As filed with the Securities and Exchange Commission on November 24, 1997
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EMERSON ELECTRIC CO.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Missouri 3621 43-0259330
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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)
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<S> <C> <C> <C>
Copies to:
Christopher Mayer Christopher M. Kelly
Davis Polk & Wardwell Jones, Day, Reavis & Pogue
450 Lexington Avenue 901 Lakeside Avenue
New York, New York Cleveland, Ohio
10017 44114
(212) 450-4000 (216) 586-1238
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effectiveness of this Registration
Statement and the effective time (the "Effective Time") of the merger (the
"Merger") of a wholly-owned subsidiary of the Registrant with and into
Computational Systems, Incorporated ("CSI") as described in the Agreement and
Plan of Merger dated as of October 17, 1997.
If 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. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed
Amount Offering Maximum Amount of
Title of Each Class of to be Price Aggregate Offering Registration
Securities to be Registered Registered(1) Per Unit(2) Price(2) Fee(3)
Common Stock, par value $0.50 per share.... 2,178,289 $54.25 $118,172,171 $35,810
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(1) Represents the estimated number of shares of Common Stock, par value
$0.50 per share, of the Registrant ("Emerson Common Stock") to be
issued in connection with the Merger in exchange for shares of Common
Stock, no par value, of CSI ("CSI Common Stock"), determined on the
basis of the average of the high and low prices of CSI Common Stock
on November 21, 1997 on the Nasdaq National Market, which was
$29.125, and the number of outstanding shares of CSI Common Stock on
November 19, 1997, which was 5,071,767.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act of
1933, as amended (the "Securities Act"), based on the average of the
high and low prices of Emerson Common Stock on November 21, 1997 on
the New York Stock Exchange.
(3) The registration fee for the securities registered hereby of $35,810
is being paid herewith. This fee has been calculated pursuant to
Rule 457(f) under the Securities Act, as one thirty-third of one
percent of $118,172,171.
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EMERSON ELECTRIC CO.
CROSS REFERENCE SHEET
ITEM NUMBER LOCATION IN PROXY
IN FORM S-4 STATEMENT/PROSPECTUS
----------- --------------------
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus....................... Facing Page of the Registration
Statement; Outside Front
Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.............. Where You Can Find More Information;
Table of Contents; Comparative Per
Share Market Price and Dividend
Information
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information...................... Outside Front Cover Page of
Prospectus; Summary; Interests
of Certain Persons in the Merger
and Related Matters;
Selected Historical Financial
Data; Comparative Per Share Data;
The Merger; Comparative Per Share
Market Price and Dividend
Information; The Special Meeting;
Where You Can Find More
Information**
4. Terms of the Transaction........ Outside Front Cover Page of
Prospectus; Summary; The Merger;
Role of Financial Advisor; The
Merger Agreement; The Special
Meeting; Comparison of
Stockholder Rights; Description
of Emerson Capital Stock
5. Pro Forma Financial Information.. *
6. Material Contacts with the Company
Being Acquired................... Summary; The Merger; The Merger
Agreement
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters........ *
8. Interests of Named Experts and
Counsel.......................... Role of Financial Advisor
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities...................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants...................... Where You Can Find More Information
11. Incorporation of Certain
Information by Reference........ Where You Can Find More Information
12. Information with Respect to S-2
and S-3 Registrants............. *
13. Incorporation of Certain
Information by Reference......... *
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants................. *
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect to S-3
Companies....................... Summary; Where You Can Find More
Information
16. Information with Respect to S-2
or S-3 Companies................ *
17. Information with Respect to
Companies Other Than S-2 or S-3
Companies....................... *
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents
or Authorizations are to be
Solicited...................... Outside Front Cover Page of
Prospectus; Summary; Interests
of Certain Persons in the Merger
and Related Matters; The Merger;
The Merger Agreement; The Special
Meeting; Comparison of
Stockholder Rights; Description
of Emerson Capital Stock; Where
You Can Find More Information
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer.......... *
- -----------
* Omitted because the Item is inapplicable or the answer thereto is negative.
** Indicates that the registrant has departed from the Item in certain
respects by virtue of the "Plain English" format of the Proxy
Statement/Prospectus.
CSI Logo
Special Meeting of Stockholders
MERGER PROPOSED--YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of Computational Systems, Incorporated has
unanimously approved a merger between CSI and Emerson Electric Co. that
would result in CSI becoming a wholly-owned subsidiary of Emerson. Emerson
is a leading manufacturer of electronic, electrical and related products
for commercial, industrial and consumer markets. The merger will
facilitate CSI's ability to introduce its technology at the original
equipment manufacturer, or OEM, level by providing CSI, through Emerson,
with greater access to OEM vendors. In addition, CSI's combination with
Emerson will provide CSI with the financial resources necessary to grow and
increase its presence worldwide. We believe that the merger with Emerson
will enhance CSI's ability to compete in the marketplace and will enable
CSI's stockholders to participate in the enhanced prospects of the combined
company.
Your Board of Directors has determined that the merger is fair to you and is
in your best interests. The Board therefore recommends that you vote to
approve the merger and the related merger agreement.
If the merger is completed, you will receive $29.65 for each share of CSI
common stock:
o $23.72 worth of Emerson common stock; and
o $5.93 in cash.
To determine the number of shares of Emerson stock you receive for each share
of CSI common stock, we will divide $23.72 by the average closing price of
Emerson common stock on the New York Stock Exchange on the 10 trading days
immediately before the merger closing date.
We intend the merger to be tax free to CSI stockholders, except to the extent
you receive cash. To preserve this tax treatment, we may have to provide you
with less cash and more stock. In no event will the value of the Emerson
stock you receive, valued as of the date prior to the merger, be less than 80%
of the value of the total consideration.
At the special meeting, CSI stockholders will be asked to approve the merger
and the related merger agreement. The affirmative vote of the holders of a
majority of the outstanding shares of CSI common stock (5,071,767 at November
19, 1997, the record date for the vote) is required to approve the merger and
related merger agreement. The merger cannot be completed unless CSI
stockholders approve it. Stockholders of Emerson are not required to approve
the merger.
The date, time and place of the special meeting:
December 29, 1997
10:00 a.m.
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
This Proxy Statement/Prospectus provides you with detailed information about
the proposed merger. In addition, you may obtain information about CSI and
Emerson from documents filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
Whether or not you plan to attend the special meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you wish to vote, your
proxy will be counted as a vote in favor of the approval of the merger and the
related merger agreement. If you fail to return the proxy card or to attend
the meeting and vote, the effect will be a vote against the merger. YOUR VOTE
IS VERY IMPORTANT.
On behalf of the Board of Directors of CSI, we urge you to vote "FOR" approval
of the merger and the related merger agreement.
/s/ Ronald G. Canada
- --------------------------
Ronald G. Canada
Chairman of the Board and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the Emerson common stock to be issued in the
merger or determined if this Proxy Statement/Prospectus is accurate or
adequate. Any representation to the contrary is a criminal offense.
Proxy Statement/Prospectus dated November 24, 1997, and first mailed to
stockholders on November 25, 1997.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER........................... 1
SUMMARY.......................................................... 2
SELECTED HISTORICAL FINANCIAL DATA............................... 6
Sources of Information........................................ 6
COMPARATIVE PER SHARE DATA....................................... 7
THE MERGER....................................................... 8
General....................................................... 8
Background of the Business Relationship and the
Merger........................................................ 8
CSI's Reasons for the Merger; Recommendation of the CSI
Board......................................................... 10
Emerson's Reasons for the Merger.............................. 12
Opinion of CSI's Financial Advisor............................ 12
Forward-Looking Statements May Prove Inaccurate............... 12
Accounting Treatment.......................................... 12
Certain U.S. Federal Income Tax Consequences.................. 13
Regulatory Approvals.......................................... 14
No Appraisal Rights........................................... 14
Federal Securities Laws Consequences; Resale Restrictions..... 15
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION................................................... 16
ROLE OF FINANCIAL ADVISOR........................................ 17
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED
MATTERS....................................................... 21
New Employment Arrangements................................... 21
Existing Employment Agreements................................ 21
Stock Options................................................. 21
Employee Stock Purchase Plan.................................. 21
Indemnification and Insurance................................. 21
Ownership of CSI Securities by Certain Beneficial Owners
and Management; Compensation and Benefits..................... 22
THE MERGER AGREEMENT............................................. 22
Structure; Effective Time..................................... 22
Structure; Effective Time..................................... 22
Merger Consideration.......................................... 23
Employee Stock Purchase Plan.................................. 23
Employee Stock Options........................................ 23
Conversion of Shares.......................................... 23
Certain Covenants............................................. 23
Certain Representations and Warranties........................ 25
Conditions to the Merger...................................... 25
Termination of the Merger Agreement........................... 26
Other Expenses................................................ 27
Amendments; No Waivers........................................ 27
STOCKHOLDER OPTION AGREEMENT..................................... 27
SPECIAL MEETING.................................................. 28
Time and Place; Purpose....................................... 28
Record Date; Voting Rights and Proxies........................ 29
Share Ownership of Management and Certain
Stockholders.................................................. 29
Solicitation of Proxies....................................... 29
Quorum........................................................ 29
Required Vote................................................. 29
COMPARISON OF STOCKHOLDER RIGHTS................................. 30
General....................................................... 30
Comparison of Rights of CSI Stockholder and Rights of
Emerson Stockholders.......................................... 30
DESCRIPTION OF EMERSON CAPITAL STOCK............................. 32
Authorized Capital Stock...................................... 32
Emerson Common Stock.......................................... 32
Emerson Preferred Stock....................................... 33
Transfer Agent and Registrar.................................. 33
Stock Exchange Listing; Delisting and Deregistration of CSI
Common Stock.................................................. 33
LEGAL MATTERS.................................................... 33
EXPERTS.......................................................... 33
FUTURE STOCKHOLDER PROPOSALS..................................... 34
WHERE YOU CAN FIND MORE INFORMATION.............................. 34
INDEX OF DEFINED TERMS........................................... 36
LIST OF ANNEXES
ANNEX A - Agreement and Plan of Merger
ANNEX B - Stockholder Option Agreement
ANNEX C - Opinion of McDonald & Company
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is CSI proposing the merger?
A: The merger will combine CSI's leadership in condition-monitoring
technology with Emerson's financial and technological resources,
longstanding commitment to engineering and development, and global
reach. CSI believes that the merger with Emerson will enhance CSI's
ability to compete in the marketplace and will enable CSI's stockholders
to participate in the enhanced prospects of the combined company.
To review the background and reasons for the merger in greater detail, see
page 8.
Q: When is the special meeting?
A: The special meeting will take place on December 29, 1997. At the
meeting, CSI stockholders will be asked to approve the merger and the
related merger agreement. Emerson stockholders do not need to vote on
the merger.
Q: What do I need to do now?
A: Please complete and mail the proxy card to us as soon as possible. If
you sign, date and mail your proxy card without indicating how you wish
to vote, your proxy will be counted as a vote in favor of approval of
the merger and the related merger agreement. If you fail to return your
proxy card and fail to vote at the meeting, the effect will be a vote
against the merger.
Q: What do I do if I want to change my vote?
A: You must deliver to CSI prior to the special meeting a later-dated, signed
proxy card or attend the special meeting in person and vote.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: You cannot vote shares held in "street name"; only your broker can. If
you do not provide your broker with instructions on how to vote your
shares, your broker will not be permitted to vote them, and the effect
will be a vote against the merger.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, CSI will send you written instructions
for exchanging your stock certificates.
Q: Will the value of the merger consideration change?
A: No. If the merger is completed, CSI stockholders will receive merger
consideration that will be no less than $29.65 for each share of CSI
common stock they own at the time the merger is consummated. As
explained above, the amount of cash and stock received by CSI
stockholders may change but the value of the merger consideration will
not be less than $29.65.
Q: Please explain how Emerson common stock will be valued.
A: Emerson common stock will be valued based on the average of its closing
price as reported on the New York Stock Exchange Composite Tape on each
of the last 10 trading days immediately preceding the date on which the
merger is consummated.
Q: Will I owe any federal income tax as a result of the merger?
A: CSI stockholders will owe federal income tax only on gain realized in
the Merger up to the amount of cash received for shares, including
fractional shares, of CSI common stock.
Q: Does Emerson pay dividends?
A: Unlike CSI, Emerson does pay regular cash dividends. Currently,
Emerson pays a quarterly dividend of $0.295 per share of Emerson common
stock. Emerson's Board of Directors may change that policy based on
business conditions, Emerson's financial condition and earnings and
other factors. Nevertheless, Emerson has increased its annual dividend
for the last 41 years.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. In
addition to CSI stockholder approval, CSI and Emerson must also obtain
certain regulatory approvals. We hope to complete the merger during
December 1997.
Q: Whom should I call with questions?
A. If you have any questions about the merger, please call Michele Ciechon,
Director of Investor Relations at CSI, at (423) 675-2110.
SUMMARY
This summary highlights selected information from this Proxy
Statement/Prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we have referred you. See "Where
You Can Find More Information" on page 46. We have included page references
in parentheses to direct you to a more complete description of the topics
presented in this summary.
The Companies
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
(423) 675-2110
CSI's primary business is the design, manufacture, and sale of a family of
high-tech instruments that help companies determine when their industrial
machines are in need of repair or adjustment. CSI also offers services to
help its customers better manage the maintenance of their equipment. CSI's
products and services help its customers keep their production lines
running and maintain the quality of their products which may be adversely
affected by an improperly functioning production line machine. CSI's
customers are primarily large manufacturing, processing or power generating
companies. In fiscal 1996, about 78% of CSI's sales occurred in the United
States and Canada.
Emerson Electric Co.
8000 W. Florissant Avenue
St. Louis, MO 63136
(314) 553-2000
Based in St. Louis, 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
acquisition. Emerson is now engaged principally in the worldwide design,
manufacture and sale of a broad range of electrical, electromechanical and
electronic products and systems. Sales for fiscal 1996 totaled $11.1 billion.
CSI's Reasons for the Merger (See page 10)
The merger will combine CSI's leadership in condition-monitoring technology
with Emerson's financial and technological resources, longstanding commitment
to engineering and development and global reach. CSI believes that the merger
with Emerson will enhance CSI's ability to compete in the marketplace and will
enable CSI's stockholders to participate in the enhanced prospects of the
combined company.
The Special Meeting
The special meeting will be held at 10:00 a.m. on December 29, 1997 at CSI's
headquarters, 835 Innovation Drive, Knoxville, Tennessee 37932. At the
special meeting, CSI stockholders will be asked to approve the merger and the
related merger agreement.
Recommendation to CSI Stockholders
The CSI Board of Directors believes that the merger is fair to you and in your
best interests and unanimously recommends that you vote "for" approval of the
merger and the related merger agreement.
Record Date; Voting Power
You are entitled to vote at the special meeting if you owned shares as of the
close of business on November 19, 1997, the Record Date.
There were 5,071,767 shares of CSI common stock outstanding on the Record
Date. CSI stockholders will have one vote at the special meeting for each
share of CSI common stock they own on the Record Date.
Stockholder Vote Required to Approve the Merger
The favorable vote of the holders of a majority of the outstanding shares of
CSI common stock is required to approve the merger and the related merger
agreement. Your failure to vote will have the effect of a vote against the
merger. Emerson stockholders will not vote on the merger.
Share Ownership of Management and Certain Stockholders
On the Record Date, CSI directors, executive officers and their affiliates
owned and were entitled to vote 1,840,079 shares of CSI common stock, or
approximately 36.28% of the shares of CSI common stock outstanding on the
Record Date.
The directors and executive officers of CSI have indicated that they intend to
vote the CSI common stock owned by them "for" approval of the merger and the
related merger agreement.
The Merger
The merger agreement (Annex A) is attached at the back of this Proxy
Statement/Prospectus. We encourage you to read the merger agreement as it is
the legal document that governs the merger.
What CSI Stockholders Will Receive in the Merger
If the merger is completed, you will receive no less than $29.65 for each
share of CSI common stock:
o $23.72 worth of Emerson common stock; and
o $5.93 in cash.
To determine the number of shares of Emerson stock you receive for each share
of CSI common stock, we will divide $23.72 by the average closing price of
Emerson common stock on the New York Stock Exchange on the 10 trading days
immediately before the merger closing date.
We intend the merger to be tax free to CSI stockholders, except to the extent
you receive cash. To preserve this tax treatment, we may have to provide you
with less cash and more stock. In no event will the value of the Emerson
stock that you receive, valued as of the date prior to the merger, be less
than 80% of the value of the total consideration.
Emerson will not issue any fractional shares in the merger. Instead, each CSI
stockholder otherwise entitled to a fractional share will receive a cash
payment equal to such stockholder's proportionate share of the net proceeds
resulting from the sale on the New York Stock Exchange of all fractional
shares resulting from the conversion of CSI common stock into the merger
consideration.
CSI stockholders should not send in their stock certificates for exchange
until instructed to do so later.
Ownership of Emerson After the Merger
Emerson will issue approximately 2.2 million shares of Emerson common stock to
CSI stockholders in the merger. Based on that number, following the merger,
CSI stockholders will own approximately 0.6% of the outstanding Emerson
common stock (assuming all CSI and Emerson stock options are exercised). This
information is based on the number of shares of CSI and Emerson common stock
outstanding on November 19, 1997.
Interests of Officers and Directors in the Merger
(See page 21)
CSI directors and certain officers have employment agreements, stock options
and other benefit plans and other arrangements that may provide them with
interests in the merger that are different from, or in addition to, yours.
Specifically, to satisfy a condition to the closing of the merger, Ronald G.
Canada, CSI's Chairman and Chief Executive Officer, and Kenneth R. Piety, Vice
Chairman, have agreed to enter into employment agreements providing for their
continued employment by CSI for five years after the merger. These agreements
will allow Messrs. Canada and Piety to continue receiving salary and benefits
from CSI if their employment with Emerson is terminated less than five years
after the merger under certain conditions.
In addition, CSI stock options granted to participants in CSI's incentive
plans, including CSI officers and directors of CSI, will, under the merger
agreement, to the extent not then vested or exercisable, vest and become
exercisable for shares of Emerson common stock immediately upon consummation
of the merger.
The Board of CSI was aware of these interests and considered them in
approving the merger.
Conditions to the Merger (See page 25)
The merger will be completed if certain conditions, including the following,
are met:
(1) the approval of CSI stockholders;
(2) there being no law or court order that prohibits the merger;
(3) the absence of a material breach by Emerson or CSI of its
representations, warranties or obligations under the merger agreement;
and
(4) the receipt of a legal opinion from CSI's counsel that the merger
will qualify as a tax-free reorganization.
Termination of the Merger Agreement (See page 26)
CSI and Emerson may agree to terminate the merger agreement without completing
the merger.
The merger agreement may also be terminated in certain other circumstances, as
follows:
(1) Either company may terminate the merger agreement if:
(a) the merger is not completed on or before April 30, 1998.
However, neither CSI nor Emerson may terminate the merger
agreement if its breach of the merger agreement is the reason
the merger has not been completed;
(b) the stockholders of CSI do not approve the merger;
(c) the other party materially breaches its representations or
agreements in the merger agreement and such breach cannot be
cured; or
(d) a law or final court order permanently prohibits the merger.
(2) CSI may also terminate the merger agreement in order to
concurrently enter into an acquisition agreement with respect to a
superior proposal made by a third party.
Termination Fee and Expenses (See page 26)
CSI must pay Emerson a termination fee of $5 million in cash and Emerson's
reasonable out-of-pocket expenses incurred in connection with the merger (in
an amount not to exceed $1 million) if the merger agreement is terminated in
the following circumstances:
o the stockholders of CSI do not approve the merger (but only if another
acquisition proposal with respect to CSI is publicly announced prior to
the special meeting); or
o CSI terminates the merger agreement in order to enter concurrently into
an acquisition agreement with respect to a superior proposal made by a
third party.
Stockholder Option Agreement (See page 27 and Annex B)
As an inducement for Emerson to enter into the merger agreement, Ronald G.
Canada, the Chairman and Chief Executive Officer of CSI, has entered into a
stockholder option agreement with Emerson. Pursuant to this agreement, Mr.
Canada has granted to Emerson:
(i) an option to purchase all of Mr. Canada's shares of CSI common
stock (approximately 22% of CSI's outstanding common stock) at a
price of $29.65 per share in cash (the option becomes exercisable
for a period of thirty business days upon termination of the merger
agreement in the same circumstances that the $5 million termination
fee referred to above is payable to Emerson); and
(ii) a proxy to vote all of Mr. Canada's shares of CSI common stock in
favor of the merger and against certain transactions that could
impede consummation of the merger.
The grant of the option and proxy to Emerson, together with the termination
fee and CSI's expense reimbursement obligation, may have the effect of
discouraging entities other than Emerson from attempting to merge with, or
acquire, CSI.
Regulatory Approvals (See page 14)
CSI and Emerson are both required to make filings with or obtain approvals
from certain regulatory authorities in connection with the merger, including
antitrust authorities. It is expected that CSI and Emerson will obtain all
required regulatory approvals prior to the special meeting.
Accounting Treatment (See page 12)
The merger will be accounted for by Emerson as a purchase of a business.
Under this method of accounting, the assets and liabilities of CSI will be
recorded at their fair value, and any excess of Emerson's purchase price over
such fair value will be goodwill. The revenues and expenses of CSI will be
included in Emerson's financials from the date of consummation of the merger.
The pro forma effect of the merger on the consolidated financial statements of
Emerson is not material.
Fairness Opinion of Financial Advisor (See page 17 and Annex C)
In deciding to approve the merger, CSI's Board considered an opinion from its
financial advisor, McDonald & Company Securities, Inc., as to the fairness of
the merger consideration to CSI's stockholders from a financial point of view.
This opinion is attached as Annex C to this Proxy Statement/Prospectus. We
encourage you to read this opinion.
Certain Federal Income Tax Consequences (See page 13)
Counsel to CSI will deliver an opinion to the effect that neither CSI nor its
stockholders will recognize gain or loss for federal income tax purposes as a
result of the merger, except for taxes payable by the stockholders on gain up
to the amount of cash received. Receipt of this legal opinion is a condition
to the merger.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult
your tax advisors for a full understanding of the tax consequences of the
merger to you.
No Appraisal Rights (See page 14)
Under Tennessee law, CSI stockholders do not have any right to an appraisal of
the value of their CSI shares in connection with the merger.
Comparative Per Share Market Price Information (See page 16)
CSI common stock is listed on the Nasdaq National Market, and Emerson common
stock is listed on the New York Stock Exchange and the Chicago Stock Exchange.
On October 16, 1997, the last full trading day prior to the public announcement
of the proposed merger, CSI common stock closed at $20.44 and Emerson common
stock closed at $56.44. On November 21, 1997, CSI common stock closed at $29.00
and Emerson common stock closed at $54.19.
Listing of Emerson Common Stock
Emerson has listed the shares of its common stock to be issued in the merger
on the New York Stock Exchange.
SELECTED HISTORICAL FINANCIAL DATA
Sources of Information
CSI and Emerson are providing the following information to aid
you in your analysis of the financial aspects of the merger. This information
was derived from the audited and unaudited financial statements of CSI and
Emerson for their fiscal years 1992 through 1996 and, with respect to CSI, for
the nine months ended September 30, 1996 and 1997 and, with respect to
Emerson, for the nine months ended June 30, 1996 and 1997.
The information is only a summary and you should read it in
conjunction with the historical financial statements (and related notes)
contained in the annual reports on Form 10-K and other information that CSI and
Emerson have filed with the Securities and Exchange Commission. See "Where
You Can Find More Information" on page 34.
CSI
Selected Consolidated Financial Data
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine months ended
September 30,
(unaudited) Year ended December 31,
------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $45,376 $33,175 $50,046 $41,772 $31,165 $26,350 $23,503
Net income.................. 2,213 2,637 4,534 2,947 1,798 307 1,093
Net income per share........ 0.43 0.52 0.90 0.72 0.51 0.08 0.29
Total assets................ 46,132 35,296 45,273 32,151 19,725 15,361 15,145
Long-term debt, including
current maturities......... 0 18 13 32 3,600 5,326 3,769
</TABLE>
Emerson
Selected Consolidated Financial Data
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Nine months ended June 30,
(unaudited) Year ended September 30,
-------------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $9,142.5 $8,282.4 $11,149.9 $10,012.9 $8,607.2 $8,173.8 $7,706.0
Net earnings................ 831.9 752.3 1,018.5 907.7 788.5 708.1 662.9
Earnings per common share... 1.87 1.68 2.27 2.03 1.76 1.57 1.48
Cash dividends per share.... 0.81 0.735 0.98 0.89 0.78 0.72 0.69
Total assets................ 11,096.5 10,445.6 10,481.0 9,399.0 8,215.0 7,814.5 6,627.0
Long-term debt.............. 654.7 786.2 772.6 208.6 279.9 438.0 448.0
</TABLE>
- -------------
o All per share data reflect Emerson's 1997 two-for-one stock split.
o Income before cumulative effect of change in accounting for postemployment
benefits ($21.3 million; $0.05 per share) was $929.0 million in 1995. Net
earnings in 1995 includes non-recurring items which were substantially
offset by the accounting change.
o Income before cumulative effect of change in accounting for postretirement
benefits ($115.9 million; $0.26 per share) was $904.4 million in 1994. Net
earnings in 1994 includes non-recurring items which were substantially
offset by the accounting change. See Notes 2 and 7 of Notes to Consolidated
Financial Statements on pages 33, 35 and 36 of the 1996 Annual Report for
information regarding these items and Emerson's acquisition and divestiture
activities.
o On November 4, 1997, Emerson announced its financial results for the fiscal
year ended September 30, 1997. Net sales, net earnings and earnings per
common share were $12,298.6 million, $1,121.9 million and $2.52,
respectively, for fiscal 1997.
COMPARATIVE PER SHARE DATA
The following table sets forth earnings, dividends and book
values per share of Emerson common stock and CSI common stock on a historical
basis and on an equivalent basis for CSI. The equivalent information presented
is based on an assumed exchange ratio of .4203 of a share of Emerson Common
Stock for each share of CSI Common Stock (see note 2). No assurance can be
given that the assumed exchange ratio will approximate the actual exchange
ratio. The actual exchange ratio will be based on the price of a share of
Emerson common stock prior to the merger. Pro forma combined information is
not 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 consolidated financial statements and
notes thereto of Emerson and CSI included, or incorporated by reference in,
this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
Equivalent of One
CSI Share Based
Emerson on Assumed
Historical CSI Historical Exchange Ratio(2)
---------- -------------- ------------------
<S> <C> <C> <C>
Most Recent Fiscal Year(1):
Net earnings.............................. $2.27 $0.90 $0.95
Cash dividends............................ 0.98 -- 0.41
Book value at end of fiscal year ......... 11.96 6.25 5.03
</TABLE>
<TABLE>
Equivalent of One
CSI Share Based
Emerson on Assumed
Historical CSI Historical Exchange Ratio(2)
---------- -------------- ------------------
<S> <C> <C> <C>
Most Recent Nine Month Interim Period(3):
Net earnings.................................. $1.87 $0.43 $0.79
Cash dividends................................ 0.81 -- 0.34
Book value at end of interim period........... 12.45 6.69 5.23
</TABLE>
<TABLE>
Equivalent of One
CSI Share Based
on Assumed
Emerson CSI Exchange Ratio(2)
------- ------ -----------------
<S> <C> <C> <C>
Market value per share at October 16, 1997.......... $56.44 $20.44 $23.72
Cash consideration per share........................ 5.93
------
Total............................................ 29.65
======
</TABLE>
</FN>
- --------------
(1) Information presented for Emerson fiscal year ended September 30, 1996 and
CSI fiscal year ended December 31, 1996.
(2) The assumed exchange ratio was determined by dividing the value of the
stock portion of the merger consideration ($23.72 per share of CSI
common stock) by the price of Emerson common stock on October 16, 1997
($56.44 per share of Emerson common stock) and does not take account of
the cash portion of the merger consideration ($5.93 per share of CSI
common stock).
(3) Information presented for Emerson nine months ended June 30, 1997 and CSI
nine months ended September 30, 1997.
THE MERGER
The discussion in this Proxy Statement/Prospectus of the Merger
and the principal terms of the Merger Agreement and the related Stockholder
Option Agreement is subject to, and qualified in its entirety by reference to,
the Merger Agreement and the Stockholder Option Agreement, copies of which are
attached to this Proxy Statement/Prospectus as Annex A and Annex B,
respectively, and which are incorporated herein by reference.
General
Computational Systems, Incorporated, a Tennessee corporation
("CSI"), and Emerson Electric Co., a Missouri corporation ("Emerson"), are
furnishing this Proxy Statement/Prospectus to holders of common stock, no par
value per share, of CSI ("CSI Common Stock"), in connection with the
solicitation of proxies by the CSI Board of Directors (the "CSI Board")
relating to a special meeting of holders of CSI Common Stock (together with any
adjournments or postponements thereof, the "Special Meeting") to be held on
December 29, 1997.
At the Special Meeting, holders of CSI Common Stock will be
asked to vote upon a proposal to approve and adopt an Agreement and Plan of
Merger dated as of October 17, 1997 (the "Merger Agreement") among Emerson,
CSI and a wholly-owned subsidiary of Emerson ("Merger Subsidiary").
The Merger Agreement provides, on the terms and subject to the
conditions set forth therein, (i) for the merger of Merger Subsidiary into CSI
(the "Merger"), with CSI surviving the Merger as a wholly-owned subsidiary of
Emerson, and (ii) that each share of CSI Common Stock outstanding immediately
prior to the Effective Time, as defined herein (other than shares owned by
CSI, Emerson or any subsidiary of Emerson), will be converted into the right
to receive (the "Merger Consideration") $5.93 in cash and shares of common
stock, par value $0.50 per share, of Emerson ("Emerson Common Stock") having a
value of $23.72. The Merger will become effective (the "Effective Time") at
the time articles of merger are filed with the Tennessee Secretary of State
and a certificate of merger is filed with the Delaware Secretary of State (or
at such later time as is specified in the articles of merger and certificate
of merger), which is expected to occur as soon as practicable after the last
of the conditions precedent to the Merger set forth in the Merger Agreement
has been satisfied or waived.
Background of the Business Relationship and the Merger
In April 1997, CSI was contacted by Emerson to set up a meeting
to discuss their respective products. On May 13, 1997, at a meeting at CSI's
headquarters in Knoxville, Tennessee, various representatives of Emerson made
a presentation to representatives of CSI regarding Emerson and its products
and motor-monitoring technology trends. At this meeting, the participants
also discussed the business and products of CSI. At the end of the meeting,
Emerson indicated an interest in exploring a possible business combination
involving CSI and Emerson and discussed in general terms the synergies that
might result from such a business combination. At that time, Ronald G.
Canada, Chairman and Chief Executive Officer of CSI, joined the meeting to
listen to those discussions. Mr. Canada indicated to Emerson that CSI would
consider a possible business combination with Emerson but that such a business
combination was not a high priority for CSI at such time.
On May 22, 1997, George Buckley, then President of U.S.
Electrical Motors ("USEM"), a division of Emerson, met with Mr. Canada at
CSI's headquarters to discuss further a possible business combination
involving CSI and Emerson. At this meeting, Mr. Canada inquired about the
price Emerson would be willing to offer for the outstanding shares of CSI
Common Stock. Mr. Buckley stated that Emerson would need to obtain and review
certain information regarding CSI before Emerson could answer that question.
In order to facilitate Emerson's review, Mr. Canada agreed that CSI would
provide Emerson with certain non-public and proprietary CSI information. On
June 23, 1997, CSI and Emerson executed a confidentiality agreement.
On August 18, 1997, Mr. Canada met with Jean-Paul Montupet,
Executive Vice President of Emerson, and Steve Wolpert, President of USEM. At
this meeting, Messrs. Montupet and Wolpert expressed Emerson's interest in
continuing its review of CSI, its business and its strategies. During this
meeting, however, there were no discussions regarding the structure of any
business combination involving CSI and Emerson or the price at which Emerson
would be willing to acquire outstanding shares of the CSI Common Stock.
