134,087 1,869,937
Shareholders' equity:
Preferred stock issued and outstanding
93,692 shares 936,920 936,920
Common stock, $.50 par value:
Authorized 1,500,000 shares;
Issued 761,898 shares 380,949 380,949
Additional capital 1,386,626 1,386,626
Unfunded pension losses (180,007) (452,934)
Retained earnings 2,590,107 1,883,033
Treasury stock (63,885) (63,885)
Currency translation adjustment 1,152,311 877,966
------------ ------------
Commitments and contingencies (Notes 7 and 8) 6,203,021 4,948,675
------------ ------------
$34,154,722 $27,762,159
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 93
<TABLE>
Lipe-Rollway Corporation and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
Year ended
December 3, November 27, November 28,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $46,493,462 $32,903,821 $32,453,081
Costs and expenses:
Cost of products sold 32,976,505 23,823,149 24,471,706
Selling, general, and
administrative expenses 8,728,829 7,453,184 6,957,418
Other administrative expenses
(Notes 8 and 11) 1,488,108 -- --
Interest expense 1,746,486 1,208,949 1,021,935
------------ ------------ ------------
44,939,928 32,485,282 32,451,059
------------ ------------ ------------
Income from operations before
income taxes 1,553,534 418,539 2,022
Income taxes 846,460 316,951 148,154
------------ ------------ ------------
Net income (loss) $ 707,074 $ 101,588 $ (146,132)
============ ============ ============
Net income (loss) applicable to
common stock $ 613,382 $ 7,896 $ (239,824)
============ ============ ============
Net income (loss) per common share
outstanding after dividends on
preferred stock $.81 $.01 $(.32)
============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 94
<TABLE>
Lipe-Rollway Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years ended November 28, 1993, November 27, 1994, and December 3, 1995
<CAPTION>
Unfunded
Preferred Common Additional Pension
Stock Stock Capital Losses
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance November 29, 1992 $936,920 $380,949 $1,386,626 $(115,847)
Adjustment (Note 9)
------------- ------------- ------------- -------------
Balance November 29, 1992 as restated 936,920 380,949 1,386,626 (115,847)
Net loss
Preferred dividends $1 per share
Unfunded pension losses (121,925)
Currency translation adjustment
------------- ------------- ------------- -------------
Balance November 28, 1993 936,920 380,949 1,386,626 (237,772)
Net income
Unfunded pension losses (215,162)
Currency translation adjustment
------------- ------------- ------------- -------------
Balance November 27, 1994 936,920 380,949 1,386,626 (452,934)
Net income
Unfunded pension losses 272,927
Currency translation adjustment
------------- ------------- ------------- -------------
Balance December 3, 1995 $936,920 $380,949 $1,386,626 $(180,007)
============= ============= ============= =============
(Continued)
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
Currency Total
Retained Treasury Translation Shareholders'
Earnings Stock Adjustment Equity
------------- ------------- ------------- -------------
<C> <C> <C> <C>
Balance November 29, 1992 $2,382,112 $(63,885) $ 813,723 $5,720,598
Adjustment (Note 9) (353,000) (353,000)
------------- ------------- ------------- -------------
Balance November 29, 1992 as restated 2,029,112 (63,885) 813,723 5,367,598
Net loss (146,132) (146,132)
Preferred dividends $1 per share (101,535) (101,535)
Unfunded pension losses (121,925)
Currency translation adjustment (462,633) (462,633)
------------- ------------- ------------- -------------
Balance November 28, 1993 1,781,445 (63,885) 351,090 4,535,373
Net income 101,588 101,588
Unfunded pension losses (215,162)
Currency translation adjustment 526,876 526,876
------------- ------------- ------------- -------------
Balance November 27, 1994 1,883,033 (63,885) 877,966 4,948,675
Net income 707,074 707,074
Unfunded pension losses 272,927
Currency translation adjustment 274,345 274,345
------------- ------------- ------------- -------------
Balance December 3, 1995 $2,590,107 $(63,885) $1,152,311 $6,203,021
============= ============= ============= =============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 96
<TABLE>
Lipe-Rollway Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year ended
December 3, November 27, November 28,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 707,074 $ 101,588 $ (146,132)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 987,736 755,408 630,793
Provision for bad debts 225,261 (37,739) 318,318
Gain on sale of property, plant, and equipment 12,300
Deferred taxes 14,655 4,762 42,591
Provision for noncurrent pension expense (163,095) (53,975) 26,987
Provision for noncurrent environmental remediation
liability 830,000 -- --
Changes in operating assets and liabilities:
(Increase) in trade receivables (2,303,511) (1,023,052) (427,510)
(Increase) in inventories (2,182,745) (997,356) (161,881)
(Increase) decrease in due from officer (13,017) (14,975) 12,393
(Increase) decrease in other current assets 130,143 (364,145) (350,282)
Increase in trade accounts payable 813,169 1,308,330 1,175,453
Increase (decrease) in accrued expenses 1,116,359 (10,161) (49,265)
Increase (decrease) in taxes payable (116,084) 102,244 4,651
------------- ------------- -------------
Net cash provided by (used in) operating activities 58,245 (229,071) 1,076,116
Investing activities
Purchases of property, plant, and equipment (1,540,223) (1,800,146) (375,975)
Proceeds from sale of equipment 13,183 -- --
(Increase) decrease in other noncurrent assets (279,544) (15,822) 29,096
------------- ------------- -------------
Net cash used in investing activities (1,806,584) (1,815,968) (346,879)
Financing activities
Proceeds from long-term borrowings 6,498,204 -- --
Principal payments on long-term debt and capital lease
obligations (2,717,874) (1,272,268) (1,193,535)
Net borrowings (payments) under revolving lines of credit
and short-term borrowings (1,426,924) 3,529,769 375,898
Preferred stock redemption -- (65,000) (65,000)
Dividends paid -- -- (101,535)
Net cash provided by (used in) financing activities 2,353,406 2,192,501 (984,172)
Effect of exchange rate changes on cash (283,237) (97,122) 65,601
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents 321,830 50,340 (189,334)
Cash and cash equivalents at beginning of year 59,649 9,309 198,643
------------- ------------- -------------
Cash and cash equivalents at end of year $ 381,479 $ 59,649 $ 9,309
============= ============= =============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 97
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 3, 1995, November 27, 1994, and November 28, 1993
1. Summary of Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of all domestic and
foreign subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
Fiscal Year
The Corporation's fiscal year ends on the Sunday nearest November 30. Fiscal
year 1995 included 53 weeks; fiscal years 1994 and 1993 included 52 weeks.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Foreign Currency Translation
In accordance with Financial Accounting Standards Board Statement No. 52, all
balance sheet accounts of foreign subsidiaries are translated at current
exchange rates and income statement items are translated at an average exchange
rate for the year. The gain or loss resulting from translating subsidiary
financial statements is recorded as a separate component of shareholders'
equity. Transaction gains and losses are recorded in operations.
Inventories
Inventories are stated at the lower of cost or market. Inventories, summarized
by cost method, follow:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Last-in, first-out (LIFO) method $ 6,050,580 $ 4,590,139
First-in, first-out (FIFO) method 6,520,030 5,364,325
------------ ------------
Total inventories $12,570,610 $ 9,954,464
============ ============
</TABLE>
<PAGE> 98
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (Continued)
If the first-in, first-out method of inventory accounting had been used for all
inventories, inventories would have been approximately $4,862,000 and
$4,843,000 higher than reported at December 3, 1995 and November 27, 1994,
respectively.
Properties and Depreciation
Properties are recorded at cost and include expenditures for additions and
major improvements and equipment acquired under capital leases. Provisions for
depreciation are based on the estimated useful lives of the respective assets
and are computed by the straight-line method. Capital lease assets aggregated
$2,522,474 and $2,296,587 at December 3, 1995 and November 27, 1994,
respectively (accumulated amortization aggregated $1,399,406 and $1,209,583,
respectively). Amortization of capital leases is included with depreciation
expense in the statement of operations.
Income Taxes
The Company does not provide U.S. income taxes on cumulative undistributed
earnings of foreign subsidiaries, which totaled $3,544,000 and $2,041,000 at
December 3, 1995 and November 27, 1994, respectively, because such earnings are
considered as invested indefinitely.
Beginning November 29, 1993, the Company provides for income taxes in
accordance with the liability method as set forth in Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under the
liability method, deferred taxes are determined based on the difference between
the financial statements and tax basis of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse. The principal differences relate to depreciation and certain non-
deductible reserves (see Note 5). There was no cumulative effect of the
adoption of the new method of accounting for income taxes.
Prior to 1994, the Company provided for deferred taxes in accordance with
Accounting Principles Board Opinion #11.
Pension Plans
Annual costs of the pension plans are computed by actuaries in accordance with
the provisions of Financial Accounting Standards Board Statement No. 87,
"Employers' Accounting for Pensions".
<PAGE> 99
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (Continued)
Earnings (Loss) Per Common Share
Earnings (loss) per common share outstanding are based on the weighted average
number of shares of common stock outstanding during each year (752,628 in 1995,
1994, and 1993). Earnings per share in each year give effect to the preferred
dividends of $93,692; however, the computation excludes the impact of stock
options as their dilutive effect is not material.
Other Assets
Included in the caption other assets is the cash value of officers' life
insurance of $1,717,193 net of loans of $1,492,739 as of December 3, 1995 and
$1,483,980 net of loans of $1,364,959 as of November 27, 1994.
Deferred Financing Costs
Deferred financing costs are being amortized on a straight line basis over the
term of the mortgage loan with a bank (15 years).
Concentrations of Credit Risk
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. There are no significant
concentrations of credit risk at December 3, 1995.
Reclassification
Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 presentation.
2. Borrowing Arrangements
The Company has domestic and foreign lines of credit which provide for
borrowings up to approximately $10,020,000 at December 3, 1995. Borrowings
against these lines of credit aggregated $8,686,818 at December 3, 1995
($6,100,446 domestic and $2,586,372 foreign). Interest on the borrowings is
set as a function of the prime rate.
Equipment, inventory, and receivables are pledged as collateral on these loans
in addition to a mortgage on building facilities and a general assignment of
assets.
The weighted average interest rate on short-term borrowings outstanding as of
December 3, 1995 and November 27, 1994 was 10.35% and 9.21%, respectively.
On March 21, 1995, the Company refinanced, with a bank, certain debt owed to
the bank and another financial institution. The Company used the proceeds of
<PAGE> 100
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
2. Borrowing Arrangements (Continued)
two term loans and an available revolving line of credit to pay short and long-
term borrowings and, as a result, $7,388,224 of short-term borrowings
outstanding as of November 27, 1994 has been classified as long-term debt at
November 27, 1994. The debt is secured by land, buildings, equipment, accounts
receivable and inventory owned by the domestic company.
At December 3, 1995 and November 27, 1994, long-term obligations consisted of
the following:
<TABLE>
<CAPTION>
December 3, November 27,
1995 1994
------------ ------------
<S> <C> <C>
Term loan payable to a bank with monthly principal and interest installments of
$71,363 through April 2002 including interest at prime plus 1.75%,
collateralized by a security interest in all business assets. $3,923,074 $4,200,000
Mortgage loan payable to a bank with monthly principal and interest installments
of $20,318 through April 2010 including interest at prime plus 1.875%,
collateralized by land, building, and fixtures in Liverpool, New York. 1,771,190 1,800,000
Revolving line of credit, up to a maximum of $6,500,000, based on the level of
qualifying accounts receivable and inventory. Interest is payable monthly at
prime plus 1.25% through April 1, 1996, collateralized by a security interest in
all business assets. 6,100,446 2,748,097
Foreign term loan payable in semiannual installments through 2001. Effective
interest rate 8.65% and 9.25% in 1995 and 1994, respectively. 1,217,459 1,214,923
Note payable with monthly principal and interest installments of $5,000 per month
through December 2004 including interest at 11.683% (see Note 9). 334,942 353,000
Capitalized lease obligations expiring at various dates through 1997. Average
interest rate was 13.69% and 12.8% for 1995 and 1994, respectively. 515,367 730,116
------------ ------------
13,862,478 11,046,136
Less current maturities of long-term debt 995,224 880,697
Less revolving line of credit 6,100,446 --
------------ ------------
$6,766,808 $10,165,439
============ ============
</TABLE>
<PAGE> 101
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
2. Borrowing Arrangements (Continued)
Aggregate maturities of long-term obligations as of December 3, 1995 are as
follows:
<TABLE>
<C> <C>
1997 $ 953,332
1998 1,014,822
1999 1,044,686
2000 1,084,154
2001 915,302
Thereafter 1,754,512
----------
$6,766,808
==========
</TABLE>
Loan Covenants
Terms of the various debt agreements limit, among other things, property,
plant, and equipment additions and require a certain minimum working capital
ratio and a maximum debt to equity ratio.
Interest Payments
Total interest paid aggregated $1,417,608 in 1995, $963,084 in 1994, and
$874,095 in 1993.
3. Accrued Expenses
Accrued expenses include the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Salaries, wages, and related items $ 870,666 $ 504,937
Pension and retirement contributions 240,321 81,822
Other accrued items 1,394,167 778,042
------------ ------------
$2,505,154 $1,364,801
============ ============
</TABLE>
<PAGE> 102
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
4. Preferred Stock, Common Stock, and Other Shareholders' Equity
Preferred Stock
The Company has 250,000 shares authorized of $1 cumulative preferred stock with
a stated par value of $10 per share. The preferred stock is senior to the
Company's common stock, both with respect to the payment of dividends and
liquidation rights. The Company has the option to redeem outstanding shares at
the liquidating preference of $20 per share.
As of December 3, 1995, the Company has dividends in arrears of $187,384 on the
$1 cumulative preferred stock.
Common Stock
Included in shares issued at December 3, 1995 and November 27, 1994 are 9,270
shares of treasury stock which were repurchased at a total cost of $63,885.
Stock Options
In 1995 the Board of Directors, with the approval of the Company's
shareholders, reserved for issuance 80,000 shares of stock under the
Lipe-Rollway Corporation 1994 Performance Stock Option Plan. Options for
73,332 shares were granted at $1.80 per share. During 1995 an option for 6,666
shares was forfeited. No shares were exercised during the year; and under
terms of the original option plan, options for 36,667 shares are exercisable at
December 3, 1995. However, in connection with normal option provisions related
to changes in control, the option committee of the Board of Directors is
expected to amend the plan and options granted to provide that all options
shall become vested and exercisable immediately prior to the effective time of
a pending acquisition (see Note 11).
5. Income Taxes
The components of income (loss) from operations before income taxes consisted
of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Domestic $ (780,892) $(201,742) $(286,672)
Foreign 2,334,426 620,281 288,694
------------ ------------ ------------
$1,553,534 $ 418,539 $ 2,022
============ ============ ============
</TABLE>
<PAGE> 103
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
5. Income Taxes (Continued)
Effective November 29, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes". As permitted under the new
rules, prior years financial statements have not been restated. There was no
cumulative effect of adopting Statement 109.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred tax assets and liabilities as of December 3, 1995
and November 27, 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Deferred tax liability:
Tax over book depreciation $ 778,084 $ 691,376
------------ ------------
Total deferred tax liability 778,084 691,376
Deferred tax assets:
Federal net operating loss carryforward 2,152,019 2,044,930
Postretirement benefits 167,527 204,642
Inventory related 603,435 568,001
Insurance reserves 130,517 106,948
Environmental reserve 306,000 --
Other - net 19,127 80,814
State net operating loss carryforward 332,297 315,761
Investment tax credits 359,602 265,529
Valuation allowance for deferred tax assets (3,645,942) (3,234,096)
------------ ------------
Total deferred tax assets 424,582 352,529
------------ ------------
Net deferred tax liability $ 353,502 $ 338,847
============ ============
</TABLE>
The net deferred tax liabilities have been classified as long term and relate
solely to tax over book depreciation of a foreign subsidiary. The valuation
allowance for deferred tax assets results from the inability to determine the
recoverability of the deferred tax assets due to the cumulative domestic tax
loss.
<PAGE> 104
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
5. Income Taxes (Continued)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Deferred
Liability Method Method
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Currently payable:
Federal $ -- $ -- $ --
State 1,477 6,685 641
Foreign 830,328 305,504 104,922
------------ ------------ ------------
Total current 831,805 312,189 105,563
Deferred:
Foreign 14,655 4,762 42,591
------------ ------------ ------------
Provision for income taxes $846,460 $316,951 $148,154
============ ============ ============
</TABLE>
Income taxes paid (net) were $918,996 in 1995, $192,641 in 1994, and $101,326
in 1993.
At December 3, 1995, the Company has net operating loss carryforwards of
approximately $6,329,000 which are available to offset future taxable income,
expiring in various years through 2010. In addition, the Company has unused
federal and state investment tax credits of approximately $360,000 for tax
purposes to offset future taxes through the year 2005.
A reconciliation of income tax at the statutory U.S. rate and the actual tax as
recorded follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Tax at statutory rate $528,202 $142,303 $ 687
State income taxes 1,477 6,685 641
Foreign income taxes at other than statutory rate 51,278 99,370 49,357
Change in deferred tax asset valuation allowance 282,446 45,006 --
Other non-deductible items, net (16,943) 23,587 9,342
Domestic loss with no tax benefit -- -- 88,127
------------ ------------ ------------
Tax as recorded $846,460 $316,951 $148,154
============ ============ ============
</TABLE>
<PAGE> 105
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Benefit Plans
The Company has defined benefit retirement plans covering substantially all of
its hourly employees. Benefits are based on a monthly flat rate multiplied by
the years of credited service. The Company's funding policy is to contribute
amounts to the Plans sufficient to meet the minimum funding requirements set
forth in the Employee Retirement Income Security Act of 1974, plus such
additional amounts as the Company may determine to be appropriate from time to
time.
The Company also sponsors a defined contribution retirement plan covering
certain salaried employees. The Company contributes 4% of each plan
participant's covered compensation. Costs of the Plan are summarized below.
The Company also has employees in certain foreign countries that are covered by
defined contribution plans. Related costs charged to operations are not
material.
A summary of net periodic pension cost for 1995, 1994, and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 102,190 $ 128,751 $ 108,397
Interest cost on projected benefit obligation 661,881 644,460 632,494
Actual return on plan assets (1,067,791) 127,299 (540,820)
Net amortization and deferral 527,106 (727,736) 47,393
------------ ------------ ------------
Net pension cost for defined benefit plans 223,386 172,774 247,464
Defined contribution plan costs 138,660 107,344 111,582
------------ ------------ ------------
Net pension expense $ 362,046 $280,118 $359,046
============ ============ ============
</TABLE>
The primary assumptions used in the accounting for the defined benefit plans as
of December 3, 1995, November 27, 1994, and November 28, 1993 were:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average discount rates 8.5% 8.5% 8%
Expected long-term rate of return on
assets 11.0% 11.0% 9%
</TABLE>
<PAGE> 106
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Benefit Plans (Continued)
The following table sets forth the funding status and amounts recognized in the
consolidated balance sheets at December 3, 1995 and November 27, 1994 for the
Company's defined benefit pension plans:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(8,057,531) $(8,079,799)
Nonvested benefit obligation (8,349) (34,656)
------------ ------------
Accumulated benefit obligation $(8,065,880) $(8,114,455)
============ ============
Actuarial present value of projected benefit
obligations for services rendered to date $(8,065,880) $(8,114,455)
Plan assets at fair value 6,691,472 6,161,216
------------ ------------
Projected benefit obligation in excess of plan
assets (1,374,408) (1,953,239)
Unrecognized net loss 83,753 525,654
Unrecognized prior service cost 163,137 186,108
Unrecognized net obligation at end of year, net of
amortization 529,279 613,434
------------ ------------
Net pension liability recognized in the statement
of financial position $ (598,239) $ (628,043)
============ ============
</TABLE>
The components of the net pension liability are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Prepaid pension expense (asset) $ 33,997 $ --
Minimum liability deferred pension cost (asset) 562,165 870,782
Accrued pension cost (accrued expenses) (240,321) (81,822)
Long-term pension liability (1,134,087) (1,869,937)
Unfunded pension loss (equity component) 180,007 452,934
------------ ------------
$ (598,239) $ (628,043)
============ ============
</TABLE>
<PAGE> 107
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Benefit Plans (Continued)
The increase in the weighted average discount rates and in the expected long-
term rates of return has caused a decrease in the defined benefit plan's
projected benefit obligation by $390,000 in 1994. The increase in the expected
long-term rate of return also caused a decrease in the net pension expense by
$117,000 in 1994.
The Plan's assets are invested in government securities, corporate bonds,
common stocks, insurance company separate accounts, and unallocated insurance
contracts.
7. Operating Lease Commitments
The Company leases certain of its manufacturing and sales facilities and
equipment, trucks, and automobiles under cancelable and noncancelable
agreements. Rental expense charged to operations was $163,424 in 1995,
$225,775 in 1994, and $214,635 in 1993.
The future minimum rental commitments, as of December 3, 1995, for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Machinery
Total & Equipment Automobiles
------------ ------------ ------------
<S> <C> <C> <C>
1996 $130,631 $ 41,590 $ 89,041
1997 94,128 37,922 56,206
1998 47,211 34,254 12,957
1999 34,254 34,254 --
2000 6,158 6,158 --
------------ ------------ ------------
$312,382 $154,178 $158,204
============ ============ ============
</TABLE>
The Company incurred capital lease obligations totaling $380,298 in 1995,
$273,064 in 1994 and $135,599 in 1993 in connection with lease agreements to
acquire equipment.
8. Contingencies
The Company is involved in various claims and lawsuits incidental to its
business. Some of the matters are in their early stages of discovery and
consequently management is unable to determine their ultimate effect on the
Company. Management believes that the ultimate liability, if any, resulting
from these actions will not have a material impact on the Company's
consolidated financial position.
<PAGE> 108
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
8. Contingencies (Continued)
In connection with "Note 9", three former employees of the Company were
indicted on December 7, 1994. The employees were found not guilty of the
charges made and the Company has expensed legal costs associated with their
defense approximating $270,000. The Company is seeking reimbursement of a
portion of these costs from its insurance carrier under its directors and
officers liability policy. The outcome of the recovery is not determinable at
this time.
As part of the due diligence process, Emerson Electric Company, a party to a
proposed transaction (see Note 11) and the Company have identified certain
environmental issues related to the Company. The nature and scope of these
matters is set forth in certain reports entitled "Environmental Site Assessment
of Lipe-Rollway Corporation in Liverpool, New York" prepared by Environmental
Strategies Corporation dated November 28, 1995 and "Environmental Site
Assessment Groundwater Investigation Results" prepared by Environmental
Strategies Corporation dated November 30, 1995 (hereinafter the "ESC Reports").
These matters have been referred to the appropriate governmental authorities as
required. Rough estimates of the potential costs of remediation associated
with these matters have been made which indicate a range of costs between
$900,000 and $2,300,000; however, significantly more site characterization will
have to be performed prior to arriving at a reliable estimate. The Company,
because it cannot determine what amount within the estimated range represents a
better estimate than another amount, has recorded a $900,000 liability at
December 3, 1995. Management, in conjunction with its environmental advisors,
has estimated that $70,000 of this liability will be incurred during the
ensuing fiscal year and consequently the remainder of the liability has been
shown as a long-term liability.
In addition to the above, the Company as part of its due diligence has
determined that it has failed to make certain filings required under the
Emergency Planning and Community Right to Know Act (42 USC Section 1101 et.
seq.). Although it is possible that the Company could be subject to certain
civil penalties for such non-compliance, at this time the likelihood of
incurring such penalties is unknown.
9. Settlement and Prior Period Adjustment
The Company was involved in discussions with the Department of Defense related
to certain contract pricing issues. In December 1994, the Company reached an
agreement with the United States Government calling for the repayment of
$353,000 of revenue recognized by the Company in 1991 that was erroneously
charged to the United States Government by the Company. The repayment
represents the specific amounts overcharged to the Government on a certain
contract and consequently the repayment has been treated as a prior period
adjustment. Repayment of the above amount will be made over ten years on a
monthly basis at $5,000 per month, including interest at 11.683%. Such
principal amount is included in long-term debt. The Company has the right to
accelerate the payment of the principal amount outstanding subject to certain
prepayment penalties. In addition to the repayment, the Company was subject to
a $30,000 fine which has been included in administrative expenses in fiscal
1994 and was paid in fiscal 1995. In connection with the acquittal of the
<PAGE> 109
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
9. Settlement and Prior Period Adjustment (Continued)
three employees discussed in Note 8, the Company is seeking a reduction of the
balance due the Government; however, the reduction, if any, is unknown at this
time.
10. Operations by Industry Segment and Geographic Area
The Company's segments include Bearing Products and Automation Equipment
Products. Operations by industry segment are summarized as follows:
<TABLE>
<CAPTION>
Year Ended
December 3, November 27, November 28,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES
Bearing Products $43,569,137 $29,747,797 $29,530,825
Automation Equipment Products 2,924,325 3,156,024 2,922,256
------------ ------------ ------------
TOTAL NET SALES $46,493,462 $32,903,821 $32,453,081
============ ============ ============
PRETAX INCOME
Bearing Products $ 3,195,243 $ 1,320,978 $ 772,739
Automation Equipment Products 104,777 306,510 251,218
------------ ------------ ------------
TOTAL OPERATING INCOME 3,300,020 1,627,488 1,023,957
Interest expense 1,746,486 1,208,949 1,021,935
------------ ------------ ------------
PRETAX INCOME $ 1,553,534 $ 418,539 $ 2,022
============ ============ ============
IDENTIFIABLE ASSETS
Bearing Products $32,357,550 $26,197,961 $21,690,252
Automation Equipment Products 1,797,172 1,564,198 831,237
------------ ------------ ------------
TOTAL ASSETS $34,154,722 $27,762,159 $22,521,489
============ ============ ============
CAPITAL EXPENDITURES
Bearing Products $ 1,421,823 $ 1,348,358 $ 343,389
Automation Equipment Products 118,400 451,788 32,586
------------ ------------ ------------
TOTAL CAPITAL EXPENDITURES $ 1,540,223 $ 1,800,146 $ 375,975
============ ============ ============
DEPRECIATION AND AMORTIZATION
Bearing Products $ 963,911 $ 738,813 $ 620,510
Automation Equipment Products 23,825 16,595 10,283
------------ ------------ ------------
TOTAL DEPRECIATION AND AMORTIZATION $ 987,736 $ 755,408 $ 630,793
============ ============ ============
</TABLE>
<PAGE> 110
Lipe-Rollway Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
10. Operations by Industry Segment and Geographic Area (Continued)
Sales between industry segments are not significant. Operating profit is total
revenue, less expenses related to the segments' operating revenue. In
computing operating profit, interest expense has been excluded.
Operations by geographic areas are summarized as follows:
<TABLE>
<CAPTION>
Year Ended
December 3, November 27, November 28,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES
United States $22,201,710 $18,830,377 $19,774,192
Europe 24,291,752 14,073,444 12,678,889
------------ ------------ ------------
TOTAL NET SALES $46,493,462 $32,903,821 $32,453,081
============ ============ ============
OPERATING PROFIT
United States $ 543,964 $ 649,415 $ 468,754
Europe 2,756,056 978,073 555,203
------------ ------------ ------------
TOTAL OPERATING PROFIT $ 3,300,020 $ 1,627,488 $ 1,023,957
============ ============ ============
IDENTIFIABLE ASSETS
United States $17,508,720 $ 9,329,637 $ 6,281,916
Europe 16,646,002 18,432,522 16,239,573
------------ ------------ ------------
TOTAL ASSETS $34,154,722 $27,762,159 $22,521,489
============ ============ ============
</TABLE>
11. Pending Transaction
In November 1995, the Company entered into an agreement in principle with
Emerson Electric Co. (EMR) for the acquisition of the Company by EMR. The
Company would become part of the Emerson Power Transmission subsidiary of EMR.
The proposed transaction is subject to certain conditions, finalization of
definitive merger agreements, completion of governmental filings, and approval
by the Company's shareholders. Costs incurred in connection with merger
activities amounted to approximately $318,000 in fiscal 1995.
