SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[X] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Nalco Chemical Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[X] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid: $818,208.02
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(2) Form, Schedule or Registration Statement no.: Schedule 14D-1
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(3) Filing Party: Suez Lyonnaise des Eaux
H2O Acquisition Co.
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(4) Date Filed: July 1, 1999
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[NALCO LETTERHEAD]
November __, 1999
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
of Nalco Chemical Company (the "Special Meeting") to be held at 10:00 a.m. on
[day], [date], 1999, at the offices of White & Case LLP, 1155 Avenue of the
Americas, New York, New York 10036.
As described in the enclosed Proxy Statement, at the Special Meeting
you will be asked to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated as of June 27, 1999 (the "Merger Agreement"),
among Suez Lyonnaise des Eaux, a societe anonyme organized and existing under
the laws of the Republic of France ("Suez Lyonnaise"), H2O Acquisition Co.
("H2O"), a Delaware corporation and an indirect, wholly owned subsidiary of Suez
Lyonnaise, and Nalco Chemical Company, a Delaware corporation ("Nalco", "we" or
"us"), providing for, among other things, the merger of H2O with and into Nalco
(the "Merger"). Following the Merger, Nalco will continue as the surviving
corporation and will become an indirect, wholly owned subsidiary of Suez
Lyonnaise. A copy of the Merger Agreement is attached to this Proxy Statement as
Exhibit A.
The Merger will constitute the second and final step of the acquisition of
Nalco by Suez Lyonnaise. The first step was a tender offer (the "Offer")
commenced by H2O on July 1, 1999 for all of the outstanding shares of our common
stock, par value $0.1875 per share, including the associated preferred stock
purchase rights (the "Common Stock"), and our Series B ESOP Preferred Stock (the
"ESOP Preferred Stock", and such shares of Common Stock and ESOP Preferred
Stock, collectively, the "Shares") at a price of $53.00 per share of Common
Stock and $1,060.00 per share of ESOP Preferred Stock, net to the seller in
cash, without interest thereon (the "Offer Price"). Pursuant to the Offer, which
expired on November 8, 1999, H2O accepted for payment [66,195,851.711] shares
(including 907,700 shares tendered pursuant to notices of guaranteed delivery of
Common Stock (or approximately [96.8]% of the Common Stock outstanding) and
[346,606.379] shares of ESOP Preferred Stock (or approximately [100]% of the
ESOP Preferred Stock outstanding). On a fully diluted basis, this represents
approximately [97.1]% of all Shares outstanding on November 8, 1999 and
approximately [97.1]% of all Shares outstanding on November [__], 1999, the
record date for the Special Meeting (the "Record Date"). In accordance with the
Merger Agreement, Suez Lyonnaise intends to cause H2O to vote in favor of the
Merger and to merge with and into Nalco, and all Shares (other than Shares owned
by Suez Lyonnaise, H2O or any other subsidiary of Suez Lyonnaise, or Shares held
by Nalco as treasury stock, or by stockholders, if any, of Nalco who are
entitled to and who properly exercise appraisal rights under the Delaware
General Corporation law) will be converted into the right to receive the
respective Offer Price.
On June 27, 1999, our Board of Directors unanimously (i) determined
that the Merger is advisable and that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to and in the
best interests of our stockholders, (ii) approved and adopted the Merger
Agreement and the transactions contemplated thereby, (iii) recommended that our
stockholders accept the Offer, approve the Merger, and approve and adopt the
Merger Agreement and the transactions contemplated thereby, and (iv) approved an
amendment to the Stockholders Rights Agreement dated as of November 1, 1995,
between the Company and First Chicago Trust Company of New York, as Rights
Agent, as amended from time to time, rendering it inapplicable to the Offer and
the Merger.
H2O OWNS AN AGGREGATE OF [73,127,979.291] SHARES, REPRESENTING, ON A FULLY
DILUTED BASIS, APPROXIMATELY [97.1]% OF ALL SHARES OUTSTANDING ON THE RECORD
DATE. BECAUSE THE APPROVAL OF THE HOLDERS OF A MAJORITY OF ALL OUTSTANDING
SHARES IS SUFFICIENT TO APPROVE THE MERGER AND APPROVE AND ADOPT THE MERGER
AGREEMENT, H2O CAN CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY
OTHER HOLDER OF SHARES. SUEZ LYONNAISE AND H2O HAVE AGREED PURSUANT TO THE
MERGER AGREEMENT TO VOTE ALL THEIR SHARES IN FAVOR OF APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER.
If the Merger is consummated, holders of Shares who do not vote in
favor of approval and adoption of the Merger Agreement and approval of the
Merger and who otherwise comply with the requirements of Section 262 of the
Delaware General Corporation Law (a copy of which is included as Exhibit B to
the enclosed Proxy Statement) will be entitled to receive such consideration as
may be determined to be due under such provisions. Only holders of our stock of
record at the close of business on November 11, 1999, are entitled to notice of
and to vote at the Special Meeting or any adjournments or postponements thereof.
You are urged to read this Proxy Statement, which describes the terms
of the Merger, in its entirety. A copy of the Merger Agreement is included as
Appendix A to the enclosed Proxy Statement.
It is very important that your shares be represented at the Special
Meeting. Whether or not you plan to attend the Special Meeting, you are
requested to complete, date, sign and return the proxy card in the enclosed
postage-paid envelope. Failure to return a properly executed proxy card or vote
at the Special Meeting would have the same effect as a vote against the Merger
Agreement and the Merger. Executed proxies with no instructions indicated
thereon will be voted "FOR" approval and adoption of the Merger Agreement and
approval of the Merger.
Please do not send in your stock certificates at this time. You will be
sent a letter of transmittal for that purpose as soon as reasonably practicable
after the Merger is consummated.
Sincerely,
---------------------
Edward J. Mooney
Chairman and CEO
<PAGE>
[NALCO LETTERHEAD]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Nalco Chemical Company:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Nalco
Chemical Company (the "Special Meeting") will be held on [__], [_____], 1999, at
10:00 a.m., at the offices of White & Case LLP, 1155 Avenue of the Americas, New
York, New York, 10036, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt
the Agreement and Plan of Merger dated as of June 27, 1999, by and
among us, Suez Lyonnaise des Eaux, a societe anonyme organized and
existing under the laws of the Republic of France ("Suez Lyonnaise"),
and H2O Acquisition Co. ("H2O"), a Delaware corporation and a wholly
owned subsidiary of Suez Lyonnaise (the "Merger Agreement"), attached
as Exhibit A to the accompanying Proxy Statement, and the Merger
contemplated thereby. Under the terms of the Merger Agreement, at the
Effective Time (as defined in the Merger Agreement), among other
things, (i) H2O will be merged with and into us (the "Merger"), (ii)
each outstanding share of our common stock, par value $0.1875 per share
(the "Common Stock"), including the associated preferred stock purchase
rights issued pursuant to the Rights Agreement, dated as of June 20,
1996, as amended, between us and First Chicago Trust Company of New
York as Rights Agent (the "Rights") (other than shares of Common Stock
held by any of our subsidiaries, held in treasury, held by Suez
Lyonnaise des Eaux, H2O Acquisition Co. or any other subsidiary of Suez
Lyonnaise and other than dissenting shares), will be converted into the
right to receive an amount in cash equal to $53.00 without interest
thereon, (iii) each outstanding share of our Series B ESOP Convertible
Preferred Stock, par value $1.00 per share (the "ESOP Preferred Stock",
and together with the Common Stock and the Rights, the "Shares") (other
than shares of ESOP Preferred Stock held by any of our subsidiaries, in
treasury, or by Suez Lyonnaise des Eaux, H2O Acquisition Co. or any
other subsidiary of Suez Lyonnaise), will be converted into the right
to receive an amount in cash equal to $1,060.00 without interest
thereon, and (iv) each Share issued and outstanding and owned by Suez
Lyonnaise, H2O or any other subsidiary of Suez Lyonnaise will cease to
be outstanding, will be canceled and retired without payment of any
consideration therefore and will cease to exist; and
2. To act upon such other and further business as may properly
come before the Special Meeting or any adjournment or adjournments
thereof.
The Board of Directors has specified November 19, 1999, at the close
of business, as the record date for the purpose of determining the stockholders
who are entitled to receive notice of and to vote at the Special Meeting. Only
holders of Common Stock of record at the close of business on that date will be
entitled to notice of and to vote at the Special Meeting or any adjournments or
postponements thereof.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. To
ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, whether or not you plan to attend the Special Meeting. Executed
proxies with no instructions indicated thereon will be voted "FOR" approval and
adoption of the Merger Agreement and approval of the Merger. You may revoke your
proxy in the manner described in the accompanying Proxy Statement at any time
before it is voted at the Special Meeting.
Pursuant to a tender offer, H2O owns an aggregate of 66,195,851.711 shares
of Common Stock, representing 96.8% of such shares, and 346,606.379 shares of
ESOP Preferred Stock, representing 100% of such shares. Because the approval of
the holders of a majority of all outstanding Shares is sufficient to approve the
Merger and approve and adopt the Merger Agreement, H2O can cause the Merger to
occur without the affirmative vote of any other holders of Shares. Suez
Lyonnaise and H2O have agreed pursuant to the Merger Agreement to vote all their
Shares in favor of approval and adoption of the Merger Agreement and approval of
the Merger.
If the Merger is consummated, holders of Shares who do not vote in
favor of approval of the Merger Agreement and approval of the Merger and who
otherwise comply with the requirements of Section 262 of the Delaware General
Corporation Law (a copy of which is included as Exhibit B to the enclosed Proxy
Statement) will be entitled to receive such consideration as may be determined
to be due under such provisions.
By Order of the Board of Directors
Suzzanne Gioimo, Secretary
Naperville, Illinois
November __, 1999
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK
ENTITLED TO VOTE THEREON IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT
AND THE MERGER. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY
REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN
THE ATTACHED PROXY STATEMENT. ANY STOCKHOLDER PRESENT AT THE SPECIAL MEETING,
INCLUDING ANY ADJOURNMENT OR POSTPONEMENT THEREOF, MAY REVOKE SUCH HOLDER'S
PROXY AND VOTE PERSONALLY ON THE MERGER AGREEMENT AND THE MERGER AT THE SPECIAL
MEETING.
PLEASE DO NOT SEND YOUR CERTIFICATES AT THIS TIME.
<PAGE>
[NALCO LETTERHEAD]
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
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This Proxy Statement is being furnished to holders of shares of common
stock, par value $0.1875 per share (the "Common Stock"), including the
associated preferred stock purchase rights issued pursuant to the Rights
Agreement, dated as of June 20, 1996, as amended, between Nalco Chemical Company
and First Chicago Trust Company of New York as Rights Agent (the "Rights") and
Series B ESOP Convertible Preferred Stock, par value $1.00 per share (the "ESOP
Preferred Stock" and, together with the Common Stock, the "Shares" and holders
of such Shares, "Holders") of Nalco Chemical Company, a Delaware corporation
("Nalco", "we", or "us") in connection with the solicitation of proxies by our
Board of Directors (the "Board of Directors" or the "Board") for use at the
Special Meeting of Shareholders to be held on [__], [__], 1999, at the offices
of White & Case LLP, 1155 Avenue of the Americas, New York, New York 10036, and
at any adjournments or postponements thereof (the "Special Meeting"). The Board
of Directors has fixed the close of business on November 19, 1999, as the record
date (the "Record Date") for the Special Meeting with respect to this
solicitation.
At the Special Meeting, Holders will consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Merger among Suez Lyonnaise des
Eaux, a societe anonyme organized and existing under the laws of the Republic of
France ("Suez Lyonnaise"), H2O Acquisition Co., a Delaware corporation and
wholly owned subsidiary of Suez Lyonnaise ("H2O"), and Nalco dated as of June
27, 1999 (the "Merger Agreement"), and the Merger (as defined below)
contemplated thereby. A copy of the Merger Agreement is attached to this Proxy
Statement as Appendix A. Pursuant to the Merger Agreement and subject to the
satisfaction of certain conditions set forth therein, (i) H2O will be merged
with and into Nalco (the "Merger"), (ii) each outstanding share of Common Stock,
including the associated preferred stock purchase rights issued pursuant to the
Rights Agreement, dated as of June 20, 1996, as amended, between us and First
Chicago Trust Company of New York as Rights Agent (the "Rights") (other than
shares of Common Stock held in treasury, held by Suez Lyonnaise des Eaux, H2O or
any other subsidiary of Suez Lyonnaise and other than dissenting shares), will
be converted into the right to receive an amount in cash equal to $53.00 without
interest thereon, (iii) each outstanding share of our Series B ESOP Convertible
Preferred Stock, par value $1.00 per share (the "ESOP Preferred Stock", and
together with the Common Stock and the Rights, the "Shares") (other than shares
of ESOP Preferred Stock held in treasury, by Suez Lyonnaise des Eaux, H2O or any
other subsidiary of Suez Lyonnaise), will be converted into the right to receive
an amount in cash equal to $1,060.00 without interest thereon ((ii) and (iii)
each, as applicable, the "Merger Consideration"), and (iv) each Share issued and
outstanding and owned by Suez Lyonnaise, H2O or any other subsidiary of Suez
Lyonnaise will cease to be outstanding, will be canceled and retired without
payment of any consideration therefore and will cease to exist.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition by Suez Lyonnaise of the entire equity interest in
Nalco. The first step was a tender offer (the "Offer") commenced by H2O on July
1, 1999 for all of the outstanding shares of our Common Stock and our ESOP
Preferred Stock at a price of $53.00 per share of Common Stock and $1,060.00 per
share of ESOP Preferred Stock, net to the seller in cash, without interest
thereon (the "Offer Price"). Pursuant to the Offer, which expired on November 8,
1999, H2O accepted for payment 66,195,851.711 shares (including 907,700 shares
tendered pursuant to notices of guaranteed delivery) of Common Stock (or
approximately 96.8% of the Common Stock outstanding) and 346,606.379 shares of
ESOP Preferred Stock (or 100% of the ESOP Preferred Stock outstanding). On a
fully diluted basis, this represents approximately 97.1% of all Shares
outstanding on the Record Date. In accordance with the Merger Agreement, Suez
Lyonnaise intends to cause H2O to vote in favor of the Merger and to merge with
and into Nalco, and all Shares (other than Shares owned by Suez Lyonnaise, H2O
or any other subsidiary of Suez Lyonnaise, or Shares held by Nalco as treasury
stock, or by stockholders, if any, of Nalco who are entitled to and who properly
exercise appraisal rights under the Delaware General Corporation Law), will be
converted into the right to receive the appropriate Merger Consideration.
