SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 27, 1999
NALCO CHEMICAL COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 1-4957 36-1520480
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Nalco Center, Naperville, Illinois 60563-1198
(Address of principal executive offices)
(630) 305-1000
(Registrant's telephone number, including area code)
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Item 1. Change in Control of Registrant.
On June 27, 1999, the registrant entered into a definitive Agreement
and Plan of Merger (the "Merger Agreement") with Suez Lyonnaise des Eaux, a
societe anonyme organized under the laws of the Republic of France, and H2O
Acquisition Co., a Delaware corporation and a wholly owned subsidiary of Suez
Lyonnaise des Eaux, providing for the acquisition by Suez Lyonnaise des Eaux of
all the issued and outstanding shares (the "Shares") of (i) the registrant's
common stock at $53 per share and (ii) the registrant's Series B ESOP
Convertible Preferred Stock at $1060 per share, in each case, in cash. The
transaction is structured as a cash tender offer for all outstanding Shares to
be followed by a merger of H2O Acquisition Co. with the registrant. The
registrant has announced the transaction through a press release dated June 28,
1999.
The Merger Agreement and the press release are filed as exhibits to this
Form 8-K, are incorporated by reference into the text of this Item 1 and qualify
the description in this Item 1 in its entirety.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
2.01 Agreement and Plan of Merger, dated as of June 27, 1999, by and
among Suez Lyonnaise des Eaux, its wholly owned subsidiary H2O
Acquisition Co. and Nalco Chemical Company (filed herewith).(1)
99.01 Press Release dated June 28, 1999 (filed herewith).
- --------
(1) Certain exhibits and schedules to this Exhibit filed herewith
have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of
any omitted exhibit or schedule will be furnished to the Commission upon
request.
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
2.01. Agreement and Plan of Merger, dated as of June 27, 1999, by and among
Suez Lyonnaise des Eaux, its wholly owned subsidiary H2O Acquisition Co.
and Nalco Chemical Company.(2)
99.01. Press Release June 28, 1999 (filed herewith).
- --------
(2) Certain exhibits and schedules to this Exhibit filed herewith
have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A
copy of any omitted exhibit or schedule will be furnished to the
Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NALCO CHEMICAL COMPANY
Date: June 28, 1999 /s/ Suzzanne J. Gioimo
---------------------------------------
Name: Suzzanne J. Gioimo
Title: Corporate Secretary
EXECUTION COPY
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)
Defined Term Location of Definition
Affiliate............................... ss. 9.03(a)
Agreement............................... Preamble
Acquisition Proposal.................... ss. 6.05(a)
Beneficial Owner........................ ss. 9.03(b)
Blue Sky Laws........................... ss. 3.05(b)
Board................................... Recitals
Business Day............................ ss. 9.03(c)
Certificate of Merger................... ss. 2.02
Certificates............................ ss. 2.09(b)
Code.................................... ss. 3.10(a)
Common Stock............................ Recitals
Company................................. Preamble
Company Benefit Plans................... ss. 3.10(a)
Company Change of Control Agreement..... ss. 3.10(d)
Company Preferred Stock................. ss. 3.03
Company Stock Option Plans.............. ss. 2.07
Confidentiality Agreement............... ss. 6.04(c)
Control................................. ss. 9.03(d)
Delaware Law............................ Recitals
Disclosure Schedule..................... Introduction to Article III
Dissenting Shares....................... ss. 2.08
Effective Time.......................... ss. 2.02
Environmental Laws...................... ss. 9.03(e)
ERISA................................... ss. 3.10(a)
ESOP Preferred Stock.................... Recitals
Exchange Act............................ ss. 1.02(b)
Goldman................................. ss. 1.02(a)
Governmental Antitrust Authority........ ss. 6.08(b)
Governmental Order...................... ss. 7.01(c)
Hazardous Substances.................... ss. 9.03(f)
HSR Act................................. ss. 3.05(b)
Holders................................. Recitals
Indemnified Parties..................... ss. 6.07(c)
Indemnification Provisions.............. ss. 6.07(a)
IRS..................................... ss. 3.10(a)
Junior A Preferred Stock................ ss. 3.03(a)
Junior C Preferred Stock................ ss. 2.06(a)
knowledge............................... ss. 9.03(g)
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2
known................................... ss. 9.03(g)
Material Adverse Effect................. ss. 9.03(h)
Material Subsidiary..................... ss. 9.03(i)
Merger.................................. Recitals
Merger Consideration.................... ss. 2.06(b)
Minimum Condition....................... ss. 1.01(a)
Offer................................... Recitals
Offer Documents......................... ss. 1.01(b)
Offer to Purchase....................... ss. 1.01(b)
Option.................................. ss. 2.07
Parent.................................. Preamble
Paying Agent............................ ss. 2.09(a)
Payment Fund............................ ss. 2.09(a)
Permitted Liens......................... ss. 3.14(b)
Per Common Share Amount................. Recitals
Per Preferred Share Amount.............. Recitals
Person.................................. ss. 9.03(j)
Proxy Statement......................... ss. 3.12
Purchaser............................... Preamble
Rights Agreement........................ ss. 3.14
Schedule 14D-9.......................... ss. 1.02(b)
Schedule 14D-1.......................... ss. 1.01(b)
SEC..................................... ss. 9.03(k)
SEC Rules............................... ss. 9.03(l)
SEC Reports............................. ss. 3.07(a)
Securities Act.......................... ss. 3.07(a)