<PAGE> 111
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
by and among
EMERSON ELECTRIC CO.,
EMERSUB XLI, INC.
and
LIPE-ROLLWAY CORPORATION
Dated April 1, 1996
<PAGE> 112
AGREEMENT AND PLAN OF MERGER
by and among
EMERSON ELECTRIC CO.,
EMERSUB XLI, INC.
and
LIPE-ROLLWAY CORPORATION
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
ARTICLE I
TERMS AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 115
1.1 Merger and Effect of Merger. . . . . . . . . . . . . . . . . . . 115
1.2 Method of Effecting Merger and Closing . . . . . . . . . . . . . 115
1.3 Conversion of Emersub Stock. . . . . . . . . . . . . . . . . . . 116
1.4 Conversion of Rollway Stock. . . . . . . . . . . . . . . . . . . 116
1.5 Manner of Exchange of Stock. . . . . . . . . . . . . . . . . . . 117
1.6 Emerson Share Value. . . . . . . . . . . . . . . . . . . . . . . 118
1.7 Calculation of the Merger Consideration. . . . . . . . . . . . . 119
1.8 Treatment of Options . . . . . . . . . . . . . . . . . . . . . . 119
1.9 Closing Balance Sheet and Closing Net Worth. . . . . . . . . . . 119
1.10 Closing Pension Liability. . . . . . . . . . . . . . . . . . . . 120
1.11 Closing Balance Sheet and Closing Pension Liability Disputes . . 121
1.12 Holdback . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
1.13 Merger Escrow Account. . . . . . . . . . . . . . . . . . . . . . 122
1.14 Certificate of Incorporation and By-Laws of the Surviving
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . 123
1.15 Directors and Officers of the Surviving Corporation. . . . . . . 123
1.16 Settled Issues . . . . . . . . . . . . . . . . . . . . . . . . . 123
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ROLLWAY. . . . . . . . . . . . . . . . . 123
2.1 Corporate Organization, Qualification and Power. . . . . . . . . 123
2.2 Capitalization and Related Matters . . . . . . . . . . . . . . . 124
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 124
2.4 Corporate Power and Authority. . . . . . . . . . . . . . . . . . 124
2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 125
2.6 Inventories; Consignment . . . . . . . . . . . . . . . . . . . . 126
2.7 Accounts and Notes Receivable. . . . . . . . . . . . . . . . . . 126
2.8 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . 126
2.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
2.10 Events Subsequent to the 1995 Balance Sheet Date . . . . . . . . 128
2.11 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 130
2.12 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
2.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 131
2.14 No Breach of Law or Governing Document; Licenses and Permits . . 132
2.15 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . 132
2.16 Validity of Contracts; Government Contracts. . . . . . . . . . . 133
2.17 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . 134
2.18 Litigation and Arbitration . . . . . . . . . . . . . . . . . . . 134
2.19 Officers, Directors, Employees and Consultants . . . . . . . . . 135
2.20 Indebtedness to and from Officers, Directors and Others. . . . . 135
2.21 Affiliated Transactions. . . . . . . . . . . . . . . . . . . . . 135
2.22 Outside Financial Interests. . . . . . . . . . . . . . . . . . . 135
2.23 Payments, Compensation and Perquisites of Agents and Employees . 135
2.24 Labor Agreements, Employee Benefit Plans . . . . . . . . . . . . 136
2.25 Terminated Plans . . . . . . . . . . . . . . . . . . . . . . . . 137
<PAGE> 113
2.26 Overtime, Back Wages, Vacation and Minimum Wages . . . . . . . . 138
2.27 Discrimination, Workers Compensation and Occupational Safety and
Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
2.28 Alien Employment Eligibility . . . . . . . . . . . . . . . . . . 138
2.29 Labor Disputes; Unfair Labor Practices . . . . . . . . . . . . . 138
2.30 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . 138
2.31 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
2.32 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . 139
2.33 Product Liability Claims . . . . . . . . . . . . . . . . . . . . 139
2.34 Product Safety Authorities . . . . . . . . . . . . . . . . . . . 139
2.35 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . 139
2.36 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 141
2.37 Foreign Assets . . . . . . . . . . . . . . . . . . . . . . . . . 141
2.38 Foreign Operations and Export Control. . . . . . . . . . . . . . 142
2.39 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 142
2.40 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . 142
2.41 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 142
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EMERSON AND EMERSUB. . . . . . . . . . . 143
3.1 Corporate Organization, Qualification and Power. . . . . . . . . 143
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 143
3.3 Corporate Power and Authority. . . . . . . . . . . . . . . . . . 143
3.4 The Emerson Shares . . . . . . . . . . . . . . . . . . . . . . . 144
3.5 SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . 144
3.6 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 144
ARTICLE IV
COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . 144
4.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 144
4.2 Preservation of Business; Maintenance of Insurance . . . . . . . 145
4.3 Securities Laws Filings. . . . . . . . . . . . . . . . . . . . . 145
4.4 Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . 146
4.5 Meeting of Shareholders; Redemption of Preferred Shares. . . . . 146
4.6 Amendment of Options . . . . . . . . . . . . . . . . . . . . . . 146
4.7 Actions to Effect the Merger . . . . . . . . . . . . . . . . . . 146
4.8 Full Access. . . . . . . . . . . . . . . . . . . . . . . . . . . 147
4.9 Books, Records and Financial Statements. . . . . . . . . . . . . 147
4.10 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . 147
4.11 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 147
4.12 Public Announcements . . . . . . . . . . . . . . . . . . . . . . 147
4.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 148
4.14 Labor Agreements, Employee Benefit Plans and Employment
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 148
4.15 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 148
ARTICLE V
CONDITIONS TO OBLIGATIONS OF EMERSON AND EMERSUB . . . . . . . . . . . . . 148
5.1 Representations and Warranties of Rollway. . . . . . . . . . . . 148
5.2 Performance of this Agreement. . . . . . . . . . . . . . . . . . 148
5.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 149
5.4 No Injunction or Action. . . . . . . . . . . . . . . . . . . . . 149
5.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
5.6 Compliance with Applicable Law.. . . . . . . . . . . . . . . . . 149
5.7 Government Approvals . . . . . . . . . . . . . . . . . . . . . . 149
5.8 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . 149
5.9 Registration Statement Effective . . . . . . . . . . . . . . . . 149
5.10 Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . 149
<PAGE> 114
5.11 Certificate of Rollway . . . . . . . . . . . . . . . . . . . . . 149
5.12 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 149
5.13 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . 150
5.14 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . 150
5.15 Preferred Terms Amendment. . . . . . . . . . . . . . . . . . . . 150
5.16 Rollway Options. . . . . . . . . . . . . . . . . . . . . . . . . 150
5.17 Subsidiary Ownership Transfers . . . . . . . . . . . . . . . . . 150
5.18 FCPA Certificates. . . . . . . . . . . . . . . . . . . . . . . . 150
5.19 Split-Dollar Agreement . . . . . . . . . . . . . . . . . . . . . 150
5.20 Easements and Title Policy . . . . . . . . . . . . . . . . . . . 150
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF ROLLWAY . . . . . . . . . . . . . . . . . . . 150
6.1 Representations and Warranties of Emerson and Emersub. . . . . . 150
6.2 Performance of this Agreement. . . . . . . . . . . . . . . . . . 151
6.3 No Injunction or Action. . . . . . . . . . . . . . . . . . . . . 151
6.4 Compliance with Applicable Law.. . . . . . . . . . . . . . . . . 151
6.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . 151
6.6 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . 151
6.7 Registration Statement Effective . . . . . . . . . . . . . . . . 151
6.8 Certificate of Emerson and Emersub . . . . . . . . . . . . . . . 151
6.9 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 151
6.10 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . 151
6.11 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . 151
ARTICLE VII
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
7.1 Escrow Withdrawals . . . . . . . . . . . . . . . . . . . . . . . 152
7.2 Indemnification by Shareholders. . . . . . . . . . . . . . . . . 152
7.3 Survival of Representations and Warranties . . . . . . . . . . . 152
7.4 Appointment of Representative. . . . . . . . . . . . . . . . . . 153
7.5 Limitations on Indemnification . . . . . . . . . . . . . . . . . 153
7.6 Tax Indemnification. . . . . . . . . . . . . . . . . . . . . . . 154
7.7 Additional Indemnification . . . . . . . . . . . . . . . . . . . 154
ARTICLE VIII
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
8.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . 154
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 154
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
9.1 Assignment; Binding Agreement. . . . . . . . . . . . . . . . . . 155
9.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
9.3 Entire Agreement and Modification. . . . . . . . . . . . . . . . 155
9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 156
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 157
9.7 Headings; Interpretation . . . . . . . . . . . . . . . . . . . . 157
9.8 Governing Law, Jurisdiction and Venue. . . . . . . . . . . . . . 157
9.9 Payment of Fees and Expenses . . . . . . . . . . . . . . . . . . 157
9.10 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 157
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . 159
TABLE OF SCHEDULES AND EXHIBITS. . . . . . . . . . . . . . . . . . . . . . 161
<PAGE> 115
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated April 1,
1996, is made and entered into by and among EMERSON ELECTRIC CO., a Missouri
corporation ("Emerson"), EMERSUB XLI, INC., a Delaware corporation wholly owned
by Emerson ("Emersub"), and LIPE-ROLLWAY CORPORATION, a New York corporation
("Rollway").
RECITALS
A. The Board of Directors of Rollway has approved the proposed
merger of Emersub with and into Rollway (the "Merger") in accordance with the
New York Business Corporation Law (the "NYL") and on the terms and conditions
set forth herein.
B. The Board of Directors of Emersub, and Emerson as the sole
shareholder of Emersub, have each approved the Merger in accordance with the
General Corporation Law of the State of Delaware (the "DGCL") and on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter expressed, the parties hereto agree as follows:
ARTICLE I
TERMS AND PLAN OF MERGER
1.1 Merger and Effect of Merger.
(a) The constituent corporations of the Merger are Rollway and
Emersub.
(b) Upon the terms and subject to the conditions hereof, and
in accordance with the NYL and the DGCL, at the Effective Time (as hereinafter
defined) Emersub shall be merged into Rollway and the separate corporate
existence of Emersub thereupon shall cease. Rollway shall be the surviving
corporation in the Merger (the "Surviving Corporation"), and the separate
corporate existence of Rollway, with all its rights, privileges, powers and
franchises, shall continue unaffected and unimpaired by the Merger.
(c) At and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises and be subject
to all the restrictions, disabilities and duties of both Emersub and Rollway,
as provided more particularly in the NYL.
1.2 Method of Effecting Merger and Closing. The Merger shall be
effected as follows:
(a) This Agreement and the transactions contemplated hereby
shall be submitted to the shareholders of Rollway for their approval, as
contemplated by Section 4.5 of this Agreement, to the extent required by and in
accordance with the provisions of the NYL and the Certificate of Incorporation
and By-Laws of Rollway. Such submission to the shareholders of Rollway shall
include a proposal to amend (the "Preferred Terms Amendment") the terms of the
$1.00 Cumulative Convertible Preferred Stock, $10.00 par value per share (the
"Rollway Preferred Shares"), of Rollway to permit the conversion of the Rollway
Preferred Shares into shares of the common stock, $1.00 par value per share
(the "Emerson Stock"), of Emerson as provided herein. If such submission is
not approved by the holders of a majority of the Rollway Preferred Shares,
<PAGE> 116
Rollway shall redeem all of the issued and outstanding Rollway Preferred Shares
according to the terms thereof immediately prior to the Effective Time, as
provided in Section 4.5 hereof.
(b) Subject to the approval of the shareholders of Rollway, to
the extent required by and in accordance with the provisions of the NYL and the
Certificate of Incorporation and By-Laws of Rollway, and subject to
satisfaction or waiver of all other conditions to the Closing (as hereinafter
defined), Rollway and Emersub shall execute a Certificate of Merger in
substantially the form of Exhibit 1.2(a) (the "NY Certificate of Merger") and a
Certificate of Merger in substantially the form of Exhibit 1.2(b) (the
"Delaware Certificate of Merger"), and shall cause the NY Certificate of Merger
and the Delaware Certificate of Merger to be filed and recorded on the Closing
Date (as hereinafter defined) in accordance with the applicable provisions of
the NYL and the DGCL, respectively. The Merger shall thereupon become
effective and be consummated immediately upon such filings or at such later
time as may be specified therein in accordance with the NYL and the DGCL (the
"Effective Time").
(c) The closing (the "Closing") of the Merger shall take place
at the offices of Bryan Cave LLP, St. Louis, Missouri, at 10:00 a.m. local time
on (i) the date that is the last day of Rollway's fiscal month in which the
Merger is approved by the shareholders of Rollway or (ii) such other date, time
and place as the parties may mutually agree (the "Closing Date").
1.3 Conversion of Emersub Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder thereof, the
outstanding shares of the Common Stock, $1.00 par value per share, of Emersub
shall be converted into one share of the common stock of the Surviving
Corporation, which share shall be the only issued and outstanding capital stock
of the Surviving Corporation, and shall be owned by Emerson.
1.4 Conversion of Rollway Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder thereof (except
for the approvals of the shareholders described herein), shares of the capital
stock of Rollway ("Rollway Stock") shall be treated as follows:
(a) Each of the shares of the common stock, $.50 par value per
share, of Rollway (the "Rollway Common Stock") issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares (as
hereinafter defined)) shall, by virtue of the Merger, automatically be
converted into the right to receive, upon surrender of the certificate
representing each such share, a pro rata share of the following amount:
$8,269,936 (the "Gross Merger Consideration") minus the Closing Book Value
Adjustment (as hereinafter defined), if any, plus or minus the Pension
Liability Adjustment (as hereinafter defined), if any, minus the Rollway Share
Value (as hereinafter defined) of the Dissenting Shares of Rollway Common
Stock, if any, subject to the Holdback and the Escrow described below in
Sections 1.12 and 1.13. The Merger Consideration (as hereinafter defined)
shall be paid by Emerson to the shareholders of Rollway Common Stock in shares
of Emerson Stock, valued as provided in Section 1.6. From and after the
Effective Time, each certificate theretofore evidencing one or more shares of
Rollway Common Stock shall no longer evidence Rollway Common Stock, but shall
evidence only the right to receive, in exchange therefor, Emerson Stock in the
manner provided in Section 1.5 of this Agreement, subject to the
indemnification obligations of such shareholders as herein provided.
<PAGE> 117
(b) Subject to approval by the holders of a majority of the
Rollway Preferred Shares, as contemplated by Section 1.2(a), each of the
Rollway Preferred Shares issued and outstanding immediately prior to the
Effective Time other than Dissenting Shares of Rollway Preferred Shares shall,
by virtue of the Merger, automatically be converted into the right to receive,
upon surrender of the certificate representing each such share, a fraction of a
share of Emerson Stock (valued as provided in Section 1.6) equal to $20.00 (the
"Preferred Consideration" and together with the Merger Consideration, the
"Consideration"). Subject to approval by the holders of a majority of the
Rollway Preferred Shares, as contemplated by Section 1.2(a), from and after the
Effective Time, each certificate theretofore evidencing one or more Rollway
Preferred Shares shall no longer evidence Rollway Preferred Shares, but shall
evidence only the right to receive, in exchange therefor, Emerson Stock in the
manner provided in Section 1.5 of this Agreement.
(c) All Rollway capital stock held in the treasury of Rollway
immediately prior to the Effective Time shall be canceled and no Emerson Stock,
cash or other consideration of any kind shall be delivered in exchange therefor
under this Agreement.
(d) Any Rollway Stock outstanding immediately prior to the
Effective Time as to which the holder thereof shall have validly exercised any
dissenter's appraisal rights available to such holder under Section 910 of the
NYL (the "Dissenting Shares") shall not, after the Effective Time, be entitled
to vote for any purpose or be entitled to the payment of dividends or other
distributions (except dividends or other distributions payable to shareholders
of record prior to the Effective Time). No Dissenting Shares shall be
converted into the right to receive the Consideration payable in the Merger
hereunder unless and until the holder thereof shall have failed to perfect, or
shall have effectively withdrawn or lost, such holder's right to payment for
such holder's Dissenting Shares as provided in Section 623 of the NYL. Each
holder of Dissenting Shares who becomes entitled under Sections 623 and 910 of
the NYL to payment therefor shall receive such payment after the Effective Time
from the Surviving Corporation (but only after the amount thereof shall have
been agreed upon or finally determined pursuant to Section 623 of the NYL) and
such Dissenting Shares shall be canceled.
1.5 Manner of Exchange of Stock.
(a) As of the Effective Time, the stock transfer books of
Rollway shall be closed and no transfer of certificates representing Rollway
Stock outstanding at the Effective Time shall thereafter be made. Boatmen's
Trust Company of St. Louis shall be the agent for surrender and exchange of
shares of Rollway Stock (the "Exchange Agent"). Promptly after the Effective
Time, the Surviving Corporation shall mail or deliver to each record holder of
Rollway Stock a letter of transmittal and instructions (a "Letter of
Transmittal") for use in surrendering certificates representing Rollway Stock
and receiving the applicable Consideration therefor. The Letter of Transmittal
shall be in substantially the form of Exhibit 1.5.
(b) After the Effective Time, each holder of Rollway Stock who
has not validly exercised appraisal rights, upon surrender for cancellation to
the Exchange Agent, free and clear of all security interests, claims, or
restrictions (other than legends or other restrictions evidencing the
restricted nature of such Rollway Stock pursuant to applicable state and
federal securities laws), of all certificate(s) representing the outstanding
shares of Rollway Stock held by that holder, together with a Letter of
Transmittal duly executed and completed in accordance with the instructions
<PAGE> 118
thereto, shall be entitled to receive a portion of the Consideration payable in
the Merger in exchange for that holder's shares of Rollway Stock plus, with
respect to any holders of Rollway Preferred Shares if the Preferred Terms
Amendment has been approved, any unpaid dividends on the Rollway Preferred
Shares paid in cash. No interest on such portion of Consideration or dividends
shall be paid, regardless of when certificates formerly representing shares of
Rollway Stock are surrendered for exchange; provided, however, no delay in
surrendering Rollway Stock for exchange shall affect any rights of the holder
thereof to receive, once that holder's certificates formerly representing
Rollway Stock have been surrendered, any dividends or distributions paid after
the Effective Time with respect to any Emerson Shares to be received by such
holder as a result of the Merger. The number of shares of Emerson Stock
("Emerson Shares") issued to each holder shall be an amount equal to the number
of shares of Rollway Stock held by such holder multiplied by the applicable
Exchange Ratio (as hereinafter defined), less in the case of holders of Rollway
Common Stock that holder's pro rata portion (based on such holder's percentage
ownership of all shares of Rollway Common Stock) of the Escrow Deposit and the
Holdback (as such terms are hereinafter defined).
(c) Notwithstanding Section 1.4 or any other provision of this
Section 1.5, no fractional Emerson Shares will be issued. Emerson shall
aggregate the Emerson Shares issuable to any person, and, if following such
aggregation, any person would be entitled to receive a fractional Emerson Share
but for this Section, such person will, in lieu of such fractional share and
after surrender of such person's certificate or certificates of Rollway Stock,
be entitled to receive an amount in cash equal to the Emerson Share Value
multiplied by the fraction of the Emerson Share to which such person would
otherwise be entitled.
(d) If any Emerson Shares are to be issued to a person other
than the person in whose name the certificate surrendered in exchange therefor
is registered, it shall be a condition to such exchange that the person
requesting such exchange pay to Emerson any transfer or other similar taxes
required by reason of the payment of such cash or issuance of such Emerson
Shares to a person other than the registered holder of the certificate
surrendered, or such person shall establish to the satisfaction of Emerson that
such tax has been paid or is not applicable. The Certificates representing
Emerson Shares issued in the Merger shall bear any legends required by law or
otherwise appropriate under the circumstances, including, where applicable, a
legend stating the resale restrictions under Rule 145 promulgated under the
Securities Act of 1933, as amended (the "1933 Act").
1.6 Emerson Share Value. For purposes of valuing and issuing the
Emerson Shares issuable in the Merger, the following terms shall have the
following meanings:
(a) The "Emerson Share Value" shall equal the average closing
price of an Emerson Share for the ten consecutive trading days ending on the
third business day prior to the Closing Date, as reported in "The Wall Street
Journal", New York Stock Exchange Composite Transactions, adjusted if necessary
to account for any stock splits or stock dividends occurring between the
commencement of such ten day period and the Effective Time.
(b) The "Rollway Share Value" shall equal, (i) in the case of
shares of Rollway Common Stock, the Merger Consideration divided by the sum of
the number of shares of Rollway Common Stock issued and outstanding at the
Effective Time plus the number of shares of Rollway Common Stock issuable under
<PAGE> 119
Rollway Options (as hereinafter defined) then outstanding, and, (ii) in the
case of Rollway Preferred Shares, $20.00 per Rollway Preferred Share.
(c) The "Exchange Ratio" shall equal the applicable Rollway
Share Value divided by the Emerson Share Value.
1.7 Calculation of the Merger Consideration.
(a) The "Merger Consideration" shall equal the Gross Merger
Consideration minus the Closing Book Value Adjustment (as hereinafter defined),
if any, plus or minus the Pension Liability Adjustment (as hereinafter
defined), if any.
(b) The "Closing Book Value Adjustment" shall equal the
amount, if any, by which the Closing Book Value Benchmark (as hereinafter
defined) exceeds the Closing Book Value (as hereinafter defined). The Closing
Book Value Adjustment shall equal 0 in the event the Closing Book Value is
equal to or exceeds the Closing Book Value Benchmark. The "Closing Book Value
Benchmark" shall equal the amount set forth on Schedule 1.7 opposite the month
in which the Closing Date occurs.
(c) The "Pension Liability Adjustment" shall equal the amount
by which the Closing Pension Liability (as hereinafter defined) is greater than
or less than $1,953,000.
(d) For purposes of issuing Emerson Stock to former
shareholders of Rollway who surrender their certificates formerly representing
shares of Rollway Common Stock after the Effective Time but prior to the final
determination of the Merger Consideration, the consideration initially payable
to such shareholders (subject to the Escrow Deposit and Holdback) shall be
calculated in accordance with Section 1.9 below based on the balance sheet of
Rollway as of the month-end immediately preceding the Closing Date (the
"Pre-Closing Balance Sheet"), as if the Pre-Closing Balance Sheet were the
Closing Balance Sheet. Such initial amount of consideration is referred to
herein as the "Estimated Merger Consideration."
1.8 Treatment of Options. As provided in Section 4.6, prior to
the Effective Time, the Board Committee (the "Committee") overseeing the Lipe-
Rollway Corporation 1994 Stock Option Plan (the "Rollway Option Plan") shall
amend the Rollway Option Plan and each option agreement issued thereunder
(each, a "Rollway Option") to provide that options to acquire Rollway Common
Stock shall become fully vested and exercisable immediately prior to the
Effective Time. It is a condition to Emerson's obligations hereunder that all
Rollway Options be exercised prior to the Effective Time.
1.9 Closing Balance Sheet and Closing Net Worth.
(a) As of the Closing Date, the Surviving Corporation shall
prepare a balance sheet (the "Closing Balance Sheet") of the Surviving
Corporation. Emerson shall deliver the Closing Balance Sheet to the
Representative (as hereinafter defined) not later than 60 days after the
Closing Date.
(b) The Closing Balance Sheet shall be prepared based on a
physical inventory as of the Closing Date and Rollway's historical accounting
practices to the extent such practices are in conformity with U.S. generally
accepted accounting principles ("GAAP") consistently applied (except for the
adjustments to be made to the Closing Balance Sheet as described in this
<PAGE> 120
Section). The Closing Balance Sheet shall include accruals for Closing Fees
(as hereinafter defined) payable by Rollway but not actually paid by Rollway as
of the Closing Date, all as provided in Section 9.9(b). The physical inventory
of Rollway shall be taken on or after the Closing Date. Emerson hereby agrees
to grant the Representative and Representative's agents the right to observe
the taking of the physical inventory and access to such books and records as
may be reasonably necessary to verify the calculation of the Closing Balance
Sheet and the Closing Pension Liability.
(c) The Closing Balance Sheet shall include a calculation of
the Closing Book Value of Rollway as of the Closing Date. For purposes of
calculating the Closing Book Value, the following principles shall apply: (i)
there shall be no adjustment for currency translation, (ii) the line items for
"intangible pension asset," "pension accrual" and "long term pension liability"
shall be reversed, (iii) up to $236,000 of the legal fees and expenses of the
former Rollway employees Wiehl, Connor and Cramp, if paid by Rollway prior to
the Closing Date, shall be added to assets on the Closing Balance Sheet, or, if
such legal fees and expenses are accrued on the books of Rollway as a liability
on the Closing Date, then such accrual (up to $236,000) shall be disregarded in
calculating the liabilities of Rollway on the Closing Balance Sheet, (iv) the
costs and expenses associated with the remediation (but not the costs or
expenses incurred by Rollway in connection with the discovery or assessment
thereof) of the environmental issues described on Schedule 1.16, if approved in
writing by Emerson in advance and paid by Rollway prior to the Closing Date,
shall be added to the Closing Balance Sheet, or if such costs and expenses are
accrued on the books of Rollway as a liability on the Closing Date, then such
accruals shall be disregarded in calculating the liabilities of Rollway on the
Closing Balance Sheet, (v) deferred taxes shall be fixed at zero, (vi)
severance payments, if any, made prior to the Closing Date to Stephen Bregande
or Edmund Babiarz pursuant to their respective employment agreements with
Rollway, triggered by the transactions contemplated hereby, shall be added to
the Closing Balance Sheet, or, if such payments are accrued on the books of
Rollway as a liability on the Closing Date, such accruals shall be disregarded
in calculating the liabilities of Rollway on the Closing Balance Sheet, and
(vii) an amount equal to 40% of the taxable gain realized by Rollway as a
result of the transfer of life insurance policies to H. Follett Hodgkins, Jr.
shall be subtracted from the Closing Book Value. The foregoing adjustments are
illustrated on Schedule 1.9, which shall govern in the event of a conflict
between this Section 1.9(c) and Schedule 1.9.
1.10 Closing Pension Liability. Concurrent with the delivery of
the Closing Balance Sheet, Emerson shall also deliver to the Representative a
calculation of the "Closing Pension Liability," which shall equal the
underfunded pension liability of Rollway as of the Closing Date, defined as the
amount by which the projected benefit obligation of the Rollway pension plans
exceeds the fair market value of plan assets, calculated using the following
assumptions:
Discount rate: 8.00%
Mortality: 1983 GAM
Termination: 125% of Sarason's T-5
Retirement: Age Rate
----- ----
55-61 2%
62 15%
63 10%
64 10%
65 100%
<PAGE> 121
1.11 Closing Balance Sheet and Closing Pension Liability Disputes.
If the Representative disputes the Closing Balance Sheet or the calculation of
the Closing Pension Liability, the Representative must, within 30 business days
after his receipt of the Closing Balance Sheet or the calculation of the
Closing Pension Liability, as the case may be, give written notice of such
dispute (a "Notice of Dispute") to Emerson, specifying in reasonable detail all
points of disagreement with the Closing Balance Sheet or the Closing Pension
Liability. Upon receipt of a Notice of Dispute, Emerson shall promptly consult
with the Representative with respect to his specified points of disagreement in
an effort to resolve the dispute. If any such dispute cannot be resolved by
Emerson and the Representative within 30 business days after Emerson receives
the Notice of Dispute, they shall refer the dispute to a partner in Price
Waterhouse, LLP, certified public accountants (the "Arbiter"), as an arbitrator
to finally determine, as soon as practicable and in any event within 30 days
after such reference, all points of disagreement with respect to the Closing
Balance Sheet and/or the Closing Pension Liability. The parties hereto
represent and warrant that none of them has a material pre-existing
relationship with the Arbiter. For purposes of such arbitration, each of
Emerson and the Representative shall submit a proposed Closing Balance Sheet
and calculation of the Closing Pension Liability. Emerson's proposed Closing
Balance Sheet and calculation of the Closing Pension Liability need not be
identical to the Closing Balance Sheet and calculation of the Closing Pension
Liability delivered pursuant to this Section. The Arbiter shall apply the
terms of this and the preceding Section and shall otherwise conduct the
arbitration under such procedures as the parties may agree or, failing such
agreement, under the Commercial Rules of the American Arbitration Association.
The fees and expenses of the arbitration and the Arbiter incurred in connection
with the arbitration hereunder shall be allocated between the parties by the
Arbiter in proportion to the extent either party did not prevail on items in
dispute; provided, that such fees and expenses shall not include, so long as a
party complies with the procedures of this Section, the other party's outside
counsel or accounting fees. All determinations by the Arbiter shall be final,
conclusive and binding with respect to the Closing Balance Sheet, the Closing
Pension Liability and the allocation of arbitration fees and expenses.
1.12 Holdback. Emerson Shares valued at the Emerson Share Value
worth $1,000,000 (the "Holdback") shall be withheld from the payment of the
Estimated Merger Consideration (a) as security for any adjustments to the
Estimated Merger Consideration pursuant to Section 1.9 following completion of
the Closing Balance Sheet and the calculation of the Closing Pension Liability,
and (b) to fund any reasonable expenses incurred by the Representative in
resolving any dispute relating to the Closing Balance Sheet and/or the
calculation of the Closing Pension Liability (the "Representative's Expenses").
After the Merger Consideration has been finally determined, and if it is
greater than the Estimated Merger Consideration (less the Holdback, net of the
Representative's Expenses, if any (the "Net Holdback")), such excess shall be
promptly issued in Emerson Stock to the former holders of shares of Rollway
Common Stock on a pro rata basis in proportion to each such holder's portion of
the Merger Consideration. If the Estimated Merger Consideration (less the Net
Holdback) is greater than the Merger Consideration, Emerson shall be entitled
to retain the Holdback and withdraw from the Escrow Funds (as hereinafter
defined) the amount, if any, by which the Estimated Merger Consideration (less
the Net Holdback) exceeds the Merger Consideration. To the extent the Escrow
Funds are insufficient to reimburse Emerson for the amount by which the
Estimated Merger Consideration (less the Net Holdback) exceeds the Merger
Consideration, each former holder of shares of Rollway Common Stock shall be
obligated to return to Emerson such holder's pro rata portion of such excess
consideration by either: (a) tendering to Emerson his certificate representing
<PAGE> 122
Emerson Shares issued in the Merger in exchange for new certificates
representing the number of Emerson Shares to which such holder is actually
entitled; or (b) paying Emerson cash equal to such holder's pro rata portion of
such excess consideration.
1.13 Merger Escrow Account. In connection with the Closing,
Emerson, the Representative, and Boatmen's Trust Company of St. Louis (the
"Escrow Agent") shall execute an escrow agreement in the form of Exhibit 1.13
(the "Escrow Agreement"), which provides for: (a) any adjustments pursuant to
Article VII hereof of the Merger Consideration payable to the holders of shares
of Rollway Common Stock; and (b) payment of the reasonable fees and expenses of
the Representative, up to $100,000, incurred in resolving any dispute relating
to such adjustment(s). At the Effective Time, Emerson shall deliver to the
Escrow Agent a portion of the Emerson Shares issuable in the Merger equal in
value to Two Million Six Hundred Thousand Dollars ($2,600,000), rounded up to
the nearest whole share (the "Escrow Deposit"), to be held in escrow under the
Escrow Agreement. The Escrow Deposit shall be funded from the Merger
Consideration otherwise payable to the holders of shares of Rollway Common
Stock. For purposes of determining the Escrow Deposit, Emerson Shares shall be
valued at the Emerson Share Value. The Escrow Agent shall distribute the
Escrow Deposit and all income earned thereon (collectively, the "Escrow Funds")
to the former holders of the Rollway Common Stock in accordance with the Escrow
Agreement as follows:
(i) on January 3, 1997, the Escrow Agent shall distribute a
portion of the Escrow Deposit (valued at the Emerson Share Value) equal to the
lesser of (A) One Million Dollars ($1,000,000), together with all income earned
thereon, less any amounts distributed to Emerson under the Escrow Agreement in
respect of claims arising from or relating to the commission payment practices
of Lipe-Rollway N.V. ("LRNV"), or (B) the Escrow Funds, to the former holders
of the Rollway Common Stock; and
(ii) eighteen months after the Closing Date, the Escrow Agent
shall distribute the balance of the Escrow Funds to the former holders of the
Rollway Common Stock;
except in each case to the extent some or all of the Escrow Funds have been
distributed to Emerson or to the Representative pursuant to the terms of the
Escrow Agreement.
Notwithstanding the foregoing, in the event Emerson discovers, prior
to January 1, 1997, reasonably reliable evidence that, in connection with the
commission payment practices of LRNV, LRNV and/or Rollway committed acts that
justify or might justify an extension to 5 years of the statute of limitations
applicable to any tax-reporting or tax-payment statute applicable to such
commission payment practices, the Escrow Agent shall not make the distribution
described in subparagraph (i) above and shall, upon the expiration of eighteen
months after the Closing Date, retain from the distribution described in
subparagraph (ii) above Emerson Shares (valued at the Emerson Share Value)
equal to the lesser of (A) One Million Dollars ($1,000,000), together with all
income earned thereon, less any amounts distributed to Emerson under the Escrow
Agreement in respect of claims arising from or relating to the commission
payment practices of LRNV, or (B) the Escrow Funds, until January 4, 1999, at
which time such retained Escrow Funds, to the extent not distributed to Emerson
or the Representative, shall be distributed to the former holders of the
Rollway Common Stock pursuant to the Escrow Agreement.
<PAGE> 123
1.14 Certificate of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Certificate of Incorporation of the Surviving
Corporation shall be as set forth in Exhibit 1.14(a).
(b) The By-Laws of the Surviving Corporation shall be as set
forth in Exhibit 1.14(b).
1.15 Directors and Officers of the Surviving Corporation. The
directors and officers listed on Schedule 1.15 shall be the directors and
officers of the Surviving Corporation, until their successors shall have been
duly elected and qualified or until their earlier death, resignation or
removal.
1.16 Settled Issues. During the course of its due diligence
process, Emerson noted several areas which gave rise to some concerns regarding
Rollway. These items are listed on Schedule 1.16 and have been thoroughly
discussed among the parties. In an effort to resolve the matters, the parties
have agreed to a financial settlement encompassing all of these items which has
been reflected in the Merger Consideration. Accordingly, the parties
acknowledge and agree that the Merger Consideration shall not be further
reduced nor shall any claim for indemnification be made with respect to any of
these items regardless of any representations or warranties of Rollway
contained in this Agreement. Nothing in this Section shall affect Emerson's
right to make claims for indemnification with respect to matters not
specifically identified on Schedule 1.16.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ROLLWAY
Rollway hereby makes the following representations and warranties,
each of which is true and correct on the date hereof and will be true and
correct on the Closing Date, and each of which shall survive the Closing Date
and the Merger as provided in Section 7.3. Unless otherwise specifically
provided herein, each reference to Rollway in this Agreement shall be deemed a
reference to Rollway and to each of its subsidiaries, as listed on Schedule 2.3
(the "Subsidiaries"), such that each representation, warranty or covenant with
respect to Rollway, whether contained in this Article II or elsewhere in this
Agreement, shall also be a representation, warranty or covenant with respect to
each of the Subsidiaries.
2.1 Corporate Organization, Qualification and Power. Rollway
(excluding the Subsidiaries) is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its state, country or other jurisdiction of
incorporation, as listed on Schedule 2.3. Rollway has all requisite corporate
power and authority to own, lease and use its assets and properties and to
conduct the business in which it is engaged and holds all authorizations,
licenses and permits necessary and required therefor. Except as set forth on
Schedule 2.1, Rollway is duly licensed or qualified to do business as a foreign
corporation and is in good standing in the state(s), countries or other
jurisdictions listed on Schedule 2.1 (or Schedule 2.3 with respect to the
Subsidiaries), and is not required to be registered, licensed or qualified to
do business in any other jurisdiction in which the failure to be so registered,
licensed or qualified will or may reasonably be expected to have a material
<PAGE> 124
adverse effect upon the business, assets, results of operations or condition,
financial or otherwise (collectively, the "Business Condition") of Rollway.
Rollway has delivered to Emerson true, complete and correct copies of the
constituent documents (e.g., articles or certificate of incorporation, by-laws,
etc.), as currently in effect, of Rollway.