OUR BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS VOTE THEIR SHARES "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
H2O owns an aggregate of 73,127,979.291 Shares, representing, on a
fully diluted basis, approximately 97.1% of all Shares outstanding on the Record
Date. Because the approval of the Holders of at least a majority of all
outstanding Shares is sufficient to approve and adopt the Merger Agreement and
approve the Merger, H2O can cause the Merger to occur without the affirmative
vote of any other stockholder. Suez Lyonnaise and H2O have agreed pursuant to
the Merger Agreement to vote all their Shares in favor of approval and adoption
of the Merger Agreement and approval of the Merger. However, one of the
anti-takeover provisions of our Restated Certificate of Incorporation requires
that this proxy solicitation be mailed to all stockholders.
Shareholders are urged to read and consider carefully the information
contained in this Proxy Statement and to consult with their personal financial
and tax advisors.
This Proxy Statement, the accompanying Notice of Special meeting and
the accompanying proxy are first being mailed to Holders on or about November
__, 1999.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOUR PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
---------------
The date of this Proxy Statement is November __, 1999.
---------------
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF NALCO
SINCE THE DATE HEREOF.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: With whom are we merging?
A: H2O will merge into us. H2O is an indirect, wholly owned subsidiary of Suez
Lyonnaise des Eaux, a societe anonyme organized and existing under the laws
of the Republic of France. As a result of the proposed merger, subsidiaries
of Suez Lyonnaise will own all of our stock.
Q: What will I receive in the merger?
A: Our stockholders (other than stockholders who perfect their appraisal
rights) will be entitled to receive $53.00 in cash, without interest, for
each of their shares of our common stock or $1,060.00 in cash, without
interest, for each of their shares of our Series B ESOP Convertible
Preferred Stock.
Q: Why is the Board of Directors recommending that I vote to approve the
Merger and approve and adopt the Merger Agreement?
A: In the opinion of the Board of Directors, the terms and provisions of the
Merger Agreement and the Merger are advisable and in the best interests of
Nalco and our stockholders. To review the background of and reasons for the
Merger, see pages ___ to ___.
Q: How many votes are required to approve the Merger and approve and adopt the
Merger Agreement?
A: The affirmative vote of the holders of a majority of all outstanding shares
of our common stock as of the record date is required to approve the Merger
and approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. Suez Lyonnaise, through H2O,
already owns such a majority of shares pursuant to a tender offer, and
intends to vote in favor of the Merger. Thus, its passage is assured
without the vote of any other stockholder.
Q: Why is my proxy being solicited?
A: One of the anti-takeover provisions in our Restated Certificate of
Incorporation requires this solicitation be mailed to our stockholders, as
well as ensuring that a fair price is paid in an acquisition.
Q: If I am a stockholder, what do I need to do now?
A: After you read and consider carefully the information contained in this
Proxy Statement, please fill out, sign and date your proxy card and mail it
in the enclosed postage-paid envelope as soon as possible so that your
shares may be represented at the Special Meeting.
Q: What rights do I have if I oppose the Merger?
A: Stockholders who oppose the Merger may dissent from the Merger and seek to
receive the fair value of their shares but only if they comply with the
procedures of Delaware law explained on page ___.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Yes, if you provide instructions to your broker on how to vote. You should
fill out, sign, date and return the proxy card and otherwise follow the
directions provided by your broker regarding how to instruct your broker to
vote your shares.
Q: Can I change my vote or revoke my proxy after I have mailed my signed proxy
card?
A: Yes, you can change your vote at any time before your vote is counted at
the Special Meeting. You can do this in one of three ways. First, you can
send a written notice stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy card. If you choose either
of these methods, you must timely submit your notice of revocation or your
new proxy card to us. If you have instructed a broker to vote your Shares,
you must follow directions received from your broker to change your vote.
Third, you may attend the Special Meeting and vote your Shares.
Q: Should I send in my stock certificate now?
A: No. Shortly after the Merger, you will receive a letter of transmittal with
instructions informing you how to send in your stock certificates to our
paying agent.
Q: When do you expect the Merger to be completed?
A: We are working towards completing the Merger as soon as possible. For the
Merger to occur, it must be approved by our stockholders. If the
stockholders approve the Merger, we expect to complete the Merger on the
date of the Special Meeting. We expect to mail letters of transmittal for
stockholders to submit their Shares for payment shortly after the date of
the Special Meeting.
Q: What are the tax considerations of the Merger?
A: The receipt of cash by a stockholder in exchange for common stock
surrendered in the merger or upon the exercise of dissenters rights will,
in each case, constitute a taxable transaction for U.S. federal income tax
purposes and also may be a taxable transaction under state, local, foreign
and other tax laws. To review the tax considerations of the Merger in
greater detail, see page ____.
<PAGE>
Who Can Help Answer My Other Questions?
If you have more questions about the merger, you should contact
White & Case LLP
155 Avenue of the Americas
New York, New York 10036
Attn: Daniel J. Kessler, Esq.
<PAGE>
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
The statements contained or incorporated by reference in this Proxy
Statement which are not historical facts are forward-looking statements that
involve risks and uncertainties. We wish to caution you that these
forward-looking statements, such as our outlook for readiness, expected costs
and contingency planning regarding year 2000 issues, future cash requirements,
capital expenditures, and projections of our future results of operations, are
only predictions or expectations and actual events or results may differ
materially as a result of risks facing us. These risks include, but are not
limited to, customer demand for our products and services, the overall level of
economic activity in our major markets, competitors' actions, manufacturing
interruptions, dependence on certain suppliers, fluctuations in operating
results, the attraction and retention of qualified personnel and other risks
that may be described in our filings with the Securities and Exchange
Commission, including our Form 10-K for the year ended December 31, 1998 and
Forms 10-Q for the quarters ended September 30, 1999.
<PAGE>
SUMMARY
The following is a summary of material information contained elsewhere
in this Proxy Statement. This Summary is not intended to be a complete
description and is qualified in its entirety by reference to the more detailed
information contained in this Proxy Statement or incorporated by reference in
this Proxy Statement or in the documents attached as Appendices hereto. Each
Holder is urged to give careful consideration to all the information contained
in this Proxy Statement and the Appendices before voting.
The Special Meeting
Matters To Be Considered at the Special Meeting. The Special Meeting is
scheduled to be held at 10:00 a.m. on [__], [__], 1999, at the offices of White
& Case LLP, 1155 Avenue of the Americas, New York, New York 10036. At the
Special Meeting, Holders will consider and vote upon (i) a proposal to approve
and adopt the Merger Agreement and approve the Merger and (ii) such other
matters as may properly be brought before the Special Meeting. See "THE SPECIAL
MEETING--Matters To Be Considered At The Special Meeting" and "OTHER MATTERS".
Record Date and Voting. The Record Date for the Special Meeting is the
close of business on November 19, 1999. At the close of business on the Record
Date, there were outstanding [__] shares of Common Stock, each of which is
entitled to one vote, and no shares of ESOP Preferred Stock, held by
approximately [__] Holders of record. The presence, either in person or by
proxy, of a majority of the outstanding shares of Common Stock and ESOP
Preferred Stock (each share of ESOP Preferred Stock counting as twenty shares of
Common Stock) entitled to be voted is necessary to constitute a quorum at the
Special Meeting. Abstentions (including broker non-votes) are included in the
calculation of the number of votes represented at a meeting for purposes of
determining whether a quorum has been achieved. See "THE SPECIAL MEETING--Record
Date and Voting."
Vote Required; Revocability of Proxies. Approval and adoption of the
Merger Agreement and approval of the Merger will require the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock and ESOP
Preferred Stock, voting together as a single class, entitled to vote thereon.
The required vote on the Merger Agreement and the Merger is based upon
the total number of outstanding shares of Common Stock and shares of Common
Stock into which shares of ESOP Preferred Stock may be converted. The failure to
submit a proxy card (or vote in person at the Special Meeting) or the abstention
from voting by a Holder (including broker non-votes) will have the same effect
as a vote "AGAINST" approval and adoption of the Merger Agreement and approval
of the Merger. See "THE SPECIAL MEETING--Vote Required; Revocability of
Proxies".
The presence of a Holder at the Special Meeting will not automatically
revoke such Holder's proxy. However, a Holder may revoke a proxy at any time
prior to its exercise by (i) delivering to Suzzanne Gioimo, Secretary, Nalco
Chemical Company, One Nalco Center, Naperville, Illinois 60563, a written notice
of revocation prior to the Special Meeting, (ii) delivering prior to the Special
Meeting a duly executed proxy bearing a later date or (iii) attending the
Special Meeting and voting in person.
Accountants. Representatives of PricewaterhouseCoopers LLP, our
principal accountants for the current year and for the most recently completed
fiscal year, are expected to be present at the Special Meeting, will have the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
Solicitation of Proxies
We will bear the costs of soliciting proxies from Holders. In addition
to soliciting proxies by mail, our directors, officers and employees, without
receiving additional compensation therefor, may solicit proxies by telephone, by
telegram or in person. Arrangements will also be made with brokerage firms and
other custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of shares held of record by such persons, and we will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith. See
"THE SPECIAL MEETING--Solicitation of Proxies".
Appraisal Rights
Under the DGCL, holders of shares of Common Stock who do not vote in
favor of approval and adoption of the Merger Agreement and approval of the
Merger and who otherwise comply with the requirements of DGCL Section 262 will
be entitled to statutory appraisal rights (such shares collectively referred to
as the "Dissenting Shares"). See "THE SPECIAL MEETING--Appraisal Rights" and
DGCL Section 262, which is attached hereto as Appendix B.
Parties to the Merger.
Nalco Chemical Company. We manufacture and market specialty water
treatment and process chemicals and services worldwide. We serve customers in
steelmaking, pulp and papermaking, mining and mineral processing, automotive,
metalmaking, oil refining and petroleum, power generation, food and beverage,
light industrial, hospitals, and office buildings in more than 120 countries.
See "PARTIES TO THE MERGER--Nalco Chemical Company".
Suez Lyonnaise des Eaux. Suez Lyonnaise, a societe anonyme organized
and existing under the laws of the Republic of France, operates private
infrastructure services in more than 120 countries, providing electricity and
natural gas, waste treatment, communications services, and water services and
maintains interests mainly in construction and capital investments. Suez
Lyonnaise des Eaux was formed from the 1997 merger of Compagnie de Suez (builder
of the Suez Canal) and Lyonnaise des Eaux. See "PARTIES TO THE MERGER--Suez
Lyonnaise des Eaux".
H2O Acquisition Co. H2O, a newly incorporated Delaware corporation, has
not conducted any business other than in connection with the Offer and the
Merger Agreement. All of the issued and outstanding shares of H2O are
beneficially owned by subsidiaries of Suez Lyonnaise. Pursuant to the terms of
the Merger Agreement, at the Effective Time, H2O would be merged with and into
Nalco, with Nalco continuing as the Surviving Corporation and an indirect,
wholly owned subsidiary of Suez Lyonnaise. See "PARTIES TO THE MERGER--H2O
Acquisition Co.".
Recommendation of the Board of Directors; Reasons for the Merger
Our Board of Directors has determined that the Merger is advisable and
that the Merger Agreement and the transactions contemplated thereby, including
the Offer and the Merger are fair to and in the best interests of our
shareholders and has unanimously approved the Merger Agreement and the Merger.
Accordingly, the Board unanimously recommends that Holders vote "FOR" approval
and adoption of the Merger Agreement and approval of the Merger.
In determining to approve and adopt the Merger Agreement and approve
the Merger and to recommend that shareholders approve and adopt the Merger
Agreement and approve the Merger, the Board of Directors considered a number of
factors, as more fully described under "THE MERGER--Background of the Merger"
and "--Reasons for the Merger".
Opinion of Financial Advisor
On June 27, 1999, Goldman, Sachs & Co., financial advisor to Nalco
("Goldman"), delivered its oral opinion, subsequently confirmed in writing, to
our Board of Directors that, as of the date of such opinion, the $53.00 per
share of Common Stock in cash to be received by the holders of Common Stock in
the Offer and the Merger is fair from a financial point of view to such holders.
