<PAGE>
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 [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only
(as permitted by Rule 14a-
6(e)(2))
[X] 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:
(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:
(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
(2) Form, Schedule or Registration Statement no.: SCHEDULE 14D-1
(3) Filing Party: SUEZ LYONNAISE DES EAUX
H2O ACQUISITION CO.
(4) Date Filed: JULY 1, 1999
<PAGE>
[LOGO NALCO CHEMICAL COMPANY]
November 24, 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
Monday, December 20, 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 the
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 the accompanying 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
66,097,769.314 shares of Common Stock (or approximately 96.7% 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 97.0% of all Shares outstanding
on November 8, 1999 and approximately 97.0% of all Shares outstanding on
November 19, 1999, the record date for the Special Meeting (the "Record
Date"). In accordance with the Merger Agreement, (i) Suez Lyonnaise intends to
cause H2O (A) to vote in favor of approval and adoption of the Merger
Agreement and approval of the Merger and (B) to merge into Nalco, and (ii) 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 73,029,896.894 SHARES, REPRESENTING, ON A FULLY
DILUTED BASIS, APPROXIMATELY 97.0% 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
<PAGE>
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 APPROVAL OF 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 19, 1999, are entitled to
notice of and to vote at the Special Meeting or any adjournments or
postponements thereof.
You are urged to read the enclosed Proxy Statement, which describes the
terms of the Merger, in its entirety. A copy of the Merger Agreement is
included as Exhibit 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,
/s/ Edward J. Mooney
Edward J. Mooney
Chairman and Chief Executive Officer
2
<PAGE>
[LOGO NALCO CHEMICAL COMPANY]
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 Monday, December 20,
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 an indirect, wholly owned
subsidiary of Suez Lyonnaise (the "Merger Agreement") and approve 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, 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 by any of our subsidiaries, in treasury, or
by Suez Lyonnaise, 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
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 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 66,097,769.31 shares of
Common Stock, representing 96.7% 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.
1
<PAGE>
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
accompanying 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 24, 1999
----------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF 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 APPROVE THE MERGER. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD
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 ACCOMPANYING 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 PROPOSAL TO APPROVE AND
ADOPT THE MERGER AGREEMENT AND APPROVE THE MERGER AT THE SPECIAL MEETING.
PLEASE DO NOT SEND YOUR CERTIFICATES AT THIS TIME.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... 3
SUMMARY.................................................................... 5
The Special Meeting...................................................... 5
Matters To Be Considered at the Special Meeting........................ 5
Record Date and Voting................................................. 5
Vote Required; Revocability of Proxies................................. 5
Accountants............................................................ 5
Solicitation of Proxies.................................................. 5
Appraisal Rights......................................................... 6
Parties to the Merger.................................................... 6
Nalco Chemical Company................................................. 6
Suez Lyonnaise des Eaux................................................ 6
H2O Acquisition Co. ................................................... 6
Recommendation of the Board of Directors................................. 6
Opinion of Financial Advisor............................................. 6
The Merger Agreement..................................................... 7
Termination.............................................................. 7
Regulatory Approvals..................................................... 7
Financing of the Merger.................................................. 7
Interests of Certain Persons in the Merger............................... 7
U.S. Federal Income Tax Consequences..................................... 7
Security Ownership of Management and Certain Beneficial Owners........... 8
Market Prices of Common Stock............................................ 8
Selected Consolidated Financial Data..................................... 8
THE SPECIAL MEETING........................................................ 9
Matters to be Considered at the Special Meeting.......................... 9
Record Date and Voting................................................... 9
Vote Required; Revocability of Proxies................................... 10
Solicitation of Proxies.................................................. 10
Procedures for Exchange of Certificates.................................. 10
THE PARTIES TO THE TRANSACTION............................................. 11
Nalco Chemical Company................................................... 11
Comparative Market Price Data.......................................... 11
Dividends.............................................................. 12
Summary Consolidated Financial Information............................. 13
Certain Projections of Future Operating Results........................ 14
Suez Lyonnaise des Eaux.................................................. 14
H2O Acquisition Co. ..................................................... 14
THE MERGER................................................................. 15
Background of the Merger................................................. 15
Reasons for the Merger................................................... 17
Recommendation of the Board of Directors................................. 19
Opinion of Financial Advisor............................................. 19
Certain Effects of the Merger............................................ 20
Rights Agreement......................................................... 20
Accounting Treatment of the Merger....................................... 20
Regulatory Approvals..................................................... 20
United States.......................................................... 20
European Union......................................................... 21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
THE MERGER AGREEMENT..................................................... 22
Effective Time of the Merger........................................... 22
Conditions to Consummation of the Merger............................... 22
No Solicitation of Other Offers........................................ 22
Representations and Warranties......................................... 22
Covenants.............................................................. 23
Termination of the Merger Agreement.................................... 24
Amendments to the Merger Agreement..................................... 25
Interests of Certain Persons in the Merger............................. 25
Employment Agreements................................................ 25
Indemnification and Insurance........................................ 26
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO U.S.
HOLDERS................................................................. 27
FINANCING OF THE MERGER.................................................. 28
PLANS OR PROPOSALS AFTER THE MERGER...................................... 28
PROCEDURES FOR EXCHANGE OF CERTIFICATES.................................. 28
RIGHTS OF DISSENTING STOCKHOLDERS........................................ 30
EXPENSES OF SOLICITATION................................................. 32
INDEPENDENT PUBLIC ACCOUNTANTS........................................... 32
AVAILABLE INFORMATION.................................................... 32
INFORMATION INCORPORATED BY REFERENCE.................................... 33
</TABLE>
<TABLE>
<S> <C>
EXHIBIT A -- Merger Agreement
EXHIBIT B -- Section 262 of Delaware General Corporation Law
EXHIBIT C -- Opinion of Goldman, Sachs & Co.
</TABLE>
2
<PAGE>
[LOGO of NALCO CHEMICAL COMPANY]
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
----------------
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 Stockholders to be held on
Monday, December 20, 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 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
an indirect, 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 Exhibit 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 (other than shares of Common Stock held in treasury, held by
Suez Lyonnaise, H2O or any other subsidiary of Suez Lyonnaise and other than
Dissenting Shares (as defined below)), will be converted into the right to
receive an amount in cash equal to $53.00 without interest thereon, (iii) each
outstanding share of ESOP 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 66,097,769.314 shares of
Common Stock (or approximately 96.7% 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
97.0% 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
approval and adoption of the Merger Agreement and approval 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 Dissenting Shares), will be converted into the
right to receive the appropriate Merger Consideration.
1
<PAGE>
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 73,029,896.894 Shares, representing, on a fully
diluted basis, approximately 97.0% 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.
Stockholders 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 card are first being mailed to Holders on or about November
24, 1999.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU 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 24, 1999.
----------------
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.
2
<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 and we will be the surviving corporation in the Merger. 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 14 to 18.
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.
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 29.
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.
3
<PAGE>
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 26.
Who Can Help Answer My Other Questions?
If you have more questions about the merger, you should contact
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attn: Kevin Keogh
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 March 31, June 30 and September 30, 1999.
4
<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 Exhibits hereto. Each
Holder is urged to give careful consideration to all the information contained
in this Proxy Statement and the Exhibits 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 Monday, December 20, 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 approximately 75,303,430.58 shares of Common Stock outstanding,
each of which is entitled to one vote, and 346,606.741 shares of ESOP
Preferred Stock, held by approximately 2,930 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 is present. 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 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,
5
<PAGE>
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 Delaware General Corporation Law ( 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 Section 262 of the DGCL will be entitled to statutory
appraisal rights (such shares collectively referred to as the "Dissenting
Shares"). See "THE SPECIAL MEETING--Appraisal Rights" and Section 262 of the
DGCL, which is attached hereto as Exhibit 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 the
steelmaking, pulp and papermaking, mining and mineral processing, automotive,
metalmaking, oil refining and petroleum, power generation, and food and
beverage industries, 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 des Eaux, 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 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
Merger are fair to and in the best interests of our stockholders and has
unanimously approved and adopted the Merger Agreement and approved 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.
6
<PAGE>
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 Exhibit C.
The Merger Agreement
Subject to the provisions of the Merger Agreement, at the Effective Time (as
defined below): (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, 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 (as defined
below) 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".
7
<PAGE>
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 $52 15/16 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".
8
<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 Monday, December 20, 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 STOCKHOLDERS 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."
STOCKHOLDERS 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 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 stockholders 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 approximately 75,303,430.58 shares of
Common Stock and 346,606.741 shares of ESOP Preferred Stock outstanding and
entitled to vote at the Special Meeting, held by approximately 2,930
stockholders 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 is present.
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 Stockholders 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
9
<PAGE>
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".
STOCKHOLDERS 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 STOCKHOLDERS 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 97.0% 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."
10
<PAGE>
THE PARTIES TO THE TRANSACTION
Nalco Chemical Company
We are in the business of providing services, chemicals, technology,
equipment, and systems (monitoring and surveillance) used in water treatment,
pollution control, energy conservation, steelmaking, papermaking, mining and
mineral processing, electricity generation, other industrial processes, and
commercial building utility systems. Service chemicals are developed,
formulated, and manufactured to meet specific customer needs. They are part of
value added programs designed to help customers maintain a high level of
operating performance and efficiency in their facilities, improve the quality
of customers' end products, or help customers meet environmental discharge
limits in a cost-effective way. Our products are used for purposes such as:
control of scale, corrosion, foam and fouling in cooling systems, boilers, and
other equipment; clarification of water; separation of liquid and solids;
improving combustion; control of dust; lubrication and corrosion protection in
rolling, drawing and forming of metals; improving production of pulp and
qualities of paper; recovery of minerals; and specialized process applications
in a variety of industries. The quality and on-site availability of technical
expertise provide through highly qualified personnel are very important
considerations to customers. The effective use of our products requires a
substantial amount of problem solving, monitoring, and technical assistance on
the part of our employees.
Service chemicals are usually marketed through our own organization because
of the high degree of technical service required. The worldwide field sales
force is trained in the application and use of Nalco service chemicals, and is
supported by a marketing and research staff of specialists in the technology
and use of various Nalco service chemicals. Our principal method of
competition is based on quality service, product performance and technology
through safe, practical applied science. Our principal executive offices are
located at One Nalco Center, Naperville, Illinois 60563, and our telephone
number is (630) 305-1000.
Comparative Market Price Data
The primary market for the Common Stock is 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:
<TABLE>
<CAPTION>
High Low
------- ----
<S> <C> <C>
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.............................. 52 1/2 47
</TABLE>
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 $52 15/16 per share. Holders of Common Stock are encouraged to
review current share prices.
11
<PAGE>
Dividends
Since December 31, 1996, we have paid the following cash dividends (and no
common stock dividends) to holders of record of our common stock:
<TABLE>
<CAPTION>
Dividend Amount
---------------
<S> <C>
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.................................. $0.25
</TABLE>
12
<PAGE>
Summary Consolidated Financial Information
Set forth below is certain summary historical consolidated financial
information of Nalco and our subsidiaries. The historical financial
information (other than the ratios of earnings to fixed charges) was derived
from the audited consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 1998 (the "1998 Annual
Report"), and from the unaudited summary consolidated financial statements
included in our Quarterly Reports on Form 10-Q for the periods ended June 30,
1999 and June 30, 1998 (the "Quarterly Reports"), and other information and
data contained in the 1998 Annual Report and the Quarterly Reports. More
comprehensive financial information is included in such reports and the
financial information which follows is qualified in its entirety by reference
to, and should be read in conjunction with, such reports and all of the
financial statements and related notes contained therein, copies of which may
be obtained as set forth below under the caption "AVAILABLE INFORMATION."
NALCO Chemical Company
Selected Consolidated Financial and Operating Data
($ in millions except per share data)
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
------------------------------------------------ ----------------
1994 1995 1996 1997 1998 1998 1999
Statement of Operations: -------- -------- -------- -------- -------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
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 research.......... 498.8 477.7 518.2 561.4 618.0 302.4 309.7
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
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------- -----------------
1994 1995 1996 1997 1998 1999
Statement of Operations: -------- -------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
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 Tax-
es.................... 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>
13
<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 Nalco 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)
<TABLE>
<CAPTION>
Second Third Fourth Total
Qtr Qtr Qtr Year
------ ------ ------ --------
<S> <C> <C> <C> <C>
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
</TABLE>
Suez Lyonnaise des Eaux
Suez Lyonnaise des Eaux, 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 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 97.0% 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 acquisition of
Nalco. As of the date hereof, and as a result of the Offer, H2O owns
approximately 97.0% 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.
14
<PAGE>
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) 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 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 Nalco 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.
15
<PAGE>
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
Nalco 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 Nalco until a definite merger
agreement was reached.
16
<PAGE>
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
17
<PAGE>
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
Exhibit 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
18
<PAGE>
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.
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.
19
<PAGE>
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 consummation 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
20
<PAGE>
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.
21
<PAGE>
THE MERGER AGREEMENT
Effective Time of the Merger
The Merger will become effective upon the filing of one of (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 the DGCL 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;
22
<PAGE>
(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 and H2O 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; (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 we or any subsidiary of ours
has significant business relations. We further agreed that neither we nor any
subsidiary of ours would 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
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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 (v) 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 our
past practices or those of 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 requisite approval and adoption by our stockholders: (i)
by mutual written consent duly authorized by the Boards of Directors of Suez
Lyonnaise,
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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 his 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 the Surviving Corporation, 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) participation in all incentive and benefit plans provided to
similar senior executives; and (iv) 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.
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Each Employment Letter also includes a provision for (i) non-competition
with the Surviving Corporation 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 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).
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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 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
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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 ARE 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, marketable securities and available credit lines.
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 our
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 corporate 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
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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 such
certificates the Merger Consideration deliverable in respect of the Shares
formerly represented by such certificates. Until so surrendered, each such
certificate will be deemed, for all corporate purposes, to evidence only the
right to receive upon such surrender the Merger Consideration to which the
holder thereof 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 CARD.
At and after the Effective Time, each Holder will cease to have any rights
as a stockholder of Nalco, except for 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 the 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. Certificates
theretofore evidencing Shares presented to the Surviving Corporation after the
Effective Time will be canceled and exchanged for cash as described above.
Promptly following the date which is one year after the Effective Time, the
Paying Agent will return to the Surviving Corporation 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 theretofore evidencing Shares may surrender such
certificate to the Surviving Corporation 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 or Suez Lyonnaise than may be accorded to general
creditors of the Surviving Corporation 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 of a certificate theretofore evidencing
Shares for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
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RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to the DGCL, any 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 the DGCL shall be
entitled to an appraisal by the Delaware Court of Chancery (the "Delaware
Court") of the fair value of such Shares.
