UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5005
SELAS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-1069060
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
DRESHER, PENNSYLVANIA 19025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(215) 646-6600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
(X) YES ( ) NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT OCTOBER 28, 1997
COMMON SHARES, $1.00 PAR VALUE 5,577,324 (exclusive of 363,564
treasury shares)
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SELAS CORPORATION OF AMERICA
I N D E X
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 . . . . . 3, 4
Consolidated Statements of Operations for the
Three Months Ended September 30, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Operations for the
Nine Months Ended September 30, 1997 and 1996. . . 6
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1997 and 1996 . . . . . . . . . . . . . . . . . . 7
Consolidated Statement of Shareholders' Equity
for the Nine Months Ended September 30, 1997 . . . 8
Notes to Consolidated Financial Statements . . . 9, 10, 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 12, 13, 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . 15
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SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Assets
September 30, December 31,
1997 1996
(Unaudited) (Audited)
Current assets
Cash, including cash equivalents of
$2,113,000 in 1997 and $7,532,000
in 1996 . . . . . . . . . . . . . . $ 3,031,872 $ 8,343,820
Accounts receivable (including unbilled
receivables of $12,073,000 in 1997
and $7,783,000 in 1996, less allowance
for doubtful accounts of $696,000 in
1997 and $787,000 in 1996) . . . . . 34,716,632 41,660,153
Inventories . . . . . . . . . . . . . 9,605,982 8,433,522
Deferred income taxes . . . . . . . . 2,761,010 2,051,580
Other current assets . . . . . . . . . 537,855 623,169
Total current assets . . . . . . . 50,653,351 61,112,244
Investment in unconsolidated affiliate . 535,217 538,278
Property, plant and equipment
Land . . . . . . . . . . . . . . . . 1,050,109 1,118,802
Buildings . . . . . . . . . . . . . . 10,845,569 11,499,609
Machinery and equipment . . . . . . . 22,075,945 19,455,946
33,971,623 32,074,357
Less: Accumulated depreciation . . . 16,946,992 15,362,577
Net property, plant and equipment . 17,024,631 16,711,780
Deferred pension cost. . . . . . . . . . 183,723 225,060
Excess of cost over net assets of acquired
subsidiaries less accumulated amortization
of $1,547,000 and $1,140,000 . . . . . 15,650,643 12,126,709
Other assets including patents, less
amortization . . . . . . . . . . . . . 804,356 448,201
$84,851,921 $91,162,272
=========== ===========
See accompanying notes to the consolidated financial statements.
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SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
September 30, December 31,
1997 1996
(Unaudited) (Audited)
Current liabilities
Notes payable . . . . . . . . . . . . . . $ 1,168,078 $ 583,767
Current maturities of long-term debt . . 2,620,984 2,271,830
Accounts payable . . . . . . . . . . . . 17,717,952 20,169,143
Federal, state and foreign income taxes . 1,596,587 926,823
Customers' advance payments on contracts 88,050 4,854,880
Guarantee obligations and estimated
costs of service . . . . . . . . . . . 2,420,313 1,725,690
Other accrued liabilities . . . . . . . 6,045,597 10,758,185
Total current liabilities . . . . 31,657,561 41,290,318
Long-term debt . . . . . . . . . . . . 7,696,204 6,836,593
Pension plan obligation . . . . . . . . 183,723 225,060
Other postretirement benefit obligations 4,023,066 4,084,768
Deferred income taxes. . . . . . . . . . 1,310,444 1,084,057
Contingencies and commitments
Shareholders' equity
Common shares, $1 par; 10,000,000 shares
authorized; 5,577,324 and 5,553,624
shares issued, respectively. . . . . . 5,577,324 5,553,624
Additional paid-in capital . . . . . . 11,740,628 11,660,807
Retained earnings . . . . . . . . . . . 22,658,007 19,672,731
Foreign currency translation adjustment 386,901 1,136,251
Less: 363,564 common shares held in
treasury, at cost . . . . . . . (381,937) (381,937)
Total shareholders' equity . . . 39,980,923 37,641,476
$84,851,921 $91,162,272
=========== ===========
See accompanying notes to the consolidated financial statements.
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SELAS CORPORATION OF AMERICA
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30, September 30,
1997 1996
Sales, net $28,328,138 $29,724,295
Operating costs and expenses
Cost of sales 22,852,879 23,740,370
Selling, general and
administrative expenses 3,735,121 3,638,310
Operating income 1,740,138 2,345,615
Interest (expense) (247,341) (304,634)
Interest income 71,872 84,607
Other income (expense), net 156,937 (101,680)
Income before income taxes 1,721,606 2,023,908
Income taxes 582,448 684,031
Net income $ 1,139,158 $ 1,339,877
=========== ===========
Earnings per share
Primary
Income per common and
common equivalent share $.21 $.25
=========== ===========
Weighted average common
shares outstanding 5,374,000 5,277,000
Fully diluted
Income per common and
common equivalent share $.21 $.25
=========== ===========
Weighted average common
shares outstanding 5,383,000 5,296,000
See accompanying notes to the consolidated financial statements.
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SELAS CORPORATION OF AMERICA
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended
September 30, September 30,
1997 1996
Sales, net $86,334,612 $73,755,093
Operating costs and expenses
Cost of sales 67,931,495 57,751,598
Selling, general and
administrative expenses 11,632,796 11,065,522
Operating income 6,770,321 4,937,973
Interest (expense) (764,952) (798,871)
Interest income 207,360 221,248
Other income (expense), net (146,599) (71,518)
Income before income taxes 6,066,130 4,288,832
Income taxes 2,385,789 1,567,858
Net income $ 3,680,341 $ 2,720,974
=========== ===========
Earnings per share
Primary
Income per common and
common equivalent share $.69 $.52
=========== ===========
Weighted average common
shares outstanding 5,360,000 5,253,000
Fully diluted
Income per common and
common equivalent share $.68 $.51
=========== ===========
Weighted average common
shares outstanding 5,382,000 5,296,000
See accompanying notes to the consolidated financial statements.
SELAS CORPORATION OF AMERICA
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Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30, September 30,
1997 1996
Cash flows from operating activities:
Net income . . . . . . . . . . . . . $ 3,680,341 $ 2,720,974
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization . . . 2,608,439 2,105,766
Equity in (income) loss of unconsoli-
dated affiliate . . . . . . . . . (1,967) 60,010
(Gain) loss on sale of property and
equipment . . . . . . . . . . . 6,105 (1,240)
Deferred taxes . . . . . . . . . . (508,732) (404,795)
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable. . . . . . . . . . . . 3,507,647 (4,108,386)
(Increase) in inventories . . . . . (1,674,593) (883,375)
(Increase) decrease in other assets (360,902) 501,480
Increase in accounts payable . . . 965,971 11,441,656
Increase (decrease) in accrued
expenses . . . . . . . . . . . . (2,508,456) 1,880,571
(Decrease) in customer advances . . (4,206,834) (1,391,912)
(Decrease) in other liabilities . . (10,653) (27,292)
Net cash provided by
operating activities . . . . . 1,496,366 11,893,457
Cash flows from investing activities:
Purchases of property, plant and
equipment . . . . . . . . . . . . . (2,592,533) (1,670,308)
Proceeds from sale of property, plant
and equipment . . . . . . . . . . . 8,052 35,912
Purchase of long term investment . . -- 16,742
Acquisition of subsidiary company,
net of cash acquired . . . . . . . . (5,151,620) --
Net cash (used) by investing
activities . . . . . . . . . (7,736,101) (1,617,654)
Cash flows from financing activities:
Proceeds from short-term bank
borrowings 670,119 --
Proceeds from long-term borrowings 176,793 --
Proceeds from borrowings to acquire
subsidiary company . . . . . . . . . 3,500,000 --
Repayments of short-term bank
borrowings . . . . . . . . . . . . . (7,404) (1,329,248)
Repayments of long-term debt . . . . (2,192,339) (1,629,974)
Proceeds from exercise of stock
options . . . . . . . . . . . . . . 91,269 --
Payment of dividends . . . . . . . . (695,065) (622,808)
Net cash provided (used) by
financing facilities . . . . . 1,543,373 (3,582,030)
Effect of exchange rate changes on
cash . . . . . . . . . . . . . . . . (615,586) (180,613)
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . (5,311,948) 6,513,160
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . 8,343,820 3,912,364
Cash and cash equivalents, end of
period . . . . . . . . . . . . . . . $ 3,031,872 $10,425,524
=========== ===========
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SELAS CORPORATION OF AMERICA
Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 1997
(Unaudited)
Common Stock Additional
Number of Paid-In
Shares Amount Capital
Balance, January 1, 1997 5,553,624 $5,553,624 $11,660,807
Net income
Exercise of stock options 23,700 23,700 79,821
Cash dividends paid
($.135 per share)
Translation (loss)
Balance, September 30, 1997 5,577,324 $5,577,324 $11,740,628
========= ========== ===========
Foreign
Currency
Retained Translation
Earnings Adjustment
Balance, January 1, 1997 $19,672,731 $1,136,251
Net income 3,680,341
Exercise of stock options
Cash dividends paid
($.135 per share) (695,065)
Translation (loss) (749,350)
Balance, September 30, 1997 $22,658,007 $ 386,901
========== ==========
Total
Treasury Shareholders'
Stock Equity
Balance, January 1, 1997 $ (381,937) $37,641,476
Net income 3,680,341
Exercise of stock options 103,521
Cash dividends paid
($.135 per share) (695,065)
Translation (loss) (749,350)
Balance, September 30, 1997 $ (381,937) $39,980,923
========== ==========
(See accompanying notes to the consolidated financial statements)
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
1. In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly Selas Corporation of
America's consolidated financial position as of September 30, 1997 and
December 31, 1996, and the consolidated results of its operations for
the three and nine months ended September 30, 1997 and 1996 and
consolidated statements of shareholders' equity and cash flows for the
nine months then ended.
2. The accounting policies followed by the Company are set forth in note 1
to the Company's financial statements in the 1996 Selas Corporation of
America Annual Report.
3. Inventories consist of the following:
September 30, December 31,
1997 1996
Raw material $2,966,021 $2,601,927
Work-in-process 2,080,850 1,749,371
Finished products and
components 4,559,111 4,082,224
Total $9,605,982 $8,433,522
========== ==========
4. Income Taxes
Consolidated income taxes for the nine month periods ended September
30, 1997 and 1996 are $2,386,000 and $1,568,000 which result in
effective tax rates of 39.3% and 36.6%, respectively. The rate of
tax in relation to pre-tax income in 1997 has been impacted by the
settlement of a tax issue at one of the Company's European
subsidiaries in the amount of approximately $80,000.
5. Legal Proceedings
The Company is a defendant along with a number of other parties in
approximately 155 lawsuits as of December 31, 1996 (112 as of
December 31, 1995) alleging that plaintiffs have or may have
contracted asbestos-related diseases as a result of exposure to
asbestos products or equipment containing asbestos sold by one or
more named defendants. Due to the noninformative nature of the
complaints, the Company does not know whether any of the complaints
state valid claims against the Company. The Company is also one of
approximately 500 defendants in a class action on behalf of
approximately 2700 present or former employees of a Texas steel mill
alleging that products supplied by the defendants created a poisonous
atmosphere that caused unspecified physical harm. These
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)-
(Continued)
5. Legal Proceedings - (Continued)
cases are being defended by one or more of the Company's insurance
carriers presently known to be "at risk." Through October 1993, the
legal costs of defense of the asbestos and steel mill cases were
shared among the insurance carriers (92%) and the Company (8%). The
lead insurance carrier settled a number of the cases in 1993 and
requested that the Company pay a portion of the settlement amount.
The Company declined to do so because no such payment is required by
the express terms of the policies. The lead carrier then purported
in October 1993 to abrogate the arrangement under which the defense
costs had been shared, and the Company responded by tendering all of
the cases to the lead carrier and demanding that the lead carrier
honor its obligations under its policies to pay 100% of the costs of
defense and 100% of all settlements and judgments up to the policy
limits. The lead carrier has settled approximately 17 and 98 claims
in 1996 and 1995, respectively, with no request for the Company to
participate in any settlement. The lead carrier has informed the
Company that the primary policy for the period July 1, 1972 - July 1,
1975 has been exhausted and that the lead carrier will no longer
provide a defense under that policy. The Company has requested that
the lead carrier substantiate this situation. The Company has
contacted representatives of the Company's excess insurance carrier
for some or all of this period. The Company does not believe that
the asserted exhaustion of the primary insurance coverage for this
period will have a material adverse effect on the financial
condition, liquidity, or results of operations of the Company.
In 1995, a dispute which was submitted to arbitration, arose under a
contract between a customer and a subsidiary of the Company.
Substantial claims were asserted against the subsidiary Company under
the terms of the contract. The Company recorded revenue of
approximately $1,400,000 in 1994 and has a current billed receivable
of $140,000.
The Company is also involved in other lawsuits arising in the normal
course of business. While it is not possible to predict with
certainty the outcome of these matters, management is of the opinion
that the disposition of these lawsuits and claims will not materially
affect the Company's consolidated financial position, liquidity, or
results of operations.
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)-
(Continued)
6. Statements of Cash Flows
Supplemental disclosures of cash flow information:
Nine Months Ended
September 30, September 30,
1997 1996
Interest received . . . . . . . $ 176,480 $ 165,042
Interest paid . . . . . . . . . $ 660,870 $ 452,139
Income taxes paid . . . . . . . $1,469,521 $ 864,387
7. Accounts Receivable
At September 30, 1997, the Company had $1,667,620 of trade accounts
receivable due from the major U.S. automotive manufacturers and
$2,713,324 of trade accounts receivable due from hearing aid
manufacturers. The Company also had $21,356,756 in receivables from
long-term contracts for customers in the steel industry in North
America, Europe and Asia.
8. Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share are computed based on
the weighted average number of shares outstanding each quarter, giving
effect to the exercise of outstanding stock options, where dilutive.
On April 22, 1997, the Board of Directors declared a three-for-two stock
split of the Company's outstanding common stock pursuant to which
1,851,213 shares were issued. Shareholders of record on June 10, 1997
received one additional share for every two common shares held. The
effect of this transaction was to reduce additional paid-in capital by
$1,851,213 with a corresponding increase in common stock which has been
retroactively recorded. All common and earnings per share data in these
financial statements and footnotes has been retroactively recorded.
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Consolidated net sales for the three and nine months ended September 30,
1997 declined to $28.3 million from $29.7 million for the same period in
1996. Consolidated sales for the nine months ended September 30, 1997
increased to $86.3 million compared to $73.8 million for the same period in
1996. Net sales for the heat processing segment decreased to $16.4 million
for the quarter ended September 30, 1997 and increased to $51 million for
the nine months ended September 30, 1997 compared to $19.7 million and
$43.4 million for the same periods in 1996. The lower sales for the
current quarter are due to the fact that several large engineered contracts
are nearing completion and the negative impact of a stronger U.S. dollar
on the Company's foreign operations. Higher sales for the nine months are
due to progress made on several large engineered contracts in the first
half of 1997, partially offset by the impact of the stronger U.S. dollar
on the Company's foreign operations. Sales and earnings of large engineered
system's contracts are recognized on a percentage-of-completion method.
Such contracts generally require more than twelve months to complete. The
sales backlog for the heat processing segment at September 30, 1997 is
$16.9 million compared to $57.7 million at September 30, 1996. Net sales
for the precision electromechanical and plastics component segment
increased to $8.6 million and $24.6 million for the three and nine month
periods ended September 30, 1997 compared to $6.8 million and $20.3 million
for the same periods in 1996. The increase is primarily due to the
acquisition in February, 1997 of RTI Electronics (formerly Rodan Division
of Ketema) which accounted for the majority of the increase as its sales
were $1.7 million and $4.1 million for the three and nine month periods
in 1997. Net sales for the tire holders, lifts and related products'
segment increased to $3.3 million and $10.7 million for the three and nine
months ended September 30, 1997 compared to $3.2 million and $10 million for
the same periods in 1996, due to higher tire lift sales to the Company's
automotive customers.
The Company's gross profit margin as a percentage-of-sales decreased to
19.3% and 21.4% for the three and nine month periods ended September 30,
1997 compared to 20.1% and 21.7% for the same periods in 1996. Gross
profit margins for the Company's heat processing segment for the three
months ended September 30, 1997 decreased to 11.7% from 14.2% for the same
period in 1996 and increased to 15.6% for the nine months ended September
30, 1997 from 15.2% for the same period in 1996. The current quarter's
gross profit margins were impacted by higher costs on a contract that is
nearing completion. Gross profit margins in the heat processing segment
vary markedly from contract to contract, depending on customer
specifications and
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
other conditions related to the contract. Gross profit margins for the
precision electromechanical and plastics component segment decreased to
35.3% and 35.7% for the three and nine months ended September 30, 1997
compared to 40.3% and 39.9% for the same periods in 1996. The decrease in
gross profit margins is due to a shift in the mix of products sold by this
segment in 1997 that carry lower gross profit margins than the products
sold in 1996. This is driven by the February acquisition of RTI
Electronics whose gross profit margins are lower than the segment's
historical gross profit margins and to a lesser degree by a shift in the
mix of products being sold to hearing aid manufacturers due to an increase
in market demand for programmable hearing aids. Gross profit margins for
the Company's
tire holder, lifts and related products segment increased to 15% and 16.2%
for the three and nine months ended September 30, 1997 from 13.8% and 13%
for the same periods in 1996. The higher gross profit margins are due to
increased units sold and improved manufacturing efficiencies.
Selling, general and administrative expenses increased to $3.7 million and
$11.6 million for the three month and nine month periods ended September
30, 1997 compared to $3.6 million and $11.1 million for the same periods in
1996. The increase is due to the February, 1997 acquisition of RTI
Electronics, as their expenses for the quarter were $.2 million and $.5
million for the three and nine month periods ended September 30, 1997.
Interest income for the three and nine months ended September 30, 1997
decreased to $72,000 and $207,000 compared to $85,000 and $221,000 for the
same periods in 1996. Interest expense for the three and nine month
periods ended September 30, 1997 decreased to $247,000 and $765,000
compared to $305,000 and $798,000 due to lower borrowings in the current
year.
Other income (expense) includes foreign exchange gain for the three months
ended September 30, 1997 of $161,000 and a loss for the nine months ended
September 30, 1997 of $68,000 compared to losses of $46,000 and $17,000 for
the same periods in 1996.
Consolidated income taxes for the nine month periods ended September 30,
1997 and 1996 are $2,386,000 and $1,568,000 which result in effective tax
rates of 39.3% and 36.6%, respectively. The rate of tax in relation to
pre-tax income in 1997 has been impacted by the settlement of a tax issue
at one of the Company's European subsidiaries in the amount of
approximately $80,000.
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SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Consolidated net income for the three and nine months periods ended
September 30, 1997 is $1,139,000 and $3,680,000 compared to $1,340,000 and
$2,721,000 for the same periods in 1996. The lower earnings for the
current quarter are due to lower sales and lower gross profit margins. The
higher nine months earnings are due to higher sales, slightly offset by
lower gross profit margins.
In February 1997, the Financial Accounting Standards Board issued Statement
128, "Earnings Per Share", and Statement 129, "Disclosure of Information
about Capital Structure", whose provisions are effective for the Company
for fiscal years ending after December 15, 1997. Had the Company
determined earnings per share based on the provisions of Statement 128 for
the three and nine months ended September 30, 1997, the results would have
been presented as indicated below:
Three Months Nine Months
Ended Ended
September 30, September 30,
1997 1997
Earnings per common share $ .22 $ .71
Earnings per common share
assuming dilution $ .21 $ .69
Liquidity and Capital Resources
Consolidated net working capital decreased to $19 million for the nine
months ended September 30, 1997 from $19.8 million at December 31, 1996.
The decrease is due primarily to the acquisition of RTIE in February, 1997
and the payment of dividends, partially offset by the net earnings for the
nine months ended September 30, 1997. The major changes in the components
of working capital are lower current liabilities of $9.6 million, lower
receivables of $7 million, lower cash balances of $5.3 million, and higher
inventories of $1.2 million.
In September the Company announced an agreement to acquire MRL Industries,
Sonora, California, for $16,750,000 in Selas stock which is intended to be
accounted for as a pooling of interest and is subject to completion of
due diligence and the approval of the Company's shareholders.
The Company believes that its present working capital position, combined
with funds expected to be generated from operations and the available
borrowings capacity through its revolving credit loan facilities, will be
sufficient to meet its anticipated cash requirements for operating needs
and capital expenditures for 1997.
-15-
SELAS CORPORATION OF AMERICA
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following Exhibit is filed as part of this report.
10K. Agreement and Plan of Acquisition dated as of September 25,
1997 by and among the Company, Selas Acquisition Corporation,
NII, Incorporated, Widmar, Inc. and certain shareholders of
NII and Widmar, Inc. and certain shareholders of NII and
Widmar, together with Exhibit A thereto, the form of the
Agreement and Plan of Merger among the Company, Selas
Acquisition Corporation and NII, Incorporated.
(b) Reports on Form 8-K - The Company did not file any reports on
Form 8-K during the quarter for which this report is filed.
SELAS CORPORATION OF AMERICA
SIGNATURE
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 thereunto duly authorized.
SELAS CORPORATION OF AMERICA
(Registrant)
Date: October 29, 1997 Robert W. Ross
Vice President and CFO
EXHIBIT
AGREEMENT AND PLAN OF MERGER
DATED AS OF ____________, 1997
BY AND AMONG
SELAS CORPORATION OF AMERICA,
SELAS ACQUISITION CORPORATION
AND
NII, INCORPORATED
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the
"Agreement") is dated as of , 1997 by and among SELAS
CORPORATION OF AMERICA, a Pennsylvania corporation ("Parent"), SELAS
ACQUISITION CORPORATION, a California corporation ("Merger Sub"), and NII,
INCORPORATED, a California corporation ("NII"). Merger Sub and NII are
hereinafter sometimes collectively referred to as the "Constituent
Corporations." Parent is a party to this Agreement as a third party and
not as a Constituent Corporation.