The full text of Goldman's opinion, which sets forth assumptions made,
procedures followed, matters considered and limits on the reviews undertaken, is
attached as Exhibit C to this Proxy Statement, and is incorporated herein by
reference. Stockholders are urged to read the opinion in its entirety. See "THE
MERGER--Opinion of Financial Advisor" and the opinion, a copy of which is
attached hereto as Appendix C.
The Merger Agreement
Subject to the provisions of the Merger Agreement, at the Effective
Time: (i) H2O will be merged with and into us, (ii) each outstanding share of
our Common Stock (other than shares of Common Stock held by any of our
subsidiaries, held in treasury, held by Suez Lyonnaise, H2O or any other
subsidiary of Suez Lyonnaise and other than Dissenting Shares), will be
converted into the right to receive an amount in cash equal to $53.00 without
interest thereon, (iii) each outstanding share of our ESOP Preferred Stock
(other than shares of ESOP Preferred Stock held by any of our subsidiaries, in
treasury, or by Suez Lyonnaise des Eaux, H2O or any other subsidiary of Suez
Lyonnaise), will be converted into the right to receive an amount in cash equal
to $1,060.00 without interest thereon, and (iv) each Share issued and
outstanding and owned by Suez Lyonnaise, H2O or any other subsidiary of Suez
Lyonnaise will cease to be outstanding, will be canceled and retired without
payment of any consideration therefore and will cease to exist, and no
consideration will be delivered in exchange therefor. See "THE MERGER
AGREEMENT--Effective Time" and "--The Merger".
Consummation of the Merger is subject to various conditions, including,
among others, (i) the approval and adoption of the Merger Agreement by the
requisite vote of the Holders, (ii) completion or receipt of any review or
approval required by governmental authorities in countries in which we or any of
our subsidiaries have operations material to us and any of our subsidiaries,
taken as a whole; and (iii) the absence of any injunction or other order
preventing consummation of the Merger.
Termination
The Merger Agreement may be terminated and the Merger and other
transactions contemplated thereby may be abandoned at any time prior to the
Effective Time, notwithstanding any approval or adoption by our stockholders by
mutual written consent duly authorized by the boards of directors of Suez
Lyonnaise, H2O and Nalco.
Regulatory Approvals
The obligation of each of Suez Lyonnaise and Nalco to consummate the
Merger is conditioned upon the expiration of the applicable HSR Act waiting
period and the approval of the Commission of the European Union. As of the date
of this Proxy Statement, and as a condition to the purchase of the Shares
pursuant to the Offer, all applicable regulatory agencies have approved the
Merger. See "THE MERGER--Regulatory Approvals".
Financing of the Merger
The total amount of funds required by Suez Lyonnaise to purchase all
the outstanding Shares pursuant to the Merger and to pay related fees and
expenses associated with the Merger would be approximately $4.1 billion. See
"FINANCING OF THE MERGER".
Interests of Certain Persons in the Merger
Certain of our employee-directors have entered into letter agreements
relating to the terms of their employment following the consummation of the
Merger. See "THE MERGER--Interests of Certain Persons in the Merger".
U.S. Federal Income Tax Consequences
The Merger will be a taxable transaction to Holders. Holders will
recognize gain or loss in the Merger in an amount determined by the difference
between the Merger Consideration received and their tax basis in the Shares
exchanged therefor. For further information, see "MATERIAL U.S. FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO U.S. HOLDERS".
Security Ownership of Management and Certain Beneficial Owners
As of November 9, 1999, the directors and executive officers of Nalco
beneficially owned no Shares. 97.1% of the Shares were beneficially owned by
Suez Lyonnaise through H2O pursuant to the Offer, and Suez Lyonnaise intends to
vote its Shares for the approval and adoption of the Merger Agreement and
approval of the Merger. See "SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS".
Market Prices of Common Stock
The Common Stock is listed on both the NYSE and the Chicago Stock
Exchange under the name "Nalco Chemical Company" and traded under the symbol
"NLC". On June 23, 1999, the day before the public announcement that Nalco was
in talks about a possible business combination transaction, the reported closing
sale price of the Common Stock on the NYSE was $37 1/4 per share. On June 25,
1999, the last full trading day prior to the public announcement of the Offer,
the reported closing sale price of the Common Stock on the NYSE was $42 1/2 per
share. On June 30, 1999, the last full trading day prior to the date of the
Offer, the reported closing sale price of the Common Stock on the NYSE was $51
7/8 per share. On November 8, 1999, the last full trading day prior to the
expiration of the Offer, the reported closing sale price per share of Common
Stock on the NYSE was $__ per share. For additional information concerning
historical market prices of the Common Stock, see "THE PARTIES TO THE
TRANSACTION--Nalco Chemical Company--Comparative Market Price Data".
Selected Consolidated Financial Data
Certain selected historical financial data of Nalco are set forth under
"THE PARTIES TO THE TRANSACTION--Nalco Chemical Company--Summary Consolidated
Financial Information". Those data should be read in conjunction with the
financial statements and related notes incorporated by reference in this Proxy
Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
<PAGE>
THE SPECIAL MEETING
Matters to be Considered at the Special Meeting
Each copy of this Proxy Statement mailed to Holders is accompanied by a
proxy card furnished in connection with the solicitation of proxies by the Board
of Directors for use at the Special Meeting. The Special Meeting is scheduled to
be held at 10:00 a.m., on [__], [__], 1999, at the offices of White & Case LLP,
1155 Avenue of the Americas, New York, New York 10036. At the Special Meeting,
Holders will consider and vote upon (i) a proposal to approve and adopt the
Merger Agreement and approve the Merger and (ii) such other matters as may
properly be brought before the Special Meeting.
On June 27, 1999, our Board of Directors (one director not being
present) unanimously (i) determined that the Merger is advisable and that the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, are fair to and in the best interests of our stockholders, (ii)
approved and adopted the Merger Agreement and the transactions contemplated
thereby, (iii) recommended that our stockholders accept the Offer, approve the
Merger, and approve and adopt the Merger Agreement and the transactions
contemplated thereby, and (iv) approved an amendment to the Rights Plan,
rendering it inapplicable to the Offer and the Merger.
ACCORDINGLY, OUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
See "THE MERGER--Background of the Merger" and "--Reasons for the Merger."
SHAREHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO
RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER.
Record Date and Voting
The Board of Directors has fixed the close of business on November 19,
1999, as the Record Date for the determination of the holders of Shares entitled
to notice of and to vote at the Special Meeting. Only shareholders of record at
the close of business on that date will be entitled to vote at the Special
Meeting. At the close of business on the Record Date, there were [__] shares of
Common Stock and [__] shares of ESOP Preferred Stock outstanding and entitled to
vote at the Special Meeting, held by approximately [__] shareholders of record.
Each holder of Common Stock on the Record Date will be entitled to one
vote for each share held of record and each holder of ESOP Preferred Stock on
the Record Date will be entitled to twenty votes for each share held of record.
The presence, in person or by proxy, of a majority of the outstanding Shares
entitled to be voted at the Special Meeting is necessary to constitute a quorum
thereat. Abstentions (including broker non-votes) will be included in the
calculation of the number of votes represented at the Special Meeting for
purposes of determining whether a quorum has been achieved.
If the enclosed proxy card is properly executed and received by Nalco
in time to be voted at the Special Meeting, the Shares represented thereby will
be voted in accordance with the instructions marked thereon. Executed proxies
with no instructions indicated thereon will be voted "FOR" approval and adoption
of the Merger Agreement and approval of the Merger.
The Board of Directors is not aware of any matters other than that set
forth in the Notice of Special Meeting of Shareholders that may be brought
before the Special Meeting. If any other matters properly come before the
Special Meeting, the persons named in the accompanying proxy will vote the
Shares represented by all properly executed proxies on such matters in such
manner as shall be determined by a majority of the Board of Directors, except
that Shares represented by proxies which have been voted "against" the Merger
Agreement and the Merger will not be used to vote "for" postponement or
adjournment of the Special Meeting for the purpose of allowing additional time
for soliciting additional votes "for" the Merger Agreement and the Merger. See
"--Vote Required; Revocability of Proxies" and "OTHER MATTERS".
SHAREHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES WITH THEIR PROXY
CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, CERTIFICATES SHOULD BE DELIVERED
IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL, WHICH
WOULD BE SENT TO SHAREHOLDERS BY FIRST CHICAGO, IN ITS CAPACITY AS THE PAYING
AGENT, AS SOON AS REASONABLY PRACTICABLE AFTER THE EFFECTIVE TIME.
Vote Required; Revocability of Proxies
The affirmative vote of holders of a majority of the outstanding Shares
entitled to vote thereon is required to approve and adopt the Merger Agreement.
Because the required vote of Holders on the Merger Agreement and the
Merger is based upon the total number of outstanding Shares, the failure to
submit a proxy card (or to vote in person at the Special Meeting) or the
abstention from voting by a Holder (including broker non-votes) will have the
same effect as a vote "against" approval and adoption of the Merger Agreement
and approval of the Merger.
The presence of a Holder at the Special Meeting will not automatically
revoke such Holder's proxy. However, a Holder may revoke a proxy at any time
prior to its exercise by (i) delivering to Suzzanne Gioimo, Secretary, Nalco
Chemical Company, One Nalco Center, Naperville, Illinois, 60563, a written
notice of revocation prior to the Special Meeting, (ii) delivering prior to the
Special Meeting a duly executed proxy bearing a later date or (iii) attending
the Special Meeting and voting in person.
Because the 97.1% interest of Suez Lyonnaise will be present and voted
in favor of the proposal, the presence of a quorum is guaranteed and passage of
the proposal is assured without the vote of any other stockholder. This proxy
solicitation is being conducted because one of the anti-takeover provisions of
our Certificate of Incorporation requires it. For additional information
regarding the conditions of each parties' obligation to effect the merger see
"THE MERGER AGREEMENT--Conditions to Consummation of the Merger".
No vote of the shareholders of Suez Lyonnaise is required in connection
with the Merger Agreement or the Merger. The obligations of Nalco and Suez
Lyonnaise to consummate the Merger are subject, among other things, to the
condition that the Holders approve and adopt the Merger Agreement and approve
the Merger. See "THE MERGER AGREEMENT--Conditions to the Merger."
Solicitation of Proxies
We will bear the expenses in connection with the solicitation of
proxies. Upon request, we will reimburse brokers, dealers and banks, or their
nominees, for reasonable expenses incurred in forwarding copies of the proxy
material to the beneficial owners of Shares such persons hold of record.
Solicitation of proxies will be made principally by mail. Proxies may also be
solicited in person, or by telephone or telegraph, by our officers and regular
employees. Such persons will receive no additional compensation for such
services, but will be reimbursed for any out-of-pocket expenses incurred by them
in connection with such services.
Procedures for Exchange of Certificates
As soon as practicable after the Effective Time, a letter of
transmittal and instructions for surrendering stock certificates evidencing
shares of Common Stock will be mailed to each holder of Common Stock for use in
exchanging such holder's stock certificates for the Merger Consideration to
which such holder is entitled as a result of the Merger. STOCKHOLDERS SHOULD NOT
SEND ANY CERTIFICATES WITH THEIR PROXY CARDS. Stockholders should follow the
procedures described in "THE MERGER-- Procedures for Exchange of Certificates."
THE PARTIES TO THE TRANSACTION
Nalco Chemical Company.
We manufacture and market specialty water treatment and process
chemicals and services worldwide. We serve customers in steelmaking, pulp and
papermaking, mining and mineral processing, automotive, metalmaking, oil
refining and petroleum, power generation, food and beverage, light industrial,
hospitals, and office buildings in more than 120 countries. Our principal
executive offices are located at One Nalco Center, Naperville, Illinois 60563,
and the telephone number is (630) 305-1000.
Comparative Market Price Data
Until recently, the primary market for the Common Stock was the New
York Stock Exchange. In addition, the Common Stock is listed and traded on the
Chicago Stock Exchange. The ticker symbol for the Common Stock is "NLC". The
following table sets forth, for the periods indicated, the high and low sales
prices per share of Common Stock on the New York Stock Exchange as reported by
the Dow Jones News Service:
High Low
1997:
Quarter ended 12/31/97........... $42 7/16 37 13/16
1998:
Quarter ended 3/31/98............ 40 5/8 37 1/2
Quarter ended 6/30/98............ 40 7/8 34 7/16
Quarter ended 9/30/98............ 36 1/8 28 1/16
Quarter ended 12/31/98........... 34 5/16 28 3/8
1999:
Quarter ended 3/31/99............ 30 15/16 26
Quarter ended 6/30/99............ 51 7/8 26 3/4
Quarter ended 9/30/99............ [______] [______]
------------------------
On June 23, 1999, the day before we announced that we were in talks
about a possible business combination transaction, the reported closing sales
price of the Common Stock on the New York Stock Exchange was $37 1/4 per share
of Common Stock. On June 25, 1999, the last full trading day prior to the public
announcement of the Offer, the reported closing sales price of the Common Stock
on the New York Stock Exchange was $42 1/2 per share of Common Stock. On
November 8, 1999, the last trading day prior to the expiration of the Offer, the
last reported sales price of the Common Stock on the New York Stock Exchange was
$_____ per share. Holders of Common Stock are encouraged to review current share
prices.