On August 25, 1997, Mr. Canada met with Mr. Montupet and
Charles F. Knight, Chairman and Chief Executive Officer of Emerson. At this
meeting, Mr. Canada described CSI, its business and its strategies, and Mr.
Knight confirmed Emerson's interest in engaging in a business combination with
CSI. During this meeting, the parties did not discuss the structure of any
transaction or any price for outstanding shares of CSI Common Stock.
During the period May 1997 through September 1997, Mr. Canada
had informal exchanges from time to time with the CSI Board regarding
Emerson's interest in CSI. In addition, at a meeting of the CSI Board held on
July 24, 1997, Mr. Canada discussed the substance of CSI's meetings and
discussions to date with Emerson. Also during this period, CSI was actively
reviewing and analyzing publicly available information regarding Emerson and
its business, strategies and products.
On September 4, 1997, McDonald & Company Securities, Inc.
("McDonald") was engaged by CSI to act as its financial advisor in connection
with the possible business combination with Emerson.
On September 16, 1997, Emerson representatives Robert M. Cox,
Jr., Senior Vice President - Acquisitions and Development, and Robert M. Levy,
Assistant Vice President - Development met with Ralph M. Della Ratta, Jr.,
Senior Managing Director, and Mark A. Filippell, Managing Director, of
McDonald to discuss CSI and a possible business combination involving CSI and
Emerson. In particular, the representatives from Emerson and McDonald
discussed the value of CSI Common Stock and the synergies that could result
from Emerson's acquisition of CSI.
On October 1, 1997, a number of representatives of Emerson,
including senior level members of management, toured CSI's operating
facilities and engaged in extensive meetings with CSI's management regarding
CSI's services, products, technology and five-year financial plan. In
addition, throughout the months of August through October, Emerson contacted
CSI representatives from time to time to discuss various questions Emerson had
regarding information CSI had provided to Emerson.
On October 8, 1997, Messrs. Canada, Della Ratta, Montupet, Cox
and Levy met at Emerson's headquarters in St. Louis, Missouri. At this
meeting, Emerson and CSI engaged in extensive negotiations regarding the price
Emerson would pay for the CSI Common Stock. At the conclusion of these
negotiations, Emerson presented a proposal to acquire all of the outstanding
shares of CSI Common Stock for $29.65 per share in a merger that would qualify
as a tax-free reorganization. The purchase price would be payable primarily
in Emerson Common Stock, although Emerson agreed that a portion of the merger
consideration could be payable in cash. Emerson's proposal was subject to
Emerson's obtaining further comfort regarding CSI's technology and five-year
financial plan. Mr. Canada indicated to Emerson's representatives that he
would submit Emerson's proposal to the CSI Board.
On October 9, 1997, the CSI Board held a telephonic meeting
during which Mr. Canada reviewed his discussions with Emerson and Emerson's
proposal for a merger with CSI that would qualify as a tax-free
reorganization. Following a thorough discussion of Emerson's proposal among
the members of the CSI Board, which included discussions with representatives
of McDonald and representatives of Jones, Day, Reavis & Pogue, CSI's legal
counsel, the CSI Board determined that it would be in the best interests of
CSI's stockholders to further explore a merger of CSI with Emerson whereby
CSI's stockholders would each receive approximately 20% of the purchase price
for their shares in cash and 80% in Emerson Common Stock. The CSI Board
unanimously authorized Mr. Canada to commence negotiations with Emerson with
respect to a definitive merger agreement upon such terms. After that meeting,
Mr. Canada contacted Emerson to advise it of the decision of the CSI Board.
On October 10, 1997, representatives of Emerson reviewed, at
CSI's headquarters, CSI's patents and other intellectual property. On October
11, 1997, representatives of Emerson and CSI met in Knoxville, Tennessee to
discuss CSI's fourth-quarter forecast and five-year financial plan.
On October 11, 1997, Emerson provided to CSI and its advisors a
draft of a definitive merger agreement and stockholder option agreement with
respect to the proposed business combination. On October 13, 1997, the CSI
Board held a telephonic meeting to review the draft merger agreement. At this
meeting, CSI's legal counsel discussed with the CSI Board the terms of the
draft merger agreement, including the principal issues raised by such
agreement. Following a thorough discussion, the CSI Board directed Mr. Canada
and CSI's financial and legal advisors to continue negotiations with Emerson.
During the week of October 13, 1997, negotiations regarding the
definitive merger agreement and stockholder option agreement were conducted
between Emerson and CSI and their respective financial and legal advisors.
During this period, the parties engaged in extensive negotiations with respect
to Emerson's request for an option relating to certain shares of CSI Common
Stock. After numerous discussions with its legal and financial advisors, the
CSI Board determined that the grant of such a stock option was necessary to
induce Emerson to enter into the merger agreement and indicated that it would
approve Mr. Canada's grant of such an option relating to his shares.
On October 16, 1997, the respective legal advisors of Emerson
and CSI finalized the definitive merger agreement and the stockholder option
agreement.
On October 17, the CSI Board held a telephonic meeting to
discuss the proposed terms and conditions of the definitive Merger Agreement.
During this meeting, Mr. Canada reviewed the status of the negotiations, and
CSI's legal counsel reviewed the terms and conditions of the definitive Merger
Agreement and Stockholder Option Agreement, each as finally negotiated, and
the legal duties and responsibilities of the CSI Board in connection with the
proposed transaction. McDonald presented an analysis of the financial terms
of the Merger, including a discussion of valuation methodologies and analyses
used in evaluating the proposed transaction. After its presentation, McDonald
provided an oral opinion (subsequently confirmed in writing) that as of
October 17, 1997, and based on the assumptions contained in its opinion, the
Merger Consideration was fair, from a financial point of view, to CSI's
stockholders. Following a thorough discussion, the CSI Board unanimously
approved the Merger Agreement and the Stockholder Option Agreement and
authorized its officers to execute the Merger Agreement. Shortly after the
meeting of the CSI Board had concluded, the Merger Agreement and the
Stockholder Option Agreement were executed, and a press release announcing the
Merger Agreement was issued by CSI.
CSI's Reasons for the Merger; Recommendation of the CSI Board
Information and Factors Considered by the CSI Board
At its special meeting held on October 17, 1997, the CSI Board,
by unanimous vote, (i) determined that the terms of the Merger Agreement and
the transactions contemplated thereby, including the Merger and the Stockholder
Option Agreement, are fair to and in the best interests of CSI and its
stockholders, (ii) adopted and approved the Merger Agreement and the
transactions contemplated thereby and (iii) resolved to recommend that CSI
stockholders approve the Merger and the Merger Agreement. In reaching the
foregoing conclusions and recommendations, the CSI Board considered a number
of factors, including the following:
(a) Reports from management and legal advisors on the
specific terms of the relevant agreements, including the Merger Agreement
and Stockholder Option Agreement, and other matters, including the fact
that the Merger is structured to qualify as a tax-free reorganization and
that CSI stockholders will not have to pay tax with respect to the Emerson
Common Stock they receive in the Merger.
(b) The companies' respective historical financial condition,
results of operations and anticipated future results; current financial
market conditions and historical market prices; trading information for CSI
Common Stock and Emerson Common Stock; and the consideration to be received
by CSI stockholders in the Merger.
(c) Analysis of how access to Emerson's significant resources
would enable CSI to better implement its strategic plan.
(d) The ability of CSI's stockholders to participate in the
future prospects of Emerson (including the enhanced prospects of CSI as a
part of Emerson) through ownership of Emerson Common Stock.
(e) The financial and other analyses presented by McDonald,
including the oral opinion of McDonald (subsequently confirmed in writing)
that the Merger Consideration was fair to CSI's stockholders from a
financial point of view as of the date of such opinion. See "Opinion of
CSI's Financial Advisor" below.
(f) The fact that the Merger Agreement does not preclude CSI
from (i) participating in negotiations with, and furnishing information
(pursuant to a customary confidentiality agreement) to, persons or entities
that seek to engage in discussions or negotiations, or that request
information, in connection with a bona fide written or publicly announced
takeover proposal if the CSI Board determines, in good faith based on the
advice of outside counsel, that it is necessary to do so in order to comply
with its fiduciary duties, or (ii) terminating the Merger Agreement to
accept a bona fide takeover proposal if the CSI Board determines that the
terms of such proposal in its good faith reasonable judgment, based on a
written opinion of McDonald or another nationally recognized financial
advisor, are more favorable to CSI's stockholders than the Merger and for
which financing, to the extent required by such proposal, is committed
(such termination being subject to the payment of up to $1 million of
Emerson's out-of-pocket expenses and a $5 million termination fee)
("Superior Proposal").
(g) The fact that third parties are not precluded from
bidding by the Stockholder Option Agreement, which was necessary to induce
Emerson to enter into the Merger Agreement and pursuant to which Mr.
Canada has granted to Emerson (i) an irrevocable, unconditional option to
purchase all of Mr. Canada's CSI Common Stock for a thirty business day
period commencing upon the termination of the Merger Agreement as a result
of (A) the public announcement by a third party of a takeover proposal and
the subsequent rejection of the Merger and the Merger Agreement by CSI
stockholders at the Special Meeting, or (B) the decision of the CSI Board
to enter into an acquisition agreement with respect to a Superior Proposal
and (ii) an irrevocable proxy to vote all of Mr. Canada's CSI Common Stock
in favor of the Merger and the Merger Agreement and against all
transactions that could reasonably be expected to impede or delay
consummation of the Merger and the transactions contemplated by the Merger
Agreement.
(h) The market prices and financial data related to companies
engaged in similar businesses to CSI and prices and premiums paid in recent
acquisitions of similar companies.
(i) The absence of any term or condition in the Merger
Agreement that in the view of the CSI Board is unduly onerous or could
materially impede or impair the consummation of the Merger.
(j) The financial condition and business reputation of
Emerson and the ability of Emerson to complete the Merger in a timely
manner.
(k) The amount of consideration offered to CSI's
stockholders, which represents a premium of 62%, 73%, 87% and 108% over the
average CSI closing prices for the 30-day period, the 45-day period, the
60-day period and the 90-day period, respectively, preceding October 17,
1997 and a premium of approximately 65% over the average price at which CSI
Common Stock has traded in the past year.
The CSI Board also considered (i) the risk that the benefits
sought in the Merger would not be obtained, (ii) the risk that the Merger
would not be consummated, (iii) the effect of the public announcement of the
Merger on CSI's sales, customer and supplier relationships, operating results
and ability to retain employees, and on the trading price of CSI Common Stock,
(iv) the potentially substantial management time and effort that will be
required to consummate the Merger and integrate the operations of CSI with
Emerson and (v) the possibility that the Stockholder Option Agreement and
certain provisions of the Merger Agreement might have the effect of
discouraging other persons potentially interested in merging with or acquiring
CSI. In the judgment of the CSI Board, the potential benefits of the Merger
outweighed all these considerations.
The foregoing discussion of the information and factors
considered by the CSI Board is not intended to be exhaustive but includes all
material factors considered. The CSI Board did not assign relative weight to
the above factors. Rather, it viewed its position and recommendation as being
based on the totality of the information presented and considered. In
addition, individual members of the CSI Board may have given different weight
to different factors.
Recommendation of the CSI Board. The CSI Board unanimously
recommends that the CSI stockholders vote "for" approval of the Merger and the
Merger Agreement.
Emerson's Reasons for the Merger
Emerson anticipates substantial growth in the market for
predictive maintenance hardware and software and believes that CSI's existing
client and manufacturing base will combine with Emerson's distribution
networks and electronics expertise to enable CSI to grow faster than otherwise
possible.
Opinion of CSI's Financial Advisor
McDonald has acted as financial advisor to CSI in connection
with the Merger. As part of its role as financial advisor to CSI, McDonald
was engaged to render its opinion as to the fairness, from a financial point
of view, to CSI's stockholders of the consideration to be offered to such
stockholders in the Merger.
The full text of the written opinion of McDonald is attached as
Annex C and is incorporated herein by reference. CSI stockholders should read
such opinion for a discussion of assumptions made, factors considered and
limitations on the review undertaken by McDonald in rendering its opinion.
The summary of the McDonald opinion set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
Forward-Looking Statements May Prove Inaccurate
This document (including documents that have been incorporated
herein by reference) includes various forward-looking statements about CSI,
Emerson and the combined company that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future results
of operations of CSI, Emerson and the combined company after the Effective
Time, set forth, among other places, under "Questions and Answers About The
Merger," "Summary," "--Background of the Business Relationship and the
Merger," "--CSI's Reasons for the Merger; Recommendation of the CSI Board,"
"--Emerson's Reasons for the Merger," "--Opinion of CSI's Financial Advisor"
and those preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, CSI and Emerson claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Accounting Treatment
The Merger will be accounted for by Emerson as a purchase of a
business. Under this method of accounting, the assets and liabilities of CSI
will be recorded at their fair value, and any excess of Emerson's purchase
price over such fair value will be accounted for as goodwill. The revenues
and expenses of CSI will be included in Emerson's financials from the date of
consummation of the Merger. The pro forma effect of the Merger on the
consolidated financial statements of Emerson is not material.
Certain U.S. Federal Income Tax Consequences
Tax Opinion. Consummation of the Merger is conditioned upon
the receipt of a legal opinion of Jones, Day, Reavis & Pogue, CSI's legal
counsel, to the effect that the Merger will qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986 (the
"Code") and that each of CSI and Emerson will be a party to that
reorganization within the meaning of Section 368(b) of the Code. If CSI
waives the condition to its obligation to consummate the Merger relating to
the receipt of the legal opinion referred to above, CSI will resolicit proxies
from its stockholders with respect to the Merger.
In rendering this opinion, CSI's legal counsel will rely upon
representations contained in letters from CSI, Emerson and certain
stockholders of CSI delivered for the purpose of the opinion. The opinion
will also assume that the Merger will be consummated in accordance with the
provisions of the Merger Agreement.
Certain Consequences of Reorganization Status. Provided that
the Merger constitutes a reorganization within the meaning of Section 368(a)
of the Code, and subject to the discussion below under "Additional
Considerations," a stockholder will generally recognize capital gain, but not
loss, for U.S. federal income tax purposes with respect to the receipt of
Emerson Common Stock and cash in exchange for CSI Common Stock pursuant to the
Merger. The amount of gain, if any, recognized by a stockholder will be equal
to the lesser of (i) the amount of gain realized (i.e., the excess of the
amount of cash and the fair market value of Emerson Common Stock received in
the Merger over the tax basis of the CSI Common Stock surrendered) and (ii)
the amount of cash (other than cash received in lieu of a fractional share of
Emerson Common Stock) received in the Merger. In the case of a stockholder
that owns more than one "block" of CSI Common Stock, the amount of gain
recognized should be calculated separately with respect to each "block"
surrendered in the Merger. For purposes of such calculation, the aggregate
amount of cash and Emerson Common Stock received by a stockholder will be
allocated proportionally among the "blocks" of CSI Common Stock surrendered in
exchange therefor pursuant to the Merger. In the case of an individual
stockholder, capital gain recognized with respect to the receipt of Emerson
Common Stock and cash in exchange for CSI Common Stock will generally be
subject to U.S. federal income tax at a maximum rate of (i) 20%, if the
stockholder held such CSI Common Stock for more than 18 months at the
Effective Time and (ii) 28%, if the stockholder held such CSI Common Stock for
more than one year, but not more than 18 months at the Effective Time. The
aggregate tax basis of the Emerson Common Stock received by a stockholder will
be the same as the aggregate tax basis of the CSI Common Stock surrendered in
exchange therefor pursuant to the Merger, decreased by the total amount of
cash received (other than cash received in lieu of a fractional share of
Emerson Common Stock) and increased by the amount of gain recognized. The
holding period of the Emerson Common Stock will include the holding period of
the CSI Common Stock surrendered in exchange therefor. A stockholder of CSI
who receives cash in lieu of a fractional share of Emerson Common Stock will
generally be treated as having received such fractional share of Emerson
Common Stock and sold such share in a taxable transaction. Accordingly, such
stockholder will recognize gain or loss equal to the difference, if any,
between the amount of cash received and such stockholder's adjusted tax basis
in the fractional share interest.
Additional Considerations. The gain recognized should be
treated as capital gain provided the requirements of Section 302 of the Code
are satisfied. If those requirements are not satisfied, the gain recognized
could be treated as dividend income. In order to determine whether those
requirements are satisfied, a stockholder is treated as receiving solely
Emerson Common Stock in the Merger (instead of the combination of shares of
Emerson Common Stock and cash actually received) and then receiving cash from
Emerson in a hypothetical redemption of the additional shares of Emerson
Common Stock a CSI stockholder would be treated as having received. The
hypothetical redemption will satisfy the requirements of Section 302 if it is
"not essentially equivalent to a dividend." Whether such hypothetical
redemption of Emerson Common Stock is "not essentially equivalent to a
dividend" depends on the individual facts and circumstances of each
stockholder but in any event must result in a meaningful reduction of a
stockholder's proportionate stock interest in Emerson. Generally, in the case
of a CSI stockholder whose stock interest in Emerson (relative to the total
number of Emerson shares outstanding) is minimal, and who exercises no control
or management power over the affairs of Emerson, any actual reduction in
proportionate interest will be treated as "meaningful". Because of the
complexity of the test under Section 302 of the Code, stockholders are urged
to consult their own tax advisors regarding the proper treatment of the gain
recognized by such stockholder in the Merger.
Backup Withholding. Unless an exemption applies, Emerson's
exchange agent will be required to withhold 31% of any cash payments to which
a stockholder or other payee is entitled pursuant to the Merger, unless the
stockholder or other payee provides his or her tax identification number
(social security number or employer identification number) and certifies that
such number is correct. Each stockholder and, if applicable, each other payee
is required to complete and sign the Form W-9 that will be included as part of
the transmittal letter sent to CSI stockholders by Emerson to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to Emerson and the exchange agent.
The foregoing discussion is intended only as a summary of the
material U.S. federal income tax consequences of the Merger and does not
purport to be a complete analysis or description of all potential tax effects
of the Merger. In addition, the discussion does not address all of the tax
consequences that may be relevant to particular taxpayers in light of their
personal circumstances or to taxpayers subject to special treatment under the
Code (for example, insurance companies, financial institutions, dealers in
securities, tax-exempt organizations, foreign corporations, foreign
partnerships or other foreign entities and individuals who are not citizens or
residents of the United States).
The foregoing discussion is based upon the provisions of the
Code, applicable Treasury regulations thereunder, Internal Revenue Service
rulings and judicial decisions, as in effect as of the date of this Proxy
Statement/Prospectus. There can be no assurance that future legislative,
administrative or judicial changes or interpretations will not affect the
accuracy of the statements or conclusions set forth herein. Any such change
could apply retroactively and could affect the accuracy of such discussion. No
rulings have been or will be sought from the Internal Revenue Service
concerning the tax consequences of the Merger.
No information is provided herein with respect to the tax
consequences, if any, of the Merger under applicable foreign, state, local or
other tax laws.
Each stockholder of CSI is urged to consult such stockholder's
own tax advisor as to the specific tax consequences to such stockholder of the
Merger under U.S. federal, state, local or any other applicable tax laws.
Regulatory Approvals
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (the "HSR
Act"), consummation of the Merger was prohibited until notifications were given
and certain information was furnished to the Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and specified waiting period requirements were
satisfied. On November 6, 1997, CSI and Emerson filed the required
notification and report forms under the HSR Act with the FTC and the Antitrust
Division. On November 18, 1997, early termination of the waiting period under
the HSR Act was granted, thereby permitting consummation of the Merger.
Notwithstanding the grant of early termination, the FTC and the Antitrust
Division have the authority to challenge the Merger on antitrust grounds
before or after the Merger is completed. Each state in which CSI or Emerson
has operations may also review the Merger under state antitrust laws.
Regulatory approvals or filings may be required in one or more
additional jurisdictions.
CSI and Emerson believe that they will obtain all required
regulatory approvals prior to the Special Meeting.
No Appraisal Rights
Under the Tennessee Business Corporation Act (the "TBCA"),
stockholders of CSI have no right to dissent from the Merger, because CSI
Common Stock is traded on the Nasdaq National Market.
Federal Securities Laws Consequences; Resale Restrictions
This Proxy Statement/Prospectus does not cover resales of the
Emerson Common Stock to be received by the stockholders of CSI upon
consummation of the Merger, and no person is authorized to make any use of
this Proxy Statement/Prospectus in connection with any such resale.
All shares of Emerson Common Stock received by CSI stockholders
in the Merger will be freely transferable, except that shares of Emerson
Common Stock received by persons who are deemed to be "affiliates" (as such
term is defined under the Securities Act of 1933, as amended (the "1933 Act"))
of CSI may be resold by them only in transactions permitted by the resale
provisions of Rule 145 (or Rule 144 in the case of such persons who become
affiliates of Emerson) or as otherwise permitted under the 1933 Act. Persons
who may be deemed to be affiliates of CSI or Emerson generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of CSI
or Emerson as well as significant stockholders. The Merger Agreement requires
CSI to use its reasonable best efforts to cause each of its affiliates to
execute a written agreement to the effect that such persons will not offer or
sell or otherwise dispose of any of the shares of Emerson Common Stock issued
to them in the Merger in violation of the 1933 Act or the rules and
regulations promulgated by the Securities and Exchange Commission (the "SEC")
thereunder.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Emerson Common Stock is listed on the New York Stock Exchange
(the "NYSE") and the Chicago Stock Exchange, and CSI Common Stock is listed on
the Nasdaq National Market (the "NNM"). The Emerson ticker symbol on the NYSE
is "EMR". The CSI ticker symbol on the NNM is "CSIN".
The table below sets forth, for the calendar quarters
indicated, the reported high and low closing prices of Emerson Common Stock as
reported on the NYSE Composite Transaction Tape and of CSI Common Stock as
reported by the NNM, in each case based on published financial sources.
<TABLE>
<CAPTION>
Emerson Common Stock(1) CSI Common Stock(2)
------------------------------------- --------------------
Market Price Dividend Market Price
-------------------- -------- ---------------------
High Low High Low
------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
1995
First Quarter............................... $33.563 $30.750 $0.215 n/a n/a
Second Quarter.............................. 36.000 32.063 0.215 n/a n/a
Third Quarter............................... 37.688 34.875 0.245 $17.250 $12.500
Fourth Quarter.............................. 40.875 34.313 0.245 16.875 14.625
1996
First Quarter............................... 43.375 38.875 0.245 19.250 14.000
Second Quarter.............................. 45.188 38.750 0.245 24.380 17.500
Third Quarter............................... 45.813 39.375 0.245 22.250 15.750
Fourth Quarter.............................. 51.750 43.750 0.270 19.630 14.750
1997
First Quarter............................... 52.625 45.000 0.270 23.000 17.500
Second Quarter.............................. 57.500 45.000 0.270 20.750 11.875
Third Quarter............................... 60.375 52.313 0.270 19.125 13.625
Fourth Quarter (through November 21, 1997).. 58.250 49.750 0.295 29.500 19.250
</TABLE>
- ------------
(1) Adjusted for Emerson's 1997 two-for-one stock split.
(2) CSI has not paid dividends during the periods presented.
On October 16, 1997, the last full trading day prior to the
public announcement of the proposed Merger, the closing price of Emerson
Common Stock on the NYSE Composite Transaction Tape was $56.44 per share and
the closing price of CSI Common Stock on the NNM was $20.44 per share. On
November 21, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the closing price of Emerson Common Stock on
the NYSE Composite Transaction Tape was $54.19 per share and the closing
price of CSI Common Stock on the NNM was $29.00 per share.
Stockholders are urged to obtain current market quotations
prior to making any decision with respect to the Merger.
ROLE OF FINANCIAL ADVISOR
On September 4, 1997, the CSI Board retained McDonald to serve
as its financial advisor in connection with the transaction and to render an
opinion to the CSI Board concerning the fairness, from a financial point of
view, to the stockholders of CSI of the Merger Consideration. McDonald was
retained by the CSI Board on the basis of, among other things, its experience
and expertise and familiarity with CSI and the industry. As part of its
investment banking business, McDonald is customarily engaged in the valuation
of businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for
corporate and estate planning purposes.
Representatives of McDonald attended the October 17, 1997
meeting of the CSI Board at which the directors considered the merger proposal
and approved the Merger Agreement. At such meeting, representatives of
McDonald made presentations and reviewed various aspects of the Merger,
including the financial terms and conditions of the Merger.
At the October 17, 1997 meeting of the CSI Board, McDonald
rendered its oral opinion to the CSI Board to the effect that, as of that
date, the Merger Consideration was fair, from a financial point of view, to
the stockholders of CSI. That opinion was subsequently confirmed in writing.
The full text of the written opinion of McDonald is attached as Annex C and is
incorporated herein by reference. Stockholders should read such opinion for
a discussion of assumptions made, factors considered and limitations on the
review undertaken by McDonald in rendering its opinion. The summary of the
McDonald opinion set forth in this Proxy Statement/Prospectus is qualified in
its entirety by reference to the full text of such opinion.
McDonald's opinion is directed to the CSI Board and addresses
only the fairness, from a financial point of view, to the CSI stockholders of
the Merger Consideration. The opinion does not constitute a recommendation to
any stockholder as to how such stockholder should vote at the Special Meeting.
In connection with rendering this opinion, McDonald reviewed
and analyzed, among other things, the following: (i) a draft of the Merger
Agreement dated October 16, 1997, including the exhibits and schedules
thereto; (ii) certain publicly available information concerning CSI, including
its Annual Reports to Shareholders and Annual Reports on Form 10-K for each of
the last two fiscal years and its Quarterly Reports on Form 10-Q for each of
the first three quarters of fiscal 1997; (iii) certain publicly available
information concerning Emerson, including its Annual Reports to Shareholders
and Annual Reports on Form 10-K for the last three fiscal years and its
quarterly reports on Form 10-Q for the first three quarters of Emerson's
fiscal 1997; (iv) certain other internal information, primarily financial in
nature, including projections, concerning the business and operations of CSI
furnished to McDonald by CSI for purposes of its analysis; (v) certain
publicly available information concerning the trading of, and the trading
markets for, the CSI Common Stock and the Emerson Common Stock; (vi) certain
publicly available information with respect to other companies that McDonald
believed to be comparable to CSI or to Emerson and the trading markets for
certain of such other companies' securities; and (vii) certain publicly
available information concerning the nature and terms of other transactions
that McDonald considered relevant to its inquiry. McDonald also met with
certain officers and employees of CSI and Emerson to discuss the business and
prospects of CSI and Emerson, and considered such other matters as McDonald
believed relevant to its inquiry.
McDonald assumed and relied upon the accuracy and completeness
of all of the financial and other information provided to it or publicly
available and assumed and relied upon the representations and warranties of
CSI and Emerson contained in the Merger Agreement. McDonald was not engaged
to, and did not independently attempt to, verify any of such information.
McDonald also relied upon the management of CSI as to the reasonableness of
the CSI financial and operating projections (and the assumptions and bases
therefor) provided to it and, with CSI's consent, assumed that such
projections were reasonably prepared on bases reflecting the best currently
available estimates and judgments of CSI management as to the matters covered
thereby. McDonald was not engaged to assess the achievability of such
projections or the assumptions on which they were based; however, for purposes
of its analysis, McDonald took into account its assessment of the risks
associated with the achievement of certain aspects of CSI's management's
projections. In addition, McDonald did not conduct an appraisal of any of the
assets, properties or facilities of either CSI or Emerson and was not
furnished with any such evaluation or appraisal. McDonald also assumed that
the conditions to the Merger as set forth in the Merger Agreement would be
satisfied and that the Merger would be consummated on a timely basis in the
manner contemplated by the Merger Agreement.
The following is a summary of analyses presented orally by
McDonald to the CSI Board on October 17, 1997 (the "McDonald Report") in
connection with its opinion.
Comparable Company Analysis. McDonald compared selected
historical and projected market value multiples of eight publicly traded
companies that it deemed to be comparable to CSI (the "Peer Group"). The
companies included in the Peer Group for purposes of McDonald's analysis were
Computational Products, Inc., CEM Corp., Daniel Industries, Honeywell Inc.,
Liberty Technologies Inc., MTS Systems Corp., Symbol Technologies Inc. and
Telxon Corp. No Peer Group company was identical to CSI. Accordingly,
McDonald considered the market multiples for the composite of Peer Group
companies to be more relevant than the market multiples of any single company.
McDonald calculated a range of implied values based upon the
market multiples of companies in the Peer Group and applied them to the
historical and projected results of CSI in order to determine a range of
implied values for the CSI Common Stock. McDonald calculated the multiples of
enterprise value (i.e., equity market capitalization plus the book value of
preferred stock and long and short-term debt, less cash and cash equivalents)
to latest twelve months ("LTM") sales, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), and earnings before interest and
taxes ("EBIT") for the Peer Group companies. McDonald also calculated the
multiples of market value (equity market capitalization) to LTM net income,
and projected net income (based on published third-party estimates) for 1997
and 1998 for the Peer Group companies. McDonald applied the multiples of the
Peer Group companies to CSI's LTM revenues, EBITDA, EBIT and net income, and
to analysts' projected 1997 and 1998 net income. The companies in the Peer
Group had multiples ranging from 0.6x to 2.8x LTM sales, 8.3x to 84.1x LTM
EBITDA, (62.4)x to 35.5x LTM EBIT, (687.5)x to 52.7x LTM net income, 17.5x to
168.8x projected 1997 net income and 15.3x to 22.6x projected 1998 net income.
The median multiples for the Peer Group companies were 1.3x LTM sales, 12.3x
LTM EBITDA, 13.8x LTM EBIT, 21.4x LTM net income, 27.1x projected 1997 net
income and 20.9x projected 1998 net income. McDonald also examined multiples
of book value for the companies in the Peer Group. Book value multiples for
the Peer Group ranged from 1.2x to 7.2x, with a median multiple of 2.9x.
Application of the median Peer Group multiples to CSI resulted
in an implied price per share of $14.20 based on LTM sales, $19.46 based on
LTM EBITDA, $15.24 based on LTM EBIT, $15.44 based on LTM net income, $24.39
based on projected 1997 net income, $24.24 based on projected 1998 net income
and $17.66 based on tangible book value, as compared to the Merger
Consideration of $29.65 per share.
Premium Analysis. McDonald reviewed publicly available
information concerning premiums to be paid in 53 publicly announced
acquisition transactions involving an aggregate purchase price of between $100
million and $225 million announced between January 1, 1996 and October 17,
1997 and derived an implied price per share for the CSI Common Stock based on
the median premiums paid in these transactions over the market price of the
securities four weeks, one week and one day prior to the public announcement
of the proposed transaction. The median premiums represented by the purchase
prices paid in the acquisitions reviewed by McDonald were 16.7% (four weeks
prior to announcement), 16.9% (one week prior to announcement) and 12.5% (one
day prior to announcement). The implied price resulting from the application
of these median premiums to CSI ranged from $21.59 to $24.25 per share, as
compared to the Merger Consideration of $29.65 per share.
Analysis of Selected Acquisition Transactions. In order to
assess market pricing for comparable acquisitions, McDonald identified seven
acquisition transactions involving companies in the measuring and controlling
devices/process control instruments industry completed since January 1, 1995.
Three of these transactions involved acquisitions of the target company, and
four involved the purchase of minority interests. The acquisition
transactions were Measurex Corp.'s acquisition of Data Measurement Corp.,
Gillette Co.'s acquisition of Thermoscan and Genstar Capital Partners II
L.P.'s acquisition of Andros Inc. Due to the limited number of comparable
transactions involving acquisitions of a controlling interest, McDonald
included in its analysis four acquisitions of minority interests in companies
in the industry. These transactions involved purchases made by investor groups
in AMETEK, Inc., Andros Inc. and Tech-Sym Corp. McDonald analyzed the range
of LTM sales, EBITDA, EBIT and net income value multiples represented by the
purchase price paid in the transactions it reviewed. Revenue multiples ranged
from 1.1x to 4.5x. EBITDA multiples ranged from 6.3x to 24.9x. EBIT
multiples ranged from 8.3x to 112.1x. Net income multiples ranged from 10.7x
to 118.6x. Median multiples for the transactions reviewed by McDonald were
1.3x sales, 11.1x EBITDA, 14.3x EBIT and 37.4x net income.