Background
Merger Sub is a corporation duly
organized and validly existing under the laws of the State of California.
The authorized capital stock of Merger Sub consists of 100 Common Shares,
no par value ("Merger Sub Common Shares"), all of which shares are issued
and outstanding as of the date hereof and owned by Widmar, Inc., a
California corporation and wholly-owned subsidiary of Parent ("Widmar").
NII is a corporation duly organized and validly existing under the laws of
the State of California. The authorized capital stock of NII consists of
100,000,000 Common Shares, no par value ("NII Common Shares"), of which,
as of the date hereof, [28,586,067] NII Common Shares are issued and
outstanding.
The parties hereto are entering into
this Agreement in order to set forth the terms and conditions of the
proposed merger of Merger Sub into NII (the "Merger"), the amendments to
the articles of incorporation of the surviving corporation to be effected
by the Merger, the mode of carrying the Merger into effect, the manner of
converting the outstanding NII Common Shares and Merger Sub Common Shares
and related matters. The parties hereto, together with certain
shareholders of NII, have executed and delivered an Agreement and Plan of
Acquisition dated as of September , 1997 (the "Acquisition Agreement"),
setting forth certain representations, warranties, covenants and agreements
with respect to the Merger and related transactions.
The respective Boards of Directors and
shareholders of Merger Sub and NII, and the Board of Directors of Parent,
by resolutions duly adopted, have approved and adopted this Agreement. The
shareholders of Parent have approved the transactions contemplated by the
Acquisition Agreement, including, without limitation, the issuance of the
Common Shares, par value $1 per share, of Parent ("Parent Common Shares")
to be issued in connection with the Merger.
NOW, THEREFORE, in consideration of the
foregoing and the respective representations, warranties, covenants and
agreements set forth herein and in the Acquisition Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
A. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Acquisition Agreement. As
used herein, the following terms shall have the following meanings:
"ACQUISITION AGREEMENT" shall have the
meaning set forth in the Background section hereof.
"AGGREGATE SELAS SHARES" means a number
of Parent Common Shares equal to the lesser of (x) a quotient equal to
$16,750,000 divided by the Average Share Price and (y) 1,675,000; provided,
however, that if Parent exercises the Selas Option (as defined in Section
6.10 of the Acquisition Agreement), the Aggregate Selas Shares means a
number of Parent Common Shares equal to a quotient equal to $16,750,000
divided by the Average Share Price. If between the first date that is used
in calculating the Average Share Price and the Effective Time the issued
and outstanding Parent Common Shares shall have been changed into a
different number of or class of shares as the result of a stock dividend, a
stock split, a reverse split, recapitalization, reclassification or other
similar change in capitalization of Parent without the receipt of any
consideration by Parent (such event, a "Parent Recapitalization"), the
Aggregate Selas Shares shall be appropriately adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange.
"AVERAGE SHARE PRICE" means the average
of the daily closing prices per share of Parent Common Shares for the
fifteen trading days ending seven trading days prior to the Closing Date.
The closing price for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the American Stock Exchange.
"CGCL" shall have the meaning set forth
in Section 2.1.
"DISSENTING SHAREHOLDERS" shall have
the meaning set forth in Section 4.2(a) hereof.
"DISSENTING SHARES" shall have the
meaning set forth in Section 4.2(a) hereof.
"EFFECTIVE TIME" shall have the meaning
set forth in Section 2.3 hereof.
"EXCHANGE RATIO" shall mean a fraction
whose numerator equals the Non-Widmar Percentage of the Aggregate Selas
Shares and whose denominator equals the number of issued and outstanding
NII Common Shares immediately prior to the Effective Time other than NII
Common Shares owned immediately prior to the Effective Time by Widmar.
"MCENTIRE" shall mean William D.
McEntire.
"MERGER SUB COMMON SHARES" shall have
the meaning set forth in the Background section hereof.
"MERGER" shall have the meaning set
forth in the Background section hereof.
"NII COMMON SHARES" shall have the
meaning set forth in the Background Section hereof.
"NON-WIDMAR PERCENTAGE" shall mean a
percentage equal to the percentage of the aggregate outstanding NII Common
Shares immediately prior to the Effective Time that are owned immediately
prior to the Effective Time by holders other than Widmar.
"PARENT RECAPITALIZATION" shall have
the meaning set forth in the definition of Aggregate Selas Shares above.
"SURVIVING CORPORATION" shall have the
meaning set forth in Section 2.1 hereof.
ARTICLE II
THE MERGER
B. Merger of Merger Sub into NII. In
accordance with the provisions of this Agreement, the
Acquisition Agreement and the California General Corporation
Law, as amended (the "CGCL"), at the Effective Time, Merger Sub
shall be merged with and into NII, which shall be the surviving
corporation (hereinafter sometimes referred to as the "Surviving
Corporation"). After the Effective Time, the Surviving
Corporation shall continue its corporate existence as a
California corporation. At the Effective Time, the separate
existence of Merger Sub shall cease.
C. Effect of the Merger. At the Effective
Time, the effect of the Merger shall be as provided in the
applicable provisions of the CGCL. Without limiting the
generality of the foregoing, and subject thereto and to the
Acquisition Agreement, at the Effective Time, except as may be
otherwise provided herein, the Surviving Corporation shall
succeed, without other transfer, to all property, rights,
privileges, powers and franchises of Merger Sub, and all debts,
liabilities and duties of Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation as if the
Surviving Corporation had itself incurred them.
D. Effective Time. The Merger shall
become effective upon the filing with the Secretary of State of
the State of California of a copy of this Agreement with the
officers' certificates required by Section 1103 of the CGCL
attached thereto (the "Effective Time").
ARTICLE III.
SURVIVING CORPORATION
E. Articles of Incorporation. From and
after the Effective Time and until amended in accordance with
the CGCL, the articles of incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be amended as of
the Effective Time so that Article I of such articles of
incorporation reads in its entirety as follows: "The name of
the corporation is __________." and, as so amended, such
articles of incorporation shall be the articles of incorporation
of the Surviving Corporation.
F. Bylaws. From and after the Effective
Time and until amended in the manner provided in the bylaws of
Merger Sub and the CGCL, the bylaws of Merger Sub in effect
immediately prior to the Effective Time shall be the bylaws of
the Surviving Corporation.
G. Directors and Officers.
a. The directors of Merger Sub at the
Effective Time shall be the initial directors of the Surviving
Corporation after the Effective Time and shall hold office from
the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the
articles of incorporation and bylaws of the Surviving
Corporation or as otherwise provided by law.
b. The officers of NII at the Effective
Time shall be the initial officers of the Surviving Corporation
after the Effective Time and shall hold office from the
Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the
articles of incorporation and bylaws of the Surviving
Corporation or as otherwise provided by law.
ARTICLE IV
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
H. Conversion of NII Common Shares. At
the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, NII or the holders of
NII Common Shares:
a. Each issued and outstanding Merger Sub
Common Share shall be converted into and become one validly
issued, fully paid and nonassessable Common Share, no par value
per share, of the Surviving Corporation.
b. Each NII Common Share that is (i) held
in the treasury of NII, (ii) owned by any subsidiary of NII or
(ii) owned by Parent or any subsidiary of Parent (including,
without limitation, Widmar) or NII shall automatically be
cancelled and retired and shall cease to exist, and no Parent
Common Shares or other consideration shall be delivered or
exchanged therefor.
c. Subject to Section 4.4(c), each issued and outstanding NII
Common Share (excluding Dissenting Shares and NII Common Shares described
in Section 4.1(b)) shall be converted into a number of fully paid and
nonassessable Parent Common Shares equal to the Exchange Ratio. As of the
Effective Time, all such NII Common Shares shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist
and each holder of a certificate which immediately prior to the Effective
Time represented any such NII Common Shares shall cease to have any rights
with respect thereto, except the right to receive Parent Common Shares (and
any cash in lieu of fractional Parent Common Shares) into which such NII
Common Shares were converted upon surrender of such certificate in
accordance with Section 4.3, without interest.
I. Dissenting Shareholders.
a. Any NII Common Shares for which the holder thereof has, as of
the Effective Time, asserted or preserved, and not effectively withdrawn or
otherwise lost, his dissenters' rights pursuant to the CGCL (all such
holders, collectively, the "Dissenting Shareholders" and all such shares,
the "Dissenting Shares") shall not be converted into the right to receive
the consideration described in Section 4.1(c), but the Dissenting
Shareholders shall be entitled to payment of the value of the Dissenting
Shares in accordance with the provisions of the CGCL; provided, however,
that if, after the Effective Time, any Dissenting Shareholder fails to
perfect or otherwise loses any such dissenters' rights pursuant to the
CGCL, any such Dissenting Shareholder shall forfeit the right to appraisal
of such Dissenting Shares, and such Dissenting Shares shall thereupon be
deemed to have been converted into and to have been exchangeable for, as of
the Effective Time, the right to receive the consideration described in
Section 4.1(c) hereof, without any interest, unless otherwise required by
law.
b. NII shall give prompt notice to Parent with respect to any
preservation or assertion of rights under the CGCL by any holder of NII
Common Shares. NII shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any rights of any Dissenting Shareholder.
J. Surrender of Certificates.
a. At the Effective Time, the Representative shall surrender to
Parent certificates that immediately prior to the Effective Time
represented all of the then issued and outstanding NII Common Shares (other
than Dissenting Shares). Parent shall mark all certificates delivered
pursuant to this Section 4.3(a) to indicate their cancellation and shall
promptly thereafter deliver the same to the Surviving Corporation for
disposal. The holder of a certificate that represented issued and
outstanding NII Common Shares immediately prior to the Effective Time shall
have no rights after the Effective Time with respect to such NII Common
Shares, except: (i) in the case of holders of NII Common Shares described
in Section 4.1(c), to receive the consideration provided for in Section
4.1(c) or (ii) in the case of Dissenting Shareholders, to perfect the
rights to appraisal for such shares which are Dissenting Shares or to
receive the consideration provided for in Section 4.1(c) in accordance with
Section 4.2(a).
b. The Boards of Directors of Parent and the Surviving Corporation
are empowered to adopt further rules and regulations, not materially
inconsistent with the provisions of this Agreement, regarding the surrender
and exchange of certificates that represented the issued and outstanding
NII Common Shares immediately prior to the Effective Time.
K. Consideration and Payment.
a. Subject to Section 4.4(b) below and the terms and conditions set
forth in the Acquisition Agreement, in reliance upon the representations,
warranties, covenants and agreements of NII and the Principal Shareholders
contained in the Acquisition Agreement, and in consideration of the Merger
and the other transactions contemplated by the Acquisition Agreement,
Parent shall, at the Effective Time, deliver or cause to be delivered to
the Representative, in full payment in respect of the Merger, certificates
representing that number of whole Parent Common Shares to which the former
holders of NII Common Shares described in Section 4.1(c) are entitled
pursuant to Section 4.1(c) and the aggregate amount of cash in lieu of
fractional Parent Common Shares to which such holders are entitled pursuant
to Section 4.4(c). No interest will be paid or will accrue on any cash
payable pursuant to Section 4.4(c) or on any dividends payable with respect
to the whole Parent Common Shares deliverable hereunder. Such certificates
shall be registered in the names of such former NII Shareholders, with a
single certificate for each such holder reflecting the Parent Common Shares
to which such holder is entitled based upon the NII Shareholder List
furnished to Parent pursuant to Section ___ of the Acquisition Agreement;
provided, however, that in order to facilitate the deposit into escrow
contemplated by Section 8.7 of the Acquisition Agreement, the Parent Common
Shares issuable to each Principal Shareholder shall be divided into two
certificates, one representing the number of Parent Common Shares required
to be deposited into escrow by such Principal Shareholder and the other
representing the balance of the Parent Common Shares which such Principal
Shareholder is entitled to receive hereunder.
b. If the Representative delivers certificates to Parent pursuant
to Section 4.3(a) hereof that represent fewer than all of the NII Common
Shares described in Section 4.1(c), Parent shall be entitled to withhold
from its delivery to the Representative pursuant to Section 4.4(a) the
corresponding certificates for whole Parent Common Shares and cash in lieu
of fractional shares until such date as such certificates are delivered by
the Representative.
c. Notwithstanding any other provision of this Agreement, each
holder of NII Common Shares whose shares are converted in the Merger who
would otherwise have been entitled to receive pursuant to the Merger a
fraction of a Parent Common Share (after taking into account all NII Common
Shares owned by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount, less the amount of any withholding taxes which may
be required thereon, equal to such fractional part of a Parent Common Share
multiplied by the Average Share Price (adjusted as appropriate to reflect
any Parent Recapitalization). No certificates or scrip representing
fractional Parent Common Shares shall be issued as a result of the Merger,
and no such fractional share interest will entitle the owner thereof to
vote or to any rights of a shareholder of Parent.
ARTICLE V
MISCELLANEOUS
L. Consummation. The obligation of each of the parties hereto to
effect the Merger shall be subject to all of the terms and conditions to
such party's obligations under the Acquisition Agreement.
M. Amendment and Modification. The parties hereto may amend or
modify this Agreement in any respect by action taken or authorized by their
respective Boards of Directors at any time before or after approval hereof
by the shareholders of NII or Parent but prior to the Effective Time;
provided that, after such approval, no amendment shall be made which by law
requires further approval by such shareholders without such further
approval. This Agreement may not be amended or modified except in a
writing signed on behalf of each party hereto.
N. Termination. This Agreement shall automatically be terminated
and the transactions contemplated herein shall automatically be abandoned
upon a termination of the Acquisition Agreement.
O. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but which
together shall constitute a single agreement.
P. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California, to the extent applicable to the Merger, and in all
other respects, by the laws of the Commonwealth of Pennsylvania, without
regard to internal conflict of law principles.
IN WITNESS WHEREOF, Parent and each of
the Constituent Corporations have caused this Agreement to be executed by
their respective officers hereunto duly authorized, all as of the date
first above written.
SELAS CORPORATION OF AMERICA
By:_______________________________
Name: Stephen F. Ryan
Title: President and CEO
By:_______________________________
Name: Robert W. Ross
Title: Secretary
SELAS ACQUISITION CORPORATION
By:_______________________________
Name: Stephen F. Ryan
Title: President and CEO
By:_______________________________
Name: Robert W. Ross
Title: Secretary
NII, INCORPORATED
By:_______________________________
Name: William D. McEntire
Title: President and CEO
By:_______________________________
Name: Suzanne M. McEntire
Title: Secretary<PAGE>
AGREEMENT AND PLAN OF ACQUISITION
dated as of September 25, 1997
by and among
SELAS CORPORATION OF AMERICA,
SELAS ACQUISITION CORPORATION,
NII, INCORPORATED,
CERTAIN SHAREHOLDERS OF NII, INCORPORATED
and
THE SHAREHOLDERS OF WIDMAR, INC.
TABLE OF CONTENTS
Page
SECTION 1. THE MERGER . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time of Merger . . . . . . . . . . . . . 2
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF NII AND THE
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . 2
2.1 Organization . . . . . . . . . . . . . . . . . . . 2
2.2 Capitalization . . . . . . . . . . . . . . . . . . 3
2.3 Articles of Incorporation and Bylaws . . . . . . . 4
2.4 Power and Authority . . . . . . . . . . . . . . . . 4
2.5 No Conflict; Consents and Approvals . . . . . . . . 5
2.6 Investments and Subsidiaries . . . . . . . . . . . 6
2.7 Compliance with Laws . . . . . . . . . . . . . . . 7
2.8 Litigation; Orders . . . . . . . . . . . . . . . . 8
2.9 Financial Statements . . . . . . . . . . . . . . . 8
2.10 Absence of Undisclosed Liabilities . . . . . . . . 9
2.11 Title to Properties; Encumbrances . . . . . . . . . 9
2.12 Condition and Sufficiency of Assets . . . . . . . . 10
2.13 Accounts Receivable . . . . . . . . . . . . . . . . 10
2.14 Inventory . . . . . . . . . . . . . . . . . . . . . 10
2.15 Product Design; Warranties . . . . . . . . . . . . 11
2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . 11
2.17 List of Certain Assets, Rights, Contracts, etc . . 13
2.18 Contracts . . . . . . . . . . . . . . . . . . . . . 15
2.19 Intellectual Property . . . . . . . . . . . . . . . 16
2.20 Customers and Suppliers . . . . . . . . . . . . . . 16
2.21 Labor Matters . . . . . . . . . . . . . . . . . . . 17
2.22 Employee Benefits . . . . . . . . . . . . . . . . . 19
2.23 Relationships With Related Persons . . . . . . . . 23
2.24 Environmental Matters . . . . . . . . . . . . . . . 23
2.25 Absence of Certain Changes and Events . . . . . . . 26
2.26 Books and Records . . . . . . . . . . . . . . . . . 27
2.27 Insurance . . . . . . . . . . . . . . . . . . . . . 28
2.28 Brokers . . . . . . . . . . . . . . . . . . . . . 30
2.29 Information Supplied . . . . . . . . . . . . . . . 30
2.30 Voting Requirements . . . . . . . . . . . . . . . 30
2.31 Accounting Matters . . . . . . . . . . . . . . . . 30
2.32 Full Disclosure. . . . . . . . . . . . . . . . . . 30
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB . . . . . . . . . . . . . . . . . 31
3.1 Organization and Good Standing . . . . . . . . . . 31
3.2 Power and Authorization . . . . . . . . . . . . . . 31
3.3 No Conflict; Consents and Approvals . . . . . . . . 32
3.4 Capitalization . . . . . . . . . . . . . . . . . . 33
3.5 Parent Common Shares . . . . . . . . . . . . . . . 33
3.6 SEC Reports; Financial Statements . . . . . . . . . 33
3.7 Absence of Changes . . . . . . . . . . . . . . . . 34<PAGE>
Page
3.8 Brokers . . . . . . . . . . . . . . . . . . . . . . 34
3.9 Information Supplied . . . . . . . . . . . . . . . 34
3.10 Interim Operations of Merger Sub . . . . . . . . . 34
3.11 Accounting Matters . . . . . . . . . . . . . . . . 34
SECTION 4. COVENANTS . . . . . . . . . . . . . . . . . . . . 35
4.1 Conduct of Business by the Acquired Companies. . 35
4.2 Negative Covenants . . . . . . . . . . . . . . . . 35
4.3 Access to Information; Confidentiality . . . . . . 36
4.4 Preparation of the Registration Statement and the
Prospectus . . . . . . . . . . . . . . . . . . . . 37
4.5 Conditions to Closing; Consents and Approvals . . . 38
4.6 Notifications . . . . . . . . . . . . . . . . . . . 39
4.7 Shareholders' Meetings . . . . . . . . . . . . . . 39
4.8 Pooling Letter of NII's Accountants . . . . . . . . 40
4.9 Pooling Letter of Parent's Accountants . . . . . . 40
4.10 Comfort Letters . . . . . . . . . . . . . . . . . 40
4.11 Additional Financial Statements . . . . . . . . . 41
4.12 Affiliates . . . . . . . . . . . . . . . . . . . . 41
4.13 Pooling of Interests . . . . . . . . . . . . . . . 42
4.14 NII ESOP . . . . . . . . . . . . . . . . . . . . . 42
4.15 NII Shareholder List; Execution of Acknowledgement
and Consent . . . . . . . . . . . . . . . . . . . . 42
4.16 Noncompetition . . . . . . . . . . . . . . . . . . 42
4.17 NII Disclosure Statement . . . . . . . . . . . . . 44
4.18 The Stock Acquisition . . . . . . . . . . . . . . . 44
SECTION 5. CERTAIN CONDITIONS PRECEDENT TO PARENT'S
AND MERGER SUB'S OBLIGATIONS . . . . . . . 48
5.1 Representations and Warranties . . . . . . . . . . 48
5.2 Performance of Covenants . . . . . . . . . . . . . 48
5.3 Officer's Certificates . . . . . . . . . . . . . . 48
5.4 Parent Shareholder Approval . . . . . . . . . . . . 48
5.5 Consents and Approvals . . . . . . . . . . . . . . 48
5.6 Legal Matters . . . . . . . . . . . . . . . . . . . 49
5.7 Employment Agreements . . . . . . . . . . . . . . . 49
5.8 Due Diligence Review . . . . . . . . . . . . . . . 49
5.9 Resignation of Directors and Officers . . . . . . . 49
5.10 Opinion of Counsel . . . . . . . . . . . . . . . . 50
5.11 Pooling Letters . . . . . . . . . . . . . . . . . 50
5.12 Affiliate Letters . . . . . . . . . . . . . . . . 50
5.13 Dissenters' Rights . . . . . . . . . . . . . . . . 50
5.14 NII Shareholder Approval . . . . . . . . . . . . . 50
5.15 Effectiveness of Registration Statement . . . . . 50
5.16 Listing of Parent Common Shares . . . . . . . . . 50
5.17 Net Worth . . . . . . . . . . . . . . . . . . . . 50
5.18 The Merger Agreement . . . . . . . . . . . . . . . 50
5.19 Shareholder Signatories . . . . . . . . . . . . . 50
5.20 Escrow Agreement . . . . . . . . . . . . . . . . . 51
5.21 GAAP Statements . . . . . . . . . . . . . . . . . 51
-ii-
Page
5.22 Waivers . . . . . . . . . . . . . . . . . . . . . 51
5.23 NII Disclosure Statement . . . . . . . . . . . . . 51
SECTION 6. CERTAIN CONDITIONS PRECEDENT TO NII'S
OBLIGATIONS . . . . . . . . . . . . . . . . . 51
6.1 Representations and Warranties . . . . . . . . . . 51
6.2 Performance of Covenants . . . . . . . . . . . . . 51
6.3 Officer's Certificate . . . . . . . . . . . . . . . 51
6.4 Parent Shareholder Approval . . . . . . . . . . . . 51
6.5 Approvals . . . . . . . . . . . . . . . . . . . . . 52
6.6 Legal Matters . . . . . . . . . . . . . . . . . . . 52
6.7 NII Shareholder Approval . . . . . . . . . . . . . 52
6.8 Effectiveness of Registration Statement . . . . . . 52
6.9 Opinion of Counsel . . . . . . . . . . . . . . . . 52
6.10 Average Share Price . . . . . . . . . . . . . . . . 52
6.11 The Merger Agreement . . . . . . . . . . . . . . . 52
6.12 Listing of Parent Common Shares . . . . . . . . . . 52
6.13 Escrow Agreement . . . . . . . . . . . . . . . . . 53
SECTION 7. TERMINATION AND ABANDONMENT . . . . . . . . . . . 53
7.1 Termination . . . . . . . . . . . . . . . . . . . . 53
7.2 Procedure for Termination; Effect of Termination . 53
SECTION 8. INDEMNIFICATION; ESCROW . . . . . . . . . . . . . 54
8.1 Indemnification by Principal Shareholders . . . . . 54
8.2 Indemnification by Parent . . . . . . . . . . . . . 54
8.3 Limitations on Liability . . . . . . . . . . . . . 54
8.4 Procedure For Indemnification - Third Party
Claims . . . . . . . . . . . . . . . . . . . . . . 55
8.5 Procedure for Indemnification - Other Claims . . . 57
8.6 Acknowledgement; Release . . . . . . . . . . . . . 57
8.7 Escrow of Parent Common Shares . . . . . . . . . . 57
8.8 Appointment of Representative . . . . . . . . . . . 58
SECTION 9. GENERAL PROVISIONS . . . . . . . . . . . . . . . 59
9.1 Survival of Representations and Warranties . . . . 59
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . 60
9.3 Further Assurances . . . . . . . . . . . . . . . . 61
9.4 Costs and Expenses . . . . . . . . . . . . . . . . 61
9.5 Public Announcements . . . . . . . . . . . . . . . 61
9.6 Waiver; Amendment . . . . . . . . . . . . . . . . . 62
9.7 Assignment and Benefit . . . . . . . . . . . . . . 62
9.8 Governing Law; Consent to Jurisdiction . . . . . . 63
9.9 Section Headings and Defined Terms . . . . . . . . 63
9.10 Severability . . . . . . . . . . . . . . . . . . . 64
9.11 Counterparts . . . . . . . . . . . . . . . . . . . 64
9.12 Entire Agreement . . . . . . . . . . . . . . . . . 64
-iii-
Exhibits
EXHIBIT A . . . . . . . . . . . . Agreement and Plan of Merger
EXHIBIT B . . . . . . . . . . . . . Form of Employment Agreement
EXHIBIT C . . . . . . . . . . . . . . . Form of Escrow Agreement
EXHIBIT D . . . . . . . . . . . . . . Acknowledgement and Consent
EXHIBIT E . . . . Form of Opinion of Carr, McClellan, Ingersoll,
Thomspon & Horn, Professional Corporation
EXHIBIT F . . . . . Form of Opinion of Drinker Biddle & Reath LLP
-iv-
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION is dated as of
September 25, 1997, by and among SELAS CORPORATION OF AMERICA, a
Pennsylvania corporation ("Parent"), SELAS ACQUISITION
CORPORATION, a California corporation ("Merger Sub"), NII,
INCORPORATED, a California corporation ("NII"), WIDMAR, INC., a
California corporation ("Widmar"), RONALD E. ERICKSON and ELAINE
B. ERICKSON, TRUSTEES OF THE ERICKSON 1994 REVOCABLE TRUST DATED
APRIL 15, 1994 ("Erickson Trust"), RONALD E. ERICKSON, BERNIE A.