Dividends
Since February 1, 1997, we have paid the following cash dividends (and no common
stock dividends) to holders of record of our common stock:
Dividend Amount
1996:
Quarter ended 12/31/96........................ $0.25
1997:
Quarter ended 3/31/97......................... $0.25
Quarter ended 6/30/97......................... $0.25
Quarter ended 9/30/97......................... $0.25
Quarter ended 12/31/97........................ $0.25
1998:
Quarter ended 3/31/98......................... $0.25
Quarter ended 6/30/98......................... $0.25
Quarter ended 9/30/98......................... $0.25
Quarter ended 12/31/98........................ $0.25
1999:
Quarter ended 3/31/99......................... $0.25
Quarter ended 6/30/99......................... $0.25
Quarter ended 9/30/99......................... $0.25
Summary Consolidated Financial Information
Set forth below is certain summary historical consolidated financial
information of Nalco and our subsidiaries. The historical financial information
(other than the ratios of earnings to fixed charges) was derived from the
audited consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 1998 (the "1998 Annual Report"), and from
the unaudited summary consolidated financial statements included in our
Quarterly Reports on Form 10-Q for the periods ended June 30, 1999 and June 30,
1998 (the "Quarterly Reports"), and other information and data contained in the
1998 Annual Report and the Quarterly Reports. More comprehensive financial
information is included in such reports and the financial information which
follows is qualified in its entirety by reference to, and should be read in
conjunction with, such reports and all of the financial statements and related
notes contained therein, copies of which may be obtained as set forth below
under the caption "AVAILABLE INFORMATION."
<PAGE>
<TABLE>
<CAPTION>
Nalco Chemical Company
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
($ in millions except per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Statement of Operations: Year Ended December 31, Ended June 30,
- --------------------------------------- -------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
(unaudited)
Revenues............................... $1,246.8 $1,214.5 $1,303.5 $1,433.7 $1,573.5 $770.1 $794.7
Operating costs and expenses:
Cost of products sold............... 543.7 531.3 568.6 629.6 714.1 346.1 358.1
Selling, administrative and 498.8 477.7 518.2 561.4 618.0 302.4 309.7
research.........................
Cost reduction program.............. - 180.0 - -
-------- -------- -------- -------- -------- ------ ------
Total operating costs and expenses.. 1,110.7 1,009.0 1,086.8 1,191.0 1,512.1 648.5 667.8
Operating income (loss)................ 136.1 205.5 216.7 242.7 61.4 121.6 126.9
Interest and investment income...... 16.6 7.2 2.6 0.7 2.4 0.7 20.5
Interest expense.................... (21.8) (16.2) (14.4) (15.3) (26.5) (11.8) (16.0)
Equity in earnings of partnership... 6.9 16.9 24.5 28.2 22.6 14.9 8.5
Earnings from Continuing Operations
Before Income Taxes................. 137.8 213.4 229.4 256.3 59.9 125.4 139.9
Income tax (expense)/benefit........... 64.6 77.7 83.5 92.9 22.0 45.4 48.5
-------- -------- -------- -------- -------- ------ ------
Earnings from Continuing Operations.... 73.2 135.7 145.9 163.4 37.9 - -
Earnings from Discontinued Operations.. 23.9 18.0 8.6 - - - -
Cumulative Effect of Change in
Accounting for Business Process
Reengineering Costs, Net of Taxes... - - - (4.5) - - -
-------- -------- -------- -------- -------- ------ ------
Net Earnings......................... $ 97.1 $ 153.7 $ 154.5 $ 158.9 $ 37.9 $ 80.0 $ 91.4
======== ======== ======== ======== ======== ====== ======
Per Share of Common Stock
Earnings from Continuing
Operations - Diluted................. $ 0.88 $ 1.71 $ 1.86 $ 2.10 $ 0.40 $ 1.04 $ 1.21
Discontinued Operations................. .31 .24 .11 - - - -
Accounting Change....................... - - - (.06) - - -
-------- -------- -------- -------- -------- ------ ------
Net Earnings............................ 1.19 1.95 1.97 2.04 .40 1.04 1.21
======== ======== ======== ======== ======== ====== ======
Cash Dividends Paid..................... .945 .99 1.00 1.00 1.00 0.50 0.50
Six Months
Statement of Operations: Year Ended December 31, Ended June 30,
- --------------------------------------- -------------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1999 (unaudited)
Consolidated Balance Sheet Data:
Working Capital...................... $ 87.8 $ 14.2 $ 95.5 $ 153.4 $ 126.3 $ 37.2
Property, plant and equipment, net... 523.9 520.0 522.0 492.5 517.3 485.7
Total assets......................... 1,269.2 1,360.5 1,394.5 1,440.9 1,650.7 1,668.8
Long-term Debt....................... 245.3 221.5 252.6 335.3 496.2 510.1
Deferred Income Taxes................ 56.8 53.3 42.9 37.2 15.6 29.1
Total Shareholders' Equity........... 544.2 580.3 654.5 652.7 585.9 649.8
</TABLE>
<PAGE>
Certain Projections of Future Operating Results
Prior to entering into the Merger Agreement, Suez Lyonnaise conducted a
due diligence review of Nalco and in connection with such review received
certain non-public information provided by us, including certain projected
financial data (the "Projections") for the year ending December 31, 1999. We do
not in the ordinary course publicly disclose projections and the Projections
were not prepared with a view to public disclosure. We have advised Suez
Lyonnaise and H2O that the Projections were prepared by our management based on
numerous assumptions including, among others, projections of revenues, operating
income, benefits and other expenses, depreciation and amortization and capital
expenditure. The Projections do not give effect to the Offer, the Merger,
expenditure requirements or the potential combined operations of us and Suez
Lyonnaise. Such information is set forth below in this Proxy Statement for the
limited purpose of giving Holders access to financial projections prepared by
our management that were made available to Suez Lyonnaise and H2O in connection
with the Merger Agreement and the Offer.
Nalco Chemical Company
Selected 1999 Projected Financial Data
(In Millions of Dollars Except Per Share Data)
Second Third Fourth Total
Qtr Qtr Qtr Year
----- ----- ----- -----
Net Sales...........................408.8 423.0 418.7 1,645.7
Cost of Products Sold...............184.3 192.7 190.7 747.7
----- ----- ----- -----
Gross Earnings......................224.5 230.3 228.0 898.0
----- ----- ----- -----
Total Operating Expenses............133.4 135.9 137.5 535.6
----- ----- ----- -----
Operating Earnings.................. 68.5 69.5 64.6 267.4
---- ---- ---- -----
Earnings Before Taxes............... 64.6 65.6 61.8 253.1
Income Taxes.................... 23.1 23.5 22.1 90.6
---- ---- ---- -----
Net Earnings........................ 41.5 42.1 39.7 162.5
==== ==== ==== =====
Earnings Per Share..................$0.55 $0.56 $0.52 $2.15
Suez Lyonnaise des Eaux
Suez Lyonnaise, a societe anonyme organized and existing under the laws
of the Republic of France, operates private infrastructure services in more than
120 countries, providing electricity and natural gas, waste treatment,
communications services, and water services and maintains interests mainly in
construction and capital investments. Suez Lyonnaise des Eaux was formed from
the 1997 merger of Compagnie de Suez (builder of the Suez Canal) and Lyonnaise
des Eaux. The principal executive offices of Suez Lyonnaise are located at 1,
rue d'Astorg, 75008 Paris, France and the telephone number is
011-33-1-40-06-64-00. As a result of the acceptance and purchase of Shares
pursuant to the Offer, Suez Lyonnaise indirectly owns approximately 97.1% of our
outstanding Common Stock. In addition, pursuant to the Merger Agreement, Suez
Lyonnaise may designate all of the members of our Board of Directors.
H2O Acquisition Co.
H2O Acquisition Co. is an indirect, wholly owned subsidiary of Suez
Lyonnaise and has been formed solely for the purpose of the Merger. As of the
date hereof, and as a result of the Offer, H2O owns 97.1% of our outstanding
capital stock. H2O has not engaged in any business activity unrelated to the
Offer and the Merger. The principal executive offices of H2O are located care of
Suez Lyonnaise des Eaux, 1, rue d'Astorg, 75008 Paris, France and the telephone
number is 011-33-1-40-06-64-00.
THE MERGER
Under the Merger Agreement, H2O will merge with and into Nalco and the
separate corporate existence of H2O will cease, and we will be the Surviving
Corporation in the Merger (the "Surviving Corporation").
Each share of our Common Stock outstanding immediately prior to the
Effective Time (other than (i) any such shares which are held by any of our
subsidiaries, in our treasury, or which are held, directly or indirectly, by
Suez Lyonnaise or any direct or indirect subsidiary of Suez Lyonnaise (including
H2O), all of which will be canceled and none of which will receive any payment
with respect to the Merger, and (ii) shares of our Common Stock as to which
appraisal rights have not been forfeited under the Delaware General Corporation
Law (the "DGCL"), if effective notice of exercise of appraisal rights with
respect to such shares under Section 262 of the DGCL was required and given
prior to the Effective Time ("Dissenting Shares")) will be canceled and will be
converted into the right to receive an amount in cash equal to $53.00, without
interest thereon. Holders of Dissenting Shares ("Dissenting Stockholders") will
be entitled to receive from the surviving corporation in the Merger a cash
payment in the amount of the "fair value" of such shares, determined in the
manner provided in Section 262 of the DGCL. See "THE MERGER--Rights of
Dissenting Stockholders".
Each of our stock options issued and outstanding at the Effective Time
will be converted into the right to receive a cash payment equal to the
difference between $53.00 and the exercise price of such options.
Each share of ESOP Preferred Stock outstanding at the Effective Time
(other than shares of ESOP Preferred Stock which are held by any of our
subsidiaries or in our treasury, or which are held, directly or indirectly, by
Suez Lyonnaise or any direct or indirect subsidiary of Suez Lyonnaise (including
H2O), all of which will be canceled and none of which will receive any payment
with respect to the Merger) will be canceled and will be converted into the
right to receive an amount in cash equal to $1,060.00, without interest thereon.
Suez Lyonnaise has informed us that it intends to fund payment of the
Merger Consideration through existing cash, marketable securities and available
credit lines.
The Merger is not contingent on any financing. Upon consummation of the
Merger, each outstanding share of H2O's common stock will be converted into one
share of common stock of the Surviving Corporation. After the Merger, Suez
Lyonnaise, through wholly owned subsidiaries, will own 100% of the outstanding
shares of common stock, par value $0.01 per share, of the Surviving Corporation.
For a detailed discussion of provisions contained in the Merger Agreement see
"THE MERGER AGREEMENT."
Background of the Merger
We undertook an exploration of our strategic alternatives beginning in
the first quarter of 1999. During meetings from March 23 to April 5, 1999,
Goldman presented our management with a description of strategic alternatives
and a list of various entities that it considered to be potentially suitable
strategic partners.
On April 5, 1999, representatives of Goldman and the Company met to
consider further the list of potential strategic partners in greater detail. At
this meeting, we and Goldman identified a select group of companies that we
considered suitable candidates for initial contact.
On April 9, 1999, a Goldman representative contacted Mr. Christian
Maurin, the Chairman of Degremont, a wholly owned subsidiary of Suez Lyonnaise,
and advised him that we were in the process of considering various strategic
options that could ultimately include a role for Degremont. As a result,
representatives of us and Degremont participated in a meeting the following
week. This meeting was held in Paris and attended by, among others, Mr. W.
Steven Weeber, our Vice Chairman and Executive Vice President, Mr. Maurin, Mr.
Pascal Remy, Executive Vice President of Degremont, Mr. Charles Dupont, Chief
Executive Officer of Degremont, and representatives of Goldman. At the meeting,
we advised we were still in the process of considering various strategic
options, including a possible sale of Nalco. The parties also discussed
Degremont's potential suitability as a strategic partner with us.
Degremont entered into a confidentiality agreement, dated as of April
13, 1999, with us and was subsequently provided with background information
relating to us and our operations.
Between the dates of April 6 and April 26, 1999, we directly, and
through Goldman, contacted six other entities that were considered as
potentially suitable strategic partners. Each of these six entities was advised
of the fact that we were considering various strategic options. As a result of
this initial contact, five of the six entities approached by us and Goldman
expressed a desire to consider further a possible transaction with us. Two of
these five entities entered into confidentiality agreements with us, which
agreements included standstill provisions, and were permitted an opportunity to
review background information relating to us and our affiliates. Discussions
with these entities did not produce any firm proposals to acquire Nalco.
On April 21, 1999, senior representatives of each of Degremont, Suez
Lyonnaise and Nalco met in Chicago, Illinois. The meeting was attended by, among
others, Mr. Edward J. Mooney, our Chairman and Chief Executive Officer, and
Goldman representatives. We and Goldman representatives answered questions
raised by the representatives of Suez Lyonnaise, Degremont and J.P. Morgan, Suez
Lyonnaise's and Degremont's financial advisor.
On April 27, 1999, Mr. Maurin sent a letter to Mr. Mooney advising us
of Degremont's interest in acquiring the company in a cash transaction. At its
regularly scheduled meeting of April 28, 1999, our Board of Directors was
advised of (i) Degremont's interest in acquiring Nalco and (ii) developments
relating to the various other entities with whom confidentiality agreements had
been signed.
On May 2, 1999, Goldman sent a letter to Degremont requesting that
Degremont indicate an approximate purchase price at which it would be willing to
acquire Nalco. On May 10, 1999, Degremont provided us with a preliminary
non-binding proposal in which it (i) reiterated its interest in acquiring Nalco
and (ii) indicated a potential purchase price in the range of $43.00-$49.00 per
share of Common Stock. We were advised that this preliminary proposal was
subject to Degremont's due diligence review of Nalco. During the evening of May
10, a representative of Goldman advised Mr. Maurin and Mr. Remy that there would
be no further discussions if the proposed purchase price remained in that range
($43.00-$49.00).