Application of these multiples to CSI resulted in an implied
price per share of $14.20 based on median sales multiples, $17.56 per share
based on median EBITDA multiples, $15.79 based on median EBIT multiples and
$26.99 based on median net income multiples. These compare to the merger
price of $29.65 per share. Because of the limited number of comparable
transactions for which information was available and the inclusion of
acquisitions of non-controlling interests in McDonald's comparable transaction
analysis, McDonald did not give great weight to the comparable transactions
analysis for purposes of its opinion.
Discounted Cash Flow Analysis. McDonald performed a discounted
cash flow analysis to calculate CSI's implied price per share based on
management's projections through December 31, 2002. Those projections were
prepared by CSI's management in the ordinary course of business for the
purpose of setting certain financial targets for CSI. Because these
projections did not reflect management's view of CSI's expected results over
this period, McDonald calculated the net present value of free cash flows CSI
could generate through December 31, 2002 using two different discount rate
assumptions. McDonald also calculated the terminal value of CSI in the year
2002 based on an 8.0x EBITDA multiple. This terminal value was discounted
using discount rates of 18.6% (the "Base Case Rate") and 31.0% (the
"Assumption Discount Rate"). In deriving the Base Case Rate, McDonald used a
weighted average cost of capital for CSI calculated in accordance with the
Capital Asset Pricing Model. McDonald used the Base Case Rate as a starting
point in deriving the Assumption Discount Rate. McDonald then reviewed
management's projections and the assumptions on which they were based and
assigned discount rates to the future cash flows associated with various
components of CSI's business that reflected its judgment concerning the risks
associated with the achievement of the future cash flows projected for those
components. The discount rates for these business components were then
weighted by their projected contributions to sales in order to determine a
discount rate to apply to CSI as a whole. Aspects of the Company's
projections where, in McDonald's judgment, the risks associated with the
achievement of projected cash flows supported higher discount rates than the
Base Case Rate included those relating to sales and earnings contribution of
certain new products and sales and earnings growth attributable to European
markets.
The sum of the present value of the free cash flows and
terminal values less outstanding debt (net of cash) yielded an implied price
per share of $43.70 using the Base Case Rate, and $27.70 using the Assumption
Discount Rate. These implied values compare with the Merger Consideration of
$29.65 per share. As a result of its assessment of the risks associated with
the achievement of management's projections, McDonald determined to give
greater weight to the value implied using the Assumption Discount Rate in
assessing the results of its discounted cash flow analysis.
Inherent in any discounted cash flow valuation are the use of a
number of assumptions, including the accuracy of management's projections, and
the subjective determination of an appropriate terminal value and discount rate
to apply to the projected cash flows of the entity under examination.
Variations in any of these assumptions or judgments could significantly alter
the results of a discounted cash flow analysis.
Other Analyses. In rendering its opinion, McDonald considered
certain other factors and conducted certain other analyses. These analyses
did not directly focus on the Merger Consideration, but were undertaken to
provide contextual data and comparative market data to assist in assessing the
Merger and the market's valuation of Emerson Common Stock. McDonald reviewed
the trading volume and market prices for Emerson Common Stock over the past
ten years, and compared Emerson's performance, as measured by LTM EBITDA,
EBITDA margin, EBIT, EBIT margin, net income and analysts' projected net
income for 1997 and 1998, to the performance of a group of companies that
McDonald deemed to be comparable to Emerson. McDonald also reviewed the
market price of Emerson Common Stock as measured by multiples of LTM sales,
EBITDA, EBIT, net income and analysts' projected 1997 and 1998 net income, and
compared that to the multiples of the comparable companies. The companies
included in the comparable group for purposes of McDonald's analysis were
Cooper Industries, Inc., General Electric Company, General Signal Corporation,
Honeywell, Inc., Hubbell, Inc., Illinois Tool Works and United Technologies
Corp. McDonald also performed a Leveraged Buyout Analysis, which evaluated
the purchase price to be paid and hypothetical financing arrangements for the
proposed transaction from the perspective of an unaffiliated financial buyer.
Because a Leveraged Buyout Analysis looks at a transaction from the
perspective of a financial buyer, McDonald used this analysis only for
purposes of establishing a base reference point for its valuation of CSI, and
did not directly rely on this analysis for purposes of its opinion.
No company or transaction used in the above analyses for
comparative purposes is identical to CSI or Emerson. Accordingly, an analysis
of the results of the foregoing necessarily involves complex considerations
and judgments concerning differences in financial and operating
characteristics of the companies and other factors. Mathematical analysis
(such as determining the average or median) is not, in itself, a meaningful
method of using comparable company or transaction data.
The summary of the McDonald Report set forth above does not
purport to be a complete description of the presentation by McDonald of the
McDonald Report to the CSI Board or of the analyses performed by McDonald.
The preparation of a fairness opinion is not necessarily susceptible to
partial analysis or summary description. McDonald believes that its analyses
and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, or of
the above summary, without considering all factors and analyses, would create
an incomplete view of the process underlying the analyses set forth in the
McDonald Report and its opinion. In addition, McDonald may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to represent the actual value of CSI.
In performing its analyses, McDonald made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of CSI. The analyses
performed by McDonald are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
McDonald's analysis of the fairness of the consideration to be paid pursuant
to the Merger and were provided to the CSI Board in connection with the
delivery of McDonald's opinion. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the
prices at which any securities may trade at the present time or at any time in
the future. In addition, as described above, McDonald's opinion and
presentation to the CSI Board was one of many factors taken into consideration
by the CSI Board in making its determination to approve the Merger Agreement.
McDonald has expressed no opinion as to the prices at which CSI
Common Stock or Emerson Common Stock may trade following the date of its
opinion.
McDonald served as a co-managing underwriter for CSI's 1995
initial public offering of CSI Common Stock, and received customary
compensation for such services.
Pursuant to an engagement letter dated September 4, 1997, CSI
agreed to pay McDonald a fee of $500,000 upon delivery of the opinion. In
addition, contingent upon consummation of the Merger, McDonald will be entitled
to additional compensation in the amount of $993,000. CSI has also agreed to
reimburse McDonald for up to $17,000 in out-of-pocket expenses and to
indemnify McDonald against certain liabilities, including liabilities under
the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED MATTERS
In considering the recommendation of the CSI Board with respect
to the Merger Agreement and the transactions contemplated thereby,
stockholders of CSI should be aware that certain members of CSI's management
and Board have interests in the Merger that are different from, and in
addition to, the interests of CSI's stockholders.
New Employment Arrangements
As a condition to Emerson's obligation to consummate the
Merger, Messrs. Canada and Piety will enter into employment agreements with
CSI. Each of these agreements has a five year term. If, during such term, CSI
terminates Mr. Canada or Mr. Piety other than for cause, he will be entitled
to receive salary and benefits for the balance of such five year term to be
offset by salary and benefits received from another employer during such
period. "Cause" is defined in each employment agreement as (i) a material
breach of the employment agreement by the employee; or (ii) the employee's
commission of fraud or dishonesty against CSI or willful misconduct or a crime
involving moral turpitude which in any such event impairs the reputation of or
harms CSI, its subsidiaries or affiliates.
Existing Employment Agreements
Kevin Carey, Vice President of Mergers and Acquisitions, and
Carlo Gorla, President, Chief Operating Officer and Director, have existing
employment agreements, which were entered into in 1996. Mr. Carey's employment
agreement is for a three year term during which CSI may only terminate him for
cause. Mr. Gorla's employment agreement provides for an acceleration of any
options he has to purchase CSI Common Stock upon a change in the control
(including the Merger) of CSI. In addition, if Mr. Gorla is terminated other
than for cause, his agreement provides him with 12 months salary payable
monthly unless and until he is offered employment or re-employed.
Stock Options
At the Effective Time, each option to purchase shares of CSI
Common Stock will become an immediately exercisable option to acquire, on
substantially the same terms, the number of shares of Emerson Common Stock
that the holder of the CSI option would have been entitled to receive pursuant
to the Merger had such holder exercised such option in full immediately prior
to the Effective Time, at a price per share of Emerson Common Stock computed
in compliance with the requirements of the Code. In lieu of any fractional
shares issuable upon exercise of the Emerson options, a cash payment will be
made. Notwithstanding the foregoing, if an optionee expressly waives the
accelerated vesting or exercisability of a CSI option, whether provided for by
the Merger Agreement or otherwise, the Emerson option will provide for a
vesting and exercisability schedule as if the Merger had not occurred.
Employee Stock Purchase Plan
As of the Effective Time, CSI's 1995 Employee Stock Purchase
Plan ("ESPP") will be terminated. The rights of participants in the ESPP with
respect to any offering period then underway under such plan will be determined
by treating the last business day prior to the Effective Time as the last day
of such offering period and by making such other pro-rata adjustments as may
be necessary to reflect the reduced offering period but otherwise treating
such offering period as a fully effective and completed offering period for
all purposes of such plan.
Indemnification and Insurance
For a period of six years after the Effective Time, Emerson
will indemnify present and former officers and directors of CSI and its
subsidiaries in respect of acts and omissions occurring prior to the Effective
Time, to the extent provided under CSI's charter and bylaws in effect on the
date of the Merger Agreement. CSI's charter and bylaws provide for
indemnification to the fullest extent permitted by law.
In addition, for a period of six years after the Effective
Time, Emerson will use best efforts to provide officers' and directors'
liability insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such person currently covered by CSI's officers'
and directors' liability insurance policy on terms with respect to coverage
and amount no less favorable than those of such policy in effect on the date
of the Merger Agreement, such premiums not to exceed 150% of the amount per
annum paid by CSI in 1996.
Further, under the Merger Agreement, for a period of six years
after the Effective Time, Emerson will cause the surviving corporation to keep
in effect, for the benefit of present and former officers and directors of
CSI, those provisions in its charter and bylaws that provide for exculpation
of director and officer liability and advancement of litigation expenses.
Ownership of CSI Securities by Certain Beneficial Owners and Management;
Compensation and Benefits
Information regarding ownership of CSI securities by certain
beneficial owners and management, as well as a description of CSI's
compensation benefit arrangements, is set forth in CSI's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 and CSI's Proxy Statement on
Schedule 14A for its 1997 Annual Meeting. See "Where You Can Find More
Information" on page 34.
THE MERGER AGREEMENT
This section of the Proxy Statement/Prospectus describes
certain aspects of the proposed Merger, including certain provisions of the
Merger Agreement and the Stockholder Option Agreement. The description of the
Merger Agreement and the Stockholder Option Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement and the Stockholder Option
Agreement, copies of which are attached hereto as Annex A and Annex B,
respectively, and which are incorporated herein by reference. All CSI
stockholders are urged to read carefully the Merger Agreement and the
Stockholder Option Agreement in their entirety.
Structure; Effective Time
The Merger Agreement provides that a subsidiary of Emerson will
merge into CSI, with CSI surviving as a wholly-owned subsidiary of Emerson.
The Merger will become effective at the time articles of merger are filed with
the Tennessee Secretary of State and a certificate of merger is filed with the
Delaware Secretary of State (or such later time as is agreed in writing by the
parties and specified in the articles of merger and the certificate of
merger), which is expected to occur as soon as practicable after the last
condition precedent to the Merger set forth in the Merger Agreement has been
satisfied or waived.
Merger Consideration
The Merger Agreement provides that each share of CSI Common
Stock outstanding immediately prior to the Effective Time will, at the
Effective Time, be converted into the right to receive (x) $5.93 in cash plus
(y) the number of shares of Emerson Common Stock (rounded to the nearest
ten-thousandth of a share) equal to the quotient obtained by dividing $23.72
by the average of the closing prices of a share of Emerson Common Stock as
reported on the NYSE Composite Transaction Tape for the 10 trading days
immediately preceding the date of the Effective Time; provided, however, that
if and to the extent necessary for the Merger to qualify as a reorganization
under Section 368(a)(2)(E) of the Code, the cash portion of the Merger
Consideration shall be reduced and the stock portion of the Merger
Consideration shall be increased.
Employee Stock Purchase Plan
See "Interests of Certain Persons in the Merger and Related
Matters."
Employee Stock Options
See "Interests of Certain Persons in the Merger and Related
Matters."
Conversion of Shares
Promptly after the Effective Time, Emerson will send to each
holder of CSI Common Stock a letter of transmittal and instructions for use in
exchanging certificates representing shares of CSI Common Stock (the
"Certificates") for the Merger Consideration. Holders of unexchanged shares
of CSI Common Stock will not be entitled to receive any dividends or other
distributions payable by Emerson after the Effective Time until their
Certificates are surrendered. No fractional shares of Emerson Common Stock
shall be issued in the Merger. In lieu thereof, each holder of shares of CSI
Common Stock otherwise entitled to receive a fractional share of Emerson
Common Stock will be entitled to receive a cash payment representing such
holder's proportionate interest in the net proceeds from the sale (after
deduction of all expenses resulting from such sale) on the NYSE of the
aggregate fractional shares otherwise issuable in the Merger.
Certain Covenants
Interim Operations of CSI. From the date of execution of the
Merger Agreement until the Effective Time, CSI and its subsidiaries are
required to conduct their business in the ordinary course consistent with past
practice and to use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their officers and employees. In particular, during
this period, CSI may not amend its organizational documents, and neither CSI
nor its subsidiaries may merge or consolidate with any other person, acquire a
material amount of assets of any other person, sell or otherwise dispose of
material assets except pursuant to existing contracts or commitments and in
the ordinary course consistent with past practice, enter into any licensing
agreement or other similar arrangement with respect to any of its intellectual
property rights, take any action that would make any representation and
warranty of CSI under the Merger Agreement materially inaccurate in any
respect or agree or commit to any of the foregoing actions.
Special Meeting; Proxy Material. CSI has agreed to cause the
Special Meeting to be held as soon as reasonably practicable for the purpose
of voting on the approval of the Merger Agreement and the Merger. In
connection with the Special Meeting, CSI will (i) subject to "--CSI Board's
Covenant to Recommend", recommend approval and adoption of the Merger
Agreement and the Merger by CSI's stockholders and (ii) use its reasonable
best efforts to obtain the necessary approvals by its stockholders of the
Merger Agreement and the transactions contemplated thereby.
No Solicitation by CSI. CSI has covenanted in the Merger
Agreement that it will not, will not permit any of its subsidiaries to, and
will not authorize or permit any officer, director or employee of or any
investment banker, attorney or other advisor or representative of CSI or any
of its subsidiaries to, directly or indirectly, solicit, initiate or knowingly
encourage the submission of any Takeover Proposal (as defined below) or
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to CSI or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to a Takeover Proposal; provided, however, that
if the Board of Directors of CSI determines in good faith, based on the advice
of outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to CSI's stockholders under applicable law, CSI may in
response to any bona fide, written or publicly announced Takeover Proposal
which was not solicited by it and which did not otherwise result from a breach
of the covenants contained in this paragraph, and subject to providing prior
written notice to Emerson of CSI's decision to take such action and compliance
with the covenant contained in the next succeeding paragraph, furnish
information with respect to CSI pursuant to a customary confidentiality
agreement (as determined by CSI based on the advice of its outside counsel)
and participate in discussions and negotiations regarding such Takeover
Proposal. A "Takeover Proposal" means any proposal or offer for, or any
expression of interest (by public announcement or otherwise) by any person
other than Emerson or its affiliates in, a merger or other business
combination involving CSI or any of its subsidiaries or any proposal or offer
to acquire in any manner (including through a joint venture with CSI),
directly or indirectly, an equity interest in not less than 30% of the
outstanding voting securities of CSI, or assets representing not less than 30%
of the annual revenues or net earnings of, CSI and its subsidiaries, taken as
a whole.
CSI must immediately notify Emerson orally and in writing of
any request for information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, the material terms and
conditions of such request, Takeover Proposal or inquiry, and the identity of
the person making any such request, Takeover Proposal or inquiry and shall
keep Emerson fully informed of the status and material details of any such
request, Takeover Proposal or inquiry.
CSI Board's Covenant to Recommend. The CSI Board has agreed to
recommend the approval and adoption of the Merger and the Merger Agreement to
CSI stockholders. Except as expressly permitted by this paragraph, neither the
CSI Board nor any committee of the CSI Board may withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Emerson, the approval or
recommendation by the CSI Board or any such committee of the Merger or the
Merger Agreement, approve or recommend, or propose publicly to approve or
recommend, any Takeover Proposal or cause CSI or any of its subsidiaries to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") with respect to
any Takeover Proposal. Notwithstanding the foregoing, the CSI Board, to the
extent that it determines in good faith, based on the advice of outside
counsel, that in light of a Superior Proposal it is necessary to do so in order
to comply with its fiduciary duties to CSI's stockholders under applicable law,
may terminate the Merger Agreement solely in order to enter concurrently into
an Acquisition Agreement with respect to any Superior Proposal, but only at a
time that is after the fifth business day following Emerson's receipt of
written notice advising Emerson that the CSI Board is prepared to accept a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal.
Reasonable Best Efforts. Each party to the Merger Agreement
has agreed to use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by the Merger Agreement.
Indemnification and Insurance of CSI Directors and Officers.
See "Interests of Certain Persons in the Merger and Related
Matters."
Certain Other Covenants. The Merger Agreement contains certain
mutual covenants of the parties, including, without limitation, covenants
requiring the parties to: use reasonable best efforts to cause the Merger to
qualify as a tax-free reorganization; consult with each other before making
public announcements; notify each other of certain Merger-related matters; and
cooperate with each other in making certain governmental filings and in
obtaining consents and approvals necessary to consummate the Merger.
The Merger Agreement also contains certain covenants of
Emerson, including, without limitation, covenants requiring Emerson to: use
its reasonable best efforts to list the shares of Emerson Common Stock to be
issued in connection with the Merger on the NYSE; take all action necessary to
cause Merger Subsidiary to consummate the Merger; and to vote shares of CSI
Common Stock beneficially owned by it, if any, in favor of the Merger.
The Merger Agreement also contains certain covenants of CSI,
including, without limitation, covenants requiring CSI to: give Emerson and
its representatives reasonable access to CSI's and its subsidiaries' offices,
properties, books and records, use reasonable best efforts to obtain the tax
opinion described below in "Conditions to the Merger--Conditions to the
Obligations of CSI" and use reasonable best efforts to obtain prior to the
Effective Time certain letters from affiliates of CSI.
Certain Representations and Warranties
The Merger Agreement contains, subject to certain exceptions,
reciprocal representations and warranties made by CSI and Emerson as to, among
other things: due organization and good standing; corporate authorization to
execute the Merger Agreement and consummate the transactions contemplated by
the Merger Agreement; governmental approvals required in connection with the
transactions contemplated by the Merger Agreement; absence of any breach of
organizational documents and certain material agreements as a result of the
transactions contemplated by the Merger Agreement; capitalization; SEC
filings; financial statements; information included in this Proxy
Statement/Prospectus; absence of certain material changes (including changes
which would have a material adverse effect) since June 30, 1997; absence of
undisclosed material liabilities; compliance with laws and court orders;
litigation; and finders' fees. "Material adverse effect" means any change,
effect, event, occurrence or state of facts that has had, or would reasonably
be expected to have, a material adverse effect on the business, operations,
assets, liabilities, condition (financial or otherwise) or results of
operations of Emerson and its subsidiaries, taken as a whole, or CSI and its
subsidiaries, taken as a whole, as the case may be.
In addition, CSI has made representations and warranties to
Emerson including, without limitation, as to ownership of subsidiaries; tax
matters; employee matters; environmental matters; receipt of an opinion of its
financial advisor; and patents and other proprietary rights. Furthermore, CSI
has represented to Emerson that its approval of the Merger and the
transactions contemplated by the Merger Agreement satisfies the prior approval
requirements of the Tennessee Business Combination Act, and that neither the
Tennessee Control Share Acquisition Act nor any other antitakeover or similar
statute or regulation applies or purports to apply to the transactions
contemplated by the Merger Agreement.
The representations and warranties contained in the Merger
Agreement do not survive the Effective Time.
Conditions to the Merger
Conditions to Each Party's Obligations to Effect the Merger.
The obligations of Emerson and CSI to consummate the Merger are subject to the
satisfaction of the following conditions:
(i) receipt of the approval of CSI stockholders;
(ii) no applicable law or regulation, judgment, injunction,
order or decree prohibiting or enjoining the consummation of the Merger;
(iii) the registration statement of which this Proxy
Statement/Prospectus is a part not being subject to any stop order or related
proceedings by the SEC; and
(iv) the shares of Emerson Common Stock to be issued in the
Merger (and upon exercise of the Emerson options) having been approved for
listing on the NYSE, subject to official notice of issuance, if applicable.
Conditions to the Obligations of Emerson. The obligations of
Emerson to effect the Merger are subject to the satisfaction of the following
further conditions:
(i) the performance in all material respects by CSI of its
obligations under the Merger Agreement at or prior to the Effective Time;
(ii) the representations and warranties of CSI contained in
the Merger Agreement being true in all material respects at and as of the
Effective Time as if made at and as of such time; and
(iii) Ronald G. Canada and Kenneth R. Piety having
entered into employment agreements with CSI in form and substance
reasonably satisfactory to Emerson.
Conditions to the Obligations of CSI. The obligation of CSI to
effect the Merger is subject to the satisfaction of the following further
conditions:
(i) the performance in all material respects by Emerson of
its obligations under the Merger Agreement at or prior to the Effective
Time;
(ii) the representations and warranties of Emerson contained
in the Merger Agreement being true in all material respects at and as of
the Effective Time as if made at and as of such time; and
(iii) CSI having received the legal opinion of CSI's legal
counsel to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code and that each of Emerson, Merger Subsidiary and CSI will
be a party to the reorganization within the meaning of Section 368(b) of
the Code.
Termination of the Merger Agreement
Right to Terminate. The Merger Agreement may be terminated at
any time prior to the Effective Time as follows:
(i) by mutual written consent of CSI and Emerson;
(ii) by either CSI or Emerson if:
(a) the Merger has not been consummated by April 30,
1998 (but neither CSI nor Emerson may terminate if its
breach is the reason that the Merger has not been
consummated);
(b) the stockholders of CSI fail to approve the Merger
Agreement at the Special Meeting (including any adjournment
thereof); or
(c) any law or regulation makes consummation of the
Merger illegal or otherwise prohibited or any final and non-
appealable judgment, injunction, order or decree enjoins CSI
or Emerson from consummating the Merger;
(iii) by Emerson if there is a breach of any representation,
warranty, covenant or agreement of CSI, which breach cannot be cured and
would constitute a failure to satisfy the conditions to the obligations of
Emerson to effect the Merger set forth in paragraphs (i) and (ii) of
"-- Conditions to the Obligations of Emerson";
(iv) by CSI if there is a breach of any representation,
warranty, covenant or agreement of Emerson, which breach cannot be cured
and would constitute a failure to satisfy any of the conditions to the
obligations of CSI to effect the Merger set forth in paragraphs (i) and
(ii) of "--Conditions to the Obligations of CSI"; or
(v) by CSI if, in accordance with the provisions of "Certain
Covenants--No Solicitation by CSI" and "--CSI Board's Covenant to Recommend",
it elects to enter into an Acquisition Agreement with respect to a Superior
Proposal.
If the Merger Agreement is validly terminated, no provision
thereof shall survive (except for the provisions relating to confidentiality,
termination fees and expenses, governing law, jurisdiction and waiver of jury
trial) and such termination shall be without any liability on the part of any
party, unless such party is in willful or grossly negligent breach of any
provision of the Merger Agreement.
Termination Fee and Expenses Payable by CSI. CSI has agreed to
pay Emerson an amount equal to $5 million, and to reimburse Emerson for its
reasonable out-of-pocket expenses (not to exceed $1 million) incurred in
connection with the transactions contemplated by the Merger Agreement, if the
Merger Agreement is terminated in the circumstances described in paragraph
(ii)(b) (but only if a Takeover Proposal with respect to CSI is publicly
announced prior to the stockholder vote) or in paragraph (v) of "--Right to
Terminate".
Other Expenses
Except as described above, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such costs or expenses.
Amendments; No Waivers
Any provision of the Merger Agreement may be amended or waived
prior to the Effective Time only if the amendment or waiver is in writing and
signed, in the case of an amendment, by CSI, Emerson and Merger Subsidiary,
and, in the case of a waiver, by the party against whom the waiver is to be
effective; provided that after the approval of the Merger Agreement by the
stockholders of CSI, no amendment shall be made that by law requires the
further approval of the CSI stockholders.
STOCKHOLDER OPTION AGREEMENT
General. Simultaneously with the execution and delivery of the
Merger Agreement, Emerson and Mr. Ronald G. Canada, owner of approximately 22%
of the outstanding CSI Common Stock, entered into the Stockholder Option
Agreement.
Pursuant to the Stockholder Option Agreement, Mr. Canada
granted Emerson (i) an option (the "Option"), exercisable upon termination of
the Merger Agreement in certain circumstances, to purchase all shares of CSI
Common Stock held by Mr. Canada (the "Shares") at a price per share of $29.65;
and (ii) a proxy to vote all the Shares in favor of the Merger and the other
transactions contemplated by the Merger Agreement and against any action which
is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the Merger or the transactions
contemplated by the Merger Agreement.
Option. The Option is exercisable at any time prior to the 30th
business day after the termination of the Merger Agreement in the
circumstances described under "Termination of the Merger Agreement--Right to
Terminate" in paragraph (ii)(b) (but only if a Takeover Proposal with respect
to CSI is publicly announced prior to CSI's stockholder vote) or in paragraph
(v).
The number and kind of shares or securities subject to the
Option and the purchase price per share (but not the total purchase price)
will be adjusted for any change in CSI's capital stock or certain other
changes. In the event the consideration per share to be paid by Emerson
pursuant to the Merger is increased, the purchase price under the Option shall
be similarly increased.
Voting; Proxy. The Stockholder Option Agreement grants a proxy
appointing Emerson as Mr. Canada's attorney-in-fact and proxy, with full
power of substitution, to vote the Shares (i) in favor of the Merger Agreement
and the transactions contemplated by the Merger Agreement (including the
Merger) and any actions required in furtherance thereof; (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
CSI under the Merger Agreement; and (iii) against any and all of the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement):
(a) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination
involving CSI or its subsidiaries;
(b) any sale, lease or transfer of a material amount of
assets of CSI or its subsidiaries, or any share
exchange, reorganization, restructuring,
recapitalization, special dividend, dissolution or
liquidation of CSI or its subsidiaries; or
(c) any change in a majority of the persons who constitute
the CSI Board; any material change in the present
capitalization of CSI including any proposal to issue or
sell a substantial equity interest in CSI or its
subsidiaries; any amendment of CSI's charter or bylaws;
any other change in CSI's corporate structure or
business; or any other action which is intended, or
could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the
Merger or the transactions contemplated by the Merger
Agreement.
No Solicitation. Mr. Canada has agreed in the Stockholder
Option Agreement (i) not to solicit, initiate or knowingly encourage (or
authorize any person to solicit, initiate or knowingly encourage) the
submission of any Takeover Proposal; (ii) subject to his fiduciary duty as a
director of CSI, not to participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to CSI, or
take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to a Takeover
Proposal; and (iii) to advise Emerson promptly of the terms of any
communications he may receive relating to any of the foregoing.
Transfer Restrictions. Pursuant to the Stockholder Option
Agreement, Mr. Canada may not, without Emerson's prior written consent,
directly or indirectly, grant any proxies or enter into any voting trust or
other agreement or arrangement with respect to the voting of any of the
Shares, or acquire, sell, assign, transfer, encumber or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to the direct or indirect acquisition or sale, assignment, transfer,
encumbrance or other disposition of, any of the Shares during the term of the
Stockholder Option Agreement. Mr. Canada may not seek or solicit any such
acquisition or sale, assignment, transfer, encumbrance or other disposition or
any such contract, option or other arrangement or assignment or understanding
and agrees to notify Emerson promptly and to provide all details requested by
Emerson if Mr. Canada shall be approached or solicited, directly or
indirectly, by any person with respect to any of the foregoing.
Termination. The Stockholder Option Agreement will
automatically terminate upon the termination of the Merger Agreement, except
that if the termination of the Merger Agreement results in the Option becoming
exercisable as provided above in "Option", then the Stockholder Option
Agreement will automatically terminate on the 31st business day after such
termination.
SPECIAL MEETING
This Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies from the holders of CSI Common Stock by the CSI
Board for use at the Special Meeting. This Proxy Statement/Prospectus and
accompanying form of proxy are first being mailed to the stockholders of CSI
on or about November 25, 1997.
Time and Place; Purpose
The Special Meeting will be held at 10:00 a.m., Central time,
on December 29, 1997 at the headquarters of CSI, 835 Innovation Drive,
Knoxville, TN 37932. At the Special Meeting (and any adjournment or
postponement thereof), the stockholders of CSI will be asked to consider and
vote upon the approval and adoption of the Merger Agreement and the Merger.
CSI stockholder approval of the Merger Agreement and the Merger
is required by the TBCA.
The CSI Board has unanimously approved the terms of the Merger
Agreement and the consummation of the Merger contemplated thereby, unanimously
believes that the terms of the Merger Agreement and the Merger are fair to,
and in the best interests of, CSI and its stockholders, and unanimously
recommends that holders of CSI Common Stock vote "for" approval of the Merger
and the Merger Agreement.
Record Date; Voting Rights and Proxies
Only holders of record of CSI Common Stock at the close of
business on November 19, 1997 (the "Record Date") are entitled to notice of
and to vote at the Special Meeting. As of the Record Date, there were
5,071,767 shares of CSI Common Stock outstanding, each of which entitled the
holder thereof to one vote.
All shares of CSI Common Stock represented by properly executed
proxies will, unless such proxies have been previously revoked, be voted in
accordance with the instructions indicated in such proxies. If no
instructions are indicated, such shares of CSI Common Stock will be voted
"for" approval of the Merger and the Merger Agreement. A stockholder who has
given a proxy may revoke it at any time prior to its exercise by giving written
notice of revocation to CSI, by signing and returning a later dated proxy or
by voting in person at the Special Meeting. Votes cast by proxy or in person
at the Special Meeting will be tabulated by the inspector of election
appointed for the meeting.
Share Ownership of Management and Certain Stockholders
On the Record Date, CSI directors, executive officers, and
their affiliates owned and were entitled to vote 1,840,079 shares of CSI
Common Stock, or approximately 36.28% of the shares of CSI Common Stock
outstanding on the Record Date.
Solicitation of Proxies
Proxies are being solicited by and on behalf of the CSI Board.
In addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of CSI in person or by telephone, telegram
or other means of communication. Such directors, officers and employees will
not be additionally compensated, but may be reimbursed for out-of-pocket
expenses incurred in connection with such solicitation. Arrangements have also
been made with brokerage firms, banks, custodians, nominees and fiduciaries
for the forwarding of proxy solicitation materials to owners of CSI Common
Stock held of record by such persons and in connection therewith such firms
will be reimbursed for reasonable expenses incurred in forwarding such
materials.
CSI stockholders should not send any certificates representing
CSI Common Stock with their proxy cards. Following the Effective Time, CSI
stockholders will receive instructions for the surrender and exchange of such
stock certificates.
Quorum
The presence in person or by properly executed proxy of a
majority of the outstanding shares of CSI Common Stock entitled to vote is
necessary to constitute a quorum at the Special Meeting.
Required Vote
Approval of the Merger and the Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of CSI Common Stock
entitled to vote. Accordingly, any failure to vote will have the effect of a
vote against the Merger and the Merger Agreement.
COMPARISON OF STOCKHOLDER RIGHTS
General
The rights of Emerson stockholders are currently governed by
the General and Business Corporation Law of Missouri ("MGBCL") and the
articles of incorporation and bylaws of Emerson (the "Emerson Charter" and the
"Emerson Bylaws", respectively). The rights of CSI stockholders are currently
governed by the TBCA and the charter and bylaws of CSI (the "CSI Charter" and
the "CSI Bylaws", respectively). Accordingly, upon consummation of the
Merger, the rights of CSI stockholders who become Emerson stockholders in the
Merger will be governed by the MGBCL, the Emerson Charter and the Emerson
Bylaws. The following is a summary of the principal differences between the
current rights of CSI stockholders and those of Emerson stockholders.