2.2 Capitalization and Related Matters.
(a) Capital Stock. The entire authorized capital stock of
Rollway (excluding the Subsidiaries) consists solely of (i) 1,500,000 shares of
Rollway Common Stock, of which 752,628 shares are issued and outstanding, and
(ii) 250,000 shares of Rollway Preferred Shares, of which 93,692 shares are
issued and outstanding. No other capital stock of Rollway (excluding the
Subsidiaries) is authorized or issued. Schedule 2.2(a) sets forth the names,
addresses and holdings of the record holders of all Rollway Stock. Except as
set forth on Schedule 2.2(a), all of the issued and outstanding shares of the
Rollway Stock are duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights, without restriction on the transfer thereof
other than pursuant to applicable federal and state securities laws, and all of
such shares have been so issued in full compliance with all applicable federal
and state securities laws.
(b) Options and Other Securities. Schedule 2.2(b) sets forth
the names and addresses of all holders of Rollway Options. Rollway has
delivered to Emerson true, complete and correct copies of all agreements and
plans relating to the Rollway Options. Except as set forth on Schedule 2.2(b),
there are no outstanding subscriptions, rights, options, warrants, conversion
privileges or agreements of any kind entitling any person or entity to acquire
from Rollway any shares of Rollway Stock or any other type of security of
Rollway. All of the Rollway Options have been issued in full compliance with
all applicable federal and state securities laws.
2.3 Subsidiaries. Except as listed on Schedule 2.3, Rollway does
not, directly or indirectly, own or have the right to acquire any capital stock
or other equity interest in any other corporation, partnership, joint venture
or other entity. Except as described on Schedule 2.3, Rollway owns all right,
title and interest in and to all capital stock and all rights with respect to
all capital stock of the Subsidiaries. The capitalization and the state,
country or other jurisdiction of incorporation of each Subsidiary is accurately
described and identified on Schedule 2.3.
2.4 Corporate Power and Authority.
(a) Rollway has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Rollway have been
duly authorized by all requisite corporate action, except for any required
approval of Rollway's shareholders and the filing of the Certificates of Merger
pursuant to Section 1.2 above, and no person or entity other than those Rollway
shareholders properly perfecting their rights with respect to any Dissenting
Shares (and then only with respect to such appraisal rights) has, or will have
following the special meeting of shareholders contemplated by Section 4.5, any
claim arising out of the authorization or execution of this Agreement or the
Merger against or in the name of Rollway or any of its shareholders, officers,
directors or employees. Subject only to the approval of Rollway's
shareholders, this Agreement constitutes the valid and binding obligation of
Rollway, enforceable in accordance with its terms except as such enforceability
may be limited by (a) bankruptcy, insolvency, or other similar laws affecting
<PAGE> 125
the enforcement of creditors' rights generally, and (b) equitable principles of
general applicability (whether considered in a proceeding at law or in equity).
(b) Except as set forth on Schedule 2.4, Rollway is not a
party to, subject to or bound by any note, bond, mortgage, indenture, deed of
trust, agreement, lien, contract or other instrument or obligation or any
statute, law, rule, regulation, judgment, order, writ, injunction, or decree of
any court, administrative or regulatory body, governmental agency, arbitrator,
mediator or similar body, franchise or license, which would (i) conflict with
or be breached or violated or the obligations thereunder accelerated or
increased (whether or not with notice or lapse of time or both) by the
execution, delivery or performance by Rollway of this Agreement or (ii) prevent
the carrying out of the transactions contemplated hereby. Except as set forth
on Schedule 2.4 and except for compliance with the provisions of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"),
no waiver or consent of any third person or governmental authority is required
for the execution of this Agreement or the consummation of the transactions
contemplated hereby. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not result in the creation of any
lien, claim, encumbrance, security interest, charge, pledge, or other
restriction or adverse claim of whatever nature (collectively, "Liens") against
Rollway or any of its properties or assets.
(c) The Board of Directors of Rollway (excluding the
Subsidiaries) has received the written opinion of Management Planning, Inc., to
the effect that the terms of the Merger are fair, from a financial point of
view, to the shareholders and option holders of Rollway (excluding the
Subsidiaries). The Board of Directors of Rollway (excluding the Subsidiaries)
has, by resolutions duly and unanimously adopted at meetings duly called and
held on February 8, 1996 and March 28, 1996, at each of which a quorum was
present and acting throughout, approved this Agreement and the terms of the
Merger and all of the other transactions contemplated hereby, determined that
the Merger and all the other transactions contemplated hereby are fair to the
shareholders and option holders of Rollway and recommended that the
shareholders of Rollway approve the Merger and that the holders of the Rollway
Preferred Shares approve the Preferred Terms Amendment. True, complete and
correct copies of such resolutions have been delivered to Emerson, and none of
such resolutions has been rescinded, revised or supplemented in any respect
since the date of adoption thereof and all such resolutions remain in full
force and effect.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
true, complete and correct copies of the audited consolidated balance sheets of
Rollway as of November 29, 1992, November 28, 1993, November 27, 1994 and
December 3, 1995 (the "1995 Balance Sheet") and the related consolidated
statements of income and cash flows (or the equivalent) for each respective
fiscal year then ended (collectively the "Financial Statements"). Except as
set forth on Schedule 2.5, each of the Financial Statements (including in all
cases the notes thereto, if any) has been and the Pre-Closing Balance Sheet
will be based upon the information contained in Rollway's books and records
(which books and records are correct and complete), is, or will be, in the case
of the Pre-Closing Balance Sheet, accurate and complete and presents, or will
present, in the case of the Pre-Closing Balance Sheet, fairly the financial
condition, results of operations and cash flows of Rollway as of the times and
for the periods referred to therein, and such Financial Statements (including
all reserves included therein) have been and the Pre-Closing Balance Sheet will
be prepared in accordance with GAAP, consistently applied.
<PAGE> 126
2.6 Inventories; Consignment. The inventory of Rollway consists
of goods usable and salable in the ordinary course of business, is not
defective or damaged, is merchantable and fit for its intended use, is in
compliance with all applicable regulations and certifications in the market for
which it is intended to be sold, whether domestic or foreign, and is in
conformity with all applicable product registrations and specifications,
subject only to the inventory reserves, if any, for inventory write-down set
forth in the 1995 Balance Sheet. Except as set forth on Schedule 2.6 and
except for materials located at subcontractors in the normal course of
business, Rollway does not hold any materials on consignment or have title to
any materials in the possession of others.
2.7 Accounts and Notes Receivable. Subject to applicable reserves
for bad debts shown in the 1995 Balance Sheet, all accounts and notes
receivable of Rollway are properly reflected on the 1995 Balance Sheet. All of
such accounts and notes receivable are, and all accounts and notes receivable
subsequently accruing to the Effective Time will be, (a) except for the amount
due from Karl Loessner described on Schedule 2.20 (the "Loessner Debt"),
receivables arising in the ordinary course of business, (b) valid, genuine and
subsisting, (c) subject to no defenses, set-offs or counterclaims and
(d) collectible and, except for the Loessner Debt and except as set forth on
Schedule 2.7, will be paid in full, net of reserves, in the case of Rollway on
or before 90 days after the Effective Time, and, in the case of Rollway's
foreign subsidiaries on or before 120 days after the Effective Time. If
Emerson receives any funds from the Escrow Deposit based upon a claim of breach
of warranty for an unpaid account or note receivable pursuant to Section 2.7(d)
hereof and thereafter during the term of the Escrow Agreement Emerson or the
Surviving Corporation receives payment of such account or note receivable, then
Emerson shall pay back such amount received to the Escrow Deposit. Except as
set forth on Schedule 2.7, no agreement for deduction, free goods, discount or
other deferred price or quantity adjustment has been made with respect to any
such receivables.
2.8 Undisclosed Liabilities. Rollway does not have any
liabilities or obligations whatsoever, whether accrued, absolute, contingent,
unliquidated or otherwise, and there is no basis for any such liability or
obligation or any claim in respect thereof, other than: (a) to the extent
reflected on the 1995 Balance Sheet; (b) liabilities or obligations incurred in
the normal and ordinary course of business of Rollway since the date of the
1995 Balance Sheet (the "1995 Balance Sheet Date") (none of which is a
liability for breach of contract, tort, infringement, lawsuit or warranty and
none of which will or may reasonably be expected to have a material adverse
effect upon the Business Condition of Rollway); (c) obligations permitted to be
incurred pursuant to Article IV of this Agreement; (d) obligations for
performance (but not for breach) under Contracts (as hereinafter defined)
disclosed on Schedule 2.15 (or not required to be disclosed on Schedule 2.15
due to the disclosure thresholds set forth therein); and (e) other obligations
and liabilities specifically disclosed on Schedule 2.8.
2.9 Taxes.
(a) Except as set forth on Schedule 2.9, Rollway and each of
its Tax Affiliates (as hereinafter defined) has timely filed or caused to be
filed with the appropriate Government (as hereinafter defined) entity all tax
returns and reports required to be filed, including estimated tax and
informational returns ("Tax Returns"). All Tax Returns are true, correct, and
complete. There are no grounds for assertion of any understatement penalty
under
<PAGE> 127
Section 6661 (prior to repeal) of the Internal Revenue Code of 1986, as amended
(the "Code"), or Section 6662 of the Code.
(b) All Taxes (as hereinafter defined) (whether or not
reflected in Tax Returns as filed) payable by Rollway or any of its Tax
Affiliates with respect to all periods reflected on Tax Returns have been
timely and fully paid, and there are no grounds for the assertion or assessment
of any additional Taxes against Rollway or any of its Tax Affiliates or their
respective assets with respect to such periods. There are no audits,
litigation or other disputes in respect of any Tax Returns of Rollway or any of
its Tax Affiliates pending or threatened. There is no waiver of any statute of
limitations in effect with respect to any Tax Returns.
(c) All unpaid Taxes for all periods up to and including the
Closing Date are or will be properly accrued on the books of Rollway and its
Tax Affiliates. All unpaid Taxes for all periods up to the Closing Date are or
will be properly accrued on the Closing Balance Sheet.
(d) There are no Liens for Taxes upon any assets of Rollway or
its Tax Affiliates, except Liens for Taxes not yet due and payable.
(e) True, correct and complete copies of all income Tax
Returns, tax examination reports and statements of deficiencies assessed
against, or agreed to with respect to, Rollway or any of its Tax Affiliates
with respect to the last six (6) years with the Internal Revenue Service or any
taxing authority have been made available to Emerson.
(f) Neither Rollway nor any of its Tax Affiliates is or ever
has been a member of an "affiliated group" within the meaning of Section 1504
of the Code, except for the affiliated group of which Rollway is the common
parent.
(g) Rollway and each of its Tax Affiliates has complied with
all Law (as hereinafter defined) relating to the withholding of Taxes and the
payment thereof (including, without limitation, withholding of Taxes under
Section 1441 and 1442 of the Code, or any similar provision under foreign Law),
and has timely and properly withheld from employee wages and paid over to the
proper Government all amounts required to be withheld and paid over under
applicable Law.
(h) Neither Rollway nor any of its Tax Affiliates is a party
to any safe harbor lease within the meaning of Section 168(f)(8) of the Code,
as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act
of 1982. None of Rollway's or its Tax Affiliates' property or assets has been
financed with or directly or indirectly secures any industrial revenue bonds or
debt the interest on which is tax-exempt under Section 103(a) of the Code.
Neither Rollway nor any of its Tax Affiliates is a borrower or guarantor of any
outstanding industrial revenue bonds, and none of such parties is a tenant,
principal user or related person to any principal user (within the meaning of
section 144(a) of the Code) of any property which has been financed or improved
with the proceeds of any industrial revenue bonds.
(i) Rollway is not a real property holding company within the
meaning of Section 897(c) of the Code.
(j) Rollway is not required to include in income any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method initiated by Rollway and the Internal Revenue Service has not proposed
<PAGE> 128
any such adjustment or change in accounting method. Rollway has no pending
private letter ruling request with the Internal Revenue Service.
(k) None of the property owned by Rollway or any of its Tax
Affiliates is tax-exempt use property within the meaning of Section 168(h) of
the Code.
(l) No consent has been filed relating to Rollway pursuant to
Section 341(f) of the Code.
(m) As of the Closing Date, neither Rollway nor any of its Tax
Affiliates is a partner in any joint venture, partnership or other arrangement
or contract that could be treated as a partnership for federal income tax
purposes.
(n) Neither Rollway nor any of its Tax Affiliates is a party
to or has any obligation under any affiliated group consolidated return tax
allocation agreement, tax sharing agreement or tax indemnification agreement.
(o) Except as set forth on Schedule 2.9 and except with
respect to the non-U.S. Subsidiaries in the ordinary course of business,
Rollway is not liable for Taxes to any foreign taxing authority and does not
have and has not had a permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the United States
and such foreign country.
(p) All material elections with respect to taxes affecting
Rollway or any of its Tax Affiliates as of the date hereof are set forth in
Schedule 2.9. No new elections with respect to Taxes, or any changes in
current elections with respect to Taxes of Rollway or any of its Tax Affiliates
or affecting any of such parties shall be made after the date of this Agreement
without the prior written consent of Emerson.
(q) Schedule 2.9 hereto sets forth Rollway's (exclusive of
non-U.S. Subsidiaries) and each Tax Affiliate's (exclusive of non-U.S.
Subsidiaries) adjusted tax basis and accumulated depreciation for federal tax
purposes in its respective assets as of December 3, 1995. Such information on
Schedule 2.9 is true, complete and correct in all material respects.
(r) As used in this Agreement, "Taxes" means all taxes,
charges, fees, levies, or other like assessments, including without limitation
income, gross receipts, ad valorem, value added, premium, excise, real
property, personal property, windfall profit, sales, use, transfer, license,
withholding, employment, payroll, and franchise taxes imposed by: the United
States or any other nation, state, or bilateral or multilateral governmental
authority, any local governmental unit or subdivision thereof, or any branch,
agency, or judicial body thereof ("Government"); and shall include any
interest, fines, penalties, assessments, or additions to tax resulting from,
attributable to, or incurred in connection with any such Taxes or any contest
or dispute thereof. As used in this Agreement, "Tax Affiliate" shall mean,
with respect to a company, any member of an affiliated group as defined in
Section 1504 of the Code or any member of a combined or unitary group of which
such company is or was a member (other than such company).
2.10 Events Subsequent to the 1995 Balance Sheet Date. Except as
set forth on Schedule 2.10 or as otherwise expressly contemplated by this
Agreement, since the 1995 Balance Sheet Date, Rollway has not:
<PAGE> 129
(a) conducted its business or entered into any transaction or
Contract other than in the usual, regular and ordinary course consistent with
past practice;
(b) declared, set aside or paid any dividend or made any other
distributions to its shareholders, whether or not upon or in respect of any
shares of its capital stock;
(c) redeemed, purchased or otherwise acquired any shares of
its capital stock or issued or sold any capital stock or any option, warrant or
right relating thereto or any securities convertible into or exchangeable for
any shares of capital stock, or modified the terms of or waived any provision
of its capital stock or any such option, warrant, right or other securities;
(d) sold, leased, transferred or assigned any of its assets,
tangible or intangible, other than for fair consideration, or abandoned or
permitted to lapse any of its Intellectual Property (as hereinafter defined) or
granted any license or sublicense of any of its Intellectual Property, other
than licenses associated with sales of its products to customers in the
ordinary course of business in the form(s) included as part of Schedule 2.13;
(e) permitted, allowed or suffered any of its assets to be
subject to any Lien;
(f) acquired or made any investment in (by merger, exchange,
consolidation, purchase or otherwise) any corporation or partnership or
interest in any business organization or entity, or acquired any assets outside
of the ordinary course of business or which are material (except for material
purchases of inventory and supplies in the ordinary course of business),
individually or in the aggregate, to Rollway;
(g) canceled or forgiven any indebtedness or waived any claims
or rights of a substantial nature;
(h) adopted or amended any plan or agreement of the sort
described in Section 2.24;
(i) terminated or modified any Contract or any Government
license, permit or other authorization or entered into any new Contracts,
except for: (1) any Contract requiring aggregate payments during the term
thereof of less than $25,000; (2) any Contract terminated, modified or entered
into in the ordinary course of business consistent with past practices; and (3)
except as otherwise disclosed on a Schedule hereto;
(j) disclosed any confidential or proprietary information to
any person or entity other than Emerson and Emerson's representatives, agents,
attorneys and accountants or Rollway's own employees, representatives, agents,
attorneys and accountants in the ordinary course of business;
(k) made or committed to make any expenditure for capital
assets (or series of such related expenditures) involving more than $25,000;
(l) made any loan or advance to, or guarantee for the benefit
of, any other person or entity, other than advances to employees in the
ordinary course of business consistent with past practice;
(m) granted any bonus or any increase in wages, salary or
other compensation to any director, officer or employee (other than any
<PAGE> 130
increase in wages or salaries (i) required under existing Contracts which are
listed on Schedule 2.24 or (ii) otherwise not unusual in character, timing or
amount made in the ordinary course of business to employees who are not
directors or officers);
(n) made any charitable contributions or commitments in excess
of $25,000 in the aggregate;
(o) suffered or experienced any damage, destruction or loss
to, or other adverse change in the condition of, its property which, in the
aggregate, exceeds $25,000 or is material to its business (whether or not
covered by insurance);
(p) made or authorized any amendment to its Certificate of
Incorporation or By-Laws or the constituent documents of the Subsidiaries;
(q) instituted or permitted any change in the conduct of its
business, or any change in its method of purchase, sale, lease, management,
marketing, promotion or operation, or delayed or postponed the payment of
accounts payable or other liabilities other than as required by the
availability of funds;
(r) made any change in any method of accounting or accounting
policies, other than those required by generally accepted accounting
principles, or made any write-down in its accounts receivable other than in the
usual, regular and ordinary course of business consistent with past practice;
(s) incurred or assumed any liabilities, obligations or
indebtedness for borrowed money or guaranteed any such liabilities or
indebtedness other than trade accounts payable incurred in the ordinary course
of business consistent with past practices;
(t) taken any action which will or may reasonably be expected
to cause or constitute a breach of any provision of this Agreement; or
(u) agreed, whether in writing or otherwise, to do any of the
foregoing.
2.11 Real Property. Rollway does not own or lease any real property
other than that set forth on Schedule 2.11. Schedule 2.11 lists and provides
legal descriptions of all real property owned by Rollway, all real property
leased or subleased to Rollway and all other real property which is used by
Rollway and not owned by Rollway (the "Real Property"). Except as otherwise
described on Schedule 2.11: (a) there is no pending or, to the knowledge of
Rollway, threatened condemnation proceeding, administrative action or judicial
proceeding of any type relating to the Real Property or other matters affecting
adversely the current use, occupancy or value of the Real Property; (b) the
Real Property does not serve any adjoining property for any purpose
inconsistent with the use of the Real Property, and the Real Property is not
located within any flood plain or subject to any similar type of restriction
for which any permits or licenses necessary to the use thereof have not been
obtained; (c) there are no leases, subleases, licenses, easements, concessions
or other agreements, written or oral, granting to any person or entity the
right to use or occupy any portion of the Real Property which is not listed on
Schedule 2.15 or, with respect to property located in the U.S., of record; (d)
no person or entity (other than Rollway) is in possession of any of the Real
Property; (e) neither the current use of the Real Property nor the operation of
Rollway's business violates any instrument of record or agreement affecting the
<PAGE> 131
Real Property or any material applicable legal requirements; (f) all water,
gas, electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines and other utilities and systems serving the Real Property are
sufficient to enable the continued operation of the Real Property as currently
operated; (g) all material certificates of occupancy, permits, licenses,
approvals and other authorizations required in connection with the past and
present operation of its business on the Real Property have been lawfully
issued to Rollway and are, as of the date hereof, and will be following the
consummation of the transactions contemplated hereby, in full force and effect,
and Rollway and such Real Property are in compliance with all material
applicable zoning ordinances and regulations (without regard to any variances
granted thereunder); and (h) all Real Property has access to public roads and
utilities necessary to conduct Rollway's business at such Real Property as
presently conducted.
2.12 Assets. Rollway has good and marketable title to, or a valid
leasehold interest in, all properties and assets used by it, located on its
premises or shown on the 1995 Balance Sheet or acquired after the date thereof,
free and clear of all Liens, except for Liens disclosed on the 1995 Balance
Sheet or Schedule 2.11 (as to real property) or Schedule 2.12 or as
specifically disclosed on Schedule 2.15 (as to all other properties and assets)
and except for properties and assets disposed of for fair consideration in the
ordinary course of business since the 1995 Balance Sheet Date. Rollway owns or
leases or has the valid and enforceable right to use all assets, tangible or
intangible, necessary for the conduct of its business as presently conducted
and, upon the Effective Time, the Surviving Corporation will have the same
rights with respect to such assets. All of Rollway's tangible assets have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear and Rollway's normal
maintenance procedures), and are suitable for the purposes for which they are
presently used.
2.13 Intellectual Property.
(a) Schedule 2.13 contains a true, complete and accurate list
of all the Intellectual Property (as hereinafter defined). Schedule 2.13(a)
accurately identifies, where appropriate, one or more of the following for each
item of the Intellectual Property: filing date, issue date, classification of
invention or goods covered, country of origin, licensor, license date and
licensed subject matter. Schedule 2.15 contains a complete and accurate list
of all licenses and other rights granted by Rollway to any third party with
respect to any item of the Intellectual Property, other than licenses
associated with sales of products to customers in the ordinary course of
business. True, complete and correct copies of the forms of such customer
licenses are included as part of Schedule 2.13.
(b) Except as set forth on Schedule 2.13(b), (i) the
Intellectual Property is valid and enforceable and encompasses all proprietary
rights necessary or desirable for the operation of Rollway's business as
presently conducted (in each case free and clear of all Liens); (ii) Rollway
has taken all actions necessary to maintain and protect Rollway's rights to any
Intellectual Property; (iii) to the knowledge of Rollway, the owners of the
Intellectual Property licensed to Rollway have taken all actions necessary to
maintain and protect the Intellectual Property subject to such licenses; (iv)
there has been no claim made against Rollway asserting the invalidity, misuse
or unenforceability of any of the Intellectual Property or challenging
Rollway's right to use or ownership of any of the Intellectual Property, and
there are no grounds for any such claim or challenge; (v) Rollway is not aware
<PAGE> 132
of any infringement or misappropriation of any of the Intellectual Property or
of any facts raising a likelihood of infringement or misappropriation; (vi) the
conduct of Rollway's business has not infringed or misappropriated, and does
not infringe or misappropriate, any intellectual property or proprietary right
of any other entity; (vii) no loss of any of the Intellectual Property is
pending or to the knowledge of Rollway threatened or reasonably foreseeable;
and (viii) the consummation of the transactions contemplated by this Agreement
will not alter, impair or extinguish any of the Intellectual Property. Rollway
holds valid licenses to use all widely available off-the-shelf software used in
its business, which use does not and has never violated the terms of such
licenses.
(c) For purposes of this Agreement, "Intellectual Property"
shall mean all of the following (in whatever form or medium) which are owned by
or licensed to Rollway: (i) patents, trademarks, service marks and copyrights,
(ii) applications for patents and for registration of trademarks, service marks
and copyrights, (iii) trade secrets and trade names, and (iv) all other items
of proprietary information or know-how but shall not include any widely
available off-the-shelf software.
2.14 No Breach of Law or Governing Document; Licenses and Permits.
Rollway has complied with and is not in default under or in violation of any
material applicable statute, law, ordinance, decree, order, rule, or regulation
of any Government ("Law"), or the provisions of any franchise or license, or in
default under or in violation of any provision of its Certificate of
Incorporation or its By-Laws, or, with respect to the Subsidiaries, any of
their respective constituent documents. Rollway holds all material licenses or
permits required to conduct its business as presently conducted, and each such
license or permit is valid, in full force and effect, and listed on
Schedule 2.14. Upon the Effective Time, the Surviving Corporation and the
Subsidiaries will have all right and authority to conduct their respective
businesses pursuant to such licenses and permits subject to the terms thereof.
2.15 Contracts and Commitments. Except as set forth in
Schedule 2.15, Rollway is not a party to or otherwise obligated under any of
the following, whether written or oral:
(a) Any single contract or purchase order providing for an
expenditure by Rollway in excess of $25,000 or contracts or purchase orders
with the same or known affiliated vendor(s) providing for an expenditure by
Rollway in excess of $25,000.
(b) Any other contract providing for an expenditure by Rollway
for the purchase of real property.
(c) Any contract, bid or offer to sell products or to provide
services to third parties which (i) Rollway knows or has reason to believe is
at a price which would result in a net loss on the sale of such products or
provision of such services or (ii) contains terms or conditions Rollway cannot
reasonably expect to satisfy or fulfill in whole or in part.
(d) Any purchase commitment for materials, supplies, component
parts or other items or services in excess of the normal, ordinary, usual and
current requirements of Rollway or at a price in excess of the current
reasonable market price available to Rollway at the time of such commitment.
<PAGE> 133
(e) Any license or other right granted by Rollway to any third
party or granted by any third party to Rollway with respect to any Intellectual
Property (other than licenses for widely available, off-the-shelf software).
(f) Any contract pursuant to which Rollway is the lessee or
sublessee of, or holds or operates, any real or personal property owned or
leased by any other person or entity (other than leases of personal property
leased in the ordinary course of business with annual lease payments no greater
than $25,000).
(g) Any contract pursuant to which Rollway is the lessor or
sublessor of, or permits any third party to operate, any real or personal
property owned or leased by Rollway.
(h) Any revocable or irrevocable power of attorney granted to
any person, firm or corporation for any purpose whatsoever, excluding powers of
attorney granted in connection with United States and foreign patents,
trademarks, service marks, copyrights and applications therefor.
(i) Any loan agreement, indenture, promissory note,
conditional sales agreement, security agreement, letter of credit arrangement,
guarantee, indemnity, surety, foreign exchange contract, accommodation or other
similar type of agreement.
(j) Any arrangement or other agreement (other than pursuant to
a plan described on Schedule 2.24) which involves (i) a sharing of profits,
(ii) future payments of $25,000 or more per annum to other persons, or
(iii) any joint venture or similar contract or arrangement.
(k) Any sales agency, sales representation, distributorship or
franchise agreement that is not terminable without penalty within 60 days.
(l) Any contract providing for the payment of any cash or
other benefits upon the sale or change of control of Rollway or a substantial
portion of its assets.
(m) Any contract prohibiting Rollway from freely engaging in
any business anywhere in the world, or prohibiting Rollway from the disclosure
of trade secrets or other confidential or proprietary information.
(n) Any contract or commitment not made in the ordinary course
of business.
2.16 Validity of Contracts; Government Contracts.
(a) Except as set forth on Schedule 2.16(a), each written or
oral contract, agreement, indenture and evidence of indebtedness (including but
not limited to the contracts and commitments required to be disclosed on
Schedule 2.15) to which Rollway is a party or is otherwise obligated
(collectively, the "Contracts") is a valid and binding obligation of Rollway
and to the knowledge of Rollway the other parties thereto in accordance with
its terms and conditions, except as such enforceability may be limited by (a)
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and (b) equitable principles of general
applicability (whether considered in a proceeding at law or in equity). Except
as set forth on Schedule 2.16(a), neither Rollway nor any other party to a
Contract is in material default under or in violation of such Contract, and
there are no disputes with regard to any Contract. Except as set forth on
<PAGE> 134
Schedule 2.16(a) no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute, and neither the execution of this
Agreement nor the Closing hereunder do or will constitute or result in, a
default under or a violation of any Contract by Rollway or any other party to
such Contract or would cause the acceleration of any obligation of any party
thereto or the creation of a Lien upon any asset of Rollway. Rollway has
delivered to Emerson a true, complete and accurate copy of each written
Contract and a true, complete and accurate description of each oral Contract,
and none of the Contracts has been modified or amended in any respect, except
as reflected in such disclosure to Emerson.
(b) Identified on Schedule 2.16(b) are all current agreements
between Rollway and the U.S. Government ("USG"), including foreign military
sales agreements, and all subcontracts (at any tier), teaming agreements, joint
venture agreements and memoranda of agreement relating to such contracts
(collectively, "Government Contracts"). Except as set forth on
Schedule 2.16(b), (i) there are no grounds for the termination of any such
Government Contract by USG or the other contracting party based on default by
Rollway; (ii) Rollway has not breached or otherwise defaulted under any such
Government Contract; (iii) Rollway has not received notice of any violation by
it under the civil or criminal provisions of the U.S. False Claims Act, as
amended, in connection with any such Government Contract; (iv) Rollway has
provided all required cost or pricing data in compliance with 10 U.S.C. 2306a
and 41 U.S.C. 254(d) to the extent applicable to any such Government Contract
and has treated its costs in accordance with cost accounting standards and its
disclosure statement; (v) Rollway is in compliance with all Laws governing such
Government Contracts and the negotiation thereof; and (vi) there have been no
assertions of claims or potential claims by USG or any other parties to such
Government Contracts in any governmental reports, including, without
limitation, audit reports that have been prepared with respect to such
Government Contracts. Except as set forth on Schedule 2.16(b), Rollway has not
received any subpoena or investigative demand in connection with any Government
Contract and Rollway is not the subject of any governmental investigation
relating to actual or alleged wrongdoing by Rollway in connection with any
Government Contract. Except as set forth on Schedule 2.16(b), none of the
foregoing events or circumstances has occurred since January 1, 1992 with
respect to any Government Contracts to which Rollway has ever been a party.
2.17 Customers and Suppliers. Schedule 2.17 sets forth a true,
complete and correct list of Rollway's 25 largest customers and suppliers by
volume of sales (by dollar volume) and purchases (by dollar volume),
respectively, for each of the years ended November 28, 1993, November 27, 1994
and December 3, 1995. Rollway has not received any indication from any
supplier of Rollway (including those listed on Schedule 2.17) to the effect
that, and has no reason to believe that, such supplier will stop, or materially
decrease the rate of, supplying materials, products or services to Rollway.
Except as set forth on Schedule 2.17 Rollway has not received any indication
from any customer of Rollway (including those listed on Schedule 2.17) to the
effect that, and has no reason to believe that, such customer will stop, or
materially decrease the rate of, buying materials, products or services from
Rollway.
2.18 Litigation and Arbitration. Except as set forth on
Schedule 2.18, there is no suit, claim, action or proceeding now pending or, to
the best knowledge of Rollway, threatened before any court, grand jury,
administrative or regulatory body, Government agency, arbitration or mediation
panel or similar body to which Rollway is a party or which may result in any
judgment, order, decree, liability, award or other determination which will or
<PAGE> 135
may reasonably be expected to have a material adverse effect upon the Business
Condition of Rollway. Except as set forth on Schedule 2.18, no such judgment,
order, decree or award has been entered against Rollway which has, or may
reasonably be expected to have, such effect. There is no claim, action or
proceeding now pending or, to the best knowledge of Rollway, threatened before
any court, grand jury, administrative or regulatory body, Government agency,
arbitration or mediation panel or similar body involving Rollway which will or
may reasonably be expected to prevent or hamper the consummation of the
transactions contemplated by this Agreement.
2.19 Officers, Directors, Employees and Consultants. Set forth on
Schedule 2.19 is a complete list of: (a) all directors of Rollway; (b) all
officers (with office held) of Rollway; (c) all employees of Rollway; and (d)
all business consultants to Rollway; together, in each case, with the current
rate of compensation payable to each.
2.20 Indebtedness to and from Officers, Directors and Others.
Except as set forth on Schedule 2.20: (a) Rollway is not indebted to any
shareholder, director, officer, employee or agent of Rollway except for amounts
due as normal salaries, wages, employee benefits and bonuses and in
reimbursement of ordinary expenses on a basis consistent with the past
practices of Rollway; and (b) no shareholder, director, officer, employee or
agent of Rollway is indebted to Rollway except for advances for ordinary
business expenses on a basis consistent with the past practices of Rollway.
2.21 Affiliated Transactions. Except as set forth on Schedule 2.21
no director, officer, executive employee or affiliate of Rollway or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such individual or entity is known by Rollway to own any
material beneficial interest, is a party to any agreement, contract, commitment
or other form of transaction or arrangement with Rollway or has any interest in
any property used by or in connection with Rollway's business.
2.22 Outside Financial Interests. Except as set forth on
Schedule 2.22, no director or officer of Rollway has any direct or indirect
financial interest in any competitor with or supplier or customer of Rollway;
provided, however, that for this purpose ownership of corporate securities
having no more than 5% of the outstanding voting power of any competitor,
supplier or customer, which securities are listed on any national securities
exchange or authorized for quotation on the Nasdaq National Market, shall not
be deemed to be such a financial interest, provided that such person has no
other connection or relationship with such competitor, supplier or customer.