SECTION 262 IS REPRINTED IN ITS ENTIRETY AS EXHIBIT 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
EXHIBIT B. THIS DISCUSSION AND EXHIBIT 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 of the DGCL, 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 of the DGCL. This Proxy Statement shall constitute such notice to
the record Holders.
Our voting Holders 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 Holder 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 Holder 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 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 Holder of record and must reasonably inform Nalco of the identity of the
Holder of record and that such Holder of record 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 Holder of record 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
Holder of record. 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
Holder of record; however, the agent must identify the Holder of record and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the Holder of record.
A Holder of record, 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
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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:
Suzzanne Gioimo, 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 of
the DGCL 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 of the DGCL. 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 of the DGCL 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.
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
of the DGCL, however, provides that fair value is to be "exclusive of any
element of value arising from the accomplishment or expectation of the
merger."
31
<PAGE>
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 who has duly demanded appraisal in compliance with Section 262 of
the DGCL 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 OF THE DGCL WILL FORFEIT HIS OR HER RIGHTS OF DISSENT.
EXPENSES OF SOLICITATION
We will bear the cost of preparing, mailing, and soliciting the enclosed
proxy cards. 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 five-year period ended December 31, 1998, incorporated by
reference, have been audited by PricewaterhouseCoopers, independent public
accountants, as stated in their report. Representatives of
PricewaterhouseCoopers will be available at the Special Meeting to answer
appropriate questions.
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.
32
<PAGE>
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 24, 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 September 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 therein 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
Securities Exchange Act of 1934, as amended, 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 24, 1999
33
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
SUEZ LYONNAISE DES EAUX
H2O ACQUISITION CO.
and
NALCO CHEMICAL COMPANY
Dated as of June 27, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GLOSSARY OF DEFINED TERMS
(Not Part of this Agreement)
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
Affiliate........................................... (S) 9.03(a)
Agreement........................................... Preamble
Acquisition Proposal................................ (S) 6.05(a)
Beneficial Owner.................................... (S) 9.03(b)
Blue Sky Laws....................................... (S) 3.05(b)
Board............................................... Recitals
Business Day........................................ (S) 9.03(c)
Certificate of Merger............................... (S) 2.02
Certificates........................................ (S) 2.09(b)
Code................................................ (S) 3.10(a)
Common Stock........................................ Recitals
Company............................................. Preamble
Company Benefit Plans............................... (S) 3.10(a)
Company Change of Control Agreement................. (S) 3.10(d)
Company Preferred Stock............................. (S) 3.03
Company Stock Option Plans.......................... (S) 2.07
Confidentiality Agreement........................... (S) 6.04(c)
Control............................................. (S) 9.03(d)
Delaware Law........................................ Recitals
Disclosure Schedule................................. Introduction to Article III
Dissenting Shares................................... (S) 2.08
Effective Time...................................... (S) 2.02
Environmental Laws.................................. (S) 9.03(e)
ERISA............................................... (S) 3.10(a)
ESOP Preferred Stock................................ Recitals
Exchange Act........................................ (S) 1.02(b)
Goldman............................................. (S) 1.02(a)
Governmental Antitrust Authority.................... (S) 6.08(b)
Governmental Order.................................. (S) 7.01(c)
Hazardous Substances................................ (S) 9.03(f)
HSR Act............................................. (S) 3.05(b)
Holders............................................. Recitals
Indemnified Parties................................. (S) 6.07(c)
Indemnification Provisions.......................... (S) 6.07(a)
IRS................................................. (S) 3.10(a)
Junior A Preferred Stock............................ (S) 3.03(a)
Junior C Preferred Stock............................ (S) 2.06(a)
knowledge........................................... (S) 9.03(g)
known............................................... (S) 9.03(g)
Material Adverse Effect............................. (S) 9.03(h)
Material Subsidiary................................. (S) 9.03(i)
Merger.............................................. Recitals
Merger Consideration................................ (S) 2.06(b)
Minimum Condition................................... (S) 1.01(a)
Offer............................................... Recitals
Offer Documents..................................... (S) 1.01(b)
Offer to Purchase................................... (S) 1.01(b)
Option.............................................. (S) 2.07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
Parent................................................... Preamble
Paying Agent............................................. (S) 2.09(a)
Payment Fund............................................. (S) 2.09(a)
Permitted Liens.......................................... (S) 3.14(b)
Per Common Share Amount.................................. Recitals
Per Preferred Share Amount............................... Recitals
Person................................................... (S) 9.03(j)
Proxy Statement.......................................... (S) 3.12
Purchaser................................................ Preamble
Rights Agreement......................................... (S) 3.14
Schedule 14D-9........................................... (S) 1.02(b)
Schedule 14D-1........................................... (S) 1.01(b)
SEC...................................................... (S) 9.03(k)
SEC Rules................................................ (S) 9.03(l)
SEC Reports.............................................. (S) 3.07(a)
Securities Act........................................... (S) 3.07(a)
Shares................................................... Recitals
Stockholders' Meeting.................................... (S) 6.01(a)
Subsidiary............................................... (S) 9.03(m)
Superior Proposal........................................ (S) 6.05(b)
Surviving Corporation.................................... (S) 2.01
Transactions............................................. (S) 3.04
</TABLE>
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
SECTION 1.01. The Offer................................................. 1
SECTION 1.02. Company Action............................................ 2
ARTICLE II
THE MERGER
SECTION 2.01. The Merger................................................ 3
SECTION 2.02. Effective Time; Closing................................... 3
SECTION 2.03. Effect of the Merger...................................... 4
SECTION 2.04. Certificate of Incorporation; By-laws..................... 4
SECTION 2.05. Directors and Officers.................................... 4
SECTION 2.06. Conversion of Securities.................................. 4
SECTION 2.07. Employee and Director Stock Options....................... 5
SECTION 2.08. Dissenting Shares......................................... 5
SECTION 2.09. Surrender of Shares; Stock Transfer Books................. 5
SECTION 2.10. Merger Without Meeting of Stockholders.................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Material Subsidiaries..... 7
SECTION 3.02. Certificate of Incorporation and By-laws.................. 7
SECTION 3.03. Capitalization............................................ 7
SECTION 3.04. Authority Relative to this Agreement...................... 7
SECTION 3.05. No Conflict; Required Filings and Consents................ 7
SECTION 3.06. Compliance................................................ 7
SECTION 3.07. SEC Filings; Financial Statements......................... 9
SECTION 3.08. Absence of Certain Changes or Events...................... 9
SECTION 3.09. Absence of Litigation; Joint Ventures..................... 10
SECTION 3.10. Employee Benefit Plans.................................... 10
SECTION 3.11. Labor Matters............................................. 11
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement.......... 11
SECTION 3.13. Taxes..................................................... 11
SECTION 3.14. Rights Agreement.......................................... 13
SECTION 3.15. Trademarks, Patents and Copyrights........................ 13
SECTION 3.16. Environmental Matters..................................... 13
SECTION 3.17. Brokers................................................... 14
SECTION 3.18. Year 2000................................................. 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization.................................... 14
SECTION 4.02. Authority Relative to this Agreement...................... 14
SECTION 4.03. No Conflict; Required Filings and Consents................ 14
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 4.04. Financing................................................. 15
SECTION 4.05. Offer Documents; Proxy Statement.......................... 15
SECTION 4.06. Brokers................................................... 15
SECTION 4.07. Absence of Litigation..................................... 15
SECTION 4.08. No Prior Activities....................................... 15
SECTION 4.09. Parent Not an Affiliated Shareholder...................... 16
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger..... 16
Third Party Standstill Agreements and Confidentiality
SECTION 5.02. Agreements................................................ 17
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting..................................... 18
SECTION 6.02. Proxy Statement........................................... 18
SECTION 6.03. Company Board Representation; Section 14(f)............... 18
SECTION 6.04. Access to Information; Confidentiality.................... 19
SECTION 6.05. No Solicitation........................................... 19
SECTION 6.06. Employee Benefits Matters................................. 21
SECTION 6.07. Directors' and Officers' Indemnification and Insurance.... 21
SECTION 6.08. Further Action; Reasonable Best Efforts................... 22
SECTION 6.09. Public Announcements...................................... 22
SECTION 6.10. Confidentiality Agreement................................. 22
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger.................................. 22
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination............................................... 23
SECTION 8.02. Effect of Termination..................................... 23
SECTION 8.03. Fee....................................................... 23
SECTION 8.04. Amendment................................................. 25
SECTION 8.05. Waiver.................................................... 25
ARTICLE IX
GENERAL PROVISIONS
Non-Survival of Representations, Warranties and
SECTION 9.01. Agreements................................................ 25
SECTION 9.02. Notices................................................... 25
SECTION 9.03. Certain Definitions....................................... 26
SECTION 9.04. Severability.............................................. 27
SECTION 9.05. Entire Agreement; Assignment.............................. 27
SECTION 9.06. Parties in Interest....................................... 28
SECTION 9.07. Governing Law............................................. 28
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 9.08. Headings.................................................... 28
SECTION 9.09. Counterparts................................................ 28
SECTION 9.10. Waiver of Jury Trial........................................ 28
</TABLE>
ANNEX A
Conditions to the Offer
ANNEX B
Employee Benefit Matters
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of June 27, 1999 (this "Agreement")
among SUEZ LYONNAISE DES EAUX, a societe anonyme organized under the laws of
the Republic of France ("Parent"), H2O ACQUISITION CO., a Delaware corporation
and a wholly owned subsidiary of Parent ("Purchaser"), and NALCO CHEMICAL
COMPANY, a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser
shall make a cash tender offer (the "Offer") to acquire all the issued and
outstanding shares of (i) the Company's Common Stock, par value $0.1875 per
share (the "Common Stock"), for $53 per share of Common Stock (such amount, or
any greater amount per share of Common Stock paid pursuant to the Offer, being
hereinafter referred to as the "Per Common Share Amount") and (ii) the
Company's Series B ESOP Convertible Preferred Stock, par value $1.00 per share
(the "ESOP Preferred Stock"), for $1060 per share of ESOP Preferred Stock
(such amount, or any greater amount per share of ESOP Preferred Stock paid
pursuant to the Offer, being hereinafter referred to as the "Per Preferred
Share Amount"), in each case net to the seller in cash, upon the terms and
subject to the conditions of this Agreement and the Offer (shares of Common
Stock and shares of ESOP Preferred Stock are hereinafter collectively referred
to as "Shares"); and
WHEREAS, the Board of Directors of the Company (the "Board") has adopted
resolutions determining that the Offer and the Merger are fair to and in the
best interests of the holders of the Shares (the "Holders") and recommending
that the Holders approve the Merger, this Agreement and the other transactions
contemplated hereby and adopt this Agreement and tender their Shares pursuant
to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors of
Parent, Purchaser and the Company have each approved the merger (the "Merger")
of Purchaser with and into the Company in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law") following the
consummation of the Offer and upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Upon the terms and subject to the conditions of
this Agreement, Purchaser shall commence the Offer as promptly as reasonably
practicable after the date hereof, but in no event later than five Business
Days after the initial public announcement of Purchaser's intention to
commence the Offer. The initial scheduled expiration date for the Offer shall
be 20 Business Days following the commencement of the Offer. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer shall be subject to the condition (the "Minimum Condition") that there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer at least such number of Shares which, when added to any shares of
Common Stock already owned by Parent, shall constitute a majority of the then
outstanding shares of Common Stock on a fully diluted basis (including,
without limitation, all shares of Common Stock issuable upon the conversion of
the ESOP Preferred Stock and any convertible securities or upon the exercise
of any options, warrants or rights) and also shall be subject to the
satisfaction of the other conditions set forth in Annex A hereto. The
conditions to the Offer set forth in Annex A hereto are for the benefit of
Parent and Purchaser regardless of the circumstances giving rise to such
conditions or, except as expressly set forth herein, may be waived by Parent
and Purchaser in whole or in part. Purchaser expressly reserves the right to
waive any such condition, to increase the price per Share payable in the
Offer, and to make any other changes in the terms and conditions of the Offer;
provided, however, that without the prior written consent of the Company,
Parent and Purchaser shall not
<PAGE>
(i) waive the Minimum Condition, (ii) decrease the price per Share payable in
the Offer, (iii) reduce the maximum number of Shares to be purchased in the
Offer, (iv) amend or add to the conditions to the Offer set forth in Annex A
hereto, (v) extend the Offer, (vi) change the form of consideration payable in
the Offer, or (vii) amend, add to or waive any other term of the Offer in any
manner which would be adverse to the Company or the Holders. Notwithstanding
the foregoing, Purchaser may, without the consent of the Company, extend the
Offer: (i) if, on the scheduled expiration date of the Offer, any of the
conditions to Purchaser's obligation to accept for payment and pay for the
Shares shall not have been satisfied or waived, until the fifth Business Day
after the date Purchaser reasonably believes to be the earliest date on which
such conditions will be satisfied; (ii) for any period required by any rule,
regulation, interpretation or position of the SEC or its staff applicable to
the Offer; or (iii) from time to time, for an aggregate period of not more
than 10 Business Days (for all such extensions) beyond the latest expiration
date that would be permitted under clause (i) or (ii) of this sentence. In
addition, if, on the scheduled expiration date of the Offer, (i) the waiting
period under the HSR Act shall not have expired or been terminated, (ii) the
Commission of the European Union shall not have approved the Transactions
under Regulation (EC) No. 4064/89, as amended, of the Council of the European
Union or (iii) a temporary restraining order prohibiting the purchase of the
Shares shall have been issued by a court of competent jurisdiction in any
country in which the Company or its Subsidiaries have operations material to
the Company and its Subsidiaries, taken as a whole, the Purchaser shall extend
the Offer from time to time until five Business Days after the expiration or
termination of the waiting period under the HSR Act, such approval of the
Commission of the European Union or the lifting of such temporary restraining
order, subject to the right of Parent, Purchaser or the Company to terminate
this Agreement pursuant to the terms hereof. The Per Common Share Amount and
the Per Preferred Share Amount shall be net to the seller in cash, upon the
terms and subject to the conditions of the Offer. Subject to the terms and
conditions of the Offer, Purchaser shall, and Parent shall cause Purchaser to,
pay, as promptly as practicable after expiration of the Offer, for all Shares
validly tendered and not withdrawn.