On May 12, 1999, Mr. Maurin and Mr. Mooney, in a telephone
conversation, agreed to meet to discuss a possible transaction between the
parties. On May 17 and May 18, 1999, senior representatives of Degremont, Suez
Lyonnaise, and us participated in meetings in Paris. At these meetings, the
participants discussed various issues relating to a possible transaction among
the parties, including potential synergies between the companies.
On May 25, 1999, Degremont sent a further non-binding proposal relating
to a potential cash acquisition of Nalco at a purchase price of $52.00 per share
of Common Stock. This offer represented a premium of 53% over our then-current
market price and a premium of 66% over our three-month weighted average market
price. Shortly thereafter, Mr. Mooney and Mr. Maurin had a telephone
conversation during which Mr. Mooney advised Mr. Maurin that our Board of
Directors would be meeting on June 5, 1999 to consider, among other things,
Degremont's non-binding proposal to acquire Nalco and the status of discussions
with other entities.
Following our Board of Directors' meeting, Mr. Mooney had a telephone
conversation with Mr. Maurin on June 7, 1999 during which he advised Mr. Maurin
that, although our Board of Directors appreciated Degremont's most recent offer
and considered it to be a serious proposal, the purchase price remained
insufficient.
On June 9, 1999, Mr. Maurin and Mr. Mooney had a further telephone
conversation during which they reached an agreement, subject to the favorable
negotiation of a definitive merger agreement, whereby Degremont indicated it
would acquire Nalco for a purchase price of $54.00 per share of Common Stock,
provided it was given certain assurances relating to exclusivity in negotiations
with us.
From June 11, 1999, legal, financial and accounting representatives of
Suez Lyonnaise continued the due diligence review of us until a definite merger
agreement was reached.
Beginning on June 16, 1999 through June 18, 1999, representatives of
Suez Lyonnaise, Degremont and Nalco met in New York City to discuss and
negotiate the proposed acquisition of Nalco.
On June 17, 1999, our Board of Directors met to discuss the status of
discussions. Following our Board of Directors' meeting, representatives of Suez
Lyonnaise and Degremont participated in a meeting with Mr. Mooney, Mr. Weeber,
Mr. Stephen D. Newlin, our President, Mr. William E. Buchholz, our Senior Vice
President and Chief Financial Officer, and Mr. James F. Lambe, our Senior Vice
President for Human Resources, during which the parties considered the potential
terms of the continued employment of our officers with Nalco following the
proposed acquisition of Nalco by Suez Lyonnaise. Subsequently, four additional
officers participated in similar discussions.
On June 24, 1999, following a significant increase in the trading
volume and price of our Common Stock, we issued a press release announcing that
we were engaged in discussions regarding a possible business combination. Later
that same day, members of the senior management of Suez Lyonnaise, Degremont and
Nalco met in New York City to discuss further ongoing issues raised during the
due diligence review. During these discussions, Suez Lyonnaise indicated that it
wished to renegotiate the purchase price. Later that afternoon, our Board of
Directors was advised of this development and about issues raised by Suez
Lyonnaise with respect to the proposed merger agreement.
On June 25, 1999, the parties continued to negotiate the proposed
purchase price and other terms of the proposed merger agreement relating to the
conditions to the Offer, termination rights and payment of fees and expenses.
Agreement was reached, subject to final negotiation of the definitive agreement,
that Suez Lyonnaise would agree to acquire Nalco for a purchase price of $53.00
per share of Common Stock and $1,060.00 per share of ESOP Preferred Stock.
The legal representatives of Suez Lyonnaise and Nalco continued to
negotiate the terms of the proposed merger agreement throughout June 26 and June
27, 1999.
At a meeting held on June 27, 1999, our Board of Directors approved Suez
Lyonnaise's offer to acquire Nalco for a purchase price of $53.00 per share of
Common Stock and $1,060.00 per share of ESOP Preferred Stock, the Merger and the
Merger Agreement. Later that same evening, the Merger Agreement was executed by
Suez Lyonnaise, H2O and us.
Reasons for the Merger
In approving the Merger Agreement and the transactions contemplated
thereby, and recommending that Holders accept the Offer and tender their Shares
pursuant to the Offer, our Board of Directors considered a number of factors,
including, but not limited to, the following:
(1) The financial condition and results of operations of
Nalco, as well as the projected financial results, prospects and
strategic objectives of Nalco, taking into consideration the risks
involved in achieving those results, prospects and objectives in our
industry. The members of our Board of Directors were knowledgeable
about our affairs, including the present and possible future economic
and competitive environment in which we operate our business. Our Board
of Directors viewed as supportive that the transaction offered a
substantial premium over current and historic trading prices of our
Common Stock, and that the achievement of comparable values through
growth of our business could not be achieved with certainty in the near
term.
(2) Historical market prices and trading information with
respect to the Common Stock, including the fact that the $53.00 per
share of Common Stock to be received by our stockholders in both the
Offer and Merger represents a substantial premium of 24% over the
closing market price of $42.50 per share of Common Stock on June 25,
1999 (the last trading day prior to the Board's approval of the Offer
and the Merger) and of 42% over the closing market price of $37.25 per
share of Common Stock on June 23, 1999 (the last trading day prior to
our public announcement that we were engaged in business combination
discussions) and the fact that the $53.00 per share of Common Stock to
be received by our stockholders in both the Offer and Merger represents
a premium of 24% over the ten-year high market price per share of
Common Stock. An analysis of premiums paid in comparable transactions
supported our Board of Directors' recommendations.
(3) Developments within the specialty chemicals industry,
including the trend towards consolidation within the industry which has
resulted in competitors that are significantly larger and have greater
financial resources than Nalco, which indicated to our Board of
Directors the challenges facing us in remaining competitive in a
consolidating industry.
(4) Our Board of Directors' view, after consultation with
management and Goldman and considering the process, regarding the
likelihood of the existence of other buyers on terms as favorable as
those in the Offer and the Merger. Our Board of Directors determined
that, based on the terms contained in the Offer and the Merger,
including the Offer Price, it was unlikely that our stockholders would
be extended a comparable offer on as favorable terms.
(5) Presentations to our Board of Directors by Goldman and the
oral opinion of Goldman (subsequently confirmed in writing) that, as of
June 27, 1999, the $53.00 per share of Common Stock in cash to be
received by the holders of shares of Common Stock in the Offer and the
Merger is fair from a financial point of view to such holders. The full
text of the written opinion of Goldman, which sets forth assumptions
made, procedures followed, matters considered and limits on the review
undertaken, is attached as Annex C to this Proxy Statement and is
incorporated herein by reference. HOLDERS OF SHARES ARE URGED TO READ
THIS OPINION IN ITS ENTIRETY.
(6) The availability of appraisal rights under Section 262 of
DGCL for dissenting stockholders.
(7) The terms and conditions of the Merger Agreement and the
course of the negotiations resulting in the execution thereof. Our
Board of Directors viewed favorably that the Merger Agreement imposed
limited conditions to the acceptance of Shares in the Offer and closing
of the Merger and the limited termination rights under the Merger
Agreement, thus making consummation of the transaction more likely than
one in which the agreement imposes more significant conditions to the
consummation or greater termination rights.
(8) That our Board of Directors viewed each share of ESOP
Preferred Stock as being financially equivalent to the twenty shares of
Common Stock into which it can be converted. Further, our Board of
Directors viewed the Offer and the Merger as according equivalent
treatment to both the ESOP Preferred Stock and the Common Stock given
that holders of ESOP Preferred Stock were entitled to receive $1,060.00
per share of such stock pursuant to the Offer and the Merger, and that
such amount reflected the fact that each share of ESOP Preferred Stock
automatically converts into twenty shares of Common Stock upon a
transfer of record ownership (i.e., $53.00 x 20 = $1,060.00).
(9) The likelihood that the proposed acquisition would be
consummated, including the likelihood of obtaining the regulatory
approvals required pursuant to, and satisfying the other conditions to,
the Offer and the Merger contained in the Merger Agreement, the
experience, reputation and financial condition of Suez Lyonnaise and
the risks to Nalco if the acquisition were not consummated.
(10) That the Merger Agreement permits our Board of Directors,
in the exercise of its fiduciary duties, to terminate the Merger
Agreement in favor of an unsolicited superior acquisition proposal and
the conditions permitting such termination.
(11) The recommendation of our management with respect to the
proposed transaction.
The members of our Board of Directors evaluated the factors described
above in view of their knowledge of the business and operations of Nalco and
their business judgment. In view of the wide variety of factors considered in
connection with its evaluation of the Offer and the Merger, our Board of
Directors did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determination. On balance, the factors described above supported
our Board of Directors' recommendation. Our Board of Directors recognized that
Suez Lyonnaise, by virtue of the acquisition of the Shares pursuant to the
Merger Agreement, will have sufficient voting power to approve the Merger
without the affirmative vote of any other stockholder of Nalco. While
consummation of the Offer would result in the remaining stockholders of Nalco
receiving a premium for their shares of Common Stock over the trading prices of
such shares prior to the announcement of the Offer and the Merger, it would
eliminate any opportunity for the stockholders of Nalco other than H2O to
participate in the potential future growth prospects of Nalco. Our Board of
Directors, however, believed that the value of such potential future growth was
reflected in the Offer price to be paid and also recognized that there can be no
assurance of growth, if any, to be attained by Nalco in the future.
Recommendation of the Board of Directors
On June 27, 1999 our Board of Directors (one director not being
present) unanimously (i) determined that the Merger is advisable and that the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, are fair to and in the best interests of our stockholders, (ii)
approved and adopted the Merger Agreement and the transactions contemplated
thereby, (iii) recommended that our stockholders accept the Offer, approve the
Merger, and approve and adopt the Merger Agreement and the transactions
contemplated thereby, and (iv) approved an amendment to the Rights Plan,
rendering it inapplicable to the Offer and the Merger. For a discussion of the
material factors considered by the Board of Directors in reaching its conclusion
and the reasons why the Board determined that the Merger is procedurally fair
see "SPECIAL FACTORS--Nalco's Reasons for the Merger; Recommendation of Our
Board of Directors."
Opinion of Financial Advisor
On June 27, 1999, Goldman delivered its oral opinion, subsequently
confirmed in writing, to our Board of Directors that, as of such date, the
$53.00 per share of Common Stock in cash to be received by the holders of Common
Stock in the Offer and the Merger is fair from a financial point of view to such
holders.
The full text of Goldman's opinion, which sets forth assumptions made,
procedures followed, matters considered and limits on the reviews undertaken, is
attached as Exhibit C to this Proxy Statement, and is incorporated herein by
reference. Stockholders are urged to read the opinion in its entirety. The
summary of Goldman's opinion set forth in this Proxy Statement is qualified in
its entirety by reference to the full text of the opinion. Goldman's opinion is
directed only to the consideration received by the stockholders and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote at the Special Meeting.
We retained Goldman to act as our exclusive financial advisor in
connection with the Merger. We selected Goldman based on its qualifications,
expertise and reputation, as well as its investment banking relationship and
familiarity with Nalco.
In arriving at its opinion, Goldman reviewed certain publicly available
business and financial information relating to Nalco, as well as the Merger
Agreement. Goldman also reviewed certain other information that we provided to
it, including certain internal analyses and forecasts prepared by management.
Goldman discussed with our management the business and prospects of Nalco.
Goldman considered certain of our financial and stock market data, and
compared that data with similar data for other publicly held companies in
businesses similar to ours. Goldman also considered the financial terms of
certain other transactions which have been recently effected. Goldman also
performed such other studies and analyses which it deemed appropriate.
In connection with its review, Goldman did not assume any
responsibility for independent verification of any of the foregoing information
and relied on its being complete and accurate. In addition, Goldman did not make
an independent evaluation or appraisal of our assets or liabilities, nor was
Goldman furnished with any such evaluations or appraisals.
Certain Effects of the Merger
The purpose of the Offer was to provide our stockholders with liquidity
for their Shares by enabling them to sell their Shares at a fair price and at a
substantial premium over recent and historical market prices.
The acquisition of the Shares was structured as a cash tender offer
followed by a merger in order to (i) effect a prompt and orderly transfer of
ownership of Nalco from the stockholders to Suez Lyonnaise and (ii) provide
stockholders with cash for all of their Shares more quickly than through
alternative transaction structures that had been considered by our Board of
Directors.
The structure of the transactions was the result of extensive
negotiations between us and Suez Lyonnaise. In connection with such
negotiations, Suez Lyonnaise indicated its desire to structure the transactions
to qualify for purchase accounting. In order to induce Suez Lyonnaise to proceed
with the transactions and to provide our stockholders with the benefits of Suez
Lyonnaise's offer for Nalco, we agreed to proceed based on Suez Lyonnaise's
proposed structure.
Suez Lyonnaise's purpose for engaging in the transactions is to enable
it to obtain complete ownership of Nalco, thereby becoming entitled to all
benefits that result from such ownership. Such benefits include management and
investment discretion with regard to the future conduct of our business, the
benefits of the profits generated by the operations of the company and any
increase in Nalco's value. Similarly, Suez Lyonnaise will also bear the risk of
any decrease in the value of Nalco.
Upon the consummation of the Merger, Suez Lyonnaise, through wholly
owned subsidiaries, will own 100% of the outstanding Shares.