Shares.................................. Recitals
Stockholders' Meeting................... ss. 6.01(a)
Subsidiary.............................. ss. 9.03(m)
Superior Proposal....................... ss. 6.05(b)
Surviving Corporation................... ss. 2.01
Transactions............................ ss. 3.04
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER
SECTION 1.01. The Offer.................................................2
SECTION 1.02. Company Action............................................3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger................................................5
SECTION 2.02. Effective Time; Closing...................................5
SECTION 2.03. Effect of the Merger......................................5
SECTION 2.04. Certificate of Incorporation; By-laws.....................5
SECTION 2.05. Directors and Officers....................................5
SECTION 2.06. Conversion of Securities..................................6
SECTION 2.07. Employee and Director Stock Options.......................6
SECTION 2.08. Dissenting Shares.........................................7
SECTION 2.09. Surrender of Shares; Stock Transfer Books.................8
SECTION 2.10. Merger Without Meeting of Stockholders....................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Material Subsidiaries....10
SECTION 3.02. Certificate of Incorporation and By-laws.................10
SECTION 3.03. Capitalization...........................................10
SECTION 3.04. Authority Relative to this Agreement.....................11
SECTION 3.05. No Conflict; Required Filings and Consents...............11
SECTION 3.06. Compliance...............................................12
SECTION 3.07. SEC Filings; Financial Statements........................12
SECTION 3.08. Absence of Certain Changes or Events.....................13
SECTION 3.09. Absence of Litigation; Joint Ventures....................14
SECTION 3.10. Employee Benefit Plans...................................14
SECTION 3.11. Labor Matters............................................15
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement.........16
SECTION 3.13. Taxes....................................................16
SECTION 3.14. Rights Agreement.........................................19
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ii
SECTION 3.15. Trademarks, Patents and Copyrights.......................19
SECTION 3.16. Environmental Matters....................................19
SECTION 3.17. Brokers..................................................20
SECTION 3.18. Year 2000................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization...................................20
SECTION 4.02. Authority Relative to this Agreement.....................20
SECTION 4.03. No Conflict; Required Filings and Consents...............21
SECTION 4.04. Financing................................................21
SECTION 4.05. Offer Documents; Proxy Statement.........................21
SECTION 4.06. Brokers..................................................22
SECTION 4.07. Absence of Litigation....................................22
SECTION 4.08. No Prior Activities......................................22
SECTION 4.09. Parent Not an Affiliated Shareholder.....................22
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger....23
SECTION 5.02. Third Party Standstill Agreements and Confidentiality
Agreements...............................................25
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting....................................26
SECTION 6.02. Proxy Statement..........................................26
SECTION 6.03. Company Board Representation; Section 14(f)..............26
SECTION 6.04. Access to Information; Confidentiality...................27
SECTION 6.05. No Solicitation..........................................28
SECTION 6.06. Employee Benefits Matters................................30
SECTION 6.07. Directors' and Officers' Indemnification and Insurance...30
SECTION 6.08. Further Action; Reasonable Best Efforts..................32
SECTION 6.09. Public Announcements.....................................32
SECTION 6.10. Confidentiality Agreement................................32
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iii
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger.................................33
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination..............................................33
SECTION 8.02. Effect of Termination....................................35
SECTION 8.03. Fee......................................................35
SECTION 8.04. Amendment................................................36
SECTION 8.05. Waiver...................................................37
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements...............................................37
SECTION 9.02. Notices..................................................37
SECTION 9.03. Certain Definitions......................................38
SECTION 9.04. Severability.............................................40
SECTION 9.05. Entire Agreement; Assignment.............................40
SECTION 9.06. Parties in Interest......................................40
SECTION 9.07. Governing Law............................................41
SECTION 9.08. Headings.................................................41
SECTION 9.09. Counterparts.............................................41
SECTION 9.10. Waiver of Jury Trial.....................................41
ANNEX A
Conditions to the Offer
ANNEX B
Employee Benefit Matters
<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:
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2
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 (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
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3
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 ss. 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
shares of Common Stock from a financial point of view. Subject to the fiduciary
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4
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.