The following summary is not intended to be complete and is
qualified in its entirety by reference to the MGBCL, the Emerson Charter, the
Emerson Bylaws, the TBCA, the CSI Charter and the CSI Bylaws. Copies of the
Emerson Charter, the Emerson Bylaws, the CSI Charter and the CSI Bylaws are
incorporated by reference herein and will be sent to holders of shares of CSI
Common Stock upon request. See "Where You Can Find More Information" on page
34.
Comparison of Rights of CSI Stockholder and Rights of Emerson Stockholders
The Emerson Charter and Bylaws are not being amended in
connection with the Merger.
The rights of CSI stockholders under the TBCA and the CSI
Charter and CSI Bylaws prior to the Merger are substantially the same as the
rights of Emerson stockholders under the MGBCL and the Emerson Charter and
Emerson Bylaws, with the following principal exceptions.
Authorized Capital Stock. The authorized capital stock of CSI
consists of 50,000,000 shares of CSI Common Stock, no par value, and 5,000,000
shares of preferred stock, no par value. The authorized capital of Emerson is
set forth under "Description of Emerson Capital Stock--Authorized Capital
Stock" on page 32.
Size of Board of Directors. CSI currently has seven directors.
Emerson currently has 17 directors.
Election of Board of Directors. CSI directors are elected at
each annual meeting of stockholders for a term of one year.
Emerson directors are divided into three classes with 1/3 of
the directors elected at each annual meeting of stockholders for a three year
term.
Removal of Directors. CSI directors may be removed, but only
for cause, by the affirmative vote of the holders of a majority of the voting
power of the shares entitled to vote for the election of directors.
Emerson directors may be removed from office, with or without
cause, only (a) by action of a majority of Emerson's Board of Directors (the
"Emerson Board"), in the event a director fails to meet the qualifications
stated in the Emerson Bylaws for election as a director or in the event a
director is in breach of any agreement between such director and Emerson
relating to such director's service as a director or employee of Emerson, or
(b) by a vote of the holders of 85% of the shares entitled to vote at an
election of directors, voting as a single class.
Amendment of Corporate Charter. The CSI Charter may generally
be amended if at a meeting at which a quorum is present votes cast in favor of
such amendment exceed votes cast against such amendment.
The Emerson Charter may be amended by the affirmative vote of
the holders of shares representing a majority of the votes entitled to be cast
on the amendment; provided that:
(a) certain provisions contained in Emerson's Charter
respecting business combinations, the board of directors, removal of
directors, amendment of bylaws and special meetings of shareholders may be
amended only by the affirmative vote of the holders of 85% of the total
voting power of all outstanding shares of Emerson, voting as a single
class, provided, however, that the provisions respecting business
combinations may be amended upon the affirmative vote of the holders of a
majority of the total voting power of all outstanding shares of Emerson if
such amendment shall first have been approved and recommended by a majority
of those directors who meet certain criteria of independence from parties
seeking a business combination; and
(b) an amendment which provides that the "control share
acquisitions" provision of the Missouri corporate law does not apply to the
corporation requires the affirmative vote of the holders of two-thirds of
Emerson's voting shares.
Amendment of Bylaws. The CSI Bylaws may be amended by either
the affirmative vote of a majority of the stock represented at any stockholder
meeting, or by the affirmative vote of a majority of the directors present at
any regular or special meeting of the CSI Board.
The Emerson Bylaws may only be amended by the Emerson Board.
Business Combinations. Certain business combinations,
including a merger, involving CSI require the approval of a majority of the
outstanding shares of CSI Common Stock.
Certain business combinations involving Emerson require the
affirmative vote of the holders of 85% of the outstanding shares of Emerson
Common Stock unless (i) a majority of the continuing directors (as defined in
the Emerson Charter) have approved the proposed business combination, or (ii)
various conditions intended to ensure the adequacy of the consideration
offered by the party seeking the combination are satisfied.
Special Meetings of Stockholders. Special meetings of the
stockholders of CSI may be called by the board of directors or by the holders
of 10% of all of the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting.
Special meetings of stockholders of Emerson may be called by
the board of directors, by the Chairman of the Board, the Vice Chairman of the
Board, the President, the Secretary, or by the holders of at least 85% of all
of the outstanding shares of Emerson Common Stock entitled to vote at the
proposed meeting.
Rights Plan. Unlike CSI, Emerson does have a shareholder
rights plan. Emerson's shareholder rights plan would deter any potential
bidder from acquiring more than 20% of the outstanding Emerson Common Stock
without the prior approval of the Emerson Board.
Takeover Statutes. The Tennessee Business Combination Act
provides that a Tennessee corporation may not engage in a broad range of
business combinations with an interested shareholder of such corporation
(owner of 10% or more of the voting power) or any affiliate or associate of
such interested shareholder for five years following the interested
shareholder's share acquisition unless the business combination or the
transaction resulting in the interested shareholder's becoming an interested
shareholder is approved by the board of directors of the corporation or the
business combination is exempt from the Tennessee Business Combination Act.
The MGBCL contains provisions regulating a broad range of
business combinations, such as a merger or consolidation, between a Missouri
corporation with shares of its stock registered under the federal securities
laws, or a corporation that makes an election, and an "interested shareholder"
(which is defined as any owner of 20% or more of the corporation's stock) for
five years after the date on which such shareholder became an interested
shareholder, unless the stock acquisition which caused the person to become an
interested shareholder was approved in advance by the corporation's board of
directors. This so-called "five year freeze" provision is effective even if
all the parties should subsequently decide that they wish to engage in a
business combination.
The MGBCL also contains a "control share acquisition" provision
which effectively denies voting rights to shares of a Missouri corporation
acquired in a "control share acquisition" unless a resolution granting such
voting rights is approved at a meeting of shareholders by affirmative majority
vote of (i) all outstanding shares entitled to vote at such meeting voting by
class if required by the terms of such shares; and (ii) all outstanding shares
entitled to vote at such meeting voting by class if required by the terms of
such shares, excluding all interested shares. A "control share acquisition"
is one by which a purchasing shareholder acquires more than one-fifth,
one-third, or a majority, under various circumstances, of the voting power of
the stock of an "issuing public corporation". An "issuing public corporation"
is a Missouri corporation with (i) 100 or more shareholders; (ii) its
principal place of business, principal office or substantial assets in
Missouri; and (iii) either (a) more than 10% of its shareholders resident in
Missouri; (b) more than 10% of its shares owned by Missouri residents; or (c)
10,000 shareholders resident in Missouri.
Consideration of Non-Stockholder Interests. No provision
regarding the consideration of non-stockholder interests is applicable to CSI.
The MGBCL provides that in exercising business judgment in
connection with acquisition proposals, the board of directors may consider,
among other things, social, legal and economic effects on employees,
suppliers, customers and others having similar relationships with the
corporation and the communities in which the corporation conducts its
businesses.
DESCRIPTION OF EMERSON CAPITAL STOCK
The summary of the terms of the capital stock of Emerson set
forth below does not purport to be complete and is qualified by reference to
the Emerson Charter and Emerson Bylaws. Copies of the Emerson Charter and
Emerson Bylaws are incorporated by reference herein and will be sent to
holders of shares of CSI Common Stock upon request. See "Where You Can Find
More Information" on page 34.
Authorized Capital Stock
Emerson's authorized capital stock consists of 5,400,000 shares
of preferred stock (the "Preferred Stock"), $2.50 par value per share, and
1,200,000,000 shares of Emerson Common Stock.
Emerson Common Stock
The holders of Emerson Common Stock are entitled to one vote
for each share held of record on all matters submitted to a vote of
stockholders. Subject to the full cumulative dividends on any outstanding
Preferred Stock having been paid, dividends may be declared and paid on the
shares of Emerson Common Stock out of any funds or property legally available
therefor. In the event of a liquidation or dissolution of Emerson, holders of
Emerson Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and the liquidation preference and accumulated
and unpaid dividends of any outstanding Preferred Stock.
Holders of Emerson Common Stock have no preemptive rights and
have no rights to convert their Emerson Common Stock into any other
securities. All of the outstanding shares of Emerson Common Stock are, and the
shares of Emerson Common Stock to be issued pursuant to the Merger will be,
duly authorized, validly issued, fully paid and nonassessable.
Emerson Preferred Stock
The Emerson Board is authorized to approve the issuance of any
series of Preferred Stock and the powers, preferences and rights of the shares
of such series and the qualifications, limitations or restrictions thereof
without further action by the holders of Emerson Common Stock. As of the
Record Date, no shares of Preferred Stock were issued or outstanding.
One of the effects of authorized but unissued and unreserved
shares of capital stock may be to render more difficult or discourage an
attempt by a potential acquiror to obtain control of Emerson by means of a
merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of Emerson's management. The issuance of such shares of capital
stock may have the effect of delaying, deferring or preventing a change in
control of Emerson without any further action by the stockholders of Emerson.
Transfer Agent and Registrar
ChaseMellon Shareholder Services, L.L.C. is the transfer agent
and registrar for the Emerson Common Stock.
Stock Exchange Listing; Delisting and Deregistration of CSI Common Stock
It is a condition to the Merger that the shares of Emerson
Common Stock issuable in the Merger be approved for listing on the NYSE on or
prior to the Effective Time, subject to official notice of issuance. If the
Merger is consummated, CSI Common Stock will cease to be listed on the NNM.
LEGAL MATTERS
The validity of the Emerson Common Stock to be issued to CSI
stockholders pursuant to the Merger will be passed upon by Harley M. Smith,
Esq., Assistant General Counsel and Assistant Secretary of Emerson. It is a
condition to the consummation of the Merger that CSI receive an opinion from
Jones, Day, Reavis & Pogue, CSI's legal counsel, with respect to the tax
treatment of the Merger. See "The Merger Agreement--Conditions to the Merger"
on page 35.
EXPERTS
The historical financial information incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K for
Emerson for the year ended September 30, 1996 have been so incorporated in
reliance on the report of KPMG Peat Marwick LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The historical financial information incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K for CSI
for the year ended December 31, 1996 have been so incorporated in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.
FUTURE STOCKHOLDER PROPOSALS
CSI expects to hold an annual meeting of CSI stockholders in
the first calender quarter of 1998 unless the Merger is completed prior
thereto. Any CSI stockholder who intends to submit a proposal for inclusion
in the proxy materials for the 1998 CSI annual meeting, if any, must submit
such proposal to the Secretary of CSI by November 25, 1997.
SEC rules set forth standards as to what stockholder proposals
are required to be included in a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
CSI and Emerson file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information filed by either company at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The companies' SEC filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov".
Emerson filed a Registration Statement on Form S-4 to register
with the SEC the Emerson Common Stock to be issued to CSI stockholders in the
Merger. This Proxy Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of Emerson in addition to being a proxy
statement of CSI for the Special Meeting. As allowed by SEC rules, this Proxy
Statement/Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
The SEC allows CSI and Emerson to "incorporate by reference"
information into this Proxy Statement/Prospectus, which means important
information may be disclosed to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed
to be part of this Proxy Statement/Prospectus, except for any information
superseded by information in (or incorporated by reference in) this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus incorporates by
reference the documents set forth below that have been previously filed with
the SEC. These documents contain important information about our companies
and their finances.
Emerson SEC Filings (File No. 001-00278) Period
- ---------------------------------------- ------
Annual Report on Form 10-K Year ended September 30, 1996.
Quarterly Reports on Form 10-Q Quarters ended June 30, 1997;
March 31,1997; and December 31,
1996.
Proxy Statement on Schedule 14A for 1997 Dated December 6, 1996.
Annual Meeting
Current Report on Form 8-K Filed October 17, 1997.
CSI SEC Filings (File No. 0-26596) Period
- ---------------------------------- ------
Annual Report on Form 10-K Year ended December 31, 1996.
Quarterly Reports on Form 10-Q Quarters ended March 31, 1997;
June 30, 1997; and September 30,
1997.
Proxy Statement on Schedule 14A for 1997 Dated March 20, 1997.
Annual Meeting
Current Report on Form 8-K Filed October 21, 1997
CSI and Emerson are also incorporating by reference additional
documents that either company may file with the SEC between the date of this
Proxy Statement/Prospectus and the date of the Special Meeting.
Emerson has supplied all information contained or incorporated
by reference in this Proxy Statement/Prospectus relating to Emerson, and CSI
has supplied all such information relating to CSI.
If you are a stockholder, CSI may have sent you some of the CSI
documents incorporated by reference, but you can obtain any of them through
either CSI or the SEC. Documents incorporated by reference are available from
either company without charge, excluding all exhibits unless specifically
incorporated by reference in this Proxy Statement/Prospectus. Stockholders may
obtain documents incorporated by reference in this Proxy Statement/Prospectus
by requesting them in writing or by telephone from the appropriate party at
the following address:
For CSI Documents: For Emerson Documents:
Computational Systems, Incorporated Emerson Electric Co.
835 Innovation Drive 8000 W. Florissant Avenue
Knoxville, Tennessee St. Louis, MO 63136
Tel: (423) 675-2110 Tel: (314) 553-2197
Attention: Michele Ciechon Attention: Investor Relations
Web site: www.compsys.com Web site: www.emersonelectric.com
If you would like to request documents from either company,
please do so by December 12, 1997 to receive them before the Special Meeting.
You should rely only on the information contained or
incorporated by reference in this Proxy Statement/Prospectus to vote on the
approval of the Merger Agreement and the Merger. Neither CSI nor Emerson has
authorized anyone to provide you with information that is different from what
is contained in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus is dated November 24, 1997. You should not assume that
the information contained in the Proxy Statement/Prospectus is accurate as of
any date other than such date, and neither the mailing of this Proxy
Statement/Prospectus to stockholders nor the issuance of Emerson Common Stock
in the Merger shall create any implication to the contrary.
INDEX OF DEFINED TERMS
Term Page
1933 Act.....................................................15
Acquisition Agreement........................................24
Assumption Discount Rate.....................................19
Base Case Rate...............................................19
Certificates.................................................23
Code.........................................................13
control share acquisition....................................32
CSI Board.................................................... 8
CSI Bylaws...................................................30
CSI Charter..................................................30
CSI Common Stock............................................. 8
CSI.......................................................... 8
EBIT.........................................................18
EBITDA.......................................................18
Effective Time............................................... 8
Emerson...................................................... 8
Emerson Board................................................30
Emerson Bylaws...............................................30
Emerson Charter..............................................30
Emerson Common Stock......................................... 8
ESPP.........................................................21
interested shareholder.......................................31
issuing public corporation...................................32
LTM..........................................................18
Material adverse effect......................................25
McDonald..................................................... 9
McDonald Report..............................................24
Merger....................................................... 8
Merger Agreement............................................. 8
Merger Consideration......................................... 8
Merger Subsidiary............................................ 8
MGBCL........................................................30
NNM..........................................................16
NYSE.........................................................16
Option.......................................................27
Peer Group...................................................18
Preferred Stock..............................................32
Record Date..................................................29
SEC..........................................................15
Shares.......................................................27
Special Meeting.............................................. 8
Superior Proposal............................................11
Takeover Proposal............................................24
TBCA.........................................................14
USEM......................................................... 8
Annex A
AGREEMENT AND PLAN OF MERGER
dated as of
October 17, 1997
among
COMPUTATIONAL SYSTEMS, INCORPORATED,
EMERSON ELECTRIC CO.
and
EMERSUB LVII, INC.
TABLE OF CONTENTS
---------------
Page
----
ARTICLE 1
The Merger
Section 1.1. The Merger......................................... 1
Section 1.2. Conversion of Shares............................... 2
Section 1.3. Surrender and Payment.............................. 2
Section 1.4. Stock Options...................................... 3
Section 1.5. Employee Stock Purchase Plan....................... 4
Section 1.6. Adjustments........................................ 4
Section 1.7. Fractional Shares.................................. 5
Section 1.8. Withholding Rights................................. 5
Section 1.9. Lost Certificates.................................. 5
ARTICLE 2
The Surviving Corporation
Section 2.1. Certificate of Incorporation....................... 5
Section 2.2. Bylaws............................................. 6
Section 2.3. Directors and Officers............................. 6
ARTICLE 3
Representations and Warranties of the Company
Section 3.1. Corporate Existence and Power...................... 6
Section 3.2. Corporate Authorization............................ 6
Section 3.3. Governmental Authorization......................... 7
Section 3.4. Non-contravention.................................. 7
Section 3.5. Capitalization..................................... 8
Section 3.6. Subsidiaries....................................... 8
Section 3.7. SEC Filings........................................ 9
Section 3.8. Financial Statements............................... 10
Section 3.9. Disclosure Documents............................... 10
Section 3.10. Absence of Certain Changes......................... 10
Section 3.11. No Undisclosed Material Liabilities................ 12
Section 3.12. Compliance with Laws and Court Orders.............. 12
Section 3.13. Litigation......................................... 12
Section 3.14. Finders' Fees...................................... 13
Section 3.15. Taxes.............................................. 13
Section 3.16. Employee Benefit Plans............................. 14
Section 3.17. Environmental Matters.............................. 16
Section 3.18. Opinion of Financial Advisor....................... 17
Section 3.19. Patents and Other Proprietary Rights............... 17
Section 3.20. Antitakeover Statutes.............................. 18
ARTICLE 4
Representations and Warranties of Parent
Section 4.1. Corporate Existence and Power...................... 18
Section 4.2. Corporate Authorization............................ 18
Section 4.3. Governmental Authorization......................... 18
Section 4.4. Non-contravention.................................. 19
Section 4.5. Capitalization..................................... 19
Section 4.6. SEC Filings........................................ 20
Section 4.7. Financial Statements............................... 20
Section 4.8. Disclosure Documents............................... 20
Section 4.9. Absence of a Material Adverse Change............... 21
Section 4.10. No Undisclosed Material Liabilities................ 21
Section 4.11. Compliance with Laws and Court Orders.............. 21
Section 4.12. Litigation......................................... 22
Section 4.13. Stock Ownership.................................... 22
Section 4.14. Finders' Fees...................................... 22
ARTICLE 5
Covenants of the Company
Section 5.1. Conduct of the Company............................. 22
Section 5.2. Stockholder Meeting; Proxy Material................ 23
Section 5.3. No Solicitation.................................... 23
Section 5.4. Access to Information; Confidentiality............. 25
ARTICLE 6
Covenants of Parent
Section 6.1. Obligations of Merger Subsidiary................... 26
Section 6.2. Voting of Shares................................... 26
Section 6.3. Director and Officer Liability..................... 26
Section 6.4. Registration Statement; Form S-8................... 27
Section 6.5. Stock Exchange Listing............................. 27
ARTICLE 7
Covenants of Parent and the Company
Section 7.1. Reasonable Best Efforts............................ 28
Section 7.2. Certain Filings.................................... 28
Section 7.3. Public Announcements............................... 28
Section 7.4. Further Assurances................................. 28
Section 7.5. Notices of Certain Events.......................... 28
Section 7.6. Tax-free Reorganization............................ 29
Section 7.7. Rule 145 Affiliates................................ 29
ARTICLE 8
Conditions to the Merger
Section 8.1. Conditions to the Obligations of Each Party........ 29
Section 8.2. Conditions to the Obligations of Parent and Merger
Subsidiary......................................... 30
Section 8.3. Conditions to the Obligations of the Company....... 30
ARTICLE 9
Termination
Section 9.1. Termination........................................ 31
Section 9.2. Effect of Termination.............................. 32
ARTICLE 10
Miscellaneous
Section 10.1. Notices........................................... 32
Section 10.2. Survival of Representations and Warranties........ 33
Section 10.3. Amendments; No Waivers............................ 33
Section 10.4. Expenses.......................................... 33
Section 10.5. Successors and Assigns............................ 34
Section 10.6. Governing Law..................................... 34
Section 10.7. Jurisdiction...................................... 34
Section 10.8. Waiver of Jury Trial.............................. 34
Section 10.9. Counterparts; Effectiveness....................... 34
Section 10.10. Entire Agreement................................. 35
Section 10.11. Third Party Beneficiaries........................ 35
Section 10.12. Captions......................................... 35
Section 10.13. Severability..................................... 35
Section 10.14. Specific Performance............................. 35
Section 10.15. Definitions and Usage............................ 35
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of October 17, 1997 among
Computational Systems, Incorporated, a Tennessee corporation (the "Company"),
Emerson Electric Co., a Missouri corporation ("Parent"), and Emersub LVII,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary").
The parties hereto agree as follows:
ARTICLE 1
The Merger
Section 1.1. The Merger. (a) Subject to the terms and
conditions of this Agreement, at the Effective Time, Merger Subsidiary shall
be merged (the "Merger") with and into the Company in accordance with the
Tennessee Business Corporation Act (the "TBCA") and the Delaware General
Corporation Law (the "DGCL"), whereupon the separate existence of Merger
Subsidiary shall cease, and the Company shall be the surviving corporation
(the "Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger set forth herein
the Company and Merger Subsidiary will file articles of merger (the "Articles
of Merger") with the Tennessee Secretary of State and a certificate of merger
(the "Certificate of Merger") with the Delaware Secretary of State and make
all other filings or recordings required by the TBCA and the DGCL in
connection with the Merger. The Merger shall become effective at such time
(the "Effective Time") as the Articles of Merger are duly filed with the
Tennessee Secretary of State and the Certificate of Merger is duly filed with
the Delaware Secretary of State (or at such later time as may be agreed in
writing by the parties hereto and specified in the Articles of Merger and the
Certificate of Merger).
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, powers, privileges and franchises and be subject
to all of the obligations, liabilities, restrictions and disabilities of the
Company and Merger Subsidiary, all as provided under the TBCA. The Merger
shall have the effects specified by the TBCA and the DGCL.
Section 1.2. Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) each share of common stock, no par value per share, of the
Company ("Company Stock") outstanding immediately prior to the Effective Time
shall (except as otherwise provided in Section 1.02(b)) be converted into the
right to receive (the "Merger Consideration") (x) $5.93 in cash and (y) the
number of shares of common stock, $.50 par value per share, of Parent ("Parent
Stock") (rounded to the nearest ten-thousandth of a share) equal to the
quotient obtained by dividing (i) $23.72 by (ii) the average of the closing
prices of a share of Parent Stock as reported on the New York Stock Exchange
(the "NYSE") Composite Tape on each of the last ten trading days ending on the
trading day immediately preceding the date of the Effective Time; provided,
however, that if and to the extent necessary for the Merger to qualify as a
reorganization under Section 368(a)(2)(E) of the Code, the cash portion of the
Merger Consideration (as described in clause (x) above) shall be reduced and
the stock portion of the Merger Consideration (as described in clause (y)
above) shall be increased;
(b) each share of Company Stock held by the Company as treasury
stock or owned by Parent or any of its subsidiaries immediately prior to the
Effective Time shall be canceled, and no payment shall be made with respect
thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
Section 1.3. Surrender and Payment. (a) Prior to the
Effective Time, Parent shall appoint an agent reasonably acceptable to the
Company (the "Exchange Agent") for the purpose of exchanging certificates
representing Company Stock (the "Certificates") for the Merger Consideration.
Parent will make available to the Exchange Agent, as needed, the Merger
Consideration to be paid in respect of shares of Company Stock. Promptly
after the Effective Time, Parent will send, or will cause the Exchange Agent
to send, to each holder of shares of Company Stock at the Effective Time
(other than the Company or Parent or any of its subsidiaries) a letter of
transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and instructions for use
in effecting the surrender of the Certificates for payment therefor.
(b) Each holder of shares of Company Stock that have been converted
into the right to receive the Merger Consideration will be entitled to receive,
upon surrender to the Exchange Agent of a Certificate, together with a
properly completed letter of transmittal, the Merger Consideration in respect
of each share of Company Stock represented by such Certificate. Until so
surrendered, each such Certificate shall, after the Effective Time, represent
for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person (as defined in Section 10.15) other than the person in whose name the
Certificate is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and promptly exchanged for the consideration provided for, and in
accordance with the procedures set forth, in this Article.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the
holders of shares of Company Stock six months after the Effective Time shall
be returned to Parent upon demand, and any such holder who has not exchanged
shares of Company Stock for the Merger Consideration in accordance with this
Section prior to that time shall thereafter look only to Parent for payment of
the Merger Consideration in respect of such shares of Company Stock.
Notwithstanding the foregoing, Parent shall not be liable to any holder of
shares of Company Stock for any amount paid to a public official pursuant to
applicable abandoned property laws.
(f) No dividends, interest or other distributions with respect to
securities of Parent constituting part of the Merger Consideration shall be
paid to the holder of any unsurrendered Certificates until such Certificates
are surrendered as provided in this Section. Upon such surrender, there shall
be paid, without interest, to the person in whose name the securities of Parent
have been registered, all dividends, interest and other distributions payable
in respect of such securities on a date subsequent to, and in respect of a
record date after, the Effective Time.
Section 1.4. Stock Options. At the Effective Time, each
option to purchase shares of Company Stock outstanding under any employee stock
option or compensation plan or arrangement of the Company, whether or not
exercisable, and whether or not vested, shall be deemed to constitute an
immediately exercisable option to acquire, on substantially the same terms and
conditions as were applicable to the original option to which it relates (a
"Substitute Option"), the same number of shares of Parent Stock as the holder
of such option would have been entitled to receive pursuant to the Merger had
such holder exercised such option in full immediately prior to the Effective
Time, at a price per share of Parent Stock computed in compliance with the
requirements of Section 424(a) of the Internal Revenue Code of 1986 (the
"Code"); provided, however, that the number of shares of Parent Stock that may
be purchased upon exercise of such Parent stock option shall not include any
fractional share and, upon exercise of such Parent stock option, a cash
payment shall be made for any fractional share based upon the closing price of
a share of Parent Stock on the NYSE on the last trading day of the calendar
month immediately preceding the date of exercise. Prior to the Effective
Time, the Company will use its best efforts to obtain such consents, if any,
as may be necessary to give effect to the transactions contemplated by this
Section. In addition, prior to the Effective Time, the Company will use its
best efforts to make any amendments to the terms of such stock option or
compensation plans or arrangements that are necessary to give effect to the
transactions contemplated by this Section; provided, however, that the Company
shall not be required to make any such amendment if the effect thereof would
be to change the treatment of any stock option or stock option plan under the
Code; provided, further, that in the event an optionee expressly waives the
accelerated vesting or exercisability of an option, whether provided for by
this Agreement or otherwise, the Substitute Option shall provide for a vesting
and exercisability schedule as if the transactions contemplated by this
Agreement had not occurred. Except as contemplated by this Section, the
Company will not, after the date hereof, without the written consent of Parent,
amend any outstanding options to purchase shares of Company Stock.
Section 1.5. Employee Stock Purchase Plan. As of the Effective
Time, the Company's 1995 Employee Stock Purchase Plan shall be terminated.
The rights of participants in such Plan with respect to any offering period
then underway under such Plan shall be determined by treating the last
business day prior to the Effective Time as the last day of such offering
period and by making such other pro-rata adjustments as may be necessary to
reflect the reduced offering period but otherwise treating such offering
period as a fully effective and completed offering period for all purposes of
such Plan. Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of the Company's Employee Stock
Purchase Plan) that are necessary to give effect to the transactions
contemplated by this Section.
Section 1.6. Adjustments. If at any time during the period
between the date of this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Parent shall occur, including by reason
of any reclassification, recapitalization, stock split or combination, exchange
or readjustment of shares, or any stock dividend thereon with a record date
during such period, the Merger Consideration shall be adjusted appropriately.
Section 1.7. Fractional Shares. No fractional shares of
Parent Stock shall be issued in the Merger, but in lieu thereof each holder of
shares of Company Stock otherwise entitled to receive as a result of the
Merger a fractional share of Parent Stock will be entitled to receive a cash
payment representing such holder's proportionate interest in the net proceeds
resulting from the sale (after deduction of all expenses resulting from such
sale) on the NYSE through one or more of its member firms of the fractional
shares of Parent Stock all holders of shares of Company Stock would otherwise
be entitled to receive as a result of the Merger.
Section 1.8. Withholding Rights. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable to any person pursuant to this Article such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Stock in respect of which such deduction and withholding was made by
the Surviving Corporation or Parent, as the case may be.
Section 1.9. Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or destroyed and,
if required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration to be paid in respect of the
shares of Company Stock represented by such Certificates as contemplated by
this Article.
ARTICLE 2
The Surviving Corporation
Section 2.1. Certificate of Incorporation. At the Effective
Time and without any further action on the part of the Company or Merger
Subsidiary, the certificate of incorporation of Merger Subsidiary in effect at
the Effective Time shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law, except that
Article 1 shall be amended to read "The name of the company is Computational
Systems, Incorporated".
Section 2.2. Bylaws. At the Effective Time and without any
further action on the part of the Company or Merger Subsidiary, the bylaws of
Merger Subsidiary in effect at the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with applicable law.
Section 2.3. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of Merger Subsidiary at the
Effective Time shall be the directors of the Surviving Corporation and (ii) the
officers of the Company at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE 3
Representations and Warranties of the Company
The Company represents and warrants to Parent that, except as
disclosed in writing by the Company to Parent prior to the date hereof:
Section 3.1. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Tennessee and has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, have a material adverse effect (as
defined in Section 10.15) on the Company. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the Company. The Company has heretofore delivered
to Parent true and complete copies of the certificate of incorporation and
bylaws of the Company as currently in effect.
Section 3.2. Corporate Authorization. (a) The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby and thereby are within the Company's
corporate powers and, except for the required approval of the Company's
stockholders in connection with the consummation of the Merger, have been duly
authorized by all necessary corporate action. The affirmative vote of the
holders of a majority of the outstanding shares of Company Stock is the only
vote of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger. No other vote of the holders
of the Company's capital stock is necessary in connection with this Agreement
or the consummation of the transactions contemplated hereby. This Agreement
constitutes a valid and binding agreement of the Company.
(b) The Company's Board of Directors, at a meeting duly called and
held, has (i) determined that this Agreement and the transactions contemplated
hereby (including the Merger) are fair to and in the best interests of the
Company's stockholders, (ii) approved and adopted this Agreement and the
transactions contemplated hereby (including the Merger), and (iii) resolved
(subject to Section 5.03(b)) to recommend approval and adoption of this
Agreement and the Merger by its stockholders.
Section 3.3. Governmental Authorization. The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby require no action by or
in respect of, or filing with, any governmental body, agency, official or
authority other than (a) the filing of the Articles of Merger in accordance
with the TBCA, (b) the filing of the Certificate of Merger in accordance with
the DGCL, (c) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), the
Securities Act of 1933 ("1933 Act"), the Securities Exchange Act of 1934
("1934 Act"), foreign or state securities or Blue Sky laws, and (d) any other
filings, approvals or authorizations which, if not obtained, would not,
individually or in the aggregate, have a material adverse effect on the
Company or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
Section 3.4. Non-contravention. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (i)
violate the certificate of incorporation or bylaws of the Company, (ii)
assuming compliance with the matters referred to in Section 3.3, violate any
applicable law, rule, regulation, judgment, injunction, order or decree, (iii)
require any consent or other action by any person under, constitute a default
under, or give rise to any right of termination, cancellation or acceleration
of any right or obligation of the Company or any of its subsidiaries or to a
loss of any benefit to which the Company or any of its subsidiaries is
entitled under any provision of any agreement or other instrument binding upon
the Company or any of its subsidiaries or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Company or any of its subsidiaries
or (iv) result in the creation or imposition of any Lien on any asset of the
Company or any of its subsidiaries except, in the case of clauses (ii), (iii)
and (iv), for such matters as would not, individually or in the aggregate,
have a material adverse effect on the Company or materially impair the ability
of the Company to consummate the transactions contemplated by this Agreement.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset.