2.23 Payments, Compensation and Perquisites of Agents and
Employees. All payments to agents, consultants and others made by Rollway have
been in payment of bona fide fees and commissions and not as bribes or illegal
or improper payments. Rollway has properly and accurately reflected on its
books and records: (a) all compensation paid to and perquisites provided to or
on behalf of its agents and employees; and (b) all compensation and perquisites
which are due and payable to such persons but which have not been paid or
provided. Such compensation and perquisites have been properly and accurately
disclosed in the financial statements and other public or private reports,
records or filings of Rollway, to the extent required by Law.
<PAGE> 136
2.24 Labor Agreements, Employee Benefit Plans and Employment
Agreements.
(a) Disclosure. Schedule 2.24 describes all pension, thrift,
savings, profit sharing, retirement, incentive bonus or other bonus, medical,
dental, life, accident insurance, benefit, employee welfare, disability, group
insurance, consulting, stock appreciation, stock option, stock purchase,
executive or deferred compensation, hospitalization and other similar fringe or
employee benefit plans, programs and arrangements, whether or not written, and
any, whether written or unwritten, employment or consulting contracts, "golden
parachutes," union collective bargaining agreements, works council or similar
agreements, severance agreements or plans, vacation and sick leave plans,
programs, arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals, and
all written statements of policies relating to employment, which are provided
to, for the benefit of, or relate to, any persons ("Employees") now employed or
previously employed (to whom coverage is presently provided) by Rollway. The
items described in the foregoing sentence are hereinafter sometimes referred to
collectively as "Employee Plans/Agreements," and each individually as an
"Employee Plan/Agreement." Each of the Employee Plans/Agreements has been
furnished to Emerson. No Employee Plan/Agreement is a "multiemployer plan" (as
defined in Section 4001 of ERISA), and Rollway has never contributed nor been
obligated to contribute to any such multiemployer plan. Rollway has furnished
Emerson with respect to each Employee Plan/Agreement the three most recent
annual reports prepared in connection therewith (Form 5500 including all
schedules thereto) or, if an Employee Plan/Agreement has been in existence for
less than three years, the annual report prepared for each year such Employee
Plan/Agreement has been in existence. There are no negotiations, written
demands or proposals which are pending which concern matters now covered, or
that would be covered, by any Employee Plans/Agreements. Rollway has at all
times operated its business and conducted its employment practices in
accordance with the terms of such Employee Plans/Agreements.
(b) Prohibited Transactions. There have been no "prohibited
transactions" within the meaning of Section 406 or 407 of ERISA or Section 4975
of the Code for which a statutory or administrative exemption does not exist
with respect to any Employee Plan/Agreement.
(c) Payments and Compliance. With respect to each Employee
Plan/Agreement (A) all payments due from Rollway to date have been made and all
amounts properly accrued to date as liabilities of Rollway which have not been
paid have been properly recorded on the books of Rollway and are reflected in
Rollway's most recent balance sheet; (B) all reports and information relating
to each such Employee Plan/Agreement required to be disclosed or provided to
participants or their beneficiaries have been timely disclosed or provided; and
(C) each such Employee Plan/Agreement which is intended to qualify under
Section 401 of the Code has received a favorable determination letter from the
Internal Revenue Service with respect to such qualification (or has timely
caused an application to be submitted with the Internal Revenue Service for
each such Employee Plan/Agreement seeking such determination), its related
trust has been determined to be exempt from taxation under Section 501(a) of
the Code, and nothing has occurred since the date of such letter that would
adversely affect such qualification or exemption. Each trust created under any
such Employee Plan/Agreement is exempt from tax under Section 501(a) of the
Code and has been so exempt during the period from creation to date. Rollway
has furnished Emerson with the most recent determination letters of the
Internal Revenue Service relating to each such Employee Plan/Agreement. Each
<PAGE> 137
Employee Plan/Agreement has been maintained in compliance with its terms and
with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the Code.
(d) Post-Retirement Benefits. Except as set forth on
Schedule 2.24, no Employee Plan/Agreement provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
current or former Rollway employees beyond their retirement or other
termination of service other than (A) continuation coverage mandated by Section
4980B(f) of the Code ("Continuation Coverage"), (B) death or pension benefits
under any Employee Plan/Agreement that is an employee pension benefit plan, (C)
deferred compensation benefits accrued as liabilities on the books of Rollway
(including Rollway's most recent balance sheet), (D) disability benefits under
any Employee Plan/Agreement that is an employee welfare benefit plan and which
have been fully provided for by insurance or otherwise, or (E) benefits in the
nature of severance pay. No tax under Section 4980B of the Code has been
incurred in respect of an Employee Plan/Agreement that is a group health plan,
as defined in Section 5000(b)(1) of the Code.
(e) No Triggering of Obligations. Except as set forth on
Schedule 2.24, other than by reason of actions taken by Emerson following the
Closing, the consummation of the transaction contemplated by this Agreement
will not (A) entitle any current or former employee of Rollway to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement, (B) except as provided in Section 1.8, accelerate
the time of payment or vesting, or increase the amount of compensation due to
any such employee or former employee, (C) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available, or (D) give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
(f) International Plans. Schedule 2.24 identifies each
Employee Plan/Agreement covering any Employee or former Employee outside of the
United States ("International Plan"). Rollway has furnished Emerson with
copies of each International Plan. Each International Plan has been maintained
in substantial compliance with its terms and with the requirements prescribed
by any and all applicable statutes, orders, rules and regulations (including
any special provisions relating to qualified plans where such International
Plan was intended to so qualify) and has been maintained in good standing with
applicable regulatory authorities. According to the actuarial assumptions and
valuations most recently used for the purpose of funding each International
Plan (or, if the same has no such assumptions or valuations or is unfunded,
according to its actuarial assumptions and valuations in use by the PBGC on the
date hereof), as of the Closing the total amount or value of the funds
available under such International Plan to pay benefits accrued thereunder or
segregated in respect of such accrued benefits, together with any reserve or
accrual with respect thereto, exceeded the present value of all benefits
(actual or contingent) accrued as of such date of all participants and past
participants therein who are Employees of former Employees of Rollway. From
and after the Closing, Emerson (or the Surviving Corporation) shall have the
full benefit of any such funds, accruals or reserves.
2.25 Terminated Plans. Since January 1, 1990, Rollway has not
terminated or taken action to terminate (a) any Employee Plan/Agreement subject
to Section 412 of the Code or Section 302 of ERISA or (b) any International
Plan.
<PAGE> 138
2.26 Overtime, Back Wages, Vacation and Minimum Wages. Except as
set forth on Schedule 2.26, no present or former employee of Rollway has given
written notice to Rollway of, and there is no valid basis for, any claim
against Rollway (whether under Law, any employment agreement or otherwise) on
account of or for (a) overtime pay, other than overtime pay for the current
payroll period, (b) wages or salary (excluding current bonus, accruals and
amounts accruing under "employee benefit plans," as defined in Section 3(3) of
ERISA) for any period other than the current payroll period, (c) vacation, time
off or pay in lieu of vacation or time off, other than that earned in respect
of the current fiscal year, or (d) any violation of any Law relating to minimum
wages or maximum hours of work.
2.27 Discrimination, Workers Compensation and Occupational Safety
and Health. Except as set forth on Schedule 2.18, no person or party
(including, but not limited to, Government agencies of any kind) has any valid
claim, or valid basis for any action or proceeding, against Rollway arising out
of any Law relating to discrimination in employment or employment practices or
occupational safety and health standards. Since November 30, 1991 Rollway has
not received any written notice from any U.S. federal, state, local or foreign
Government entity alleging a violation of occupational safety or health
standards. Except as set forth on Schedule 2.27, there are no pending workers
compensation claims involving Rollway. Except as set forth on Schedule 2.27
since January 1, 1978, there have not been any workers compensation claims
against Rollway relating to the use or existence of asbestos in any of
Rollway's products. Rollway has delivered to Emerson a true, correct and
complete list of all workers compensation claims made over the three years
preceding the date hereof.
2.28 Alien Employment Eligibility. With respect to each person
employed by Rollway (exclusive of the non-U.S. Subsidiaries) on or after May 1,
1987, and who actually commenced such employment on or after November 6, 1986,
(a) Rollway hired such person in compliance with the Immigration Reform and
Control Act of 1986 and the rules and regulations thereunder ("IRCA") and
(b) Rollway has complied with all recordkeeping and other regulatory
requirements under IRCA.
2.29 Labor Disputes; Unfair Labor Practices. Except as set forth
on Schedule 2.29, there is neither pending nor, to the best knowledge of
Rollway, threatened any labor dispute, strike or work stoppage which affects or
which reasonably may be expected to affect the Business Condition of Rollway.
Except as set forth on Schedule 2.29, within the past three years, neither
Rollway nor any of its agents, representatives or employees has committed any
unfair labor practice, as defined in the National Labor Relations Act of 1947,
as amended. There is not now pending or, to the knowledge of Rollway,
threatened any charge or complaint against Rollway by the National Labor
Relations Board, any state or local labor or employment agency or any
representative thereof, and the execution of this Agreement and the Merger
hereunder will not result in any such charge or complaint.
2.30 Insurance Policies.
(a) Set forth on Schedule 2.30(a) is a list of all insurance
policies and bonds in force covering or relating to the properties, operations
or personnel of Rollway. All of such insurance policies are in full force and
effect and such policies or substantially equivalent policies will continue in
full force and effect for the benefit of the Surviving Corporation (except as
contemplated herein) following the Merger with respect to claims and
<PAGE> 139
occurrences relating to pre-Merger periods, and Rollway is not in default with
respect to any of its obligations under any of such insurance policies.
(b) Schedule 2.30(b) is a complete list of all liability insurance
policies held by Rollway covering the period or periods from December 1, 1967
until April 1, 1985.
2.31 Guarantees. Except as set forth on Schedule 2.31, Rollway is
not a guarantor, indemnitor, surety or accommodation party or otherwise liable
for any indebtedness of any other person, firm or corporation, except as
endorser of checks received and deposited in the ordinary course of business.
2.32 Product Warranties. Set forth on Schedule 2.32 are the
standard forms of product warranties and guarantees used by Rollway and copies
of all other product warranties and guarantees. No oral product warranties or
guarantees have been made containing terms less favorable to Rollway than the
terms of the forms of product warranties and guarantees set forth on
Schedule 2.32. Except as specifically described on one or more Schedule(s) to
this Agreement, since January 1, 1990, no product warranty or similar claims
have been made against Rollway except routine claims. The aggregate loss and
expense (including out-of-pocket expenses) attributable to all product warranty
and similar claims now pending or hereafter asserted with respect to products
manufactured on or prior to the Effective Time will not exceed the higher of
the 1995 Balance Sheet reserve or $25,000. In no event will the return of
product pursuant to the return policy described on Schedule 2.7 be considered a
product warranty or similar claim for purposes of this Section 2.32. No person
or party (including, but not limited to, Government agencies of any kind) has
any valid claim, or valid basis for any action or proceeding, against Rollway
under any Law relating to unfair competition, false advertising or other
similar claims arising out of product warranties, guarantees, specifications,
manuals or brochures or other advertising materials used by Rollway.
2.33 Product Liability Claims. Except as described on
Schedule 2.33, since January 1, 1985, Rollway has never received notice or
information as to any claim or allegation of personal injury, death, or
property or economic damages, any claim for punitive or exemplary damages, any
claim for contribution or indemnification, or any claim for injunctive relief
in connection with any product manufactured, sold or distributed by, or in
connection with any service provided by, Rollway. Schedule 2.33 accurately and
completely describes all such claims, together in each case with the date such
claim was made, the amount claimed, and the disposition or status of such claim
(including settlement or judgment amount). Rollway has at all times and
currently has in full force and effect insurance of the type and amount
adequate to cover all claims of the sort described in this Section.
2.34 Product Safety Authorities. Rollway has not been required to
file any notification or other report with or provide written information or
oral presentation to any Government agency or product safety standards group
concerning actual or potential defects or hazards with respect to any product
manufactured, sold or distributed by Rollway and there exist no valid grounds
for the recall of any such product.
2.35 Environmental Matters.
(a) Except as set forth on Schedule 2.35, all assets and property
currently or previously owned, leased, operated, or used by Rollway
("Environmental Property"), all current or previous conditions on and uses of
the Environmental Property, and all current or previous ownership or operation
<PAGE> 140
of Rollway or the Environmental Property (including, without limitation,
transportation and disposal of Hazardous Materials (as hereinafter defined) by
or for Rollway) comply and have at all times complied with, and do not cause,
have not caused, and will not cause liability to be incurred by Rollway under
any current or past Law relating to the protection of health or the
environment, including, without limitation: the Clean Air Act, the Federal
Water Pollution Control Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substance Control Act, any comparable state or foreign law, and the common law,
including the law of nuisance and strict liability ("Environmental Law");
provided, however, that the sites specifically listed on Schedule 2.35 in
response to Section 2.35(j) shall not be deemed property "used" by Rollway.
Except as set forth on Schedule 2.35, Rollway is not in violation of and has
not violated any Environmental Law. All real property included in the
Environmental Property, together with the addresses thereof, is listed on
Schedule 2.35.
(b) Except as set forth on Schedule 2.35, Rollway has properly
obtained and is, or will be on the Closing Date, in compliance with all
necessary permits, registrations, approvals, and licenses, and has properly
made all filings with and submissions to any Government or other authority
required by any Environmental Law (the "Environmental Permits"). No
deficiencies have been asserted by any such Government or authority with
respect to such items.
(c) Except as set forth on Schedule 2.35, there has been no spill,
discharge, leak, leaching, emission, migration, injection, disposal, escape,
dumping, or release of any kind on, beneath, above, or into the Environmental
Property or into the environment surrounding the Environmental Property of any
pollutants, contaminants, hazardous substances, hazardous chemicals, toxic
substances, hazardous wastes, infectious wastes, radioactive materials,
petroleum including crude oil or any fraction thereof, asbestos fibers, or
industrial wastes or other hazardous materials, including, without limitation,
those defined in any Environmental Law (collectively, "Hazardous Materials").
(d) Except as set forth on Schedule 2.35, there are and have been
no (i) Hazardous Materials stored, disposed of, generated, manufactured,
refined, transported, produced, or treated at, upon, or from the Environmental
Property; (ii) asbestos fibers or materials or polychlorinated biphenyls on or
beneath the Environmental Property; or (iii) underground storage tanks on or
beneath the Environmental Property.
(e) Rollway has delivered to Emerson, prior to the execution and
delivery of this Agreement, complete copies of any and all (i) documents
received by Rollway from, or submitted by Rollway to, the Environmental
Protection Agency (the "EPA") and/or any state, county or municipal
environmental or health agency concerning the environmental condition of the
Environmental Property or the effect of Rollway's operations on the
environmental condition of the Environmental Property; and (ii) reviews,
audits, reports, or other analyses concerning the Environmental Property.
(f) Except as set forth on Schedule 2.35, no expenditure will be
required in order for Rollway to comply with any Environmental Laws in effect
at the time of the Closing in connection with the operation or continued
operation of Rollway's business or the Environmental Property in a manner
consistent with the current operation thereof by Rollway, other than
expenditures in connection with the ordinary course of business renewal of
Environmental Permits after the Closing.
<PAGE> 141
(g) Except as set forth in Schedule 2.35, there never has been
pending or threatened against Rollway or to the knowledge of Rollway any other
person or entity to the extent that such other person or entity from time to
time has owned, leased, occupied or conducted operations on the Environmental
Property, any civil, criminal or administrative action, suit, summons,
citation, complaint, claim, notice, demand, request, judgment, order, lien,
proceeding, hearing, study, inquiry or investigation based on or related to an
Environmental Permit or an Environmental Law.
(h) Except as set forth in Schedule 2.35, neither Rollway, nor to
the knowledge of Rollway any other person or entity to the extent that such
other person or entity from time to time has owned, leased, occupied or
conducted operations on the Environmental Property, has ever received from any
person any notice of, or has any knowledge of, any past, present or anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions, agreements or plans that could: (i) interfere with, prevent, or
increase the costs of compliance or continued compliance with any Environmental
Permits or any renewal or transfer thereof or any Environmental Law; (ii) make
more stringent any restriction, limitation, requirement or condition under any
Environmental Law or any Environmental Permit in connection with the operations
on the Environmental Property; or (iii) give rise to any liability, loss or
expense, or form the basis of any civil, criminal or administrative action,
suit, summons, citation, complaint, claim, notice, demand, request, judgment,
order, lien, proceeding, hearing, study, inquiry or investigation involving the
Environmental Property or Rollway, based on or related to an Environmental
Permit or an Environmental Law or to the presence, manufacture, generation,
refining, processing, distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, handling, emission, discharge, release or
threatened release of any Hazardous Materials.
(i) Except as set forth on Schedule 2.35, Rollway has not
transported or arranged for the transportation of any Hazardous Materials to
any location which is: (i) listed on, or proposed for listing on, the EPA's
National Priorities List published at 40 CFR Part 300 or on any similar state
list; or (ii) the subject of any regulatory action which may lead to claims
against Rollway for damages to natural resources, personal injury, clean-up
costs or clean-up work.
(j) Schedule 2.35 contains a list of all sites where Rollway's
Hazardous Materials may have been sent in the past, or are currently being sent
for disposal, treatment, recycling or storage, including the address of each
such site, and a description and estimate of the amount of the Hazardous
Materials disposed of, treated, recycled or stored at each such site.
(k) Schedule 2.35 contains a list containing the name and address
of each person, firm, corporation or other entity engaged in the handling,
transportation or disposal of Rollway's Hazardous Materials, a description of
such Hazardous Materials, and an estimate of the amount of such Hazardous
Materials.
2.36 Broker's Fees. Neither Rollway nor any of its shareholders
has retained any broker, finder or agent or agreed to pay any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement.
2.37 Foreign Assets. Except as set forth on Schedule 2.37 or as
otherwise disclosed on any other Schedule attached hereto, Rollway has no
interest in any real property or tangible or intangible personal property
<PAGE> 142
located outside of the United States, including any stock, securities or
investments in, claims against, or receivables from any entities or persons
with substantially all their property or business so located.
2.38 Foreign Operations and Export Control. Rollway has at all
times acted:
(a) pursuant to valid qualifications to do business in all
jurisdictions outside the United States where such qualification is required by
local Law and where the failure to so qualify would have a material adverse
effect on the Business Condition of Rollway;
(b) in compliance with all applicable foreign Law, including
without limitation Law relating to foreign investment, foreign exchange
control, immigration, employment and taxation;
(c) without notice of violation of and in compliance with all
relevant anti-boycott legislation, including without limitation the Tax Reform
Act of 1976, as amended, the Export Administration Act of 1979, as amended, and
regulations thereunder, including all reporting requirements;
(d) without violation of and pursuant to any required export
licenses granted under the Export Administration Act of 1979, as amended, and
regulations thereunder, which licenses are described on Schedule 2.38; and
(e) without violation of the Foreign Corrupt Practices Act of
1977.
2.39 Bank Accounts. Set forth on Schedule 2.39 is a list of all
bank accounts, investment accounts and safe deposit boxes maintained by
Rollway, together with the names of all persons who are authorized signatories
or have access thereto or control thereover.
2.40 Books and Records. The books of account, stock record books
and minute books and other corporate records of Rollway are in all respects
complete and correct, have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected on the
Financial Statements, to the extent appropriate. Copies of the minute books
and stock books of Rollway have been delivered to Emerson and are true, correct
and complete to the date hereof except for certain confidential information
relating to the acquisition of Rollway which has been redacted or eliminated,
which confidential information will be delivered to Emerson on the Closing
Date.
2.41 Full Disclosure. No representation or warranty of Rollway
herein and no statement, information or certificate furnished or to be
furnished by or on behalf of Rollway or its counsel, accountants or other
agents pursuant hereto or in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
<PAGE> 143
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EMERSON AND EMERSUB
Emerson and Emersub hereby make the following representations and
warranties, each of which is true and correct on the date hereof and will be
true and correct on the Closing Date and each of which shall expire immediately
upon the Closing.
3.1 Corporate Organization, Qualification and Power.
Emerson is a corporation duly organized, validly existing and in good standing
under the laws of the State of Missouri. Emersub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Emerson and Emersub has all requisite corporate power and
authority to own, lease and use its assets and properties and to conduct the
business in which it is engaged.
3.2 Capitalization.
(a) Emerson. The entire authorized capital stock of Emerson
consists of 400,000,000 shares of Emerson Stock, of which _______ shares are
issued and outstanding on the date hereof, and 5,400,000 shares of Preferred
Stock, par value $2.50 per share (which includes 2,500,000 shares of Series A
Junior Participating Preferred Stock), none of which Preferred Stock is issued
or outstanding.
(b) Emersub. The entire authorized capital stock of Emersub
consists solely of 1,000 shares of Common Stock, par value $1.00 per share, of
which 1,000 shares are issued and outstanding. Emerson owns all issued and
outstanding capital stock of Emersub.
3.3 Corporate Power and Authority.
(a) Each of Emerson and Emersub has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Emerson and Emersub have been duly authorized by all requisite
corporate action, except for the filing of the Certificates of Merger pursuant
to Section 1.2 above. This Agreement constitutes the valid and binding
obligation of Emerson and Emersub, enforceable in accordance with its terms.
(b) Neither Emerson nor Emersub is a party to, subject to or bound
by any note, bond, mortgage, indenture, deed of trust, agreement, lien,
contract or other instrument or obligation or any statute, law, rule,
regulation, judgment, order, writ, injunction, or decree of any court,
administrative or regulatory body, governmental agency, arbitrator, mediator or
similar body, franchise or license, which would (i) conflict with or be
breached or violated or the obligations thereunder accelerated or increased
(whether or not with notice or lapse of time or both) by the execution,
delivery or performance by either of Emerson or Emersub of this Agreement or
(ii) prevent the carrying out of the transactions contemplated hereby. Except
for compliance with the provisions of the H-S-R Act, and applicable federal and
state securities laws, no waiver or consent of any third person or governmental
authority is required for the execution of this Agreement or the consummation
of the transactions contemplated hereby. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
creation of any Lien against Emerson or Emersub or any of their respective
properties or assets.
<PAGE> 144
3.4 The Emerson Shares. The Emerson Shares to be issued in
connection with the Merger, when delivered hereunder, will be duly authorized,
validly issued, and fully paid and nonassessable, and will not be subject to
any preemptive rights of Emerson's shareholders.
3.5 SEC Reports. Emerson has filed in a timely manner all reports
and other documents required by the Securities Exchange Act of 1934, as amended
(the "1934 Act"), or the 1933 Act, since January 1, 1990 (the "SEC Reports").
As of their respective dates of filing, the SEC Reports (including all exhibits
and schedules therein and documents incorporated by reference therein) (i)
complied as to form in all material respects with all requirements of
applicable law, including the 1933 Act and the 1934 Act, as appropriate, and
the rules and regulations thereunder, and (ii) did not contain any untrue
statement of, or omit to state, a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.6 Broker's Fees. Neither Emerson nor Emersub has retained any
broker, finder or agent or agreed to pay any brokerage fees, finder's fees or
commission with respect to the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE PARTIES
Emerson and Emersub, on the one hand, and Rollway, on the other hand,
hereby covenant and agree with each other as follows:
4.1 Conduct of Business. Except as otherwise specifically
contemplated by this Agreement, without the prior written consent of Emerson,
Rollway will not and will not agree to:
(a) Grant any increase in the rate of pay of any of its
employees, grant any increase in the salaries of any officer, employee or
agent, grant any additional Rollway Options, accelerate the vesting of any
existing Rollway Options or otherwise modify the terms thereof (except as
specifically contemplated herein), enter into or increase the benefits provided
under any bonus, profit-sharing, incentive compensation, pension, retirement,
medical, hospitalization, life insurance or other insurance plan or plans, or
other contracts or commitments, or in any other way increase in any amount the
benefits or compensation of any such officer, employee or agent, except,
however, ordinary increases in compensation not unusual in character, timing or
amount made in the ordinary course of business to employees who are not
directors or officers provided, however, nothing herein contained shall be
deemed to prohibit Rollway from continuing in place any benefit, bonus or
incentive plan which is scheduled by its terms to terminate or lapse as of the
end of the current fiscal year and proceed with such plan through the Closing
Date;
(b) Enter into (i) any employment contract or (ii) any
collective bargaining agreement;
(c) Enter into any contract or commitment or engage in any
transaction which is not in the usual and ordinary course of business or which
is inconsistent with past practices;
(d) Sell or dispose of or encumber any amount of assets
(except pursuant to existing Contracts disclosed herein);
<PAGE> 145
(e) Make, or enter into any contract for, any capital
expenditure or enter into any material lease of capital equipment or real
estate involving more than $50,000 individually (except pursuant to existing
Contracts disclosed herein);
(f) Enter into any contract or commitment (other than for the
purchase or sale of inventory, supplies, other products or services in the
ordinary course of business) involving more than $25,000, or enter into any
series of such contracts with one party or known affiliated group of parties
involving more than $25,000 in the aggregate;
(g) Create, assume, incur or guarantee any indebtedness other
than (i) in the usual and ordinary course of business and with a maturity date
of less than one year or (ii) that incurred pursuant to existing Contracts
disclosed herein;
(h) Declare or pay any dividend on, issue or make any sale of,
or distribution in respect of, its capital stock or directly or indirectly
redeem, purchase or otherwise acquire any of its capital stock, except for
issuances of Rollway Stock under existing Rollway Options;
(i) Conduct or transact business other than in a manner
consistent with its past practices or change any accounting procedures or
practices or its financial structure, except as required to conform to GAAP, in
which case Rollway shall give Emerson prior notice thereof;
(j) Except as contemplated by this Agreement, make any
amendments to or changes in its Certificate of Incorporation or By-Laws, or,
with respect to the Subsidiaries, any of their respective constituent
documents; or
(k) Perform any act, or attempt to do any act, or permit any
act or omission to act, which will or may reasonably be expected to cause a
breach by Rollway of any Contract to which it is a party, including this
Agreement.
4.2 Preservation of Business; Maintenance of Insurance. Rollway
shall conduct its activities substantially in the same manner as heretofore
conducted and shall use its reasonable best efforts to keep its business
organization intact, including its present employees and present relationships
with suppliers and customers and others having advantageous business relations
with it. Rollway agrees to maintain its existing insurance policies or
substantially equivalent replacement policies on property owned or leased by it
in full force and effect and will operate, maintain and repair all of such
property in a manner consistent with past practice.
4.3 Securities Laws Filings.
(a) The parties hereto agree to cooperate to prepare and file with
the Securities and Exchange Commission (the "Commission") Emerson's
registration statement on Form S-4 (together with all amendments and
supplements thereto, the "Registration Statement") and all appropriate state
securities or "blue sky" filings with respect to the Emerson Shares to be
issued pursuant to the Merger. Rollway shall have the right to review and
comment on the Registration Statement prior to its original filing and the
filing of any amendments thereto. The Registration Statement shall contain the
proxy statement (the "Proxy Statement") of Rollway for distribution to its
shareholders in connection with the special meeting of such shareholders to be
<PAGE> 146
called to consider and vote upon the approval and adoption of this Agreement
and the Merger and the Preferred Terms Amendment. Each of Emerson and Rollway
shall use its reasonable best efforts to cause the Registration Statement to be
prepared, filed and declared effective as promptly as practicable after the
date hereof, in compliance with all applicable laws, including, without
limitation, the 1933 Act and the 1934 Act and the rules and regulations under
each of such acts, and thereafter Rollway promptly shall deliver or mail the
Proxy Statement to its shareholders.
At all times up to and including the date of Rollway shareholders'
meeting, the Board of Directors of Rollway shall, unless advised in a written
opinion of outside counsel that their fiduciary duties require otherwise,
recommend that Rollway shareholders vote to adopt and approve the Merger and
that holders of Rollway Preferred Shares vote to adopt and approve the
Preferred Terms Amendment, and the Proxy Statement and the documents sent to
the shareholders of Rollway and the holders of Rollway Options shall contain
such recommendations. If at any time prior to the Effective Time there shall
occur any event that should be set forth in an amendment of, or a supplement
to, the Proxy Statement, the parties hereto will promptly prepare and Rollway
will promptly deliver or mail to its shareholders and option holders such an
amendment or supplement.
(b) Rollway agrees to indemnify and hold harmless Emerson and its
directors, officers, control persons, employees, agents, attorneys, accountants
and other representatives from and against any liability (including reasonable
attorneys' fees) relating to or arising out of information provided by Rollway
for inclusion in the Registration Statement or any federal or state filing.
The covenants of Rollway contained in this Section shall survive the Effective
Time and the Merger forever, are intended to benefit the indemnified parties,
shall be enforceable by such persons and shall be enforceable against the
former holders of Rollway Common Stock, as provided in Article VII.
4.4 Stock Exchange Listing. If necessary, Emerson will use its
reasonable best efforts to prepare and file an application for listing of the
Emerson Shares to be issued pursuant to the Merger on the New York Stock
Exchange.
4.5 Meeting of Shareholders; Redemption of Preferred Shares.
Rollway shall take all action necessary in accordance with the NYL and its
Certificate of Incorporation and By-Laws to convene a special meeting of its
shareholders as promptly as practicable to consider and vote upon the Merger
and the Preferred Terms Amendment. The Board of Directors of Rollway
(excluding the Subsidiaries) shall use its reasonable best efforts to obtain
the necessary approvals of Rollway's shareholders and to take all other actions
as are necessary or helpful to secure the vote or consent of such shareholders.
In the event the holders of a majority of the Rollway Preferred Shares do not
approve the Preferred Terms Amendment, Rollway shall redeem all of the issued
and outstanding Rollway Preferred Shares according to their terms and in
accordance with the NYL immediately prior to the Effective Time, using borrowed
funds, if necessary.
4.6 Amendment of Options. Prior to the Closing, the Committee
shall amend the Rollway Option Plan and each option agreement issued thereunder
to provide that all Rollway Options shall be exercisable as described in
Section 1.8 hereof.
4.7 Actions to Effect the Merger. Each of the parties hereto
shall use its reasonable best efforts to consummate and make effective as
<PAGE> 147
promptly as practicable the transactions contemplated hereby and to assist each
other in their respective efforts to obtain all necessary waivers, consents and
approvals from other parties to material loan agreements, leases and other
contracts. Each of the parties hereto agrees to use its reasonable best
efforts (a) to obtain all necessary consents, approvals and authorizations as
are required to be obtained under any Law, (b) to effect all necessary
registrations and filings, including, but not limited to, filings under the H-
S-R Act, and all other submissions of information required by Government
authorities, and (c) to meet all other conditions to closing set forth in
Articles V and VI of this Agreement. The preceding shall not be construed as
imposing upon either party hereto the obligation to enter into any agreement or
consent order that such party in its sole and absolute discretion determines
not to be in its best interests, unless such agreement is specifically required
hereunder.
4.8 Full Access. Representatives of Emerson shall have full
access at all reasonable times to all premises, properties, books, records,
Contracts, tax records and documents of Rollway relating to its Business
Condition, and Rollway will furnish to Emerson any such information as Emerson
may reasonably request from time to time. Such examination and investigation
shall not affect the representations and warranties of Rollway contained in
this Agreement.
4.9 Books, Records and Financial Statements. Rollway shall
maintain its books and financial records in accordance with GAAP consistently
applied and on a basis consistent with its past practices. Said books and
financial records shall fairly and accurately reflect the operations, results
and condition, financial and otherwise, of Rollway. Rollway shall furnish to
Emerson promptly, as available, financial statements and operating reports
applicable to Rollway since the 1995 Balance Sheet Date (including the
Pre-Closing Balance Sheet), all of which shall be prepared in accordance with
GAAP consistently applied but without requiring any footnote disclosures and
shall present fairly the consolidated financial position and results of
operations of Rollway at the dates and for the periods indicated.
4.10 No Solicitation. From the date hereof until the termination
hereof, Rollway will not, directly or indirectly through its agents or
representatives or otherwise, solicit or cause the solicitation of, or in any
way encourage the making of, any offer, proposal or indication of interest
involving the purchase, sale, transfer, merger or recapitalization of all or
any portion of the securities, business or assets of Rollway, or negotiate
with, respond to any inquiry from (except for "no comment" or a similar
statement), cooperate with or furnish or cause or allow to be furnished any
information to, any third party or its agents or representatives with respect
thereto. Emerson will be immediately advised by Rollway if any such offer,
proposal or indication of interest is received by Rollway or any of their
agents or representatives and the terms thereof.