Rights Agreement
The Rights Agreement contains certain provisions that may delay, defer or
prevent a takeover of Nalco. Pursuant to the Merger Agreement, our Board of
Directors has taken all action necessary to render the Rights Agreement
inapplicable to the Offer, the Merger and any other transaction contemplated by
the Merger Agreement. On June 27, 1999, our Board of Directors adopted a
resolution approving an amendment to the Rights Agreement prior to execution of
the Merger Agreement to the effect that, among other things, the acquisition of
Shares pursuant to the Offer and the Merger would not constitute a Triggering
Event (as defined in the Rights Agreement) and no Rights would become
exercisable pursuant to the Rights Agreement as a result of execution of the
Merger Agreement or the consumation of the transactions contemplated thereby.
The Amendment to the Rights Agreement is dated June 28, 1999.
Accounting Treatment of the Merger
The Merger will be accounted for under the purchase method of
accounting under which the total consideration paid in the Merger will be
allocated among the surviving corporation's consolidated assets and liabilities
based on the fair values of the assets acquired and liabilities assumed.
Regulatory Approvals
United States
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission, certain mergers and acquisitions may not be consummated unless
notice has been given and certain information has been furnished to the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission and certain waiting period requirements have been satisfied.
The Merger is subject to the HSR Act requirements.
We filed with the Antitrust Division and the Federal Trade Commission a
Notification and Report Form with respect to the Merger on July 2, 1999. Suez
Lyonnaise filed with the Antitrust Division and the Federal Trade Commission a
Notification and Report Form with respect to the Merger on July 2, 1999. Under
the HSR Act, the Merger may not be consummated until the expiration of a waiting
period of 30-calendar days following the receipt of all required filings, unless
the waiting period is earlier terminated by the Federal Trade Commission or the
Antitrust Division, or unless the waiting period is extended by a request for
additional information or documentary material. Termination of the waiting
period was granted effective October 22, 1999.
State Attorneys General and private parties also may bring legal
actions under the federal or state antitrust laws under certain circumstances.
There can be no assurance that a challenge to the proposed merger on antitrust
grounds will not be made or of the result if such a challenge is made.
European Union
The EC Merger Regulation (Council Regulation No. 4064/89 of December 21,
1989, as amended) requires notification to the European Commission within seven
days of the conclusion of an agreement or commencement of an offer to acquire a
controlling interest or the commencement of a cash tender offer therefor, of all
concentrations between companies which are deemed to have a "Community
dimension" because they exceed certain global and European turnover thresholds.
Such concentrations may not be consummated until the European Commission, acting
within fixed deadlines, approves them as being "compatible with the Common
Market." A concentration is compatible with the Common Market if it does not
create or strengthen a dominant position as a result of which effective
competition would be significantly impeded in the European Economic Area, or in
a substantial part of it.
Suez Lyonnaise filed a notification in conformity with Article 4 of
Regulation (EEC) No. 4064/89 of the Council on July 20, 1999, On August 20, 1999
Suez Lyonnaise received notice that its filing satisfied the EC Merger
Regulation and that the Merger did not conflict with the Common Market.
THE MERGER AGREEMENT
Effective Time of the Merger
The Merger will become effective upon the filing of either (a) a duly
executed and verified Certificate of Merger, (b) the Merger Agreement or (c) a
Certificate of Ownership and Merger, with the Secretary of State of the State of
Delaware (the "Effective Time"). The filing will occur after all conditions to
the merger contained in the Merger Agreement have been satisfied or waived. We,
Suez Lyonnaise and H2O anticipate that the Merger will be consummated as
promptly as practicable following the Special Meeting.
Conditions to Consummation of the Merger
The respective obligations of Nalco, Suez Lyonnaise and H2O to effect
the Merger are subject to the satisfaction of various conditions at or prior to
the Effective Time. These conditions include, among others:
(a) Stockholder Approval. The Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the affirmative
vote of our stockholders to the extent required by Delaware Law and our Restated
Certificate of Incorporation;
(b) HSR Act; EC. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and the commission of the European Union shall have
approved the transactions under Regulation (EC) No. 4064/89, as amended, of the
Council of the European Union;
(c) Other Reviews/Approvals. Any review or approval required by
governmental authorities in countries in which we or any of our subsidiaries
have operations material to us and any of our subsidiaries, taken as a whole,
shall have been completed or obtained;
(d) No Order. No United States federal or state or Republic of France
governmental authority or other agency or commission or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of prohibiting consummation of the Merger; and
(e) Offer. H2O or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer.
No Solicitation Of Other Offers
The Merger Agreement provides that we shall not, nor shall we permit
any of our subsidiaries to, nor shall we authorize any representative of ours or
any of our subsidiaries to, directly or indirectly solicit, facilitate or
initiate, or knowingly encourage the submission of any proposal or offer from
any third party relating to any direct or indirect acquisition or purchase of
all or a substantial part of our assets or of over 20% of our voting securities,
any tender offer or exchange offer that if consummated would result in any
person beneficially owning 20% or more of our voting securities, any merger,
consolidation, business combination, sale of substantially all our assets,
recapitalization, liquidation, dissolution or similar transaction involving us,
other than the transactions contemplated by the Merger Agreement or any other
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Offer or the Merger or which
could reasonably be expected to dilute materially the benefits to Suez Lyonnaise
of the transactions contemplated by the Merger Agreement.
Representations and Warranties
We have made various representations and warranties in the Merger
Agreement relating to: (a) corporate organization, existence, power, authority
and qualification; (b) enforceability; (c) capital structure; (d) consents and
approvals; (e) non-contravention and compliance with laws; (f) Securities and
Exchange Commission filings; (g) absence of certain material changes; (h)
compliance with laws; (i) litigation; (j) employee benefit plans; (k) taxes; (l)
absence of undisclosed material liabilities; (m) intellectual property; (n)
accuracy of the Proxy Statement and other documents filed with the Securities
and Exchange Commission with respect to the merger, and related materials; (o)
utilization of, and payment of fees to, brokers and finders; (p) environmental
matters; (q) labor matters; and (r) year 2000 compliance.
Suez Lyonnaise des Eaux and H2O Acquisition Co. have also made various
representations and warranties in the Merger Agreement relating to: (a)
corporate organization, existence, power, authority and qualification (b)
enforceability; (c) consents, approvals and non-contravention; (d) utilization
of, and payment of fees to, brokers and finders; (e) financing; and (f) accuracy
of the information contained in filings of required documents with the
Securities and Exchange Commission (g) absence of litigation; (h) no prior
activities by H2O; and (i) the fact that neither is an affiliated shareholder of
Nalco.
Covenants
Each of the parties to the Merger Agreement has agreed to cooperate and
use its reasonable best efforts to fulfill or obtain fulfillment of the
conditions to the consummation of the Merger.
We agreed that we and each of our subsidiaries shall conduct our
businesses only in the ordinary course and shall use all reasonable efforts to
preserve substantially intact the business organization of Nalco and our
subsidiaries, to keep available the services of our current officers and
employees and to preserve the current relationships of Nalco and our
subsidiaries with customers, suppliers and other persons with which Nalco or any
subsidiary of ours has significant business relations. We further agreed that
neither we nor any subsidiary of ours shall directly or indirectly do, or
propose to do, any of the following without the prior written consent of Suez
Lyonnaise:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, deliver, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, delivery, sale, pledge, disposition, grant or
encumbrance of (i) any shares of capital stock of any class of Nalco or any
subsidiary, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of Nalco or any
subsidiary (except for the issuance of Shares issuable pursuant to stock options
outstanding on June 27, 1999) or (ii) any assets of Nalco or any of our
subsidiaries for consideration in excess of $25,000,000 in the aggregate;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except for regular quarterly dividends on the Shares
declared and paid at times consistent with past practices;
(d) reclassify, combine, split, subdivide, or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of our capital stock, or redeem, purchase or otherwise acquire,
directly or indirectly, any shares of our capital stock or any of our
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof for consideration in excess
of $10,000,000 in the aggregate; (ii) except for borrowings under existing
credit facilities not to exceed $30,000,000 in the aggregate and excepting
transactions between us and any subsidiary, incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any person; (iii)
except for transactions between us and any subsidiary, make any loans, advances,
or capital contributions to, or investments in, any person, for an amount in
excess of $10,000,000 in the aggregate; (iv) authorize capital expenditures
which are, in the aggregate, in excess of $25,000,000 for us or any of our
subsidiaries; (v) acquire any assets for consideration in excess of $10,000,000
in the aggregate; or (vi) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in (i) to (vi)
above;
(f) except as provided in Section 5.01 of the Disclosure Schedule, as
contemplated by the Merger Agreement or in the ordinary course of business
consistent with past practices (i) increase the compensation payable or to
become payable to its officers or employees, (ii) other than in accordance with
existing policies and arrangements, grant any severance pay to or (iii)
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, except as contemplated by the Merger Agreement or
to the extent required by applicable law or the terms of a collective bargaining
agreement or a contractual obligation existing on June 27, 1999;
(g) other than as required by generally accepted accounting
principles, make any change to its accounting policies or procedures;
(h) agree to the settlement of any claim or litigation which would
have a Material Adverse Effect (as defined in the Merger Agreement);
(i) make, change or rescind any material Tax (as defined in the Merger
Agreement) election (other than (i) recurring elections that customarily are
made in connection with the filing of any Tax Return (as defined in the Merger
Agreement); provided that any such elections are consistent with the past
practices of us or our subsidiaries, as the case may be; (ii) gain recognition
agreements under Section 367 of the Code (as defined in the Merger Agreement)
and Treasury regulations thereunder with respect to transactions occurring in
the 1998 fiscal year of Nalco; and (iii) elections with respect to subsidiaries
purchased by us under Section 338(h)(10) of the Code or, solely in the case of
non-U.S. subsidiaries purchased by us, Section 338(g) of the Code) or settle or
compromise any material Tax liability that is the subject of an audit, claim for
delinquent Taxes, examination, action, suit, proceeding or investigation by any
taxing authority;
(j) except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of the Merger
Agreement or as contemplated by the Merger Agreement, accelerate the payment,
right to payment or vesting of any bonus, severance, profit sharing, retirement,
deferred compensation, stock option, insurance or other compensation or
benefits;
(k) pay, discharge or satisfy any material claims, material
liabilities or material obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction (A)
of any such material claims, material liabilities or material obligations in the
ordinary course of business and consistent with past practice or (B) of material
claims, material liabilities or material obligations reflected or reserved
against in, or contemplated by, the consolidated financial statements (or the
notes thereto) contained in our SEC Reports (as defined in the Merger
Agreement);
(l) enter into any agreement, understanding or commitment that
restrains, limits or impedes our or any of our subsidiaries' ability to compete
with or conduct any business or line of business, including, but not limited to,
geographic limitations on our or any of our subsidiaries' activities;
(m) materially modify, amend or terminate any material contract to
which we are a party or waive any of our material rights or claims except in the
ordinary course of business consistent with past practice; or
(n) agree or enter into, in writing or otherwise, or amend any
contract, agreement commitment or arrangement with respect to any of the
foregoing actions.
Termination of the Merger Agreement
The Merger Agreement may be terminated and the Merger and other
transactions contemplated thereby may be abandoned at any time prior to the
Effective Time, notwithstanding any approval or adoption by our stockholders:
(i) by mutual written consent duly authorized by the boards of directors of Suez
Lyonnaise, H2O and Nalco; or (ii) if any United States federal or state court of
competent jurisdiction or court of the Republic of France of competent
jurisdiction or other United States federal or state governmental authority or
other governmental authority of the Republic of France shall have issued an
order, decree, ruling or taken any other action restraining, enjoining, or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and non-appealable.
Amendments to the Merger Agreement
The Merger Agreement may only be amended by a writing signed by each of
the parties thereto by action taken by or on behalf of their respective boards
of directors at any time prior to the Effective Time. After approval and
adoption of the Merger Agreement and the transactions contemplated thereby, no
amendment to the Merger Agreement may be made which would reduce the amount or
change the type of consideration into which each Share shall be converted upon
consummation of the Merger.
Interests of Certain Persons in the Merger
In considering the recommendation of our Board of Directors with
respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that, in addition to the matters discussed above,
certain members of both management and our Board of Directors have interests in
the Merger in addition to the interests of our stockholders generally which
create conflicts of interest.
Employment Agreements
The following is a summary description of the Employment Letters
executed by the respective executive. The summary is qualified in its entirety
by reference to the Form of Agreement as to Terms of Employment which is
incorporated in the Schedule 14D-1.
In connection with the Merger Agreement, Degremont, a wholly owned
subsidiary of Suez Lyonnaise, H2O and each of Messrs. George M. Brannon, III,
William E. Buchholz, John T. Burns, Michael E. Kahler, James F. Lambe, Edward J.
Mooney, Stephen D. Newlin, William J. Roe, and W. Steven Weeber (each an
"Executive") entered into a letter agreement (each an "Employment Letter")
relating to the terms of their employment following the consummation of the
Merger. The Employment Letters contain identical terms, except as noted below.
The Employment Letters provide for Nalco to offer the Executive employment with
us, and each Executive to accept such employment on the terms and conditions
described below. It is currently expected that the offer of employment will
become effective November 9, 1999 (the "Effective Date"). The parties have
agreed to enter into, and are currently negotiating, definitive employment
agreements, and it is anticipated that such agreements will be between each
Executive and Nalco.