Section 3.5. Capitalization. The authorized capital stock of
the Company consists of 50,000,000 shares of Company Stock and 5,000,000
shares of preferred stock, no par value per share. No shares of preferred
stock have been issued. As of October 14, 1997, there were outstanding
5,052,173 shares of Company Stock and options to purchase an aggregate of
639,517 shares of Company Stock at an average exercise price of $13.80 per
share (of which options to purchase an aggregate of 229,211 shares of Company
Stock were exercisable). All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in this Section, except as disclosed in
writing by the Company to Parent prior to the date hereof and except for
changes since October 14, 1997 resulting from the exercise of employee stock
options outstanding on such date, there are no outstanding (i) shares of
capital stock or voting securities of the Company, (ii) securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company or (iii) options or other rights to acquire from the
Company or other obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company. There are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any securities referred to in clauses (i), (ii) or (iii) above.
Section 3.6. Subsidiaries. (a) Each subsidiary (as defined in
Section 10.15) of the Company is a corporation or other entity duly
incorporated or organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has all corporate
or other powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not, individually or in the aggregate, have a material
adverse effect on the Company. Each subsidiary of the Company is duly
qualified to do business and is in good standing in each jurisdiction where
such qualification is necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the Company. All material subsidiaries of the
Company and their respective jurisdictions of incorporation or organization
are identified in the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1996 ("Company 10-K").
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each subsidiary of the Company is owned
by the Company, directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting
securities or ownership interests), other than any restrictions imposed under
the 1933 Act. Except as set forth in this Section, there are no outstanding
(i) shares of capital stock or other voting securities or ownership interests
in any of the Company's subsidiaries, (ii) securities of the Company or any of
its subsidiaries convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests in any of the Company's
subsidiaries or (iii) options or other rights to acquire from the Company or
any of its subsidiaries, or other obligation of the Company or any of its
subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any of
the Company's subsidiaries. There are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any of the securities referred to in clauses (i), (ii) or (iii) above.
Section 3.7. SEC Filings. (a) The Company has delivered or
made available to Parent (i) the Company's annual report on Form 10-K for its
fiscal year ended December 31, 1996, (ii) its quarterly reports on Form 10-Q
for its fiscal quarters ended after December 31, 1996, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held since December 31, 1996 and
(iv) all of its other reports, statements, schedules and registration
statements filed with the Securities and Exchange Commission ("SEC") since
December 31, 1996 (the documents referred to in this Section being referred to
collectively as the "Company SEC Filings") . The Company's quarterly report
on Form 10-Q for its fiscal quarter ended June 30, 1997 is referred to herein
as the "Company 10-Q".
(b) As of its filing date, each Company SEC Filing complied as to
form in all material respects with the applicable requirements of the 1933 Act
and the 1934 Act.
(c) As of its filing date, each Company SEC Filing filed pursuant
to the 1934 Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement, as amended or supplemented,
if applicable, filed pursuant to the 1933 Act did not, as of the date such
statement or amendment became effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Section 3.8. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of the Company included in the Company SEC Filings fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments and the absence
of footnote disclosure in the case of any unaudited interim financial
statements). For purposes of this Agreement, "Company Balance Sheet" means
the consolidated balance sheet of the Company as of June 30, 1997 set forth in
the Company 10-Q and "Company Balance Sheet Date" means June 30, 1997.
Section 3.9. Disclosure Documents. (a) The proxy statement/
prospectus of the Company to be filed with the SEC in connection with the
Merger (the "Company Proxy Statement") and any amendments or supplements
thereto will, when filed, comply as to form in all material respects with the
applicable requirements of the 1934 Act. At the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company and at the time such stockholders vote on the
approval of this Agreement and the Merger, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading. The foregoing representations and
warranties will not apply to statements included in or omissions from the
Company Proxy Statement or any amendment or supplement thereto based upon
information furnished to the Company by Parent for use therein.
(b) None of the information furnished or to be furnished by the
Company to Parent for use in (or incorporation by reference in) the
Registration Statement (as defined in Section 4.08(a)) or any amendment or
supplement thereto will contain, at the time the Registration Statement or any
amendment or supplement thereto becomes effective or at the Effective Time,
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein not misleading.
Section 3.10. Absence of Certain Changes. Since the Company
Balance Sheet Date, the business of the Company and its subsidiaries has been
conducted in the ordinary course consistent with past practices and there has
not been:
(a) any event, occurrence, development or state of circumstances or
facts which would, individually or in the aggregate, have a material adverse
effect on the Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company,
or any repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any of its subsidiaries;
(c) any amendment of any material term of any outstanding security
of the Company or any of its subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any
of its subsidiaries of any material indebtedness for borrowed money other than
in the ordinary course and in amounts and on terms consistent with past
practices;
(e) any creation or other incurrence by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary
course consistent with past practices;
(f) any making of any material loan, advance or capital
contributions to or investment in any person other than loans, advances or
capital contributions to or investments in wholly-owned subsidiaries of the
Company made in the ordinary course consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any
of its subsidiaries which would, individually or in the aggregate, have a
material adverse effect on the Company;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any of its subsidiaries relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any of its subsidiaries of any
contract or other right, in either case, material to the Company and its
subsidiaries, taken as a whole, other than transactions and commitments in the
ordinary course consistent with past practices and those contemplated by this
Agreement;
(i) any change in any method of accounting, method of tax
accounting, or accounting practice by the Company or any of its subsidiaries,
except for any such change required by reason of a concurrent change in
generally accepted accounting principles or Regulation S-X;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any of its subsidiaries, (ii)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements, (iii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or
any of its subsidiaries, (iv) establishment, adoption or amendment (except as
required by applicable law) of any collective bargaining, bonus, profit
sharing, thrift, pension, retirement, deferred compensation, compensation,
stock option, restricted stock or other benefit plan or arrangement covering
any director, officer or employee of the Company or any of its subsidiaries,
or (v) increase in compensation, bonus or other benefits payable to directors,
officers or employees other than in the ordinary course consistent with past
practices;
(k) any material labor dispute, other than routine individual
grievances, or, to the knowledge of the Company, any activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its subsidiaries, which employees were not subject to a
collective bargaining agreement at the Company Balance Sheet Date, or any
material lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to such employees; or
(l) any tax election, other than those consistent with past
practice, not required by law or any settlement or compromise of any tax
liability in either case that is material to the Company and its subsidiaries,
taken as a whole.
Section 3.11. No Undisclosed Material Liabilities. There are
no liabilities of the Company or any of its subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, other than:
(a) liabilities or obligations provided for in the Company Balance
Sheet or disclosed in the notes thereto;
(b) other liabilities or obligations (including, without
limitation, liabilities and obligations incurred in the ordinary course of
business), which would not, individually or in the aggregate, have a material
adverse effect on the Company; and
(c) liabilities or obligations under this Agreement.
Section 3.12. Compliance with Laws and Court Orders. The
Company and each of its subsidiaries is and has been in compliance with, and
to the knowledge of the Company, is not under investigation with respect to
and has not been threatened to be charged with or given notice of any violation
of, any applicable law, rule, regulation, judgment, injunction, order or
decree, except for such matters as would not, individually or in the
aggregate, have a material adverse effect on the Company.
Section 3.13. Litigation. Except as set forth in the Company
SEC Filings prior to the date hereof, there is no action, suit, investigation,
audit or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its subsidiaries or any
of their respective properties before any court or arbitrator or any
governmental body, agency or official which would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
Company.
Section 3.14. Finders' Fees. Except for McDonald & Company, a
copy of whose engagement agreement has been provided to Parent, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Company or any of its
subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section 3.15. Taxes. Except as set forth in the Company
Balance Sheet (including the notes thereto) and except as would not,
individually or in the aggregate, have a material adverse effect on the
Company, (i) all tax returns, statements, reports and forms (collectively, the
"Company Returns") required to be filed with any taxing authority by, or with
respect to, the Company and its subsidiaries have been filed in accordance
with all applicable laws; (ii) as of the time of filing, the Company Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of the Company and its subsidiaries;
(iii) the Company and its subsidiaries have timely paid all taxes (including
withholding tax on payments made by the Company and its subsidiaries) due and
payable with respect to all Company Returns which have been filed; (iv) the
Company and its subsidiaries have made adequate provision for all taxes
payable by the Company and its subsidiaries for which no Company Return has
yet been filed; (v) the charges, accruals and reserves for taxes with respect
to the Company and its subsidiaries reflected on the Company Balance Sheet
are adequate under United States generally accepted accounting principles
("GAAP") to cover the tax liabilities accruing through the date thereof; (vi)
there is no action, suit, proceeding, audit or claim now proposed or pending
against or with respect to the Company or any of its subsidiaries in respect
of any tax; (vii) neither the Company nor any of its subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (viii) neither the Company nor any of its
subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which the Company was the common parent; (ix)
neither the Company nor any of its subsidiaries has any obligation under any
tax sharing agreement, tax allocation agreement, tax indemnification agreement
or any other agreement or arrangement pursuant to which the Company or any
subsidiary is or might be required to make any payment in respect of any tax
of any person (other than the Company or such subsidiary); (x) there are no
requests for rulings or determinations in respect of any tax or tax asset
pending between the Company or any subsidiary and any taxing authority; (xi)
neither the Company nor any subsidiary, nor any other person on behalf of the
Company or any subsidiary, has entered into any agreement or consent pursuant
to Section 341(f) of the Code; (xii) neither the Company nor any subsidiary
will be required to include any adjustment in taxable income for any
post-closing tax period under Section 481(c) of the Code (or any similar
provision of the tax laws of any jurisdiction) as a result of a change in
method of accounting for a pre-closing tax period or pursuant to the
provisions of any agreement entered into with any taxing authority with regard
to the tax liability of the Company or any subsidiary for any pre-closing tax
period; (xiii) except with respect to Company Returns with a taxable year
ended after December 31, 1993, all Company Returns have been examined by the
appropriate taxing authority or the period for assessment of the taxes in
respect of which such tax returns were required to be filed has expired; (xiv)
all deficiencies asserted or assessments made as a result of any examination
of any Company Return by any taxing authority have been paid in full; (xv)
none of the property owned by the Company or any of its subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
and (xvi) there are no Liens for taxes upon the assets of the Company or any
of its subsidiaries except Liens for current taxes not yet due.
For purposes of this Section:
"post-closing tax period" means any tax period (or portion
thereof) beginning after the close of business on the date on which the
Effective Time occurs;
"pre-closing tax period" means any tax period (or portion
thereof) ending on or before the close of business on the date on which the
Effective Time occurs; and
"tax asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce taxes (including without limitation
deductions and credits related to alternative minimum taxes).
Section 3.16. Employee Benefit Plans. (a) The Company has
provided Parent with a list identifying each material "employee benefit plan",
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA"), each material employment, severance or similar contract, plan,
arrangement or policy applicable to any director or officer of the Company and
each material plan or arrangement (written or oral) providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or
medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by the Company
or any of its affiliates (as defined in Section 10.15) and covers any employee
or former employee of the Company or any of its affiliates, or under which the
Company or any of its affiliates has any liability. Copies of such "employee
benefit plans" (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof have been furnished to
Parent together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any such plan.
Such plans are referred to collectively herein as the "Company Employee Plans".
(b) Each Company Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations (including but not limited to ERISA and the
Code) which are applicable to such Plan, except where failure to so comply
would not, individually or in the aggregate, have a material adverse effect on
the Company.
(c) At no time has the Company or any person who was at that time
an affiliate of the Company maintained an employee benefit plan subject to
Title IV of ERISA.
(d) Each Company Employee Plan which is intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and, to the best knowledge of the Company, has been
so qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of the
Code.
(e) No director or officer or, to the knowledge of the Company,
other employee of the Company or any of its subsidiaries will become entitled
to any retirement, severance or similar benefit or enhanced or accelerated
benefit solely as a result of the transactions contemplated hereby. Without
limiting the generality of the foregoing, no amount required to be paid or
payable to or with respect to any employee of the Company or any of its
subsidiaries in connection with the transactions contemplated hereby (either
solely as a result thereof or as a result of such transactions in conjunction
with any other event) will be an "excess parachute payment" within the meaning
of Section 280G of the Code.
(f) No Company Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of the Company
or any of its subsidiaries.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its affiliates
relating to, or change in employee participation or coverage under, any
Company Employee Plan which would increase materially the expense of
maintaining such Company Employee Plan above the level of the expense incurred
in respect thereof for the 12 months ended on the Company Balance Sheet Date.
(h) At no time has the Company or any person that was at that
time an affiliate of the Company contributed to or been obligated to
contribute to a "multiemployer plan" (as defined in Section 3(37) of
ERISA).
Section 3.17. Environmental Matters. (a) Except as set forth
in the Company SEC Filings prior to the date hereof and except as would not,
individually or in the aggregate, have a material adverse effect on the
Company,
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been
filed, no penalty has been assessed, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of
the Company, is threatened by any governmental entity or other person
relating to or arising out of any Environmental Law;
(ii) the Company is and has been in compliance with all
Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities of or relating to the Company or
any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising
under or relating to any Environmental Law and there are no facts,
conditions, situations or set of circumstances which could reasonably
be expected to result in or be the basis for any such liability.
(b) Neither the Company nor any of its subsidiaries owns or leases
or has owned or leased any real property in New Jersey or Connecticut.
(c) The following terms shall have the meaning set forth below:
"Company" and "its subsidiaries" shall, for purposes of this
Section, include any entity which is, in whole or in part, a corporate
predecessor of the Company or any of its subsidiaries.
"Environmental Laws" means any federal, state, local or foreign
law (including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority
or other third party, relating to human health and safety or the environment or
to hazardous substances, wastes or materials.
"Environmental Permits" means, with respect to any person, all
permits, licenses, franchises, certificates, approvals and other similar
authorizations of governmental authorities relating to or required by
Environmental Laws and affecting, or relating in any way to, the business of
such person as currently conducted.
Section 3.18. Opinion of Financial Advisor. The Company's
Board of Directors has received the opinion of McDonald & Company, financial
advisor to the Company, to the effect that, as of the date of this Agreement,
the Merger Consideration is fair to the Company's stockholders from a
financial point of view.
Section 3.19. Patents and Other Proprietary Rights. The
Company and its subsidiaries have rights to use, whether through ownership,
licensing or otherwise, all patents, trademarks, service marks, trade names,
copyrights, trade secrets and other proprietary rights and processes of which
the Company is aware that are material to its business as now conducted
(collectively the "Company Intellectual Property Rights"). Except for such
matters as would not, individually or in the aggregate, have a material
adverse effect on the Company, (a) the Company and its subsidiaries have not
assigned, hypothecated or otherwise encumbered any of the Company Intellectual
Property Rights and (b) none of the licenses included in the Company
Intellectual Property Rights purports to grant sole or exclusive licenses to
another person including, without limitation, sole or exclusive licenses
limited to specific fields of use. The patents owned by the Company and its
subsidiaries are valid and enforceable and any patent issuing from patent
applications of the Company and its subsidiaries will be valid and enforceable,
except as such invalidity or unenforceability would not, individually or in the
aggregate, have a material adverse effect on the Company. The Company has no
knowledge of any infringement by any other person of any of the Company
Intellectual Property Rights, and the Company and its subsidiaries have not
entered into any agreement to indemnify any other party against any charge of
infringement of any of the Company Intellectual Property Rights, except for
such matters as would not, individually or in the aggregate, have a material
adverse effect on the Company. The Company and its subsidiaries have not and
do not violate or infringe any intellectual property right of any other
person, and neither the Company nor any of its subsidiaries have received any
communication alleging that it violates or infringes the intellectual property
right of any other person, except for such matters as would not, individually
or in the aggregate, have a material adverse effect on the Company. Except
for such matters as would not, individually or in the aggregate, have a
material adverse effect on the Company, the Company and its subsidiaries have
not been sued for infringing any intellectual property right of another
person. None of the Company Intellectual Property Rights or other know-how
relating to the business of the Company and its subsidiaries, the value of
which to the Company is contingent upon maintenance of the confidentiality
thereof, has been disclosed by the Company or any affiliate thereof to any
person other than those persons who are bound to hold such information in
confidence pursuant to confidentiality agreements or by operation of law.
Section 3.20. Antitakeover Statutes. The Board of Directors
of the Company has approved this Agreement and the transactions contemplated
hereby, and such approval satisfies the prior approval requirements of the
Tennessee Business Combination Act, and neither the Tennessee Control Share
Acquisition Act nor any other antitakeover or similar statute or regulation
applies or purports to apply to the transactions contemplated hereby.
ARTICLE 4
Representations and Warranties of Parent
Parent represents and warrants to the Company that:
Section 4.1. Corporate Existence and Power. Each of Parent and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and Parent
has all corporate powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for those licenses, authorizations, permits, consents and
approvals the absence of which would not, individually or in the aggregate,
have a material adverse effect on Parent. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on Parent. Parent has heretofore delivered to the
Company true and complete copies of the certificate of incorporation and
bylaws of Parent and Merger Subsidiary as currently in effect. Since the date
of its incorporation, Merger Subsidiary has not engaged in any activities
other than in connection with or as contemplated by this Agreement.
Section 4.2. Corporate Authorization. The execution, delivery
and performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and
have been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary.
Section 4.3. Governmental Authorization. The execution,
delivery and performance by Parent and Merger Subsidiary of this Agreement and
the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (a) the filing of
the Articles of Merger in accordance with the TBCA, (b) the filing of the
Certificate of Merger in accordance with the DGCL, (c) compliance with any
applicable requirements of the HSR Act, the 1933 Act, the 1934 Act, foreign
or state securities or Blue Sky laws, and (d) any other filings, approvals or
authorizations which, if not obtained, would not, individually or in the
aggregate, have a material adverse effect on Parent or materially impair the
ability of Parent to consummate the transactions contemplated by this
Agreement.
Section 4.4. Non-contravention. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) violate the certificate of incorporation or
bylaws of Parent or Merger Subsidiary, (ii) assuming compliance with the
matters referred to in Section 4.3, violate any applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) require any consent
or other action by any person under, constitute a default under, or give rise
to any right of termination, cancellation or acceleration of any right or
obligation of Parent or any of its subsidiaries or to a loss of any benefit to
which Parent or any of its subsidiaries is entitled under any provision of any
agreement or other instrument binding upon Parent or any of its subsidiaries or
any license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
Parent or any of its subsidiaries or (iv) result in the creation or
imposition of any Lien on any asset of Parent or any of its subsidiaries
except, in the case of clauses (ii), (iii) and (iv), for such matters as would
not, individually or in the aggregate, have a material adverse effect on
Parent or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement.
Section 4.5. Capitalization. (a) The authorized capital stock
of Parent consists of 1,200,000,000 shares of Parent Stock, and 5,400,000
shares of preferred stock, $2.50 par value per share. No shares of preferred
stock have been issued. As of September 30, 1997, there were outstanding
440,803,685 shares of Parent Stock and options to purchase an aggregate of
6,697,920 shares of Parent Stock at an average exercise price of $34.77 per
share. All outstanding shares of capital stock of Parent have been duly
authorized and validly issued and are fully paid and non-assessable.
(b) The shares of Parent Stock to be issued as part of the Merger
Consideration have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and non-assessable and the issuance thereof is not subject
to any preemptive or other similar right.
Section 4.6. SEC Filings. (a) Parent has delivered or made
available to the Company (i) its annual report on Form 10-K for its fiscal
year ended September 30, 1996 (the "Parent 10-K"), (ii) its quarterly reports
on Form 10-Q for its fiscal quarters ended after September 30, 1996, (iii) its
proxy or information statements relating to meetings of or actions taken
without a meeting by Parent's stockholders held since September 30, 1996, and
(iv) all of its other reports, statements, schedules and registration
statements filed with the SEC since September 30, 1996 (the documents referred
to in this Section being referred to collectively as the "Parent SEC
Filings"). The Parent's quarterly report on Form 10-Q for its fiscal quarter
ended June 30, 1997 is referred to herein as the "Parent 10-Q".
(b) As of its filing date, each Parent SEC Filing complied as to
form in all material respects with the applicable requirements of the 1933 Act
and the 1934 Act.
(c) As of its filing date, each Parent SEC Filing filed pursuant
to the 1934 Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement as amended or supplemented, if
applicable, filed pursuant to the 1933 Act did not, as of the date such
statement or amendment became effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Section 4.7. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of Parent included in the Parent SEC Filings fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Parent and its subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments and the absence of footnote disclosure
in the case of any unaudited interim financial statements). For purposes of
this Agreement, "Parent Balance Sheet" means the consolidated balance sheet of
Parent as of June 30, 1997 set forth in the Parent 10-Q and "Parent Balance
Sheet Date" means June 30, 1997.
Section 4.8. Disclosure Documents. (a) The registration
statement of Parent to be filed with the SEC with respect to the offering of
Parent Stock in connection with the Merger (the "Registration Statement") and
any amendments or supplements thereto will, when filed, comply as to form in
all material respects with the applicable requirements of the 1933 Act. At the
time the Registration Statement or any amendment or supplement thereto becomes
effective and at the Effective Time, the Registration Statement, as amended or
supplemented, if applicable, shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements contained therein not misleading.
The foregoing representations and warranties will not apply to statements or
omissions included in the Registration Statement or any amendment or
supplement thereto based upon information furnished to Parent or Merger
Subsidiary by the Company for use therein.
(b) None of the information furnished or to be furnished by Parent
to the Company for use in (or incorporation by reference in) the Company Proxy
Statement or any amendment or supplement thereto will contain, at the time the
Company Proxy Statement or any amendment or supplement thereto is first mailed
to stockholders of the Company or at the time the stockholders vote on the
approval of this Agreement and the Merger, any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which
they were made, not misleading.
Section 4.9. Absence of a Material Adverse Change. Since the
Parent Balance Sheet Date, the business of Parent and its subsidiaries has been
conducted in the ordinary course consistent with past practices, and there has
not been any event, occurrence, development or state of circumstances or facts
which would, individually or in the aggregate, have a material adverse effect
on Parent.
Section 4.10. No Undisclosed Material Liabilities. There are
no liabilities of Parent or any of its subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, other than:
(a) liabilities or obligations provided for in the Parent Balance
Sheet or disclosed in the notes thereto;
(b) other liabilities or obligations (including, without
limitation, liabilities and obligations incurred in the ordinary course of
business), which would not, individually or in the aggregate, have a material
adverse effect on Parent; and
(c) liabilities or obligations under this Agreement.
Section 4.11. Compliance with Laws and Court Orders. Parent
and each of its subsidiaries is and has been in compliance with, and to the
knowledge of Parent, is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for such matters as would not, individually or in the aggregate, have a
material adverse effect on Parent.
Section 4.12. Litigation. Except as set forth in the Parent
SEC Filings prior to the date hereof, there is no action, suit, investigation,
audit or proceeding pending against, or to the knowledge of Parent threatened
against or affecting, Parent or any of its subsidiaries or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official which would reasonably be expected to have, individually or
in the aggregate, a material adverse effect on Parent.
Section 4.13. Stock Ownership. As of the date of this
Agreement, Parent does not, directly or indirectly, beneficially own any
shares of Company Stock other than shares of Company Stock, if any, held in
employee benefit plans.
Section 4.14. Finders' Fees. No investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement has been
retained by or is authorized to act on behalf of Parent or any of its
subsidiaries.
ARTICLE 5
Covenants of the Company
The Company agrees that:
Section 5.1. Conduct of the Company. The Company agrees that
from the date hereof until the Effective Time, except with the prior written
consent of Parent, the Company and its subsidiaries shall conduct their
business in the ordinary course consistent with past practice and shall use
their reasonable best efforts to preserve intact their business organizations
and relationships with third parties and to keep available the services of
their present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time:
(a) the Company will not adopt or propose any change in its
certificate of incorporation or bylaws;
(b) the Company will not, and will not permit any of its
subsidiaries to, merge or consolidate with any other person or acquire a
material amount of assets of any other person;
(c) the Company will not, and will not permit any of its
subsidiaries to, sell, lease, license or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or commitments
and (ii) in the ordinary course consistent with past practice;
(d) the Company will not, and will not permit any of its
subsidiaries, to take any action that would make any representation and
warranty of the Company hereunder materially inaccurate in any respect at, or
as of any time prior to, the Effective Time;
(e) the Company will not, and will not permit any of its
subsidiaries to enter into any licensing agreement or other similar
arrangement with respect to any Company Intellectual Property Right; or
(f) the Company will not, and will not permit any of its
subsidiaries to, agree or commit to do any of the foregoing.
Section 5.2. Stockholder Meeting; Proxy Material. The Company
shall cause a meeting of its stockholders (the "Company Stockholder Meeting")
to be duly called and held as soon as reasonably practicable for the purpose
of voting on the approval of this Agreement and the Merger. In connection
with such meeting, the Company will (i) subject to Section 5.03(b), recommend
approval and adoption of this Agreement and the Merger by the Company's
stockholders, (ii) promptly prepare and file with the SEC, use its reasonable
best efforts to have cleared by the SEC and thereafter mail to its
stockholders as promptly as practicable the Company Proxy Statement and all
other proxy materials for such meeting, (iii) use its reasonable best efforts
to obtain the necessary approvals by its stockholders of this Agreement and the
transactions contemplated hereby and (iv) otherwise comply with all legal
requirements applicable to such meeting.
Section 5.3. No Solicitation. (a) The Company shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit
any officer, director or employee of or any investment banker, attorney or
other advisor or representative of the Company or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or knowingly encourage the
submission of any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to the Company or take any other action to facilitate any inquiries or the
making of any proposal that constitutes or may reasonably be expected to lead
to a Takeover Proposal; provided, however, that if the Board of Directors of
the Company determines in good faith, based on the advice of outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's stockholders under applicable law, the Company may in response
to any bona fide, written or publicly announced Takeover Proposal which was
not solicited by it and which did not otherwise result from a breach of this
Section, and subject to providing prior written notice of its decision to take
such action to Parent and compliance with Section 5.03(c), (x) furnish
information with respect to the Company pursuant to a customary
confidentiality agreement (as determined by the Company based on the advice
of its outside counsel) and (y) participate in negotiations regarding such
Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means
any proposal or offer for, or any expression of interest (by public
announcement or otherwise) by any person other than Parent or its affiliates
in, a merger or other business combination involving the Company or any of its
subsidiaries or any proposal or offer to acquire in any manner (including
through a joint venture with the Company), directly or indirectly, an equity
interest in not less than 30% of the outstanding voting securities of the
Company, or assets representing not less than 30% of the annual revenues or
net earnings of, the Company and its subsidiaries, taken as a whole.
(b) Except as expressly permitted by this Section, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Merger Subsidiary, the approval or recommendation by such Board of Directors
or any such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal
or (iii) cause the Company or any of its subsidiaries to enter into any letter
of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") with respect to any Takeover
Proposal. Notwithstanding the foregoing, the Board of Directors of the
Company, to the extent that it determines in good faith, based on the advice of
outside counsel, that in light of a Superior Proposal it is necessary to do so
in order to comply with its fiduciary duties to the Company's stockholders under
applicable law, may terminate this Agreement solely in order to concurrently
enter into an Acquisition Agreement with respect to any Superior Proposal, but
only at a time that is after the fifth business day following Parent's receipt
of written notice advising Parent that the Board of Directors of the Company is
prepared to accept a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. For purposes of this Agreement, a "Superior Proposal"
means any bona fide Takeover Proposal on terms which the Board of Directors
of the Company determines in its good faith reasonable judgment, based on the
written opinion of McDonald & Company or another financial advisor of
nationally recognized reputation (which opinion shall be provided promptly to
Parent), to be more favorable to the Company's stockholders than the Merger
and for which financing, to the extent required, is then committed. Nothing
contained herein shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
1934 Act.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section, the Company shall immediately advise
Parent orally and in writing of any request for information or of any Takeover
Proposal, or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry, and the identity of the person making any such Takeover Proposal
or inquiry and shall keep Parent fully informed of the status and material
details of any such Takeover Proposal, inquiry or request.
Section 5.4. Access to Information; Confidentiality. (a) From
the date hereof until the Effective Time, the Company will give Parent, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of the Company
and its subsidiaries and such financial and operating data and other
information as such persons may reasonably request and will instruct the
Company's employees, counsel and financial advisors to cooperate with Parent
in its investigation of the business of the Company and its subsidiaries;
provided that no investigation pursuant to this Section shall affect any
representation or warranty given by the Company to Parent hereunder. If as a
result of any such investigation, Parent concludes that the Company has
breached any of its representations and warranties hereunder, it will so
notify the Company; provided, however that failure by Parent to so notify the
Company will not affect any of the rights or obligations hereunder of any of
the parties hereto. Without limiting the foregoing, such failure will not
operate as a waiver of any of Parent's rights under this Agreement, including,
without limitation, Parent's right to refuse to close pursuant to Section
8.02(a) or Parent's right to terminate pursuant to Section 9.01.
(b) Prior to the Effective Time and after any termination of
this Agreement, Parent will hold, and will use its reasonable best efforts to
cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Company and its
subsidiaries furnished to Parent in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (a) previously known on a nonconfidential basis by
Parent, (b) in the public domain through no fault of Parent, (c) independently
developed by Parent without reference to Company information or (d) later
lawfully acquired by Parent from sources other than the Company, which sources
Parent believed, after reasonable inquiry, not to be prohibited from
disclosing such information by a contractual, legal or fiduciary obligation;
provided that Parent may disclose such information to its officers, directors,
employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement so long as
such persons are informed by Parent of the confidential nature of such
information and are directed by Parent to treat such information
confidentially. The obligation of Parent to hold any such information in
confidence shall be satisfied if it exercises the same care with respect to
such information as it would take to preserve the confidentiality of its own
similar information. If this Agreement is terminated, Parent will, and will
use its reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver
to the Company, upon request, all documents and other materials, and all
copies thereof, obtained by it or on its behalf from the Company in connection
with this Agreement that are subject to such confidence.
(c) Simultaneously with the execution of this Agreement,
the parties agree that the confidentiality agreement dated June 23, 1997
between Parent and the Company will terminate.
ARTICLE 6
Covenants of Parent
Parent agrees that:
Section 6.1. Obligations of Merger Subsidiary. Parent will
take all action necessary to cause Merger Subsidiary to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
Section 6.2. Voting of Shares. Parent agrees to vote all
shares of Company Stock beneficially owned by it in favor of adoption of this
Agreement at the Company Stockholder Meeting.
Section 6.3. Director and Officer Liability. (a) For six
years after the Effective Time, Parent will indemnify and hold harmless the
present and former officers and directors of the Company and its subsidiaries
in respect of acts or omissions occurring prior to the Effective Time to the
extent provided under the Company's certificate of incorporation and bylaws in
effect on the date hereof; provided, however, that if any claim or claims are
asserted or made within such six-year period, all rights to indemnification in
respect of such claims shall continue until the final disposition of any and
all such claims. For six years after the Effective Time, Parent will cause
the Surviving Corporation to use its best efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy on terms with
respect to coverage and amount no less favorable than those of such policy in
effect on the date hereof; provided that in satisfying its obligation under
this Section, Parent shall not be obligated to cause the Surviving Corporation
to pay premiums in excess of 150% of the amount per annum the Company paid in
the 12 months ended December 31, 1996, which amount has been disclosed by the
Company to Parent prior to the date of this Agreement.
(b) Parent shall cause the Surviving Corporation to keep in
effect in its by-law or charter provisions for a period of not less than six
years after the Effective Time (or, in the case of matters occurring prior to
the Effective Time which have not been resolved prior to the sixth anniversary
of the Effective Time, until such matters are finally resolved) which provide
for exculpation of director and officer liability and indemnification (and
advancement of expenses related thereto) of the past and present officers and
directors of the Company in respect of acts or omissions occurring prior to the
Effective Time to the fullest extent permitted by the TBCA which provisions
shall not be amended except as required by applicable law or except to make
changes permitted by law that would enhance the rights of past or present
officers and directors to indemnification or advancement of expenses in respect
of acts or omissions occurring prior to the Effective Time.