4.11 Confidentiality. The parties hereto acknowledge that the
information being provided to each other pursuant to this Agreement is subject
to the terms of confidentiality agreements between Rollway and Emerson (the
"Confidentiality Agreements"), the terms of which are incorporated herein by
reference. Effective upon, and only upon, the Closing, the Confidentiality
Agreements shall terminate.
4.12 Public Announcements. Except as required by Law or the
applicable rules of any stock exchange, Emerson and Emersub on the one hand,
and Rollway on the other hand, shall not issue any press release or otherwise
<PAGE> 148
make any public statements with respect to this Agreement, the Merger or any of
the terms hereof or thereof without the prior written consent of the other.
4.13 Further Assurances. From time to time, as and when requested
by any party hereto, the other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
4.14 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Except with respect to the Employee Plans/Agreements set forth on
Schedule 2.24, neither Emerson nor the Surviving Corporation shall assume any
plans, arrangements, agreements, or programs, written or otherwise, relating to
current, former, or retired employees of Rollway or affiliates of Rollway,
including any "employee benefit plan" (as defined in Section 3(3) of ERISA),
pension, thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock appreciation, stock option, executive or
deferred compensation, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, whether or not written, and any,
written or unwritten, employment or consulting contracts, "golden parachutes,"
union collective bargaining agreements, works council or similar agreements,
severance agreements or plans, vacation and sick leave plans, programs,
arrangements and policies participated in, sponsored or maintained, at any time
during the period ending on the Closing Date by any organization which is a
member of a controlled group of organizations (within the meaning of Sections
414(b), (c), (m) or (o) of the Code) of which Rollway is a member. Any claim
against or loss or expense incurred by Emerson or the Surviving Corporation
arising from or related to any of the foregoing not assumed by Emerson shall be
a "Loss," with respect to which the Indemnified Parties (as hereinafter
defined) shall be indemnified as provided in Article VII hereof.
4.15 Tax Matters. At the Closing, Rollway shall deliver to
Emerson: (a) a true, correct and complete list of all Tax Returns for periods
up to and including the Closing Date (whether or not the period ends on such
date) which have not been filed on or before the Closing Date and which as of
the Closing Date are not yet due, and (b) a certificate stating that Rollway is
not a real property holding company within the meaning of Section 897(c) of the
Code.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF EMERSON AND EMERSUB
The obligations of Emerson and Emersub to consummate the transactions
provided for in this Agreement shall be subject to the satisfaction of each of
the following conditions on or before the Closing Date, subject to the right of
Emerson and Emersub to waive any one or more of such conditions:
5.1 Representations and Warranties of Rollway. The
representations and warranties of Rollway contained in this Agreement shall be
true and correct in all material respects on the date hereof and on the Closing
Date, as if such representations and warranties were made on the Closing Date.
5.2 Performance of this Agreement. Rollway shall have duly
performed or complied in all material respects with all of the covenants and
<PAGE> 149
obligations to be performed or complied with by it under the terms of this
Agreement on or prior to the Closing Date.
5.3 No Material Adverse Change. Since the date hereof, there
shall have been no material adverse change, actual or threatened, in the
Business Condition of Rollway, whether or not covered by insurance, as a result
of any cause whatsoever.
5.4 No Injunction or Action. No preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental agency concerning this Agreement or the
Merger, shall be in effect, or shall have been recommended by the staff of a
governmental agency and approved by such agency, which would make illegal or
otherwise prevent consummation of the Merger.
5.5 Consents. All consents and approvals necessary to ensure that
the Surviving Corporation will continue to have the same full rights with
respect to Rollway's property and assets as existed immediately prior to the
consummation of the transactions contemplated hereby shall have been obtained.
5.6 Compliance with Applicable Law. The requirements of any
applicable Law relating to the consummation of the Merger shall have been duly
complied with.
5.7 Government Approvals. All necessary governmental and
regulatory approvals and requirements in connection with the transactions
contemplated hereby, including, without limitation, expiration of the waiting
period(s) under the H-S-R Act, shall have been received or satisfied.
5.8 Shareholder Approval. The holders of the Common Stock of
Rollway shall have duly approved this Agreement and the Merger in accordance
with the NYL and Rollway's Certificate of Incorporation and By-Laws.
5.9 Registration Statement Effective. The Registration Statement
shall have been declared effective by the Commission and no stop order
suspending the effectiveness thereof shall have been issued or threatened, and
all other clearances or approvals as may be necessary under applicable state
securities or blue sky laws relative to the issuance of the Emerson Shares
pursuant to the Merger shall have been obtained.
5.10 Dissenting Shareholders. Holders of outstanding Rollway
Common Stock representing not less than 95% of the outstanding Rollway Common
Stock shall not have exercised or claimed appraisal or dissenting shareholder
rights with respect to the Merger. Holders of outstanding Rollway Preferred
Shares representing not less than 95% of the outstanding Rollway Preferred
Shares shall not have exercised or claimed appraisal or dissenting shareholder
rights with respect to the Preferred Terms Amendment.
5.11 Certificate of Rollway. Emerson shall have received a
certificate signed by a duly authorized officer of Rollway, dated as of the
Closing Date and subject to no qualification, certifying that the conditions
set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.8 and 5.10 hereof have been fully
satisfied. Such certificate shall be deemed a representation and warranty of
Rollway under this Agreement.
5.12 Opinion of Counsel. Emerson shall have received from Hancock
& Estabrook, LLP, counsel to Rollway, an opinion of such counsel, dated the
Closing Date, substantially in the form of Exhibit 5.12.
<PAGE> 150
5.13 Employment Agreements. Emerson shall have received (i) an
employment agreement duly executed by Karl L. Loessner in the form of
Exhibit 5.13(a), (ii) an employment agreement duly executed by Stephen M.
Bregande in the form of Exhibit 5.13(b), and (iii) a non-competition agreement
duly executed by H. Follett Hodgkins, Jr. in the form of Exhibit 5.13(c).
5.14 Resignations. Emerson shall have received the written
resignation of the officers and directors of Rollway and the Subsidiaries
listed on Schedule 5.14.
5.15 Preferred Terms Amendment. The Preferred Terms Amendment
shall have been duly approved by the holders of the Rollway Preferred Shares or
such Rollway Preferred Shares shall have been properly redeemed by Rollway.
5.16 Rollway Options. All of the Rollway Options shall have been
duly exercised in their entireties in accordance with Section 1.8 hereof.
5.17 Subsidiary Ownership Transfers. Emerson shall have received
all documentation necessary to facilitate the transfer of any ownership
interests in any Subsidiaries held by parties other than Rollway, duly executed
by such parties.
5.18 FCPA Certificates. Rollway shall have delivered to Emerson
certificates in the form of Exhibit 5.18 dated the Closing Date, signed by
H. Follett Hodgkins, Jr., Stephen M. Bregande, Karl L. Loessner and William
Eames.
5.19 Split-Dollar Agreement. H. Follett Hodgkins, Jr. shall have
executed and delivered, or shall have caused to be executed and delivered, all
documents and instruments, and shall have taken or caused to be taken all
actions as Emerson reasonably deems necessary or desirable to (a) terminate his
rights and benefits under that certain split-dollar agreement dated June 18,
1963 by and between him and Rollway with respect to Northwestern Mutual Life
Insurance Policy No. 5470570 and his rights and benefits to said insurance
policy and (b) vest such rights and benefits in the Surviving Corporation.
5.20 Easements and Title Policy. Rollway shall have executed
easement documents in a form reasonable satisfactory to Emerson documenting the
uses of its property at 7600 Morgan Road by the adjoining property owners
listed on Schedule 2.11, and Rollway shall have obtained customary owner's
title insurance with respect to such property.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF ROLLWAY
The obligations of Rollway to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Rollway to waive any one or more of such conditions:
6.1 Representations and Warranties of Emerson and Emersub. The
representations and warranties of Emerson and Emersub contained in this
Agreement shall be true and correct in all material respects on the date hereof
and on the Closing Date, as if such representations and warranties were made on
the Closing Date.
<PAGE> 151
6.2 Performance of this Agreement. Emerson and Emersub shall have
duly performed or complied in all material respects with all of the covenants
and obligations to be performed or complied with by them under the terms of
this Agreement on or prior to the Closing Date.
6.3 No Injunction or Action. No preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental agency concerning this Agreement or the
Merger, shall be in effect, or shall have been recommended by the staff of a
governmental agency and approved by such agency, which would make illegal or
otherwise prevent consummation of the Merger.
6.4 Compliance with Applicable Law. The requirements of any
applicable Law relating to the consummation of the Merger shall have been duly
complied with.
6.5 Governmental Approvals. All necessary governmental and
regulatory approvals and requirements in connection with the transactions
contemplated hereby, including, without limitation, expiration of the waiting
period(s) under the H-S-R Act, shall have been received or satisfied.
6.6 Shareholder Approval. The shareholders of Rollway shall have
duly approved this Agreement and the Merger in accordance with the NYL and
Rollway's Certificate of Incorporation and By-Laws.
6.7 Registration Statement Effective. The Registration Statement
shall have been declared effective by the Commission and no stop order
suspending the effectiveness thereof shall have been issued or threatened, and
all other clearances or approvals as may be necessary under applicable state
securities or blue sky laws relative to the issuance of the Emerson Shares
pursuant to the Merger shall have been obtained.
6.8 Certificate of Emerson and Emersub. Rollway shall have
received a certificate signed by duly authorized officers of Emerson and
Emersub, dated as of the Closing Date and subject to no qualification,
certifying that the conditions set forth in Sections 6.1, 6.2 and 6.3 hereof
have been fully satisfied. Such certificate shall be deemed a representation
and warranty of Emerson and Emersub under this Agreement.
6.9 Opinion of Counsel. Rollway shall have received from Bryan
Cave LLP and Harley M. Smith, counsel to Emerson and Emersub, opinions of such
counsel, dated the Closing Date, substantially in the forms of Exhibits 6.9(a)
and (b).
6.10 Non-Competition Agreement. Rollway shall have received a non-
competition agreement duly executed by Emerson in the form of Exhibit 5.13(c).
6.11 Tax Opinion. Rollway shall not have received any written
notification from Hancock & Estabrook, LLP that its tax opinion in the form of
Exhibit 6.11 has been rescinded; provided, however, if said tax opinion is
rescinded then Emerson, at its option, may employ another law firm (reasonably
acceptable to Rollway) to give such opinion and if such other law firm, within
30 days of being employed by Emerson, shall give to Rollway such legal firm's
tax opinion in the form of Exhibit 6.11, then Rollway shall pay the fees and
expenses of such law firm in connection with such opinion and Rollway shall be
deemed to have waived the condition set forth in this Section 6.11.
<PAGE> 152
ARTICLE VII
INDEMNIFICATION
7.1 Escrow Withdrawals. In the event that Emerson or the
Surviving Corporation, or any of their respective affiliates, shareholders,
directors, officers, successors, permitted assigns, or agents (the "Indemnified
Parties"), incurs, suffers or is subjected to, after the Effective Time, any
claims, losses, damages, liabilities, expenses or costs (including reasonable
legal and other fees and expenses incurred in connection with the enforcement
of this Agreement and taking into account the tax effect thereof) ("Losses")
resulting from or arising out of any breach of or default under Rollway's
representations, warranties, covenants and agreements (including, but not
limited to, Rollway's agreement contained in Section 9.9(b) hereof and as
provided in Sections 4.14 and 7.7 hereof) contained in this Agreement, Emerson
shall be entitled, subject to the terms and conditions of the Escrow Agreement,
to withdraw from the Escrow Funds an amount equal to such Losses and thereby
reduce the amount of the Merger Consideration payable in connection with the
Merger; provided, however, that neither Emerson nor the Surviving Corporation
shall be entitled to withdraw from the Escrow Funds until all Losses for which
payment is being sought exceed $100,000 in the aggregate, but in the event
undisputed Losses exceed $100,000, withdrawals may be made for all such Losses,
including the first $100,000 thereof. The foregoing $100,000 threshold for
indemnification withdrawals shall not apply to indemnification withdrawals for
Losses described in Section 7.7(a).
7.2 Indemnification by Shareholders. By voting to approve the
Merger or tendering certificates representing shares of Rollway Common Stock
for conversion in the Merger, holders of Rollway Common Stock shall be deemed
to have agreed to indemnify the Indemnified Parties on demand against any and
all Losses to the extent Escrow Funds are not available therefor, either
because the Escrow Funds have been withdrawn by Emerson or the Escrow Agreement
has terminated; provided, however, that such indemnification obligations shall
be several and only in proportion to, and shall be limited to, each such
shareholder's portion of the aggregate Merger Consideration. Such shareholders
shall also be deemed to have waived any right of contribution or other similar
right against the Surviving Corporation arising out of Rollway's
representations, warranties, covenants and agreements contained herein and
shall be deemed to have agreed to all other provisions hereof specifically
stated to be an obligation or agreement of such shareholders.
7.3 Survival of Representations and Warranties. Except as
otherwise specifically provided in Section 4.3(b) and this Section 7.3, all
representations and warranties of Rollway made in this Agreement or in any
exhibit, statement, Schedule, certificate, instrument or any document delivered
pursuant hereto shall survive the Closing and shall remain in effect for a
period of eighteen (18) months after the Closing Date and shall thereupon
terminate and be of no further force or effect. The representations and
warranties of Rollway relating to good and marketable title of all of Rollway's
property and assets contained in Section 2.12 shall remain in effect until May
14, 2006 and shall thereupon terminate and be of no further force or effect.
In the case of any representation, warranty and agreement of Rollway contained
in Sections 2.9 or 7.6 hereof, the same shall survive until the later of (a)
the final resolution of any judicial or administrative proceeding involving any
such Tax or (b) expiration of any applicable statute of limitations (including
any suspensions, tollings or extensions thereof). In the case of a
representation or warranty made by any party hereto which is not true when made
and which was made by such party fraudulently or with intent to defraud or
mislead, the same shall survive without limitation as to time. All rights and
remedies of the parties under this Agreement are cumulative and without
<PAGE> 153
prejudice to any other rights or remedies under Law. All representations and
warranties hereunder shall be deemed to be material and relied upon by the
parties with or to whom the same were made, notwithstanding any investigation
or inspection made by or on behalf of such party or parties except as set forth
in Section 7.5 herein.
7.4 Appointment of Representative.
(a) By voting to approve the Merger or tendering certificates
representing shares of Rollway Common Stock for conversion in the Merger, the
holders of Rollway Common Stock (the "Shareholders") shall AUTOMATICALLY BE
DEEMED TO HAVE DESIGNATED HENRY FUST AS THE "REPRESENTATIVE." The
Representative shall have full power to act on behalf of the Shareholders in
the manner specified herein in connection with all matters with respect to
which action by the Representative is contemplated by this Agreement. Emerson
hereby agrees to grant the Representative and the Representative's agents
access in Syracuse, New York to such books, records and other information as
may be reasonably necessary to respond to any indemnification claim. The
Representative shall be entitled to reimbursement from the Shareholders of all
reasonable expenses included in the performance of his duties as Representative
under this Agreement, including, but not limited to the right to employ
financial advisors and other agents to undertake or assist in the assessment
arbitration, litigation, and/or settlement of any such claims; provided,
however, that neither Emerson nor the Surviving Corporation shall have any
obligation or liability for such expenses or payment of any fees of the
Representative. The Representative is expressly authorized to rely upon the
advice of such consultants and agents. THE SHAREHOLDERS SHALL AUTOMATICALLY BE
DEEMED TO HAVE WAIVED ANY RIGHT OR CAUSE OF ACTION FOR ANY ACTION, OF ANY
NATURE WHATSOEVER, TAKEN OR OMITTED FROM BEING TAKEN BY THE REPRESENTATIVE OR
ANY SUCCESSOR REPRESENTATIVE ABSENT A CLEAR SHOWING OF HIS, HER OR ITS GROSS
ERROR OR FRAUD.
(b) The Representative shall take all actions required to be
taken by the Representative under this Agreement and may take any action
contemplated by this Agreement on behalf of the Shareholders. By giving notice
to the Representative in the manner provided by Section 9.4, Emerson shall be
deemed to have given notice to all of the Shareholders and any action taken by
the Representative may be considered by Emerson to be the action of each
Shareholder for whom such action was taken for all purposes of this Agreement.
The Representative's duties shall terminate upon the final distribution of the
Escrow Funds under the Escrow Agreement.
7.5 Limitations on Indemnification. In addition to the
limitations set forth in Section 7.2, Emerson shall not be entitled to
indemnification for Losses arising out of a breach of Rollway's representations
and warranties made herein to the extent the fact or facts constituting such
breach (a) were actually known by Robert M. Levy, coordinator of Emerson's due
diligence for the Rollway transaction, prior to the date hereof and (b) were
not actually known by Rollway or any of its employees, advisors or directors
prior to the date hereof; provided, however, that the Shareholders shall have
the burden of proving both conditions (a) and (b). Further, the parties agree
that the Indemnified Parties shall not be entitled to indemnification hereunder
in excess of $1,000,000 (plus all income earned on such amount while in escrow
under the Escrow Agreement) with respect to Losses incurred as a result of
LRNV's failure to timely report to taxing authorities commission payments to
customers and/or distributors, unless Emerson discovers, prior to
January 1, 1997, reasonably reliable evidence that, in connection with the
commission payment practices of LRNV, LRNV and/or Rollway committed acts that
<PAGE> 154
justify or might justify an extension to 5 years of the statute of limitations
applicable to any tax-reporting or tax-payment statute applicable to such
commission payment practices, in which event the Indemnified Parties'
entitlement to indemnification for such matters shall be limited only to the
aggregate Merger Consideration.
7.6 Tax Indemnification. Subject to Section 7.1, in addition to
any other indemnification granted herein and notwithstanding the absence of any
representation herein, the Shareholders agree to indemnify, defend and hold
harmless Emerson, its affiliates and their respective officers, directors,
employees and agents from and against all loss, liability, including Rollway's
or the Surviving Corporation's liability for its own Taxes or its liability, if
any, for the Taxes of others (for example, by reason of transferee liability or
application of Treas. Reg. Section 1.1502-6), including, but not limited to,
any former Tax Affiliate, or damage or reasonable expense (including but not
limited to reasonable attorneys' fees and expenses) payable with respect to
Taxes claimed or assessed against Rollway or the Surviving Corporation (a) for
any taxable period ending on or before the Closing Date or (b) for any taxable
period resulting from a breach of any of the representations or warranties
contained in Section 2.9 hereof; provided, however, that the Shareholders shall
not be liable for those Taxes which are properly accrued as liabilities on the
Closing Balance Sheet.
7.7 Additional Indemnification. For purposes of this Article VII,
the following shall also be deemed indemnifiable Losses:
(a) any Losses resulting from or arising out of any agreement
or arrangement regarding indemnification of Management Planning, Inc.;
(b) any Losses resulting from or arising out of LRNV's
commission payment practices; and
(c) any Losses resulting from or arising out of items 5 and 6
on Schedule 2.18.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as
follows:
(a) By mutual written consent of the Boards of Directors of
Rollway and Emerson (or officers of such parties authorized by their respective
Boards to terminate this Agreement); or
(b) By either Rollway or Emerson in the event the Merger shall
not have been consummated on or before July 31, 1996, unless the failure to
consummate the Merger is a result of the breach of or default under this
Agreement by such party.
8.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1 hereof, all obligations of the parties hereto shall
terminate without liability of any party hereto to another party hereto, except
(a) as set forth in Section 9.9 hereof, (b) as provided in the Confidentiality
Agreement, and (c) nothing in this Section or elsewhere in this Agreement shall
impair or restrict the rights of any party to any and all remedies at law or in
<PAGE> 155
equity in the event of a breach of or default under this Agreement by another
party.
ARTICLE IX
MISCELLANEOUS
9.1 Assignment; Binding Agreement. Neither this Agreement nor any
rights or obligations of the parties hereto may be assigned by any party
without the prior written consent of the other party hereto. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
to their respective successors and permitted assigns.
9.2 Amendments. This Agreement may be amended with the approval
of the Boards of Directors of the parties hereto (or any officer of any such
party authorized by its Board of Directors to approve such amendment) at any
time before the Closing Date; provided, however, that, after approval of the
Merger by the shareholders of Rollway, no amendment which would materially
adversely affect such shareholders may be made without the further approval of
such shareholders.
9.3 Entire Agreement and Modification. This Agreement, including
the Schedules delivered hereunder, the other agreements and documents delivered
pursuant hereto and the Confidentiality Agreement constitutes the entire
agreement between the parties. No changes of, modifications of, or additions
to this Agreement shall be valid unless the same shall be in writing and signed
by all of the parties hereto.
9.4 Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given and made upon being delivered
either by courier or fax delivery to the party for whom it is intended,
provided that a copy thereof is deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail, bearing
the address shown in this Section for, or such other address as may be
designated in writing hereafter by, such party:
(a) If to Emerson or Emersub:
Emerson Electric Co.
8000 West Florissant, Building AA
St. Louis, Missouri 63136
Attention: Robert M. Levy
Telephone: (314) 553-2000
Facsimile: (314) 553-3851
with a copy to:
Bryan Cave LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2750
Attention: Don G. Lents
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
<PAGE> 156
(b) If to Rollway:
Lipe-Rollway Corporation
Post Office Box 4827
Syracuse, New York 13221
Attention: Stephen M. Bregande
Telephone: (315) 457-6211 ext. 531
Facsimile: (315) 457-2263
with a copy to:
Hancock & Estabrook, LLP
1500 MONY Tower I
Post Office Box 4976
Syracuse, New York 13221-4976
Attention: Donald A. Denton
Telephone: (315) 471-3151
Facsimile: (315) 471-3167
and a copy to:
Hiscock & Barclay, LLP
221 South Warren Street
Syracuse, New York 13202
Attention: Donald Mawhinney, Jr.
Telephone: (315) 422-2131
Facsimile: (315) 472-3059
(c) If to the Representative:
Henry Fust, C.P.A.
Fust, Chambers, Charles & Harfosh LLP
5786 Widewater Parkway
DeWitt, New York 13214
Telephone: (315) 446-3600
Facsimile: (315) 446-3899
with a copy to:
Hancock & Estabrook, LLP
1500 MONY Tower I
Post Office Box 4976
Syracuse, New York 13221-4976
Attention: Donald A. Denton
Telephone: (315) 471-3151
Facsimile: (315) 471-3167
and a copy to:
Hiscock & Barclay, LLP
221 South Warren Street
Syracuse, New York 13202
Attention: Donald Mawhinney, Jr.
Telephone: (315) 422-2131
Facsimile: (315) 472-3059
9.5 Severability. If any provision of this Agreement shall be
determined to be contrary to law and unenforceable by any court of law, the
<PAGE> 157
remaining provisions shall be severable and enforceable in accordance with
their terms to the fullest extent permitted by applicable law.
9.6 Counterparts. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
9.7 Headings; Interpretation. The table of contents and article
and section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of the
Agreement. All parties hereto have participated substantially in the
negotiation and drafting of this Agreement and each party hereby disclaims any
defense or assertion in any litigation or arbitration that any ambiguity herein
should be construed against the draftsman.
9.8 Governing Law, Jurisdiction and Venue.
(a) This Agreement shall be governed by and construed and
interpreted in accordance with the substantive laws of the State of Missouri,
without reference to its principles of choice of law.
(b) The parties agree that any legal action, suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby shall be instituted in a Federal or state court located in the Eastern
District of Missouri or St. Louis County, Missouri, or the Northern District of
New York or Onondaga County, New York, as the case may be, and each party
hereto waives any objection which such party may now or hereafter have to the
laying of venue of any such action, suit or proceeding, and irrevocably submits
to the jurisdiction of any such court in any such action, suit or proceeding.
Any and all service of process and any other notice in any such action, suit or
proceeding shall be effective against such party when transmitted in accordance
with Section 9.4 hereof. Nothing contained herein shall be deemed to affect
the right of any party hereto to serve process in any manner permitted by law.
9.9 Payment of Fees and Expenses.
(a) Emerson and Emersub shall pay all fees and expenses of their
counsel, accountants and other experts and all other expenses incurred by them
incident to the negotiation, preparation and execution of this Agreement, the
Registration Statement and the consummation of the transactions contemplated
hereby, including the costs and fees of filing under the H-S-R Act.
(b) Rollway shall pay (or accrue on its books prior to the
preparation of the Closing Balance Sheet) all fees and expenses of Rollway's
counsel, accountants and other experts and all other expenses (including
Section 6.11 fees and expenses, if applicable) incurred by Rollway incident to
the negotiation, preparation and execution of this Agreement, the Registration
Statement, and the consummation of the transactions contemplated hereby
(collectively, the "Closing Fees"), including, without limitation, the fees and
expenses of any finder's or brokerage fees.
9.10 No Third Party Beneficiaries. Nothing herein shall grant or
create in any person not a party hereto, or any such person's dependents or
heirs, any right to be offered or to continue employment or to receive any
other benefits, and no such party shall be entitled to sue any party to this
Agreement with respect hereto.
<PAGE> 158
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
as of the day and year first above written.
EMERSON ELECTRIC CO.
By: /S/ ROBERT M. LEVY
-------------------------------------
Robert M. Levy
Assistant Vice President-Development
EMERSUB XLI, INC.
By: /S/ ROBERT M. LEVY
-------------------------------------
Robert M. Levy
President
LIPE-ROLLWAY CORPORATION
By: /S/ STEPHEN M. BREGANDE
-------------------------------------
Stephen M. Bregande
President and Chief Operating Officer
<PAGE> 159
INDEX OF DEFINED TERMS
Page
"Merger Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . .119
1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118
1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144
1995 Balance Sheet Date. . . . . . . . . . . . . . . . . . . . . . . . . . .126
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Arbiter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121
Business Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . .126
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . .119
Closing Book Value Benchmark . . . . . . . . . . . . . . . . . . . . . . . .119
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
Closing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .157
Closing Pension Liability. . . . . . . . . . . . . . . . . . . . . . . . . .120
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
Confidentiality Agreements . . . . . . . . . . . . . . . . . . . . . . . . .147
Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133
Delaware Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . .116
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
Emerson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Emerson Share Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . .118
Emerson Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118
Emerson Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Emersub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Environmental Property . . . . . . . . . . . . . . . . . . . . . . . . . . .139
EPA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122
Escrow Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122
Escrow Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122
Estimated Merger Consideration . . . . . . . . . . . . . . . . . . . . . . .119
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .125
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128
Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .134
Gross Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . .116
H-S-R Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Holdback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .152
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . .132
International Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .137
IRCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138
Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132
Letter of Transmittal. . . . . . . . . . . . . . . . . . . . . . . . . . . .117
Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125
<PAGE> 160
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152
LRNV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Net Holdback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121
Notice of Dispute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121
NY Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . .116
NYL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Pension Liability Adjustment . . . . . . . . . . . . . . . . . . . . . . . .119
Pre-Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . .119
Preferred Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . .117
Preferred Terms Amendment. . . . . . . . . . . . . . . . . . . . . . . . . .115
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . .145
Representative
REPRESENTATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153
Representative's Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .121
Rollway. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Rollway Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
Rollway Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
Rollway Option Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
Rollway Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . .115
Rollway Share Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . .118
Rollway Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .123
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Tax Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .126
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128
USG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134
<PAGE> 161
TABLE OF SCHEDULES AND EXHIBITS
Schedules*
- ---------
1.7 Closing Book Value Benchmark
1.9 Closing Balance Sheet Adjustments
1.15 Directors and Officers of the Surviving Corporation
1.16 Settled Issues
2.1 Qualification to do Business
2.2(a) Shareholders
2.2(b) Option Holders
2.3 Subsidiaries
2.4 Consents
2.5 Financial Statements
2.6 Consignment
2.7 Accounts and Notes Receivable
2.8 Undisclosed Liabilities
2.9 Taxes
2.10 Subsequent Events
2.11 Real Property
2.12 Liens on Property Other Than Real Property
2.13(a) Intellectual Property
2.13(b) Intellectual Property
2.14 Licenses
2.15 Contracts and Commitments
2.16(a) Validity of Contracts
2.16(b) Government Contracts
2.17 Customers and Suppliers
2.18 Litigation and Arbitration
2.19 Officers, Directors, Employees and Consultants
2.20 Indebtedness to and from Officers, Directors and Others
2.22 Outside Financial Interests
2.24 Employee Benefit Plans
2.26 Overtime, Back Wages, Vacation and Minimum Wages
2.27 Discrimination, Workers Compensation and Occupational Safety and
Health
2.29 Labor Disputes; Unfair Labor Practices
2.30(a) Current Insurance Policies
2.30(b) Previous Insurance Policies
2.31 Guarantees
2.32 Product Warranties
2.33 Product Liability Claims
2.35 Environmental Matters
2.37 Foreign Assets
2.38 Foreign Operations and Export Control
2.39 Bank Accounts
5.14 Resignations
- ---------------
* All Schedules except Schedules 1.7 and 1.9 are omitted.
<PAGE> 162
Exhibits
- --------
1.2(a) NY Certificate of Merger*
1.2(b) Delaware Certificate of Merger*
1.5 Letter of Transmittal*
1.13 Escrow Agreement
1.14(a) Certificate of Incorporation of Surviving Corporation*
1.14(b) By-Laws of Surviving Corporation*
5.12 Opinion of Hancock & Estabrook, LLP*
5.13(a) Employment Agreement for K. Loessner
5.13(b) Employment Agreement for S. Bregande
5.13(c) Non-Competition Agreement for H.F. Hodgkins, Jr.
5.18 FCPA Certificate*
6.9(a) Opinion of Bryan Cave LLP*
6.9(b) Opinion of Harley M. Smith*
6.11 Tax Opinion*
- ---------------
* Omitted.
<PAGE> 163
<TABLE>
SCHEDULE 1.7
3/29/96 Revised
Consolidated ($000's)
Income Statement Projection
- ---------------------------
<CAPTION>
Nov Dec Jan Feb March April May June July
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 3,950 3,605 3,755 3,925 4,095 3,985 3,995 4,115 3,571
Cost of Sales 2,609 2,217 2,399 2,685 2,818 2,718 2,718 2,870 2,400
Gross Margin 1,341 1,388 1,356 1,240 1,277 1,267 1,277 1,245 1,171
Selling & Admin 821 876 846 850 875 847 847 850 845
Interest 140 142 140 140 142 140 140 140 140
Pretax Income 380 370 370 250 260 280 290 255 186
Balance Sheet Projection
- ------------------------
<CAPTION>
Nov Dec Jan Feb March April May June July
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- ------
Current Assets 26,126 26,577 26,925 27,074 27,124 27,236 27,403 27,632 27,845
Other Assets 1,207 1,207 1,207 1,207 1,207 1,207 1,207 1,198 1,198
Fixed Assets 7,960 7,950 7,890 7,840 7,790 7,790 7,790 7,705 7,805
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Assets 35,293 35,734 36,022 36,121 36,121 36,233 36,400 36,535 36,848
Liabilities
- -----------
Current Liability 18,396 18,631 18,716 18,686 18,556 18,488 18,445 18,764 18,953
Other Liability 9,125 9,060 8,995 8,955 8,915 8,915 8,915 8,807 8,807
Equity 7,772 8,043 8,311 8,480 8,650 8,830 9,040 9,214 9,338
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Liability 35,293 35,734 36,022 36,121 36,121 36,233 36,400 36,785 37,098
- ---------------
<FN>
Note: Does not include any expenses associated with sale of company.