(b) As promptly as reasonably practicable on the date of commencement of the
Offer, Purchaser shall file with the SEC (i) a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain
or shall incorporate by reference an offer to purchase (the "Offer to
Purchase") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Offer to Purchase and such
other documents, together with all supplements and amendments thereto, being
referred to herein collectively as the "Offer Documents"). The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to the filing thereof with the SEC. Parent, Purchaser
and the Company agree to correct promptly any information provided by any of
them for use in the Offer Documents which shall have become false or
misleading, and Parent and Purchaser further agree to take all steps necessary
to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the
other Offer Documents as so corrected to be disseminated to Holders, in each
case as and to the extent required by applicable federal securities laws.
Parent and Purchaser agree to provide the Company and its counsel with copies
of any written comments Parent, Purchaser or their counsel may receive from
the SEC or its staff with respect to the Offer Documents promptly after
receipt of such comments.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that (i) the Board, at a meeting duly
called and held on June 27, 1999, has duly adopted resolutions that (A)
determined that the Merger is advisable and that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are fair
to and in the best interests of the Holders, (B) approved and adopted this
Agreement and the transactions contemplated hereby (such approval and adoption
having been made in accordance with the provisions of (S) 203 of Delaware
Law), (C) recommended that the stockholders of the Company accept the Offer,
approve the Merger and approve and adopt this Agreement and the transactions
contemplated hereby and (D) took all other applicable action necessary to
render (x) Section 203 of the General Corporation Law of the State of Delaware
and other state takeover statutes and (y) the Rights Agreement, inapplicable
to the Offer and the Merger, and (ii) Goldman Sachs & Co. ("Goldman") has
delivered to the Board its opinion (which will be confirmed in writing), as of
the date hereof, that the consideration to be received by the holders of
shares of Common Stock pursuant to each of the Offer and the Merger is fair to
the holders of
2
<PAGE>
shares of Common Stock from a financial point of view. Subject to the
fiduciary duties of the Board under applicable law as determined by the Board
in good faith after receiving advice from independent counsel, the Company
hereby consents to the inclusion in the Offer Documents of the recommendation
of the Board described in the immediately preceding sentence. The Company has
advised Parent that each of its directors and executive officers intends to
tender pursuant to the Offer all Shares owned of record and beneficially by
him or her except to the extent such tender would violate applicable
securities laws.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the fiduciary duties of
the Board under applicable law as determined by the Board in good faith after
receiving advice from experienced, independent counsel, the recommendation of
the Board described in Section 1.02(a) and shall disseminate the Schedule 14D-
9 to the extent required by Rule 14D-9 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any other
applicable federal securities laws. Parent and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 prior to the filing
thereof with the SEC. The Company, Parent and Purchaser agree to correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall have become false or misleading, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and disseminated to Holders, in each case as and to the
extent required by applicable federal securities laws. To the extent
practicable, the Company shall cooperate with Parent and Purchaser in mailing
or otherwise disseminating the Schedule 14D-9 with the Offer Documents to the
Company's stockholders. The Company agrees to provide Parent and Purchaser and
their counsel with any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt
of such comments.
(c) The Company shall promptly furnish to Purchaser mailing labels
containing the names and addresses of all record Holders and with security
position listings of Shares held in stock depositories, each as of a recent
date, together with all stockholder lists, other available listings and
computer files containing names, addresses and security position listings of
record holders and beneficial owners of Shares. The Company shall furnish to
Purchaser such additional information, including, without limitation, updated
listings and computer files of stockholders, mailing labels and security
position listings, and such other assistance as Parent, Purchaser or their
agents may reasonably request. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Offer or the Merger,
Parent and Purchaser shall hold in confidence the information contained in
such labels, listings and files, shall use such information only in connection
with the Offer and the Merger, and, if this Agreement shall be terminated in
accordance with Section 8.01, shall deliver to the Company all copies of such
information then in their possession.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with Delaware Law, at the Effective
Time (as hereinafter defined) Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 2.02. Effective Time; Closing. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing
this Agreement or a certificate of merger or certificate of ownership and
merger (in either case, the "Certificate of Merger") with the Secretary of
State of the State of Delaware, in such form as is required by, and executed
in accordance with, the relevant provisions of Delaware Law (the date and time
of such filing being the "Effective Time").
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SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Certificate of Incorporation; By-laws. (a) At the Effective
Time, the Restated Certificate of Incorporation of the Company shall be
restated in a form acceptable to Purchaser and shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation; provided, however, that
such restated Certificate of Incorporation shall be in accordance with the
provisions of Section 6.07 hereof.
(b) The By-laws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 2.05. Directors and Officers. The directors of Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Purchaser, the
Company or the holders of any of the following securities:
(a) Each share of Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Common Stock to be
canceled pursuant to Section 2.06(c) and any Dissenting Shares (as
hereinafter defined)), together with the associated right to purchase
Company Series C Junior Participating Preferred Stock (the "Junior C
Preferred Stock") pursuant to the Rights Agreement, shall be canceled
and shall be converted automatically into the right to receive an
amount equal to the Per Common Share Amount in cash (the "Merger
Consideration") payable, without interest, to the holder of such share
of Common Stock, upon surrender, in the manner provided in Section
2.09, of the certificate that formerly evidenced such share of Common
Stock;
(b) Each share of ESOP Preferred Stock issued and outstanding immediately
prior to the Effective Time (other than shares of ESOP Preferred Stock
to be canceled pursuant to Section 2.06(c)) shall be canceled and shall
be converted automatically into the right to receive an amount in cash
equal to the product of the Merger Consideration multiplied by the
number of shares of Common Stock into which such share of ESOP
Preferred Stock shall be convertible immediately prior to the Effective
Time, payable, without interest, to the holder of such share of ESOP
Preferred Stock, upon surrender, in the manner provided in Section
2.09, of the certificate that formerly evidenced such share of ESOP
Preferred Stock;
(c) Each Share held in the treasury of the Company and each Share owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company immediately prior to the Effective Time shall
be canceled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(d) Each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into, and exchanged for, one validly issued, fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
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SECTION 2.07. Employee and Director Stock Options. (a) The Company shall,
immediately prior to the Effective Time, (i) terminate the Company Stock
Option Plans (as defined in Section 2.07(b) below) and any other plan, program
or arrangement providing for the issuance, grant or purchase of any other
interest in respect of the capital stock of the Company or any of its
Subsidiaries without prejudice to the holders of Options (as defined in
Section 2.07(b) below), and (ii) amend the provisions of any other Company
Benefit Plan, or related trust or funding vehicle, providing for the issuance,
holding, transfer or grant of any Shares, or any interest in respect of any
Shares (collectively the "Company Stock Plans"), to provide no continuing
rights to acquire, hold, transfer, or grant any Shares or any interest in any
Shares. Prior to the Effective Time, the Company shall cause all amounts
currently held as cash in participant accounts under the Company's Employee
Stock Purchase Program to be returned to the applicable participants and all
previously purchased shares of Common Stock held in such accounts to be
distributed to the applicable participants.
(b) Parent and the Company shall take all action necessary to (i) provide
that each option to purchase shares of Common Stock (an "Option") pursuant to
the Non-Employee Directors Stock Option Plan, the Company's Employee Stock
Compensation Plan, the 1990 Stock Option Plan and the 1982 Stock Option Plan
or any stock option agreement to which the Company is a party (the "Company
Stock Option Plans"), which is outstanding immediately prior to the acceptance
of the Shares by the Purchaser pursuant to the Offer, shall become fully
exercisable and vested, whether or not previously exercisable or vested, as of
the time of such acceptance and (ii) provide that, with respect to each such
Option, the holder thereof shall be entitled to receive from the Company, at
the time payment is made for the Shares tendered pursuant to the Offer, an
amount in cash in cancellation of such Option equal to the difference between
the Merger Consideration and the per share exercise price of such Option,
multiplied by the number of shares of Common Stock to which such Option
remains unexercised, less any income or employment tax withholding required
under the Code or any provision of state or local law. Prior to the acceptance
of the Shares by the Purchaser pursuant to the Offer, the Company shall make
all amendments to the Company Stock Plans necessary, and take all actions
necessary, to effect the transactions contemplated by this Section 2.07 and
Annex B. The Company and the Parent shall cooperate, and take all reasonable
steps to share in advance information, to effect the transactions contemplated
by this Section 2.07.
SECTION 2.08. Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing an appraisal for such Shares in accordance with
Section 262 of Delaware Law (collectively, the "Dissenting Shares") shall not
be converted into or represent the right to receive the Merger Consideration.
Such stockholders shall be entitled to receive payment of the appraised value
of such Shares held by them in accordance with the provisions of such Section
262, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such Shares under such Section 262 shall thereupon be deemed
to have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 2.09 of
the certificate or certificates that formerly evidenced such Shares. The
Company will give Parent and Purchaser (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
related instruments received by the Company, and (ii), after the acceptance of
the Shares by Purchaser pursuant to the Offer, the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal. The
Company will not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal or settle or offer
to settle any such demand.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) As of the
Effective Time, Purchaser shall deposit (and Parent shall provide all
necessary funds and otherwise cause Purchaser to deposit), or shall cause to
be deposited, with a bank or trust company designated by Parent or Purchaser
(and reasonably satisfactory to the Company) to act as its paying agent (the
"Paying Agent"), for the benefit of the Holders, for payment in accordance
with this Article II, through the Paying Agent, cash in an amount equal to the
sum of (i) the Per Common Share Amount multiplied by the number of shares of
Common Stock outstanding
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immediately prior to the Effective Time plus (ii) the Per Preferred Share
Amount multiplied by the number of shares of ESOP Preferred Stock outstanding
immediately prior to the Effective Time (such cash being hereinafter referred
to as the "Payment Fund"). The Paying Agent shall, pursuant to irrevocable
instructions, deliver the cash contemplated to be paid pursuant to this
Article II out of the Payment Fund. The Payment Fund shall not be used for any
other purpose. The Payment Fund shall be invested by the Paying Agent as
directed by the Surviving Corporation, provided that such investments shall be
in obligations of or guaranteed by the United States of America or of any
agency thereof and backed by the full faith and credit of the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Service, Inc. or Standard & Poor's Rating Services, respectively, or
in deposit accounts, certificates of deposit or banker's acceptances of,
repurchase or reverse repurchase agreements with, or Eurodollar time deposits
purchased from, commercial banks with capital, surplus and undivided profits
aggregating in excess of $1 billion (based on the most recent financial
statements of such bank which are then publicly available at the SEC or
otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation shall cause
to be mailed to each person who was, at the Effective Time, a holder of record
of Shares entitled to receive the Merger Consideration pursuant to Sections
2.06(a) and 2.06(b) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for each
Share formerly evidenced by such Certificate, and such Certificate shall then
be canceled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such taxes either have been
paid or are not applicable.
(c) At any time following the first anniversary of the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to Holders (including, without limitation, all interest and other
income received by the Paying Agent in respect of all funds made available to
it), and thereafter such Holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws)
only as general creditors thereof with respect to any Merger Consideration
that may be payable. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Share for
any Merger Consideration delivered in respect of such Share to a public
official pursuant to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the Holders outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
SECTION 2.10. Merger Without Meeting of Stockholders. Notwithstanding the
foregoing, in the event that Purchaser, or any other direct or indirect
subsidiary of Parent, shall acquire at least 90 percent of the outstanding
Shares, the parties hereto agree to take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a meeting of stockholders of the Company, in
accordance with Section 253 of Delaware Law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule (the "Disclosure Schedule")
delivered by the Company to Parent and Purchaser on or prior to the date of
this Agreement or as disclosed in any of the SEC Reports, the Company hereby
represents and warrants to Parent and Purchaser that:
SECTION 3.01. Organization and Qualification; Material Subsidiaries. Each of
the Company and each Material Subsidiary is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and
has the requisite power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to be so organized, existing or
in good standing or to have such power, authority and governmental approvals
does not, individually or in the aggregate, have a Material Adverse Effect.
Each of the Company and each Material Subsidiary is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated
by it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that do not, individually or in the aggregate, have a Material
Adverse Effect. Exhibit 21 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the SEC, is a true, accurate and
correct list of all of the Subsidiaries of the Company. All of the outstanding
capital stock of, or ownership interests in, each Subsidiary of the Company is
owned by the Company, directly or indirectly, free and clear of all liens. All
of the shares of capital stock of each Subsidiary are validly issued, fully
paid and non-assessable.
SECTION 3.02. Certificate of Incorporation and By-laws. The Company has
heretofore made available to Parent a complete and correct copy of the
Restated Certificate of Incorporation and the By-laws, each as amended to
date, of the Company. Such Restated Certificate of Incorporation and By-Laws
are in full force and effect, and the Company is not in material violation of
any provision thereof.
SECTION 3.03. Capitalization. The shares of issued and outstanding capital
stock of the Company have been duly authorized and validly issued and are
fully paid and nonassessable; none of the outstanding shares of capital stock
of the Company was issued in violation of the preemptive or other similar
rights of any security holder of the Company. The authorized capital stock of
the Company consists of 200,000,000 shares of Common Stock and 2,000,000
shares of preferred stock of the Company ("Company Preferred Stock"), par
value $1.00 per share (of which 450,000 shares have been designated Series A
Junior Participating Preferred Stock ("Junior A Preferred Stock"), 415,800
have been designated as ESOP Preferred Stock and 200,000 have been designated
Junior C Preferred Stock). As of June 24, 1999, (i) 66,263,894 shares of
Common Stock and 353,908.409 shares of ESOP Preferred are issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
and no shares of Junior A Preferred Stock or of Junior C Preferred Stock are
issued and outstanding, (ii) 14,023,674 shares of Common Stock and no shares
of Company Preferred Stock are held in the treasury of the Company, (iii) no
shares of Common Stock and no shares of Company Preferred Stock are held by
the Subsidiaries, (iv) no shares of Common Stock and no shares of Company
Preferred Stock are reserved for issuance pursuant to currently outstanding
stock options granted pursuant to the Company's Stock Option Plans, (v) no
shares of Common Stock and no shares of Company Preferred Stock are reserved
for issuance pursuant to stock options to be granted pursuant to the Company's
Stock Option Plans and (vi) 200,000 shares of Junior C Preferred Stock are
reserved for issuance pursuant to the Rights Agreement. All of the outstanding
shares of ESOP Preferred Stock are held by the Company's employee stock
ownership plan. Except as set forth in this Section 3.03, in the Restated
Certificate of Incorporation of the Company or for the rights to purchase
Junior C Preferred Stock pursuant to the Rights Agreement, neither the Company
nor any Subsidiary has granted any options, warrants or other rights, or
entered into any agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant
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to which they are issuable, will be duly authorized, validly issued, fully
paid and nonassessable. The total number of Options outstanding is no greater
than 10,888,271 and the weighted average exercise price is no less than
$34.27. There are no outstanding contractual obligations of the Company or any
Subsidiary to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Subsidiary or any other person
other than to Subsidiaries in the ordinary course of business consistent with
past practice.