(c) If, after the Effective Time, Parent or Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers all or substantially all of its properties and assets to any person,
then, in each such case, proper provisions shall be made so that the
successors and assigns of Parent or Surviving Corporation, as the case may be,
shall assume all of the obligations set forth in this Section. The provisions
of this Section are intended for the benefit of and shall be enforceable by
each person who is now or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, an officer or director
of the Company or any of its subsidiaries.
Section 6.4. Registration Statement; Form S-8. Parent shall
promptly prepare and file with the SEC under the 1933 Act the Registration
Statement (and Registration Statements on Form S-8 as necessary to register
shares of Parent Stock underlying Substitute Options), and shall use its
reasonable best efforts to cause the Registration Statement (and such
Registration Statements on Form S-8) to be declared effective by the SEC as
promptly as practicable. Parent shall promptly take any action required to be
taken under foreign or state securities or Blue Sky laws in connection with
the issuance of Parent Stock in the Merger or pursuant to Substitute Options.
Section 6.5. Stock Exchange Listing. Parent shall use its
reasonable best efforts to cause the shares of Parent Stock to be issued in
connection with the Merger (and the shares of Parent Stock underlying
Substitute Options) to be listed on the NYSE, subject to official notice of
issuance.
ARTICLE 7
Covenants of Parent and the Company
The parties hereto agree that:
Section 7.1. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
Section 7.2. Certain Filings. The Company and Parent shall
cooperate with one another (i) in connection with the preparation of the
Company Proxy Statement and the Registration Statement, (ii) in determining
whether any action by or in respect of, or filing with, any governmental body,
agency, official, or authority is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and (iii) in taking such actions or making any such filings,
furnishing information required in connection therewith or with the Company
Proxy Statement or the Registration Statement and seeking timely to obtain any
such actions, consents, approvals or waivers.
Section 7.3. Public Announcements. Parent and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing
agreement with any national securities exchange, will not issue any such press
release or make any such public statement prior to such consultation.
Section 7.4. Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of the Company or
Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of the Company or Merger Subsidiary, any
other actions and things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 7.5. Notices of Certain Events. Each of the Company
and Parent shall promptly notify the other party hereto of:
(a) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with
the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any breach of a representation or warranty given by
such party.
Section 7.6. Tax-free Reorganization. (a) Prior to the
Effective Time, each party shall use its reasonable efforts to cause the
Merger to qualify as a reorganization qualifying under the provision of
Section 368(a)(2)(E) of the Code.
(b) The Company shall use reasonable best efforts to obtain the
opinion referred to in Section 8.03(b).
Section 7.7. Rule 145 Affiliates. Within 45 days following
the date of this Agreement, the Company shall deliver to Parent a letter
identifying all known persons who may be deemed affiliates of the Company
under Rule 145 of the 1933 Act. The Company shall use its reasonable best
efforts to obtain prior to the Effective Time a written agreement from each
person who may be so deemed, substantially in the form of Exhibit A hereto.
ARTICLE 8
Conditions to the Merger
Section 8.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been approved by the
stockholders of the Company in accordance with the TBCA;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Merger;
(d) the Registration Statement shall have been declared effective
and no stop order suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose shall be pending before
or threatened by the SEC; and
(e) the shares of Parent Stock to be issued in the Merger (as well
as the shares of Parent Stock to be issued upon exercise of Substitute Options)
shall have been approved for listing on the NYSE, subject to official notice of
issuance, if applicable.
Section 8.2. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
Effective Time, and the representations and warranties of the Company
contained in this Agreement and in any certificate or other writing delivered
by the Company pursuant hereto shall be true in all material respects at and as
of the Effective Time as if made at and as of such time; and
(b) Ronald G. Canada and Kenneth R. Piety shall have entered into
employment agreements with the Company in form and substance reasonably
satisfactory to Parent.
Section 8.3. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed in
all material respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Time, and the representations and
warranties of Parent and Merger Subsidiary contained in this Agreement and in
any certificate or other writing delivered by Parent or Merger Subsidiary
pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time; and
(b) the Company shall have received an opinion of Jones, Day,
Reavis & Pogue in form and substance reasonably satisfactory to the Company,
on the basis of certain facts, representations and assumptions set forth in
such opinion, dated the Effective Time, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code and that each of Parent, Merger
Subsidiary and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon certain representations from the
Company and certain shareholders of the Company, in each case in form and
substance reasonably satisfactory to such counsel, and upon representations
from Parent, substantially in the form of Exhibit B hereto.
ARTICLE 9
Termination
Section 9.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the Board of Directors of
the Company or Parent or the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if
(i) the Merger has not been consummated on or before April
30, 1998; provided that the right to terminate this Agreement pursuant
to this Section shall not be available to any party whose breach of
any provision of this Agreement results in the failure of the Merger
to be consummated by such time;
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining any party from
consummating the Merger is entered and such judgment, injunction,
order or decree shall have become final and non-appealable; or
(iii) this Agreement shall not have been approved and adopted
in accordance with the TBCA by the Company's stockholders at the
Company Stockholder Meeting (including any adjournment thereof); or
(c) by the Company in accordance with Section 5.03(b); provided
that in order for the termination of this Agreement pursuant to this paragraph
(c) to be deemed effective, the Company shall have complied with all
provisions of Section 5.03, including the notice provisions therein.
(d) by Parent if there is a breach of any representation,
warranty, covenant or agreement of the Company, which breach cannot be cured
and would cause the conditions set forth in Section 8.02(a) to be incapable of
being satisfied.
(e) by the Company if there is a breach of any representation,
warranty, covenant or agreement of Parent, which breach cannot be cured and
would cause the conditions set forth in Section 8.03(a) to be incapable of
being satisfied.
The party desiring to terminate this Agreement pursuant to this Section (other
than pursuant to Section 9.1(a)) shall give notice of such termination to the
other party.
Section 9.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto, except that (i) the
agreements contained in Sections 5.04(b), 10.04, 10.06, 10.07 and 10.08 shall
survive the termination hereof and (ii) no such termination shall release any
party of any liabilities or damages resulting from any willful or grossly
negligent breach by that party of any provision of this Agreement.
ARTICLE 10
Miscellaneous
Section 10.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission) and shall be given,
if to Parent or Merger Subsidiary, to:
Emerson Electric Co.
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
Fax: (314) 553-3851
Attention: Robert M. Levy
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Christopher Mayer, Esq.
if to the Company, to:
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
Fax: (423) 675-5532
Attention: Ronald G. Canada
with a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Fax: (216) 579-0212
Attention: Christopher M. Kelly, Esq.
or such other address or fax number as such party may hereafter specify for
the purpose by notice to the other parties hereto. All such notices, requests
and other communications shall be deemed received on the date of receipt by
the recipient thereof if received prior to 5 p.m. in the place of receipt and
such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
Section 10.2. Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time. This
Section shall not limit any covenant or agreement of the parties hereto, which
by its terms contemplates performance after the Effective Time.
Section 10.3. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, but
only if, such amendment or waiver is in writing and is signed, in the case of
an amendment, by each party to this Agreement or in the case of a waiver, by
the party against whom the waiver is to be effective; provided that after the
approval of this Agreement by the stockholders of the Company, there shall be
made no amendment that by law requires the further approval of the
stockholders of the Company.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 10.4. Expenses. (a) Except as otherwise provided in
this Section, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) The Company agrees to pay Parent in immediately available funds
by wire transfer an amount equal to the sum of Parent's reasonable
out-of-pocket expenses incurred in connection with this transaction (but not
to exceed $1 million) and an amount equal to $5 million promptly, but in no
event later than two business days, after the termination of this Agreement
pursuant to (A) Section 9.01(b)(iii); provided that a Takeover Proposal shall
have been publicly announced at any time prior to the date of the Company's
stockholder vote or (B) Section 9.01(c).
Section 10.5. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that Parent
or Merger Subsidiary may transfer or assign, in whole or from time to time in
part, to one or more of their affiliates, the right to enter into the
transactions contemplated by this Agreement, but any such transfer or
assignment will not relieve Parent or Merger Subsidiary of its obligations
hereunder.
Section 10.6. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of Delaware.
Section 10.7. Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in any federal court located in the State of Delaware or any
Delaware state court, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient form. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 10.1 shall be deemed effective service of process on such party.
Section 10.8. Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.9. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
No provision of this Agreement is intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 10.10. Entire Agreement. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter of
this Agreement and supersedes all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter
hereof and thereof.
Section 10.11. Third Party Beneficiaries. Except for the
agreements set forth in Article 1 and Section 6.03, nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries.
Section 10.12. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 10.13. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any parts. Upon
such a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
Section 10.14. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof in
addition to any other remedy to which they are entitled at law or in equity.
Section 10.15. Definitions and Usage. (a) For purposes of this
Agreement:
"affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control
with such person.
"knowledge" of any person which is not an individual means the
knowledge of such person's officers after reasonable inquiry.
"material adverse effect" means, when used in connection with
Parent or the Company, any change, effect, event, occurrence or state of facts
that has had, or would reasonably be expected to have, a material adverse
effect on the business, operations, assets, liabilities, condition (financial
or otherwise) or results of operations of Parent and its subsidiaries, taken
as a whole, or the Company and its subsidiaries, taken as a whole, as the case
may be.
"officer" means in the case of Parent and the Company, any
executive officer of Parent or the Company, as applicable, within the meaning
of Rule 3b-7 of the 1934 Act.
"person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"subsidiary" means, with respect to any person, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such person.
A reference in this Agreement to any statute shall be to such
statute as amended from time to time, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
1933 Act......................................... 3.3
1934 Act......................................... 3.3
Acquisition Agreement............................ 5.03(b)
Articles of Merger............................... 1.01(b)
Certificate of Merger............................ 1.01(b)
Certificates..................................... 1.03(a)
Code............................................. 1.04
Company.......................................... preamble
Company 10-K..................................... 3.6(a)
Company 10-Q..................................... 3.07(a)
Company Balance Sheet............................ 3.8
Company Balance Sheet Date....................... 3.8
Company Employee Plan............................ 3.16(a)
Company Intellectual Property Rights............. 3.19
Company Proxy Statement.......................... 3.9(a)
Company Returns.................................. 3.15
Company SEC Filings.............................. 3.07(a)
Company Stock.................................... 1.2(a)
Company Stockholder Meeting...................... 5.2
DGCL............................................. 1.01(a)
Effective Time................................... 1.1(b)
Environmental Laws............................... 3.17(c)
Environmental Permits............................ 3.17(c)
ERISA............................................ 3.16(a)
Exchange Agent................................... 1.03(a)
GAAP............................................. 3.15
HSR Act.......................................... 3.3
Lien............................................. 3.4
Merger........................................... 1.01(a)
Merger Consideration............................. 1.02(a)
Merger Subsidiary................................ preamble
NYSE............................................. 1.02(a)
Parent........................................... preamble
Parent 10-K...................................... 4.06(a)
Parent 10-Q...................................... 4.06(a)
Parent Balance Sheet............................. 4.07
Parent Balance Sheet Date........................ 4.07
Parent SEC Filings............................... 4.06(a)
Parent Stock..................................... 1.2(a)
Registration Statement........................... 4.08(a)
SEC.............................................. 3.07(a)
Stock Price...................................... 1.02(a)
Substitute Option................................ 1.04
Superior Proposal................................ 5.03(b)
Surviving Corporation............................ 1.01(a)
Takeover Proposal................................ 5.03(a)
TBCA............................................. 1.1(a)
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers 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 LVII, INC.
By: /s/ Robert M. Levy
----------------------------------------
Robert M. Levy
President
COMPUTATIONAL SYSTEMS,
INCORPORATED
By: /s/ Ronald G. Canada
----------------------------------------
Ronald G. Canada
Chairman of the Board and Chief
Executive Officer
EXHIBIT A
AFFILIATE'S LETTER
(__________________________________)
____________, 1997
Emerson Electric Co.
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this
letter the undersigned may be deemed to be an "affiliate" of Computational
Systems, Incorporated, a Tennessee corporation ("Company"), as the term
"affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of
the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). Pursuant to the terms of the Agreement and Plan of
Merger dated as of October 17, 1997 (the "Agreement") among the Company,
Emerson Electric Co., a Missouri corporation ("Parent"), and Emersub LVII,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary"), Merger Subsidiary will be merged with and into Company with
Company to be the surviving corporation in the merger (the "Merger").
As a result of the Merger, the undersigned will receive shares
of Common Stock, $.50 par value per share, of Parent (the "Parent Common
Stock") in exchange for shares owned by the undersigned of Common Stock, no
par value per share, of Company (the "Company Common Stock").
The undersigned represents, warrants and covenants to Parent and
Company that as of the date the undersigned receives any Parent Common Stock
as a result of the Merger:
A. The undersigned shall not make any sale, transfer or other
disposition of the Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. The undersigned has carefully read this letter and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon the undersigned's ability to sell, transfer or otherwise
dispose of the Parent Common Stock to the extent the undersigned felt
necessary with the undersigned's counsel or counsel for Company.
C. The undersigned has been advised that the issuance of Parent
Common Stock to the undersigned pursuant to the Merger will be registered with
the Commission under the Act on a Registration Statement on Form S-4.
However, the undersigned has also been advised that, since at the time the
Merger is submitted for a vote of the stockholders of Company, the undersigned
may be deemed to be an affiliate of Company, the undersigned may not sell,
transfer or otherwise dispose of the Parent Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 promulgated by the Commission
under the Act, or (iii) in the opinion of counsel reasonably acceptable to
Parent, or pursuant to a "no action" letter obtained by the undersigned from
the staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act; provided, however, that in
any such case, such sale, assignment or transfer shall only be permitted if,
in the opinion of counsel for Parent, such transaction would not have,
directly or indirectly, any adverse consequences for Parent with respect to
the treatment of the Merger for tax purposes.
D. The undersigned understands that Parent is under no obligation
to register the sale, transfer or other disposition of the Parent Common Stock
by the undersigned or on the undersigned's behalf under the Act or to take any
other action necessary in order to enable such sale, transfer or other
disposition by the undersigned in compliance with an exemption from such
registration.
E. The undersigned also understands that there will be placed on
the certificates for the Parent Common Stock issued to the undersigned or any
substitution thereof, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION INVOLVING COMPUTATIONAL SYSTEMS, INCORPORATED TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH THE
TERMS OF A LETTER AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF
AND PARENT, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF PARENT."
F. The undersigned also understands that unless the transfer by
the undersigned of the undersigned's Parent Common Stock has been registered
under the Act or is a sale made in conformity with the provisions of Rule 145
under the Act, Parent reserves the right to put the following legend on the
certificates issued to the undersigned's transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION INVOLVING
COMPUTATIONAL SYSTEMS, INCORPORATED TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SECURITIES HAVE NOT
BEEN ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of substitute
certificates without such legend if (i) the securities represented thereby
have been registered for sale by the undersigned under the 1933 Act or (ii)
Parent has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Parent, or a "no-action" letter obtained
by the undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
G. The undersigned further understands and agrees that the
representations, warranties, covenants and agreements of the undersigned set
forth herein are for the benefit of Parent, Company and the Surviving
Corporation (as defined in the Merger Agreement) and will be relied upon by
such entities and their respective counsel and accountants.
H. The undersigned understands and agrees that this letter
agreement shall apply to all shares of the capital stock of Parent and Company
that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws.
Execution of this letter should not be considered an admission
on the part of the undersigned that the undersigned is an "affiliate" of
Company as described in the first paragraph of this letter or as a waiver of
any rights the undersigned may have to object to any claim that the
undersigned is such an affiliate on or after the date of this letter.
Very truly yours,
By:
-----------------------
Name:
Title:
Accepted this ____ day of , 1997.
EMERSON ELECTRIC CO.
By:
----------------------------
Name:
Title:
EXHIBIT B
PARENT CORPORATION REPRESENTATION LETTER
[Effective Time]
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to
Section 8.3(b) of the Agreement and Plan of Merger (the "Agreement")(1) dated
October 17, 1997, among Emerson Electric Co., a Missouri corporation
("Parent"), Emersub LVII, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Subsidiary"), and Computational Systems,
Incorporated, a Tennessee corporation ("Company"), the undersigned officers
of Parent and Merger Subsidiary hereby certify and represent as to Parent and
Merger Subsidiary that the facts relating to the merger (the "Merger") of
Merger Subsidiary with and into Company pursuant to the Agreement and as
described in the Company Proxy Statement dated ________, 1997 (the "Proxy
Statement"), are true, correct and complete in all respects at the date hereof
and will be true, correct and complete in all respects at the Effective Time
and that:
1. The consideration to be received in the Merger by holders of
Company Stock was determined by arm's length negotiations between the
managements of Parent and Company.
- ----------
(1) References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or
annex thereto.
2. Immediately after the Merger, to the knowledge of the
management of Parent, Company will hold at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the gross
assets held by Merger Subsidiary and Company immediately prior to the Merger.
For purposes of this representation, amounts paid by Company or Merger
Subsidiary to pay expenses in connection with the Merger, and all redemptions
and distributions (if any, except for regular, normal dividends) made by
Company in contemplation of the Merger will be included as assets of Company
or Merger Subsidiary, respectively, immediately prior to the Merger.
3. Prior to the Merger, Parent will be in control of Merger
Subsidiary within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code"). Merger Subsidiary was formed in 1996, and at
no time has or will Merger Subsidiary conduct any business activities or other
operations of any kind other than the issuance of its stock to Parent prior
to the Effective Time.
4. Following the Merger, Parent has no present plan or intention
to cause Company to issue additional shares of stock that would result in
Parent losing control of Company within the meaning of Section 368(c) of the
Code.
5. Parent has no present plan or intention to liquidate Company,
to merge Company with or into another corporation, to sell, exchange, transfer
or otherwise dispose of any stock of Company or to cause Company to sell,
exchange, transfer or otherwise dispose of a substantial portion of its assets,
except for (i) dispositions made in the ordinary course of business, (ii)
transfers described in Section 368(a)(2)(C) of the Code, or (iii) asset
dispositions to the extent that all such dispositions, sale, transfer or
exchange of assets will not, in the aggregate, violate paragraph 2 of this
letter.
6. In the Merger, Merger Subsidiary will have no liabilities
(other than immaterial liabilities, if any, related to its incorporation)
assumed by Company and will not transfer to Company any assets subject to
liabilities.
7. Parent has no present plan or intention to cause Company,
following the Merger, (i) to cease to operate its historic business or (ii) to
cease to use a significant portion of its historic business assets in a
business.
8. Parent and Merger Subsidiary each will pay its or their own
expenses, if any, incurred in connection with or as part of the Merger or
related transactions. Neither Parent nor Merger Subsidiary has paid or will
pay, directly or indirectly, any expenses (including transfer taxes) incurred
by any holder of Company Stock in connection with or as part of the Merger or
any related transactions. Except as otherwise provided under Section 6.03 of
the Merger Agreement, neither Parent nor Merger Subsidiary has agreed to
assume, nor will it directly or indirectly assume, any expense or other
liability, whether fixed or contingent, of any holder of Company Stock.
9. There is no intercorporate indebtedness existing between
Parent and Company or between Merger Subsidiary and Company that was issued,
acquired or will be settled at a discount.
10. Neither Parent nor Merger Subsidiary is an "investment
company" within the meaning of Section 368(a)(2)(F) of the Code.
11. The payment of cash in lieu of fractional shares of Parent
Stock in the Merger is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the Merger by Parent or the Merger Subsidiary to holders of
Company Stock instead of issuing fractional shares of Parent Stock will not
exceed 1% of the total consideration that will be issued in the Merger to
holders of Company Stock. The fractional share interests of each holder of
Company Stock will be aggregated and, to the knowledge of the management of
Parent, no holder of Company Stock will receive cash in an amount equal to or
greater than the value of one full share of Parent Stock.
12. None of the employee compensation received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock to be surrendered in the
Merger. None of the shares of Parent Stock to be received by any
shareholder-employee of Company in the Merger is or will be separate
consideration for, or allocable to, any employment, consulting or similar
arrangement. Any compensation paid or to be paid to any shareholder of
Company who will be an employee of or perform advisory services for Parent,
Merger Subsidiary, Company, or any affiliate thereof after the Merger, will be
determined by bargaining at arm's length.
13. During the past 5 years, none of Parent or any subsidiary
thereof has owned or owns, beneficially or of record, any class of stock of
Company or any securities of Company or any instrument giving the holder the
right to acquire any such stock or securities (other than the Stockholder
Option Agreement between Parent and the Stockholder referred to therein).
14. The Merger Agreement and the documents described in the Merger
Agreement represent the entire understanding of Parent, Merger Subsidiary, and
Company with respect to the Merger.
15. Neither Parent nor Merger Subsidiary will take any position
on any Federal, state or local income or franchise tax return, or take any
other tax reporting position, that is inconsistent with the treatment of the
Merger as a reorganization within the meaning of Section 368(a) of the Code,
unless otherwise required by a "determination" (as defined in Section
1313(a)(1) of the Code) or by applicable state or local income or franchise
tax law.
16. Except pursuant to its pre-existing stock purchase program that
was commenced prior to 1997 and is scheduled to terminate in 2001 (although
such program may be extended by the board of directors of Parent), Parent has
no present plan or intention to reacquire any of its stock issued in the
transaction. Any stock reacquired pursuant to the stock purchase program will
be acquired (1) in the open market or from brokers or dealers and, although
such stock may include stock issued in the Merger, will not be knowingly
acquired from any shareholder of the Company or (2) from shareholders (other
than any shareholder of the Company) of Parent in privately negotiated
transactions.
Very truly yours,
EMERSON ELECTRIC CO.
By:
----------------------
Name:
Title:
EMERSUB LVII, INC.
By:
----------------------
Name:
Title:
Annex B
STOCKHOLDER OPTION AGREEMENT
AGREEMENT dated as of October 17, 1997 between Emerson Electric
Co., a Missouri corporation ("Buyer"), and Ronald G. Canada (the
"Stockholder").
W I T N E S S E T H:
WHEREAS, immediately prior to the execution of this Agreement,
Buyer, Computational Systems, Incorporated, a Tennessee corporation (the
"Company"), and Emersub LVII, Inc., a Delaware corporation ("Merger
Subsidiary"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Subsidiary will be merged with and into the Company
(the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Buyer has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
Option
Section 1.1. Grant of Option. The Stockholder hereby grants to
Buyer an irrevocable, unconditional option (the "Option") to purchase any and
all of the shares of common stock, no par value per share, of the Company
beneficially owned (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) by the Stockholder or
with respect to which the Stockholder has a contractual right to acquire,
whether conditioned on continued employment, payment of the purchase price
therefor or otherwise (the "Shares"), at a purchase price of $29.65 per Share
(the "Purchase Price").
Section 1.2. Exercise of Option. (a) Subject to the
conditions set forth in Section 1.5 hereof, the Option may be exercised by
Buyer, in whole or in part, at any time or from time to time after the
termination of the Merger Agreement pursuant to (x) Section 9.01(b)(iii)
thereof; provided that a Takeover Proposal (as defined in the Merger
Agreement) shall have been publicly announced at any time prior to the date of
the Company's stockholder vote on the approval of the Merger and the Merger
Agreement, or (y) Section 9.01(c) thereof and, in each case, prior to the 30th
business day after such termination. In the event Buyer wishes to exercise
the Option for all or some of the Shares, Buyer shall send a written notice
(the "Exercise Notice") to the Stockholder and Escrow Agent (as defined in
Section 1.3) specifying the total number of Shares it wishes to purchase
pursuant to such exercise and the place, the date (not less than one nor more
than 20 business days from the date of the Exercise Notice), and the time for
the closing of such purchase, provided that such date and time may be earlier
than one day after the Exercise Notice if reasonably practicable. Each
closing of a purchase of Shares (a "Closing") shall take place at the place,
on the date and at the time designated by Buyer in its Exercise Notice,
provided that if, at the date of the Closing herein provided for, the
conditions set forth in Section 1.5 shall not have been satisfied (or waived
by the Stockholder), Buyer may postpone the Closing until a date within five
business days after such conditions are satisfied.
(b) Buyer shall not be under any obligation to deliver any Exercise
Notice and may allow the Option to terminate without purchasing any Shares
hereunder; provided however that once Buyer has delivered to the Stockholder
an Exercise Notice, subject to the terms and conditions of this Agreement,
Buyer shall be bound to effect the purchase as described in such Exercise
Notice.
Section 1.3. Deposit in Escrow. Within five calendar days of
the execution and delivery of this Agreement, the Stockholder shall execute and
deliver to Buyer and the escrow agent (the "Escrow Agent") a copy of the
Escrow Agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). Concurrently with the execution and delivery of the Escrow
Agreement, the Stockholder shall deliver a certificate or certificates
representing (or cause to be made book entry delivery to an account designated
by the Escrow Agent of) all of the Shares to the Escrow Agent, duly endorsed
or accompanied by stock powers duly executed in blank. All Shares so
delivered to the Escrow Agent shall remain subject to the Escrow Agreement
until the earlier of (i) the purchase of any of such Shares by Buyer hereunder,
or (ii) termination of this Agreement.
Section 1.4. Closing. At any Closing, (a) Buyer shall deliver
to the Stockholder a certified or bank cashier's check payable to or upon the
order of the Stockholder in an amount equal to (i) the number of the Shares
being purchased at such Closing multiplied by (ii) the Purchase Price (the
"Purchase Amount"), and (b) upon receipt of the items enumerated in Section
2 of the Escrow Agreement, the Escrow Agent shall deliver to Buyer a
certificate or certificates representing such Shares, duly endorsed or
accompanied by stock powers duly executed in blank, or make book entry
delivery of such Shares to an account designated by Buyer.
Section 1.5. Conditions to the Obligations of the Stockholder.
The obligations of the Stockholder to sell Shares at any Closing is subject to
the following conditions:
(a) The representations and warranties of Buyer contained in
Article 4 shall be true and correct in all material respects on the date
thereof.
(b) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") applicable to the exercise of the
Option shall have expired or been terminated.
(c) There shall be no preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or
by a governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining the exercise of the Option.
Section 1.6. Adjustment Upon Change in Capitalization or
Merger. (a) In the event of any change in the Company's capital stock by
reason of stock dividends, stock splits, mergers, consolidations,
recapitalizations, combinations, conversions, exchanges of shares,
extraordinary or liquidating dividends, or other changes in the corporate or
capital structure of the Company which would have the effect of diluting or
changing Buyer's rights hereunder, the number and kind of shares or securities
subject to the Option and the purchase price per Share (but not the total
purchase price) shall be appropriately and equitably adjusted so that Buyer
shall receive upon exercise of the Option the number and class of shares or
other securities or property that Buyer would have received in respect of the
Shares purchasable upon exercise of the Option if the Option had been
exercised immediately prior to such event. The Stockholder shall take such
steps in connection with such consolidation, merger, liquidation or other such
action as may be necessary to assure that the provisions hereof shall
thereafter apply as nearly as possible to any securities or property
thereafter deliverable upon any exercise of the Option.
(b) In the event the consideration per Share to be paid by Buyer
pursuant to the Merger is increased, the Purchase Price shall be similarly
increased.
ARTICLE 2
Grant of Proxy
The Stockholder hereby revokes any and all previous proxies
granted with respect to the Shares. By entering into this Agreement, the
Stockholder hereby grants a proxy appointing Buyer as his attorney-in-fact and
proxy, with full power of substitution, for and in such Stockholder's name, to
vote the Shares held of record by such Stockholder (a) in favor of the Merger
Agreement and the transactions contemplated by the Merger Agreement (including
the Merger) and any actions required in furtherance thereof; (b) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) against any and all of the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement):
(i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or
its subsidiaries;
(ii) any sale, lease or transfer of a material amount of
assets of the Company or its subsidiaries, or any share exchange,
reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of the Company or its subsidiaries; or
(iii) (A) any change in a majority of the persons who
constitute the board of directors of the Company; (B) any material change in
the present capitalization of the Company including any proposal to issue or
sell a substantial equity interest in the Company or its subsidiaries; (C) any
amendment of the Company's certificate of incorporation or by-laws; (D) any
other change in the Company's corporate structure or business; or (E) any
other action which is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially adversely affect the Merger or
the transactions contemplated by this Agreement or the Merger Agreement.
The proxy granted by the Stockholder pursuant to this Article 2
is irrevocable, is coupled with an interest and shall survive the death,
disability, incapacity or incompetency of the Stockholder and in all other
circumstances; provided, however, that such proxy shall be automatically
revoked upon termination of this Agreement in accordance with its terms. For
Shares of which the Stockholder is the beneficial but not the record owner,
the Stockholder shall use his best efforts to cause any record owner of such
Shares to grant to Buyer a proxy to the same effect as that contained herein.
The Stockholder shall perform such further acts and execute such further
documents as may be required to vest in Buyer the sole power to vote such
Shares during the term of the proxy granted herein.
ARTICLE 3
Representations and Warranties of the Stockholder
The Stockholder represents and warrants to Buyer that:
Section 3.1. Valid Title. The Stockholder is the sole, true,
lawful and beneficial owner of the Shares purported to be owned by the
Stockholder with no restrictions on his voting rights or rights of disposition
pertaining thereto. At any Closing, the Stockholder will convey good and
valid title to the Shares being purchased free and clear of any and all
claims, liens, charges, encumbrances and security interests. None of the
Shares is subject to any voting trust or other agreement or arrangement with
respect to the voting of such Shares.
Section 3.2. Non-Contravention. The execution, delivery and
performance by the Stockholder of this Agreement and the consummation of the
transactions contemplated hereby do not and will not contravene or constitute
a default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Stockholder or to a loss of any
benefit of the Stockholder under any provision of applicable law or regulation
or of any agreement, judgment, injunction, order, decree or other instrument
binding on the Stockholder or result in the imposition of any lien on any asset
of the Stockholder.
Section 3.3. Binding Effect. This Agreement is a valid and
binding Agreement of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally.
Section 3.4. Total Shares. As of the date of this Agreement,
the Stockholder beneficially owns 1,070,692 Shares (of which 1,066,652 of these
Shares are held of record) and has options to purchase an aggregate of 24,661
Shares (of which options to purchase an aggregate of 4,040 Shares are
exercisable). Except as set forth in this Section and except for 53,000 Shares
held of record by the Stockholder as trustee for the benefit of Kenneth R.
Piety's children, the Stockholder owns no securities of the Company or options
to purchase or rights to subscribe for or otherwise acquire any securities of
the Company and has no other interest in or voting rights with respect to any
securities of the Company.
Section 3.5. Finder's Fees. No investment banker, broker or
finder is entitled to a commission or fee from Buyer or the Company in respect
of this Agreement based upon any arrangement or agreement made by or on behalf
of the Stockholder.
ARTICLE 4
Representations and Warranties of Buyer
Buyer represents and warrants to the Stockholder:
Section 4.1. Corporate Power and Authority. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by the board of directors of
Buyer and no other corporate action on the part of Buyer is necessary to
authorize the execution, delivery or performance by Buyer of this Agreement
and the consummation by Buyer of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and is a valid and
binding Agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally.
Section 4.2. Acquisition for Buyer's Account. The Shares to be
acquired by Buyer upon any exercise of the Option will be acquired by Buyer
for its own account and not with a view to the public distribution thereof and
will not be transferred except in compliance with the Securities Act of 1933.
ARTICLE 5
Covenants of the Stockholder
The Stockholder hereby covenants and agrees that:
Section 5.1. No Proxies for or Encumbrances on Shares. Except
pursuant to the terms of this Agreement, the Stockholder shall not, without the
prior written consent of Buyer, directly or indirectly, (i) grant any proxies
or enter into any voting trust or other agreement or arrangement with respect
to the voting of any of the Shares or (ii) acquire, sell, assign, transfer,
encumber or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the direct or indirect acquisition
or sale, assignment, transfer, encumbrance or other disposition of, any of the
Shares during the term of this Agreement. The Stockholder shall not seek or
solicit any such acquisition or sale, assignment, transfer, encumbrance or
other disposition or any such contract, option or other arrangement or
assignment or understanding and agrees to notify Buyer promptly and to provide
all details requested by Buyer if the Stockholder shall be approached or
solicited, directly or indirectly, by any person with respect to any of the
foregoing.