FREDRICK, RHONDA FREDRICK, ROBERT E. TAMBEAU, JIMMI ROBERTS, JAMES
ROBERTS, RICHARD J. MCENTIRE, SUZANNE M. MCENTIRE and WILLIAM D.
MCENTIRE (Widmar, Erickson Trust, and such individuals,
collectively, the "Principal Shareholders"). An index of defined
terms is attached as an appendix hereto.
BACKGROUND
NII is a holding company which owns, inter alia, all of
the outstanding capital stock of MRL Industries, Inc., a
California corporation ("MRL"). Widmar owns a substantial portion
of the outstanding capital stock of NII. Bernie A. Fredrick,
Rhonda Fredrick, James Roberts, Jimmi Roberts, William D. McEntire
and Suzanne M. McEntire (collectively, the "Widmar Shareholders")
own all of the outstanding capital stock of Widmar.
MRL is engaged in the business (the "Business") of
manufacturing, distributing and servicing furnaces and related
parts used in the fabrication of silicon wafers for semiconductor
devices and other products.
The parties hereto desire to provide for the acquisition
of the Business by Parent through the acquisition by Parent of all
of the outstanding capital stock of Widmar (the "Stock
Acquisition") followed by the merger of Merger Sub (which would
become a subsidiary of Widmar immediately following the
acquisition of Widmar by Parent) with and into NII in accordance
with the California General Corporation Law (the "CGCL") and an
Agreement and Plan of Merger (the "Merger Agreement") attached
hereto as Exhibit A (the merger provided for therein being herein
called the "Merger").
For Federal income tax purposes, it is intended that the
Stock Acquisition and the Merger shall qualify as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
For financial accounting purposes, it is intended that
the Stock Acquisition and the Merger will be accounted for as a
pooling of interests.<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements
herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. THE MERGER
1.1 The Merger. In accordance with the terms and
conditions of the Merger Agreement and the CGCL, at the Effective
Time (as defined in Section 1.2 hereof), Merger Sub shall be
merged with and into NII and the separate existence of Merger Sub
shall thereupon cease. At the election of Parent, any direct or
indirect wholly-owned subsidiary of Parent may be substituted as a
constituent corporation in the Merger. In such event, the parties
hereto shall execute an appropriate amendment to this Agreement
and to the Merger Agreement in order to reflect such substitution.
1.2 Effective Time of Merger. The Merger shall become
effective upon the filing of a copy of the properly executed
Merger Agreement, together with the officers' certificates
required by the CGCL, with the Secretary of State of the State of
California (the date and time when such event has occurred is
referred to herein as the "Effective Time"). Such filing shall be
made as soon as practicable after the closing of the transactions
contemplated in this Agreement in accordance with Section 1.3
hereof.
1.3 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at
the offices of Drinker Biddle & Reath LLP, 1100 Philadelphia
National Bank Building, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107, at 10:00 a.m., local time, on a date to be
specified by NII and Parent that may be on, but shall be no later
than the fifth business day following, the day on which all
conditions to Closing set forth in Sections 5.4, 5.13, 5.14, 6.4
and 6.7 hereof are satisfied or waived, or at such other date,
time and place as NII and Parent shall mutually agree (the date on
which the Closing occurs is referred to herein as the "Closing
Date").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF NII AND THE
PRINCIPAL SHAREHOLDERS
NII and the Principal Shareholders hereby jointly and
severally represent and warrant to Parent and Merger Sub as
follows:
2.1 Organization. Each of NII, MRL and NII's other
subsidiaries listed in subclause (i) of Section 2.6
(collectively, the "Acquired Companies" and individually, an
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"Acquired Company") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation. Each Acquired Company has all necessary
corporate power and corporate authority to carry on its business
as presently conducted, to own, lease and operate all of the
properties and the assets that it owns or leases and to perform
all its obligations under each agreement and instrument by which
it is bound. Each Acquired Company is duly qualified to do
business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which the character or location
of the properties and assets owned or leased by it or the nature
of its activities requires such qualification.
2.2 Capitalization.
(a) NII's authorized capital stock consists of
100,000,000 shares, no par value ("NII Common Shares"). As of the
date of this Agreement, there were 28,586,067 NII Common Shares
issued and outstanding. Except as described in Section 2.2(a) of
the disclosure statement to be delivered by NII to Parent promptly
following the execution of this Agreement as contemplated by
Section 4.17 (the "NII Disclosure Statement"), there are no
outstanding options, rights, warrants or other agreements or
commitments of any nature whatsoever (either firm or conditional)
obligating any Acquired Company or, to the knowledge of the
Acquired Companies, any shareholder thereof to issue, deliver or
sell, or cause to be issued, delivered or sold, any shares of
capital stock or other equity securities of any Acquired Company
or obligating any Acquired Company or, to the knowledge of the
Acquired Companies, any shareholder thereof to grant, extend or
enter into any such option, right, warrant, agreement or
commitment. Section 2.2(a) of the NII Disclosure Statement sets
forth the name of, and the number of NII Common Shares owned by,
each shareholder of NII as of the date hereof. Except as
described in Section 2.2(a) of the NII Disclosure Statement, each
of the issued shares of capital stock of each Acquired Company has
been duly authorized and validly issued and is fully paid and
nonassessable and has not been issued in violation of (nor are any
of the authorized shares of capital stock of any Acquired Company
subject to) any preemptive or similar rights created by statute,
the articles of incorporation or bylaws (or the equivalent
organizational documents) of any Acquired Company or any agreement
to which any Acquired Company is a party or is bound, and all of
such issued and outstanding shares owned by any Acquired Company
are owned free and clear of all security interests, liens, claims,
pledges, charges, easements, equitable interests, conditions,
options, rights of first refusal, mortgages, deeds of trust,
restrictions of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other
attribute of ownership, or other encumbrances of any nature
whatsoever (each, an "Encumbrance" and collectively,
"Encumbrances").
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(b) Except as described in Section 2.2(b) of the
NII Disclosure Statement and except for the provisions of Section
4.7 hereof, there are no shareholders' agreements, voting trusts,
proxies or other agreements or arrangements restricting transfers
or voting of any of the capital stock of any Acquired Company.
(c) Except as described in Section 2.2(c) of the
NII Disclosure Statement, there are no obligations, contingent or
otherwise, of any Acquired Company to (i) repurchase, redeem or
otherwise acquire any securities of any Acquired Company or (ii)
provide material funds to, or make any material investment in (in
the form of a loan, capital contribution or otherwise) or provide
any guarantee with respect to the material obligations of any
Acquired Company.
(d) Section 2.2(d) of the NII Disclosure Statement
sets forth the authorized, issued and outstanding capital stock
and other securities of each Acquired Company other than NII.
(e) No securities of any of the Acquired Companies
are or ever have been (i) registered under or required to be
registered under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or equivalent laws of any state, local or
foreign jurisdiction, (ii) offered to the public, or (iii) listed
for trading on any stock exchange, market or system; and no
registration statement or application has been filed, nor
agreement entered into, to so register or list any such securities
or to offer them to the public.
2.3 Articles of Incorporation and Bylaws. NII has
heretofore furnished or made available to Parent complete and
correct copies of the articles of incorporation and the bylaws (or
the equivalent organizational documents) of each Acquired Company,
in each case as amended or restated to date. Neither NII nor MRL
is in violation of its articles of incorporation or bylaws (or
equivalent organizational documents), and no other Acquired
Company is in violation of its articles of incorporation or,
except as may be immaterial, its bylaws.
2.4 Power and Authority. NII has all requisite
corporate power and corporate authority to execute, deliver and
(subject to, in the case of the Merger, the approval and adoption
of this Agreement and the Merger Agreement by the shareholders of
NII as contemplated by Section 5.14 hereof) perform its
obligations under this Agreement, the Merger Agreement and all
other agreements and documents required to be delivered by it
prior to or at the Closing (collectively, the "NII Transaction
Documents"). The execution, delivery and performance by NII of
the NII Transaction Documents have been duly authorized by all
necessary corporate action on the part of NII (subject to, in the
case of the Merger, the approval and adoption of this Agreement
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and the Merger Agreement by the shareholders of NII as
contemplated by Section 5.14 hereof). This Agreement has been
duly and validly executed and delivered by NII and each of the
Principal Shareholders and, assuming due authorization, execution
and delivery thereof by Parent and Merger Sub, constitutes the
legal, valid and binding obligation of each of NII and each
Principal Shareholder, enforceable against each of them in accor-
dance with its terms. When executed and delivered as contemplated
herein, each of the other NII Transaction Documents shall,
assuming due authorization, execution and delivery by the other
parties thereto, constitute a legal, valid and binding obligation
of each of NII and each Principal Shareholder that is a party
thereto, enforceable against each of them that is a party thereto
in accordance with its terms.
2.5 No Conflict; Consents and Approvals.
(a) Except as described in Section 2.5 of the NII
Disclosure Statement, the execution and delivery of this Agreement
do not, and the execution and delivery of the Merger Agreement and
the consummation of the transactions contemplated by the NII
Transaction Documents will not (in each case, with or without the
passage of time or the giving of notice):
(i) violate or conflict with (A) the
articles of incorporation or bylaws (or equivalent organizational
documents) of any of the Acquired Companies or (B) any law,
statute, regulation, permit, license, certificate, judgment,
order, award or other decision or requirement of any arbitrator,
court, government or governmental agency or instrumentality
(federal, state, local or foreign) (collectively, "Laws")
applicable to any Principal Shareholder or any of the Acquired
Companies or by or to which any properties or assets of any of the
Acquired Companies or any Principal Shareholder is bound or
subject;
(ii) violate or conflict with, result in a
breach of, or constitute a default or otherwise cause any loss of
benefit under, or give to others any rights (including rights of
termination, amendment, foreclosure, cancellation or
acceleration), in or with respect to, any Contract to which any of
the Acquired Companies or any Principal Shareholder is a party or
by which any assets or properties of any of the Acquired Companies
or any Principal Shareholder is bound or affected or any
Authorization held by any Acquired Company; or
(iii) result in, require or permit the
creation or imposition of any Encumbrance upon or with respect to
any of the Acquired Companies or any properties or assets of any
of the Acquired Companies or any Principal Shareholder.
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(b) The execution and delivery of this Agreement
by NII and the Principal Shareholders do not, and the execution
and delivery of the Merger Agreement by NII and the consummation
by NII and the Principal Shareholders of the transactions
contemplated by the NII Transaction Documents will not, require
any of the Acquired Companies to obtain any consent, license,
permit, waiver, approval, authorization or order of, or to make
any filing, registration or declaration with or notification to,
any court, government, governmental agency or instrumentality
(federal, state, local or foreign), except (i) the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing and recordation of appropriate merger documents as required
under California law and (iii) any such consent, license, permit,
waiver, approval, authorization, order, registration,
notification, filing or declaration, the failure to obtain or make
which would not prevent or delay consummation of the Merger or
otherwise prevent NII or the Principal Shareholders from
performing any of their respective obligations under the NII
Transaction Documents and would not result in a material adverse
effect on the financial condition, results of operations, business
or prospects of any of the Acquired Companies or permit the
termination of, or make void or voidable by any individual,
corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture,
estate, trust, association or other entity or governmental
authority or instrumentality (each, a "Person"), or constitute a
default or give rise to any liability to any third party under,
any Contract to which any of the Acquired Companies is a party or
by which any assets or properties of any of the Acquired Companies
is bound or affected, any Authorization held by any Acquired
Company or any Laws.
(c) There are no actions, proceedings or, to the
knowledge of the Acquired Companies, investigations pending or, to
the knowledge of the Acquired Companies, threatened, that question
any of the transactions contemplated by this Agreement or the
validity of any of the NII Transaction Documents or which, if ad-
versely determined, could reasonably be expected to have a mater-
ial adverse effect upon NII's or the Principal Shareholders's
ability to enter into or perform their respective obligations
under the NII Transaction Documents.
2.6 Investments and Subsidiaries. Except for (i) NII's
direct record and beneficial ownership of all of the outstanding
capital stock of Thermtec, Inc., a California corporation, and
Tuolumne Fabrication, Inc., a California corporation, (ii) NII's
direct beneficial and record ownership of all of the outstanding
capital stock of MRL, and (iii) NII's direct record and beneficial
ownership of 51,000 shares of capital stock of Western Sales
Engineering Inc., a California corporation ("Western"), which
common shares constitute approximately 21.5% of the outstanding
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capital stock of Western, NII does not directly or indirectly own,
control or have any investment or other equity interest in any
Person. Except as described in Section 2.6 of the NII Disclosure
Statement, none of the Acquired Companies has agreed, contingently
or otherwise, to share any profits, losses, costs or liabilities
or to indemnify any Person or to guaranty the obligations of any
Person. The Business is, and has since November 1, 1993 been,
conducted solely by and through the Acquired Companies other than
NII and through or by no other Person. All of the outstanding
capital stock and other equity securities of each Acquired Company
other than NII are owned beneficially and of record by NII.
2.7 Compliance with Laws.
(a) Each of the Acquired Companies is, and has at
all times since October 31, 1995 and, to the knowledge of the
Acquired Companies, between October 31, 1993 and October 31, 1995
been, in compliance with all applicable Laws and does not have any
basis to expect and has not received any notice, order or other
communication from any government, governmental agency or
instrumentality of any alleged, actual, or potential violation of
or failure to comply with any material Laws.
(b) Without limiting the generality of the
foregoing, none of the Acquired Companies and no Person acting on
behalf of any of the Acquired Companies has made any payment to,
or conferred any benefit directly or indirectly on, any supplier,
customer, employee or agent of a supplier or customer or any
official or employee of any government or agency or
instrumentality or any political party or candidate for office
that was unlawful either in the United States or in the place
where, and at the time when, such payment or benefit was
authorized, given or received.
(c) Each of the Acquired Companies is and has at
all times since October 31, 1993 been in possession of all
federal, state, local, foreign and other governmental consents,
licenses, permits, variances, franchises, exemptions, approvals,
grants and authorizations (collectively "Authorizations")
necessary to own, lease and operate its properties and to carry on
its business as currently conducted and as conducted at all
material times in the past. Such Authorizations are in full force
and effect without any default or violation thereunder by any of
the Acquired Companies or, to the knowledge of the Acquired
Companies, by any other party thereto. None of the Acquired
Companies has received any notice of any claim or charge that any
of the Acquired Companies is or at any material time in the past
has been in violation of or in default under any such
Authorization. No such Authorization currently in effect shall be
affected by the transactions contemplated herein. No Acquired
Company has received any notice that any such Authorization
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currently in effect may be revoked or may not in the ordinary
course be renewed upon its expiration.
2.8 Litigation; Orders. (a) Except as described in
Section 2.8(a) of the NII Disclosure Statement, there are no, and
during the last four years there have not been any, claims,
actions, suits, proceedings (arbitration or otherwise) or, to the
knowledge of the Acquired Companies, investigations involving or
affecting any of the Acquired Companies, any properties or assets
of any of the Acquired Companies or any directors, officers or
shareholders of any of the Acquired Companies in their capacities
as such, before or by any court, government, governmental agency
or instrumentality (federal, state, local or foreign), or before
an arbitrator of any kind. To the knowledge of the Acquired
Companies, no such claim, action, suit, proceeding or investiga-
tion is presently threatened or contemplated. To the knowledge of
the Acquired Companies, there are no facts which could reasonably
serve as a basis for any such claim, action, suit, proceeding or
investigation that could reasonably be expected to present a
material risk of loss to any Acquired Company. There are no
unsatisfied judgments, penalties or awards against or affecting
any of the Acquired Companies or any properties or assets of any
of the Acquired Companies.
(b) Except as described in Section 2.8(b) of the
NII Disclosure Statement, there is no material award, injunction,
judgment, order, ruling, subpoena (that has been served) or
verdict or other decision entered, issued, made or rendered by any
court, arbitrator, government or governmental agency or
instrumentality, or agreement with any government or governmental
agency or instrumentality (federal, state, local or foreign)
(collectively, "Orders") to which any Acquired Company or any of
their assets or properties is subject. To the knowledge of the
Acquired Companies, no officer, director, partner, shareholder or
employee of any Acquired Company is subject to any Order that
prohibits such officer, director, partner, shareholder or employee
from engaging in or continuing any conduct, activity or practice
relating to the Business. The Acquired Companies have each
complied in all respects with the terms and conditions of each
Order applicable to any of them.
2.9 Financial Statements.
(a) Section 2.9(a) of the NII Disclosure Statement
includes the following unaudited consolidated financial statements
of NII (collectively, the "Existing Financial Statements"): (i)
the consolidated balance sheet as of October 31, 1996 and October
31, 1995 and the related consolidated statements of income for the
fiscal years then ended and (ii) the consolidated balance sheet as
of July 31, 1997, together with the related consolidated statement
of income for the nine months then ended. The Existing Financial
Statements have not in all respects been prepared in accordance
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with United States generally accepted accounting principles
("GAAP").
(b) As promptly as practicable after the date
hereof, NII shall deliver to Parent the following financial
statements (collectively, the "GAAP Statements"): (i) the
consolidated and consolidating balance sheet of NII as of
October 31, 1996 and as of October 31, 1995 and October 31, 1994
and the related consolidated and consolidating statements of
income and retained earnings, shareholders' equity and cash flow
for each of the fiscal years then ended, together, in the case of
the financial statements for the year ending October 31, 1996,
with the report thereon of Meredith, Cardozo, Lanz & Chiu LLP,
independent accountants; (ii) the consolidated balance sheet of
NII as at July 31, 1997 (including notes thereto, the "Interim NII
Balance Sheet"), and the related consolidated statements of income
and retained earnings, shareholders' equity and cash flow for the
nine months then ended, together with the corresponding period of
the preceding fiscal year, together with the report thereon of
Meredith, Cardozo, Lanz & Chiu LLP. The GAAP Statements and notes
will be true, complete and correct in all material respects, will
be prepared from the books and records of NII and its subsidiaries
and will fairly present the consolidated financial condition, cash
flow and results of operations of NII as of the respective dates
thereof and for the periods therein referred to, all in accordance
with GAAP consistently applied.