SECTION 3.04. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby (the "Transactions"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
Transactions have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Transactions (other
than, with respect to the Merger, the approval and adoption of this Agreement
by the holders of a majority of the votes cast by the holders of the then
outstanding shares of Common Stock and shares of ESOP Preferred Stock, voting
together as a single class, if and to the extent required by applicable law,
and the filing and recordation of appropriate merger documents as required by
Delaware Law). This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution and delivery by
Parent and Purchaser, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by the Company does not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws or equivalent organizational documents
of the Company or any Material Subsidiary, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any Material Subsidiary or by which any property or asset of the Company or
any Material Subsidiary is bound or affected other than conflicts or
violations that do not, individually or in the aggregate, have a Material
Adverse Effect or prevent the consummation of any of the Transactions, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or other encumbrance on any property or
asset of the Company or any Material Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation, other than breaches or defaults that do not,
individually or in the aggregate, have a Material Adverse Effect or prevent
the consummation of any of the Transactions or prohibit or materially limit
the operation by Parent or Purchaser of all or any material portion of the
business of the Company and its Subsidiaries, taken as a whole.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing or registration with
or notification to, any governmental or regulatory authority, domestic or
foreign, with respect to the Company or any of its Subsidiaries, except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"),
the filing of a notification with the European Commission under Council
Regulation (EC) No. 4064/89, as amended, or similar antitrust filings or
notifications in other jurisdictions and filing and recordation of appropriate
merger documents as required by Delaware Law and (ii) where failure to obtain
such consents, approvals, orders, registrations, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Offer or the Merger, or otherwise prevent the Company from performing
its obligations under this Agreement, and do not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.06. Compliance. Neither the Company nor any Material Subsidiary is
in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any
Material Subsidiary or by which any property or asset of the Company or any
Material Subsidiary is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
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instrument or obligation to which the Company or any Material Subsidiary is a
party or by which the Company or any Material Subsidiary or any property or
asset of the Company or any Material Subsidiary is bound or affected, except
for any such conflicts, defaults or violations that do not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
January 1, 1998 and has heretofore made available to Parent, in the form filed
with the SEC, (i) the Company's Annual Reports on Form 10-K for the fiscal
years ended December 31, 1997 and 1998, (ii) the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1999, (iii) all proxy
statements relating to the Company's meetings of stockholders (whether annual
or special) held since January 1, 1998, and (iv) all other forms, reports and
other registration statements filed by the Company with the SEC since January
1, 1998 (the forms, reports and other documents referred to in clauses (i),
(ii), (iii) and (iv) above, together with any amendments or supplements
thereto, being referred to herein, collectively, as the "SEC Reports"). The
SEC Reports (i) were prepared in accordance with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, as the case may be, and the rules and regulations thereunder and (ii) did
not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Subsidiary is
required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the SEC Reports was prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and each fairly presented, in all material
respects, the consolidated financial position, results of operations and cash
flow of the Company and the Subsidiaries as at the respective dates thereof
and for the respective periods indicated therein (except as otherwise noted
therein and subject, in the case of unaudited statements, to normal and
recurring year-end adjustments).
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the Subsidiaries as at March 31, 1999, including the notes
thereto, neither the Company nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected on a balance sheet prepared in
accordance with generally accepted accounting principles, except for
liabilities and obligations that do not, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.08. Absence of Certain Changes or Events. From March 31, 1999
through the date of this Agreement, there has not been (i) any event,
occurrence or condition which, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, (ii) any amendments or
changes in the Certificate of Incorporation or Bylaws of the Company, (iii)
any revaluation by the Company or any of its Subsidiaries of any of their
respective assets, including, without limitation, write-offs of accounts
receivable, other than in the ordinary course of the Company's and its
Subsidiaries' businesses consistent with historical practices, (iv) any
material change by the Company or any of its Subsidiaries in its accounting
methods, principles or practices, (v) any entry by the Company or any
Subsidiary into any contract material to the Company and the Subsidiaries,
taken as a whole, (vi) any declaration, setting aside or payment of any
dividend or distribution in respect of any capital stock of the Company or any
redemption, repurchase or other acquisition of any of its securities (other
than regular quarterly dividends on the shares of Common Stock and regular
dividends on the shares of ESOP Preferred Stock), (vii) any event pursuant to
which the Company or any of its Subsidiaries (A) incurred any liabilities
(direct, contingent or otherwise) which are material to the Company and its
Subsidiaries, taken as a whole, or (B) engaged in any transaction or entered
into any agreement material to the Company and its Subsidiaries, taken as a
whole, in each of clause (A) and (B) outside of the ordinary course of
business, or (viii) other than pursuant to the contractual arrangements
referred to in Section 3.10 and Annex B, any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan, or any other
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increase in the compensation payable or to become payable to any officers or
key employees of the Company or any Subsidiary, except in the ordinary course
of business consistent with past practice.
SECTION 3.09. Absence of Litigation; Joint Ventures. (a) As of the date of
this Agreement, there is no claim, action, proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary or against Treated Water Outsourcing, a Nalco/U.S. Filter Joint
Venture ("TWO"), or any property or asset of the Company or any Subsidiary or
TWO, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect.
As of the date of this Agreement, none of the Company, any Subsidiary or TWO
nor any property or asset of the Company, any Subsidiary or TWO is subject to
any order, writ, judgment, injunction, decree, determination or award that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) As of the date of this Agreement, the aggregate amount of indebtedness,
net of cash and cash equivalents (i) of TWO is not materially greater than
$24,700,000 and (ii) of Nalco/Exxon Energy Chemicals, L.P. is not materially
greater than $6,700,000.
SECTION 3.10. Employee Benefit Plans. (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
maintained or contributed to by the Company or any Subsidiary, or any
organization which, together with the Company or any Subsidiary, would be
treated as a "single employer" within the meaning of Section 414 of the Code
or Section 4001(a)(14) of ERISA (collectively, the "Company Benefit Plans"),
the Company has made available to Parent a true and correct copy of (i) the
most recent annual report (Form 5500) filed with the Internal Revenue Service
(the "IRS"), (ii) such Company Benefit Plan, (iii) each trust agreement
relating to each Company Benefit Plan, (iv) the most recent summary plan
description for each Company Benefit Plan for which a summary plan description
is required, (v) the most recent actuarial report or valuation, if any,
relating to a Company Benefit Plan subject to Title IV of ERISA and (vi) the
most recent determination letter, if any, issued by the IRS with respect to
any Company Benefit Plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
(b) With respect to the Company Benefit Plans, to the knowledge of the
Company, no event has occurred and there exists no condition or set of
circumstances in connection with which the Company or any Subsidiary could be
subject to any liability under the terms of such Company Benefit Plans, ERISA,
the Code or any other applicable law which would have a Material Adverse
Effect.
(c) Except as required by law or as would not have a Material Adverse
Effect, no Company Benefit Plan provides retiree medical or retiree life
insurance benefits to any person.
(d) The Company has made available to Parent (i) copies of all material
employment agreements with officers of the Company and the Subsidiaries (or
copies of forms of agreements setting forth representative employment terms
and conditions) and (ii) copies of all plans, programs, agreements and other
arrangements of the Company with or relating to its employees which contain
change of control provisions (the "Company Change of Control Agreements").
(e) Except as would not have a Material Adverse Effect, (i) each Company
Benefit Plan which is intended to be "qualified" within the meaning of Section
401(a) of the Code, has received a favorable determination letter from the
Internal Revenue Service and, to the knowledge of the Company, no event has
occurred and no condition exists which could reasonably be expected to result
in the revocation of any such determination; (ii) during the six year period
preceding the Effective Time, no Company Benefit Plan covered by Title IV of
ERISA has been terminated and no proceedings have been instituted to terminate
or appoint a trustee to administer any such plan; (iii) during the six year
period preceding the Effective Time, no Company Benefit Plan subject to
Section 412 of the Code or Section 302 of ERISA has incurred any accumulated
funding
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deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA, or obtained a waiver of any minimum funding standard or an extension of
any amortization period under Section 412 of the Code or Section 303 or 304 of
ERISA; and (iv) no liability, claim, action or litigation has been made,
commenced or, to the Company's knowledge, threatened with respect to any
Company Benefit Plan (other than routine claims for benefits payable in the
ordinary course, and appeals of such denied claims).
SECTION 3.11. Labor Matters. Neither the Company nor any Material Subsidiary
is a party to any collective bargaining or other labor union contract
applicable to persons employed by the Company or a Material Subsidiary in the
United States and no collective bargaining agreement is being negotiated by
the Company or any Material Subsidiary with respect to such United States
employees. As of the date of this Agreement, there is no effort by or on
behalf of any labor union to organize any persons employed by the Company or
any Material Subsidiary in the United States, and, to the knowledge of the
Company, no such effort has been threatened, and no labor dispute, strike or
work stoppage against the Company or any Material Subsidiary pending or, to
the knowledge of the Company, threatened in writing which may interfere with
the respective business activities of the Company or the Material
Subsidiaries, except where such dispute, strike or work stoppage would not
have a Material Adverse Effect. As of the date of this Agreement, to the
knowledge of the Company, none of the Company or any of the Material
Subsidiaries, or their respective representatives or employees, has committed
any unfair labor practices in connection with the operation of the respective
businesses of the Company or the Material Subsidiaries, and there is no charge
or complaint against the Company or the Material Subsidiaries by the National
Labor Relations Board or any comparable state agency pending or threatened in
writing, except where such unfair labor practice, charge or complaint would
not have a Material Adverse Effect.
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement. Neither the
Schedule 14D-9 nor any information supplied by the Company for inclusion or
incorporation by reference in the Offer Documents shall, at the respective
times set out in the Schedule 14D-9, the Offer Documents or any amendments or
supplements thereto that are filed with the SEC or are first published, sent
or given to stockholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. Neither the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders' Meeting (as hereinafter defined) nor the information statement
to be sent to such stockholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, being referred to herein as
the "Proxy Statement"), shall, at the date the Proxy Statement (or any
amendment or supplement thereto) is first mailed to stockholders of the
Company, at the time of the Stockholders' Meeting and at the Effective Time,
be false or misleading with respect to any material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading. If, at any
time prior to the Effective Time, any event with respect to the Company, its
officers and directors or any of its Subsidiaries should occur which is
required to be described in an amendment of, or a supplement to, the Schedule
14D-9, the Offer Documents or the Proxy Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to Holders. Prior to the filing of
such amendment or supplement with the SEC, a copy thereof will be delivered to
Parent and its counsel, who shall, to the extent practicable under the
circumstances and applicable law, have the opportunity to comment on such
amendment or supplement. The Schedule 14D-9 and the Proxy Statement shall
comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 3.13. Taxes. (a) The Company and its Subsidiaries have timely filed,
or will timely file, all material Tax Returns required to be filed by, or with
respect to, the Company and its Subsidiaries on or before the Effective Time
(taking into account proper extensions of time to file), which Tax Returns are
true and complete in all material respects. All material Taxes which are due
and payable by the Company or any of its Subsidiaries as of the date of this
Agreement have been timely paid or have been adequately disclosed and fully
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provided for as a liability on the financial statements of the Company and its
Subsidiaries in accordance with generally accepted accounting principles,
consistently applied. All material Taxes which are not yet due and payable,
but become due and payable by the Company or any of its Subsidiaries on or
before the Effective Time, will be timely paid or will be adequately disclosed
and fully provided for, on or before the Effective Time, as a liability on the
financial statements of the Company and its Subsidiaries in accordance with
generally accepted accounting principles, consistently applied. The Company
and each Subsidiary have withheld and collected all material Taxes that are
required to be withheld and collected by them as of the date of this Agreement
and have timely paid to the proper authorities such Taxes withheld and
collected to the extent due and payable. The Company and each Subsidiary will
withhold and collect on or before the Effective Time all material Taxes that
will be required to be withheld and collected by them on or before the
Effective Time and will timely pay to the proper authorities such Taxes
withheld and collected to the extent due and payable on or before the
Effective Time.
(b) Neither the Company nor any of its Subsidiaries has waived or been
requested to waive any statute of limitations in respect of material Taxes of
the Company or any of its Subsidiaries. Neither the Internal Revenue Service
nor any other taxing authority (domestic or foreign) is now asserting or, to
the knowledge of the Company, threatening to assert against the Company or any
Subsidiary any deficiency or claim for material additional Taxes. No liens or
security interests arising in connection with a failure (or alleged failure)
to pay any material Taxes have attached to any of the assets of the Company or
any of its Subsidiaries, except for Taxes that are being contested in good
faith through proper proceedings.
(c) Neither the Company nor any of its Subsidiaries has any liability for
material Taxes of any person (other than the Company and its Subsidiaries),
including liability arising from the application of Treasury regulation
section 1.1502-6 or any analogous provision of state, local or foreign law, or
as a transferee or successor, by contract or otherwise, other than a liability
for which any person (other than the Company and its Subsidiaries) is
required, by contract or otherwise, to indemnify the Company or any of its
Subsidiaries, and other than a liability which is adequately disclosed and
fully provided for on the financial statements of the Company and its
Subsidiaries in accordance with generally accepted accounting principles,
consistently applied. To the knowledge of the Company, no person or taxing
authority has asserted liability against the Company or any of its
Subsidiaries for material Taxes of any person (other than the Company and its
Subsidiaries), including liability arising from the application of Treasury
regulation section 1.1502-6 or any analogous provision of state, local or
foreign law, or as a transferee or successor, by contract or otherwise.
(d) There are no tax sharing, allocation, indemnification or similar
agreements in effect as between the Company or its Subsidiaries or any
predecessor or affiliate thereof and any other party under which Parent or
Purchaser, the Company or its Subsidiaries could be liable for material Taxes
or other material claims of any party (other than the Company or its
Subsidiaries), other than Taxes or other claims which are adequately disclosed
and fully provided for on the financial statements of the Company and its
Subsidiaries in accordance with generally accepted accounting principles,
consistently applied.