Section 5.2. No Shopping. The Stockholder shall not directly
or indirectly (i) solicit, initiate or knowingly encourage (or authorize any
person to solicit, initiate or knowingly encourage) the submission of any
Takeover Proposal or (ii) subject to the fiduciary duty of the Stockholder as
a director of the Company under applicable law, participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect to the Company, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes or may reasonably be expected
to lead to a Takeover Proposal. The Stockholder shall promptly advise Buyer
of the terms of any communications it may receive relating to any of the
foregoing.
ARTICLE 6
Miscellaneous
Section 6.1. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost
or expense.
Section 6.2. Further Assurances. In the event any exercise of
the Option occurs, each of Buyer and the Stockholder will execute and deliver
or cause to be executed and delivered all further documents and instruments and
use its best efforts to secure such consents and take all such further action
as may be reasonably necessary in order to consummate the transactions
contemplated hereby or to enable Buyer to exercise and enjoy all benefits and
rights of the Stockholder with respect to the Shares to be acquired upon such
exercise of the Option.
Section 6.3. Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or
bound, to consummate and make effective the transactions contemplated by this
Agreement, to obtain all necessary waivers, consents and approvals and effect
all necessary registrations and filings, including, but not limited to,
filings under the HSR Act, responses to requests for additional information
related to such filings, and submission of information requested by
governmental authorities, and to rectify any event or circumstances which
could impede consummation of the transactions contemplated hereby.
Section 6.4. Specific Performance. Buyer and the Stockholder
agree that Buyer would be irreparably damaged if for any reason the Stockholder
failed to sell the Shares (or other securities deliverable pursuant to Section
1.6) to be purchased upon any exercise of the Option or to perform any of its
other obligations under this Agreement, and that Buyer would not have an
adequate remedy at law for money damages in such event. Accordingly, Buyer
shall be entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by the Stockholder. This
provision is without prejudice to any other rights that Buyer may have against
the Stockholder for any failure to perform his obligations under this
Agreement.
Section 6.5. Notices. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram or telex, or by registered or
certified mail (postage prepaid, return receipt requested) to such party at its
address set forth on the signature page hereto.
Section 6.6. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares to be acquired by Buyer upon any
exercise of the Option.
Section 6.7. Amendments; Termination. This Agreement may not
be modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement will automatically terminate upon the termination of the Merger
Agreement in accordance with its terms, except that if the termination of the
Merger Agreement results in the Option becoming exercisable as provided in
Section 1.02 hereof, then this Agreement shall automatically terminate on the
31st business day after such termination. Such termination will not adversely
affect any rights that have accrued hereunder prior to the date of such
termination.
Section 6.8. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 6.9. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of Delaware without giving effect to
the principles of conflicts of laws thereof.
Section 6.10. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective on October 18, 1997 when
each party hereto shall have received counterparts hereof signed by all of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
EMERSON ELECTRIC CO.
By: /s/ Robert M. Levy
------------------------------------
Robert M. Levy
Assistant Vice President-Development
Emerson Electric Co.
8000 W. Florissant Avenue
St. Louis, Missouri 63136
/s/ Ronald G. Canada
------------------------------------
Ronald G. Canada
835 Innovation Drive
Knoxville, Tennessee 37932
Exhibit A
ESCROW AGREEMENT
AGREEMENT dated as of October __, 1997 among Emerson Electric
Co., a Missouri corporation ("Buyer"), Ronald G. Canada (the "Stockholder")
and ___________ (the "Escrow Agent").
The parties hereto hereby agree as follows:
1. Pursuant to Section 1.3 of the Stockholder Option Agreement,
the Stockholder hereby delivers to the Escrow Agent a certificate or
certificates representing the Shares (the "Certificates"). The Escrow Agent
hereby acknowledges receipt of the Certificate or Certificates in escrow
pursuant to the terms and conditions of this Agreement.
2. (a) Upon receipt of (i) a certificate of Buyer stating that
(x) all conditions set forth in the Stockholder Option Agreement have been met
or waived pursuant to the terms thereof and (y) Buyer has tendered the Purchase
Amount as provided therein and (ii) evidence from Buyer that the Purchase
Amount has been so tendered and received by the Stockholder, the Escrow Agent
will deliver to Buyer the Certificates.
(b) The Escrow Agent will deliver the Certificates to Buyer upon
receipt of the certificate and evidence provided for in paragraph 2(a) above,
notwithstanding any claim given to, or demand made upon, the Escrow Agent or
any action taken or threatened to be taken by any other person or entity. The
Escrow Agent's obligation to so deliver such Certificates shall survive the
death, disability, incapacity, incompetence or other circumstance relating to
the Stockholder.
(c) Buyer will deliver simultaneously to the Stockholder a copy of
all certificates, evidences and instructions delivered to the Escrow Agent
hereunder.
3. Except pursuant to the terms and conditions of this Agreement
or by joint written instructions signed by all parties hereto, the Escrow Agent
shall not sell, transfer or otherwise dispose of in any manner the Shares held
in escrow by it.
4. The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and the Escrow
Agent shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement.
5. The Escrow Agent is not a party to, and is not bound by or
charged with notice of, any agreement out of which this escrow may arise,
including but not limited to the Stockholder Option Agreement.
6. The Escrow Agent shall not be responsible for any failure or
inability of the other parties hereof, or any one of them, to perform or comply
with the provisions of this Agreement or the Stockholder Option Agreement.
7. In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely upon any document, instrument or signature believed
by it in good faith to be genuine and signed by any party hereto or an
authorized officer or agent thereof, and shall not be required to investigate
the truth or accuracy of any statement contained in any such document or
instrument. The Escrow Agent may assume that any person purporting to give
any notice in accordance with the provisions hereof has been duly authorized
to do so.
8. The Escrow Agent shall not be liable for any error of judgment,
or any action taken, suffered or omitted to be taken hereunder except in the
case of its gross negligence or willful misconduct, nor shall it be liable for
the default or misconduct of any employee, agent or attorney appointed by it
who shall have been selected with reasonable care.
9. The Escrow Agent shall have no responsibility as to the
validity or value of the escrowed Shares. The Escrow Agent shall have no duty
as to the collection or protection of the Shares held in escrow by it or income
thereon, nor as to the preservation of any rights pertaining thereto, beyond
the safe custody of any such securities actually in its possession.
10. The Escrow Agent or any successor to it as escrow agent
hereafter appointed may at any time resign and be discharged of the duties
imposed hereunder by giving notice to each of the parties hereto, such
resignation to take effect upon a successor escrow agent's acceptance of
appointment.
11. Upon execution of this Agreement the Escrow Agent shall receive
an acceptance fee in the amount to which the Escrow Agent and Buyer have
heretofore agreed together with reasonable attorney's fees incurred in
connection with the preparation of this Agreement.
12. Buyer will reimburse and indemnify the Escrow Agent for, and
hold it harmless against, any loss, liability or expense, including, but not
limited to, reasonable attorney's fees, incurred without gross negligence or
willful misconduct on the part of the Escrow Agent arising our of or in
connection with the acceptance of, or the performance of its duties and
obligations under, this Agreement, as well as the reasonable costs and
expenses of defending itself against any claim or liability arising out of or
relating to this Agreement.
13. All notices, requests, demands and other communications
provided for by this Agreement (unless otherwise specified herein) shall be in
writing and delivered by mail, telegram, telex or personal delivery and shall
be given to all persons specified below, and shall be deemed given, if by
telegram, telex or personal delivery when received, and if mailed, two
business days after being mailed postage prepaid, registered or certified mail,
and addressed to the respective parties as set forth below or at such other
address as any party may specify to the other parties in writing (such change
of address to become effective only upon receipt of such notification in
writing).
If to the Stockholder:
Ronald G. Canada
835 Innovation Drive
Knoxville, Tennessee 37932
Fax: (423) 675-5532
If to Buyer:
Emerson Electric Co.
8000 W. Florissant Avenue
P.O. Box 4100
St. Louis, Missouri 63136
Fax: (314) 553-3851
Attention: Robert M. Levy
If to the Escrow Agent:
________________
________________
________________
14. This Agreement shall terminate upon the earlier of (a) the
transfer of all the Shares by the Escrow Agent to Buyer as provided in
Section 2 of this Agreement or (b) the termination of the Stockholder Option
Agreement as provided therein. The Stockholder and Buyer shall give notice to
the Escrow Agent of a termination of this Agreement pursuant to clause 14(b)
above and, upon receipt of both such notices, any Shares held by the Escrow
Agent pursuant hereto shall be returned immediately to the Stockholder.
15. This Agreement shall be governed by and construed and enforced
in accordance with the law of the State of Delaware.
16. This Agreement may be amended, modified, superseded or
canceled, and any of the terms hereof may be waived, only by written
instrument executed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any breach of any
term contained in this Agreement shall be deemed to be or construed as a
further or continuing waiver of any such breach in any subsequent instance or
a waiver of any breach of any other term contained in this Agreement.
17. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
EMERSON ELECTRIC CO.
By:
------------------------------------
Robert M. Levy Assistant Vice
President-Development
[ESCROW AGENT]
By:
------------------------------------
Name:
Title:
------------------------------------
Ronald G. Canada
Annex C
[McDONALD & COMPANY]
October 17, 1997
PERSONAL AND CONFIDENTIAL
- -------------------------
Board of Directors
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, of the consideration to be paid by Emerson Electric
Company ("Emerson") to the holders of the issued and outstanding shares of
Common Stock, without par value (the "Common Stock") of Computational Systems,
Incorporated (the "Company"), in connection with the Emerson's proposed
acquisition of the Company under the terms of an Agreement and Plan of Merger
dated as of October 17, 1997 (the "Agreement") by and among Emerson, Emersub
LVII, Inc., a wholly-owned subsidiary of Emerson ("Merger Sub") and the
Company.
You have advised us that, pursuant to the Agreement, Merger Sub
will be merged with and into the Company (the "Merger"), all of the shares of
Common Stock issued and outstanding prior to the Merger (other than shares
held in treasury or those as to which dissenters' rights of appraisal have
been perfected) will be converted into the right to receive the consideration
specified in the Agreement, and the Company will become a wholly-owned
subsidiary of Emerson. Under the terms of the Agreement, each issued and
outstanding share of the Company's Common Stock to the Merger will be
converted into the right to receive aggregate consideration of $29.65,
consisting of (i) $5.93 per share in cash and (ii) a number of shares of the
Common Stock, $.50 par value, of Emerson (the "Emerson Stock") equal to the
quotient obtained by dividing $23.72 by the average of the closing prices of a
share of Emerson Stock for the ten trading days immediately preceding the
effective date of the Merger (the "Consideration").
McDonald & Company Securities, Inc., as part of its investment
banking business, is customarily engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes.
In connection with rendering this opinion, we have reviewed and
analyzed, among other things, the following: (i) a draft of the Agreement
dated October 16, 1997, including the exhibits and schedules thereto; (ii)
certain publicly available information concerning the Company, including its
Annual Reports to Shareholders and Annual Reports on Form 10-K for each of the
last two fiscal years and its Quarterly Reports on Form 10-Q for each of the
first two quarters of fiscal 1997; (iii) certain publicly available
information concerning Emerson, including its Annual Reports to Shareholders
and Annual Reports on Form 10-K for the last three fiscal years and its
quarterly reports on Form 10-Q for the first three quarters of fiscal 1997;
(iv) certain other internal information, primarily financial in nature,
including projections, concerning the business and operations of the Company
furnished to us by the Company for purposes of our analysis; (v) certain
publicly available information concerning the trading of, and the trading
markets for, the Company's Common Stock and the Emerson Stock; (vi) certain
publicly available information with respect to certain other companies that we
believe to be comparable to the Company or to Emerson and the trading markets
for certain of such other companies' securities; and (vii) certain publicly
available information concerning the nature and terms of certain other
transactions that we consider relevant to our inquiry. We have also met with
certain officers and employees of the Company and Emerson to discuss the
business and prospects of the Company and Emerson, and considered such other
matters as we believed relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we
have assumed and relied upon the accuracy and completeness of all of the
financial and other information provided us or publicly available and have
assumed and relied upon the representations and warranties of the Company and
Emerson contained in the Agreement. We have not been engaged to, and have not
independently attempted to, verify any of such information. We have also
relied upon the management of the Company as to the reasonableness of the
financial and operating projections (and the assumptions and bases therefor)
provided to us and, with your consent, we have assumed that such projections
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of management as to the matters covered thereby. We
have not been engaged to assess the achievability of such projections or the
assumptions on which they were based; however, for purposes of our analysis,
we have taken into account our assessment of the risks associated with the
achievement of certain aspects of management's projections. In addition, we
have not conducted an appraisal of any of the assets, properties or facilities
of either the Company or Emerson nor have we been furnished with any such
evaluation or appraisal. We have also assumed that the conditions to the
Merger as set forth in the Agreement would be satisfied and that the Merger
would be consummated on a timely basis in the manner contemplated by the
Agreement.
It should be noted that this opinion is based on economic and
market conditions and other circumstances existing on, and information made
available as of, the date hereof and does not address any matters subsequent
to such date, including the value of the Emerson Stock at the time of issuance
thereof to the holders of the Company's Common Stock. In addition, our
opinion is, in any event, limited to the fairness, as of the date hereof, from
a financial point of view, of the consideration to be paid by Emerson pursuant
to the Merger and does not address the Company's underlying business decision
to effect the Merger or any other terms of the Merger.
We have previously provided certain investment banking services
to the Company for which we have received customary compensation. We have
acted as financial advisor to the Company in connection with the Merger and
will receive from the Company a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger. We will also receive
a fee for rendering this opinion, and the Company has agreed to indemnify us
under certain circumstances.
In the ordinary course of our business, we may actively trade
securities of both the Company and Emerson for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
It is understood that this opinion was prepared for the
confidential use of the Board of Directors and senior management of the
Company and may not be disclosed, summarized, excerpted from or otherwise
publicly referred to without our prior written consent. Our opinion is
directed to the Board of Directors and does not constitute a recommendation to
any stockholder of the Company as to how such stockholder should vote at the
stockholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing and such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be paid by Emerson pursuant to the Agreement is fair, from a
financial point of view, to the stockholders of the Company.
Very truly yours,
/s/ McDONALD & COMPANY SECURITIES, INC.
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, Emerson shareholders adopted indemnification agreements with the
directors of Emerson and amendments to the Bylaws of Emerson which incorporate
indemnity provisions permitted by Section 351.355(7) described above. The
agreements and amended Bylaws 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 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. Exhibits and Financial Statement Schedules.
Exhibit Number Description Page
- -------------- ----------- ----
2(a) Agreement and Plan of Merger dated as of October
17, 1997 among Emerson, CSI and Merger Subsidiary
(included as Annex A to the Proxy Statement/
Prospectus contained in this Registration Statement).
2(b) Stockholder Option Agreement dated as of October 17,
1997 between Emerson and Ronald G. Canada (included
as Annex B to the Proxy Statement/Prospectus contained
in this Registration Statement).
3(a) Restated Articles of Incorporation of Emerson
(incorporated herein by reference to Emerson's Form 10-Q
for the quarter ended March 31, 1997).
3(b) Bylaws of Emerson.
4 Rights Agreement dated as of November 1, 1988
(incorporated herein by reference to Emerson's Form 8-K,
dated November 1, 1988), as amended by the First
Amendment to Rights Agreement (incorporated herein by
reference to Emerson's Form 8-K, filed October 17, 1997).
5 Opinion of Harley M. Smith, Esq. regarding the validity
of the securities being registered.
8 Form of Opinion of Jones, Day, Reavis & Pogue regarding
certain federal income tax consequences relating to the
Merger.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of Coopers & Lybrand L.L.P.
23(c) Consent of Harley M. Smith, Esq. (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d) Consent of Jones, Day, Reavis & Pogue.*
23(e) Consent of McDonald & Company Securities, Inc.
99 Form of Computational Systems, Incorporated Proxy Card.
* To be added by amendment.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) 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 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.
(2) That prior to any public reoffering of the 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), 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.
(3) That every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 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.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/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.
(c) 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.
(d) 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 question 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.
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 November 24, 1997.
EMERSON ELECTRIC CO.
(Registrant)
By: /s/ W.J. Galvin
-------------------------------------
Name: W.J. Galvin
Title: Senior Vice-President--Finance,
Chief Financial Officer and Chief
Accounting Officer
---------------------------
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints W.J. Galvin, W.W. Withers and H.M. Smith, and each of them, his
or her 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) and supplements to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such 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 or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or 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 by the following persons in the
capacities indicated on November 24, 1997.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ C.F. Knight Chairman of the Board, President and Chief November 24, 1997
- ------------------------- Executive Officer and Director
C.F. Knight
/s/ W.J. Galvin Senior Vice President - Finance and Chief November 24, 1997
- -------------------------- Financial Officer (principal financial officer
W.J. Galvin and principal accounting officer)
/s/ L.L. Browning, Jr. Director November 24, 1997
- -------------------------
L.L. Browning, Jr.
/s/ A.A. Busch III Director November 24, 1997
- -------------------------
A.A. Busch III
/s/ D.C. Farrell Director November 24, 1997
- -------------------------
D.C. Farrell
/s/ J.A. Frates Director November 24, 1997
- -------------------------
J.A. Frates
/s/ R.B. Horton Director November 24, 1997
- -------------------------
R.B. Horton
/s/ G.A. Lodge Director November 24, 1997
- -------------------------
G.A. Lodge
/s/ V.R. Loucks, Jr. Director November 24, 1997
- --------------------------
V.R. Loucks, Jr.
/s/ R.B. Loynd Director November 24, 1997
- ---------------------------
R.B. Loynd
/s/ R.L. Ridgway Director November 24, 1997
- ----------------------------
R.L. Ridgway
/s/ R.W. Staley Director November 24, 1997
- ----------------------------
R.W. Staley
/s/ A.E. Suter Director November 24, 1997
- ----------------------------
A.E. Suter
/s/ W.M. Van Cleve Director November 24, 1997
- ----------------------------
W.M. Van Cleve
/s/ E.E. Whitacre, Jr. Director November 24, 1997
- ----------------------------
E.E. Whitacre, Jr.
/s/ E.F. Williams, Jr. Director November 24, 1997
- -----------------------------
E.F. Williams, Jr.
</TABLE>
EXHIBIT INDEX
Exhibit Number Description Page
- -------------- ----------- ----
2(a) Agreement and Plan of Merger dated as of October
17, 1997 among Emerson, CSI and Merger Subsidiary
(included as Annex A to the Proxy Statement/
Prospectus contained in this Registration Statement).
2(b) Stockholder Option Agreement dated as of October 17,
1997 between Emerson and Ronald G. Canada (included
as Annex B to the Proxy Statement/Prospectus contained
in this Registration Statement).
3(a) Restated Articles of Incorporation of Emerson
(incorporated herein by reference to Emerson's Form 10-Q
for the quarter ended March 31, 1997).
3(b) Bylaws of Emerson.
4 Rights Agreement dated as of November 1, 1988
(incorporated herein by reference to Emerson's Form 8-K,
dated November 1, 1988), as amended by the First
Amendment to Rights Agreement (incorporated herein by
reference to Emerson's Form 8-K, filed October 17, 1997).
5 Opinion of Harley M. Smith, Esq. regarding the validity
of the securities being registered.
8 Form of Opinion of Jones, Day, Reavis & Pogue regarding
certain federal income tax consequences relating to the
Merger.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of Coopers & Lybrand L.L.P.
23(c) Consent of Harley M. Smith, Esq. (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d) Consent of Jones, Day, Reavis & Pogue.*
23(e) Consent of McDonald & Company Securities, Inc.
99 Form of Computational Systems, Incorporated Proxy Card.
* To be added by amendment.
Exhibit 3(b)
=====================================================================
EMERSON ELECTRIC CO.
BYLAWS
As Amended through October 7, 1997
===================================================================
EMERSON ELECTRIC CO.
BYLAWS
INDEX
-----
Page
ARTICLE I
Offices; Definitions
Section 1. Registered Office................................................1
Section 2. Other Offices....................................................1
Section 3. Definitions......................................................1
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meetings................................................1
Section 2. Annual Meeting...................................................1
Section 3. Special Meetings.................................................2
Section 4. Notice of Meetings...............................................2
Section 5. List of Shareholders Entitled to Vote............................2
Section 6. Quorum...........................................................2
Section 7. Requisite Vote...................................................3
Section 8. Voting...........................................................3
Section 9. Notice of Shareholder Business at Annual Meetings................3
ARTICLE III
Directors
Section 1. Number; Classification; Nominations;
Election; Term of Office.........................................4
Section 2. Filling of Vacancies.............................................6
Section 3. Qualifications...................................................6
Section 4. Removal..........................................................6
Section 5. General Powers...................................................7
Section 6. Place of Meetings................................................7
Section 7. Regular Annual Meeting...........................................7
Section 8. Additional Regular Meetings......................................7
Section 9. Special Meetings.................................................7
Section 10. Place of Meetings................................................8
Section 11. Notices..........................................................8
Section 12. Quorum...........................................................8
Section 13. Compensation of Directors........................................8
Section 14. Executive Committee..............................................8
Section 15. Finance Committee................................................9
Section 16. Other Committees of the Board....................................9
Section 17. Committees - General Rules.......................................9
Section 18. Director Emeritus and Advisory Directors.........................9
ARTICLE IV
Notices
Section 1. Service of Notice...............................................10
Section 2. Waiver of Notices...............................................10
ARTICLE V
Officers
Section 1. Titles..........................................................10
Section 2. Election........................................................10
Section 3. Term............................................................11
Section 4. Chairman of the Board...........................................11
Section 5. President.......................................................11
Section 6. Vice Chairmen of the Board......................................11
Section 7. Vice Presidents.................................................12
Section 8. Secretary and Assistant Secretaries.............................12
Section 9. Treasurer and Assistant Treasurers..............................12
Section 10. Controller and Assistant Controllers............................12
Section 11. Appointed Officers..............................................13
ARTICLE VI
Certificates of Shares
Section 1. Certificates....................................................13
Section 2. Signatures on Certificates......................................13
Section 3. Transfer Agents and Registrars; Facsimile Signatures............13
Section 4. Lost Certificates...............................................14
Section 5. Transfer of Shares..............................................14
Section 6. Registered Shareholders.........................................14
Section 7. Interested Shareholders.........................................14
ARTICLE VII
Indemnification of Directors, Officers,
Employees And Agents
Section 1. Actions Involving Directors, Officers or Employees..............14
Section 2. Actions Involving Agents........................................15
Section 3. Determination of Right to Indemnification in
Certain Instances...............................................15
Section 4. Advance Payment of Expenses.....................................16
Section 5. Successful Defense..............................................16
Section 6. Not Exclusive Right.............................................16
Section 7. Insurance.......................................................17
Section 8. Subsidiaries of Corporation.....................................17
Section 9. Spousal Indemnification.........................................17
ARTICLE VIII
General Provisions
Section 1. Dividends.......................................................18
Section 2. Checks..........................................................18
Section 3. Fiscal Year.....................................................18
Section 4. Seal............................................................18
Section 5. Closing of Transfer Books and Fixing of Record Dates............18
ARTICLE IX
Amendments
Section 1...................................................................19
EMERSON ELECTRIC CO.
* * * * *
BYLAWS
* * * * *
ARTICLE I
Offices; Definitions
Section 1. Registered Office. The registered office of
Emerson Electric Co. (the "Corporation") shall be located in the County of St.
Louis, State of Missouri.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Missouri as
the Board may, from time to time, determine or the business of the Corporation
may require.
Section 3. Definitions. Unless the context otherwise
requires, defined terms herein shall have the meaning ascribed thereto in the
Articles of Incorporation (the "Articles").
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meeting. All meetings of the shareholders
shall be held at such place within or without the State of Missouri as may be,
from time to time, fixed or determined by the Board.
Section 2. Annual Meeting. The annual meeting of the
shareholders shall be held on the first Tuesday in February of each year if
not a legal holiday, or, if a legal holiday, then on the next business day
following, at such hour as may be specified in the notice of the meeting;
provided, however, that the day fixed for such meeting in any year may be
changed by resolution of the Board to such other day in February, March,
April, May or June not a legal holiday as the Board may deem desirable or
appropriate. At the annual meeting the shareholders shall elect Directors in
accordance with Article 5 of the Articles of Incorporation and Article III of
these Bylaws, and shall transact such other business as may properly be
brought before the meeting. If no other place for the annual meeting is
determined by the Board of Directors and specified in the notice of such
meeting, the annual meeting shall be held at the principal offices of the
Corporation at 8000 West Florissant Avenue, St. Louis, Missouri.
Section 3. Special Meetings.
(a) Unless otherwise limited by statute or by the Articles, special
meetings of the shareholders, for any purpose or purposes, may be called at
any time by the Chairman of the Board, any Vice Chairman of the Board, the
President, the Secretary, or a majority of the Board.
(b) A special meeting may also be called by the holders of not less than
85% of all of the outstanding shares entitled to vote at such meeting, upon
written request delivered to the Secretary of the Corporation. Such request
shall state the purpose or purposes of the proposed meeting. Upon receipt of
any such request, it shall be the duty of the Secretary to call a special
meeting of the shareholders to be held at any time, not less than ten (10) nor
more than seventy (70) days thereafter, as the Secretary may fix. If the
Secretary shall neglect to issue such call, the person or persons making the
request may issue the call.
Section 4. Notice of Meetings. Written notice of every
meeting of the shareholders, specifying the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called shall be delivered or mailed, postage prepaid, by
or at the direction of the Secretary, not less than ten (10) nor more than
seventy (70) days before the date of the meeting to each shareholder of record
entitled to vote at such meeting.
Section 5. List of Shareholders Entitled to Vote. At least
ten (10) days before each meeting of the shareholders, a complete list of the
shareholders entitled to vote at such meeting shall be prepared and arranged
in alphabetical order with the address of each shareholder and the number of
shares held by each, which list, for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered office of the Corporation and
shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time
and place of the meeting, and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger
or transfer book, or a duplicate thereof kept in the State of Missouri, shall
be prima facie evidence as to who are the shareholders entitled to examine
such list or share ledger or transfer book or to vote at any meeting of the
shareholders. Failure to comply with the above requirements in respect of
lists of shareholders shall not affect the validity of any action taken at
such meeting.
Section 6. Quorum. The holders of a majority of the issued
and outstanding shares entitled to vote, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided by
law, the Articles or by these Bylaws. The shareholders present at a meeting at
which a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of such number of shareholders as to reduce the
remaining shareholders to less than a quorum. Whether or not a quorum is
present, the chairman of the meeting or a majority of the shareholders
entitled to vote thereat, present in person or by proxy, shall have power,
except as otherwise provided by statute, successively to adjourn the meeting
to such time and place as they may determine, to a date not longer than ninety
(90) days after each such adjournment, and no notice of any such adjournment
need be given to shareholders other than the announcement of the adjournment
at the meeting. At any adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 7. Requisite Vote. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the
shares entitled to vote which are present in person or represented by proxy
shall decide any questions brought before such meeting, unless the question
is one upon which, by express provision of law, the Articles or by these
Bylaws, a different vote is required, in which case such express provisions
shall govern and control the decision of such question.
Section 8. Voting. Each shareholder shall, at every meeting
of the shareholders, be entitled to one vote in person or by proxy for each
share having voting power held by such shareholder, but no proxy shall be
voted after eleven (11) months from the date of its execution unless otherwise
provided in the proxy. In each election for Directors, no shareholder shall be
entitled to vote cumulatively or to cumulate his votes.
Section 9. Notice of Shareholder Business at Annual Meetings.
At any annual meeting of shareholders, only such business shall be conducted
as shall have been properly brought before the meeting. In addition to any
other requirements imposed by or pursuant to law, the Articles or these
Bylaws, each item of business to be properly brought before an annual meeting
must (a) be specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board or the persons calling the meeting
pursuant to the Articles; (b) be otherwise properly brought before the
meeting by or at the direction of the Board; or (c) be otherwise properly
brought before the meeting by a shareholder. For business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
60 days nor more than 90 days prior to the annual meeting; provided, however,
that in the event less than 70 days' notice or prior public disclosure of the
date of the annual meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. For
purposes of these Bylaws "public disclosure" shall mean disclosure in a press
release reported by the Dow Jones, Associated Press, Reuters or comparable
national news service, or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"). A
shareholder's notice to the Secretary shall set forth as to each matter he or
she proposes to bring before the annual meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the shareholder(s) proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the proposing shareholder(s), and (d) any material
interest of the proposing shareholder(s) in such business. Notwithstanding
anything in these Bylaws to the contrary, but subject to Article III, Section
1(c) hereof, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section. The Chairman of the
annual meeting shall, if the facts warrant, determine and declare to the
annual meeting that business was not properly brought before the annual
meeting in accordance with the provisions of this Section; and if he or she
should so determine, shall so declare to the meeting and any such business not
properly brought before the annual meeting shall not be transacted. The
Chairman of the meeting shall have absolute authority to decide questions of
compliance with the foregoing procedures, and his or her ruling thereon shall
be final and conclusive.
ARTICLE III
Directors
Section 1. Number; Classification; Nominations; Election; Term
of Office.
(a) The Board shall consist of such number of Directors as
the Board may from time to time determine, provided that in no event shall
the number of Directors be less than three (3), and provided further that
no reduction in the number of Directors shall have the effect of shortening
the term of any incumbent Director. In addition, the Board may, from time
to time, appoint such number of "Advisory Directors" and "Directors
Emeritus" as it may deem advisable.
(b) The Board of Directors (herein the "Board") shall be
divided into three classes, as nearly equal in number as possible. In the
event of any increase in the number of Directors, the additional
Director(s) shall be added to such class(es) as may be necessary so that
all classes shall be as nearly equal in number as possible. In the event
of any decrease in the number of Directors, all classes of Directors shall
be decreased as nearly equally as may be possible. Subject to the
foregoing, the Board shall determine the class(es) to which any additional
Director(s) shall be added and the class(es) which shall be decreased in
the event of any decrease in the number of Directors.
At each annual meeting of shareholders the successors to the
class of Directors whose term shall then expire shall be elected for a term
expiring at the third succeeding annual meeting after such election.
(c) In addition to the qualifications set out in Section 3
of this Article III, in order to be qualified for election as a Director,
persons must be nominated in accordance with the following procedure:
Nominations of persons for election to the Board of the
Corporation may be made at a meeting of shareholders by or at the direction of
the Board or by any shareholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the procedures set
forth in this Section 1(c). In order for persons nominated to the Board,
other than those persons nominated by or at the direction of the Board, to be
qualified to serve on the Board, such nominations shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received by the
Secretary of the Corporation not less than 60 days nor more than 90 days prior
to the meeting; provided, however, that in the event less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made. Such shareholder's notice shall set forth (i) as to each person
whom the shareholder proposes to nominate for election or re-election as a
Director, (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the
class and number of shares of the Corporation which are beneficially owned by
such person, (D) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected) and (E) if the
shareholder(s) making the nomination is an Interested Person, details of any
relationship, agreement or understanding between the shareholder(s) and the
nominee; and (ii) as to the shareholder(s) making the nomination (A) the name
and address, as they appear on the Corporation's books, of such shareholder(s)
and (B) the class and number of shares of the Corporation which are
beneficially owned by such shareholder(s). At the request of the Board, any
person nominated by the Board for election as a Director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. No person
shall be qualified for election as a Director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 1(c).
The Chairman of a meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine,
shall so declare to the meeting, and the defective nomination shall be
disregarded. The Chairman of a meeting shall have absolute authority to
decide questions of compliance with the foregoing procedures, and his or her
ruling thereon shall be final and conclusive.
(d) Directors shall be elected at annual meetings of the
shareholders, except as provided in Section 2 of this Article III, and each
Director shall hold office until his or her successor is elected and
qualified.
Section 2. Filling of Vacancies. Vacancies and newly created
directorships shall be filled only by a majority of the remaining Directors,
though less than a quorum, and each person so elected shall be a Director
until his or her successor is elected by the shareholders, who may make such
election at the next annual meeting of the shareholders at which Directors of
his or her class are elected or at any special meeting of shareholders duly
called for that purpose and held prior thereto.