Each Employment Letter: (i) provides a three year employment period,
with a one-year evergreen after the three year period and a six-month notice
provision for non-renewal; (ii) salary commensurate with the Executive's
position; (iii) a bonus opportunity comparable to those provided to similar
senior executives; (iv) participation in all incentive and benefit plans
provided to similar senior executives; and (v) includes a retention payment
("Retention Payment") equal to two times the Executive's salary plus regular
Management Incentive Plan target bonus (as of June 22, 1999) payable in cash, if
the Executive is employed by us for three years from the date of the change in
control.
Each of the Employment Letters provides for various severance payments,
if an Executive's employment is terminated without "cause" by us or for "good
reason" by the Executive; provided, however, that such severance payments will
be offset by the Retention Payment if the termination occurs within two years of
the Executive's receipt of the Retention Payment. Each Employment Letter also
provides for a full golden parachute excise tax gross-up (excluding the
Retention Payment) for future changes in control, but only in the event of
termination without "cause" by us or resignation for "good reason" by the
Executive.
Each Employment Letter also includes a provision for (i)
non-competition with us and non-solicitation of customers and employees during
employment and for two years thereafter and (ii) a perpetual agreement for
non-disclosure, non-disparagement and availability for litigation support.
Each Employment Letter also provides for a settlement of existing key
executives agreements with each Executive through: (i) a payment of three times
the sum of the Executive's current base salary and regular management incentive
program ("MIP") bonus, which will be paid on the Effective Date or shortly
thereafter, (ii) three times the Executive's supplemental MIP bonus and, in
addition, his outstanding 1997 and 1998 Performance Share Awards to be paid at
the end of the three-year period following the Effective Date, with interest,
provided the Executive is still employed by the Company or in the event of the
Executive's prior death, disability, termination by us without "cause" or by the
Executive for "good reason", prior to the end of the end of the three-year
period, assuming in each case a performance level of 100% of the target award;
(iii) payments of outstanding restricted stock awards, including the outstanding
1995 Performance Share Plan awards, stock options and a full golden parachute
excise tax gross-up, with respect to the change in control payments (except for
the Retention Payment) made in connection with the transactions contemplated by
the Merger Agreement on the Effective Date or shortly thereafter.
Indemnification and Insurance
The Merger Agreement provides that the surviving corporation's
Certificate of Incorporation and By-laws will contain provisions with respect to
indemnification of directors and officers that are no less favorable than those
set forth in our Restated Certificate of Incorporation and By-laws. The
surviving corporation will maintain in effect the current directors' and
officers' liability insurance or substantially similar insurance with respect to
matters occurring prior to the Effective Time for a period of at least 6 years
(provided that the surviving corporation in the Merger is not required to pay an
annual premium for any such policy in excess of 200% of the last annual premium
paid by us prior to the Merger Agreement).
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO U.S. HOLDERS
The following is a description of the material U.S. federal income tax
consequences of the Merger to Holders of Shares that dispose of such Shares in
the Merger, that are United States Persons (as defined below), and that, on the
date of disposition, hold such Shares as capital assets (as defined in the
Internal Revenue Code of 1986, as amended (the "Code")) (each a "United States
Holder"). This discussion is based on the Code, income tax regulations, proposed
and final, issued under the Code, and administrative and judicial
interpretations of the Code and regulations, each as in effect and available on
the date of this Proxy Statement. These income tax laws, regulations and
interpretations, however, may change at any time, and any change could be
retroactive to the date of this Proxy Statement. Although we will not seek any
rulings from the Internal Revenue Service or an opinion of counsel with respect
to the transactions contemplated by the Merger Agreement, we believe that the
Merger will have the U.S. federal income tax consequences described below to
United States Holders.
We urge all Holders to consult their own tax advisors regarding the
U.S. federal, state, local, and non-U.S. tax consequences of the disposition of
Shares in the Merger. This description does not address aspects of U.S. taxation
other than U.S. federal income taxation, nor does it address all aspects of U.S.
federal income taxation that may be applicable to particular holders. In
addition, this description does not address the U.S., State or local tax
consequences or the tax consequences in jurisdictions other than the U.S. of the
Merger. The following discussion does not address taxpayers subject to special
treatment under the U.S. federal income tax laws, such as financial
institutions, real estate investment trusts, regulated investment companies,
brokers and dealers or traders in securities or currencies, persons whose
functional currency is not the U.S. dollar, insurance companies, tax-exempt
organizations, S corporations, persons that hold Shares as part of a position in
a straddle or as part of a hedging or conversion transaction, persons who
acquired Shares pursuant to an exercise of employee stock options or rights or
otherwise as compensation, persons who hold employee stock options or rights to
acquire Shares and taxpayers subject to alternative minimum tax.
A "United States Person" is a beneficial owner of Common Stock or ESOP
Preferred Stock, as the case may be, that, for U.S. federal income tax purposes,
is: (1) a citizen or resident of the U.S., including some former citizens or
residents of the U.S.; (2) a partnership or corporation created or organized in
or under the laws of the U.S. or any state thereof, including the District of
Columbia; (3) an estate if its income is subject to U.S. federal income taxation
regardless of its source; or (4) a trust if such trust validly has elected to be
treated as a United States person for U.S. federal income tax purposes or if (a)
a U.S. court can exercise primary supervision over its administration and (b)
one or more United States persons have the authority to control all of its
substantial decisions.
A United States Holder generally will realize gain or loss upon the
surrender of such holder's Shares pursuant to the Merger in an amount equal to
the difference, if any, between the amount of cash received and such holder's
aggregate adjusted tax basis in the Shares surrendered therefor.
In general, any gain or loss recognized by a United States Holder in
the Merger will be eligible for capital gain or loss treatment. Any capital gain
or loss recognized by a United States Holder will be long-term capital gain or
loss if the Shares giving rise to such recognized gain or loss have been held
for more than one year; otherwise, such capital gain or loss will be short term.
In the case of a noncorporate United States Holder, generally the maximum
marginal U.S. federal income tax rate applicable to long-term capital gain will
be lower than the maximum marginal U.S. federal income tax rate applicable to
ordinary income. The deductibility of capital losses is subject to limitations.
For corporations, a capital gain is subject to U.S. federal income tax
at a maximum rate of 35% while any capital loss can be offset only against other
capital gains. Any unutilized capital loss generally can be carried back three
years and forward five years to be offset against net capital gains generated in
such years.
Under the U.S. federal backup withholding tax rules, unless an
exemption applies, the Paying Agent (as defined below) will be required to
withhold, and will withhold, 31% of all cash payments to which a Holder or other
payee is entitled pursuant to the Merger Agreement, unless the holder or other
payee provides a tax identification number (social security number, in the case
of an individual, or employer identification number, in the case of other
holders), certifies that such number is correct, and otherwise complies with
such backup withholding tax rules. Each holder, and, if applicable, each other
payee, should complete and sign the Substitute Form W-9 included as part of the
letter of transmittal to be returned to the Paying Agent in order to provide the
information and certification necessary to avoid backup withholding tax, unless
an exemption applies and is established in a manner satisfactory to the Paying
Agent.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR
GENERAL INFORMATION ONLY AND IS NOT INTENDED TO CONSTITUTE A COMPLETE
DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE MERGER. EACH HOLDER OF
SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE APPLICABILITY AND
EFFECT OF U.S. STATE, LOCAL AND OTHER TAX LAWS).
FINANCING OF THE MERGER
The aggregate net cost to Suez Lyonnaise of acquiring all of the Shares
in the Offer and the Merger, making required payments to holders of stock
options (see "SPECIAL FACTORS - Interests of Certain Persons in the Merger"),
paying off our existing indebtedness and paying the fees and expenses is
expected to be approximately $4.1 billion. These funds are expected to be
available to H2O from Suez Lyonnaise and to Suez Lyonnaise and/or various of its
subsidiaries from cash on hand at the Effective Time.
PLANS OR PROPOSALS AFTER THE MERGER
Following the Merger, we will be an indirect, wholly owned subsidiary
of Suez Lyonnaise, our shares of Common Stock will no longer be traded on the
New York Stock Exchange or the Chicago Stock Exchange and the registration of
the Common Stock under the Exchange Act will be terminated. Except as set forth
herein, it is expected that we and our subsidiaries will continue to engage in
water treatment activities on a basis substantially consistent with current
operations. Following the Merger, only Suez Lyonnaise will have the opportunity
to benefit from any of our earnings and growth, and will bear the risk of any
decrease in our value.
Suez Lyonnaise does not have any present plans that relate to or would
result in an extraordinary coporate transaction such as a merger, reorganization
or liquidation, other than transactions which may provide a more efficient
structure for operating in certain geographical jurisdictions, involving Nalco
or any of its subsidiaries or a sale or other transfer of a material amount of
assets of Nalco or any of its subsidiaries or any changes in Nalco's corporate
structure or business. Suez Lyonnaise, however, will continue to evaluate the
business and operations of Nalco after the Merger and make such changes as are
deemed appropriate.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Suez Lyonnaise has designated First Chicago Trust Company of New York
to act as paying agent (the "Paying Agent") for purposes of making the cash
payments contemplated by the Merger Agreement. Suez Lyonnaise or H2O will
deposit in trust with the Paying Agent cash in United States dollars in an
aggregate amount equal to the sum of (a) the product of (i) the number of shares
of Common Stock outstanding immediately prior to the Effective Time (other than
(A) any shares of Common Stock which are held by any of our subsidiaries, in our
treasury or which are held, directly or indirectly, by Suez Lyonnaise or any
direct or indirect subsidiary of Suez Lyonnaise (including H2O), all of which
will be canceled and none of which will receive any payment with respect to the
Merger, and (B) Dissenting Shares) and (ii) $53.00 and (b) the product of (i)
the number of shares of ESOP Preferred Stock outstanding immediately prior to
the Effective Time (other than any shares of ESOP Preferred Stock which are held
by any of our subsidiaries, in our treasury or which are held, directly or
indirectly, by Suez Lyonnaise or any direct or indirect subsidiary of Suez
Lyonnaise (including H2O), all of which will be canceled and none of which will
receive any payment with respect to the Merger) and (ii) $1,060 ((a) and (b)
together the "Payment Fund"). The Paying Agent will, pursuant to irrevocable
instructions, deliver to the Holders their respective portions of the Payment
Fund according to the procedure summarized below.
At the close of business on the day of the Effective Time our stock
ledger will be closed.
As soon as practicable after the Effective Time, Suez Lyonnaise will
cause the Paying Agent to mail and/or make available to each holder of a
certificate theretofore evidencing Shares, a notice and letter of transmittal
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Paying Agent such certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") in exchange for the Merger Consideration. Upon the surrender for
cancellation to the Paying Agent of such Certificates, together with a letter of
transmittal, duly executed and completed in accordance with the instructions
thereon, and any other items specified by the letter of transmittal, the Paying
Agent will promptly pay to the holder of the Certificate the Merger
Consideration deliverable in respect of such Certificate. Until so surrendered,
each Certificate will be deemed, for all corporate purposes, to evidence only
the right to receive upon such surrender the Merger Consideration to which the
Certificate holder is entitled. No interest will be paid or accrued in respect
of such cash payments.
If the Merger Consideration (or any portion thereof) is to be delivered
to a person other than the person in whose name the Certificates surrendered in
exchange therefor are registered, it will be a condition to the payment of the
Merger Consideration that such Certificates be properly endorsed or accompanied
by appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay to
the Paying Agent any transfer or other taxes payable by reason of the foregoing
or establish to the satisfaction of the Paying Agent that such taxes have been
paid or are not required to be paid.
STOCKHOLDERS SHOULD NOT FORWARD THEIR CERTIFICATES TO THE PAYING AGENT
WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN THEIR CERTIFICATES WITH
THE ENCLOSED PROXY.
At and after the Effective Time, each holder of a Certificate will
cease to have any rights as a stockholder of Nalco, except for, in the case of a
holder of a Certificate, the right to surrender his or her Certificate in
exchange for payment of the Merger Consideration or, in the case of a Dissenting
Stockholder, to perfect his or her right to receive payment for his or her
Shares pursuant to DGCL and the Merger Agreement if such Holder has validly
perfected and not withdrawn his or her right to receive payment for his or her
Shares, and no transfer of Shares will be made on the stock transfer books of
the surviving corporation in the Merger. Certificates presented to the surviving
corporation in the Merger after the Effective Time will be canceled and
exchanged for cash as described above.
Promptly following the date which is six months after the Effective
Time, the Paying Agent will return to the surviving corporation in the Merger
all cash, certificates and other instruments in its possession that constitute
any portion of the Payment Fund, and the Paying Agent's duties will terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
surviving corporation in the Merger and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Consideration, without interest, but will have no greater rights against the
surviving corporation in the Merger or Suez Lyonnaise than may be accorded to
general creditors of the surviving corporation in the Merger or Suez Lyonnaise
under applicable law. Notwithstanding the foregoing, none of the Paying Agent,
Nalco, Suez Lyonnaise or H2O will be liable to a Holder for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws.
RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to the DGCL, any record Holder on the Record Date (i) who
properly files a demand for appraisal in writing prior to the vote taken at the
Special Meeting, (ii) who continuously holds his or her Shares until the
Effective Time, (iii) whose Shares are not voted in favor of the Merger and (iv)
otherwise complies with the requirements of Section 262 of DGCL (Section "262")
shall be entitled to an appraisal by the Delaware Court of Chancery (the
"Delaware Court") of the fair value of his or her Shares.