(e) No election under Section 341(f) of the Code has been made or shall be
made prior to the Effective Time to treat the Company or any of its
Subsidiaries as a consenting corporation, as defined in Section 341 of the
Code.
(f) The Company is not a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(g) Neither the Company nor any of its Subsidiaries has applied for, been
granted, been required to make, or agreed to any accounting method change for
which it will be required to take into account any material adjustment under
Section 481 of the Code or any similar provision of the Code or the
corresponding tax laws of any nation, state or locality, and the Internal
Revenue Service or any other taxing authority has not initiated or proposed
any such adjustment or change in accounting period.
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(h) No material amount of indebtedness of the Company or any of its
Subsidiaries consists of "corporate acquisition indebtedness" within the
meaning of Section 279 of the Code.
(i) For purposes of this Agreement (i) "Tax" (and, with correlative meaning,
"Taxes") means any United States federal, state, local, foreign or other
income, gross receipts, profits, windfall profits, property, sales, use,
license, excise, franchise, occupation, employment, payroll, premium,
withholding, alternative or added minimum, ad valorem, transfer, stamp,
severance, capital gains, capital stock or excise tax, or any other tax, levy,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of a Tax Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest imposed by any
governmental authority with respect to the foregoing, and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity with respect to Taxes, and (ii) "Tax
Return" means any return, form, report or similar statement with respect to
any Tax (including any schedules, related or supporting information),
including without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
SECTION 3.14. Rights Agreement. The copy of the Rights Agreement, dated as
of June 20, 1996, between the Company and First Chicago Trust Company, as
Rights Agent (the "Rights Agreement"), including all amendments and exhibits
thereto, that is set forth as an exhibit to the Company's Form 10-K for the
year ended December 31, 1998 is a complete and correct copy thereof. The Board
has taken all necessary action to amend the Rights Agreement so that none of
the execution of this Agreement, the making of the Offer or the consummation
of the Merger will (a) cause the Rights issued pursuant to the Rights
Agreement to become exercisable, (b) cause Parent or Purchaser to become an
Acquiring Person (as such term is defined in the Rights Agreement) or (c) give
rise to a Distribution Date or a Triggering Event (as each term is defined in
the Rights Agreement).
SECTION 3.15. Trademarks, Patents and Copyrights. The Company and the
Subsidiaries own, or possess licenses or other valid rights to use, all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, servicemarks, trade secrets, applications for trademarks
and for servicemarks, know-how and other proprietary rights and information
that are material to the business of the Company and the Material Subsidiaries
as currently conducted, and the Company is unaware of any assertion or claim
challenging the validity of any of the foregoing, other than any assertion or
claim which, individually or in the aggregate, does not have a Material
Adverse Effect. The conduct of the business of the Company and the Material
Subsidiaries as currently conducted does not conflict with any patent, patent
right, license, trademark, trademark right, trade name, trade name right,
service mark or copyright of any third party, other than conflicts that,
individually or in the aggregate, do not have a Material Adverse Effect. To
the knowledge of the Company, there are no infringements by any third party of
any proprietary rights owned or licensed by or to the Company or any Material
Subsidiary which, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 3.16. Environmental Matters. Except as would not, individually or in
the aggregate, have a Material Adverse Effect, (a) the Company is in
compliance with all applicable Environmental Laws and has obtained and is in
compliance with all governmental permits, licenses and other authorizations
required under any Environmental Law, (b) there are no written claims pursuant
to any Environmental Law pending or, to the Company's knowledge, threatened,
against the Company, (c) the Company has made available to Purchaser copies of
any and all environmental assessment or audit reports or other similar studies
or analyses generated within the last three years and in the Company's
possession, that relate to the Company, and (d) there are no facts,
circumstances or conditions relating to the business or operations of the
Company or any Material Subsidiary, or to any real property currently owned or
operated by the Company or any Material Subsidiary (or, to the knowledge of
the Company, any real property previously owned or operated by the Company or
any Material Subsidiary as a result of the actions or operations of the
Company or any Material Subsidiary), that would reasonably be expected to give
rise to any claim, proceeding or action, or to any liability, under any
Environment Law.
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SECTION 3.17. Brokers. No broker, finder or investment banker (other than
Goldman) is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf
of the Company. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and Goldman pursuant to
which such firm would be entitled to any payment relating to the Transactions.
SECTION 3.18. Year 2000. Except as would not, individually or in the
aggregate, have a Material Adverse Effect, to the knowledge of the Company all
internal computer systems, computer software, equipment or technology that are
material to the business, finances or operations of the Company and its
Material Subsidiaries or were sold or licensed to customers of the Company and
its Material Subsidiaries are (i) able to receive, record, store, process,
calculate, manipulate and output dates from and after January 1, 2000, time
periods that include January 1, 2000 and information that is dependent on or
relates to such dates or time periods, in the same manner and with the same
accuracy, functionality, data integrity and performance as when dates or time
periods prior to January 1, 2000 are involved, (ii) able to store and output
date information in a manner that is unambiguous as to century and (iii) to
recognize Year 2000 as a leap year.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant to
the Company that:
SECTION 4.01. Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing or in good standing or
to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a material adverse effect on the
ability of Parent or Purchaser to perform their obligations hereunder, or
prevent or materially delay the consummation of the Transactions.
SECTION 4.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions
have been duly and validly authorized by all necessary corporate action, and
no other corporate proceedings on the part of Parent or Purchaser are
necessary to authorize this Agreement or to consummate the Transactions (other
than, with respect to the Merger, the filing and recordation of appropriate
merger documents as required by Delaware Law). This Agreement has been duly
and validly executed and delivered by Parent and Purchaser and, assuming the
due authorization, execution and delivery by the Company, constitutes legal,
valid and binding obligations of each of Parent and Purchaser enforceable
against each of Parent and Purchaser in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of either Parent or Purchaser, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or Purchaser or by which any property or asset of either of them is
bound or affected, or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or Purchaser pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Purchaser is a
party or by which Parent or Purchaser or any property or asset of either of
them is bound or affected, except for any such violations, breaches, defaults
or other occurrences which
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would not, individually or in the aggregate, have a material adverse effect on
the ability of Parent or Purchaser to perform their obligations hereunder, or
prevent or materially delay the consummation of the Transactions.
(b) The execution and delivery of this Agreement by Parent and Purchaser do
not, and the performance of this Agreement by Parent and Purchaser will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act,
Blue Sky Laws and state takeover laws, the HSR Act, the filing of a
notification with the European Commission under Council Regulation (EC) No.
4064/89, as amended, or similar antitrust filings or notifications in other
jurisdictions and filing and recordation of appropriate merger documents as
required by Delaware Law and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, have a material
adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions.
SECTION 4.04. Financing. Parent has sufficient funds to permit Purchaser to
acquire all the outstanding Shares in the Offer and the Merger.
SECTION 4.05. Offer Documents; Proxy Statement. The Offer Documents will
not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they are made, not misleading. The
information supplied by Parent for inclusion in the Proxy Statement will not,
on the date the Proxy Statement (or any amendment or supplement thereto) is
first mailed to stockholders of the Company, at the time of the Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or omits to state any material
fact required to be stated therein or necessary in order to make the
statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the
foregoing documents or the Offer Documents. The Offer Documents shall comply
in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 4.06. Brokers. No broker, finder or investment banker (other than
J.P. Morgan & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Parent or Purchaser.
SECTION 4.07. Absence of Litigation. As of the date of this Agreement, there
is no litigation, suit, claim, action, proceeding or investigation pending or,
to the knowledge of Parent and Purchaser, threatened against, Parent or
Purchaser or any of their respective properties or assets before any court,
arbitrator or administrator, governmental or regulatory authority or body,
domestic or foreign, which seeks to delay or prevent or would result in the
material delay of or would prevent the consummation of any Transaction. As of
the date of this Agreement, neither Parent nor Purchaser or any property or
asset of Parent or Purchaser is subject to any continuing order of, consent
decree, settlement agreement or similar written agreement with, or, to the
knowledge of Parent and Purchaser, continuing investigation by, any
governmental or regulatory authority, domestic or foreign, or any order, writ,
judgment, injunction, decree, determination or award of any governmental or
regulatory authority or any arbitrator which would prevent Parent or Purchaser
from performing their respective material obligations under this Agreement or
prevent or materially delay the consummation of any Transaction.
SECTION 4.08. No Prior Activities. Since the date of its incorporation,
Purchaser has not engaged and will not engage prior to the Effective Time or
termination of this Agreement in any activities other than in connection with
or as contemplated by this Agreement.
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SECTION 4.09. Parent Not an Affiliated Shareholder. As of the date hereof,
(i) neither Parent nor any of its Affiliates is, with respect to the Company,
an "interested stockholder" as such term is defined in Section 203 of Delaware
Law and (ii) except to the extent that Parent or its Affiliates may be deemed
to beneficially own Shares as a result of this Agreement, Parent and its
Affiliates collectively do not hold directly or indirectly five percent or
more of the outstanding voting securities of the Company.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger. Except
as set forth in Section 5.01 of the Disclosure Schedule, the Company agrees
that, between the date of this Agreement and the Effective Time, the Company
shall, and shall cause its Subsidiaries to, conduct its businesses only in the
ordinary course and shall use all reasonable efforts to preserve substantially
intact the business organization of the Company and the Subsidiaries, to keep
available the services of their current officers and employees and to preserve
the current relationships of the Company and the Subsidiaries with customers,
suppliers and other persons with which the Company or any Subsidiary has
significant business relations. As amplification of the foregoing, except as
contemplated by this Agreement or in Section 5.01 of the Disclosure Schedule,
neither the Company nor any Subsidiary shall, between the date of this
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Parent:
(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 the Company
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 the Company or any Subsidiary (except for the issuance of
Shares issuable pursuant to stock options outstanding on the date hereof)
or (ii) any assets of the Company or any Subsidiary 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 its capital stock, or redeem, purchase or
otherwise acquire, directly or indirectly, any shares of the capital stock
of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(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 the Company 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 the
Company 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 the Company and the
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 this Section 5.01(e);
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(f) except as provided in Section 5.01 of the Disclosure Schedule, as
contemplated by this 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 Agreement or to the extent required by applicable law or the terms or a
collective bargaining agreement or a contractual obligation existing on the
date hereof;
(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;
(i) make, change or rescind any material Tax election (other than (i)
recurring elections that customarily are made in connection with the filing
of any Tax Return; provided that any such elections are consistent with the
past practices of the Company or its Subsidiaries, as the case may be; (ii)
gain recognition agreements under Section 367 of the Code and Treasury
regulations thereunder with respect to transactions occurring in the 1998
fiscal year of the Company; and (iii) elections with respect to
Subsidiaries purchased by the Company under Section 338(h)(10) of the Code
or, solely in the case of non-U.S. Subsidiaries purchased by the Company,
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 this
Agreement or as contemplated by this 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 the
Company SEC Reports;
(l) enter into any agreement, understanding or commitment that restrains,
limits or impedes the Company's or any of its Subsidiaries' ability to
compete with or conduct any business or line of business, including, but
not limited to, geographic limitations on the Company's or any of its
Subsidiaries' activities;
(m) materially modify, amend or terminate any material contract to which
it is a party or waive any of its 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 actions set
forth in this Section 5.01.
SECTION 5.02. Third Party Standstill Agreements and Confidentiality
Agreements. During the period from the date of this Agreement through the
Effective Time, subject to the fiduciary duties of the Board under applicable
law as determined by the Board in good faith after receiving the advice of
experienced, independent counsel (which counsel may be Shearman & Sterling)
(i) the Company shall not terminate, amend, modify or waive any provision of
any confidentiality or standstill agreement to which the Company or any of its
Subsidiaries is a party (other than any involving Parent), and (ii) the
Company shall enforce, to the fullest extent
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permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof having
jurisdiction. In the event of any Acquisition Proposal or unsolicited bid for
any Shares from any third party which is a party to any such standstill
agreement, the Company shall advise Parent that such third party is subject to
such a standstill agreement and that the Company will enforce such standstill
agreement as contemplated by this Section 5.02.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting. The Company, acting through the Board,
shall, in accordance with applicable law and the Company's Restated
Certificate of Incorporation and By-laws, (i) duly call, give notice of,
convene and hold an annual or special meeting of its stockholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on this Agreement and the transactions contemplated hereby
(the "Stockholders' Meeting") and (ii) subject to the fiduciary duties of the
Board under applicable law as determined by the Board in good faith after
receiving the advice of experienced, independent counsel, (A) include in the
Proxy Statement the recommendation of the Board that the stockholders of the
Company approve and adopt this Agreement and the Transactions and (B) use all
reasonable efforts to obtain such approval and adoption. At the Stockholders'
Meeting, Parent and Purchaser shall cause all Shares then owned by them and
their Subsidiaries to be voted in favor of the approval and adoption of this
Agreement and the Transactions. The record date for the Stockholders' Meeting
shall be a date subsequent to the date Parent or Purchaser becomes a record
holder of Shares purchased pursuant to the Offer.
SECTION 6.02. Proxy Statement. If stockholder approval of the Merger is
required by applicable law, as soon as practicable following consummation of
the Offer, the Company shall file the Proxy Statement with the SEC under the
Exchange Act, and shall use all reasonable efforts to have the Proxy Statement
cleared by the SEC. Parent, Purchaser and the Company shall cooperate with
each other in the preparation of the Proxy Statement, and the Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between the Company, or any representative of the
Company, and the SEC or its staff. The Company shall give Parent and its
counsel the opportunity to review the Proxy Statement prior to its being filed
with the SEC and shall give Parent and its counsel the opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and
Purchaser agrees to use all reasonable efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the Holders entitled to vote at the
Stockholders' Meeting at the earliest practicable time.
SECTION 6.03. Company Board Representation; Section 14(f). (a) Promptly upon
the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as shall give
Purchaser representation on the Board equal to the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of
shares of Common Stock beneficially owned by Purchaser or any Affiliate of
Purchaser following such purchase bears to the total number of shares of
Common Stock then outstanding, and the Company shall, at such time, promptly
take all actions necessary to cause Purchaser's designees to be elected as
directors of the Company, including increasing the size of the Board or
securing the resignations of incumbent directors or both. At such times, the
Company shall use all reasonable efforts to cause persons designated by
Purchaser to constitute the same percentage of each committee of the Board as
persons designated by Purchaser to constitute the Board to the extent
permitted by applicable law.