2.10 Absence of Undisclosed Liabilities. There are no
liabilities of any of the Acquired Companies (whether absolute,
accrued, contingent or otherwise), except liabilities: (a)
described in Section 2.10 of the NII Disclosure Statement; (b) as,
and only to the extent, reflected or reserved against in the
Interim NII Balance Sheet or disclosed in the notes thereto; or
(c) incurred in the ordinary course of business consistent with
past practice after July 31, 1997 and prior to the Closing Date
and which are neither material in amount nor inconsistent with any
of the representations or warranties made herein.
2.11 Title to Properties; Encumbrances. Section 2.11 of
the NII Disclosure Statement contains a complete and accurate list
of all interests in real property owned, leased or occupied by any
of the Acquired Companies. Except as described in the following
sentence, each of the Acquired Companies has good, valid and
marketable title to, or a valid leasehold interest in, all of its
properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all the properties and
assets reflected in the Interim NII Balance Sheet (except for
properties and assets not material, individually or in the
aggregate, to the Business that were disposed of in the ordinary
course of business consistent with past practices since July 31,
1997). None of such properties or assets are subject to any
liability, obligation or Encumbrance of any kind (whether
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absolute, accrued, contingent or otherwise), except (i) as set
forth in Section 2.11 of the NII Disclosure Statement, and (ii)
minor imperfections of title and Encumbrances, if any, which are
not substantial in amount, do not materially detract from the
value of the property or assets subject thereto and do not impair
the operations of any of the Acquired Companies. All buildings,
plants and structures owned by any Acquired Company lie wholly
within the boundaries of the real property owned by such Acquired
Company and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person, and, to
the knowledge of the Acquired Companies, all buildings, plants and
structures leased by any Acquired Company lie wholly within the
boundaries of the real property leased by such Acquired Company
and do not encroach upon the property of, or otherwise conflict
with the property rights of, any other Person. No condemnation
proceeding is pending or, to the knowledge of the Acquired
Companies, threatened with respect to any real property identified
in the NII Disclosure Statement, nor, to the knowledge of the
Acquired Companies, is any change in any Law pending or threatened
which would interfere with the use of any such building, structure
or other appurtenance thereon.
2.12 Condition and Sufficiency of Assets. All of the
buildings, plants, structures and equipment owned, leased or used
by each Acquired Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance, repairs or
improvements except for ordinary, routine maintenance and repairs
that are not material in nature or cost. All of the buildings,
plants, structures and equipment of the Acquired Companies are
sufficient for the continued conduct of the Business after the
Closing in substantially the same manner as it has been conducted
since October 31, 1993.
2.13 Accounts Receivable. All accounts and notes
receivable reflected in the Interim NII Balance Sheet or that are
reflected on the accounting records of any Acquired Company as of
the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations from bona fide sales
actually made or services actually performed by an Acquired
Company in the ordinary course of business. Unless paid prior to
the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective
reserves shown on the Interim NII Balance Sheet or on the
accounting records of the Acquired Companies as of the Closing
Date (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing
Date, will not exceed $15,000).
2.14 Inventory. All inventory of the Acquired
Companies, whether or not reflected in the Interim NII Balance
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Sheet, consists of a quality and quantity useable and salable in
the ordinary course of business consistent with past practice,
except for obsolete items and items of below-standard quality, all
of which have been written off or written down to net realizable
value in the Interim NII Balance Sheet or on the accounting
records of the Acquired Companies as of the Closing Date, as the
case may be. All inventories not written off have been priced at
the lower of cost or market on a first in, first out basis. The
quantities of each item of inventory (whether raw materials, work-
in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
All work in process and finished goods inventory is free of any
defect or other deficiency.
2.15 Product Design; Warranties.
(a) Except as described in Section 2.15(a) of the
NII Disclosure Statement, (i) no Acquired Company has agreed to
become, or is otherwise responsible for, consequential damages;
(ii) there are no warranties (express or implied) outstanding with
respect to any products created, manufactured, sold, distributed
or licensed, or any services rendered, by any of the Acquired
Companies other than any such implied by law pursuant to Sections
2-312 and 2-314 of the Uniform Commercial Code; (iii) there are no
material design, manufacturing or other material defects, latent
or otherwise, with respect to any such products; and (iv) such
products are not toxic. A copy of each standard warranty of each
Acquired Company is included in Section 2.15 of the NII Disclosure
Statement. Except as described in Section 2.15(a) of the NII
Disclosure Statement, no Acquired Company has modified or expanded
its warranty obligation to any customer beyond that set forth in
such standard warranties. No products have been sold or
distributed by any Acquired Company under an understanding that
such products would be returnable.
(b) The NII Interim Balance Sheet reflects
appropriate reserves for product design and warranty claims.
2.16 Taxes.
(a) All federal, state, local and foreign returns,
statements and reports relating to Taxes (or extensions relating
thereto) required to be filed by or with respect to any of the
Acquired Companies or any affiliate thereof, including, without
limitation, those relating to or affecting the Business, have been
filed on a timely basis with the appropriate governments or
governmental agencies or instrumentalities in all jurisdictions in
which such returns, statements and reports are required to be
filed, and all such returns, statements, and reports were true and
correct when filed.
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(b) All federal, state, local and foreign income,
profits, franchise, sales, use, payroll, premium, occupancy, prop-
erty, severance, excise, withholding, value added, unemployment,
business privilege, transfer and other taxes and governmental
charges and customs duties (including, without limitation,
interest and penalties) (collectively, "Taxes") due from or
required to be remitted by any of the Acquired Companies or any
affiliate thereof with respect to taxable periods ending on or
prior to, and the portion of any interim period up to, the Closing
Date, have been fully and timely paid or, to the extent not yet
due and payable, have been adequately provided for on the Interim
NII Balance Sheet or, in the case of Taxes accruing after July 31,
1997, on the books and records of the Acquired Companies.
(c) There are no levies, liens, or other
encumbrances existing, threatened or pending with respect to any
assets or properties of any Acquired Company relating to any
Taxes.
(d) Section 2.16(d) of the NII Disclosure
Statement lists all federal, state, local and foreign income,
franchise sales and use tax returns of, or covering, any of the
Acquired Companies or affiliates which have been examined or which
are currently under examination by the Internal Revenue Service or
by other appropriate taxing authorities, and, except as and to the
extent described in Section 2.16(d) of the NII Disclosure
Statement or provided for on the Interim NII Balance Sheet, all
deficiencies asserted or assessments made as a result of such
examinations have been fully paid, and there are no other unpaid
deficiencies asserted or assessments made by any taxing authority
against any of the Acquired Companies or affiliates thereof or
otherwise affecting any assets or properties of any of the
Acquired Companies.
(e) Section 2.16(e) of the NII Disclosure
Statement lists all elections by or with respect to any of the
Acquired Companies for federal or state income or franchise tax
purposes that are currently applicable. None of the Acquired
Companies: has filed any consent under section 341(f)(1) of the
Code or agreed to have the provisions of Code section 341(f)(2)
apply to any dispositions of "subsection (f) assets" as such term
is defined in Code section 341(f)(4); has agreed to or is required
to make any adjustments under Code section 481(a) by reason of a
change in accounting method or otherwise; employs the LIFO method
of accounting for inventories for federal income tax purposes; has
made a transfer of intangible property on which Code section
367(d) or 482 will require the recognition of additional income
for any period after the date hereof; or owns stock in a "passive
foreign investment company" within the meaning of Code section
1296(a). The books and records of each of the Acquired Companies
are sufficient to prove the correctness of all tax returns for
open tax years and to determine and to prove the adjusted tax
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basis for federal income tax purposes of each asset of each of the
Acquired Companies.
(f) Except as described in Section 2.16(f) of the
NII Disclosure Statement, none of the Acquired Companies is a
party to any tax sharing agreement or tax indemnification
agreement.
(g) No Acquired Company has any agreement,
contract or commitment that provides for any payment that could
constitute an "excess parachute payment" within the meaning of
Section 280G of the Code.
2.17 List of Certain Assets, Rights, Contracts, etc.
Section 2.17 of the NII Disclosure Statement contains a complete
and accurate list of and reasonably complete details concerning
each item described below, and NII has delivered or made available
to Parent true and complete copies of each written Contract
described below (and, in the case of oral Contracts, a true and
complete description thereof):
(a) All vehicles, items of machinery, equipment
and other tangible assets with a book or fair market value in
excess of $3,000 in respect of any item, owned, leased, used or
held by any Acquired Company and the location thereof (together,
if applicable, with the identity of the lessor and lessee, the
annual rental and unexpired term of the lease);
(b) All Authorizations currently in effect held by
any Acquired Company or that otherwise relate to the business of,
or to any of the assets owned or used by, any Acquired Company;
(c) All (i) fictitious business names, tradenames,
registered and unregistered trademarks, service marks and related
applications, (ii) patents, patent rights and patent applications,
(iii) registered and unregistered copyrights in published and
material unpublished works, computer programs and software (other
than commercially available programs such as WordPerfect) and (iv)
agreements, contracts and commitments relating to any of the
foregoing to which any Acquired Company is a party or by which any
Acquired Company is bound, and each agreement, commitment, or
contract to which any Acquired Company is a party or by which any
Acquired Company is bound relating to: know-how, trade secrets,
confidential information, software, technical information, process
technology, plans, drawings and blue prints (the items referred to
in clauses (i)-(iii) above and referred to following the
immediately preceding colon are collectively referred to herein as
"Intellectual Property"), in each case owned, leased, used, held
by, granted to or licensed by, as either licensor or licensee, any
Acquired Company;
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(d) All outstanding loans or advances (excluding
advances to employees for ordinary and necessary business expenses
made in the ordinary course of business) by any Acquired Company
to any director, officer, employee or stockholder of any Acquired
Company or to any other Person;
(e) All Contracts which restrict or purport to
restrict any business activities or freedom of any Acquired
Company (or, to the knowledge of the Acquired Companies, any of
their respective officers or employees) to engage in any business
or to compete with any Person;
(f) All Contracts to which any Acquired Company is
a party or is otherwise bound providing for payments (contingent
or otherwise) to or by any Person based on sales, purchases or
profits, other than direct payments for goods and services;
(g) All forms of Contracts and catalogs and
brochures used by any Acquired Company as a standard form in the
ordinary course of business;
(h) All notes, debt instruments, other evidences
of indebtedness, letters of credit and guaranties issued by or for
the benefit of any Acquired Company, and all loan and other
agreements relating thereto;
(i) All Contracts for capital expenditures;
(j) All Contracts to which any Acquired Company is
a party or by which any Acquired Company or any of its assets are
bound that:
(i) involves performance of services or sale
or lease of goods or materials by such Acquired Company of an
amount or value in excess of $10,000;
(ii) involves performance of services or sale
or lease of goods or materials to such Acquired Company of an
amount or value in excess of $10,000;
(iii) is not in the ordinary course of business
and involves expenditures or receipts by such Acquired Company of
more than $10,000; or
(iv) is not terminable by such Acquired
Company without payment of penalty or premium on less than 30
days' notice; or
(v) is otherwise material to the business,
operations, financial condition or prospects of such Acquired
Company.
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For purposes of this Agreement, "Contracts" means
all purchase orders, contracts, instruments, leases and other
agreements and commitments, whether oral or written. For purposes
of this Section 2.17 only, "Contracts" shall exclude Contracts
that are fully performed and under which no party to such Contract
has any further performance obligation, whether or not contingent.
(k) All leases, rental or occupancy Contracts, and
all other Contracts affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment
and conditional sales agreements having a value per item or
aggregate payments of less than $10,000 and with terms of less
than one year);
(l) Each outstanding proxy or power-of-attorney or
similar power granted by any Acquired Company for any purpose
whatsoever;
(m) Each bank or other financial institution in
which any Acquired Company has a deposit account, line of credit
or safe deposit box, the relevant account or other identifying
number and the name of all Persons authorized to act or deal in
connection therewith; and
(n) Each amendment, supplement and modification
(other than changes to purchase orders that are made in the
ordinary course of business) (whether oral or written) in respect
of any of the Contracts described above.
2.18 Contracts.
(a) Except as described in Section 2.18 of the NII
Disclosure Statement, all Contracts to which any Acquired Company
is a party or by which any Acquired Company or any of its assets
are bound (including any such Contract required to be identified
in the NII Disclosure Statement) were made in the ordinary course
of business, are in full force and effect and are valid, binding
and enforceable against the parties thereto in accordance with
their respective terms. Except as described in Section 2.18 of
the NII Disclosure Statement, no Acquired Company is in material
default under any such Contract to which it is a party or by which
it or its assets are bound, and no condition exists or event has
occurred which with notice or lapse of time would constitute a
material default or a basis for delay, non-performance,
termination, modification or acceleration of maturity or
performance by such Acquired Company or, to the knowledge of the
Acquired Companies, by any other party thereto. To the knowledge
of the Acquired Companies, no Acquired Company is a party to any
Contract upon which, upon completion, it would be likely to
recognize a material loss on its books and records. The terms and
conditions of all such Contracts are reasonable and customary in
-15-
the industry and trade in which the Acquired Companies operate,
and there are no extraordinary terms in such Contracts.
(b) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to any Acquired Company under current or
completed Contracts. All Contracts relating to the sale, design,
manufacture or provision of products or services by or to any
Acquired Company have been entered into in the ordinary course of
business.
(c) Except as disclosed in Section 2.18(c) of the
NII Disclosure Statement, the Acquired Companies provide goods and
services only pursuant to duly executed written Contracts, and
none of them is obligated to provide services or goods to any
Person pursuant to any Contract which is not contained in a
writing signed by all parties thereto.
2.19 Intellectual Property.
(a) Except as otherwise described in Section 2.19
of the NII Disclosure Statement: the Acquired Companies are the
sole owners of all right, title and interest in and to, or have
the exclusive perpetual right to use without payment to a third
party, all Intellectual Property, free and clear of any
Encumbrance; and no Acquired Company has granted or licensed to
any Person any rights with respect to any of the Intellectual
Property and no other Person has any rights in or to any of the
Intellectual Property (including, without limitation, any rights
to market or distribute any of the Intellectual Property).
(b) All of the Intellectual Property is in
compliance with all applicable legal requirements (including
registration, payment of filing, examination and maintenance fees
and proofs of working or use) and the Acquired Companies' rights
therein are valid and enforceable. None of the Intellectual
Property is subject to any maintenance fees or taxes or required
actions falling due within ninety days after the Closing Date. To
the knowledge of the Acquired Companies, none of the Intellectual
Property has been infringed or challenged or threatened in any
way. None of the products or services manufactured or sold by any
Acquired Company nor any Intellectual Property infringes or is, to
the knowledge of the Acquired Companies, alleged to infringe any
trademark, copyright, patent or other proprietary right of any
Person. The Acquired Companies have taken all reasonable
precautions to preserve and document their trade secrets and to
protect the secrecy, confidentiality and value of their trade
secrets.
2.20 Customers and Suppliers. Section 2.20 of the NII
Disclosure Statement lists the names of the twenty (20) customers
of MRL to whom MRL made the most sales during the 1996 fiscal year
-16-
and the aggregate revenues attributable to each in such year, and
of the twenty (20) suppliers and vendors from whom MRL made the
most purchases during such period and the aggregate expenditures
attributable to each in such year. No customer or customers that
in the aggregate accounted for more than 5% of the sales of any
Acquired Company in any fiscal year since October 31, 1993 have
terminated or materially reduced or have given notice that they
intend to terminate or materially reduce, the amount of business
done with any Acquired Company. No supplier or suppliers or
vendor or vendors that accounted for more than 1% of the purchases
of any Acquired Company in any fiscal year since October 31, 1993
have terminated or materially reduced or have given notice that
they intend to terminate or materially reduce, the amount of
business done with any Acquired Company. No Acquired Company is
aware of any such intention on the part of any such customer,
supplier or vendor, whether or not in connection with the
transactions contemplated hereunder. There are no, and during the
last four years there have not been any, material disputes or
controversies between any Acquired Company and any customer or
supplier or any other Person regarding the quality,
merchantability or safety of, or involving a claim of breach of
warranty which has not been fully resolved with respect to, or
defect in, any product purchased, manufactured or sold by such
Acquired Company. To the knowledge of the Acquired Companies,
each Acquired Company enjoys good working relationships under all
arrangements and agreements with customers and suppliers necessary
to the normal operation of its businesses. Alternative sources of
supply, on substantially similar terms and conditions, exist for
all material goods or services purchased by or supplied to any
Acquired Company.
2.21 Labor Matters.
(a) Except as described in Section 2.21 of the NII
Disclosure Statement: (i) since October 31, 1993, no Acquired
Company has been or is a party to any collective bargaining or
other labor Contract; (ii) no application or petition for
certification of a collective bargaining agent is pending or, to
the Acquired Companies' knowledge, is threatened, and none of the
employees of any Acquired Company are, or since October 31, 1993
have been, represented by any union or other bargaining
representative; (iii) since October 31, 1993, no union has
attempted to organize any group of any Acquired Company's
employees, and no such group has sought to organize into a union
or similar organization for the purpose of collective bargaining,
and, to the Acquired Companies' knowledge, no such organizational
activity is threatened or contemplated by any Person; (iv) there
has not been, there is not presently pending or existing and, to
the Acquired Companies' knowledge, there is not threatened any
strike, slowdown, picketing, work stoppage, grievance, labor
arbitration, or proceeding in respect of or arising from any labor
dispute against or affecting any Acquired Company or its premises;
-17-
(v) since October 31, 1993, there has been no lockout of any
employees by any Acquired Company, and no such action is
contemplated by any Acquired Company; and (vi) no agreement
restricts any Acquired Company from relocating, closing or
terminating any of its operations or facilities or any portion
thereof. No Acquired Company: has incurred liability under the
Workers' Adjustment and Retraining Notification Act or any other
federal, state, local or foreign "plant closing" or similar law;
is a contractor with the government of the United States or any
state, municipality or foreign jurisdiction; has failed at any
material time in the past to be in compliance with the United
States Fair Labor Standards Act and similar federal, state, local
and foreign laws with respect to hours worked by and payments made
to its employees; or has been cited for violations of the
Occupational Safety and Health Act of 1970, as amended ("OSHA"),
any regulation promulgated pursuant to OSHA or any other federal,
state, local or foreign statute, ordinance, rule or regulation
establishing standards of workplace safety or paid any fines or
penalties with respect to such citation. Each Acquired Company
that is considered a subcontractor with the government of the
United States or any state, municipality or foreign jurisdiction
such that it is required to maintain an affirmative action plan
has adopted, maintained and followed any and all such required
plans.
(b) Section 2.21(b) of the NII Disclosure
Statement sets forth the following information for each officer
and employee of each Acquired Company and for each consultant and
independent contractor regularly retained (including each such
Person on leave or layoff status): employee name and job title;
current annual rate of compensation (identifying bonuses
separately), any change in compensation since October 31, 1996 and
any future changes in compensation that may have been promised;
vacation accrued and service credited for purposes of vesting and
eligibility to participate in applicable Employee Benefit Plans;
number of NII Common Shares owned through the ESOP; and any
automobile leased or owned by an Acquired Company primarily for
use by any of the foregoing Persons. Section 2.21(b) of the NII
Disclosure Statement describes each employment, severance, change
in control, consulting, commission, agency and representative
Contract or arrangement to which any Acquired Company is a party
or is otherwise bound, including, without limitation, all
Contracts relating to wages, hours, severance, retirement benefits
or annuities, or other terms or conditions of employment (other
than unwritten employment arrangements terminable at will without
payment of any contractual severance or other amount). There are
no severance, change of control or other agreements or
arrangements to which any Acquired Company is a party or is
otherwise bound obligating any Acquired Company to make any
payment to any director, officer, employee or shareholder of any
Acquired Company, or causing any acceleration of, or other
increase in compensation to, any such Person as a result of the
-18-
Merger or any of the transactions contemplated hereby. None of
the employees of any Acquired Company has, to the knowledge of the
Acquired Companies, indicated a desire to terminate his or her
employment, or any intention to do so in connection with the
transactions contemplated hereunder.
2.22 Employee Benefits. Except as described in Section
2.22 of the NII Disclosure Statement:
(a) Neither NII, any of the other Acquired
Companies nor any ERISA Affiliate (as defined below), for the
benefit of any of their respective employees, maintains,
contributes or is or was within the past four years obligated to
make payments to any employee pension benefit plan ("Pension
Plan"), as defined in section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), any employee
welfare benefit plan ("Welfare Plan"), as defined in section 3(1)
of ERISA, any deferred compensation plan, or any other plan,
arrangement or commitment maintained by or on behalf of NII, any
of the other Acquired Companies or any ERISA Affiliate to provide
benefits to employees of NII, any of the other Acquired Companies
or any ERISA Affiliate (collectively, "Employee Benefit Plans").
As used herein, "ERISA Affiliate" shall refer to any trade or
business, whether or not incorporated, under common control with
NII within the meaning of section 414(b), (c), (m) or (o) of the
Code.