</TABLE>
<PAGE> 164
<TABLE>
SCHEDULE 1.9
ROLLWAY.XLS NET WORTH TEST 3/29/96 5:17 PM
ROLLWAY NET WORTH TEST (1): SCHEDULE 1.9
<CAPTION>
Nov-95 Dec-95 Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96 Jul-96
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVISED PROJECTED NET WORTH
ORIGINAL PROJECTION 7772 8043 8311 8480 8650 8830 9040 9214 9338
REMOVE LEGAL COSTS EXPENSED FOR
ACQUITTED EMPLOYEES 0 0 0 0 0 0 0 0 0
REMOVE DEFERRED TAXES 337 337 337 337 337 337 337 337 337
REMOVE EPA REMEDIATION EXP/ACCRUAL
FROM 12/95 -- CLOSING 0 0 0 0 0 0 0 0 0
REMOVE TRANSLATION ACCOUNT -1250 -1250 -1250 -1250 -1250 -1250 -1250 -1250 -1250
REMOVE NET IMPACT TO EQUITY OF
PENSION ACCOUNTS 1073 1073 1073 1073 1073 1073 1073 1073 1073
------ ------ ------ ------ ------ ------ ------ ------ ------
REVISED PROJECTION 7932 8203 8471 8640 8810 8990 9200 9374 9498
ESTIMATED CLOSING NET WORTH
ROLLWAY REPORTED ACTUAL NET WORTH 6203 6488 6515 6816
TRANSACTION EXPENSES <F2>
REMOVE LEGAL COSTS EXPENSED FOR
ACQUITTED EMPLOYEES <F4> 236 236 236 236 236 236 236 236 236
REMOVE DEFERRED TAXES 354 354 354 354 354 354 354 354 354
REMOVE EPA REMEDIATION EXPENSE/ACCRUAL
FROM 11/95 -- CLOSING <F3> 900 900 900 900 900 900 900 900 900
REDUCE EQUITY FOR TAX @40% TO ROLLWAY
ON TRANSFER OF INSURANCE POLICIES
REMOVE EMPLOYMENT AGREEMENT SEVERANCE
PAYMENTS
REMOVE TRANSLATION ACCOUNT -1152 -1172 -889 -993
REMOVE IMPACT TO EQUITY OF PENSION
ACCOUNTS 778 778 778 778 778 778 778 778 778
------ ------ ------ ------ ------ ------ ------ ------ ------
REVISED ACTUAL NET WORTH 7319 7584 7894 8091
BALANCE DUE EMR UNDER NET WORTH TEST 613 619 577 549
ACTUAL PENSION ACCOUNTS
INTANGIBLE PENSION ASSET 596 596 596 596 596 596 596 596 596
PENSION ACCRUAL -240 -240 -240 -240 -240 -240 -240 -240 -240
LONG TERM PENSION LIABILITY -1134 -1134 -1134 -1134 -1134 -1134 -1134 -1134 -1134
------ ------ ------ ------ ------ ------ ------ ------ ------
NET IMPACT TO EQUITY -778 -778 -778 -778 -778 -778 -778 -778 -778
<PAGE> 165
PROJECTED PENSION ACCOUNTS
INTANGIBLE PENSION ASSET 870 870 870 870 870 870 870 870 870
PENSION ACCRUAL -73 -73 -73 -73 -73 -73 -73 -73 -73
LONG TERM PENSION LIABILITY -1870 -1870 -1870 -1870 -1870 -1870 -1870 -1870 -1870
------ ------ ------ ------ ------ ------ ------ ------ ------
NET IMPACT TO EQUITY -1073 -1073 -1073 -1073 -1073 -1073 -1073 -1073 -1073
- ---------------
<FN>
<F1> ALL ADJUSTMENTS WILL BE TAX-AFFECTED TO THE EXTENT THE ITEMS BEING ADJUSTED WERE TAX-AFFECTED IN THE
PROJECTED OR CLOSING BALANCE SHEETS.
<F2> SUBTRACTED TO THE EXTENT NOT ALREADY REFLECTED IN NET WORTH.
<F3> ACTUAL EPA EXPENDITURES REQUIRE PRIOR APPROVAL BY EMR.
<F4> MATTER WAS SETTLED 3/96 FOR $236K.
</TABLE>
<PAGE> 166
EXHIBIT 1.13
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made and entered
into as of the ____ day of ___________, 1996, by and among EMERSON ELECTRIC
CO., a Missouri corporation ("Emerson"), Henry Fust, as representative (the
"Shareholders' Representative") of the common shareholders (the "Shareholders")
of Lipe-Rollway Corporation, a New York corporation ("Rollway"), and BOATMEN'S
TRUST COMPANY OF ST. LOUIS, a Missouri corporation (the "Escrow Agent").
RECITALS
A. The parties hereto (other than the Escrow Agent) are parties to an
Agreement and Plan of Merger dated as of ________, 1996 (the "Agreement"),
pursuant to which, among other things, the parties thereto agreed, subject to
approval of the Shareholders and certain other conditions, to the merger of a
subsidiary of Emerson into Rollway (the "Merger"), with Rollway surviving the
Merger (the "Surviving Corporation"). Unless indicated otherwise herein,
capitalized terms used herein shall have the same meaning as ascribed thereto
in the Agreement.
B. The conditions to the Merger have been satisfied, and the Merger
is being closed (the "Closing") contemporaneously with the execution of this
Escrow Agreement.
C. Pursuant to the Agreement, at the Closing a certain portion of the
consideration to be issued in connection with the Merger (the "Merger
Consideration") is to be deposited in escrow as security for certain
representations, warranties and covenants of Rollway, subject to the terms and
conditions of the Agreement and this Escrow Agreement.
D. In addition, pursuant to the Agreement, at the Closing a portion
of the Merger Consideration is to be deposited in escrow to fund the fees and
expenses, if any, of the Shareholders' Representative incurred in fulfilling
his duties as Shareholders' Representative, subject to the terms and conditions
of the Agreement and this Escrow Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements expressed herein and in the Agreement, the parties hereto agree as
follows:
AGREEMENTS
1. Appointment of Escrow Agent. The Escrow Agent is hereby appointed
to act as Escrow Agent hereunder and agrees to accept, hold and distribute the
Escrow Funds (as hereinafter defined) in accordance with and subject to the
terms hereof.
2. Deposit of Escrow Funds. Pursuant to the Agreement, Emerson has
deposited a portion of the Merger Consideration equal in value to Two Million
Five Hundred Thousand Dollars ($2,500,000) rounded up to the nearest whole
share (the "Indemnity Escrow Deposit"), with the Escrow Agent, and the Escrow
Agent hereby acknowledges receipt of the Indemnity Escrow Deposit. On the date
hereof, the Indemnity Escrow Deposit is comprised of _____________ shares of
the Common Stock, par value $1.00 per share, of Emerson ("Emerson Stock"),
which has been valued at the Emerson Share Value (as defined in the Agreement).
In addition, pursuant to the Agreement, Emerson has deposited a portion of the
Merger Consideration equal in value to One Hundred Thousand Dollars ($100,000)
<PAGE> 167
rounded up to the nearest whole share (the "Representative Escrow Deposit"),
with the Escrow Agent, and the Escrow Agent hereby acknowledges receipt of the
Representative Escrow Deposit. On the date hereof, the Representative Escrow
Deposit is comprised of _____________ shares of Emerson Stock, which has been
valued at the Emerson Share Value. The Indemnity Escrow Deposit and the
Representative Escrow Deposit are referred to herein collectively as the
"Escrow Deposits." The Escrow Deposits shall be deemed to have been
contributed into escrow hereunder by each Shareholder in proportion to the
portion of the Merger Consideration to which each such Shareholder is entitled
by virtue of the Merger. The Emerson Shares deposited with the Escrow Agent
hereunder (together with any shares or other securities subsequently
distributed in respect of such Emerson Shares, the "Escrow Shares") are and
will be registered in the name of the Escrow Agent for convenience only; the
parties hereto acknowledge that, unless and until the Escrow Shares are
distributed to Emerson or the Shareholders' Representative, as the case may be,
hereunder, the Shareholders are the beneficial owners of the Escrow Shares.
The Escrow Deposits and any earnings realized thereon, including cash, stock
and any other dividends or property (including securities) paid or distributed
in respect of the Escrow Shares, are referred to herein collectively as the
"Indemnity Escrow Funds," in the case of the Indemnity Escrow Deposit, and as
the "Representative Escrow Funds," in the case of the Representative Escrow
Deposit. The Indemnity Escrow Funds and the Representative Escrow Funds are
referred to herein collectively as the "Escrow Funds." The Escrow Agent agrees
to segregate the Escrow Funds and to keep separate records and accounts
regarding each of the Escrow Funds.
3. Dividends; Voting Rights.
3.1 All dividends or other property distributed in respect of the
Escrow Shares, including, without limitation, any shares issued as a result of
stock splits, stock dividends or other recapitalizations, shall be retained in
and become a part of the Escrow Funds upon issuance or payment, as the case may
be.
3.2 The Escrow Shares shall be voted on all matters submitted to the
shareholders of Emerson as the Shareholders' Representative shall direct. In
the absence of direction from the Shareholders' Representative, the Escrow
Shares shall be voted as Emerson shall direct.
4. Investments. The Escrow Agent shall cause the cash portion of the
Escrow Funds from time to time to be invested and reinvested as directed in
writing by the Shareholders' Representative in (a) debt securities for the
payment of which the full faith and credit of the United States of America is
pledged ("U.S. Securities") and repurchase agreements collateralized with U.S.
Securities, (b) money market funds investing exclusively in U. S. Securities,
(c) bonds or notes issued by any state or municipality which are rated by
Moody's or Standard & Poor's in one of the three highest rating categories by
such agencies and for which the interest thereon is excluded from gross income
for federal income tax purposes ("Municipal Obligations"), or (d) money market
funds investing in Municipal Obligations; provided that all such investments
shall mature not later than 91 days from the date of investment or
reinvestment. Absent direction, the Escrow Agent shall invest the cash portion
of the Escrow Funds in the Pilot Short Term U.S. Treasury Fund. The portion of
the Escrow Funds consisting of Escrow Shares shall remain invested in Escrow
Shares. All other earnings, dividends or other property (including securities)
received in connection with the Escrow Funds shall be converted into cash and
invested as provided in this Section 4.
<PAGE> 168
5. Application of Indemnity Escrow Funds to Claims of Emerson.
5.1 In the event Emerson claims that it or the Surviving Corporation
or any of their respective affiliates, shareholders, directors, officers,
successors, permitted assigns, or agents has suffered any Losses (as defined in
Article VII of the Agreement) resulting from or arising out of any breach of or
default under Rollway's representations, warranties, covenants and agreements
in the Agreement, it shall give written notice thereof to the Escrow Agent and
to the Shareholders' Representative. The amount of such claim, together with
interest thereon from the date of Closing at a rate equal to the aggregate rate
of return represented by all income earned on and distributions received in
respect of the Indemnity Escrow Funds during the comparable period, as
certified by the Escrow Agent, shall be paid to Emerson out of the Indemnity
Escrow Funds (allocated between cash and Escrow Shares as described below)
unless the Shareholders' Representative shall contest the right of Emerson to
such payment by delivering to the Escrow Agent and Emerson written notice of
such contest within 20 calendar days after Emerson shall have delivered notice
of its claim(s) to the Escrow Agent and the Shareholders' Representative.
5.2 If, within the 20 day period specified above, the Shareholders'
Representative delivers to the Escrow Agent and Emerson the notice of contest
referred to above, no distribution shall be made to Emerson from the Indemnity
Escrow Funds in respect of the claim(s) for Losses which the Shareholders'
Representative specifically contests in such notice, until such dispute is
settled by agreement or otherwise resolved.
5.3 Payments to Emerson shall be made in amounts of cash and Escrow
Shares in proportion to the amounts of cash and Escrow Shares in the Indemnity
Escrow Funds at the time of such payment. Notwithstanding the preceding
sentence, no fractional Escrow Shares shall be distributed to Emerson; in lieu
of fractional shares, Emerson shall receive cash from the cash portion of the
Indemnity Escrow Funds equal to the Emerson Share Value (as originally
determined under the Agreement) multiplied by the fractional Escrow Share to
which Emerson would otherwise be entitled. For purposes of making payments
under this Section 5.3, Escrow Shares shall be valued at the Emerson Share
Value, as originally determined under the Agreement. Cash and Escrow Shares
distributed to Emerson hereunder shall be charged against the interest in the
Escrow Funds of each of the Shareholders pro rata.
5.4 Should any claim be made by a person not a party to this Escrow
Agreement with respect to any matter for which Losses could be suffered,
Emerson shall promptly give the Shareholders' Representative written notice of
such claim, and the Shareholders' Representative shall thereafter defend or
settle any such claim, at the Shareholders' sole expense, on their behalf and
with counsel of the Shareholders' Representative's choosing. In such defense
or settlement, Emerson shall cooperate and assist the Shareholders'
Representative to the maximum extent reasonably possible and Emerson may
participate therein at its own expense and with counsel of its own choosing.
5.5 If, prior to the final distribution of the Escrow Funds, the
Surviving Corporation, or its successors or assigns, recover: (a) any amounts
paid by Rollway prior to the Merger for the costs to defend Messrs. Wiehl or
Cramp or Ms. Connor in connection with criminal prosecutions brought by The
Department of the Army, or (b) any amounts paid by the Surviving Corporation to
remedy the environmental matters listed on Schedule 1.16 to the Agreement from
insurance proceeds, the total amount of such recoveries shall be added by the
Surviving Corporation to the Escrow Funds.
<PAGE> 169
6. Application of Representative Escrow Funds to Shareholders'
Representative's Fees and Expenses.
6.1 The Shareholders' Representative shall be entitled to payment out
of the Representative Escrow Funds of his and his agents' and advisors' fees
and expenses incurred in connection with the investigation, dispute and/or
settlement of any claim made by Emerson. The Shareholders' Representative
shall present to the Escrow Agent and to Donald Mawhinney, Jr., c/o Hiscock &
Barclay LLP, 221 South Warren Street, Syracuse, New York 13202 ("H&B") a
detailed invoice setting forth the Shareholders' Representative's fees and
expenses. Unless the Escrow Agent receives written notice from H&B contesting
the payment request within 20 business days after the date of the Shareholders'
Representative's invoice, the Escrow Agent shall pay the invoice amount in
accordance with Section 6.2 below. In the event H&B contests the payment
request, the Escrow Agent shall refrain from making payment of any contested
amount until such time as the matter has been settled by agreement or otherwise
resolved, as stated in a written statement of resolution signed by the
Shareholders' Representative and H&B. In no event shall the Shareholders'
Representative be required to perform any services on behalf of the
Shareholders unless and until such time as the Shareholders' Representative is
reasonably assured that adequate funds are available in the Representative
Escrow Fund with which to pay the Shareholders' Representatives' fees and
expenses.
6.2 Payments to the Shareholders' Representative shall be made in
amounts of cash and Escrow Shares in proportion to the amounts of cash and
Escrow Shares in the Representative Escrow Funds at the time of such payment.
Notwithstanding the preceding sentence, no fractional Escrow Shares shall be
distributed to the Shareholders' Representative; in lieu of fractional shares,
the Shareholders' Representative shall receive cash from the cash portion of
the Representative Escrow Funds equal to the value of a share of Emerson Stock
(determined as described in the next sentence) multiplied by the fractional
Escrow Share to which Emerson would otherwise be entitled. For purposes of
making payments under this Section 6.2, each Escrow Share shall be valued at
the closing price of a share of Emerson Stock on the day on which the
Shareholders' Representative makes a claim hereunder for payment (or on the
most recently preceding business day if such claim is not made on a business
day), as reported in "The Wall Street Journal", New York Stock Exchange
Composite Transactions. Cash and Escrow Shares distributed to the
Shareholders' Representative hereunder shall be charged against the interest in
the Representative Escrow Funds of each of the Shareholders pro rata. The
Shareholders' Representative shall in no event be entitled to any portion of
and shall have no claims against the Indemnity Escrow Funds. The Shareholders'
Representative hereby acknowledges the foregoing and agrees that neither
Emerson nor any of its affiliates shall have any liability whatsoever to him
for payment of his or his agents', representatives' or advisors' fees or
expenses incurred hereunder or in connection with the Merger or the Agreement.
7. Distributions to Shareholders.
7.1 Subject to Sections 7.2 and 7.3 below:
(a) As soon as practicable after January 3, 1997, a portion of the
Indemnity Escrow Deposit (valued at the Emerson Share Value) equal to the
lesser of (i) One Million Dollars ($1,000,000), together with all income earned
thereon, less any amounts distributed to Emerson from the Indemnity Escrow
Funds in respect of claims arising from or relating to the commission payment
practices of Lipe-Rollway N.V. ("LRNV"), or (ii) the Indemnity Escrow Funds,
<PAGE> 170
shall be distributed by the Escrow Agent to the Shareholders in accordance with
the Shareholders' respective proportionate contributions to the Escrow
Deposits.
(b) As soon as practicable following the expiration of eighteen
months after the Closing Date (as defined in the Agreement), the Escrow Funds
then remaining in escrow shall be distributed by the Escrow Agent to the
Shareholders in accordance with the Shareholders' respective proportionate
contributions to the Escrow Deposits.
7.2 In the event Emerson discovers, prior to January 1, 1997,
reasonably reliable evidence that, in connection with the commission payment
practices of LRNV, LRNV and/or Rollway committed acts that justify or might
justify an extension to 5 years of the statute of limitations applicable to any
tax-reporting or tax-payment statute applicable to such commission payment
practices, Emerson may deliver a written notice to the Escrow Agent and the
Shareholders' Representative to that effect. Upon receipt of such notice, the
Escrow Agent shall not make the distribution described in paragraph 7.1(a)
above and shall, upon the expiration of eighteen months after the Closing Date,
retain from the distribution described in paragraph 7.1(b) above Escrow Shares
(valued at the Emerson Share Value) equal to the lesser of (a) One Million
Dollars ($1,000,000), together with all income earned thereon, less any amounts
distributed to Emerson under the Escrow Agreement in respect of claims arising
from or relating to the commission payment practices of LRNV, or (b) the
Indemnity Escrow Funds, until January 4, 1999, at which time such retained
Indemnity Escrow Funds, to the extent not distributed to Emerson, shall be
distributed to the Shareholders in accordance with the Shareholders' respective
proportionate contributions to the Escrow Deposits.
7.3 Distributions pursuant to Sections 7.1 and 7.2 shall be subject
to the proviso that if any claim(s) asserted by Emerson and/or the
Shareholders' Representative on or prior to the date of such distribution(s)
shall not have been paid or finally determined to be without merit or the
amount of such claim(s) shall not have been finally determined, a portion of
the Escrow Funds having an aggregate value (determined and allocated between
Escrow Shares and cash as provided in Section 5.3 above) equal to the amount of
such pending claim(s) on such date shall be retained in escrow from the
Indemnity Escrow Funds and/or the Representative Escrow Funds, as the case may
be, until such pending claim(s) shall have been paid or finally determined to
be without merit, whereupon any remaining portion of Escrow Funds shall be
distributed directly to the Shareholders pro rata. Any such distribution shall
be net of any required tax or other withholding or deduction. The parties will
make all reasonable efforts to resolve any claims pending at the time of such
distribution as quickly as possible.
8. Shareholders' Representative; Notices and Written Directions.
8.1 The Shareholders have appointed Henry Fust to be their true and
lawful attorney for all matters in connection with this Escrow Agreement and
the Escrow Funds, including, without limitation, the defense of third party
claims, the acceptance of any claim by Emerson, and the compromise of any
disputes between Emerson and the Shareholders relating to the Escrow Funds or
under this Escrow Agreement. The Shareholders' Representative hereby accepts
such appointment. If for any reason Henry Fust is unable to serve as
Shareholders' Representative, then a partner in the firm of Fust, Chambers,
Charles & Harfosh LLP chosen by such firm shall serve as the substitute
Shareholders' Representative.
<PAGE> 171
8.2 All notices, requests, demands, and other communications required
or permitted under this Escrow Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered either by courier
or fax delivery to the party for whom it is intended, provided that a copy
thereof is deposited, postage prepaid, certified or registered mail, return
receipt requested, in the United States mail, bearing the address shown in this
Section for, or such other address as may be designated in writing hereafter
by, such party:
If to Emerson:
Emerson Electric Co.
8000 West Florissant, Building AA
St. Louis, Missouri 63136
Attention: Robert M. Levy
Telephone: (314) 553-2706
Facsimile: (314) 553-3851
with a copy to:
Bryan Cave
211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2750
Attention: Don G. Lents, Esq.
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
If to the Shareholders' Representative:
Henry Fust
Fust, Chambers, Charles & Harfosh LLP
5786 Widewater Parkway
DeWitt, New York 13214
Telephone: (315) 446-3600
Facsimile: (315) 446-3899
with a copy to:
Hiscock & Barclay LLP
221 South Warren Street
Syracuse, New York 13202
Attention: Donald Mawhinney, Jr., Esq.
Telephone: (315) 422-2131
Facsimile: (315) 472-3059
If to the Escrow Agent:
Boatmen's Trust Company of St. Louis
510 Locust Street
P.O. Box 14737
St. Louis, Missouri 63178
Attention: Corporate Trust Department
Telephone: (314) 466-2461
Facsimile: (314) 466-2469
9. Transfer of Interests. The interests of the Shareholders in the
Escrow Funds and the rights and obligations of the parties hereto hereunder may
not be transferred except by will, the laws of descent and distribution, the
<PAGE> 172
provisions of any existing applicable trust instrument or by other operation of
law, and will not be represented by any certificate or instrument. The
Shareholders shall not be entitled to withdraw the Escrow Funds except as
provided hereunder or to substitute any other property therefor, or to pledge
or encumber their interests hereunder.
10. Provisions Concerning the Escrow Agent.
10.1 The duties of Escrow Agent shall be as expressed herein and
the Escrow Agent shall have no implied duties nor shall the permissive right or
power to take any action be construed as a duty to take such action under any
circumstances and it shall not be liable except in the event of its gross
negligence or willful misconduct.
10.2 The fees, expenses and advancements of the Escrow Agent shall
be paid out of the Escrow Funds. The Escrow Agent need not take any action
under the Escrow Agreement which may involve it in any expense or liability
until indemnified to its satisfaction for any expense or liability it
reasonably believes it may incur.
10.3 Any recitals contained herein shall be deemed to be those of
the parties hereto other than the Escrow Agent.
10.4 The Escrow Agent shall not be required to give any bond or
surety or report to any Court despite any statute, custom or rule to the
contrary.
10.5 The Escrow Agent shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram, or other
paper or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons.
10.6 The Escrow Agent may execute any of the duties under this
Escrow Agreement by or through agents or receivers.
10.7 The Escrow Agent shall not be required to take notice or be
deemed to have notice of any default or other fact or event under the Agreement
unless the Escrow Agent shall be specifically notified in writing of such
default, fact or event.
10.8 The Escrow Agent may at any time resign from the position
created in the Escrow Agreement by giving thirty (30) days written notice by
registered or certified mail to Emerson and the Shareholders' Representative
and such resignation shall take effect at the end of such thirty days or upon
earlier appointment of a successor.
10.9 In the event the Escrow Agent becomes involved in litigation
by reason hereof, it is hereby authorized to deposit with the Clerk of the
Court in which the litigation is pending any and all funds, securities, or
other property held by it pursuant hereto, less its fees, expenses and
advances, and thereupon shall stand fully relieved and discharged of any
further duties hereunder. Also, in the event the Escrow Agent is threatened
with litigation by reason hereof, it is hereby authorized to implead all
interested parties in any court of competent jurisdiction and to deposit with
the Clerk of such Court any such funds, securities, or other property held by
it pursuant hereto, less its fees, expenses and advances, and thereupon shall
stand fully relieved and discharged of any further duties hereunder.
<PAGE> 173
10.10 The Escrow Agent may engage legal counsel, who may be counsel
for any party to the Escrow Agreement, and shall not be liable for any act or
omission taken or suffered pursuant to the opinion of such counsel.
10.11 Unless specifically required by the terms of the Escrow
Agreement, the Escrow Agent need not take notice of or enforce any other
document or relationship, including, without limiting the generality of the
foregoing, any contract, settlement, arrangement, plan, assignment, pledge,
release, decree or the like, but its duties shall be solely as set out in the
Escrow Agreement.
10.12 The parties to the Escrow Agreement (other than the Escrow
Agent) hereby agree, jointly and severally, to indemnify and save harmless the
Escrow Agent from and against any loss, liability or expense reasonably
incurred, without negligence or bad faith on its part, arising out of or in
connection with the Escrow Agreement, including the expense of defending itself
against any claim or liability in the premises. This indemnity agreement shall
survive the termination of the Escrow Agreement.
10.13 Emerson and the Shareholders' Representative together may
terminate the appointment of the Escrow Agent hereunder upon written notice
specifying the date upon which such termination shall take effect. In the
event of such termination, Emerson and the Shareholders' Representative shall
before the date of such termination jointly appoint a successor Escrow Agent,
and shall deliver the Escrow Funds to such successor Escrow Agent. Upon
receipt of the Escrow Funds, the successor Escrow Agent shall be bound by all
of the provisions hereof.
10.14 The Escrow Agent shall file 1099-INT and/or 1099-DIV forms with
respect to income earned on the Escrow Funds.
11. Venue; Jurisdiction; Litigation Costs. The parties agree that any
legal action, suit or proceeding arising out of or relating to this Escrow
Agreement or the transactions contemplated hereby shall be instituted in a
Federal or state court located in the Eastern District of Missouri or St. Louis
County, as the case may be, which shall be the exclusive jurisdiction and venue
of said legal proceedings, and each party hereto waives any objection which
such party may now or hereafter have to the laying of venue of any such action,
suit or proceeding, and irrevocably submits to the jurisdiction of any such
court in any such action, suit or proceeding. Any and all service of process
and any other notice in any such action, suit or proceeding shall be effective
against such party when transmitted in accordance with Section 8.2 hereof.
Nothing contained herein shall be deemed to affect the right of any party
hereto to serve process in any manner permitted by law. In the event of any
such legal action, suit or proceeding, the non-prevailing party shall pay the
fees and expenses of the prevailing party incurred in connection with such
legal action, suit or proceeding, including reasonable attorneys' fees and
expenses.
12. Counterparts. Counterpart copies of this Escrow Agreement may be
signed by all parties and signature pages exchanged by telecopier. The parties
intend that counterpart copies signed and exchanged as provided in the
preceding sentence shall be fully binding. Counterpart originals of this
Escrow Agreement shall be exchanged by U.S. mail or express service at the
earliest reasonable date following the exchange of signature pages by
telecopier.
<PAGE> 174
13. Governing Law. This Escrow Agreement shall be governed by the
internal law (ignoring principles of conflicts of laws) of the State of
Missouri. All deliveries under this Escrow Agreement shall be made by and to
the parties hereto (or their lawfully appointed attorney-in-fact) in the United
States.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date first set forth above.
EMERSON ELECTRIC CO.
By:
-------------------------------------
Robert M. Levy
Assistant Vice President -
Development
-----------------------------------------
Henry Fust
BOATMEN'S TRUST COMPANY OF ST. LOUIS
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE> 175
EXHIBIT 5.13(a)
EMPLOYMENT CONTRACT
THIS ______ day of ______________, 1996, by and between LIPE-ROLLWAY N.V.
having its registered office at B-2630 Aartselaar, Kontichsestaenweg 63,
(hereinafter referred to as the "Company"), and KARL L. LOESSNER, domiciled at
Hainbuchenweg 10.5100 Aachen, West Germany, (hereinafter referred to as the
"Employee").
IT HAS BEEN AGREED UPON AS FOLLOWS:
1 The Employee has been employed by the Company since December 1, 1976, and
in the capacity of Managing Director commencing on July 13, 1983.
2 The Employee shall be employed for an indefinite period of time, during
which time either party may terminate the employment upon notice as
provided for under Belgian Labor law. Furthermore, (or, if as a result of
making such payment the Company shall not be required by law to make the
payment referred to above, in the alternative), to the extent that the
Company shall be obliged by law to do so, the Company shall pay to the
Employee in such circumstances, an indemnity equal to the remuneration that
he would obtain if German and not Belgian law were applied to the
termination of his contract of employment.
3 Unless terminated beforehand, this Agreement shall terminate when the
Employee has reached the pension age, as determined by law, provided that a
notice of termination of six months is given the Employee.
4 The Employee shall be paid the gross monthly salary of 20,833 Deutsch Marks
(for a gross annual compensation of 250,000 Deutsch Marks), which amount
may be increased from time to time by action of the Company. Any bonus
payment or other exceptional payment made by the Company in addition to the
Employee's regular agreed salary shall not be deemed part of said salary,
and nothing in this Agreement shall be construed as obligating the company
to repeat such bonus or other exceptional payments in subsequent years. It
is further agreed that the nature of the employment is such, involving a
position of trust and delegation of authority, that no claim for additional
compensation should be made even though normal working hours are exceeded
as the Company's business may require.
5 This Agreement shall be considered undertaken and to be performed at the
Company's office at B-2620 Aartselaar, Kontichsestaenweg 63, and at Lipe-
Rollway Deutschland GMBH, Postiach 8107.519 Stolberg 8, West Germany.
6 The Employee shall be reimbursed for all reasonable business expenses
incurred in the fulfillment of his duties under this Agreement. The
Employee shall furnish the Company receipts or other documents supporting
such expenses as may be requested by the Company.
7 The Employee shall have a yearly vacation, as fixed by law, to be taken at
a time which shall be fixed in agreement with the Company.
8 The Employee expressly agrees with the following points:
(a) All notes, memoranda, records, lists of customers and suppliers and
employees, correspondence, documents, computer and other discs and
tapes, data listings, codes, designs and drawings and other documents
and material whatsoever (whether made or created by the Employee or
<PAGE> 176
otherwise) relating to the business of the Company or any Group
Company (and any copies of the same):
(i) shall be and remain the property of the Company or the
relevant Group Company; and
(ii) shall be handed over by the Employee to the Company or to the
relevant Group Company on demand and in any event on the
termination of the Employment.
(b) All knowledge or information which the Company now has or shall
hereafter acquire respecting any confidential or secret goods,
devices, processes, structures, and/or methods, developed or being
developed, made, used, or sold by the Company or any Group Company
shall at all times and for all purposes be carried and held by the
Employee in a fiduciary capacity and solely for the benefit of the
company or the relevant Group Company.
(c) The Employee shall, during the continuance of this Agreement, devote
his whole time to and diligently and faithfully employ himself in and
about the Company's business and shall conduct the same to the
greatest advantage of the Company.
(d) The Employee shall not, during the continuance of this Agreement,
directly or indirectly, alone or as a partner, officer, director, or a
majority stockholder of any other company, promote or be connected
with the business or products of any other manufacturer or engage in
any other business whatsoever without first obtaining the written
consent of the Board of Directors of the Company.
In this clause 8, and in clause 9 below, "Group Company" means Emerson
Power Transmission Corp. and any subsidiary of Emerson Power Transmission
Corp. now or in the future.
9 The Employee shall neither during the continuance of his employment under
this Agreement (except in the proper performance of his duties) nor at any
time (without limit) after the termination of such employment and/or this
Agreement:
(a) divulge or communicate to any person, company, business entity or
other organisation;
(b) use for his own purposes or for any purposes other than those of the
Company or any Group Company; or
(c) through any failure to exercise due care and diligence, cause any
unauthorised disclosure of
any trade secrets or Confidential information relating to the Company or
any Group Company, but so that these restrictions shall cease to apply to
any information which shall become available to the public generally
otherwise than through the default of the Employee.
In this clause 9, "Confidential Information" shall mean details of
suppliers and their terms of business, details of customers and their
requirements, the prices charged to and terms of business with customers,
marketing plans and sales forecasts, financial information, results and
forecasts (save to the extent that these are included in published audited
<PAGE> 177
accounts), any proposals relating to the acquisition or disposal of a
company or business or any part thereof or to any proposed expansion or
contraction of activities, details of employees and officers and of the
remuneration and other benefits paid to them, information relating to
research activities, inventions, secret processes, designs, formulae and
product lines, any information which the Employee is told is confidential
and any information which has been given to the Company or any Group
Company in confidence by customers, suppliers or other persons.
10 Given the fact that the Company is involved in international business
transactions and given the fact that the Employee in his function of
Managing Director is engaged in work that directly or indirectly enables
him to become acquainted with the special practices followed by the Company
and whose use outside the Company could be detrimental to the interests of
the Company, the Company wishes to protect itself from any such competition
by the Employee upon the termination of the employment of the latter, and
to do this in accordance with the provisions of article 86, paragraph 2 of
the Parliamentary Act of July 3, 1978 concerning contracts of employment
and the National Inter-industry wide collective bargaining agreement
adapting the National Inter-industry wide collective bargaining agreement
no. 1 of February 12, 1970 concerning clauses in derogation of the non
competition provisions. December 21, 1978 (No. Ibis), rendered generally
binding by Royal Decree.