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(b) The Company shall promptly take all actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1 to fulfill
such obligations. Parent or Purchaser shall supply to the Company and be
solely responsible for any information with respect to either of them and
their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to this
Section 6.03, prior to the Effective Time, any amendment of this Agreement or
the Restated Certificate of Incorporation or By-laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or Purchaser or waiver of any of the Company's rights hereunder shall require
the concurrence of a majority of the directors of the Company then in office
who neither were designated by Purchaser nor are employees of the Company.
SECTION 6.04. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of
the Company and the Subsidiaries to, afford the officers, employees and agents
(including accountants, counsel, financial advisors and other representatives)
of Parent and Purchaser reasonable access at all reasonable times to the
officers, employees, agents, properties, offices and other facilities, books
and records of the Company and each Subsidiary, and shall furnish Parent and
Purchaser with (i) a copy of each report, schedule, registration statement and
other documents filed by it during such period pursuant to the requirements of
federal or state laws and (ii) all financial, operating and other data and
information as Parent or Purchaser, through its officers, employees or agents,
may reasonably request.
(b) All information obtained by Parent or Purchaser pursuant to this Section
6.04 shall be kept confidential in accordance with the confidentiality
agreement, dated April 13, 1999 (the "Confidentiality Agreement"), between
Degremont S.A. and Goldman on behalf of the Company.
SECTION 6.05. No Solicitation. (a) The Company shall, and shall direct and
use all reasonable efforts to cause its officers, directors, employees and
agents (including accountants, counsel, financial advisors and other
representatives) to, immediately cease any discussions or negotiations with
any parties that may be ongoing with respect to any Acquisition Proposal (as
defined below in this Section 6.05(a)). The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any agent (including accountants,
counsel, financial advisors and other representatives) of, the Company or any
of its Subsidiaries to, directly or indirectly, (i) solicit, facilitate or
initiate, or knowingly encourage the submission of, any Acquisition Proposal
(including, without limitation, the taking of any action which would make
Section 203 of the Delaware Law inapplicable to the Acquisition Proposal) or
(ii) participate in any discussions or negotiations regarding, or furnish or
disclose to any person or legal entity (other than Parent or Purchaser) any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal; provided, however, that if,
prior to the acceptance for payment of Shares pursuant to the Offer, the Board
determines in good faith that it is necessary to do so in accordance with its
fiduciary duties to the Company's stockholders under applicable law as advised
by experienced, independent counsel (which counsel may be Shearman &
Sterling), the Company may, in response to an unsolicited Acquisition
Proposal, and subject to compliance with Section 6.05(c), (x) furnish or
disclose information with respect to the Company and its Subsidiaries to any
third party pursuant to a customary confidentiality agreement on terms no less
favorable to the Company nor more favorable to such third party than those
contained in the Confidentiality Agreement and (y) participate in negotiations
regarding such Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means any bona fide inquiry, proposal or offer from any
third party relating to any direct or indirect acquisition or purchase of all
or a substantial part of the assets of the Company or of over 20% of the
voting securities of the Company, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of the
voting securities of the Company, any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company, other
than the Transactions, or any other transaction the consummation of which
could reasonably be expected to impede,
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interfere with, prevent or materially delay the Offer or the Merger or which
could reasonably be expected to dilute materially the benefits to Parent of
the Transactions.
(b) Except as set forth in this Section 6.05, neither the Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation by the Board or any such committee of the Offer, this Agreement
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal or (iii) cause the Company to enter into any
agreement with respect to any Acquisition Proposal or any letter of intent,
agreement in principle, or other similar understanding or arrangement with
respect to an Acquisition Proposal or any understanding, arrangement or
agreement requiring or incentivizing the Company to abandon, terminate or fail
to consummate the Merger or any of the Transactions. Notwithstanding the
foregoing, in the event prior to the time of acceptance for payment of Shares
pursuant to the Offer the Board determines in good faith that it is necessary
to do so in accordance with its fiduciary duties to the Company's stockholders
under applicable law as advised by experienced, independent counsel (which
counsel may be Shearman & Sterling), the Board may recommend to its
stockholders an Acquisition Proposal and in connection therewith withdraw or
adversely modify its approval or recommendation of the Offer or the Merger if
(i) a third party makes a Superior Proposal and (ii) (A) five Business Days
have elapsed following delivery to Parent of a written notice of the
determination by the Board to take such action and during such five Business
Day period the Company has fully cooperated with Parent, with the intent of
enabling Parent and Purchaser, on the one hand, and the Company, on the other
hand, to agree to a modification of this Agreement and (B) at the end of such
five Business Day period, the Acquisition Proposal continues to constitute a
Superior Proposal, and concurrently therewith or afterwards the Board may
terminate this Agreement pursuant to the provisions of Section 8.01(e) in
order to permit the Company to enter into any agreement with respect to any
such Superior Proposal; provided that any agreement with a third party with
respect to a Superior Proposal shall provide an opportunity for Parent (and
any other person) to make an additional final bid for the Company and, if such
bid would constitute a Superior Proposal, for the Company to accept such bid.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, all outstanding Shares
pursuant to a tender offer or a merger or purchase of all of the assets of the
Company (i) on terms which the Board determines in good faith (based on the
written advice of a financial advisor of nationally recognized reputation) to
be more favorable to the Company and its stockholders than the Transactions,
as proposed to be modified by Parent in accordance with the provisions of this
paragraph, (ii) for which financing, to the extent required, is then available
(it being understood that financing evidenced by highly confident letters and
similar letters shall not be considered "available" for purposes of this
Section 6.05), and (iii) which is not subject to any financing or due
diligence condition.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 6.05, immediately after receipt thereof, the
Company shall advise Parent in writing of any request for information
regarding an Acquisition Proposal, or any inquiry or proposal with respect to
an Acquisition Proposal. The Company shall keep Parent informed of the status
of any such request or Acquisition Proposal. The Company shall promptly
provide to Parent any non-public information concerning the Company provided
to any other person in connection with any Acquisition Proposal which was not
previously provided to Parent.
(d) Nothing contained in this Section 6.05 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if the Board determines in good faith that it is
necessary to do so in accordance with its fiduciary duties to the Company's
stockholders under applicable law as advised by experienced, independent
counsel (which counsel may be Shearman & Sterling).
(e) The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party. Immediately following the execution of this Agreement, the Company
shall request each person or entity which has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring
the Company or any portion thereof to return all confidential information
heretofore furnished to such person or entity by or on behalf of the Company.
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SECTION 6.06. Employee Benefits Matters. Annex B hereto sets forth certain
agreements among the parties hereto with respect to the Plans and other
employee benefits matters.
SECTION 6.07. Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions (collectively, "Indemnification
Provisions") no less favorable with respect to indemnification than are set
forth in the Restated Certificate of Incorporation and By-Laws of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would affect
adversely the rights thereunder of individuals who at the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification shall be required by law.
(b) The Surviving Corporation shall maintain in effect for six years from
the Effective Time, if available, the current directors' and officers'
liability insurance policies maintained by the Company (provided that Parent
and the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time.
Notwithstanding the foregoing, in no event shall Parent or the Surviving
Corporation be required to expend pursuant to this Section 6.07(b) more than
an amount per year equal to 200% of current annual premiums paid by the
Company for such insurance (which the Company represents to be $476,525 for
the 12 month period ended October 1, 1999); provided further that, in the
event of an expiration, termination or cancellation of such current policies,
Parent or the Surviving Corporation shall be required to obtain as much
coverage as is possible under substantially similar policies for such 200%
amount.
(c) Prior to the Effective Time, the Company shall, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and, after the Effective Time, the
Surviving Corporation shall, to the fullest extent permitted under applicable
law, indemnify and hold harmless, each present and former director, officer or
employee of the Company and each Subsidiary (collectively, the "Indemnified
Parties") against all costs and expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director or employee whether
occurring before or after the Effective Time (including, without limitation,
the Transactions), for a period of six years after the date hereof. Without
limiting the generality of the foregoing, in the event of any such claim,
action, suit, proceeding or investigation, (i) the Company or the Surviving
Corporation, as the case may be, shall pay as incurred, each Indemnified
Party's legal and other expenses (including costs of investigation and
preparation), including the fees and expenses of counsel selected by the
Indemnified Party, promptly after statements therefor are received and (ii)
the Company and the Surviving Corporation shall cooperate in the defense of
any such matter; provided, however, that none of the Company or the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); and provided
further that, in the event that any claim for indemnification is asserted or
made within such six-year period, all rights to indemnification in respect of
such claim shall continue until the disposition of such claim. The parties
intend, to the extent not prohibited by applicable law, that the
indemnification provided for in this Section 6.07 shall apply without
limitation to negligent acts or omissions of any Indemnified Party. Any
determination to be made as to whether any Indemnified Party has met any
standard of conduct imposed by law shall be made by legal counsel reasonably
acceptable to such Indemnified Party and the Surviving Corporation, retained
at the Surviving Corporation's expense. The Company or the Surviving
Corporation shall pay all expenses, including counsel fees and expenses, that
any Indemnified Party may incur in enforcing the indemnity and other
obligations provided for in this Section 6.07.
(d) In the event the Company, the Surviving Corporation or Parent or any of
their respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then and in each such case,
proper provision shall be made so that the successors and assigns of the
Company, the Surviving Corporation or Parent, as the case may be, shall assume
the obligations set forth in this Section 6.07.
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(e) This Section 6.07 is intended to benefit the Indemnified Parties and
their respective heirs, executors and personal representatives, may be
enforced by them and shall be binding on the successors and assigns of Parent,
the Company and the Surviving Corporation. This Section 6.07 shall not limit
or otherwise adversely affect any rights any Indemnified Party may have under
any agreement with the Company or any Subsidiary or the Company's or any
Subsidiary's Articles of Incorporation or By-Laws.
SECTION 6.08. Further Action; Reasonable Best Efforts. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall, and
shall use their reasonable best efforts to cause their respective
Subsidiaries, as applicable, to (i) make promptly all respective filings, and
thereafter make any other required submissions, under the HSR Act and under
Council Regulation (EC) No. 4064/89, as amended, with respect to the Merger
and the Transactions, (ii) use its reasonable best efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using all reasonable efforts to obtain all licenses, permits, consents,
waivers, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and the Subsidiaries as
are necessary for the consummation of the Transactions and to fulfill the
conditions to the Offer and the Merger and (iii) not take action (including
effecting or agreeing to effect or announcing an intention or proposal to
effect any acquisition, business combination or other transaction) which could
reasonably be expected to impede, interfere with, prevent, impair or delay the
ability of the parties to consummate the Merger. The parties shall consult and
cooperate with each other in connection with the making of all such filings or
submissions, including providing copies of all such documents to the non-
filing or non-submitting party and its advisors prior to filing or submitting.
In case at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of this Agreement, the proper officers
and directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
(b) Each of Parent and Purchaser shall use its best efforts to defend
through litigation on the merits any claim asserted in court by any party in
order to avoid the entry of, or to have vacated or terminated, any decree,
order, or judgment that would restrain or prevent the consummation of the
Offer by December 31, 1999.
SECTION 6.09. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any Transaction and shall
not issue any such press release or make any such public statement without the
prior consent of the other parties, except as may be required by applicable
law or regulation or by obligations pursuant to any listing agreement with a
national securities exchange to which Parent or the Company is a party.
SECTION 6.10. Confidentiality Agreement. The Company hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary to
permit the consummation of each Transaction. Upon the acceptance for payment
of Shares pursuant to the Offer, the Confidentiality Agreement shall be deemed
to have terminated without further action by the parties thereto.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. The respective obligations of each
party to effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Transactions shall have
been approved and adopted by the affirmative vote of the stockholders of
the Company to the extent required by Delaware Law and the Restated
Certificate of Incorporation of the Company;
(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
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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 the Company or its
Subsidiaries have operations material to the Company and its 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) (a "Governmental
Order") which is then in effect and has the effect of prohibiting
consummation of the Merger; and
(e) Offer. Purchaser or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement
and the transactions contemplated hereby by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards of Directors
of Parent, Purchaser and the Company; or
(b) By either Parent, Purchaser or the Company if (i) the Offer is not
completed on or before December 31, 1999; provided, however, that the right
to terminate this Agreement under this clause (i) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure to complete the Offer on or
before such date; or (ii) 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; or
(c) By Parent, prior to the acceptance of Shares pursuant to the Offer,
if (i) due to an occurrence or circumstance that would result in a failure
to satisfy any condition set forth in Annex A hereto, Purchaser shall have
(A) terminated the Offer without having accepted any Shares for payment
thereunder or (B) failed to pay for Shares pursuant to the Offer by
December 31, 1999, unless such failure to accept Shares for payment or to
pay for Shares shall have been caused by or resulted from the failure of
Parent or Purchaser to perform any covenant or agreement of either of them
contained in this Agreement or the breach by Parent or Purchaser of any
representation or warranty of either of them contained in this Agreement;
or (ii) prior to the purchase of Shares pursuant to the Offer, the Board or
any committee thereof shall have withdrawn or modified in a manner adverse
to Purchaser or Parent its approval or recommendation of the Offer, this
Agreement, the Merger or any other Transaction in order to approve or
recommend any other Acquisition Proposal; or
(d) By the Company, upon approval of the Board, if Purchaser shall have
(A) failed to commence the Offer within five Business Days following the
date of this Agreement, (B) terminated the Offer without having accepted
any Shares for payment thereunder or (C) failed to pay for Shares pursuant
to the Offer by December 31, 1999, unless such failure to accept Shares for
payment or to pay for Shares shall have been caused by or resulted from the
failure of the conditions specified in paragraphs (c) or (d) of Annex A to
be satisfied; or
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(e) By the Company, upon approval of the Board, if, prior to the
acceptance of Shares by Purchaser pursuant to the Offer, the Board shall
determine that it is necessary to do so in accordance with its fiduciary
duties to the Company's stockholders under applicable law as advised by
experienced, independent counsel (which counsel may be Shearman & Sterling)
in order to accept a Superior Proposal; provided that the Company may not
terminate this Agreement pursuant to this Section 8.01(e) unless and until
(i) five Business Days have elapsed following delivery to Parent of written
notice of such determination of the Company, and during such five Business
Day period the Company has fully cooperated with Parent, with the intent of
enabling both parties to agree to a modification of the terms and
conditions of this Agreement so that the transactions contemplated hereby
may be effected, (ii) at the end of such five Business Day period the
Acquisition Proposal continues to constitute a Superior Proposal and the
Board shall determine that it is necessary to terminate this Agreement and
accept such Superior Proposal in order to comply with its fiduciary duties
to the Company's stockholders under applicable law as advised by
experienced, independent counsel (which counsel may be Shearman &
Sterling), and (iii) (x) prior to such termination, Parent has received the
amount required by Section 8.03(d) and (y) concurrently with such
termination the Company enters into a definitive acquisition, merger or
similar agreement to effect the Superior Proposal which agreement with
respect to a Superior Proposal shall provide an opportunity for Parent (and
any other person) to make an additional final bid for the Company and, if
such bid would constitute a Superior Proposal, for the Company to accept
such bid.