(b) NII, the other Acquired Companies and the
ERISA Affiliates have, prior to the Closing, delivered to Parent,
with respect to all Employee Benefit Plans listed in Section 2.22
of the NII Disclosure Statement, true, complete and correct copies
of the following: all plan documents, handbooks, manuals,
collective bargaining agreements and similar documents governing
employment policies, practices and procedures; all the most recent
summary plan descriptions and any subsequent summaries of material
modifications and all other material employee communications
discussing any employee benefit; Forms 5500 as filed with the IRS
for the most recent four plan years; the most recent report of the
enrolled actuary for all defined benefit plans, funded welfare
plans or other plans requiring actuarial valuation; all trust
agreements with respect to employee benefit plans; plan contracts
with service providers and plan contracts with insurers providing
benefits for participants or liability insurance for fiduciaries
and other parties in interest or bonding; most recent annual audit
and accounting of plan assets for all funded plans; and most
recent IRS determination letter for all plans qualified under Code
section 401.
(c) With respect to each Employee Benefit Plan
required to be listed on the NII Disclosure Statement:
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(i) each Employee Benefit Plan has been
administered in compliance with its terms and is in compliance in
all material respects with the applicable provisions of ERISA, the
Code and other applicable laws, rules and regulations, as they
relate to such plans (including, but not limited to, the funding,
filing, reporting and disclosure obligations and COBRA
continuation coverage obligations).
(ii) NII, the other Acquired Companies and
the ERISA Affiliates have made or provided for all contributions
to all Employee Benefit Plans as required under the terms of each
such Employee Benefit Plan for all periods through Closing.
(iii) no Pension Plan has been the subject of
a "reportable event" (as defined in Section 4043 of ERISA) and
there have been no "prohibited transactions" (as defined in
Section 4975 of the Code or in Part 4 of Subtitle B of Title I of
ERISA) with respect to any Employee Benefit Plan.
(iv) neither NII, any of the other Acquired
Companies nor any ERISA Affiliate has incurred any liability under
any provision of ERISA or other applicable law relating to any
Employee Benefit Plan or knows of any inquiries, proceedings,
claims or suits pending or threatened by the Internal Revenue
Service (the "IRS"), the U.S. Department of Labor (the "DOL"), the
Pension Benefit Guaranty Corporation (the "PBGC"), or by any
participant or beneficiary, with respect to any Employee Benefit
Plan or trust under such Employee Benefit Plan, or the sponsor or
administrator of such Employee Benefit Plan, or any fiduciary of
such Employee Benefit Plan which is now or was formerly maintained
or contributed to by NII, any of the other Acquired Companies or
an ERISA Affiliate.
(v) the actuarial present value of
accumulated benefits (both vested and unvested) of each of the
Pension Plans, which are defined benefit plans, are fully funded
in accordance with the actuarial assumptions used by the PBGC to
determine the level of funding required in the event of the
termination of such Pension Plan.
(vi) each Employee Benefit Plan which is
intended to be a qualified plan within the meaning of section 401
of the Code is, and has from its inception been, so qualified, and
the IRS has issued each Employee Benefit Plan a favorable
determination letter which is currently applicable.
(vii) each trust created pursuant to any
Employee Benefit Plan maintained by NII, any of the other Acquired
Companies or any ERISA Affiliate has been at all times exempt from
Federal income tax under section 501(a) of the Code. No trust
under any such Employee Benefit Plan has at any time had any
"unrelated business taxable income," within the meaning of section
-20-
512 of the Code, nor has any such trust been subject to tax
thereon under section 511 of the Code.
(viii) neither NII, any of the other Acquired
Companies nor any ERISA Affiliate is aware of any circumstance or
event which would jeopardize the tax-qualified status of any
Employee Benefit Plan or the tax-exempt status of any related
trust, or would cause the imposition of any liability, penalty or
tax under ERISA or the Code with respect to any Employee Benefit
Plan.
(d) Neither NII, any of the other Acquired
Companies nor any ERISA Affiliate maintains or has ever maintained
or been obligated to contribute to any multiemployer plan
("Multiemployer Plan"), as defined in section 3(37) of ERISA.
(e) With respect to each Employee Benefit Plan
maintained by NII, any of the other Acquired Companies, or any
ERISA Affiliate: (i) no unsatisfied liabilities to participants,
the IRS, the DOL, the PBGC or to any other person or entity have
been incurred as a result of the termination of any Employee
Benefit Plan; (ii) no Pension Plan, which is subject to the
minimum funding requirements of Part 3 of Subtitle B of Title I of
ERISA or subject to Section 412 of the Code, has incurred any
"accumulated funding deficiency" within the meaning of Section 302
of ERISA or Section 412 of the Code and there has been no waived
funding deficiency within the meaning of Section 303 of ERISA or
Section 412 of the Code; and (iii) there has been no event with
respect to a Pension Plan which would require disclosure under
Sections 4062(c), 4063(a) or 4041(e) of ERISA.
(f) All reports and information required to be
filed with the DOL, IRS and PBGC and distributed to plan
participants and their beneficiaries with respect to each Employee
Benefit Plan required to be listed on the NII Disclosure Statement
have been filed and/or distributed and the financial statements
contained in all annual reports (Form 5500 series) of such
Employee Benefit Plans were certified without qualification by
each Employee Benefit Plan's accountants and actuaries. There has
been no material change with regard to any such Employee Benefit
Plan since the last annual report.
(g) All Employee Benefit Plans required to be
listed on the NII Disclosure Statement may, without liability, be
amended, terminated or otherwise discontinued except as
specifically prohibited by federal law.
(h) Any bonding required under ERISA with respect
to any Employee Benefit Plan required to be listed on the NII
Disclosure Statement has been obtained and is in full force and
effect and no funds held by or under the control of NII, any of
-21-
the other Acquired Companies or any ERISA Affiliate are plan
assets.
(i) Neither NII, any of the other Acquired
Companies nor any ERISA Affiliate maintains any retired life
and/or retired health insurance plans which provide for continuing
benefits or coverage for any employee or beneficiary of NII, any
of the other Acquired Companies or any ERISA Affiliate.
(j) The consummation of the transactions
contemplated by this Agreement will not, alone or together in any
event, (i) entitle any employee of NII, any of the other Acquired
Companies or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to
any such employee, officer or director or (iii) result in any
liability of NII, any of the other Acquired Companies or any ERISA
Affiliate under Title IV of ERISA or otherwise.
(k) Neither NII, any of the other Acquired
Companies nor any ERISA Affiliate is bound by any collective bar-
gaining agreement or legally binding arrangement to maintain or
contribute to any Employee Benefit Plan.
(l) There has been no violation of the "continu-
ation coverage requirements" of section 4980B of the Code and Part
6 of Subtitle B of Title I of ERISA with respect to any Welfare
Plan to which such continuation coverage requirements apply.
(m) All spousal consents required in connection
with distributions of funds from profit sharing accounts under the
NII Employee Stock Ownership Plan (the "ESOP") or from the
accounts under its predecessor plans have been obtained in a
timely fashion.
(n) There has been no violation of the health
insurance obligations imposed by section 9801 of the Code and Part
7 of Subtitle B of Title I of ERISA ("HIPAA") with respect to any
Welfare Plan which is a group health plan (as defined under
section 5000(b)(1) of the Code or Part 6 of Subtitle B of Title I
of ERISA) to which such insurance obligations apply.
(o) The trustees for the ESOP will be required at
the NII Shareholders' Meeting to allocate the vote of the NII
Common Shares held of record by the ESOP in accordance with the
vote of the ESOP participants as a result of the ESOP
Solicitation. Following the NII Shareholders' Meeting, such
trustees will assert dissenters' rights only in respect of the NII
Common Shares of which the ESOP is the record owner that are
allocated to the accounts of participants that previously
instructed the trustees to vote such shares against the Merger and
-22-
that affirmatively asserted dissenters rights when the trustees
informed them of their rights with respect thereto.
2.23 Relationships With Related Persons.
(a) Except as described in Section 2.23 of the NII
Disclosure Statement, no present or former officer, director or
shareholder of any Acquired Company, no member of the immediate
family of any such Person, and no Person controlling, controlled
by or under common control with, directly or indirectly, any of
the foregoing (collectively "Affiliated Persons") has, or has had
since October 31, 1993, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible) or
assets used in or pertaining to any Acquired Company's business.
Except as described in Section 2.23 of the NII Disclosure
Statement, no Affiliated Person owns, or since October 31, 1993
has owned, of record or as a beneficial owner, an equity interest
or any other financial or profit interest in any Person that has
(i) had business dealings or a material financial interest in any
transaction with any Acquired Company, or (ii) engaged in
competition with any Acquired Company with respect to any line of
the products or services of any Acquired Company (a "Competing
Business") in any market presently served by any Acquired Company
except for less than one percent of the outstanding capital stock
of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market.
(b) Except as set forth in Section 2.23 of the NII
Disclosure Statement, no Affiliated Person is a party to any
Contract with, or has any claim or right against, any Acquired
Company other than, in the case of Affiliated Persons who are
employed by an Acquired Company and disclosed in Section 2.23 of
the NII Disclosure Statement, accrued compensation and benefits
payable in the ordinary course of business and reflected on such
Acquired Company's books and records.
2.24 Environmental Matters.
(a) Except as described in Section 2.24 of the NII
Disclosure Statement:
(i) Each of the Acquired Companies, including
all of its businesses and operations, is, and at all times since
October 31, 1995 and, to the knowledge of the Acquired Companies,
between October 31, 1993 and October 31, 1995, has been operated
in compliance with all Environmental Laws (as defined below);
(ii) There are no conditions on, about,
beneath or arising from any of the premises owned, used or leased
by any of the Acquired Companies (collectively, the "Premises")
which might, under any Environmental Law, (A) give rise to
liability of or the imposition of a statutory lien on any Acquired
-23-
Company, or (B) which would or might require any "Response,"
"Removal" or "Remedial Action" (as those terms are defined below)
or any other action by any Acquired Company, including, without
limitation, reporting, monitoring, cleanup or contribution;
(iii) There were no conditions on, about,
beneath or arising from any real property which was, but is no
longer, owned, used or leased to or by any of the Acquired
Companies ("Former Real Property"), during the period of such
ownership, use, or lease, which might, under any Environmental
Law, (A) give rise to liability of or the imposition of a
statutory lien on any Acquired Company, or (B) which would or
might require any "Response," "Removal" or "Remedial Action" or
any other action by any Acquired Company, including without
limitation reporting, monitoring, cleanup or contribution;
(iv) None of the Acquired Companies has
received any notification of a release or threat of a release of a
"Hazardous Substance" (as defined below) with respect to the
Premises or the Former Real Property;
(v) No Hazardous Substances have been used,
handled, generated, processed, treated, stored, transported to or
from, released, discharged or disposed of by any of the Acquired
Companies or, to the knowledge of the Acquired Companies, any
third party on, about or beneath the Premises;
(vi) During the ownership, use or lease of
the Former Real Property by any of the Acquired Companies, no
Hazardous Substances were used, handled, generated, processed,
treated, stored, transported to or from, released, discharged or
disposed of by any of the Acquired Companies or, to the knowledge
of the Acquired Companies, any third party on, about or beneath
the Former Real Property;
(vii) There are no above or underground
storage tanks or transformers containing or contaminated with PCBs
on, about or beneath the Premises. During the ownership, use or
lease of the Former Real Property by any of the Acquired
Companies, there were no above or underground storage tanks, or
transformers containing or contaminated with PCBs on, about or
beneath the Former Real Property owned by any Acquired Company or,
to the knowledge of the Acquired Companies, leased to any Acquired
Company;
(viii) None of the Acquired Companies has
received notice or otherwise has knowledge of:
(A) any claim, demand, investigation,
enforcement, Response, Removal, Remedial Action, statutory lien or
other governmental or regulatory action instituted or threatened
-24-
against any of the Acquired Companies, the Premises or any Former
Real Property pursuant to any of the Environmental Laws;
(B) any claim, demand, suit or
action, made or threatened by any Person against any of the
Acquired Companies, the Premises or any Former Real Property
relating to (1) any form of damage, loss or injury resulting from,
or claimed to result from, any Hazardous Substance on, about,
beneath or arising from the Premises or any Former Real Property
or (2) any alleged violation of the Environmental Laws by any of
the Acquired Companies; or
(C) any communication to or from any
governmental or regulatory agency arising out of or in connection
with Hazardous Substances on, about, beneath, arising from or
generated at the Premises or any Former Real Property, including
without limitation, any notice of violation, citation, complaint,
order, directive, request for information or response thereto,
notice letter, demand letter or compliance schedule; and
(ix) No wastes generated by any of the
Acquired Companies have ever been directly or indirectly sent,
transferred, transported to, treated, stored or disposed of at any
site listed or formally proposed for listing on the National
Priority List promulgated pursuant to CERCLA or to any site listed
in any state list of sites requiring or recommended for
investigation or clean-up.
(b) As used in this Agreement:
(i) The term "Environmental Laws" shall mean
any and all Laws and Authorizations concerning or relating to
industrial hygiene or the protection of health and/or the
environment, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601 et seq., as amended ("CERCLA"), the Resource Conservation
and Recovery Act, 42 U.S.C. 6901 et. seq., as amended, the
Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq., as
amended, the Clean Air Act, 42 U.S.C. 7401 et seq., as amended,
the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., as
amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. 136 et seq., as amended, or the Safe Drinking Water Act,
42 U.S.C. 300 et seq., as amended, or regulations promulgated
thereunder.
(ii) The terms "Response," "Removal" and
"Remedial Action" shall have the meanings ascribed to them in
Sections 101(22)-101(25) of CERCLA.
(iii) The term "Hazardous Substances" or
"Hazardous Substance" shall mean any substance regulated under any
of the Environmental Laws, including, without limitation, any
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substance which is: (A) petroleum, asbestos or asbestos-
containing material, urea formaldehyde or polychlorinated
biphenyls; (B) a "hazardous substance," "pollutant" or
"contaminant" (as defined in Sections 101(14), (33) of CERCLA or
the regulations designated pursuant to Section 102 of CERCLA),
including any element, compound, mixture, solution or substance
that is or may be designated pursuant to Section 102 of CERCLA;
(C) listed in the United States Department of Transportation
Hazardous Material Tables, 49 C.F.R. 172.101; (D) defined,
designated or listed as a "hazardous waste" pursuant to the
Resource Conservation and Recovery Act, as amended (42 U.S.C.
6901, 6921,5903(5)); (E) listed as a "hazardous air pollutant"
under Section 112 of the Clean Air Act, as amended; or (F) does or
may physically, chemically, biologically or otherwise breakdown
and transform into, or otherwise produce, become, promote or
result in the presence or an increase of any of the above when
released on, at, beneath or to the environment.
2.25 Absence of Certain Changes and Events
(a) Except as described in Section 2.25 of the NII
Disclosure Statement and except as otherwise expressly provided
herein, since October 31, 1996, each of the Acquired Companies has
conducted its business only in the usual and ordinary course
consistent with past practice and there has not been any:
(i) declaration or payment of any dividend or
other distribution or payment in respect of the shares of capital
stock of any of the Acquired Companies, or any repurchase or
redemption of any such shares of capital stock;
(ii) amendment to the certificate or articles
of incorporation, bylaws or other organizational document of any
of the Acquired Companies;
(iii) payment or increase by any Acquired
Company of any bonuses, salaries, or other compensation (except
for payment of salary in the ordinary course consistent with past
practice) to any shareholder, director, officer or employee of any
Acquired Company or entry into (or amendment of) any employment,
severance or similar agreement with any director, officer or
employee of any Acquired Company;
(iv) adoption of, change in or increase in
the payments to or benefits under any Employee Benefit Plan or
labor policy of any Acquired Company;
(v) damage, destruction or loss to any
material asset or property of any Acquired Company, whether or not
covered by insurance;
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(vi) entry into, amendment, termination or
receipt of notice of termination of, any Contract which is
required to be disclosed in the NII Disclosure Statement or which
relates to any material transaction, whether or not in the
ordinary course of business;
(vii) sale (other than sales of inventory in
the ordinary course of business), assignment, conveyance, lease,
or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any asset or property of any of the Acquired
Companies;
(viii) cancellation or waiver of any claims
or rights with a value to any Acquired Company in excess of $5,000
(either individually or collectively);
(ix) change in the accounting methods,
principles or practices followed by any Acquired Company or any
change in any of the assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserve;
(x) prepayment of any amount due to any
suppliers of, or other Persons providing goods or services not yet
received to, any Acquired Company;
(xi) change in the manner in which the ESOP
is administered, including, without limitation, any increase in
the amounts contributed by NII to the ESOP; or
(xii) agreement, whether or not in writing,
to do any of the foregoing.
(b) Since October 31, 1996, there has not been any
material adverse change in the business, operations, properties,
assets, working capital, or condition (financial or otherwise) of
any Acquired Company or any event, condition or contingency that
is likely to result in such a material adverse change.
2.26 Books and Records. The books and records of each
Acquired Company, including financial records and books of
account, are complete and accurate in all material respects and
have been maintained in accordance with sound business practices.
Such books and records accurately and fairly reflect its income,
expenses, assets and liabilities and each Acquired Company
maintains internal accounting controls which provide reasonable
assurance that: (a) transactions are executed in accordance with
management's authorization; (b) transactions are recorded as
necessary to permit preparation of reliable financial statements
and to maintain accountability for earnings and assets; (c) access
to assets is permitted only in accordance with management's
authorization; (d) the recorded accountability of all assets is
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compared with existing assets at reasonable intervals; and (e)
except as described in Section 2.26 of the NII Disclosure State-
ment, all intercompany transactions, charges and expenses among or
between any Acquired Company and any Affiliated Person are
accurately reflected at fair arms length value in all financial
statements.
2.27 Insurance.
(a) Section 2.27(a) of the NII Disclosure
Statement contains a complete and accurate list of all policies
and binders of insurance (including, without limitation, property,
casualty, liability, life, health, accident, workers' compensation
and disability insurance and bonding arrangements) owned by or
maintained for the benefit of any Acquired Company or to which any
Acquired Company is a party or under which any Acquired Company,
or any director thereof, is covered.
(b) Section 2.27(b) of the NII Disclosure
Statement describes each Contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any insurance
risk by any Acquired Company.
(c) Section 2.27(c) of the NII Disclosure
Statement sets forth, by year for the current policy year and each
of the two preceding policy years:
(i) a summary of the loss experience under
each policy;
(ii) a statement describing each claim under
an insurance policy for an amount in excess of $5,000, which sets
forth: (A) the name of the claimant; (B) the description of the
policy by insurer, type of insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss
experience for all claims that were self-insured, including the
number and aggregate cost of such claims.
(d) Section 2.27(d) of the NII Disclosure
Statement describes all obligations of any Acquired Company to
provide coverage to third parties (such as, for example, under
leases or service agreements) and identifies the policy under
which such coverage is provided.
(e) Section 2.27(e) of the NII Disclosure
Statement describes any self-insurance arrangement by or affecting
any Acquired Company, including any reserves established
thereunder.
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(f) Except as set forth on Section 2.27(f) of the
NII Disclosure Statement:
(i) All policies to which any Acquired
Company is a party or that provide coverage to any Acquired
Company or director thereof:
(A) are issued by an insurer that is
financially sound and reputable;
(B) are valid, outstanding, and
enforceable;
(C) taken together, provide adequate
insurance coverage for the assets
and the operations of such
Acquired Company for all risks to
which such Acquired Company is
normally exposed;
(D) are sufficient for compliance
with all laws and contracts,
agreements and commitments to
which such Acquired Company is a
party or by which it is bound;
and
(E) will continue in full force and
effect following the Closing and
the Merger.
(ii) No Acquired Company has received within
the last three years (A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights; (B)
any notice that an issuer of any insurance policy has filed for
protection under applicable bankruptcy laws or is otherwise in the
process of liquidating or has been liquidated; (C) any notice of
cancellation or any other indication that any insurance policy is
no longer in full force and effect or that the issuer of any
policy is not willing or able to perform its obligations
thereunder; or (D) any notice from an insurer to discontinue any
coverage afforded to such Acquired Company or director thereof.
(iii) Each Acquired Company has paid all
premiums due, and has otherwise performed its obligations, under
each policy listed or required to be listed in Section 2.27 of the
NII Disclosure Statement.
(iv) Each Acquired Company has given timely
notice to the insurer of all existing claims of which it has
knowledge.
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2.28 Brokers. No person acting on behalf of any
Acquired Company, any Affiliated Party or any of their affiliates
or under the authority of any of the foregoing is or will be
entitled to any brokers' or finders' fee or any other commission
or similar fee, directly or indirectly, from any of such parties
in connection with any of the transactions contemplated by this
Agreement, other than Harris Roja Corporation.
2.29 Information Supplied. None of the information
supplied or to be supplied by any Acquired Company specifically
for inclusion or incorporation by reference in (i) the
registration statement on Form S-4, or other appropriate form, to
be filed with the Securities and Exchange Commission ("SEC") by
Parent in connection with the issuance of Parent Common Shares in
the Merger (the "Registration Statement") will (except to the
extent revised or superseded by amendments or supplements
contemplated hereby), at the time the Registration Statement is
filed with the SEC, at any time it is amended or supplemented and
at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they are made, not misleading, or (ii) the joint proxy statement
to be used by Parent and NII to solicit any required approval of
their respective shareholders as contemplated by this Agreement
(the "Proxy Statement") will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at
the date it is first mailed to Parent's and NII's shareholders and
at the time of the meeting of Parent's and NII's shareholders,
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 therein, in light of the
circumstances under which they are made, not misleading.
2.30 Voting Requirements. The affirmative vote of the
holders of a majority of the outstanding NII Common Shares at a
duly convened meeting of the NII shareholders or any adjournment
or postponement thereof to approve and adopt this Agreement and
the Merger Agreement is the only vote of the holders of any class
or series of NII's capital stock necessary to approve this
Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby.