The Employee agrees not to engage in similar activities as the ones he is
performing in furtherance of his Employment Agreement including (without
limitation) himself or by running his own company or by entering the
service of a competitor to the Company, in each case for a period of two
years after the termination of the present Employment agreement.
Given the Employee's activities in Belgium, Germany and Romania, the non-
competition obligation holds for the entire territory of each of Germany,
Belgium and Romania.
The Company will notify the Employee of its intent to invoke the
application of the non-competition clause within a period of 15 days
following the actual termination of the Employment agreement. In case the
Employment agreement is terminated by the Company with a period of notice,
the Company will notify the Employee of its intent to invoke the non-
competition provisions of this clause 10 at the time the notice is given.
The clause 10 will also be applicable in circumstances where the Company
terminates the Employment agreement without a serious reason. The non-
competition provisions of this clause 10 will not be applicable in
circumstances where the Employee terminates the Employment agreement for a
serious reason on behalf of the Employer. The term "serious reason" is to
be understood as the concept used in article 35 of the Act of July 3, 1978
concerning contracts of employment.
Whether or not the Company invokes the application of the non-competition
provisions of this clause 10, the Company will pay the Employee a lump sum
indemnity equal to half of the remuneration which would (but for the
termination of the Employee's employment) have been payable to the Employee
under this Employment agreement during the period that corresponds with the
two year period of validity of the non-competition provisions contained in
this clause 10. The basis for the calculation of this amount shall be the
gross remuneration paid to the Employee during the month preceding the day
the Employment agreement is terminated.
<PAGE> 178
Without prejudice to the non-competition provisions contained in this
clause 10, and without prejudice to any rights which the Company may have
in such circumstances (including, without limitation, any right the Company
may have to enforce the non-competition provisions of this clause 10 or to
seek a higher amount of damages from the court), should the Employee fail
to observe the non-competition provisions contained in this clause 10, he
shall reimburse the Company the amount he may have received in furtherance
of the non-competition provisions.
11 The Employee shall make voluntarily and without remuneration full and
prompt disclosure to the Company of any and all inventions or discoveries
pertaining to the subject matter of his employment or usable by the Company
in its business, whether such inventions or discoveries shall have been
made or discovered by the Employee alone or jointly with others and whether
on the Company's time or the Employee's time, during the term of his
employment and for one year thereafter.
12 Any provision or provisions of this Agreement which in any way contravene
the law shall, to the extent of such contravention of law, be deemed
separable and shall not affect any other provision or provisions of this
Agreement.
13 This Agreement sets forth the entire agreement between the parties and
merges all discussions between them and annuls and replaces every other
contract or agreement which may hitherto have existed between the parties
as to the subject matter hereof.
14 This Agreement shall in its entirely be construed in accordance with, and
shall be subject to, the laws of the Kingdom of Belgium.
This Agreement has been executed in duplicate the day and year first above-
mentioned, and each party acknowledges having received a copy thereof.
LIPE-ROLLWAY N.V.
By:
----------------------------------
Director
By:
----------------------------------
Director
- --------------------------------------
KARL L. LOESSNER
<PAGE> 179
EXHIBIT 5.13(b)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this ____ day
of ________, 1996, by and between Emerson Electric Co., a Missouri corporation
(the "Company"), and Stephen M. Bregande ("Employee").
WITNESSETH:
WHEREAS, contemporaneously with the execution of this Employment
Agreement, the Company is acquiring Lipe-Rollway Corporation and the execution
of this Employment Agreement is a condition precedent and material inducement
for the Company to acquire Lipe-Rollway Corporation;
WHEREAS, Employee has been serving in a managerial capacity with Lipe-
Rollway Corporation as President and Chief Operating Officer; and
WHEREAS, the Company desires to obtain the benefit of the services of
Employee and Employee is willing to render such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth, it is hereby agreed as follows:
1. Employment. Employee is hereby employed by the Company and
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. Term of Employment. The term of this Employment Agreement shall
commence on the date first set forth above, and shall end upon the expiration
of the twelfth (12th) month following the date hereof (the "Employment
Period"), unless sooner terminated as provided in Section 5 hereof.
3. Duties. Employee shall serve in a managerial capacity with the
Company or the business of the Company as presently conducted and as said
business may evolve, during the Employment Period, on a full-time basis.
During the Employment Period, Employee shall devote such time, attention,
skill, energy and efforts as may be necessary for the faithful performance of
duties assigned to Employee. Employee shall have the title of President of
Lipe-Rollway Corporation and be based in Syracuse, New York.
4. Compensation. During the Employment Period, the Company shall pay
Employee as compensation for his services an annual base salary of not less
than Two Hundred Thousand Dollars ($200,000), payable in accordance with the
Company's usual payment practices, and the Employee's base salary shall be
eligible for review consistent with practices of the Company in effect from
time to time during the Employment Period. Employee shall be eligible to
participate in an annual bonus program offering an incentive opportunity
ranging from $0 to $120,000. The incentive program and the actual payment of
the bonus will be based on a $60,000 targeted payout for achieving the base
financial forecast and a $120,000 targeted payout for achieving the Emerson
Board plan with Emerson synergies. Employee may also be eligible for such
other perquisites as may from time to time be awarded to Employee by the
Company payable at such times and in such amounts as the Company, in its sole
discretion, may determine. All such compensation shall be subject to customary
withholding taxes and other employment taxes as required with respect thereto.
The Company shall provide Employee with a leased automobile and shall pay
<PAGE> 180
Employee an amount of cash sufficient to pay Employee's income taxes on the
value of such leased automobile. Employee shall receive a telephone credit
card and shall be reimbursed, upon receipt of appropriate supporting
documentation, for reasonable company-related car phone, travel and
entertainment expenses. Employee shall also qualify for all rights and
benefits for which Employee may be eligible under any benefit plans including
group life, medical, health, dental and/or disability insurance or other
benefits which are provided for employees generally at his then current
location of employment.
5. Termination of Employment. Prior to the expiration of the
Employment Period, this Employment Agreement and Employee's employment may be
terminated by the Company as follows:
(a) Upon thirty (30) day's prior written notice to Employee in the
event Employee, by reason of physical or mental disability, shall be unable to
perform a material portion of the services required of Employee hereunder for a
continuous one hundred eighty (180) day period. In the event of a disagreement
concerning the existence of any such disability, the matter shall be resolved
by a disinterested licensed physician chosen by the Company.
(b) For good cause, which for the purposes of this Employment
Agreement shall mean:
(1) the continued failure of Employee to perform material
duties assigned to Employee after a written demand by the Company
identifying the manner in which it believes Employee has not performed his
duties and Employee's subsequent failure to cure the identified problem
within a reasonable time; or
(2) a material breach of this Employment Agreement by
Employee; or
(3) the Employee's commission of fraud or dishonesty against
the Company or willful conduct involving a third party which significantly
impairs the reputation of, or harms, the Company, its subsidiaries or
affiliates.
(c) For any other cause or without cause, upon not less than
thirty (30) days' prior written notice to Employee.
Upon termination of this Employment Agreement, all rights and
obligations of the parties hereunder shall cease, except: (1) if this
Employment Agreement is terminated pursuant to Subsection (c) above, Employee
shall thereafter receive his annual base salary for twelve months after
termination of employment, to be offset by any payments and benefits received
by Employee under any long-term disability plan, severance arrangement,
contract or plan; and (2) termination of employment pursuant to this Section 5
or otherwise shall not terminate or otherwise affect the rights and obligations
of the parties pursuant to Sections 6 through 10 hereof.
6. Confidential Information. Employee, during his employment by the
Company and thereafter will not, directly or indirectly (without the Company's
prior written consent), use for himself or use for, or disclose to, any party
other than the Company, or any subsidiary or affiliate of the Company, any
Confidential Information, as hereafter defined, including but not limited to
the following:
<PAGE> 181
(a) the business or products of the Company, or any of its
subsidiaries or affiliates, or
(b) the costs, uses or applications of, or the customers or
suppliers (and information concerning transactions and prospective
transactions therewith) for products made, assembled, produced or sold by
the Company, or any subsidiary or affiliate thereof, or
(c) any apparatus, method, system, manufacturing or other process
or technology at any time used, developed or investigated by or for the
Company, or any subsidiary or affiliate thereof, whether or not invented,
developed, acquired, discovered or investigated by Employee.
As used herein, "Confidential Information" shall include, but shall not be
limited to, information, in whatever form kept or recorded, pertaining to:
inventions, discoveries, know-how, ideas, computer programs, designs,
algorithms, processes and structures; product information; research and
development information; client information; financial information; business
processes and methodology; and any other technical and business information of
the Company, its subsidiaries and affiliates which is of a confidential, trade
secret and/or proprietary character.
Employee understands that Confidential Information may or may not be
labeled as "confidential" and will treat all information as confidential unless
otherwise informed by Employee's supervisor.
At the termination of the Employment Period, or at any other time the
Company or any subsidiary or affiliate thereof may request, Employee shall
promptly deliver to the Company all documents and other materials containing
all Confidential Information in physical form, including but not limited to
writings, designs, documents, records, memoranda, photographs, sound
recordings, tapes and disks containing software, computer source code listings,
routines, file layouts, record layouts, system design information, models,
manuals, documentation, notes and any material concerning costs, uses, methods,
designs, applications, purchasers of or experience with products made or sold
by the Company, its affiliates or subsidiaries or any secret or confidential
product, apparatus or process manufactured, used, developed, acquired or
investigated by Employee or by the Company, its subsidiaries or affiliates.
Employee further acknowledges and agrees that the damages resulting
from any breach of the foregoing covenants may be intangible in whole or in
part and that the Company is entitled to seek specific enforcement, injunctive
relief and other equitable remedies in addition to monetary damages and legal
remedies, and Employee hereby stipulates to the entering of such injunctive
relief enforcing the provisions of this Section. Employee hereby waives any
bond or similar requirements for granting such injunctive relief.
7. Inventions, Etc.
(a) Ownership. Employee hereby assigns to the Company all of
Employee's rights, title, and interest (including but not limited to all
patent, trademark, copyright and trade secret rights) in and to all Work
Product (as hereinafter defined) prepared by Employee, made or conceived in
whole or in part by Employee within the scope of Employee's employment by the
Company or within six (6) months thereafter, or that relate directly to or
involve the use of Confidential Information. Employee further acknowledges and
agrees that all copyrightable Work Product prepared by Employee within the
<PAGE> 182
scope of Employee's employment with the Company are "works made for hire" and,
consequently, that the Company owns all copyrights thereto.
(b) Disclosure. Employee will promptly disclose to the Company
all Work Product developed by Employee within the scope of Employee's
employment with the Company or within six (6) months thereafter, including all
inventions, discoveries, improvements and trade secrets which are or have been
made or conceived by Employee, individually or jointly with others, during his
employment by the Company and within six (6) months thereafter, or during
Employee's prior period(s) of employment with the Company, and which relate to,
result from, or arise in any way out of any work done for the Company, or any
information or assistance granted by the Company. All such Work Product is and
shall forthwith become the property of the Company, whether or not patentable
or copyrightable. Employee will execute promptly upon request any documents or
instruments at any time deemed necessary or proper by the Company in order to
formally convey and transfer to the Company title to such Work Product, or to
confirm the Company's title therein, and in order to enable the Company to
obtain and enforce United States and foreign Letters Patent, Trademarks and
Copyrights thereon. Employee will perform his obligations under this Section 7
without further compensation, except for reimbursement of reasonable out-of-
pocket expenses incurred at the request of the Company. If Employee refuses,
following ten (10) days' prior written notice from the Company, or is unable
due to disability, incapacity or death, to execute any such documents relating
to Work Product, Employee and his heirs, successors, estate and personal
representative hereby appoint each officer and director of the Company to be
his Attorney-in-Fact to so execute such documents on behalf of Employee. This
is a durable Power of Attorney, the authority of which shall not terminate if
Employee becomes disabled or incapacitated. This agency is coupled with an
interest and is therefore irrevocable without the prior written consent of the
Company.
(c) Preexisting Work Product Not Assigned. Employee has specified
on the signature page of this Employment Agreement all preexisting Work
Product, not assigned to the Company, and created prior to Employee's
employment by the Company in which Employee has any right, title, or interest.
If no such specification is made on the signature page, or if Employee writes
"none" or similar designation thereon, Employee shall be conclusively deemed
not to have any such Work Product, and all Work Product shall be property of
the Company hereunder.
(d) Original Development. Employee further represents and
warrants to the Company that all work that Employee performs for or has
performed for the Company, and all Work Product that Employee produces, which
is defined to include but is not limited to literary works, software,
documentation, memoranda, musical works, photographs, artwork, sound
recordings, audiovisual works, ideas, designs, inventions, discoveries,
improvements, trade secrets, processes, algorithms, and so forth ("Work
Product"), will not knowingly infringe upon or violate any patent, copyright,
trade secret, or other property right of any of Employee's former employers or
of any other third party. Employee will not disclose to the Company, or use in
any of Employee's Work Product, any confidential or proprietary information
belonging to others, unless both the owner thereof and the Company have
consented.
Employee further acknowledges and agrees that the damages resulting
from any breach of the foregoing covenants may be intangible in whole or in
part and that the Company is entitled to seek specific enforcement, injunctive
relief and other equitable remedies in addition to monetary damages and legal
<PAGE> 183
remedies, and Employee hereby stipulates to the entering of such injunctive
relief enforcing the provisions of this Section. Employee hereby waives any
bond or similar requirements for granting such injunctive relief.
8. Non-Competition Agreement. Employee agrees that during his
employment by the Company and for the period beginning on the date hereof and
ending on the latest of (i) expiration of the Employment Period, (ii) one (1)
year following termination of Employee's employment by the Company, or (iii)
one (1) year following the date of the last of any post-termination payments
made to Employee pursuant to Section 5 hereof, Employee will not, as an
individual or as a partner, employee, agent, advisor, consultant or in any
other capacity of or to any person, firm, corporation or other entity, directly
or indirectly, (a) carry on any business, or become involved in any business
activity, competitive with the business of Lipe-Rollway Corporation, the
business of Emerson Power Transmission or any business owned or controlled by
the Company that is similar to the business of Emerson Power Transmission, each
as presently conducted and as said businesses may evolve in the ordinary course
(the "Business") during the Employment Period, anywhere in the World, (b) hire,
or assist anyone else to hire, any employee of the Company or seek to persuade,
or assist anyone else to seek to persuade, any employee of the Company to
discontinue employment with the Company, or (c) induce or attempt to induce, or
assist anyone else to induce or attempt to induce, any customer of the Company
to reduce or discontinue its business with the Company or disclose to anyone
else the name and/or requirements of any such customer.
Employee expressly agrees that the covenants set forth in this
Section 8 are reasonable in light of the scope of the Business heretofore
conducted by the Company and that the execution by Employee of this Employment
Agreement is a material inducement for the Company's purchase of Employee's
shares of Lipe-Rollway Corporation. If any court or tribunal of competent
jurisdiction shall refuse to enforce the foregoing covenants because the time
limit applicable thereto is deemed unreasonable, it is expressly understood and
agreed that such covenant shall not be void, but that for the purpose of such
proceedings and in such jurisdiction, such time limitation shall be deemed
reduced to the extent necessary to permit enforcement of covenant. If any
court or tribunal of competent jurisdiction shall refuse to enforce the
foregoing covenants because they are more extensive (whether as to geographic
area, scope of business or otherwise) than is deemed reasonable, it is
expressly understood and agreed between the parties hereto that such covenant
shall not be void, but that for the purpose of such proceedings and in such
jurisdiction, the restrictions contained herein (whether as to geographic area,
scope of business or otherwise) shall be deemed reduced to the extent necessary
to permit enforcement of the covenant.
Employee further acknowledges and agrees that the damages resulting
from any breach of the foregoing covenants may be intangible in whole or in
part and that the Company is entitled to seek specific enforcement, injunctive
relief and other equitable remedies in addition to monetary damages and legal
remedies, and Employee hereby stipulates to the entering of such injunctive
relief prohibiting Employee from competing with the Company in breach of such
covenants. Employee hereby waives any bond or similar requirements for
granting such injunctive relief.
9. Non-Waiver of Rights. The failure to enforce at any time any of
the provisions of this Employment Agreement or to require at any time
performance by the other party of any of the provisions hereof shall in no way
be construed to be a waiver of such provisions or to affect either the validity
of this Employment Agreement, or any part hereof, or the right of either party
<PAGE> 184
thereafter to enforce each and every provision in accordance with its terms.
10. Assignments. This Employment Agreement shall be freely assignable
by the Company and shall inure to the benefit of, and be binding upon, the
Company, its successors and assigns and/or any other corporate entity which
shall succeed to the business presently being operated by the Company, but,
being a contract for personal services, neither this Employment Agreement nor
any rights hereunder are assignable by Employee.
11. Governing Law. This Employment Agreement shall be interpreted in
accordance with and governed by the laws of the State of Missouri.
12. Amendments. No modification, amendment or waiver of any of the
provisions of this Employment Agreement shall be effective unless in writing
and signed by the parties hereto.
13. Notices. Any notices to be given by either party hereunder shall
be in writing and shall be deemed to have been duly given if delivered or
mailed, certified or registered mail, postage prepaid, as follows: to the
Company at Emerson Electric Co., 8000 W. Florissant Avenue, St. Louis, Missouri
63136, Attention: Cynthia Heath; and to Employee at ____________________; or
to such other address as may have been furnished to the other party in writing.
14. Entire Agreement. This Employment Agreement supersedes any and
all prior employment and similar agreements, written and/or oral, between the
Company and Employee, and specifically supersedes and terminates the Employment
Agreement dated as of February 14, 1994 and amended as of September 20, 1994
between Employee and Lipe-Rollway Corporation and Employee hereby waives and
releases all rights and claims thereunder or with respect thereto, including,
without limitation, any entitlement to payments upon a change in control of
Lipe-Rollway Corporation.
COMPANY
EMERSON ELECTRIC CO.
By:
-------------------------------------
Name:
-----------------------------
Title:
-----------------------------
EMPLOYEE
-----------------------------------------
Stephen M. Bregande
PREEXISTING WORK PRODUCT
- ----------------------------------
- ----------------------------------
- ----------------------------------
<PAGE> 185
EXHIBIT 5.13(c)
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into as of this
____ day of ________, 1996, by and between Emerson Electric Co., a Missouri
corporation ("Emerson"), and H.F. Hodgkins, Jr. ("Hodgkins").
WITNESSETH:
WHEREAS, contemporaneously with the execution of this Non-Competition
Agreement, Emerson is acquiring Lipe-Rollway Corporation, a New York
Corporation ("Rollway"), by merger (the "Merger"), and the execution of this
Non-Competition Agreement is a condition precedent and material inducement for
Emerson to acquire Rollway;
WHEREAS, Rollway is engaged in the transaction of business primarily
throughout the United States and Europe and could conceivably expand its
operations to include more substantial distribution of its products elsewhere
in the world;
WHEREAS, Hodgkins has been serving as Chairman of the Board and Chief
Executive Officer of Rollway and was a major shareholder of Rollway, thus
benefitting from the Merger, and has resigned his positions with Rollway
effective upon consummation of the Merger; and
WHEREAS, in conjunction with the Merger Hodgkins has agreed not to
compete with the business of Rollway for a period of five years on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and the consideration exchanged in the Merger, it is hereby agreed as
follows:
1. Agreement Not To Compete. Hodgkins agrees that for a period of
five (5) years from the date hereof, Hodgkins will not, as an individual or as
a partner, employee, agent, advisor, consultant or in any other capacity of or
to any person, firm, corporation or other entity, directly or indirectly, other
than solely as a two percent (2%) or less shareholder of a publicly traded
corporation, do any of the following:
a. carry on any business, or become involved in any business
activity, competitive with the business of Rollway as presently conducted
and as said existing bearing, bar feed and conveyancing mechanism business
may evolve in the ordinary course during the term of this Non-Competition
Agreement (the "Business") anywhere in the world;
b. hire, or assist anyone else to hire (other than the providing
of requested references), any employee of Rollway or seek to persuade, or
assist anyone else to seek to persuade, any employee of Rollway to
discontinue employment with Rollway; or
c. induce or attempt to induce, or assist anyone else to induce
or attempt to induce, any vendor to or customer of Rollway to reduce or
discontinue its business with Rollway or disclose to anyone else the name
and/or requirements of any such vendor or customer.
<PAGE> 186
2. Confidential Information. Hodgkins agrees that he will never,
directly or indirectly (without Emerson's prior written consent), except in the
exercise of his rights to challenge a claim by Emerson on any holdback or
escrow established in connection with the Merger or to defend against any claim
for indemnification in connection with the Merger, use for himself or use for,
or disclose to, any party other than Emerson, or any subsidiary or affiliate of
Emerson, any Confidential Information (as hereafter defined), including but not
limited to information related to the following:
a. the business or products of Rollway, or any of its
subsidiaries or affiliates;
b. the costs, uses or applications of, or the customers or
suppliers (and information concerning transactions and prospective
transactions therewith) for products made, assembled, produced or sold by
Rollway, or any subsidiary or affiliate thereof; or
c. any apparatus, method, system, manufacturing or other process
or technology at any time used, developed or investigated by or for
Rollway, or any subsidiary or affiliate thereof, whether or not invented,
developed, acquired, discovered or investigated by Hodgkins.
As used herein, "Confidential Information" shall include all information, in
whatever form kept or recorded, pertaining to: inventions, discoveries,
know-how, ideas, computer programs, designs, algorithms, processes and
structures; product information; research and development information; client
information; financial information; business processes and methodology; and any
other technical and business information of Rollway, its subsidiaries and
affiliates which is of a confidential, trade secret and/or proprietary
character. Confidential Information shall not, however, include information
that is or becomes publicly available other than as a result of a breach by
Hodgkins of any obligation of confidentiality hereunder or information which is
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to be disclosed to any court or other tribunal. In the event of any
such request or requirement, Hodgkins will:
a. immediately provide Emerson with notice of such request(s) and the
documents or information requested thereby so that Emerson may seek an
appropriate protective order; and
b. cooperate with Emerson in taking any reasonable available steps to
resist or narrow such request or to obtain an order or other reliable
assurance that confidential treatment will be accorded to all or such
portion of the information required to be disclosed as Emerson designates.
Hodgkins is not in possession of, and shall promptly deliver to
Emerson in the event he comes to possess, any documents or other materials
containing Confidential Information in physical form, including but not limited
to writings, designs, documents, records, memoranda, photographs, sound
recordings, tapes and disks containing software, computer source code listings,
routines, file layouts, record layouts, system design information, models,
manuals, documentation, notes and any material concerning costs, uses, methods,
designs, applications, purchasers of or experience with products made or sold
by Rollway, its affiliates or subsidiaries or any secret or confidential
product, apparatus or process manufactured, used, developed, acquired or
investigated by Hodgkins or by Emerson, its subsidiaries or affiliates, other
<PAGE> 187
than items of an historical or family nature that are not and do not contain
Confidential Information.
3. Work Product. Hodgkins hereby assigns to Rollway all of Hodgkins'
rights, title, and interest (including but not limited to all patent,
trademark, copyright and trade secret rights) in and to all Work Product (as
hereinafter defined) prepared by Hodgkins, made or conceived in whole or in
part by Hodgkins within the scope of Hodgkins's employment by Rollway or within
six (6) months hereafter, or that relate directly to or involve the use of
Confidential Information. "Work Product" shall include, but is not limited to
literary works, software, documentation, memoranda, musical works, photographs,
artwork, sound recordings, audiovisual works, ideas, designs, inventions,
discoveries, improvements, trade secrets, processes, algorithms, and so forth,
other than items of an historical or family nature that are not and do not
contain Confidential Information. Hodgkins acknowledges and agrees that all
copyrightable Work Product prepared by Hodgkins within the scope of Hodgkins'
employment with Rollway are "works made for hire" and, consequently, that
Rollway owns all copyrights thereto. In addition, Hodgkins acknowledges and
agrees that all Work Product, whether or not patentable or copyrightable, is
and shall forthwith become the property of Rollway. Hodgkins hereby agrees to
execute promptly upon request any documents or instruments at any time deemed
necessary or proper by Rollway in order to formally convey and transfer to
Rollway title to such Work Product, or to confirm Rollway's title therein, and
in order to enable Rollway to obtain and enforce United States and foreign
Letters Patent, Trademarks and Copyrights thereon. Hodgkins will perform his
obligations under this Section 3 without further compensation, except for
reimbursement of reasonable out-of-pocket expenses incurred at the request of
Rollway. If Hodgkins refuses, following ten (10) days' prior written notice
from Rollway, or is unable due to disability, incapacity or death, to execute
any such documents relating to Work Product, Hodgkins and his heirs,
successors, estate and personal representative hereby appoint each officer and
director of Rollway to be his Attorney-in-Fact to so execute such documents on
behalf of Hodgkins. This is a durable Power of Attorney, the authority of
which shall not terminate if Hodgkins becomes disabled or incapacitated. This
agency is coupled with an interest and is therefore irrevocable without the
prior written consent of Rollway.
4. Term of Agreement. The term of this Non-Competition Agreement
shall commence on the date first set forth above, and shall end upon the
expiration of five (5) years following the date hereof, except that the
covenants in Section 2 and Section 3 shall survive forever. The five year term
of this Non-Competition Agreement shall be tolled during any time Hodgkins is
in breach of the covenants set forth in Section 1.
5. Compensation. In consideration of the promises and covenants set
forth in this Non-Competition Agreement, Hodgkins shall receive the following
compensation:
a. Emerson shall pay or cause to be paid to Hodgkins or his
estate One Hundred Thousand Dollars ($100,000) per year for a period of
five (5) years from the date hereof, payable in accordance with Emerson's
usual payment practices, but in no event less frequently than monthly.
b. Emerson has caused Rollway to transfer to Hodgkins the
following life insurance policies: Northwest Mutual Life Insurance Company
Policy No. 7302117 and Aetna Life Insurance Policy No. UL115792 (the
"Transferred Policies"); provided, however, that Hodgkins shall assume the
transferred Policies subject to any loans against such policies and shall
<PAGE> 188
execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such
further or other actions as Emerson may reasonably deem necessary or
desirable to relieve Rollway of any obligations under or with respect to
such policies (except for the obligations set forth herein).
c. For Mr. Hodgkins' lifetime, Emerson shall pay or caused to be
paid to Hodgkins Ten Thousand Dollars ($10,000) per year.
d. Hodgkins and his spouse shall participate for life in
Emerson's retiree medical program, and, subject to paragraph d. below, such
coverage shall be structured as a Medicare supplement with a Fifty Dollar
($50) annual deductible, an 80/20 copayment requirement, no coverage stop
loss, and a One Hundred Thousand Dollar ($100,000) individual lifetime
maximum and shall provide coverage at least equivalent in coverage to that
provided under Emerson's current retiree medical program, regardless of
pre-existing conditions;
e. Hodgkins and his spouse shall promptly apply for coverage
under Medicare Part B upon the execution of this Non-Competition Agreement
and the termination of Hodgkins's employment. In the event that the
Hodgkins' coverage under Medicare Part B has not become effective and there
is a gap in the medical coverage, the Hodgkins shall be entitled to
continued coverage under COBRA under Rollway's medical insurance policy at
the same level of coverage offered to similarly situated persons until they
become eligible for Medicare Part B coverage. Hodgkins shall pay to
Rollway the cost of exercising such COBRA rights during the gap period.
In the event Hodgkins breaches this Agreement, Emerson's obligations
hereunder, including its obligation to compensate Hodgkins, shall immediately
terminate. Such termination shall have no effect on Hodgkins' obligations
hereunder.
6. Severability. Hodgkins expressly agrees that the foregoing
covenants set forth in this Non-Competition Agreement are reasonable in light
of the scope of the Business heretofore conducted by Rollway. If any court or
tribunal of competent jurisdiction shall refuse to enforce the foregoing
covenants because the time limit applicable thereto is deemed unreasonable, it
is expressly understood and agreed that such covenant shall not be void, but
that for the purpose of such proceedings and in such jurisdiction, such time
limitation shall be deemed reduced to the extent necessary to permit
enforcement of covenant. If any court or tribunal of competent jurisdiction
shall refuse to enforce any of the foregoing covenants set forth in Non-
Competition Agreement because they are more extensive (whether as to geographic
area, scope of business or otherwise) than is deemed reasonable, it is
expressly understood and agreed between the parties hereto that such covenant
shall not be void, but that for the purpose of such proceedings and in such
jurisdiction, the restrictions contained herein (whether as to geographic area,
scope of business or otherwise) shall be deemed reduced to the extent necessary
to permit enforcement of the covenant, without reduction in the consideration
therefor.
7. Remedies of Emerson. Hodgkins further acknowledges and agrees
that the damages resulting from any breach of the foregoing covenants set forth
in this Non-Competition Agreement may be intangible in whole or in part and may
cause irreparable harm to Emerson, and that Emerson is entitled to seek
specific enforcement, injunctive relief and other equitable remedies in
addition to monetary damages and legal remedies. Hodgkins hereby stipulates to
<PAGE> 189
the entering of such injunctive relief prohibiting Hodgkins from competing with
Rollway in breach of such covenants, or otherwise enforcing the covenants
herein, and Hodgkins hereby waives any bond or similar requirements for
granting such injunctive relief.
8. Non-Waiver of Rights. The failure to enforce at any time any of
the provisions of this Non-Competition Agreement or to require at any time
performance by the other party of any of the provisions hereof shall in no way
be construed to be a waiver of such provisions or to affect either the validity
of this Non-Competition Agreement, or any part hereof, or the right of either
party thereafter to enforce each and every provision in accordance with its
terms.
9. Binding Agreement; Assignments. This Non-Competition Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and
their respective heirs, executors, legal representatives, successors and
permitted assigns. This Agreement shall be freely assignable by Emerson to any
entity which shall succeed to the business presently being operated by Rollway;
provided, however, that such assignment shall not relieve Emerson of its
obligations hereunder. Except as otherwise set forth herein, neither this Non-
Competition Agreement nor any rights or duties hereunder are assignable by
Hodgkins. There are no third party beneficiaries of this Non-Competition
Agreement, other than the parties hereto and their respective heirs, executors,
legal representatives, successors, permitted assigns, subsidiaries and
affiliates.
10. Governing Law. This Non-Competition Agreement shall be
interpreted in accordance with and governed by the laws of the State of
Missouri.
11. Amendments. No modification, amendment or waiver of any of the
provisions of this Non-Competition Agreement shall be effective unless in
writing and signed by the parties hereto.
12. Notices. Any notices to be given by either party hereunder shall
be in writing and shall be deemed to have been duly given if delivered or
mailed, certified or registered mail, postage prepaid, as follows: to Emerson
at Emerson Electric Co., 8000 W. Florissant Avenue, St. Louis, Missouri 63136-
8506, Attn: Cynthia Heath; and to Hodgkins at 100 Marvelle Road, Fayetteville,
New York 13066; or to such other address as may have been furnished to the
other party in writing.
13. Entire Agreement. This Non-Competition Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof, and supersedes any and all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter, and specifically
supersedes and terminates any employment, incentive, bonus or other agreement
or arrangement, whether written or oral, between Hodgkins and Rollway, and
Hodgkins hereby waives and releases all rights and claims thereunder or with
respect thereto, including, without limitation, any claim of entitlement to
payments based or predicated upon a change in control of Rollway or any special
incentive or bonus programs, provided however that Hodgkins shall be entitled
to any bonus earned, on a prorated basis, for the period prior to the date
hereof, as described in the letter of Donald F. Dew, chairman of Rollway's
Compensation Committee, to Stephen Bregande dated March 3, 1995, as amended.
The provisions of this Non-Competition Agreement were negotiated by the parties
hereto and shall be deemed to have been drafted by all the parties hereto,
notwithstanding any presumptions at law to the contrary.
<PAGE> 190
14. Termination of Split-Dollar Agreement. Hodgkins hereby agrees
that the Agreement dated as of June 18, 1963 by and between Rollway and
Hodgkins with respect to Northwestern Mutual Life Insurance Policy No. 5470570,
as said Agreement may have been amended from time to time, is hereby
terminated, effective as of [the day before the closing of the Merger], and
Hodgkins disclaims any interest in said Agreement and such life insurance
policy to which said Agreement relates. Hodgkins has executed and delivered,
and agrees to execute and deliver, or cause to be executed and delivered, all
such documents and instruments and shall take, or cause to be taken, all such
further or other actions as Emerson may reasonably deem necessary or desirable
to transfer the benefits heretofore payable to Hodgkins or his estate under
said Agreement and said policy to Rollway or its designee.