SECTION 8.02. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.01, this Agreement shall have no further
effect, and there shall be no further liability on the part of any party
hereto, except (i) as set forth in Sections 6.04, 8.03 and 9.01 and (ii)
nothing herein shall relieve any party from liability for any wilful breach
hereof.
SECTION 8.03. Fee. (a) In the event that (i) Parent terminates this
Agreement pursuant to Section 8.01(c)(ii), (ii) at the time of such
termination a third party shall have publicly made an Acquisition Proposal
(whether or not such Acquisition Proposal shall have been subsequently
withdrawn), and (iii) such Acquisition Proposal is consummated within 12
months after the date of such termination, then the Company shall pay Parent
promptly (but in no event later than two Business Days after the consummation
of the Acquisition Proposal referred to in clause (ii) above) a fee of
$125,000,000 (the "Fee"), which amount shall be payable in immediately
available funds.
(b) In the event that (i) Parent terminates this agreement pursuant to
Section 8.01(c)(i) because of a failure to satisfy the condition specified in
paragraph (c) or (d) of Annex A, (ii) at the time of such termination a third
party shall have publicly made an Acquisition Proposal (whether or not such
Acquisition Proposal shall have been subsequently withdrawn), and (iii) such
Acquisition Proposal is consummated within 12 months after the date of such
termination, then the Company shall pay Parent promptly (but in no event later
than two Business Days after the consummation of the Acquisition Proposal
referred to in clause (ii) above) the Fee, which shall be paid in immediately
available funds.
(c) Subject to the application of the provisions of paragraph (b) above (in
which case the provisions of this paragraph (c) shall not apply), in the event
that Parent terminates this Agreement pursuant to Section 8.01(c)(i) because
of a failure to satisfy the conditions specified in paragraphs (c) or (d) of
Annex A, then the Company shall pay to Parent promptly after being invoiced by
Parent therefor (but in no event later than two Business Days after receiving
such invoice) an amount equal to Parent's Expenses, which shall be paid in
immediately available funds.
(d) In the event the Company terminates this Agreement pursuant to Section
8.01(e), then, simultaneously with such termination by the Company, the
Company shall pay to Parent the Fee, which shall be paid in immediately
available funds.
(e) In the event that the Company terminates this Agreement pursuant to
Section 8.01(d) and Parent or Purchaser shall have failed to perform or comply
with, in any material respect, any material agreement or covenant of Parent or
Purchaser under this Agreement, then Parent shall pay to the Company promptly
after
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being invoiced by the Company therefor (but in no event later than two
Business Days after receiving such invoice) an amount equal to the Company's
Expenses, which shall be paid in immediately available funds.
(f) In the event that any party shall fail to pay the Fee or Expenses when
due, such party, without being relieved of any obligation to pay the Fee or
Expenses as the case may be in full, shall reimburse the other party for the
Expenses actually incurred or accrued by such other party in connection with
the collection under and enforcement of this Section 8.03, together with
interest on such unpaid Fee or Expenses, commencing on the date that the Fee
or Expenses became due, at a rate equal to the rate of interest publicly
announced by Citibank, N.A., from time to time, in the City of New York, as
such bank's Base Rate.
(g) "Expenses" shall mean documented and reasonable out-of-pocket fees and
expenses incurred or paid by or on behalf of the party incurring such fees and
expenses in connection with the Offer, Merger or the consummation of the
Transactions, including, but not limited to, all filing fees, printing fees
and reasonable fees and expenses of law firms, commercial banks, investment
banking firms, accountants, experts and consultants to such party.
SECTION 8.04. Amendment. Subject to Section 6.03, this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company, no
amendment 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. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 8.01, as the case may be, except that the
agreements set forth in Article II and Section 6.07 shall survive the
Effective Time indefinitely; the agreement set forth in Section 6.06 shall
survive the Effective Time until the expiration of the applicable statute of
limitations; and those set forth in Sections 6.04(b) and 8.03 shall survive
termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
if to Parent or Purchaser:
Suez Lyonnaise des Eaux
1, rue d'Astorg
75008 Paris, France
Attention: Patrice Herbet
Telephone: 33-1-40-06-65-58
Fax: 33-1-40-06-66-22
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with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Kevin Keogh
Telephone: (212) 819-8227
Fax: (212) 354-8113
if to the Company:
Nalco Chemical Company
One Nalco Center
Naperville, Illinois 60563
Attention: General Counsel
Telephone: (630) 305-2837
Fax: (630) 305 -1890
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: David W. Heleniak
Telephone: (212) 848-7049
Fax: (212) 848-7179
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the term
(a) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "Beneficial Owner" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its Affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its Affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
Affiliates or associates or person with whom such person or any of its
Affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "Business Day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "Environmental Laws" means any foreign or U.S. federal, state or
local statute, regulation, rule, law or common law applicable to the
Company or its operations relating to (A) releases or threatened releases
of, or exposure to, Hazardous Substances or materials containing Hazardous
Substances; (B) the
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manufacture, handling, transport, use, generation, treatment, storage or
disposal of Hazardous Substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution or protection of the
environment or the protection of human health;
(f) "Hazardous Substances" means (i) petroleum or any fraction thereof,
asbestos or asbestos-containing material, polychlorinated biphenyls, urea
formaldehyde foam insulation, radon gas, or (ii) any pollutant,
contaminant, constituent, chemical, mixture, raw material, intermediate,
product or by-product, industrial, solid, toxic, radioactive, infectious,
disease-causing or hazardous substance, material, waste or agent as
defined, prohibited, limited or regulated under any Environmental Laws;
(g) "knowledge" or "known" means, as for the Company with respect to any
matter in question, if Edward J. Mooney, Steven Newlin, W.S. Weeber,
William Buchholz, William Parry, James Lambe, Suzzanne Gioimo, Anthony J.
Sadowski, Steven Landsman and Sarah Garvey, after due inquiry, has actual
knowledge of such matter;
(h) "Material Adverse Effect" means any change, effect, condition, event
or circumstance that is materially adverse to the properties, assets,
liabilities, operations, results of operations or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole; provided,
however, that "Material Adverse Effect" shall not include any change,
effect, condition, event or circumstance arising out of or attributable to
(i) any decrease in the market price of the shares of Common Stock (but not
any change, effect, condition, event or circumstance underlying such
decrease to the extent that it would otherwise constitute a Material
Adverse Effect), (ii) changes, effects, conditions, events or circumstances
that generally affect the industries in which the Company or the
Subsidiaries operate (including legal and regulatory changes), (iii)
general economic conditions or change, effects, conditions or circumstances
affecting the securities markets generally or (iv) changes arising from the
consummation of the Transactions or the announcement of the execution of
this Agreement;
(i) "Material Subsidiary" means a Subsidiary of the Company that is
material to the financial condition or results of operation of the Company;
(j) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government;
(k) "SEC" means the U.S. Securities and Exchange Commission;
(l) "SEC Rules" means any rule, regulation or interpretation of the SEC
or the staff thereof; and controlled by the Company, directly or
indirectly, through one or more intermediaries.
(m) "Subsidiary" or "Subsidiaries" means an Affiliate of the Company
controlled by the Company, directly or indirectly, through one or more
intermediaries.
SECTION 9.04. Severability. If any term or other provision of this Agreement
is determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
Transactions is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the Transactions be consummated as originally contemplated to the fullest
extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes, xcept as set forth in Sections 6.04(b) and 6.10, all prior
statements, agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise,
27
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except that Parent and Purchaser may assign all or any of their rights and
obligations hereunder to any wholly owned subsidiary of Parent provided that
no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
SECTION 9.06. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than Article II and Sections 6.06 and 6.07
(which are intended to be for the benefit of each of the persons covered
thereby and may be enforced by such persons).
SECTION 9.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any federal or state court sitting in the Borough of Manhattan,
City of New York.
SECTION 9.08. Headings. The descriptive headings contained in this A
greement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 9.09. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.10. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
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<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SUEZ LYONNAISE DES EAUX
/s/ Philippe Brongniart
By __________________________________
Name: Philippe Brongniart
Title: Member of the Executive
Board
H2O ACQUISITION CO.
/s/ Christian Maurin
By __________________________________
Name: Christian Maurin
Title: President
NALCO CHEMICAL COMPANY
/s/ E.J. Mooney
By __________________________________
Name: E.J. Mooney
Title: Chairman and CEO
29
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and, on or after the initial scheduled expiration date of the Offer (as
contemplated by Section 1.01(a)), may amend the Offer and may postpone the
acceptance for payment of and payment for Shares tendered, if (i) the Minimum
Condition shall not have been satisfied, (ii) any applicable waiting period
under the HSR Act shall not have expired or been terminated prior to the
expiration of the Offer, or (iii) the Commission of the European Union shall
not have approved the Transactions under Regulation (EC) No. 4064/89, as
amended, of the Council of the European Union. In addition, notwithstanding
any other term of the Offer, Purchaser shall not be required to accept for
payment or pay for any Shares tendered pursuant to the Offer, and, at any time
on or after the date of this Agreement and prior to the acceptance of Shares
for payment, may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for Shares tendered if any of the following
conditions shall exist:
(a) there shall be instituted or pending any action or proceeding by any
United States federal or state court or Republic of France court or United
States or Republic of France governmental, administrative or regulatory
authority or agency, in each case of competent jurisdiction over the
Company or a Material Subsidiary (i) challenging or seeking to make illegal
or otherwise directly or indirectly restrain, prohibit or make materially
more costly the Offer or the Merger, (ii) seeking to prohibit or materially
limit the ownership or operation by Parent of all or any material portion
of the business or assets of the Company and its Subsidiaries taken as a
whole or to compel Parent to dispose of or hold separately all or any
material portion of the business or assets of Parent and its subsidiaries
taken as a whole or the Company and its Subsidiaries taken as a whole or
seeking to impose any material limitations on the ability of Parent or the
Company to conduct or own any material portion of the business or assets of
Parent and its subsidiaries taken as a whole or the Company and its
Subsidiaries taken as a whole, in each case as a result of the
Transactions, (iii) seeking to impose limitations on the ability of Parent
or Purchaser to exercise effectively full rights of ownership of any
Shares, including, without limitation, the right to vote any Shares
acquired or owned by Parent or Purchaser on all matters properly presented
to the Company's stockholders, including, without limitation, the approval
and adoption of this Agreement and the Transactions, or (iv) seeking to
require divestiture by Parent or Purchaser of any Shares;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, judgment, order or injunction, enacted, enforced, promulgated,
amended or issued and applicable to (i) Parent, Purchaser, the Company or
any Subsidiary of any of them or (ii) the Offer or the Merger, by any
United States federal or state or Republic of France legislative body,
court, government or governmental, administrative or regulatory authority
or agency, other than the routine application of the waiting period
provisions of the HSR Act to the Offer or to the Merger, which would
reasonably be expected to directly or indirectly, result in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) any representation or warranty of the Company in this Agreement shall
not be true and correct so as to have a Material Adverse Effect, in each
case as if such representation or warranty was made as of such time on or
after the date of this Agreement (except for representations and warranties
made as of a specific date which shall be true and correct as of such date
so as not to have a Material Adverse Effect); provided, however, that for
purposes of this paragraph (c), if any representation or warranty of the
Company in this Agreement is qualified in any respect by materiality or the
words "Material Adverse Effect", such materiality or Material Adverse
Effect qualification shall be ignored for purposes of this paragraph (c);
(d) the Company shall have failed to perform, or comply with, any
agreement or covenant of the Company to be performed or complied with by it
under this Agreement, which failure has a Material Adverse Effect;
(e) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange,
Inc. and such suspension shall continue for six consecutive
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Business Days (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or France, and such moratorium or suspension shall continue
for six consecutive Business Days, (iii) any material limitation (whether
or not mandatory) by any United States Federal or French governmental
authority or agency on the extension of credit by banks or other lending
institutions and such limitation shall continue for six consecutive
Business Days;
(f) this Agreement shall have been terminated in accordance with its
terms; or
(g) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder;
provided that, with respect to paragraphs (a), (b), (c) and (d) above,
Purchaser shall give the Company advance written notice of any intention by
Purchaser to assert the nonsatisfaction of any of the conditions set forth
in such paragraphs (a), (b), (c) or (d), which notice shall describe in
reasonable detail the basis for the belief that any such condition has not
been satisfied; and, provided further that (i) in the event of any action,
proceeding, judgment, order or injunction contemplated by such paragraphs
(a) or (b), the Purchaser shall not terminate the Offer under such
paragraphs (a) or (b), nor exercise any related rights to terminate this
Agreement, unless and until such action, proceeding, judgment, order or
injunction shall have become final and nonappealable and (ii) if any breach
or failure to perform contemplated by any of such paragraphs (c) and (d) is
capable of being cured through the exercise by the Company of its
reasonable best efforts and for so long as the Company continues to use
such reasonable best efforts to cure such breach or failure to perform, the
Purchaser shall not terminate the Offer under such paragraphs (c) or (d) or
exercise any related right to terminate this Agreement, in either case for
a period not to exceed 10 Business Days.
The foregoing conditions are for the benefit of Purchaser and Parent and may
be asserted by Purchaser or Parent regardless of the circumstances giving rise
to any such condition or, subject to the terms of this Agreement, may be
waived by Purchaser or Parent, in whole or in part, at any time and from time
to time in their discretion. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
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ANNEX B
EMPLOYEE BENEFITS MATTERS
Parent and the Company agree to the following with respect to the
compensation and benefits programs of Parent, the Company and the
Subsidiaries:
1. Continuation of Benefits. For a period of one year following the
Effective Time, Parent, the Company and the Subsidiaries shall continue and
maintain the employee benefit plans and programs of the Company and the
Subsidiaries for active and retired employees and former directors of the
Company and the Subsidiaries as in effect immediately prior to the Effective
Time; provided that Parent, the Company and the Subsidiaries shall not be
obligated to continue the Supplemental Management Incentive Plan, the
Performance Share Plan, the Company Stock Option Plans, the 1984 Restricted
Stock Plan, the Employee Stock Ownership Plan, the Company Common Stock
investment option contained in the Profit Sharing, Investment and Pay Deferral
Plan, or any other plan or program providing for compensation, in the form of,
or based on the value of the stock of Parent, the Company or the Subsidiaries,
or to provide any other incentive plan or benefits in lieu thereof.