2.31 Accounting Matters. None of the Acquired
Companies and none of the Principal Shareholders has taken or
agreed to take any action that, to the knowledge of the Acquired
Companies after consultation with NII's independent public
accountants, would prevent the business combination to be effected
by the Merger to be accounted for as a pooling of interests.
2.32 Full Disclosure. All documents and other papers
delivered by or on behalf of NII in connection with the
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transactions contemplated by this Agreement are accurate and
complete and are authentic. No representation or warranty of NII
contained in this Agreement or the NII Disclosure Statement
contains any untrue statement or omits to state a fact necessary
in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
2.33 Knowledge. For purposes of this Agreement, "to the
knowledge of the Acquired Companies" and correlative terms shall
mean the actual knowledge of any and all Principal Shareholders,
after due inquiry.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB.
Parent and Merger Sub hereby jointly and severally
represent and warrant to NII as follows:
3.1 Organization and Good Standing. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation and has all necessary corporate power and authority
to carry on its business as presently conducted, to own, lease and
operate all of the properties and the assets that it owns or
leases and to perform all its obligations under each agreement and
instrument by which it is bound.
3.2 Power and Authorization. Each of Parent and Merger
Sub has all requisite corporate power to execute, deliver and
perform its obligations under this Agreement, the Merger Agreement
and all other agreements and documents required to be delivered by
it prior to or at the Closing (collectively, the "Acquiror
Transaction Documents"). The execution, delivery and performance
by Parent and Merger Sub of the Acquiror Transaction Documents
have been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and,
assuming due authorization, execution and delivery thereof by the
other parties hereto, constitutes the legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against
each of them in accordance with its terms. When executed and
delivered as contemplated herein, each of the other Acquiror
Transaction Documents shall, assuming due authorization, execution
and delivery by the other parties thereto, constitute the legal,
valid and binding obligation of each of Parent and Merger Sub that
is a party thereto, enforceable against each of them that is a
party thereto in accordance with its terms.
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3.3 No Conflict; Consents and Approvals.
(a) Subject to paragraph (b) below, the execution
and delivery of this Agreement do not, and the execution and
delivery of the other Acquiror Transaction Documents and the
consummation of the transactions contemplated by the Acquiror
Transaction Documents will not (with or without the passage of
time or the giving of notice): (i) violate or conflict with the
articles of incorporation or bylaws (or other organizational
documents) of Parent or Merger Sub or any Law applicable to Parent
or Merger Sub or by or to which any material properties or assets
of Parent or Merger Sub are bound or subject; or (ii) except as
would not result in a material adverse effect on the financial
condition or results of operations of Parent and its subsidiaries
taken as a whole (a "Parent Material Adverse Effect") or as will
be cured or waived prior to the Closing, violate or conflict with,
result in a breach of, or constitute a default or otherwise cause
any loss of benefit under or give to others any rights in or with
respect to, any Contract to which Parent or Merger Sub is a party
or by which any assets or properties of Parent or Merger Sub are
bound or affected.
(b) The execution and delivery of this Agreement
by Parent and Merger Sub do not, and the execution and delivery by
Parent and Merger Sub of the other Acquiror Transaction Documents
and the consummation by Parent and Merger Sub of the transactions
contemplated by the Acquiror Transaction Documents will not,
require Parent or Merger Sub to obtain any consent, license,
permit, waiver, approval, authorization or order of, or to make
any filing, registration or declaration with or notification to,
any court, government, governmental agency or instrumentality
(federal, state, local or foreign), except for (i) the filing with
the SEC of the Registration Statement provided for in Section 4.4
hereof and the obtaining from the SEC of such orders as may be
required in connection therewith, (ii) filings or other actions
required under the Exchange Act, (iii) filings or other action
required by the American Stock Exchange, (iv) the filing of such
documents with, and the obtaining of such orders from, the various
state and foreign authorities, including state securities
authorities, that may be required under state securities and blue
sky laws or similar foreign laws in connection with the
transactions contemplated by this Agreement, (v) the pre-merger
notification requirements of the HSR Act, (vi) the filing and
recordation of appropriate merger documents as required under
California law and (vii) any such consent, license, permit,
waiver, approval, authorization, order, registration,
notification, filing or declaration, the failure to obtain or make
which would not prevent or delay consummation of the Merger or
otherwise prevent Parent or Merger Sub from performing any of
their respective obligations under the Acquiror Transaction
Documents and would not result in a Parent Material Adverse
Effect.
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(c) There are no actions, proceedings or investi-
gations pending or, to the knowledge of Parent, threatened, that
question any of the transactions contemplated by this Agreement or
the validity of any of the Acquiror Transaction Documents or
which, if adversely determined, could reasonably be expected to
have a material adverse effect upon Parent's or Merger Sub's
ability to enter into or perform their respective obligations
under the Acquiror Transaction Documents.
3.4 Capitalization. The authorized capital stock of
Parent consists of 1,000,000 Preferred Shares, par value $1 per
share ("Parent Preferred Shares"), and 10,000,000 Common Shares,
par value $1 per share ("Parent Common Shares"). No Parent
Preferred Shares are issued or outstanding. The authorized
capital stock of Merger Sub consists of 100 shares of capital
stock, no par value, all of which have been duly authorized and
validly issued, are fully paid and non-assessable by Merger Sub
and are owned by Parent (but will be contributed by Parent to
Widmar immediately following the consummation of the Stock
Acquisition and immediately prior to the consummation of the
Merger).
3.5 Parent Common Shares. The Parent Common Shares to
be delivered upon the consummation of the Merger have been duly
authorized and will, when so delivered, be validly issued and
outstanding, fully paid and nonassessable by Parent.
3.6 SEC Reports; Financial Statements. The Parent
Common Shares are registered under Section 12 of the Exchange Act.
Parent has provided to NII true and complete copies (without
exhibits) of the reports and proxy statements filed by Parent with
the SEC pursuant to Sections 13(a) and 14(a) of the Exchange Act
since December 31, 1995 (collectively, the "SEC Reports"). None
of the SEC Reports as of their respective dates contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Each of the consolidated balance
sheets (including the related notes) included in the SEC Reports
fairly presents the consolidated financial position of Parent and
its subsidiaries as of the respective dates thereof, and the other
related consolidated statements (including the related notes)
included therein fairly present the results of operations and the
cash flows of Parent and its subsidiaries for the respective
periods or as of the respective dates set forth therein, all in
conformity with GAAP consistently applied during the periods
involved except (i) as otherwise noted therein, (ii) in the case
of unaudited statements, as permitted by Form 10-Q of the SEC and
(iii) in the case of unaudited statements, to all adjustments
(consisting of normal recurring adjustments) necessary to present
fairly Parent's consolidated financial position.
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3.7 Absence of Changes. Except as Parent may otherwise
have advised NII prior to the date hereof or as set forth in the
SEC Reports, since June 30, 1997, there has not been any material
adverse change in the business, operations, properties, assets,
working capital or condition (financial or otherwise) of Parent
and its subsidiaries, taken as a whole, or any event, condition or
contingency that is likely to result in such a material adverse
change.
3.8 Brokers. No Person acting on behalf of Parent or
any of its affiliates or under the authority of any of the fore-
going is or will be entitled to any brokers' or finders' fee or
any other commission or similar fee, directly or indirectly, from
any of such parties in connection with any of the transactions
contemplated by this Agreement.
3.9 Information Supplied. None of the information
supplied or to be supplied by Parent or Merger Sub specifically
for inclusion or incorporation by reference in (i) the
Registration Statement will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at
the time the Registration Statement is filed with the SEC, at any
time it is amended or supplemented and at the time it becomes
effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not
misleading, or (ii) the Proxy Statement will (except to the extent
revised or superseded by amendments or supplements contemplated
hereby), at the date it is first mailed to Parent's or NII's
shareholders and at the time of the meeting of Parent's and NII's
shareholders 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 therein, in light of the
circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement will comply as to
form in all material respects with the requirements of the
Securities Act and Exchange Act and the rules and regulations
thereunder, except that no representation is made by Parent or
Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied by any Acquired
Company or any affiliate thereof specifically for inclusion or
incorporation by reference in the Registration Statement.
3.10 Interim Operations of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
3.11 Accounting Matters. Parent has not taken nor
agreed to take any action that, to Parent's knowledge after
consultation with Parent's certified independent public
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accountants, would prevent the business combination to be effected
by the Merger to be accounted for as a pooling of interests.
SECTION 4. COVENANTS
4.1 Conduct of Business by the Acquired Companies.
Except as expressly provided herein, between the date hereof and
the Closing, without the prior written consent of Parent, NII
shall and shall cause each of the other Acquired Companies to:
(a) maintain its corporate existence, pay and dis-
charge all debts, liabilities and obligations as they become due
(including, without limitation, the payment or discharge of trade
accounts payable but excluding debts, liabilities and obligations
that NII is contesting in good faith and for which NII has
established adequate reserves on its books), and operate solely in
the ordinary course in a manner consistent with past practice and
the provisions of this Agreement and in compliance with all
applicable Laws, Authorizations and Contracts (including, without
limitation, those identified in the NII Disclosure Statement);
(b) maintain its facilities and assets in the same
state of repair, order and condition as they are on the date
hereof, reasonable wear and tear excepted;
(c) maintain its books and records in accordance
with past practice, and to use best efforts to maintain in full
force and effect all Authorizations and all insurance policies and
binders; and
(d) use best efforts to preserve intact its
present business organization and maintain its relations and
goodwill with the suppliers, customers, employees and others
having a business relationship with it.
4.2 Negative Covenants. Except as expressly provided
herein, between the date hereof and the Closing, without the prior
written consent of Parent, NII shall not, and NII shall not permit
any of the other Acquired Companies to:
(a) take any action or, to the extent within any
Acquired Company's reasonable control, permit to occur any event
which would breach any covenant of NII contained herein or cause
any representation or warranty of NII contained herein to be
untrue if made immediately after such event;
(b) make any change in its authorized or issued
capital stock, grant any stock option or other right to purchase
shares of its capital stock or other securities, issue or make any
commitment to issue any capital stock or other securities, or
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purchase, redeem, retire or make any other acquisition of any
shares of any capital stock or other securities;
(c) fail to pay or discharge when due any of its
liabilities or obligations;
(d) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt
securities; or
(e) solicit or encourage (including by way of
furnishing nonpublic information), or take any other action to
facilitate (or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant
or other representative or agent retained by it to do any of the
foregoing) any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as defined below), or agree or endorse any
Takeover Proposal, or participate in any discussions or
negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal. NII shall
promptly advise Parent orally and in writing of any such inquiries
or proposals, including all of the material terms thereof. As
used in this Agreement, "Takeover Proposal" shall mean any tender
or exchange offer, proposal for a merger, consolidation, joint
venture, purchase of substantially all assets of, amalgamation,
arrangement or other business combination involving NII or any
other Acquired Company or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion
of the assets of, NII or any other Acquired Company other than the
transactions contemplated or permitted by this Agreement.
4.3 Access to Information; Confidentiality.
(a) NII shall, and shall cause the other Acquired
Companies to (i) afford to Parent and its officers, directors,
employees, accountants, consultants, legal counsel, agents and
other representatives (collectively, the "Acquiror
Representatives") reasonable access at reasonable times, upon
reasonable prior notice, to the officers, employees, accountants,
agents, properties, offices and other facilities of NII and the
other Acquired Companies and to the books and records thereof and
(ii) furnish promptly to Parent and the Acquiror Representatives
such information concerning the business, properties, contracts,
records, personnel and shareholders of NII and the other Acquired
Companies (including, without limitation, financial, operating and
other data and information) as may be reasonably requested, from
time to time, by Parent.
(b) Each of the Principal Shareholders shall
provide the Acquiror Representatives with information regarding
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his or its ownership of NII Common Shares and other information as
the Acquiror Representatives may reasonably request.
(c) No investigation by Parent made heretofore or
hereafter shall affect the representations and warranties of NII
or the Principal Shareholders that are contained herein and each
such representation and warranty shall survive such investigation.
(d) Except as required by Law, the rules of the
American Stock Exchange or as otherwise contemplated herein,
Parent shall prior to Closing afford all confidential information
relating to any Acquired Company furnished by NII to Parent or the
Acquiror Representatives (but excluding information that is
generally known by or available to the public other than as a
result of disclosure by Parent) the same degree of protection
against inadvertent or wrongful disclosure as Parent affords its
own most valuable trade secrets and shall not, except with the
written consent of NII, disclose all or any portion thereof to any
Person other than Acquiror Representatives that Parent believes
should have such information in order to participate in or
contribute to the transactions contemplated herein. Such
information shall be used by Parent and the Acquiror
Representatives solely for the purpose of evaluating the
transactions described herein. Each Acquiror Representative to
whom such information is disclosed shall be advised, prior to
receiving such information, of its confidential nature and of the
terms of this Agreement regarding such information. In the event
that this Agreement is terminated, Parent shall (i) return to NII
all copies of all documents furnished to Parent or the Acquiror
Representatives by NII reflecting confidential information
relating to any Acquired Company and (ii) either deliver to NII or
destroy all copies of all notes, documents and materials prepared
by or for Parent which reflect, interpret, include or are derived
from such information. Parent shall not acquire any license under
any patent or other Intellectual Property by virtue of NII's
disclosure of information pursuant to this Section 4.3.
4.4 Preparation of the Registration Statement and the
Prospectus. Parent shall promptly prepare and file with the SEC
the Registration Statement registering under the Securities Act
the Parent Common Shares to be issued in the Merger. NII and the
Principal Shareholders shall, and shall cause each of the other
Acquired Companies to, furnish Parent with all information
concerning the Acquired Companies and otherwise cooperate as may
be reasonably requested in connection with the preparation of the
Registration Statement and the Proxy Statement (including, without
limitation, obtaining necessary accountants' consents and audited
financial statements). Each of Parent and NII shall use
reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable
after such filing. If at any time prior to the NII Shareholders'
Meeting or the Parent Shareholders' Meeting any event or
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circumstance relating to NII or any of its affiliates, or its or
their respective officers or directors, should be discovered by
NII that should be set forth in an amendment to the Registration
Statement, or a supplement to the Proxy Statement, NII shall
promptly inform Parent of the same.
4.5 Conditions to Closing; Consents and Approvals.
(a) Between the date of this Agreement and the
Closing Date, NII and the Principal Shareholders will use all
reasonable efforts to cause the conditions in Section 5 to be
satisfied, and Parent will use all reasonable efforts to cause the
conditions in Section 6 to be satisfied. Without limiting the
generality of the foregoing, William D. McEntire, Bernie A.
Fredrick, Ronald E. Erickson and Robert E. Tambeau shall each
execute and deliver at the Closing an Employment Agreement
substantially in the form set forth in Exhibit B hereto, and
Parent and William D. McEntire shall execute and deliver at the
Closing an Escrow Agreement substantially in the form set forth in
Exhibit C hereto (the "Escrow Agreement").
(b) As promptly as practicable after the date of
this Agreement, each party will make all filings required by Law
to be made by them in order to consummate the transactions
contemplated herein (including all filings under the HSR Act to
the extent not made prior to the date hereof); provided that
Parent shall have the right, in its sole discretion, to determine
whether or not to comply with a second request for information
under the HSR Act. Between the date of this Agreement and the
Closing Date, each party will cooperate with the other parties
(and their affiliates) in connection with all filings required by
Law to be made by the other parties (and their affiliates) to
consummate the transactions contemplated herein; provided that
nothing in this Agreement shall require Parent or any of its
affiliates to dispose of or make any change in any portion of its
business or to incur any material burden in order to obtain any
consent, approval, license, waiver or other authorization. NII
and the Principal Shareholders will take all actions requested by
Parent with respect to early termination of any applicable waiting
period under the HSR Act. As promptly as practicable after the
date of this Agreement, each party shall use all reasonable
efforts to obtain all consents, approvals, waivers and other
authorizations of all third parties necessary to be obtained by
such party for the consummation of the transactions contemplated
herein.
(c) NII shall use its best efforts to obtain prior
to Closing waivers, in form and substance satisfactory to Parent
("Waivers"), from all applicable NII shareholders of all
preemptive rights under the CGCL and the NII articles of
incorporation in respect of all issuances of NII Common Shares by
NII.
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4.6 Notifications. Each party hereto shall give prompt
notice to the other parties upon becoming aware of: (i) any fact
or condition that causes or constitutes (or that reasonably could
be expected to cause or constitute) a breach of its or his
representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that
would (except as expressly contemplated by this Agreement) cause
or constitute a breach of or any inaccuracy in any of its or his
representations and warranties contained in this Agreement had
such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition; (ii) any
material failure of it or him or any of its officers, directors,
employees or agents, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it or
him hereunder; (iii) any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement; and (iv) any
actions, suits, claims, investigations or proceedings commenced
or, to the best of its or his knowledge, threatened against,
relating to or involving or otherwise affecting any Acquired
Company, or any of the transactions contemplated by this
Agreement.
4.7 Shareholders' Meetings.
(a) Parent will promptly following the date of
this Agreement establish a record date for, duly call, give notice
of, convene and hold a meeting of its shareholders (the "Parent
Shareholders Meeting") to be held as soon as is reasonably
practicable after the date on which the Registration Statement
becomes effective for the purpose of obtaining the approval of the
transactions contemplated by this Agreement by its shareholders.
Parent will, through its Board of Directors, recommend to its
shareholders such approval.
(b) NII will promptly following the date of this
Agreement establish a record date for, duly call, give notice of,
convene and hold a meeting of its shareholders to be held as soon
as is reasonably practicable after the date on which the
Registration Statement becomes effective (the "NII Shareholders'
Meeting") for the purpose of obtaining the approval and adoption
of this Agreement and the Merger Agreement by its shareholders.
NII will, through its Board of Directors, recommend to its
shareholders approval and adoption of this Agreement and the
Merger Agreement.
(c) At the NII Shareholders' Meeting, each of the
Principal Shareholders shall vote, or cause to be voted, in favor
of approval and adoption of this Agreement and the Merger
Agreement, all NII Common Shares that such shareholder owns as of
the record date of the NII Shareholders' Meeting. For purposes of
the previous sentence, each of the Principal Shareholders shall be
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deemed to "own" all NII Company Shares that he owns of record and
all other NII Common Shares over which he has sole voting power
or, combined with another Principal Shareholder, has voting power.
Each Principal Shareholder (i) shall not dispose of or in any way
encumber any NII Common Shares that he owns prior to the
consummation of the Merger, (ii) shall take no action inconsistent
with the approval and consummation of the transactions
contemplated hereby and (iii) shall execute and deliver an
affiliate letter as contemplated by Section 4.12. As part of the
ESOP Solicitation, each of the Principal Shareholders that is a
participant in the ESOP shall instruct the ESOP trustees to vote
all shares allocated to his ESOP account in favor of the Merger.
4.8 Pooling Letter of NII's Accountants. NII shall use
its reasonable efforts to cause to be delivered to Parent a letter
from Meredith, Cardozo, Lanz & Chiu LLP, addressed to Parent and
NII, dated as of the Closing Date, stating that such firm concurs
with management's conclusion that, as of such date, no conditions
exist with respect to NII or its subsidiaries which would preclude
NII from being party to a transaction that qualifies as a pooling
of interests transaction under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations.
4.9 Pooling Letter of Parent's Accountants. Parent
shall use its reasonable efforts to cause to be delivered to NII a
letter from KPMG Peat Marwick LLP, addressed to Parent, dated as
of the Closing Date, stating that (i) KPMG Peat Marwick LLP
concurs with management's conclusion that, as of such date, no
conditions exist which would preclude accounting for the Merger as
a pooling of interests transaction under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and
regulations and (ii) the basis for such a concurrence is KPMG Peat
Marwick LLP's belief that the criteria for such accounting
treatment that can be assessed at the date of such letter have
been met.
4.10 Comfort Letters. NII and the Principal
Shareholders shall cause to be delivered to Parent (i) a letter
from Meredith, Cardozo, Lanz & Chiu LLP, NII's and MRL's
independent accountants, dated the business day prior to the
mailing or delivery of the Proxy Statement to NII's and Parent's
shareholders, in form and substance reasonably satisfactory to
Parent, stating that the audited consolidated financial statements
of NII included in the Proxy Statement and the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the
published rules and regulations thereunder, and that, on the basis
of inquiries of certain officials of NII and the other Acquired
Companies who have responsibility for financial and accounting
matters, a reading of (A) the unaudited financial statements
included in the Proxy Statement and the Registration Statement, if
any, and (B) the latest available interim unaudited financial
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statements (if different from those in the Proxy Statement or the
Registration Statement), and such other procedures and inquiries
as are specified in such letter, nothing has come to their
attention which indicates that the financial statements referred
to in subclause (A) above are not in conformity with GAAP applied
on a basis substantially consistent with the audited consolidated
financial statements of NII included in the Proxy Statement and
the Registration Statement or do not comply as to form in all
material aspects with the applicable accounting requirements of
the Securities Act and the published rules and regulations
thereunder, or that the financial statements or summarized
financial information referred to in subclause (B) above are not
stated on a basis substantially consistent with the audited
consolidated financial statements of NII included in the Proxy
Statement and the Registration Statement; and (ii) a letter, in
form and substance reasonably satisfactory to Parent, confirming
as of a date not more than five days prior to the Closing Date the
statements contained in the letter delivered pursuant to the
immediately preceding clause (i).
4.11 Additional Financial Statements. Between the date
hereof and the Closing, NII shall furnish to Parent as promptly as
possible and in any event not later than 25 days following the end
of each quarter an unaudited consolidated balance sheet of NII as
of the end of such quarter and consolidated statements of revenues
and expenses, shareholders' equity and cash flow for the period
beginning July 31, 1997 and ending at the end of such period,
together with the corresponding period of the preceding fiscal
year, in each case certified by the chief financial officer of NII
as having been prepared in accordance with past practices of NII.