Section 3. Qualifications. Directors must be nominated in
accordance with the procedure set out in Section 1(c) of this Article III.
Directors need not be shareholders. No person shall be eligible for election
as a Director, either under Section 1 or Section 2 of this Article III, if
such person's seventy-second (72d) birthday shall fall on a date prior to the
commencement of the Term for which such Director is to be elected or
appointed; provided, however, that this limitation shall not apply to persons
who were Directors of the Corporation on April 4, 1967. No person shall be
qualified to be elected and to hold office as a Director if such person is
determined by a majority of the whole Board to have acted in a manner contrary
to the best interests of the Corporation, including, but not limited to,
violation of either State or Federal law, maintenance of interests not
properly authorized and in conflict with the interests of the Corporation, or
breach of any agreement between such Director and the Corporation relating to
such Director's services as a Director, employee or agent of the Corporation.
Section 4. Removal. By action of a majority of the whole
Board, any Director may be removed from office for cause if such Director
shall at the time of such removal fail to meet the qualifications for election
as a Director as set forth under Article III, Section 3 hereof. Notice of the
proposed removal shall be given to all Directors of the Corporation prior to
action thereon. Directors may be otherwise removed only in the manner
prescribed in the Articles.
Section 5. General Powers. The property and business of the
Corporation shall be controlled and managed by its Board of Directors which
may exercise all such powers of the Corporation and do all such lawful acts
and things as are not, by law, the Articles or by these Bylaws, directed or
required to be exercised and done by the shareholders or the Continuing
Directors.
Section 6. Place of Meetings. The Board may hold meetings,
both regular and special, either within or without the State of Missouri.
Section 7. Regular Annual Meeting. A regular annual meeting
of the Board, including newly elected Directors, shall be held immediately
following the annual meeting of the shareholders and shall be held at the
principal offices of the Corporation at 8000 West Florissant Avenue, St.
Louis, Missouri, unless another time or place shall be fixed therefor by the
Directors. No notice of such meeting shall be necessary to the Directors in
order, legally, to constitute the meeting, provided a majority of the whole
Board shall be present. In the event such annual meeting of the Board is not
held at the time and place specified herein, or at such other time and place
as may be fixed by the Directors, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
meetings of the Board, or as shall be specified in a written waiver signed by
all of the Directors.
Section 8. Additional Regular Meetings. Additional regular
meetings of the Board shall be held once each month on the first Tuesday
thereof, or on such other day thereof as the Board may, by resolution,
prescribe, and at such hour of such day as shall be stated in the notice of
the meeting; provided that the Chairman, in his or her discretion, may
dispense with any one or more of such meetings, by having notice of the
intention so to do given, by letter or telegram, to each Director not less
than ten (10) days prior to the regularly scheduled date of each meeting so to
be dispensed with. If the first Tuesday of any month shall be a legal
holiday, the regular meeting for such month shall be held on the Thursday
following, and if the Monday preceding the first Tuesday of any month shall be
a legal holiday, the regular meeting for such month shall be held on the
Wednesday following, in each case unless the Board shall otherwise prescribe by
resolution. Notice of any regular meeting shall be given to each Director at
least forty-eight (48) hours in advance thereof, either personally, by mail or
by telegram.
Section 9. Special Meetings. Special meetings of the Board
may be called by the Chairman, any Vice Chairman, the President, any Vice
President or the Secretary, on notice given personally, by mail, by telephone,
by telegram or by facsimile to each Director given twenty-four (24) hours in
advance of such meeting. Special meetings shall be called by the Chairman,
any Vice Chairman, the President or Secretary in like manner and on like
notice on the written request of any two Directors.
Section 10. Place of Meetings. Special meetings and regular
meetings of the Board, other than the regular annual meeting, shall be held at
such place within the City or County of St. Louis, Missouri, as may be
specified in the notice of such meeting; provided that any meeting may be held
elsewhere, within or without the State of Missouri, pursuant to resolution of
the Board or pursuant to the call of the Chairman, any Vice Chairman or the
President. Members of the Board and its Committees may participate in
meetings by means of conference telephone or similar communications equipment
whereby all persons participating in the meeting can hear each other, and such
participation shall constitute presence at the meeting.
Section 11. Notices. Notice of any meeting may be given by
the Chairman, any Vice Chairman, the President, any Vice President or the
Secretary and shall specify the time and place of the meeting.
Section 12. Quorum. At all meetings of the Board a majority
of Directors in office (the "whole Board") shall be necessary to constitute a
quorum for the transaction of business, and the acts of a majority of the
Directors present at a meeting at which a quorum is present shall be the acts
of the Board, except as otherwise may be specifically provided by law or by the
Articles. If a quorum shall not be present at any meeting of the Board, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present. So long as the whole Board shall consist of sixteen (16) or more
members, a Director who may be disqualified, by reason of personal interest,
from voting on any particular matter before a meeting of the Board may
nevertheless be counted for the purpose of constituting a quorum of the Board.
Section 13. Compensation of Directors. Directors, as such,
shall receive for their services such compensation as may be fixed, from time
to time, by resolution of the Board, together with a stipend for attendance,
and expenses of attendance, if any, for each meeting of the Board or meetings
of any committee on which the Directors may serve; provided that nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 14. Executive Committee. The Board may, by resolution
passed by a majority of the whole Board, designate two or more of its number
to constitute an Executive Committee which, to the extent provided in such
resolution, shall have and exercise the authority of the Board in the
management and business of the Corporation.
Section 15. Finance Committee. The Board may, by resolution
passed by a majority of the whole Board, designate two or more of its number,
one of whom shall be the Committee Chairman, as the Finance Committee of the
Board, which to the extent provided in such resolution shall have and exercise
the authority of the Board in the management and business of the Corporation.
The Committee shall study and consider financial matters affecting the
operations of the Corporation, including its long range financial
requirements, shall advise the Board in respect thereto, and shall have such
other duties as shall be specified by resolution of the Board.
Section 16. Other Committees of the Board. The Board may, by
resolution passed by a majority of the whole Board, designate two or more of
its members to constitute such other Committees of the Board as the Board by
such resolution or resolutions may determine. To the extent provided in such
resolution or resolutions, such Committees shall have and exercise the
authority of the Board in the management and business of the Corporation.
Section 17. Committees-General Rules. Each Committee of the
Board shall keep regular minutes of its proceedings and report the same to the
Board when required. Vacancies in the membership of each Committee shall be
filled by the Board at any regular or special meeting of the Board. A
Director who may be disqualified, by reason of personal interest, from voting
on any particular matter before a meeting of a Committee may nevertheless be
counted for the purpose of constituting a quorum of the Committee. At all
meetings of a Committee, a majority of the Committee members then in office
shall constitute a quorum for the purpose of transacting business, and the
acts of a majority of the Committee members present at any meeting at which
there is a quorum shall be the acts of the Committee.
Section 18. Directors Emeritus and Advisory Directors. The
Board may from time to time create one or more positions of Director Emeritus
and Advisory Director, and may fill such position or positions for such term
as the Board deems proper. Each Director Emeritus and Advisory Director shall
have the privilege of attending meetings of the Board but shall do so solely
as an observer. Notice of such meetings to a Director Emeritus or Advisory
Director shall not be required under any applicable law, the Articles, or
these Bylaws. Each Director Emeritus and Advisory Director shall be entitled
to receive such compensation as may be fixed from time to time by the Board.
No Director Emeritus or Advisory Director shall be entitled to vote on any
business coming before the Board, nor shall they be counted as members of the
Board for the purpose of determining the number of Directors necessary to
constitute a quorum, for the purpose of determining whether a quorum is
present, or for any other purpose whatsoever. In the case of a Director
Emeritus or Advisory Director, the occurrence of any event which in the case
of a Director would create a vacancy on the Board, shall be deemed to create a
vacancy in such position; but the Board may declare the position terminated
until such time as the Board shall again deem it proper to create and to fill
the position.
ARTICLE IV
Notices
Section 1. Service of Notice. Notices to Directors and
shareholders shall be in writing and delivered personally or mailed or sent by
telegram, telex or facsimile transmission to the Directors or shareholders at
their addresses appearing on the books of the Corporation, except that notice
to Directors of a special meeting of the Board may be given orally. Notice by
mail shall be deemed to be given at the time when the same shall be mailed;
notice by telegram when such notice is delivered to the telegraph company;
notice by facsimile transmission when transmitted.
Section 2. Waiver of Notices. Whenever any notice is
required to be given under the provisions of law, the Articles, or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
Officers
Section 1. Titles. The Officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chairman of the Board (herein
the "Chairman"), a President, at least one Vice President, a Secretary and a
Treasurer. The Board may also elect one or more Vice Chairmen of the Board
(herein "Vice Chairmen"), additional Vice Presidents, a Controller, one or
more Assistant Controllers, and such other officers as the Board may deem
appropriate. Any two of the aforesaid offices, except those of President and
Vice President or President and Secretary, may be held by the same person.
Vice Presidents of the Corporation may be given distinctive designations such
as Executive Vice President, Group Vice President, Senior Vice President and
the like.
Section 2. Election. The Board, at its annual meeting
immediately following each annual meeting of the shareholders, shall elect a
Chairman and a President, and may elect one or more Vice Chairmen, all of whom
shall be Directors or Advisory Directors; and the Board shall also at such
annual meeting elect one or more Vice Presidents, a Secretary and a Treasurer,
who may, but need not, be Directors or Advisory Directors. The Board may
elect such other officers and agents as it shall determine necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. In
connection with the election of any officer of the Corporation, the Board may
determine that such officer, in addition to the title of the office to which
he is elected, shall have a further title such as Chief Administrative
Officer, Chief Operating Officer or such other title as the Board may
designate, and the Board may prescribe powers to be exercised and duties to
be performed by any such officer to whom any such additional title of office
is given in addition to those powers and duties provided for by these Bylaws
for such office.
Section 3. Term. The officers of the Corporation shall hold
office until their respective successors are elected and qualify. Any officer
elected or appointed by the Board may be removed by the Board at any time with
or without cause by the affirmative vote of a majority of the whole Board.
Any vacancy occurring in any such office may be filled only by the Board.
Section 4. Chairman of the Board. The Chairman shall be the
Chief Executive Officer of the Corporation. In addition to his or her duties
as Chairman and Chief Executive Officer, the Chairman shall be responsible for
the general and active management of the business and affairs of the
Corporation, subject only to the control of the Board; shall have full
authority in respect to the signing and execution of deeds, bonds, mortgages,
contracts and other instruments of the Corporation; and, in the absence or
disability of a Vice Chairman or the President, shall exercise all of the
powers and discharge all of the duties of such Vice Chairman or the President.
The Chairman shall also be, ex officio, a member of all standing Board
Committees, shall preside at all meetings of shareholders and Directors, and
shall perform such other duties as the Board may prescribe.
Section 5. President. The President shall be an executive
Officer of the Corporation, shall preside at all meetings of the shareholders
and Directors in the absence of the Chairman and the Senior Vice Chairman, and
shall perform such other duties as the Chairman or the Board shall prescribe.
The President shall have equal authority with the Chairman and the Vice
Chairmen, if any, to sign and execute deeds, bonds, mortgages, contracts and
other instruments of the Corporation.
Section 6. Vice Chairmen of the Board. Vice Chairmen, if any,
may but need not be executive officers of the Corporation. The Vice Chairmen
shall perform such other duties, and have such other powers as the Chairman or
the Board may, from time to time, prescribe. Each Vice Chairman shall have
equal authority with the Chairman and the President with respect to the
signing and execution of deeds, bonds, mortgages, contracts and other
instruments of the Corporation.
Section 7. Vice Presidents. The Vice President, or if there
shall be more than one, the Vice Presidents shall, in the absence or
disability of the Chairman, the President and all Vice Chairmen, perform the
duties and exercise the powers of the President. Each Vice President shall
perform such other duties and have such other powers as the Chairman and the
Board may, from time to time, prescribe.
Section 8. Secretary and Assistant Secretaries. The Secretary
shall attend all meetings of the Board and all meetings of the shareholders
and record all the proceedings of the meetings of the Corporation and of the
Board in books to be kept for that purpose, shall perform like duties for
Committees of the Board when required, and shall perform such other duties as
may be prescribed by the Board, the Chairman, any Vice Chairman, or the
President. The Secretary shall keep in safe custody the seal of the
Corporation and affix the same to any instrument requiring it, and, when so
affixed, it shall be attested by his or her signature or by the signature of
an Assistant Secretary. The Assistant Secretary, or, if there be more than
one, the Assistant Secretaries, in the order determined by the Board, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board may, from time to time, prescribe.
Section 9. Treasurer and Assistant Treasurers. The Treasurer
shall have charge of the funds of the Corporation; shall keep the same in
depositories designated by the Board or by officers of the Corporation
authorized by the Board to make such designation; shall cause said funds to
be disbursed upon checks, drafts, bills of exchange or orders for the payment
of money signed in such manner as the Board or authorized officers of the
Corporation may, from time to time, direct; shall perform such other duties
as directed by the Board, the Chairman or other senior officers; and, if
required by the Board, shall give bond for the faithful performance of his or
her duties in such form and amount as may be determined by the Board. The
Assistant Treasurer, or, if there be more than one, the Assistant Treasurers,
in the order determined by the Board, shall, in the absence or disability of
the Treasurer, perform the duties and exercise the powers of the Treasurer,
and shall have such other duties and powers as the Board may prescribe.
Section 10. Controller and Assistant Controllers. The
Controller, if one is elected by the Board, shall have charge of the
accounting records of the Corporation; shall keep full and accurate accounts
of all receipts and disbursements in books and records belonging to the
Corporation; shall maintain appropriate internal control and auditing of the
Corporation; and shall perform such other duties as directed by the Board,
the Chairman or other senior officers. The Assistant Controller or, if there
be more than one, the Assistant Controllers, in the order determined by the
Board, shall, in the absence or disability of the Controller, perform the
duties and exercise the powers of the Controller and shall have such other
duties and powers as the Board may prescribe.
Section 11. Appointed Officers. In addition to the corporate
officers elected by the Board as hereinabove in this Article V provided, the
Chairman may, from time to time, appoint one or more other persons as
appointed officers who shall not be deemed to be corporate officers, but may,
respectively, be designated with such titles as the Chairman may deem
appropriate. The Chairman may prescribe the powers to be exercised and the
duties to be performed by each such appointed officer, may designate the term
for which each such appointment is made, and may, from time to time, terminate
any or all of such appointments with or without cause. Such appointments and
termination of appointments shall be reported periodically to the Board.
ARTICLE VI
Certificates of Shares
Section 1. Certificates. The certificates of shares of the
Corporation shall be numbered and registered in a share register as they are
issued. They shall exhibit the name of the registered holder and the number
and class of shares and the series, if any, represented thereby and the par
value of each share or a statement that such shares are without par value as
the case may be.
Section 2. Signatures on Certificates. Every share
certificate shall be signed by the Chairman of the Board, the President or a
Vice President; and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer; and shall be sealed with the
Corporation's seal which may be facsimile, engraved or printed.
Section 3. Transfer Agents and Registrars; Facsimile
Signatures. The Board may appoint one or more transfer agents or transfer
clerks and one or more registrars and may require all certificates for shares
to bear the signature or signatures of any of them. Where a certificate is
signed (a) by a transfer agent or an assistant or co-transfer agent, or (b) by
a transfer clerk or (c) by a registrar or co-registrar, the signature of any
officer thereon may be facsimile. Where a certificate is signed by a
registrar or co-registrar the certificate of any transfer agent or co-transfer
agent thereon may be by facsimile signature of the authorized signatory of such
transfer agent or co-transfer agent. In case any officer or officers of the
Corporation who have signed, or whose facsimile signature or signatures have
been used on, any such certificate or certificates shall cease to be such
officer or officers, whether because of death, resignation or otherwise,
before such certificate or certificates have been delivered by the
Corporation, such certificate or certificates may, nevertheless, be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation.
Section 4. Lost Certificates. In case of loss or destruction
of any certificate of stock or other security of the Corporation, another may
be issued in its place upon satisfactory proof of such loss or destruction and
upon the giving of a satisfactory bond of indemnity to the Corporation and to
the transfer agents and registrars, if any, of such stock or other security, in
such sum as the Board may provide. The Board may delegate to any officer or
officers of the Corporation the authorization of the issue of such new
certificate or certificates and the approval of the form and amount of such
indemnity bond and the surety thereon.
Section 5. Transfer of Shares. Upon surrender to the
Corporation or a transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Corporation may issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books.
Section 6. Registered Shareholders. The Corporation and its
transfer agents shall be entitled to treat the holder of record of any share
or shares as the holder in fact thereof and shall not be bound to recognize
any equitable or other claims to, or interest in, such shares on the part of
any other person and shall not be liable for any registration or transfer of
shares which are registered, or to be registered, in the name of a fiduciary
or the nominee of a fiduciary unless made with actual knowledge that a
fiduciary, or nominee of a fiduciary, is committing a breach of trust in
requesting such registration or transfer, or with knowledge of such facts that
its participation therein amounts to bad faith.
Section 7. Interested Shareholders. The provisions of these
Bylaws, including without limitation the provisions of this Article VI as they
apply to any Interested Person or shares beneficially owned by such Interested
Person, are subject to the provisions of Article 9 of the Articles.
ARTICLE VII
Indemnification of Directors,
Officers, Employees And Agents
Section 1. Actions Involving Directors, Officers or Employees.
The Corporation shall indemnify any person who was or is a party (other than a
party plaintiff suing on his own behalf or in the right of the Corporation),
or who is threatened to be made such a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, but not limited to, an action by or in the right
of the Corporation) by reason of the fact that he or she is or was a Director,
officer or employee of the Corporation, or is or was serving at the request of
the Corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding; provided, that no such person shall be indemnified (a)
except to the extent that the aggregate of losses to be indemnified under the
provisions of this Article VII exceeds the amount of such losses for which the
Director, officer or employee is insured pursuant to any directors and
officers liability insurance policy maintained by the Corporation; (b) in
respect to remuneration paid to such person if it shall be finally adjudged
that such remuneration was in violation of law; (c) on account of any suit in
which judgment is rendered against such person for an accounting of profits
made from the purchase or sale by such person of securities of the Corporation
pursuant to the provisions of Section 16(b) of the 1934 Act and amendments
thereto or similar provisions of any federal, state or local statutory law;
(d) on account of such person's conduct which is finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct; and (e) if
it shall be finally adjudged that such indemnification is not lawful.
Section 2. Actions Involving Agents. The Corporation may
indemnify any person who was or is a party (other than a party plaintiff suing
on his own behalf or in the right of the Corporation), or who is threatened to
be made such a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including, but not limited to, an action by or in the right of the
Corporation) by reason of the fact that he or she is an agent of the
Corporation, or is or was serving at the request of the Corporation as an
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding, all to the full extent
permitted by law.
Section 3. Determination of Right to Indemnification in
Certain Instances.
(a) Any indemnification under Section 1 of this Article VII
(unless ordered by a court) shall be made by the Corporation unless a
determination is reasonably and promptly made that indemnification of the
director, officer or employee is not proper in the circumstances because he
or she has not satisfied the conditions set forth in such Section 1. Such
determination shall be made (1) by the Board by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (3) by the shareholders; provided,
that no such determination shall preclude an action brought in an
appropriate court to challenge such determination.
(b) Any indemnification under Section 2 of this Article VII
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification
of the agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in such Section 2. Such
determination shall be made (1) by the Board by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (3) by the shareholders.
Section 4. Advance Payment of Expenses. Expenses incurred by
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amounts unless it shall ultimately be
determined that he or she is entitled to be indemnified by the Corporation as
authorized in this Article.
Section 5. Successful Defense. Notwithstanding any other
provision of this Article VII, to the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise (including the dismissal of an action without prejudice or the
settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in Sections 1 or 2 of this Article VII,
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith.
Section 6. Not Exclusive Right. The indemnification provided
by this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any statute, bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in an official capacity and as to action in another capacity
while holding such office. Without limiting the generality of the foregoing,
in the event of conflict between the provisions of this Article VII and the
provisions of any agreement adopted by the shareholders between the
Corporation on the one hand, and any director, officer, employee or agent of
the Corporation on the other, providing for indemnification, the terms of such
agreement shall prevail. Any indemnification, whether required under this
Bylaw or permitted by statute or otherwise, shall continue as to a person who
has ceased to be a director, officer or employee and shall inure to the
benefit of the heirs, executors and administrators of such person.
Section 7. Insurance. The Board shall have the power to cause
the Corporation to purchase and maintain insurance on behalf of any person who
is or was a Director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by
him or her in any such capacity, arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Section 8. Subsidiaries of Corporation. For the purposes of
this Article VII, (a) any officer, Director, or employee of the Corporation
who shall serve as an officer, director, employee or agent of any other
corporation, joint venture, trust or other enterprise of which the
Corporation, directly or indirectly, is or was a stockholder or creditor, or
in which the Corporation is or was in any way interested, or (b) any officer,
director, or employee of any subsidiary corporation, venture, trust or other
enterprise wholly owned by the Corporation, shall be deemed to be serving as
such director, officer, employee or agent at the request of the Corporation,
unless the Board shall determine otherwise. In all instances where any person
shall serve as a director, officer, employee or agent of another corporation,
joint venture, trust or other enterprise of which the Corporation is or was a
stockholder or creditor, or in which it is or was otherwise interested, if it
is not otherwise established that such person is or was serving as such
director, officer, employee or agent at the request of the Corporation, the
Board may determine whether such service is or was at the request of the
Corporation, and it shall not be necessary to show any actual or prior request
for such service.
------------------
Note: The indemnification provided in the foregoing
provisions of Article VII (and related matters) was approved by the
stockholders of the Corporation on February 10, 1987.
Section 9. Spousal Indemnification. The spouse of a person
entitled to indemnification under Section 1 hereof or who is granted
indemnification under Section 2 hereof, shall be entitled to be so
indemnified; provided, that the spouse was or is a party (other than a party
plaintiff suing on his or her own behalf or in the right of the Corporation),
or was or is threatened to be made a party, to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (including, but not limited to, an action by or in the right
of the Corporation), solely by reason of the spousal relationship to the
person entitled to indemnification under Section 1 hereof or who is granted
indemnification under Section 2 hereof.
ARTICLE VIII
General Provisions
Section 1. Dividends. Dividends upon the shares of the
Corporation, subject to the provisions of the Articles, if any, may be
declared by the Board at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
or other securities of the Corporation, in rights or warrants relating
thereto, or in any other form authorized by law.
Section 2. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board, or officers authorized by the Board, may, from
time to time, designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall commence on October 1, and close on September 30.
Section 4. Seal. The Corporation's seal shall have inscribed
thereon the name of the Corporation, the numeral "1890" being the year of the
incorporation of the Corporation, and the words "Corporate Seal, Missouri".
The seal may be used by causing it, or a facsimile thereof, to be impressed,
affixed, reproduced or otherwise.
Section 5. Closing of Transfer Books and Fixing of Record
Dates. The Board shall have power to close the share transfer books of the
Corporation for a period not exceeding seventy (70) days preceding the date of
any meeting of shareholders, or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change, conversion
or exchange of shares shall go into effect; provided, however, that, in lieu
of closing the share transfer books as aforesaid, the Board may fix in advance
a date, not exceeding seventy (70) days preceding the date of any meeting of
shareholders, or the date for the payment any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise rights in respect of any such
change, conversion or exchange of shares; and, in each such case, such
shareholders and only such shareholders as shall be shareholders of record on
the date of closing the share transfer books, or on the record date so fixed,
shall be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares after such date of closing of the
share transfer books or such record date fixed as aforesaid.
ARTICLE IX
Amendments
Section 1. These Bylaws may be altered, amended or repealed
solely by a majority vote of the members of the whole Board at any regular or
special meeting thereof duly called and convened.
Exhibit 5
November 24, 1997
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, Missouri 77070
Ladies and Gentlemen:
I am Assistant General Counsel and Assistant Secretary of
Emerson Electric Co. ("Emerson").
In connection with Emerson's Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the registration by Emerson of shares (the "Shares") of
common stock, par value $.50 per share, of Emerson to be issued in connection
with the merger of Emersub LVII, Inc. ("Merger Subsidiary"), a wholly-owned
subsidiary of Emerson, with and into Computational Systems, Incorporated
("CSI") pursuant to the terms of the Agreement and Plan of Merger dated as of
October 17, 1997 among Emerson, CSI and Merger Subsidiary (the "Merger
Agreement"), I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates and other instruments, and have conducted such other
investigations of fact and law, as I have deemed necessary or advisable for
the purposes of this opinion.
In rendering this opinion I have assumed that prior to the
issuance of any of the Shares (i) the Registration Statement, as then amended,
will have become effective under the Securities Act, (ii) the stockholders of
CSI will have approved and adopted the Merger Agreement and (iii) the
transactions contemplated by the Merger Agreement will have been consummated.
On the basis of the foregoing, I am of the opinion that the
Shares have been duly authorized and the Shares, when issued and delivered in
accordance with the terms and conditions of the Merger Agreement, will be
validly issued, fully paid and non-assessable.
I am a member of the Bar of the State of Missouri and the
foregoing opinion is limited to the laws of the State of Missouri and the
federal laws of the United States of America.
I hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of my name under the caption "Legal
Matters" in the Proxy Statement/Prospectus which is a part of the Registration
Statement.
Very truly yours,
/s/ Harley M. Smith
-------------------
Harley M. Smith
Exhibit 8
Form of Tax Opinion Letter
Computational Systems Incorporated
835 Innovation Drive
Knoxville, TN 37932
Attn: Board of Directors
Emerson Electric Co.
8000 W. Florissant Avenue
St. Louis, MO 63136
Attn: Board of Directors
Dear Sirs:
In response to your request, we are furnishing you with our opinion, as
of [Closing Date], as to the federal income tax consequences of the proposed
merger (the "Merger") of Emersub LVII, Inc. ("Sub"), a Delaware corporation
and a wholly-owned subsidiary of Emerson Electric Co. ("Parent"), a Missouri
corporation, with and into Computational Systems, Incorporated (the
"Company"), a Tennessee corporation, pursuant to the statutory merger laws of
the State of Delaware. For purposes of this opinion, we have relied upon, and
assumed the completeness, truth and accuracy of, the information contained in
the Agreement and Plan of Merger dated as of October 17, 1997, with
attachments thereto, and the Proxy Statement/ Prospectus dated November 24,
1997, without having independently confirmed the accuracy thereof. The terms
defined in such documents have the same meaning where referenced in this
opinion. In addition, we have relied upon the letters dated as of [Closing
Date], containing representations of Parent and the Company, and have assumed,
in connection therewith, that any such representations that are qualified by
reference to the knowledge of the representor (e.g., a representation that a
statement is true "to the knowledge of" management) are true without such
qualification.
Based upon the foregoing, and provided that the facts, assumptions, and
representations referenced above set forth the facts relating to the Merger
fully and accurately as of the date hereof, and will set forth such facts
fully and accurately as of the Effective Time of the Merger, we are of the
opinion that the Merger will constitute a "reorganization" within the meaning
of section 368(a) of the Code, and that Parent, Sub, and the Company will each
be "a party to the reorganization" within the meaning of section 368(b) of the
Code.
This opinion relates solely to the federal income tax consequences of the
Merger discussed herein, and no opinion is expressed as to the consequences
under any foreign, state or local tax law. Except as explicitly stated
herein, no other opinion is expressed or implied. This opinion is based upon
the currently applicable provisions of the Code, regulations thereunder,
current published positions of the Internal Revenue Service and judicial
authorities published to date, all of which are subject to change by the
Congress, the Treasury Department, the Internal Revenue Service or the courts.
Any such change may be retroactive with respect to transactions entered into
prior to the date of such change. No assurance can be provided as to the
effect upon our opinion of any such change. Finally, this opinion is not
binding upon the Internal Revenue Service or the courts, and no assurance can
be given that they will accept this opinion or agree with the views expressed
herein.
This opinion is intended for the sole benefit of Parent, Sub, and the
Company, and is not to be relied upon by any other person without our prior
written consent.
Very truly yours,
Exhibit 23(a)
CONSENT OF KPMG PEAT MARWICK LLP,
INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to our firm under the caption "Experts" in
the Proxy Statement/Prospectus constituting part of this Registration
Statement on Form S-4 of Emerson Electric Co. ("Emerson") and to the
incorporation by reference therein of our report dated November 12, 1996 which
is incorporated by reference in Emerson's Annual Report on Form 10-K for the
year ended September 30, 1996.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
St. Louis, Missouri
November 24, 1997
Exhibit 23(b)
CONSENT OF COOPERS & LYBRAND L.L.P.,
INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of Emerson
Electric Co. of our report dated January 24, 1997 on our audits of the
consolidated financial statements of Computational Systems, Incorporated as
of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, which report is incorporated by reference
in Computational Systems, Incorporated's Annual Report on Form 10-K for the
year ended December 31, 1996. We also consent to the reference to our firm
under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
November 24, 1997
Exhibit 23(e)
CONSENT OF MCDONALD & COMPANY SECURITIES, INC.
We hereby consent to the use of our opinion letter dated October 17, 1997 to
the Board of Directors of Computational Systems, Incorporated ("CSI"),
included as Annex C to the Proxy Statement/Prospectus which forms a part of
the Registration Statement on Form S-4 relating to the proposed merger of CSI
and Emerson Electric Co., and to the references therein to such opinion under
the captions "Summary-Fairness Opinion of Financial Advisor", "The
Merger-Background of the Business Relationship and the Merger", "CSI's Reasons
for the Merger; Recommendation of the CSI Board-Information and Factors
Considered by the CSI Board" and "CSI's Reasons for the Merger; Recommendation
of the CSI Board-Opinion of CSI's Financial Advisor."
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1993, 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.
/s/ McDonald & Company Securities, Inc.
---------------------------------------
MCDONALD & COMPANY SECURITIES, INC.
Cleveland, Ohio
November 24, 1997
Exhibit 99
[Form of Proxy Card]
COMPUTATIONAL SYSTEMS, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 29, 1997
The undersigned hereby appoints Ronald G. Canada, Kenneth R. Piety
and Carlo Gorla, each of them with full power of substitution, as proxies of
the undersigned, and hereby authorizes such member or members to represent and
to vote all shares of common stock, no par value, of CSI held of record by the
undersigned as of the close of business on November 19, 1997, at the Special
Meeting of stockholders of CSI to be held on December 29, 1997, and at any
adjournments or postponements thereof, upon all subjects that may properly
come before the meeting including matters described in the Proxy
Statement/Prospectus furnished herewith. The undersigned hereby revokes any
previous proxies with respect to matters covered by this Proxy.
This Proxy, when properly executed, will be voted in the manner
marked herein by the undersigned stockholder. THE BOARD RECOMMENDS A VOTE FOR
THE PROPOSAL. TO VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS, JUST
SIGN AND RETURN THIS PROXY; NO BOXES NEED TO BE CHECKED.
Your vote is important. Failure to sign and return this Proxy, or
attend the Special Meeting and vote by ballot, will have the same effect as a
vote against the merger.
SEE REVERSE SIDE
- ------------------------------------------------------------------------------
The Board of Directors of CSI recommends a vote FOR:
1. Approval and Adoption of the Agreement and Plan of Merger dated as
of October 17, 1997 among CSI, Emerson Electric Co., a Missouri
corporation ("Emerson"), and Emersub LVII, Inc., a Delaware
corporation and wholly-owned subsidiary of Emerson. The Merger
Agreement is attached to the accompanying Proxy
Statement/Prospectus as Annex A.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Approval of any proposal to adjourn or postpone the meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In the discretion of the proxies, to vote upon such other business
as may properly come before the meeting, including any adjournment
or postponement thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
----------------------------
(Date)
----------------------------
(Signature)
----------------------------
(Title)
----------------------------
(Signature, if held jointly)
When shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee, guardian, corporate
officer or partner, please give
full title as such. If a
corporation, please sign in
corporate name by president or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person. This Proxy votes all
shares held in all capacities.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY