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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").
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
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6
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.
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)
<PAGE>
7
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
<PAGE>
8
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 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
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9
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.
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:
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10
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
<PAGE>
11
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 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
<PAGE>
12
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
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)
<PAGE>
13
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
<PAGE>
14
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 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").
<PAGE>
15
(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 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,
<PAGE>
16
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
<PAGE>
17
date of this Agreement have been timely paid or have been adequately disclosed
and fully 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
<PAGE>
18
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.
(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
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19
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.
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
<PAGE>
20
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,
<PAGE>
21
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 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
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22
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.
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.
<PAGE>
23
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
<PAGE>
24
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);
(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;
<PAGE>
25
(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 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.
<PAGE>
26
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
<PAGE>
27
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.
(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.
<PAGE>
28
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, 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,
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29
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
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30
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.
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,
<PAGE>
31
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.
(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
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32
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.
<PAGE>
33
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 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:
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34
(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
(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
<PAGE>
35
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.
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36
(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 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.
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37
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
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
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38
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;
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39
(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 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;
<PAGE>
40
(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
(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, except 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, 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
<PAGE>
41
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 Agreement 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.
<PAGE>
42
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
By /s/ Philippe Brongniart
--------------------------------------
Name: Philippe Brongniart
Title: Member of the Executive Board
H2O ACQUISITION CO.
By /s/ Christian Maurin
--------------------------------------
Name: Christian Maurin
Title: President
NALCO CHEMICAL COMPANY
By /s/ E.J. Mooney
--------------------------------------
Name: E.J. Mooney
Title: Chairman and CEO
<PAGE>
A-1
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
<PAGE>
A-2
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 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
<PAGE>
A-3
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.
<PAGE>
B-1
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
<PAGE>
B-2
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.
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
<PAGE>
B-3
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 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.
<PAGE>
B-4
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
<PAGE>
B-5
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.
(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.
SUEZ LYONNAISE DES EAUX
<TABLE>
<CAPTION>
<S> <C>
Media Inquiries: Denis Boulet Media Inquiries: Paul Cholette
Suez Lyonnaise des Eaux Nalco Chemical Company
Tel: +33 1 40 06 65 30 Tel: 630 305 1147
Analysts' Inquiries: Patrick Ayoub
Tel: +33 6 8281 9882
Web site: www.suez-lyonnaise-eaux.fr or
www.suez-lyonnaise-eaux.com
US Contacts: Investors: Betsy Brod Ticker: Bloomberg: LY FP
Media: Brian Maddox Reuters: LYOE.PA
Morgen-Walke Associates, Inc. Dow Jones: S.SLX
212/850-5600
</TABLE>
FOR IMMEDIATE RELEASE
SUEZ LYONNAISE DES EAUX TO ACQUIRE NALCO CHEMICAL COMPANY
FOR $4.1 BILLION IN CASH TO BECOME WORLD'S LARGEST
WATER TREATMENT COMPANY
o Increases Suez Lyonnaise des Eaux' Water-Related
Revenues to Over $7.4 Billion
o Accretive and Value Created
PARIS, FRANCE AND NAPERVILLE, ILLINOIS -- June 28, 1999 -- Suez
Lyonnaise des Eaux (LY: Paris Bourse), a world leader in private infrastructure
services and Nalco Chemical Company (NYSE: NLC), the world's largest provider of
water treatment services and products, announced a definitive agreement for
Nalco to be acquired by Suez Lyonnaise des Eaux in an all-cash transaction of
approximately $4.1 billion, or $53 per share.
Under the terms of the agreement, which has been unanimously approved
by the Boards of Directors of both companies, Suez Lyonnaise des Eaux will seek
to acquire all of the outstanding common shares of Nalco Chemical Company
through a tender offer that will commence within five business days.
This acquisition follows Suez Lyonnaise des Eaux' June 15, 1999
announcement of a definitive agreement to acquire Calgon, a Pittsburgh-based
water treatment company with annual revenues of close to $300 million.
Nalco Chemical Company, the world's largest water treatment company
provides on-sire services to over 50,000 industrial and commercial customers in
more than 120 countries. For 1999, Nalco Chemical Company expects its revenues,
including affiliates, to be approximately $1.94 billion.
Commencing on this transaction, Gerard Mestrallet, Suez Lyonnaise des
Eaux' Chief Executive Officer and President of the Executive Board, said, "The
acquisition of Nalco Chemical Company fits perfectly into our strategic plan,
which emphasizes the international expansion and the integration of our core
businesses. As a result
<PAGE>
2
of this transaction, Suez Lyonnaise des Eaux' total water-related revenues will
exceed $7.4 billion and, the combined company will be in a strong position to
serve industrial, middle-market, institutional and process customers that are
increasingly requiring comprehensive solutions."
Mr. Mestrallet continued, "Globally, the acquisition of Nalco Chemical
Company is another step in our strategy of providing our customers around the
world with integrated services in the water, energy and waste sectors. As a
global multi-service group we partner with our customers, enabling them to focus
on their core operations. After carefully reviewing the market landscape, we are
confident that the people of Nalco Chemical Company share this vision and that
our business model well result in an accelerated growth rate for Suez Lyonnaise
des Eaux' water treatment business.
Suez Lyonnaise des Eaux expects this transaction to be value creating
and immediately accretive to cash flow in the first year and to be accretive to
earnings beginning in the second year. The Company expects to realize more than
$100 million in cost savings as a result of economies of scale, revenue
enhancement and development synergies, and to take full advantage of important
cross-selling opportunities.
Edward J. Mooney, Chairman and Chief Executive Officer of Nalco
Chemical Company, noted, "We are very pleased with this agreement, which
provides substantial value for our shareholders as well as key growth
opportunities and benefits for our company and its customers. Our goal at Nalco
Chemical Company has been to use our on-site expertise, technical innovation and
global presence to improve the profitability of our customers' dynamic and
changing operations. As part of the Suez Lyonnaise des Eaux Group, we
dramatically increase our ability to provide an expanded array of value-added
products and services to our customers.
"We expect the combination of our worldwide market positions, R&D and
technical-knowhow to give us a meaningful competitive advantage in the
marketplace," Mr. Mooney added.
Suez Lyonnaise des Eaux will base its worldwide water treatment
operating center in Naperville, under the direction of Mr. Mooney.
The transaction is subject to customary regulatory approvals in the
United States and Europe and is expected to be completed during the third
quarter of 1999.
Suez Lyonnaise des Eaux stated that is expects to fund 50% of the
all-cash transaction internally, with the remaining 50% financed by a bridge
loan that is already in place.
With annual revenues of $32.5 billion, Suez Lyonnaise des Eaux is a
world leader in private infrastructure services, with operations in more than
120 countries. The Company is a market leader in the water sector supplying
drinking water to 77 million people and providing wastewater services to 52
million people. The Group's three international core business sectors are:
energy, water, and waste services.
Headquartered in Naperville, Illinois, outside of Chicago, Nalco
Chemical Company employs 7000 people of which about 3600 are engineers and
technicians with direct customer contract and 300 are researchers located in 5
R&D centers.
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