Such financial statements shall be prepared in conformity with
GAAP consistently applied and shall fairly present the
consolidated financial condition and results of operations of NII,
as of the dates and for the periods covered by such statements
subject to adjustments (consisting of normal recurring
adjustments, nonmaterial in nature, necessary to present fairly
NII's consolidated financial position).
4.12 Affiliates. Not less than 30 days prior to the
Closing Date, NII shall deliver to Parent a letter identifying all
Persons who are, in NII's reasonable judgment, at the time this
Agreement and the Merger Agreement are submitted for approval to
the shareholders of NII, "affiliates" of NII for purposes of Rule
145 under the Securities Act or for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion
16 of the Accounting Principles Board and applicable SEC rules and
regulations. NII shall use its best efforts to cause each such
Person to deliver to Parent, and the Widmar Shareholders shall
deliver to Parent, at least 30 days prior to the Closing Date a
written agreement, in form and substance reasonably satisfactory
to Parent, providing for (i) restrictions on the transfer of their
Parent Common Shares necessary or advisable to comply with Rule
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145 under the Securities Act and the requirements for pooling
treatment and (ii) the appropriate legending of the certificates
for Parent Common Shares to be issued pursuant to the Merger.
4.13 Pooling of Interests. Each of NII and Parent will
use reasonable efforts to cause the transactions contemplated by
this Agreement, including the Merger, to be accounted for as a
pooling of interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations, and such
accounting treatment to be accepted by each of NII's and Parent's
independent public accountants, and by the SEC, respectively, and
neither NII, any Principal Shareholder nor Parent will voluntarily
take any action that would cause (to its knowledge after
consultation with its independent public accountants) such
accounting treatment not to be obtained.
4.14 NII ESOP. Prior to the NII Shareholders' Meeting
but after the Registration Statement has been declared effective,
NII will cause the ESOP to distribute the Proxy Statement to its
participants in connection with the solicitation of votes of the
ESOP participants on the Merger as required under the ESOP (the
"ESOP Solicitation").
4.15 NII Shareholder List; Execution of Acknowledgement
and Consent.
(a) NII shall deliver to Parent at least seven
business days prior to the Closing Date a list (the "NII
Shareholder List") of all holders of NII Common Shares and the
number of shares held by each such holder as of the Closing Date.
(b) Promptly following the NII Shareholders'
Meeting, NII shall use all reasonable efforts to cause each NII
Shareholder other than the Principal Shareholders to execute and
deliver an Acknowledgement and Consent to this Agreement in the
form set forth in Exhibit D hereto.
4.16 Noncompetition.
(a) During the Relevant Period (as defined below),
except for the performance of his duties as an employee of MRL,
Parent or an affiliate of Parent or as expressly consented to in
writing by Parent, no Applicable Principal Shareholder and none of
his Affiliates (each as hereinafter defined) shall, directly or
indirectly:
(i) engage, anywhere in the Territory (as
defined below), in the manufacture, assembly, design, distribution
or marketing of any product or equipment substantially similar to
or in competition with any product or equipment which, at any time
during the period from the Closing Date until the date such
Applicable Principal Shareholder ceases, for any reason, to be
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employed by MRL, Parent or an affiliate of Parent, is
manufactured, sold or distributed by MRL or any other Acquired
Company (which jointly and severally are hereinafter referred to
as the "Group") or any product or equipment which the Group
develops during such period for future manufacture, sale or
distribution;
(ii) be or become a stockholder, partner,
owner, officer, director or employee or agent of, or a consultant
to or give financial or other assistance to, any Person
considering engaging in any such activities or so engaged;
(iii) seek in competition with the business
of the Group to procure orders from or do business with any
customer of the Group;
(iv) solicit or contact with a view to the
engagement or employment by any Person of any Person who is an
employee of the Group; or
(v) seek to contract with or engage (in such
a way as to adversely affect or interfere with the business of the
Group as carried on at any time after the date hereof and on or
prior to the date such Applicable Principal Shareholder ceases,
for any reason, to be employed by MRL, Parent or an affiliate
thereof) any Person who has been contracted with or engaged to
manufacture, assemble, supply or deliver products, goods,
materials or services to the Group; provided, however, that
nothing herein shall prohibit such Applicable Principal
Shareholder and his Affiliates from owning, as passive investors,
in the aggregate not more than 5% of the publicly-traded stock of
any corporation so engaged.
The duration of each Applicable Principal Shareholder's covenants
set forth in this subparagraph shall be extended by a period of
time equal to the number of days, if any, during which such
Applicable Principal Shareholder or any of his Affiliates is in
violation of the provisions hereof.
(b) For the purposes of this Section 4.16,
"Territory" means the United States, Europe and the Far East, and
"Affiliate" means: (i) any corporation of which an Applicable
Principal Shareholder owns or otherwise possesses the power to
direct the vote, directly or indirectly, of an amount of voting
securities sufficient to elect a majority of the board of
directors of such corporation, and (ii) any other Person
controlled by such Applicable Principal Shareholder. For the
purposes of this definition of "Affiliate," "control" means the
power to direct the management and policies of a Person, directly
or indirectly, whether through the ownership of voting securities,
by contract or otherwise; provided that, any Person of which such
Applicable Principal Shareholder owns beneficially or of record,
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either directly or through one or more intermediaries, more than
20% of the ownership interests, shall be conclusively presumed to
be an "Affiliate". For purposes of this Section 4.16, Applicable
Principal Shareholder means William D. McEntire, Bernie A.
Fredrick, Ronald E. Erickson and Robert E. Tambeau, and "Relevant
Period" means the period commencing on the Closing Date and ending
three years after the relevant Applicable Principal Shareholder
ceases, for any reason, to be employed by MRL, Parent or any
affiliate of Parent.
(c) Each Applicable Principal Shareholder
acknowledges that damages alone would not be an adequate remedy
for any breach by him or his Affiliates of his covenants contained
in this Section 4.16; accordingly, in addition to any other
remedies which Parent may have, Parent shall be entitled to
injunctive relief in any court of competent jurisdiction for any
breach or threatened breach of any such covenants by an Applicable
Principal Shareholder and/or his Affiliates. Nothing contained
herein shall prevent or delay Parent from seeking, in any court of
competent jurisdiction, specific performance or other equitable
remedies in the event of any breach or intended breach by an
Applicable Principal Shareholder or any of his Affiliates of any
of their obligations hereunder.
(d) Each Applicable Principal Shareholder
acknowledges that the covenants contained in this Section 4.16 are
fair and reasonable in light of the consideration paid hereunder
and in order to protect Parent's investment in the Acquired
Companies, and the invalidity or unenforceability of any
particular provision, or part of any provision, of this
Section 4.16 shall not affect the other provisions or parts
hereof. If any provision of this Section 4.16 is determined to be
invalid or unenforceable by a court of competent jurisdiction by
reason of the duration or geographical scope of the covenants
contained therein, such duration or geographical scope, or both,
shall be considered to be reduced to a duration or geographical
scope to the extent necessary to cure such invalidity.
4.17 NII Disclosure Statement. Promptly following the
date hereof and in no event later than October 10, 1997, NII shall
complete and finalize the NII Disclosure Statement, in form
satisfactory to Parent, and deliver the same to Parent. Parent
shall be entitled to amend Schedule 8.1 hereto to add thereto any
matters disclosed in the NII Disclosure Statement.
4.18 The Stock Acquisition.
(a) Between the date hereof and the Closing, each
Widmar Shareholder (i) shall not dispose of or in any way encumber
any shares of capital stock of Widmar that such Person owns and
(ii) shall take no action inconsistent with the approval and
consummation of the transactions contemplated hereby.
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(b) Prior to Closing, the Widmar Shareholders
shall (i) cause Widmar to discharge, pay and satisfy in full all
liabilities and obligations of Widmar (whether liquidated,
unliquidated, accrued, mature, contingent or otherwise) such that
as of the Closing Widmar shall be free of all liabilities and
obligations, and (ii) cause Widmar to distribute (by way of
redemption of Widmar capital stock or otherwise) to the Widmar
Shareholders, pro rata in accordance with their current share
ownership interests in Widmar, all of Widmar's assets remaining
after the satisfaction of liabilities and obligations contemplated
by subclause (i) other than the NII Common Shares owned by Widmar
and the assets used in the operation of the Business, such
distributed assets being immaterial.
(c) At the Closing, each Widmar Shareholder shall
sell, transfer and deliver to Parent free and clear of all
Encumbrances all shares of capital stock of Widmar owned by such
Person, which in the aggregate shall constitute all of the
outstanding shares of capital stock of Widmar as of the Closing,
and Parent shall acquire such shares for the consideration set
forth in paragraph (d) below.
(d) The aggregate purchase price for the Stock
Acquisition described in subparagraph (c) above will be a number
of Parent Common Shares (rounded to the nearest whole share) equal
to the Widmar Percentage (as defined below) of the Aggregate Selas
Shares (as defined in the Merger Agreement). Such Parent Common
Shares shall be allocated among the Widmar Shareholders in
accordance with the percentage allocation set forth in Schedule
4.18 hereto and certificates therefor shall be delivered to the
Widmar Shareholders at Closing, provided, however, that any
fractional share amount shall be rounded to the nearest whole
Parent Common Share. For purposes hereof, the "Widmar Percentage"
means a percentage equal to the percentage of the aggregate
outstanding NII Common Shares as of the Closing that Widmar owns
as of the Closing.
(e) At the Closing, each Widmar Shareholder shall
deliver to Parent certificates representing all of the shares of
capital stock of Widmar owned by such Person duly endorsed for
transfer or with stock powers affixed thereto executed in blank in
proper form for transfer.
(f) The Widmar Shareholders hereby jointly and
severally represent and warrant to Parent as follows:
(i) The Widmar Shareholders own the shares of
capital stock of Widmar ascribed to them on Schedule 4.18,
beneficially and of record, free and clear of any Encumbrance.
Upon delivery to Parent of the certificates for such shares (other
than any of such shares that are redeemed as contemplated by
subparagraph (b) above) at the Closing, Parent will acquire good,
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valid and marketable title to such shares, free and clear of all
Encumbrances (other than applicable securities law restrictions),
and such shares shall constitute as of the Closing all of the
outstanding capital stock of Widmar. Each Widmar Shareholder has
the absolute right, authority, power and capacity to sell, assign
and transfer the shares of Widmar capital stock owned by him or
her free and clear of all Encumbrances (other than applicable
securities law restrictions).
(ii) Except for this Agreement, there are no
outstanding options, warrants, rights or other agreements or
commitments of any nature whatsoever (either firm or conditional)
obligating Widmar or any shareholder thereof to issue, deliver or
sell, or cause to be issued, delivered or sold, any share of
capital stock or other equity securities of Widmar or obligating
Widmar or any shareholder thereof to grant, extend, or enter into
any such option, right, warrant, agreement or commitment. Each of
the issued shares of capital stock of Widmar has been duly
authorized and validly issued and is fully paid and nonassessable
and has not been issued in violation of (nor are any such shares
subject to) any preemptive or similar rights.
(iii) (A) Each Widmar Shareholder
acknowledges that any Parent Common Shares issued to him in
connection with the Stock Acquisition will not be registered under
the Securities Act on the grounds that the issuance of such shares
is exempt from registration pursuant to Section 4(2) of the
Securities Act or Regulation D promulgated under the Securities
Act and that the reliance of Parent on such exemptions is
predicated in part on the Widmar Shareholders' representations,
warranties, covenants and acknowledgements set forth in this
section.
(B) Each Widmar Shareholder is an
"accredited investor" as defined in Rule 501 promulgated under the
Securities Act.
(C) The Parent Common Shares acquired
by each Widmar Shareholder pursuant to this Section 4.18
(collectively, the "Stock Acquisition Parent Shares") will be
acquired for his own account, not as a nominee or agent, and
without a view to resale or other distribution within the meaning
of the Securities Act, and the rules and regulations thereunder
except as contemplated hereunder, and no Widmar Shareholder will
distribute any of such shares in violation of the Securities Act.
(D) Each Widmar Shareholder (i)
acknowledges that the Stock Acquisition Parent Shares will not be
registered under the Securities Act when issued to such Person as
contemplated herein and such shares must be held indefinitely by
him unless they are subsequently registered under the Securities
Act or an exemption from registration is available, (ii) is aware
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that any routine sales of such shares made under Rule 144 under
the Securities Act may be made only in limited amounts and in
accordance with the terms and conditions for that Rule and that in
such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, and (iii) is aware
that Rule 144 will not be immediately available for use by any
Widmar Shareholder for resale of such shares.
(E) Each Widmar Shareholder is well
versed in financial matters, has had dealings over the years in
securities, and is fully capable of understanding the type of
investment represented by the Stock Acquisition Parent Shares and
the risks involved in connection therewith.
(iv) In order to ensure compliance with
applicable securities law restrictions, no Widmar Shareholder will
sell or otherwise transfer or dispose of any of the Stock
Acquisition Parent Shares or any interest therein (unless such
shares have been registered under the Securities Act) without
first having complied with either of the following conditions:
(A) Parent shall have received a
written opinion of counsel to such Widmar Shareholder in form and
substance satisfactory to Parent, in the exercise of its
reasonable judgment, or a copy of a "no-action" or interpretive
letter of the Commission, specifying the nature and circumstances
of the proposed transfer and indicating that the proposed transfer
will not be in violation of any of the registration provisions of
the Securities Act and the rules and regulations promulgated
thereunder; or
(B) Parent shall have received an
opinion from its own counsel to the effect that the proposed
transfer will not be in violation of any of the registration
provisions of the Securities Act and the rules and regulations
promulgated thereunder.
Each Widmar Shareholder acknowledges that the certificates
representing the Stock Acquisition Parent Shares may contain a
restrictive legend noting the restrictions on transfer described
in this section and required by federal and applicable state
securities laws and that appropriate "stop-transfer" instructions
will be given to Parent's stock transfer agent.
4.19 Registration by Parent. Following Closing, Parent
shall use all reasonable effort to file a registration statement
with the Commission on Form S-3 (or other form chosen by Parent)
in order to register for resale by the Widmar Shareholders in
"brokers' transactions" or in transactions directly with a "market
maker" (as defined in paragraphs (f) and (g) of Rule 144 under the
Securities Act) that number of Stock Acquisition Parent Shares as
is equal to the number of such shares that such Persons would have
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been entitled to sell publicly during the one year period
beginning on the Closing Date if resale of such shares pursuant to
Rule 144 had been immediately available. On or prior to Closing,
Parent and the Widmar Shareholders shall enter into a registration
rights agreements providing for the foregoing registration and in
form and substance reasonably satisfactory to Parent.
SECTION 5. CERTAIN CONDITIONS PRECEDENT TO PARENT'S
AND MERGER SUB'S OBLIGATIONS.
All obligations of Parent and Merger Sub under this
Agreement to effect the Stock Acquisition and the Merger and to
take the actions required to be taken by them at Closing are
subject to the fulfillment (or waiver in writing by a duly
authorized officer of Parent) at or prior to the Closing of each
of the following conditions:
5.1 Representations and Warranties. Each of the
representations and warranties of NII and the Principal
Shareholders set forth in this Agreement that is qualified by
materiality shall be true and correct, and each of the
representations and warranties of NII and the Principal
Shareholders set forth in this Agreement that is not so qualified
shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date.
5.2 Performance of Covenants. NII and each Principal
Shareholder shall have performed or complied in all material
respects with all of the agreements, covenants and conditions
required by this Agreement to be performed or complied with by
them prior to the Closing.
5.3 Officer's Certificates. NII shall have delivered
to Parent a certificate of a duly authorized officer of NII, dated
the Closing Date, certifying as to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 (other than in
respect of the matters set forth in Section 4.18), and the Widmar
Shareholders shall have delivered to Parent a certificate of the
Widmar Shareholders, dated the Closing Date, certifying as to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 in
respect of the matters set forth in Section 4.18.
5.4 Parent Shareholder Approval. The transactions
contemplated by this Agreement shall have been approved by
affirmative vote of the Parent's shareholders by the requisite
vote in accordance with Pennsylvania law and the rules of the
American Stock Exchange.
5.5 Consents and Approvals. The waiting period under
the HSR Act shall have expired or been terminated without any
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request by any governmental agency or authority for any additional
information concerning such transactions. Each consent, approval,
ratification, waiver or other authorization of any Person
necessary, in the reasonable opinion of Parent, for the
consummation of the transactions contemplated hereby and the
continuation of the Business without interruption after the
Closing in the same manner in which the Business is presently
conducted and without the imposition or acceleration of any
liability or obligation on any Acquired Company shall have been
obtained and shall be in full force and effect, and no such
consent, approval, ratification, waiver or other authorization:
(i) shall have been conditioned upon the modification, cancella-
tion or termination of any Contract, right or Authorization of any
Acquired Company or Parent or (ii) shall impose on Parent or any
Acquired Company any condition, provision or requirement not
presently imposed upon the Acquired Companies or any condition
that would be more restrictive after the Closing on the Acquired
Companies than the conditions presently imposed on the Acquired
Companies.
5.6 Legal Matters. The performance of the Acquiror
Transaction Documents and the NII Transaction Documents and the
consummation of the Closing shall not, directly or indirectly
(with or without notice or lapse of time), violate, contravene,
conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent
jurisdiction, and no suit, action, investigation or legal or
administrative proceeding shall have been brought or threatened by
any Person (other than by Parent) that questions the validity or
legality of this Agreement or the transactions contemplated
hereby.
5.7 Employment Agreements. Each of Messrs. William D.
McEntire, Bernie Fredrick, Ronald E. Erickson and Robert E.
Tambeau shall have entered into an Employment Agreement with MRL
substantially in the form attached hereto as Exhibit B (the
"Employment Agreements").
5.8 Due Diligence Review. Parent's due diligence
investigation and review of each Acquired Company's business,
prospects, obligations, capitalization, and properties, including,
but not limited to, an evaluation of the stock record books,
minute books, financial records, tax returns, Contracts, leases,
Authorizations, employment agreements, employee benefit plans, all
other Contracts material to the operation of the Acquired
Companies' businesses, compliance with Laws, and environmental
matters shall have been completed and the results thereof shall be
acceptable to Parent in its sole discretion.
5.9 Resignation of Directors and Officers. Parent
shall have received resignations in writing from such of the
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officers and directors of the Acquired Companies and Widmar as
Parent shall have requested.
5.10 Opinion of Counsel. Parent shall have received
the opinion satisfactory to Parent of Carr, McClellan, Ingersoll,
Thompson & Horn, Professional Corporation, counsel for NII and the
Principal Shareholders, dated as of the Closing Date, with respect
to those matters on Exhibit E hereto.
5.11 Pooling Letters. Parent shall have received the
letters from the accountants contemplated by Sections 4.8 and 4.9
hereof.
5.12 Affiliate Letters. Each person who may be deemed
to be an affiliate of NII and each of the Widmar Shareholders
shall have executed and delivered to Parent a letter as
contemplated by Section 4.12 hereof.
5.13 Dissenters' Rights. The period for assertion of
dissenters' rights pursuant to Chapter 13 of the CGCL shall have
expired and the holders of not more than 5% in the aggregate of
the outstanding NII Common Shares shall have perfected or
preserved their dissenters' or appraisal rights under the CGCL in
connection with the Merger.
5.14 NII Shareholder Approval. This Agreement and the
Merger Agreement shall have been approved and adopted by the
requisite vote of the NII shareholders in accordance with the
CGCL.
5.15 Effectiveness of Registration Statement. The
Registration Statement shall have been declared effective by the
SEC under the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been issued
by the SEC and no proceedings for that purpose shall have been
initiated by the SEC.
5.16 Listing of Parent Common Shares. The Parent
Common Shares to be issued in the Merger shall have been approved
for listing on the American Stock Exchange upon official notice of
issuance.
5.17 Net Worth. NII's consolidated net worth (total
assets less total liabilities), calculated in accordance with
GAAP, shall be at least $5 million as of the Closing.
5.18 The Merger Agreement. The Merger Agreement shall
have been duly executed and delivered by NII.
5.19 Shareholder Signatories. All of the NII
shareholders other than Dissenting Shareholders (as defined in the
Merger Agreement) shall be Shareholder Signatories.
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5.20 Escrow Agreement. The Escrow Agreement shall have
been duly executed and delivered by the Escrow Agent and the
Representative.
5.21 GAAP Statements. The GAAP Statements shall have
been delivered to Parent and shall not differ from the Existing
Financial Statements in any material respect. NII's consolidated
net worth reflected on the Interim NII Balance Sheet shall not be
less than $5 million.
5.22 Waivers. NII shall have obtained and delivered to
Parent Waivers duly executed by each applicable NII shareholder
(present and former).
5.23 NII Disclosure Statement. NII shall have delivered
the NII Disclosure Statement to Parent, and the NII Disclosure
Statement shall be in form and substance acceptable to Parent in
its sole discretion.
SECTION 6. CERTAIN CONDITIONS PRECEDENT TO NII'S
OBLIGATIONS.
All obligations of NII under this Agreement to effect
the Merger and to take the actions required to be taken by it at
Closing are subject to the fulfillment (or waiver in writing by a
duly authorized officer of NII) at or prior to the Closing of each
of the following conditions:
6.1 Representations and Warranties. Each of the repre-
sentations and warranties of Parent and Merger Sub set forth in
this Agreement that is qualified by materiality shall be true and
correct, and each of the representations and warranties of Parent
and Merger Sub set forth in this Agreement that is not so
qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
6.2 Performance of Covenants. Each of Parent and
Merger Sub shall have performed or complied in all material
respects with all of the agreements, covenants and conditions
required by this Agreement to be performed or complied with by it
prior to the Closing Date.