IN WITNESS WHEREOF, each of the parties hereto has caused this Non-
Competition Agreement to be executed as of the date first above written.
EMERSON ELECTRIC CO.
By:
---------------------------------
Name:
-----------------------------
Title:
-----------------------------
-------------------------------------
H.F. Hodgkins, Jr.
<PAGE> 191
EXHIBIT B
MPI MANAGEMENT PLANNING, INC.
101 Poor Farm Road . P.O. Box 611 . Princeton, NJ 08542
(609) 924-4200 Facsimile . (609) 924-4573
March 25, 1996
CONFIDENTIAL
- ------------
Board of Directors
LIPE-ROLLWAY CORPORATION
c/o Donald A. Denton, Esq.
HANCOCK & ESTABROOK, LLP
1500 Mony Tower 1
Syracuse, New York 13221
Gentlemen:
We understand that Emerson Electric Co. ("Emerson") has made a proposal (the
"Offer") to acquire all of the 752,628 outstanding shares of common stock of
Lipe-Rollway Corporation ("Lipe-Rollway") and all of the outstanding options to
acquire 66,666 shares of common stock of Lipe-Rollway for a gross aggregate
consideration of $8,269,936 subject to adjustment as described in the draft of
the Merger Agreement between Emerson and Lipe-Rollway. In addition, the
preferred stock of Lipe-Rollway would be converted into Emerson common stock at
the rate of $20 worth of Emerson common stock for each of the 93,692
outstanding shares of Lipe-Rollway nonredeemable preferred stock or
alternatively would be redeemed for $20 cash per share. The transaction will
be a merger in which the aforementioned Lipe-Rollway common stock, options and
preferred shares not redeemed for cash are converted into Emerson common stock.
Emerson common stock presently carries The Value Investment Survey's highest
rating for safety, and Standard & Poor's predicts that Emerson is likely to
remain a high quality investment. The terms and conditions of the Offer are
described fully in the aforementioned Merger Agreement.
You have asked for our opinion as to whether the total consideration to be
received by the holders of the shares of Lipe-Rollway common stock (including
option holders) and preferred stock pursuant to the Offer is fair to the
shareholders of Lipe-Rollway from a financial point of view.
Since 1939, Management Planning, Inc. ("MPI") has been engaged in the valuation
of businesses and their securities for corporate, tax and other purposes,
including financing, recapitalizations, purchases and sales of closely held
securities, estate, gift and income tax matters, and mergers and acquisitions.
In conducting our analysis and arriving at our opinion as expressed herein, we
have conducted such studies, analyses and investigations as we deemed
appropriate under the circumstances. We have also taken into account our
assessment of general economic, industry, market, and financial conditions, as
well as our experience in connection with similar transactions in securities in
general. Among other things, we:
(1) Considered the draft of the Merger Agreement, reviewed by
Lipe-Rollway's Board of Directors;
<PAGE> 192
Lipe-Rollway Corporation
March 25, 1996
Page No. 2
(2) Reviewed and analyzed financial data regarding Lipe-Rollway,
including its audited and unaudited consolidated financial
statements for the fiscal years ended approximately
November 30, 1985-1995;
(3) Reviewed and analyzed other relevant financial and operating
data supplied by Lipe-Rollway;
(4) Discussed past and current operations, financial condition,
and future prospects of Lipe-Rollway with members of its
senior management;
(5) Prepared a comparative analysis of Lipe-Rollway and certain
publicly held companies that we deemed reasonably similar to
Lipe-Rollway with respect to financial and operating results
and investment characteristics;
(6) Compared the proposed financial terms of the Offer with the
financial terms of certain other mergers and acquisitions
which we deemed to be relevant;
(7) Reviewed the premiums in value paid for control in certain
recent business combinations of companies operating in a
variety of industries;
(8) Prepared a discounted net cash flow analysis; and
(9) Reviewed historical prices and trading activity of
Lipe-Rollway common stock.
In preparing our opinion, we have relied, without independent verification, on
the accuracy, completeness, and fairness of all financial and other information
that was publicly available or furnished to us by Lipe-Rollway. Additionally,
we have not made any independent valuation or appraisal of any of the assets or
liabilities of Lipe-Rollway. Our opinion is necessarily based on economic,
market and other conditions in effect on, and the information made available to
us as of, the date hereof.
It is understood that our opinion is for the information of the Board of
Directors of Lipe-Rollway only and is not to be quoted or referred to, in whole
or in part, in any prospectus, proxy statement, or in any other written
document used in connection with the Offer, nor shall our opinion be used for
any other purposes, without the express written permission of Management
Planning, Inc. Specific approval is hereby granted for our opinion to be
described within and attached to the Lipe-Rollway Proxy Statement, and written
permission for other uses will not be unreasonably withheld.
Based on our review and analysis, it is our opinion that the consideration
offered for all of the outstanding common stock (including common shares
issuable upon conversion of options), payable in shares of Emerson common
stock, and a conversion price of $20 per share for each share of outstanding
preferred stock of Lipe-Rollway payable in shares of common stock of Emerson
common stock or in cash, is adequate and does constitute fair consideration to
the shareholders of Lipe-Rollway from a financial point of view.
<PAGE> 193
Lipe-Rollway Corporation
March 25, 1996
Page No. 3
Very respectfully yours,
MANAGEMENT PLANNING, INC.
By /s/ James W. Brockardt
-------------------------------------
James W. Brockardt, CBA
Vice President
By /s/ Roy H. Meyers
-------------------------------------
Roy H. Meyers, CFA
Vice President
<PAGE> 194
EXHIBIT C
NEW YORK BUSINESS CORPORATION LAW
SECTIONS 623, 806(b)(6) AND 910
623 PROCEDURE TO ENFORCE SHAREHOLDER'S
RIGHT TO RECEIVE PAYMENT FOR SHARES
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the
meeting of shareholders at which the action is submitted to a vote, or at such
meeting but before the vote, written objection to the action. The objection
shall include a notice of his election to dissent, his name and residence
address, the number and classes of shares as to which he dissents and a demand
for payment of the fair value of his shares if the action is taken. Such
objection is not required from any shareholder to whom the corporation did not
give notice of such meeting in accordance with this chapter or where the
proposed action is authorized by written consent of shareholders without a
meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall
give written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to
the proposed action and who thereby is deemed to have elected not to enforce
his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election
to dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such owner, as to which
such nominee or fiduciary has a right to dissent, held of record by such
nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his
acceptance in writing of an offer made by the corporation, as provided in
paragraph (g), but in no case later than sixty days from the date of
consummation of the corporate action except that if the corporation fails to
make a timely offer, as provided in paragraph (g), the time for withdrawing a
<PAGE> 195
notice of election shall be extended until sixty days from the date an offer is
made. Upon expiration of such time, withdrawal of a notice of election shall
require the written consent of the corporation. In order to be effective,
withdrawal of a notice of election must be accompanied by the return to the
corporation of any advance payment made to the shareholder as provided in
paragraph (g). If a notice of election is withdrawn, or the corporate action
is rescinded, or a court shall determine that the shareholder is not entitled
to receive payment for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares and he shall be reinstated to all his rights as a shareholder as of the
consummation of the corporate action, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by
the board as of the time of such expiration or completion, but without
prejudice otherwise to any corporate proceedings that may have been taken in
the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate
bearing such notation, each new certificate issued therefor shall bear a
similar notation together with the name of the original dissenting holder of
the shares and a transferee shall acquire no rights in the corporation except
those which the original dissenting shareholder had at the time of the
transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later
(but in no case later than ninety days from the shareholders' authorization
date), the corporation or, in the case of a merger or consolidation, the
surviving or new corporation, shall make a written offer by registered mail to
each shareholder who has filed such notice of election to pay for his shares at
a specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action
has been consummated, such offer shall also be accompanied by (1) advance
payment to each such shareholder who has submitted the certificates
representing his shares to the corporation, as provided in paragraph (f), of an
amount equal to eighty percent of the amount of such offer, or (2) as to each
shareholder who has not yet submitted his certificates a statement that advance
payment to him of an amount equal to eighty percent of the amount of such offer
will be made by the corporation promptly upon submission of his certificates.
If the corporate action has not been consummated at the time of the making of
the offer, such advance payment or statement as to advance payment shall be
sent to each shareholder entitled thereto forthwith upon consummation of the
corporate action. Every advance payment or statement as to advance payment
<PAGE> 196
shall include advice to the shareholder to the effect that acceptance of such
payment does not constitute a waiver of any dissenters' rights. If the
corporate action has not been consummated upon the expiration of the ninety day
period after the shareholders' authorization date, the offer may be conditioned
upon the consummation of such action. Such offer shall be made at the same
price per share to all dissenting shareholders of the same class, or if divided
into series, of the same series and shall be accompanied by a balance sheet of
the corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than
a twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the
foregoing, the corporation shall not be required to furnish a balance sheet or
profit and loss statement or statements to any shareholder to whom such balance
sheet or profit and loss statement or statements were previously furnished, nor
if in connection with obtaining the shareholders' authorization for or consent
to the proposed corporate action the shareholders were furnished with a proxy
or information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer the
corporation making the offer and any shareholder agree upon the price to be
paid for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which the office of
the corporation is located to determine the rights of dissenting shareholders
and to fix the fair value of their shares. If, in the case of merger or
consolidation, the surviving or new corporation is a foreign corporation
without an office in this state, such proceeding shall be brought in the county
where the office of the domestic corporation, whose shares are to be valued,
was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such proceeding
for the same purpose not later than thirty days after the expiration of such
twenty day period. If such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the supreme court, for good
cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for
their shares, shall be made parties to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The corporation shall
serve a copy of the petition in such proceeding upon each dissenting
shareholder who is a resident of this state in the manner provided by law for
the service of a summons, and upon each nonresident dissenting shareholder
either by registered mail and publication, or in such other manner as is
<PAGE> 197
permitted by law. The jurisdiction of the court shall be plenary and
exclusive.
(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the shares,
which, for the purposes of this section, shall be the fair value as of the
close of business on the day prior to the shareholders' authorization date. In
fixing the fair value of the shares, the court shall consider the nature of the
transaction giving rise to the shareholder's right to receive payment for
shares and its effects on the corporation and its shareholders, the concepts
and methods then customary in the relevant securities and financial markets for
determining fair value of shares of a corporation engaging in a similar
transaction under comparable circumstances and all other relevant factors. The
court shall determine the fair value of the shares without a jury and without
referral to an appraiser or referee. Upon application by the corporation or by
any shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the shares
whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice law and
rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest which
the corporation would have had to pay to borrow money during the pendency of
the proceeding. If the court finds that the refusal of any shareholder to
accept the corporate offer of payment for his shares was arbitrary, vexatious
or otherwise not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts
employed by it. Notwithstanding the foregoing, the court may, in its
discretion, apportion and assess all or any part of the costs, expenses and
fees incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the court
finds that their refusal to accept the corporate offer was arbitrary, vexatious
or otherwise not in good faith. The court may, in its discretion, apportion
and assess all or any part of the costs, expenses and fees incurred by any or
all of the dissenting shareholders who are parties to the proceeding against
the corporation if the court finds any of the following: (A) that the fair
value of the shares as determined materially exceeds the amount which the
corporation offered to pay; (B) that no offer or required advance payment was
made by the corporation; (C) that the corporation failed to institute the
special proceeding within the period specified therefor; or (D) that the action
of the corporation in complying with its obligations as provided in this
section was arbitrary, vexatious or otherwise not in good faith. In making any
determination as provided in clause (A), the court may consider the dollar
<PAGE> 198
amount or the percentage, or both, by which the fair value of the shares as
determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due
him, upon surrender of the certificates for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the agreed
value therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section
515 (Reacquired shares), except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
(j) No payment shall be made to a dissenting shareholder under this
section at a time when the corporation is insolvent or when such payment would
make it insolvent. In such event, the dissenting shareholder shall, at his
option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this paragraph
do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment for
his shares cannot be made because of the restrictions of this paragraph. If
the dissenting shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership, except as provided in paragraph (e), and except that
this section shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as
provided in subparagraph (e)(2) of section 907 (Merger or consolidation of
domestic and foreign corporations). (Last amended by Ch. 117, L. '86, eff.
9-1-86.)
<PAGE> 199
806(b)(6) PROVISIONS AS TO CERTAIN PROCEEDINGS
(a) . . .
(b) The following provisions shall apply to amendments and changes under
this article, except under section 808 (Reorganization under Act of Congress):
(1) . . .
(6) A holder of any adversely affected shares who does not vote for or
consent in writing to the taking of such action shall, subject to and by
complying with the provisions of section 623 (Procedure to enforce
shareholder's right to receive payment for shares), have the right to dissent
and to receive payment for such shares, if the certificate of amendment (A)
alters or abolishes any preferential right of such shares having preferences;
or (B) creates, alters or abolishes any provision or right in respect of the
redemption of such shares or any sinking fund for the redemption or purchase of
such shares; or (C) alters or abolishes any preemptive right of such holder to
acquire shares or other securities; or (D) excludes or limits the right of such
holder to vote on any matter, except as such right may be limited by the voting
rights given to new shares then being authorized of any existing or new class.
910 RIGHT OF SHAREHOLDER TO RECEIVE PAYMENT FOR SHARES
UPON MERGER OR CONSOLIDATION, OR SALE, LEASE, EXCHANGE
OR OTHER DISPOSITION OF ASSETS, OR SHARE EXCHANGE
(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right to receive
payment for shares), have the right to receive payment of the fair value of his
shares and the other rights and benefits provided by such section, in the
following cases:
(1) Any shareholder entitled to vote who does not assent to the taking
of an action specified in subparagraphs (A), (B) and (C).
(A) Any plan of merger or consolidation to which the corporation
is a party; except that the right to receive payment of the fair value of
his shares shall not be available:
(i) To a shareholder of the [1] PARENT corporation in a merger
authorized by section 905 (Merger of PARENT AND subsidiary
[2] CORPORATIONS), or paragraph (c) of section 907 (Merger
or consolidation of domestic and foreign corporations);
and
(ii) To a shareholder of the surviving corporation in a
merger authorized by this article, other than a merger
specified in subparagraph (i), unless such merger
effects one or more of the changes specified in
subparagraph (b)(6) of section 806 (Provisions as to
certain proceedings) in the rights of the shares held
by such shareholder.
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires shareholder
- ---------------
Ch. 390, L. '91, eff. 7-15-91, added matter in italic and deleted
[1]"surviving" and [2]"corporation".
<PAGE> 200
approval under section 909 (Sale, lease, exchange or other disposition of
assets) other than a transaction wholly for cash where the shareholders'
approval thereof is conditioned upon the dissolution of the corporation and
the distribution of substantially all of its net assets to the shareholders
in accordance with their respective interests within one year after the
date of such transaction.
(C) Any share exchange authorized by section 913 in which the
corporation is participating as a subject corporation; except that the
right to receive payment of the fair value of his shares shall not be
available to a shareholder whose shares have not been acquired in the
exchange.
(2) Any shareholder of the subsidiary corporation in a merger
authorized by section 905 or paragraph (c) of section 907, or in a share
exchange authorized by paragraph (g) of section 913, who files with the
corporation a written notice of election to dissent as provided in paragraph
(c) of section 623. (Last amended by Ch. 390, L. '91, eff. 7-15-91.)
<PAGE> 201
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Emerson is a Missouri corporation. Section 351.355(1) of the Revised
Statutes of Missouri provides that a corporation may indemnify a director,
officer, employee or agent of the corporation in any action, suit or proceeding
other than an action by or in the right of the corporation, against expenses
(including attorneys' fees), judgments, fines and settlement amounts actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action, had no reasonable cause to believe his conduct was
unlawful. Section 351.355(2) provides that the corporation may indemnify any
such person in any action or suit by or in the right of the corporation against
expenses (including attorneys' fees) and settlement amounts actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, except that
he may not be indemnified in respect of any matter in which he has been
adjudged liable for negligence or misconduct in the performance of his duty to
the corporation, unless authorized by the court. Section 351.355(3) provides
that a corporation shall indemnify any such person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
action, suit or proceeding if he has been successful in defense of such action,
suit or proceeding and if such action, suit or proceeding is one for which the
corporation may indemnify him under Section 351.355(1) or (2). Section
351.355(7) provides that a corporation shall have the power to give any further
indemnity to any such person, in addition to the indemnity otherwise authorized
under Section 351.355, provided such further indemnity is either (i)
authorized, directed or provided for in the articles of incorporation of the
corporation or any duly adopted amendment thereof or (ii) is authorized,
directed or provided for in any By-Law or agreement of the corporation which
has been adopted by a vote of the shareholders of the corporation, provided
that no such indemnity shall indemnify any person from or on account of such
person's conduct which was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct.
At the Annual Meeting of Shareholders held on February 10, 1987, the
shareholders adopted indemnification agreements with the directors of Emerson
and amendments to the By-Laws of Emerson which incorporate indemnity provisions
permitted by Section 351.355(7) described above. The agreements and amended
By-Laws provide that Emerson will indemnify its directors and officers against
all expenses (including attorneys' fees), judgments, fines and settlement
amounts, paid or incurred in any action or proceeding, including any action by
or on behalf of Emerson, on account of their service as a director or officer
of Emerson, any subsidiary of Emerson or any other company or enterprise when
they are serving in such capacities at the request of Emerson, excepting only
cases where (i) the conduct of such person is adjudged to be knowingly
fraudulent, deliberately dishonest or willful misconduct, (ii) a final court
adjudication shall determine that such indemnification is not lawful, (iii)
judgment is rendered against such person for an accounting of profits made from
a purchase or sale of securities of Emerson in violation of Section 16(b) of
the Securities Exchange Act of 1934 or of any similar statutory law, or (iv)
any remuneration paid to such person is adjudicated to have been paid in
violation of law. Such person shall be indemnified only to the extent that the
aggregate of losses to be indemnified exceeds the amount of such losses for
<PAGE> 202
which the director or officer is insured pursuant to any directors' or
officers' liability insurance policy maintained by Emerson.
The directors and officers of Emerson are insured under a policy of
directors' and officers' liability insurance.
Item 21.(a) Exhibits.
2.1 Agreement and Plan of Merger (attached as Exhibit A to the Proxy
Statement/Prospectus
4.1 Restated Articles of Incorporation of Registrant (incorporated herein
by reference to 1989 Form 10-K, Exhibit 3(a))
4.2 By-Laws of Registrant (incorporated herein by reference to 1989
Form 10-K, Exhibit 3(b))
4.3 Preferred Share Purchase Rights Plan (incorporated herein by reference
to Emerson's Registration Statement on Form 8-A filed under the
Exchange Act, as amended under cover on Form 8 on November 3, 1988)
5.1 Opinion of H. M. Smith, Esq., Assistant General Counsel of Emerson as
to the legality of securities being registered
8.1 Opinion of Hancock & Estabrook, LLP as to certain federal income tax
consequences
23.1 Consent of H. M. Smith, Esq., Assistant General Counsel of Emerson
(included in Exhibit 5.1)
23.2 Consent of Hancock & Estabrook, LLP (included in Exhibit 8.1)
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of Management Planning, Inc.
24.1 Power of Attorney (included in signature page)
99.1 Form of Proxy for special meeting to be mailed to Lipe-Rollway
shareholders
Pursuant to Item 601(b)(2), Emerson hereby agrees to furnish supplementally
to the Commission, a copy of any omitted schedule upon the Commission's
request.
Item 21.(b) Financial Statement Schedules.
All financial statement schedules of Emerson are omitted because they are
not required, not applicable or the information given in the financial
statements or notes thereto are contained in the Annual Report of Emerson on
Form 10-K for the fiscal year ended September 30, 1995.
<PAGE> 203
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8, or Form F-3, and the
information required to be included in the post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section 15(d)
of Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
<PAGE> 204
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The undersigned registrant undertakes that every prospectus: (i) that
is filed pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of St. Louis, State of
Missouri, on April 4, 1996.
EMERSON ELECTRIC CO.
By: /s/ W. J. GALVIN
-------------------------------------
W. J. Galvin
Senior Vice President - Finance,
Chief Financial Officer and Chief
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby severally constitutes and
appoints W. J. Galvin, W. W. Withers, C. W. Groennert and H. M. Smith, and each
of them singly, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-4, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitutes may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
- ------------------------------ ------------------------------ ---------------
/s/ C.F. KNIGHT
- ------------------------------ Chairman of the Board, April 4, 1996
C.F. Knight President and Chief Executive
Officer and Director
/s/ W.J. GALVIN Senior Vice President - April 4, 1996
- ------------------------------ Finance, Chief Financial
W.J. Galvin Officer and Chief Accounting
Officer
/s/ L. L. BROWNING, JR. Director April 4, 1996
- ------------------------------
L. L. Browning, Jr.
/s/ A. A. BUSCH, III Director April 4, 1996
- ------------------------------
A. A. Busch, III
<PAGE> 206
Signature Title Date
- ------------------------------ ------------------------------ ---------------
/s/ D. C. FARRELL Director April 4, 1996
- ------------------------------
D. C. Farrell
/s/ J. A. FRATES Director April 4, 1996
- ------------------------------
J. A. Frates
/s/ R. B. HORTON Director April 4, 1996
- ------------------------------
R. B. Horton
/s/ G. A. LODGE Director April 4, 1996
- ------------------------------
G. A. Lodge
/s/ V. R. LOUCKS, JR. Director April 4, 1996
- ------------------------------
V. R. Loucks, Jr.
/s/ R. B. LOYND Director April 4, 1996
- ------------------------------
R. B. Loynd
/s/ R. L. RIDGWAY Director April 4, 1996
- ------------------------------
R. L. Ridgway
/s/ R. W. STALEY Vice Chairman and Director April 4, 1996
- ------------------------------
R. W. Staley
/s/ A. E. SUTER Senior Vice Chairman and April 4, 1996
- ------------------------------ Chief Operating Officer and
A. E. Suter Director
/s/ W. M. VAN CLEVE Director April 4, 1996
- ------------------------------
W. M. Van Cleve
/s/ E. E. WHITACRE, JR. Director April 4, 1996
- ------------------------------
E. E. Whitacre, Jr.
/s/ E. F. WILLIAMS, JR. Director April 4, 1996
- ------------------------------
E. F. Williams, Jr.
<PAGE> 1
EXHIBIT 5.1
EMERSON ELECTRIC CO.
8000 W. FLORISSANT
P.O. BOX 4100
ST. LOUIS, MO 63138-8506
HARLEY M. SMITH
ASSISTANT GENERAL COUNSEL
AND ASSISTANT SECRETARY
(314) 553-2431
April 4, 1996
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, MO 63136
Gentlemen:
I am Assistant General Counsel and Assistant Secretary of Emerson
Electric Co., a Missouri corporation (the "Company"), and in such capacity I am
familiar with the Registration Statement on Form S-4 to be filed by the Company
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
proposed offering and sale by the Company of shares of Common Stock, par value
$1.00, of the Company (the "Shares") (including Preferred Share Purchase Rights
accompanying such Shares) in connection with the proposed merger (the "Merger")
of Emersub XLI, Inc., a Delaware corporation and a wholly-owned subsidiary of
the Company ("Emersub"), with and into Lipe-Rollway Corporation, a New York
corporation ("Rollway"), which, upon consummation of the Merger, will be the
surviving corporation and a wholly-owned subsidiary of the Company.
I have examined originals or copies, certified or otherwise,
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as I deemed necessary
for the purposes of the opinion expressed herein. I have assumed the
genuineness of all signatures on all documents examined by me, the authenticity
of all documents submitted to me as originals, and the conformity to authentic
originals of all documents submitted to me as certified or photostatic copies.
I have also assumed the due authorization, execution and delivery of all
documents.
On the basis of the foregoing, I am of the opinion that upon
consummation of the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of April 1, 1996, by and among the
Company, Emersub and Rollway, and when the Shares are issued in accordance with
the Merger Agreement, such Shares will be legally issued, fully paid and
nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement. I also consent to your filing copies of this opinion
as an exhibit to the Registration Statement with such agencies of such states
as you deem necessary in the course of complying with the laws of such states
regarding the offering and sale of the Shares.
<PAGE> 2
In giving this consent, I do not admit that I am in the category of
persons whose consent is required under Section 7 of the Securities Act or
rules and regulations of the Commission.
Yours truly,
Harley M. Smith
Assistant General Counsel
<PAGE> 1
EXHIBIT 8.1
HANCOCK & ESTABROOK, LLP
Counselors At Law
1500 Mony Tower I
Syracuse, New York 13221-4976
April 1, 1996
Lipe-Rollway Corporation
7600 Morgan Road
Liverpool, New York 13090
Re: Merger of Emersub XLI, Inc. into Lipe-Rollway Corporation
---------------------------------------------------------
Gentlemen:
We have acted as your counsel in connection with the proposed merger
(the "Merger") of Emersub XLI, Inc. ("Emersub"), a wholly owned subsidiary of
Emerson Electric Co. ("Emerson") with and into Lipe-Rollway Corporation ("Lipe-
Rollway") pursuant to which the holders of the stock of Lipe-Rollway who do not
properly dissent from the Merger will receive common stock of Emerson (the
"Emerson Common Stock").
In rendering this opinion we have relied upon certain written
representations made by Lipe-Rollway, Emersub, Emerson and certain of the
shareholders of Lipe-Rollway each of even date herewith (the "Representation
Certificates"). In addition, we have examined and reviewed the Agreement and
Plan of Merger dated April 1, 1996 by and among Emersub, Emerson and Lipe-
Rollway and the documents delivered pursuant thereto and have taken such
additional steps and reviewed such additional documents and matters as we
deemed necessary in order to render our opinion.
Based on the foregoing, we are of the opinion as follows:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
2. Lipe-Rollway will be a party to the reorganization within the
meaning of Section 368(b) of the Code;
3. No gain or loss will be recognized by Lipe-Rollway on receipt of
the assets of Emersub;
4. Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized for federal income tax purposes by the holders of Lipe-Rollway stock
on the exchange of their Lipe-Rollway stock for Emerson Common Stock;
5. Pursuant to Section 358(a) of the Code, the basis of the Emerson
Common Stock received in the Merger will equal the basis of the Lipe-Rollway
stock exchanged therefore; and
6. Provided the shares of Lipe-Rollway stock exchanged constitute a
capital asset in the hands of the exchanging shareholder, the exchanging
shareholders' holding period for the Emerson Common Stock received in the
exchange will include his or her holding period for the shares of Lipe-Rollway
stock surrendered in exchange therefor pursuant to Section 1223 of the Code.
<PAGE> 2
Lipe-Rollway Corporation
April 1, 1996
Page 2
The opinions set forth above are subject to the following
qualifications:
1. We have assumed the genuiness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to the originals
of all documents submitted to us as copies and the authenticity of the
originals of such latter documents.
2. As stated, we have relied, without investigation, as to the
matters set forth in the Representation Certificates.
Please be advised that our opinion is limited to the matters expressly
addressed above. No opinion is expressed and none should be inferred as to any
other matter including, but not limited to, any state or local tax consequences
associated with the Merger. This opinion is intended solely for the use of
Lipe-Rollway and, except as expressly provided below, may not be relied upon by
any other person or entity and may not be quoted or referred to, in whole or in
part, without our prior written approval.
Please also be advised that we are members of the Bar of the State of
New York and in rendering our opinion herein, we are passing on the above
matters only so far as they are governed by the present laws of such State and
the present federal laws of the United States.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 (the "Registration Statement") filed as a
Joint Proxy Statement/Prospectus with the Securities Exchange Commission on or
about April 2, 1996 in connection with the Merger and to the use of our name
under the caption "Legal Matters" in the prospectus filed as a part thereof.
We also consent to your filing copies of this opinion as an exhibit to the
Registration Statement with agencies of such states as you deem necessary in
the course of complying with the laws of such states regarding the Merger. In
giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
HANCOCK & ESTABROOK, LLP
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Emerson Electric Co.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus. Our
reports on the consolidated financial statements of Emerson Electric Co. as of
September 30, 1995 and 1994 and for each of the years in the three year period
ended September 30, 1995 refers to changes in accounting for postretirement
benefits other than pensions and accounting for postemployment benefits.
/S/ KPMG PEAT MARWICK LLP
St. Louis, Missouri
April 4, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 19, 1996, included in the Proxy
Statement/Prospectus that is made a part of the Registration Statement
(Form S-4) of Emerson Electric Co. for the registration of shares of its common
stock relating to the proposed merger of a wholly-owned subsidiary of Emerson
Electric Co. with and into Lipe-Rollway Corporation.
Syracuse, New York /s/ Ernst & Young LLP
April 1, 1996 Ernst & Young LLP
<PAGE> 1
EXHIBIT 23.5
CONSENT OF MANAGEMENT PLANNING INC.
We hereby consent to the use of our opinion letter dated March 25,
1996 to the Board of Directors of Lipe-Rollway Corporation, included as Exhibit
B to the Proxy Statement/Prospectus which forms a part of the Registration
Statement dated as of the date hereof on Form S-4 relating to the proposed
merger of Emersub XLI, Inc., a wholly owned subsidiary of Emerson Electric Co.,
with and into Lipe-Rollway Corporation, and to the references therein to such
opinion in the introductory section of the Proxy Statement/Prospectus and in
the sections captioned "Summary--Fairness Opinion" and "The Merger--Rollway's
Reasons for Merger; Recommendation of Rollway's Board of Directors."
In giving such consent, we do not admit and we hereby disclaim that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
MANAGEMENT PLANNING, INC.
By: /s/ James W. Brockardt
-------------------------------------
James W. Brockardt, CBA
Vice President
March 25, 1996
By: /s/ Roy H. Meyers
-------------------------------------
Roy H. Meyers, CFA
Vice President
<PAGE> 1
EXHIBIT 99.1
FORM OF PROXY
[FRONT OF PROXY]
LIPE-ROLLWAY CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR
SPECIAL MEETING OF SHAREHOLDERS
____________________, 1996
PROXY
The undersigned hereby appoints ____________________ and
____________________, and each of them, with full power of substitution,
attorneys and proxies to represent the undersigned at the Special Meeting of
Shareholders of Lipe-Rollway Corporation (the "Corporation") to be held at the
Corporation's main office, 7600 Morgan Road, Liverpool, New York at 10:00 a.m.,
local time, on ____________________, 1996, and at any adjournment or
adjournments thereof, and to vote all shares of stock which the undersigned may
be entitled to vote at said meeting, and with all other powers which the
undersigned would possess if personally present.
(1) APPROVAL OF AGREEMENT AND PLAN OF MERGER pursuant to which Emersub
XLI, Inc., a wholly owned subsidiary of Emerson Electric Co., will
merge with and into the Corporation (the "Merger") as described in the
Notice of Special Meeting of Shareholders and the Proxy
Statement/Prospectus accompanying this Proxy;
FOR [ ] ABSTAIN [ ] AGAINST [ ]
(2) APPROVAL OF PREFERRED TERMS AMENDMENT pursuant to which each
outstanding share of the Corporation's Preferred Stock, will upon
consummation of the Merger, be converted into the right to receive a
fraction of a share of Emerson Common Stock and an amount in cash
equal to any accrued and unpaid dividends on such share of the
Corporation's Preferred Stock all as described in the Notice of
Special Meeting of Shareholders and the Proxy Statement/Prospectus
accompanying this Proxy;
FOR [ ] ABSTAIN [ ] AGAINST [ ]
PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN
[BACK OF PROXY]
(3) With discretionary authority upon such other business as may properly
come before the meeting.
This Proxy will be voted as directed but, if no direction is indicated it will
be voted FOR Items (1) and (2) above each of which has been proposed by the
Board of Directors of the Corporation.
Date:
-----------------------------
-------------------------------------
-------------------------------------
Signature(s) of Shareholder(s)
<PAGE> 2
INSTRUCTIONS
Please sign exactly as name appears hereon and where shares are held
jointly each holder should sign. When signing as attorney, administrator,
executor, trustee, guardian or other fiduciary, please give your full title.
If signing for a corporation, please indicate your office.
If you cannot be present in person at the meeting, it is important that
your Proxy be dated, signed and returned promptly in the enclosed envelope in
order to assure that your stock may be voted at the meeting.