Notwithstanding the foregoing, during the aforesaid period of one year
following the Effective Time, the Parent, the Company and the Subsidiaries
shall give due consideration to providing a reasonable level of equity based
compensation. From and after the Effective Time, Parent shall honor, and shall
cause the Company and the Subsidiaries to honor, in accordance with their
terms, all contracts, arrangements, policies, plans and commitments of the
Company and the Subsidiaries in accordance with such terms that are applicable
to any current or former employees or directors of the Company or the
Subsidiaries and that have been disclosed or made available to Parent pursuant
to the provisions of Section 3.10 of this Agreement. Parent and the Company
acknowledge and agree that the transactions contemplated by this Agreement
shall constitute, as of the Effective Time, a "Change of Control" as such term
is defined in the Company Change of Control Arrangements.
2. Service Recognition. To the extent that service is relevant for purposes
of eligibility, participation or vesting under any employee benefit plan,
program or arrangement established or maintained by Parent, the Company or any
of their respective subsidiaries, employees of the Company and the
Subsidiaries shall be credited with service accrued prior to the Effective
Time with the Company or any of the Subsidiaries, as the case may be.
Employees of the Company and the Subsidiaries shall be credited with service
accrued prior to the Effective Time to the extent service is relevant for
purposes of benefit accrual (a) with respect to plans, programs or
arrangements established or maintained by Parent, the Company or the
Subsidiaries covering predominantly employees employed in the United States,
and, (b) with respect to plans, programs, or arrangements maintained by the
Company or the Subsidiaries (and not by the Parent or its Affiliates other
than the Company and the Subsidiaries) covering predominantly persons employed
outside the United States. Notwithstanding the foregoing, the crediting of any
service described in this Section 2 of Annex B shall not operate to duplicate
any benefit.
3. Management Incentive Plan. With respect to the payment of bonuses under
the Company's Management Incentive Plan (the "MIP") for the fiscal year ending
December 31, 1999 (the "1999 Fiscal Year"), the Company shall pay participants
in the MIP whose employment is terminated by Parent, the Company or any of the
Subsidiaries without Cause (as defined in Section 4 of this Annex B) on or
after the Effective Time and prior to January 1, 2000 a bonus under the MIP
equal to the pro rata portion of the bonus such participant would have earned
under the MIP for the 1999 Fiscal Year had such participant remained employed
through the end of the 1999 Fiscal Year. Any payment described in the
immediately preceding sentence shall be made following the end of the 1999
Fiscal Year, at the same time as such payment would have been made had such
person remained employed by the Company. Notwithstanding the provisions of
this Section 3 of Annex B, any person covered by a Key Executive Agreement
which remains in effect on the date of such person's termination of employment
(without Cause) shall receive the payment provided under the Key Executive
Agreement with respect to any bonus under the MIP in lieu of the pro rata
payment provided for in this Section 3. The MIP shall be administered by the
Company with respect to the 1999 Fiscal Year in accordance with past practice.
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4. Restricted Stock Unit and Performance Awards. (a) Prior to the acceptance
of the Shares by the Purchaser pursuant to the Offer, each restricted stock
unit award under the Company's 1984 Restricted Stock Plan or the Employee
Stock Compensation Plan and each performance award assigned in 1995 under the
Company's Performance Share Plan (including restricted stock awarded in the
1995 to 1998 performance cycle) (collectively the "Current Stock Awards")
shall become fully and immediately payable or distributable and the
restrictions thereon shall lapse. At the Effective Time, each holder of a
Current Stock Award shall be paid in full satisfaction of such Current Stock
Award a cash payment in an amount in respect thereof equal to the product of
(i) the Merger Consideration and (ii) the number of shares of Common Stock
subject to such Current Stock Award, less any income or employment tax
withholding required under the Code or any provision of state or local law.
(b) Each performance award assigned in the 1997 to 1999 performance cycle or
the 1998 to 2000 performance cycle under the Company's Performance Share Plan
(collectively the "Deferred Performance Awards") shall be awarded assuming a
performance level of 100% of the target award and shall vest and become
payable on the following date (referred to herein as the "Vesting Date"): (i)
on the third anniversary of the Effective Time, provided the executive to whom
such award was made has been continuously employed, including any leaves of
absence authorized by the Company, by the Company or an Affiliate of the
Company from the Effective Time until such date or (ii) upon the death or
Disability or Retirement of the executive, the termination of the executive's
employment by the Company and its Affiliates without Cause or the termination
by the executive of his or her employment with the Company and its Affiliates
for Good Reason, provided such death, Disability, Retirement or termination
occurs on or after the Effective Time and prior to the third anniversary of
the Effective Time. On the Vesting Date, each holder of a Deferred Performance
Award shall be paid in full satisfaction of such Deferred Performance Award a
cash payment in an amount in respect thereof equal to the product of (x) the
Merger Consideration and (y) the number of shares of Common Stock subject to
such Deferred Performance Award. For purposes of Sections 3 and 4(b) of Annex
B, "Disability", "Cause" and "Good Reason" shall have the following meanings:
(i) "Disability" shall mean the executive's physical or mental incapacity
which (A) would entitle the executive to disability benefits under the
Company's or Affiliate's long-term disability plan by which the executive
is covered or (B) as a result of which, in the judgment of a physician
appointed by the Company, the executive is unable to perform the duties of
his or her position with the Company and its Affiliates for 180 days during
any continuous period of 365 days.
(ii) "Cause" shall mean (A) the executive's conviction of, plea of nolo
contendere to, or written admission of his commission of, a felony, (B) any
act by the Executive involving moral turpitude, fraud or misrepresentation
with respect to his duties for the Company or its Affiliates; or (C) gross
negligence or willful misconduct on the part of the executive in the
performance of his or her duties to the Company or its Affiliates.
(iii) "Good Reason" means (A) any termination of employment of the
executive with the Company and its Affiliates or any resignation from
employment with the Company and its Affiliates by the executive following a
reduction in his or her base salary in effect on the Effective Time or
following the Company's material breach of any of its agreements set forth
in this Annex B or (B) any other termination of employment of the executive
with the Company and its Affiliates which is approved in writing by the
Company.
(iv) "Retirement" means an executive's termination of employment on or
after the date he or she attains age 62.
(c) At the Effective Time, each restricted stock unit award under the SAP
letter agreements shall be converted to a right to receive cash equal to the
product of (i) the Merger Consideration and (ii) the number of shares of
Common Stock subject to such restricted stock unit award. The foregoing amount
of cash shall be paid
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out pursuant to the terms of the SAP letter agreement, to the extent that, and
at the same time as, such restricted stock unit would otherwise, in the
absence of the transactions contemplated by this Agreement, have been vested
and paid out.
(d) The provisions of this Section 4 shall not operate to duplicate any
amounts payable to the executive under his or her Key Executive Agreement.
5. Deferred Compensation Plans. Prior to the acceptance of the Shares by the
Purchaser pursuant to the Offer, all stock units, share units or stock
equivalent units held under the Company's deferred compensation plan for
directors or held under the Agreement to Restore Benefits Reduced by ERISA-
Related Limits (the "Company Deferred Compensation Plans") (each a "Company
Stock Unit") shall be converted into an obligation to pay cash with a value
equal to the product of (i) the Merger Consideration and (ii) the number of
shares of Common Stock subject to such Company Stock Unit. With respect to the
obligation to pay cash in respect of the conversion of Company Stock Units
under the Company Deferred Compensation Plans, the obligation shall be payable
or distributable in accordance with the terms of the plan or arrangement
relating to the Company Stock Unit.
6. Directors' Retirement Policy. For purposes of calculating the pension
benefits payable under the Company's 1993 retirement policy for non-employee
directors (the "Directors' Retirement Policy"), each non-employee director who
is serving as a member of the Board as of the Effective Date and who has less
than five years of service as a member of the Board, shall be credited with
five years of service; provided, however, that each non-employee director as
of the Effective Date who has at least five years of service as a member of
the Board, but has less than ten years of service, shall be credited with ten
years of service. In addition, the Parent, the Company and the Subsidiaries
shall either (i) continue and maintain the Directors' Retirement Policy as in
effect on the Effective Date until each non-employee director entitled to
receive a pension benefit calculated thereunder (whether active or retired)
has received his or her pension benefit, or (ii) purchase or cause to be
purchased an annuity contract for each such non-employee director that
provides for the payment of such pension benefit.
7. Amendments to Tax-Qualified Plans. (a) Prior to the acceptance of the
Shares by the Purchaser pursuant to the Offer:
(i) The Company shall amend or cause to be amended its Employee Stock
Ownership Plan (the "ESOP") and the trust agreement establishing the trust
under the ESOP to provide that the net proceeds in the Suspense Account (as
defined in the ESOP) resulting from the disposition of the Shares held in
such trust and repayment of the ESOP Loans (as defined in the ESOP) will be
immediately allocated to Participants' Accounts (as defined in the ESOP)
using the ratio of the balance of each such Participant's Account to the
Accounts of all Participants.
(ii) The Company shall amend or cause to be amended its Profit Sharing,
Investment and Pay Deferral Plan and the trust agreement establishing the
trust under such plan to substantially provide that, subject to applicable
law, (1) the trustee of such trust shall vote shares of Common Stock
allocated to a participant's account under such plan in accordance with
written instructions given by such participant; (2) any such shares held in
such trust for which the trustee receives no such voting instructions shall
be voted by the trustee in the same ratio as the shares held in the trust
for which the trustee receives voting instructions; (3) in the event of a
tender offer or exchange offer for the shares of Common Stock held in such
trust, the trustee shall tender or exchange the shares of Common Stock held
in such trust which are allocated to a plan participant's account in
accordance with written instructions given by such participant; and (4) any
such shares held in such trust for which the trustee receives no such
tender or exchange instructions shall be tendered or exchanged by the
trustee in the same ratio as the shares held in the trust for which the
trustee receives such tender or exchange instructions.
(iii) The Company shall amend its Retirement Income Plan for Eligible
Employees to delete Article 20 thereof in its entirety.
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(iv) The Company shall adopt such other amendments to the plans
referenced in this Section 7, and any related agreements or instruments, or
obtain any consents, as are necessary or appropriate to effectuate the
transactions contemplated by this Agreement.
(b) The Company and the Parent shall cooperate and take all reasonable steps
to share in advance information to effect the transactions contemplated by
this Annex B.
B-4
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EXHIBIT B
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION 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 (S)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
(S)251 (g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)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 (S)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 (S)(S)
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 (S)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.
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(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 (S)228 or
(S)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.
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(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
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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.)
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EXHIBIT C
[LETTERHEAD OF GOLDMAN SACHS]
June 28, 1999
Board of Directors
Nalco Chemical Company, Inc.
One Nalco Center
Naperville, Illinois 60563-1198
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value
$0.1875 per share (the "Shares"), of Nalco Chemical Company, Inc. (the
"Company") of the $53.00 per Share in cash proposed to be paid by Suez
Lyonnaise de Eaux ("Suez") in the Tender Offer and the Merger (as defined
below) pursuant to the Agreement and Plan of Merger, dated as of June 27, 1999,
among Suez, H2O Acquisition Co. ("H2O"), a wholly-owned subsidiary of Suez, and
the Company (the "Agreement"). The Agreement provides for a tender offer for
all of the Shares (the "Tender Offer") pursuant to which H2O will pay $53.00 in
cash per Share for each Share accepted. The Agreement further provides that
following completion of the Tender Offer, H2O will be merged with and into the
Company (the "Merger") and each outstanding Share (other than Excluded Shares,
as defined in the Agreement) will be converted into the right to receive $53.00
in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We also have provided certain
investment banking services to Suez from time to time, including acting as its
financial advisor in connection with entering into an agreement to acquire
Calgon Corporation, a subsidiary of Imetal SA, announced on June 15, 1999.
Goldman, Sachs & Co. provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of the Company or Suez for its own account and for the accounts of customers.
Goldman, Sachs & Co. may provide investment banking services to Suez and its
subsidiaries in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1998; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company; certain
other communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
have also held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future
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prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the specialty and hybrid
chemicals industries specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of
the Company or any of its subsidiaries and we have not been furnished with any
such evaluation or appraisal. Our advisory services and
the opinion expressed herein are provided for the information and assistance
of the Board of Directors of the Company in connection with its consideration
of the transaction contemplated by the Agreement and such opinion does not
constitute a recommendation as to whether or not any holder of Shares should
tender such Shares in connection with, or how any holder of Shares should vote
with respect to, such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $53.00
per Share in cash to be received by the holders of Shares in the Tender Offer
and the Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
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GOLDMAN, SACHS & CO.
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NALCO CHEMICAL COMPANY
ONE NALCO CENTER
NAPERVILLE, ILLINOIS 60563
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Patrice Herbert and Kevin Keogh, and
either of them, proxies (each with full power of substitution) to vote, as
indicated below and in their discretion upon such other matters, not known or
determined at the time of solicitation of this Proxy, as may properly come
before the meeting, all shares which the undersigned would be entitled to vote
at the special meeting of stockholders of Nalco Chemical Company to be held on
December 20, 1999, at 10:00 a.m., New York City time, and at any adjournment or
postponement thereof, as indicated on the reverse side.
This proxy is solicited on behalf of the Board of Directors. This proxy
also delegates discretionary authority with respect to any other business which
may properly come before the meeting or which may properly come before any
adjournment or postponement thereof and matters incident to the conduct of the
special meeting. No proxies marked AGAINST the proposal to adopt the merger
agreement will be voted on a motion to adjourn or postpone the special meeting.
PLEASE SIGN AND DATE THIS PROXY ON REVERSE SIDE
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<PAGE>
[X] Please mark your vote as in this example.
1. A proposal to approve and adopt the Agreement and Plan of Merger dated as of
June 27, 1999, by and among Suez Lyonnaise des Eaux, H2O Acquistion Co., and
Nalco Chemical Company, and approve the Merger of H2O Acquistion Co. and
Nalco Chemical Company upon the terms and conditions described in the Merger
Agreement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned hereby acknowledges receipt of the notice of the special meeting
and the Proxy Statement.
Please sign exactly as your name appears on left. When signing as attorney,
executor, administrator, guardian or corporate offical, please give full title.
------------------------------------------
------------------------------------------
SIGNATURE(S) DATE
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