SECTION 262 IS REPRINTED IN ITS ENTIRETY AS ANNEX B TO THIS PROXY
STATEMENT. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
ANNEX B. THIS DISCUSSION AND ANNEX B SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER
WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE
RIGHT TO DO SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN OR
THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the Special Meeting, not less than 20 days prior
to the meeting each constituent corporation must notify each of the holders of
its stock for which appraisal rights are available that such appraisal rights
are available and include in each such notice a copy of Section 262. This Proxy
Statement shall constitute such notice to the record Holders of Shares.
Our voting stockholders who desire to exercise their appraisal rights
must not vote in favor of the Merger Agreement or the Merger and must deliver a
separate written demand for appraisal to us prior to the vote by our
stockholders on the Merger Agreement and the Merger. A stockholder who signs and
returns a proxy without expressly directing, by checking the applicable boxes on
the reverse side of the proxy card enclosed herewith, that his or her shares of
Common Stock be voted against the proposal or that an abstention be registered
with respect to his or her shares of Common Stock in connection with the
proposal will effectively have thereby waived his or her appraisal rights as to
those shares of Common Stock because, in the absence of express contrary
instructions, such shares of Common Stock will be voted in favor of the
proposal. (See "THE SPECIAL MEETING--Vote Required; Revocability of Proxies".)
Accordingly, a stockholder who desires to perfect appraisal rights with respect
to any of his or her shares of Common Stock must, as one of the procedural steps
involved in such perfection, either (i) refrain from executing and returning the
enclosed proxy card and from voting in person in favor of the proposal to
approve the Merger Agreement or (ii) check either the "against" or the "abstain"
box next to the proposal on such card or affirmatively vote in person against
the proposal or register in person an abstention with respect thereto. A demand
for appraisal must be executed by or on behalf of the stockholder of record and
must reasonably inform Nalco of the identity of the stockholder of record and
that such record stockholder intends thereby to demand appraisal of the shares
of Common Stock. A person having a beneficial interest in shares of Common Stock
that are held of record in the name of another person, such as a broker,
fiduciary or other nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to perfect
whatever appraisal rights are available. If the shares of Common Stock are owned
of record by a person other than the beneficial owner, including a broker,
fiduciary (such as a trustee, guardian or custodian) or other nominee, such
demand must be executed by or for the record owner. If the shares of Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares of Common Stock as a nominee for others, may exercise appraisal rights
with respect to the shares held for all or less than all beneficial owners of
shares as to which such person is the record owner. In such case, the written
demand must set forth the number of shares covered by such demand. Where the
number of shares is not expressly stated, the demand will be presumed to cover
all shares of common stock outstanding in the name of such record owner.
A stockholder who elects to exercise appraisal rights, if available,
should deliver his or her written demand before the Special Meeting to: Nalco
Chemical Company, One Nalco Center, Naperville, Illinois 60563, Attention:
Corporate Secretary.
The written demand for appraisal should specify the stockholder's name
and mailing address, the number of shares of Common Stock owned, and that the
stockholder is thereby demanding appraisal of his or her shares. A proxy or vote
against the Merger will not by itself constitute such a demand. Within ten days
after the Effective Time, the Surviving Corporation shall notify each
stockholder who has complied with Section 262 and who has not voted for or
consented to the Merger of the date the Merger became effective.
Within 120 days after the Effective Time, either the Surviving
Corporation or any stockholder who has complied with the requirements of Section
262 and who is otherwise entitled to appraisal rights may file a petition in the
Delaware Court, with a copy served on the Surviving Corporation in the case of a
petition filed by a stockholder, demanding a determination of the fair value of
the shares of all dissenting stockholders. Accordingly, our stockholders who
desire to have their shares appraised should initiate any petitions necessary
for the perfection of their appraisal rights within the time periods and in the
manner prescribed in Section 262. Suez Lyonnaise does not have any present
intentions as to whether it would file, or would cause the Surviving Corporation
to file, any such petition in the event a stockholder makes a written demand for
appraisal rights. Within 120 days after the Effective Time of the Merger, any
stockholder who has theretofore complied with the applicable provisions of
Section 262 will be entitled, upon written request, to receive from the
Surviving Corporation a statement setting forth the aggregate number of Shares
not voted in favor of the Merger Agreement and with respect to which we received
demands for appraisal, and the aggregate number of holders of such Shares. Such
written statement shall be mailed to the stockholder within 10 days after the
written request therefor has been received by the surviving corporation in the
Merger.
If a petition for an appraisal is timely filed and assuming appraisal
rights are available, at the hearing on such petition, the Delaware Court will
determine which stockholders, if any, are entitled to appraisal rights. The
Delaware Court may require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Delaware Court may dismiss the proceedings as to such
stockholder. Where proceedings are not dismissed, the Delaware Court will
appraise the shares of common stock owned by such stockholders, determining the
fair value of such shares exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
such event, the Delaware Court's appraisal may be more than, less than, or equal
to the merger consideration. In determining fair value, the Delaware Court is to
take into account all relevant factors. In relevant case law, the Delaware
Supreme Court discussed the factors that could be considered in determining fair
value in an appraisal proceeding, stating that "proof of value by any techniques
or methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts
ascertainable as of the date of the merger that throw light on future prospects
of the merged corporation. The Delaware Supreme Court also stated that "elements
of future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered." Section 262, however, provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger."
The Delaware Court will then direct the Surviving Corporation to pay
the fair value of the Dissenting Shares, together with any interest, to the
stockholders entitled to payment. Payment will be made when the Stockholder
surrenders the certificates to the Surviving Corporation.
The cost of the appraisal proceeding may be determined by the Delaware
Court and taxed against the parties as the Delaware Court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the Delaware Court
may order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorney's fees and the fees and expenses of experts, be
charged pro rata against the value of all shares of stock entitled to appraisal.
Any Holder of Shares who has duly demanded appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote for any
purpose any Shares subject to such demand or to receive payment of dividends or
other distributions on such Shares, except for dividends or distributions
payable to stockholders of record at a date prior to the Effective Time.
Any stockholder may withdraw such stockholder's demand for appraisal by
delivering to the Surviving Corporation a written withdrawal of his or her
demand for appraisal and an acceptance of the Merger Consideration, except that
(i) any withdrawal made more than 60 days after the Effective Time will require
written approval of the Surviving Corporation, and (ii) no appraisal proceeding
in the Delaware Court shall be dismissed as to any stockholder without the
approval of the Delaware Court, and such approval may be conditioned upon such
terms as the Delaware Court deems just.
ANY HOLDER WHO FAILS TO COMPLY FULLY WITH THE STATUTORY PROCEDURE SET
FORTH IN SECTION 262 WILL FORFEIT HIS OR HER RIGHTS OF DISSENT.
EXPENSES OF SOLICITATION
We will bear the cost of preparing, mailing, and soliciting the
enclosed form of consents. In addition to our solicitations by mail, our
directors, officers, and regular employees may solicit consents personally and
by telephone, facsimile, or other means, for which they will receive no
compensation in addition to their normal compensation. Arrangements will also be
made with brokerage houses and other custodians, nominees, and fiduciaries for
the forwarding of solicitation material to the beneficial owners of common stock
held of record by such persons, and we may reimburse them for their reasonable
out-of-pocket and clerical expenses.
INDEPENDENT PUBLIC ACCOUNTANTS
Our consolidated financial statements as of December 31, 1998, and for
each of the years in the three-year period ended December 31, 1998, incorporated
by reference, have been audited by PricewaterhouseCoopers, independent public
accountants, as stated in their report.
AVAILABLE INFORMATION
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934 as amended and, in accordance therewith, file
reports, proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information can be
inspected and copies made at the Public Reference Room of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and the
Securities and Exchange Commission's regional offices at 7 World Trade Center,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Securities and Exchange
Commission at its Washington address at prescribed rates.
Statements contained in this Proxy Statement or in any document
incorporated herein by reference regarding the contents of any contract or other
document are not necessarily complete and each such statement is qualified in
its entirety by reference to such contract or other document filed as an exhibit
with the Securities and Exchange Commission.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE DO SO AT LEAST
FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO RECEIVE
TIMELY DELIVERY OF SUCH DOCUMENTS.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the Special Meeting. We have
not authorized anyone to provide you with information that is different from
what is contained in this document. This document is dated November 12, 1999.
You should not assume that the information contained in this document is
accurate as of any date other than that date, and the mailing of this document
to stockholders does not create any implication to the contrary. This Proxy
Statement does not constitute a solicitation of a proxy in any jurisdiction
where, or to or from any person to whom, it is unlawful to make such proxy
solicitation in such jurisdiction.
INFORMATION INCORPORATED BY REFERENCE
Our Annual Report on Form 10-K for the year ended December 31, 1998 and
our Quarterly Report on Form 10-Q for the quarter ended [June 30], 1999, each
filed by us with the Securities and Exchange Commission are hereby incorporated
by reference into this Proxy Statement. Our 10-K and 10-Q are not presented
herein or delivered herewith, but are available (without exhibits, unless such
exhibits are specifically incorporated herein by reference) to any person,
including any beneficial owner, to whom this Proxy Statement is delivered,
without charge, upon written request directed to Nalco Chemical Company, One
Nalco Center, Naperville, Illinois 60563, Attention: Corporate Secretary. Copies
of our 10-K and 10-Q so requested will be sent, within one business day of
receipt of such request, by first class mail, postage paid.
All documents we file pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Proxy Statement and prior to the date of
the Special Meeting shall be deemed to be incorporated by reference in this
Proxy Statement and to be a part hereof from the respective dates of filing of
such documents. Any statement contained in this Proxy Statement or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained in any subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
______________________
November __, 1999
<PAGE>
APPENDIX A
MERGER AGREEMENT
[TO COME]
<PAGE>
APPENDIX B
SECTION 262 OF THE DELAWARE
GENERAL CORPORATIONS LAW
APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more shares
or fractions thereof, solely of stock of a corporation, which stock is deposited
with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss. 251
(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to ss.ss.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
(a) Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
(b) Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
(c) Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
(d) Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to ss. 228 or
ss. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holders' shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceeding as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however; that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
339, L. '98. Eff. 7-1-98.)
<PAGE>
APPENDIX C
[OPINION OF GOLDMAN TO COME]
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................7
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE...............................9
SUMMARY.......................................................................1
The Special Meeting........................................................1
Matters To Be Considered At The Special Meeting.........................1
Record Date and Voting..................................................1
Vote Required; Revocability of Proxies..................................1
Solicitation of Proxies....................................................2
Appraisal Rights...........................................................2
Parties to the Merger......................................................2
Nalco Chemical Company..................................................2
Suez Lyonnaise des Eaux.................................................2
H2O Acquisition Co......................................................2
Recommendation of the Board of Directors...................................3
Opinion of Financial Advisor...............................................3
The Merger Agreement.......................................................3
No Solicitation............................................................4
Termination; Termination Fees..............................................4
Regulatory Approvals.......................................................5
Source and Amount of Funds.................................................5
Interests of Certain Persons in the Merger.................................5
Certain Tax Consequences...................................................5
Security Ownership of Management and Certain Beneficial Owners.............6
Market Prices of Common Stock..............................................6
Selected Consolidated Financial Data.......................................6
THE SPECIAL MEETING...........................................................6
Matters to be Considered at the Special Meeting............................6
Record Date and Voting.....................................................7
Vote Required; Revocability of Proxies.....................................8
Solicitation of Proxies....................................................9
Procedures for Exchange of Certificates....................................9
THE PARTIES TO THE TRANSACTION................................................9
Nalco Chemical Company.....................................................9
Comparative Market Price Data..........................................10
Dividends..............................................................10
Summary Consolidated Financial Information.............................11
Certain Projections of Future Operating Results........................13
Suez Lyonnaise des Eaux...................................................13
H2O Acquisition Co........................................................14
THE MERGER...................................................................14
Background of the Merger..................................................15
Reasons for the Merger....................................................17
Recommendation of the Board of Directors..................................20
Opinion of Financial Advisor..............................................20
Certain Effects of the Merger.............................................21
Rights Agreement..........................................................22
Accounting Treatment of the Merger........................................22
Regulatory Approvals......................................................22
THE MERGER AGREEMENT.........................................................23
Effective Time of the Merger..............................................23
Conditions to Consummation of the Merger..................................23
No Solicitation Of Other Offers...........................................24
Representations and Warranties............................................25
Covenants.................................................................25
Termination of the Merger Agreement.......................................27
Termination Fees; Expenses................................................29
Amendments to the Merger Agreement........................................30
Interests of Certain Persons in the Merger...................................31
Employment Agreements.....................................................31
Indemnification and Insurance.............................................32
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER TO U.S. HOLDERS...............................................32
FINANCING OF THE MERGER......................................................34
PLANS OR PROPOSALS AFTER THE MERGER..........................................34
PROCEDURES FOR EXCHANGE OF CERTIFICATES......................................35
RIGHTS OF DISSENTING STOCKHOLDERS............................................36
EXPENSES OF SOLICITATION.....................................................40
INDEPENDENT PUBLIC ACCOUNTANTS...............................................40
AVAILABLE INFORMATION........................................................40
INFORMATION INCORPORATED BY REFERENCE........................................41
EXHIBIT A - Merger Agreement
EXHIBIT B - Section 262 of Delaware General Corporation Law
EXHIBIT C - Opinion of Goldman, Sachs & Co.