6.3 Officer's Certificate. Parent shall have delivered
to NII a certificate of a duly authorized officer in such person's
capacity as an officer, dated the Closing Date, certifying as to
the fulfillment of the conditions specified in Sections 6.1 and
6.2.
6.4 Parent Shareholder Approval. The transactions
contemplated by this Agreement shall have been approved by
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affirmative vote of the Parent's shareholders by the requisite
vote in accordance with Pennsylvania law and the rules of the
American Stock Exchange.
6.5 Approvals. The waiting period under the HSR Act
shall have expired or been terminated.
6.6 Legal Matters. The performance of the Acquiror
Transaction Documents and the NII Transaction Documents and the
consummation of the Closing shall not, directly or indirectly
(with or without notice or lapse of time), violate, contravene,
conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent
jurisdiction, and no suit, action, investigation or legal or
administrative proceeding shall have been brought or threatened by
any Person (other than by an Acquired Company or a Principal
Shareholder) that questions the validity or legality of this
Agreement or the transactions contemplated hereby.
6.7 NII Shareholder Approval. This Agreement and the
Merger Agreement shall have been approved and adopted by the
requisite affirmative vote of the NII shareholders in accordance
with the CGCL.
6.8 Effectiveness of Registration Statement. The
Registration Statement shall have been declared effective by the
SEC under the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been issued
by the SEC and no proceedings for that purpose shall have been
initiated by the SEC.
6.9 Opinion of Counsel. NII and the Principal
Shareholders shall have received an opinion satisfactory to NII
and the Principal Shareholders of Drinker Biddle & Reath, counsel
for Parent, dated as of the Closing Date, with respect to those
matters on Exhibit F hereto.
6.10 Average Share Price. The Average Share Price (as
defined in the Merger Agreement) shall be at least $10.00 (such
dollar amount to be adjusted as appropriate to reflect any Parent
Recapitalization (as defined in the Merger Agreement) that occurs
after the date hereof and on or prior to the Closing Date) unless
Parent shall, in its sole discretion, have elected in writing to
waive 1,675,000 as the maximum number of Aggregate Selas Shares
under the Merger Agreement (any such written election, the "Selas
Option").
6.11 The Merger Agreement. The Merger Agreement shall
have been duly executed and delivered by Parent and Merger Sub.
6.12 Listing of Parent Common Shares. The Parent Common
Shares to be issued in the Merger shall have been approved for
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listing on the American Stock Exchange upon official notice of
issuance.
6.13 Escrow Agreement. The Escrow Agreement shall have
been duly executed and delivered by the Escrow Agent and Parent.
SECTION 7. TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated and
the transactions contemplated herein may be abandoned at any time
prior to the Closing:
(a) by Parent or NII, if the Closing has not occurred
(other than through the failure of the party seeking to terminate
this Agreement to comply fully with its obligations under this
Agreement) on or before February 28, 1998, or such later date as
the parties may mutually agree upon;
(b) by mutual consent of Parent and NII;
(c) by Parent and the Merger Sub, on the one hand, or
NII and the Principal Shareholders, on the other hand, if a
material breach of any provision of this Agreement has been
committed by the other party and such breach has not been waived;
(d) by Parent, if any of the conditions in Section 5
has not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than through
the failure of Parent or the Merger Sub to comply with its
obligations under this Agreement) and Parent has not waived all
such unsatisfied conditions before termination pursuant to this
subparagraph (d); or
(e) by NII, if any of the conditions in Section 6 has
not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of any Acquired Company or any Principal Shareholder to
comply with its or his obligations under this Agreement) and NII
has not waived all such unsatisfied conditions on or before
termination pursuant to this subparagraph (e).
7.2 Procedure for Termination; Effect of Termination.
A party terminating this Agreement pursuant to Section 7.1 shall
give written notice thereof to each other party hereto, whereupon
this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by any party and
all further obligations of the parties under this Agreement will
terminate; provided, however, that if such termination is pursuant
to Section 7.1(c), the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
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SECTION 8. INDEMNIFICATION; ESCROW
8.1 Indemnification by Principal Shareholders. Subject
to the limitations set forth in Section 8.3, each Principal
Shareholder shall indemnify, defend and hold harmless Parent and
Merger Sub and each of their respective directors, officers,
shareholders, employees, agents, representatives and affiliates
(collectively, "Selas Indemnified Persons") against and in respect
of any and all losses, costs, expenses (including, without
limitation, costs of investigation and reasonable defense and
attorneys' fees), claims, damages, obligations, liabilities or
diminutions in value, whether or not involving a third party claim
(collectively, "Damages"), arising out of, based upon or otherwise
in respect of: (a) any inaccuracy in or breach of any representa-
tion or warranty of such Principal Shareholder made in or pursuant
to this Agreement (including, without limitation, the first
certificate referred to in Section 5.3 which, for this purpose,
will be deemed to have stated, inter alia, that the Principal
Shareholders' representations and warranties in this Agreement
were true and correct as of the Closing as if made on the
Closing); (b) any breach or nonfulfillment of any covenant or
obligation of any Principal Shareholder contained in this
Agreement; or (c) any of the matters described in Schedule 8.1
hereto.
8.2 Indemnification by Parent. Parent shall indemnify,
defend and hold harmless the NII shareholders against and in
respect of any and all Damages arising out of, based upon or
otherwise in respect of: (a) any inaccuracy in or breach of any
representation or warranty of Parent made in or pursuant to this
Agreement (including, without limitation, the certificate referred
to in Section 6.3 which, for this purpose, will be deemed to have
stated, inter alia, that Parent's representations and warranties
in this Agreement were true and correct as of the Closing as if
made on the Closing Date); or (b) any breach or nonfulfillment of
any covenant or obligation of Parent or Merger Sub contained in
this Agreement.
8.3 Limitations on Liability.
(a) In the absence of fraud and intentional
misrepresentation, no Principal Shareholder shall have any
obligation to indemnify any Selas Indemnified Person against
Damages pursuant to Section 8.1 of this Agreement (other than in
respect of a breach of Section 4.16) unless and until the
aggregate of all such Damages suffered or incurred by Selas
Indemnified Persons exceeds $100,000; in which event the Selas
Indemnified Persons shall be entitled to indemnification for the
full amount of all Damages suffered or incurred.
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(b) Following Closing, in the absence of fraud and
intentional misrepresentation, except for claims for Damages
pursuant to Section 8.1(b) in respect of a breach of Section 4.16,
the Principal Shareholders shall not be obligated to indemnify
Selas Indemnified Persons against Damages pursuant to Section 8.1
to the extent that an indemnification claim by one or more Selas
Indemnified Persons exceeds the value (calculated as described in
Section 8.7) of the Parent Common Shares then-constituting the
Escrow Deposit (as defined below). Following Closing, in the
absence of fraud and intentional misrepresentation, except for
claims for Damages pursuant to Section 8.1(b) in respect of a
breach of Section 4.16, (i) the sole recourse of Selas Indemnified
Persons with respect to indemnification claims shall be the Escrow
Deposit, and (ii) the remedies set forth in this Section 8 and the
Escrow Agreement (as defined below) shall be the exclusive
remedies of Selas Indemnified Persons with respect to claims
hereunder.
(c) No claim arising out of or based upon any
inaccuracy in or breach of any representation or warranty made in
or pursuant to this Agreement shall be made unless a claim arises
and written notice is delivered to the indemnifying party within
the Basic Claims Period (as defined below). For purposes hereof,
"Basic Claims Period" means the period beginning on the Closing
Date and ending on (i) in the case of the representations and
warranties set forth in Sections 2.9, 2.10, 2.13, 2.14, 2.15(b),
2.16, 2.23(b), 2.26 and 2.31, the earlier of (x) the date of
issuance of the report of Parent's independent accountants with
respect to audited consolidated financial statements of Parent for
the fiscal year in which the Closing occurs or (y) the first
anniversary of the Closing Date and (ii) in the case of all other
representations and warranties set forth herein, the first
anniversary of the Closing Date.
(d) Disclosures made after the date hereof and any
knowledge that is acquired about the accuracy or inaccuracy of or
compliance with any representation, warranty, covenant or
obligation set forth herein shall not in any manner affect rights
to indemnification hereunder based on any such representation,
warranty, covenant or obligation or be deemed in any manner to
amend the NII Disclosure Statement. The waiver by Parent of any
condition based on the accuracy of any representation or warranty,
or compliance with any covenant or obligation, will not affect any
right to indemnification based on such representations,
warranties, covenants and obligations unless otherwise expressly
agreed in writing by Parent.
8.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an
indemnified party of notice of the commencement of any proceeding
against it to which the indemnification in this Section 8 relates,
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such indemnified party shall, if a claim is to be made against an
indemnifying party under Section 8, give notice to the
indemnifying party of the commencement of such proceeding, but the
failure to so notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such proceeding is
materially prejudiced by the indemnified party's failure to give
such notice.
(b) If any proceeding referred to in paragraph (a)
above is brought against an indemnified party and it gives notice
to the indemnifying party of the commencement of such proceeding,
the indemnifying party will be entitled to participate in such
proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such proceeding and
provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to
the indemnified party under Section 8 for any fees of other
counsel or any other expenses with respect to the defense of such
proceeding, in each case subsequently incurred by the indemnified
party in connection with the defense of such proceeding, other
than reasonable costs of investigation. If the indemnifying party
assumes the defense of a proceeding, no compromise or settlement
of such claims may be effected by the indemnifying party without
the indemnified party's consent unless (1) there is no finding or
admission of any violation of Law by the indemnified party (or any
affiliate thereof) or any violation of the rights of any Person
and no effect on any other claims that may be made against the
indemnified party, and (2) the sole relief provided is monetary
damages that are paid in full by the indemnifying party. The
indemnified party will have no liability with respect to any
compromise or settlement of the claims underlying such proceeding
effected without its consent. If notice is given to an
indemnifying party of the commencement of any proceeding and the
indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of
its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in such
proceeding or any compromise or settlement effected by the
indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a
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reasonable probability that a proceeding may adversely affect it
or its affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those
issues, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such proceeding, but the
indemnifying party will not be bound by any determination of a
proceeding so defended or any compromise or settlement effected
without its consent.
8.5 Procedure for Indemnification - Other Claims. A
claim for any matter not involving a third party claim may be
asserted by notice to the party from whom indemnification is
sought.
8.6 Acknowledgement; Release.
(a) Each Principal Shareholder hereby acknowledges
that the representations, warranties and covenants made by him or
it herein are made in his or its capacity as a shareholder of NII
and/or as a shareholder of Widmar and not as a director, officer
or employee of any Acquired Company or Widmar; accordingly, each
Principal Shareholder acknowledges and confirms that following the
Closing he shall not have any claim for indemnification by or
contribution from Widmar or any Acquired Company, or any affiliate
thereof, as an officer, trustee, director or employee thereof in
respect of any matter, including without limitation, any Damages
due or owing by such Principal Shareholder pursuant to the terms
of this Agreement, and each Principal Shareholder hereby
irrevocably releases Widmar and each Acquired Company and each
affiliate thereof from any such claim.
(b) No Principal Shareholder shall have any right
hereunder or otherwise to indemnification or contribution from
Widmar, any Acquired Company or any affiliate thereof with respect
to any matter (except for claims against Parent pursuant to
Section 8.2), including, without limitation, any inaccuracy in or
breach of any representation or warranty of NII or the Principal
Shareholders made in or pursuant to this Agreement or any NII
Transaction Document or any breach or nonfulfillment of any
covenant or obligation of NII or Widmar contained in this
Agreement or any NII Transaction Document, and each Principal
Shareholder hereby irrevocably releases NII and Widmar from any
liability for any such claim.
8.7 Escrow of Parent Common Shares. Immediately
following the delivery to the Representative of certificates
representing Parent Common Shares as provided in Section 4.4(a) of
the Merger Agreement, the Principal Shareholders shall deposit
into escrow, with the Escrow Agent named in the Escrow Agreement,
an aggregate number of Parent Common Shares equal to 10% of the
number of Parent Common Shares issuable by Parent pursuant to
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Section 4.1(c) of the Merger Agreement and pursuant to Section
4.18 hereof (such deposit, the "Escrow Deposit"). Each Principal
Shareholder shall be obligated to transfer into such Escrow
Deposit that number of Parent Common Shares (rounded to the
nearest whole number of Parent Common Shares to eliminate any
fractional shares) as is equal to the product of (x) the aggregate
Parent Common Shares referred to in the immediately preceding
sentence and (y) the percentage allocation for such Principal
Shareholder set forth in Schedule 8.7 hereto. Each Principal
Shareholder hereby irrevocably authorizes and directs the
Representative to make the foregoing transfer into the Escrow
Deposit on his behalf out of Parent Common Shares received by the
Representative pursuant to Section 4.4(a) of the Merger Agreement
that such Principal Shareholder would have, but for this Section
8.7, been entitled to receive pursuant to Section 4.1(c) of the
Merger Agreement. Indemnity claims asserted by Selas Indemnified
Persons pursuant to this Section 8 shall be satisfied by the
transfer, free and clear of all Encumbrances, of ownership of
Parent Common Shares held in the Escrow Deposit to Parent in
accordance with the terms of the Escrow Agreement. In order to
facilitate any such transfer, each Principal Shareholder shall
execute and deliver at the Closing (and thereafter from time to
time as the Escrow Agent, Parent or the Representative may, from
time to time, request) appropriate stock powers in blank. Each
Parent Common Share returned to Parent out of the Escrow Deposit
in settlement of any such indemnity claim in accordance with the
Escrow Agreement shall be valued at the Average Share Price (as
defined in the Merger Agreement). With respect to Parent Common
Shares to be returned to Parent by the Principal Shareholders in
settlement of indemnity claims of Selas Indemnified Persons, any
dividends previously paid in respect of such returned shares
(whether paid in cash, Parent Common Shares or other property)
shall also be transferred, free and clear of all Encumbrances, to
Parent, provided that the value of such dividends shall not be
taken into account for purposes of determining the value of such
returned Parent Common Shares, as contemplated under Accounting
Principles Board Opinion No. 16 (Interpretation No. 30). No
Principal Shareholder shall take any action with respect to the
Parent Common Shares held in the Escrow Deposit that conflicts
with the terms of the Escrow Agreement.
8.8 Appointment of Representative. (a) Each of the
Principal Shareholders hereby appoints and, by executing the
Acknowledgement and Consent set forth on Exhibit D hereto, each of
the other NII shareholders executing such Acknowledgement and
Consent (together with the Principal Shareholders, the
"Shareholder Signatories") hereby appoints, Mr. William D.
McEntire as such Person's exclusive agent to act on such Person's
behalf with respect to (i) the surrender of certificates
contemplated by Section 4.3 of the Merger Agreement and the
distribution among such Persons of the consideration received in
respect of the Merger and (ii) in the case of the Principal
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Shareholders, all indemnification claims pursuant to this
Section 8, the delivery of Parent Common Shares into the Escrow
Deposit as contemplated by Section 8.7 and all matters arising
under the Escrow Agreement. In such representative capacity, Mr.
McEntire, or any Person who shall succeed Mr. McEntire in such
representative capacity pursuant to the terms of the Escrow
Agreement, is sometimes referred to herein as the
"Representative."
(b) Promptly following execution and delivery of
this Agreement (or the Acknowledgement and Consent set forth in
Exhibit D), each Shareholder Signatory shall deliver to the
Representative certificates for all NII Common Shares owned by
such Shareholder Signatory, and the Representative shall deliver
such certificates to Parent at the Closing as contemplated in
Section 4.3 of the Merger Agreement or, in the event this
Agreement is terminated prior to Closing, the Representative shall
return such certificates to such Shareholder Signatory promptly
following such termination. Promptly following the Effective
Time, the Representative shall deliver to each Shareholder
Signatory who delivered to the Representative prior to the
Effective Time certificates representing NII Common Shares that
were converted in the Merger a certificate representing Parent
Common Shares into which such NII Common Shares were converted,
subject, in the case of the Principal Shareholders, to Section
8.7.
(c) The Representative shall take any and all
actions which he believes are necessary or appropriate under this
Agreement or the Merger Agreement for and on behalf of the
Shareholder Signatories, as fully as if the Shareholder
Signatories were acting on their own behalf, including, without
limitation, defending all indemnity claims against the Principal
Shareholders, consenting to, compromising or settling such claims,
conducting negotiations with Parent and its representatives
regarding such claims, dealing with Parent and the Escrow Agent
under the Escrow Agreement with respect to all matters arising
under such agreement, and taking any and all other actions
specified in or contemplated by this Agreement. Parent, Escrow
Agent and Merger Sub shall have the right to rely upon all actions
taken or omitted to be taken by the Representative pursuant to
this Agreement, the Merger Agreement and the Escrow Agreement, all
of which actions or omissions shall be legally binding upon each
of the Shareholder Signatories.
SECTION 9. GENERAL PROVISIONS
9.1 Survival of Representations and Warranties. The
representations and warranties of the parties hereto shall survive
the Closing and the Merger but, except in respect of any claims
for indemnification as to which notice shall have been duly given
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prior to the relevant expiration date set forth below, shall
expire on (i) in the case of the representations and warranties
set forth in Sections 2.9, 2.10, 2.13, 2.14, 2.15(b), 2.16,
2.23(b), 2.26 and 2.31, the earlier of (x) the date of issuance of
the report of Parent's independent accountants with respect to
audited consolidated financial statements of Parent for the fiscal
year in which the Closing occurs or (y) the first anniversary of
the Closing Date and (ii) in the case of all other representations
and warranties set forth herein, the first anniversary of the
Closing Date. Notwithstanding anything to the contrary in this
Agreement, the representations and warranties of each party
hereunder, and the right of the other parties to indemnification
for breach thereof, shall not be affected by any disclosure to, or
investigation made by or on behalf of, the other parties before or
after the Closing Date.
9.2 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall
be sufficiently given if delivered personally sent by overnight
courier (providing proof of delivery), mailed by registered or
certified mail, postage prepaid, return receipt requested or
telecopied (with an additional copy mailed by first class mail) to
the parties at the following addresses (or at such other address
for a party as shall be specified by like notice). Any such
notice or communication shall be deemed to have been given as of
the date received, in the case of personal delivery, or on the
date shown on the receipt or confirmation therefor in all other
cases.
If to Parent or Merger Sub, to:
Selas Corporation of America
P.O. Box 200
2034 Limekiln Pike
Dresher, Pennsylvania 19025-1918
Telecopy: (215)646-3536
Attention: Stephen F. Ryan, President & CEO
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with a copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Telecopy: (215)988-2757
Attention: Robert D. Denious, Esq.
If to NII or any of the Principal Shareholders to:
NII, Incorporated
19500 Nugget Boulevard
Sonora, California 95370
Telecopy: (209)533-9591
Attention: William D. McEntire, President
with a copy to:
Carr, McClellan, Ingersoll, Thompson & Horn,
Professional Corporation
216 Park Road
Burlingame, CA 94010
Telecopy: (415)342-7685
Attention: Denny S. Roja, Esq.
9.3 Further Assurances. Each party hereto shall use
best efforts to comply with all requirements imposed hereby on
such party and to cause the transactions contemplated hereby to be
consummated as contemplated hereby and shall, from time to time
and without further consideration, either before or after the
Closing, execute such further instruments and take such other
actions as any other party hereto shall reasonably request in
order to fulfill his or its obligations under this Agreement and
to effectuate the purposes of this Agreement and to provide for
the orderly and efficient transition of the ownership of the
Acquired Companies to Parent. Each party shall promptly notify
the other parties of any event or circumstance known to such party
that could prevent or delay the consummation of the transactions
contemplated hereby or which would indicate a breach or non-
compliance with any of the terms, conditions, representations,
warranties or agreements of any of the parties to this Agreement.
9.4 Costs and Expenses. Except as otherwise expressly
provided herein, each party shall bear its own expenses in
connection herewith. All HSR Act filing fees shall be paid by
Parent.
9.5 Public Announcements. Neither Parent or Merger Sub
on the one hand nor any Acquired Company or Principal Shareholder
on the other shall issue any press release or make any public
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announcement or disclosure relating in any way to the transactions
contemplated hereby or the negotiations concerning same without
the prior consent of the other party; provided, however, that, as
to announcements or disclosures required by Law or by the rules of
the American Stock Exchange, Parent shall only be required to use
its best efforts to advise NII of the form and content of any such
announcement or disclosure prior to making any such announcement
or disclosure and provided further that Parent shall be entitled
to issue a press release following the execution and delivery of
this Agreement.
9.6 Waiver; Amendment. The rights and remedies of the
parties to this Agreement are cumulative and not alternative. At
any time prior to the Closing, the parties hereto may, by a
writing executed by the President and Chief Executive Officer or
the Vice President, Treasurer and Chief Financial Officer of
Parent and by the President and Chief Executive Officer of NII,
(i) extend the time for the performance of any of the obligations
or other acts of the parties hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein or in any
document delivered pursuant hereto, (iii) waive compliance with
any of the agreements or conditions contained herein except the
conditions set forth in Sections 5.14 and 6.7; provided that no
failure or delay by any party hereto in exercising any rights
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. At any time
prior to the Closing, this Agreement may be amended in any respect
by a writing executed by each of the parties hereto.
9.7 Assignment and Benefit.
(a) No party hereto shall assign this Agreement or
any rights hereunder, or delegate any obligations hereunder,
without prior written consent of the other parties hereto.
Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be
binding upon, the parties hereto, and each of their respective
successors, heirs and assigns.
(b) This Agreement shall not be construed as
giving any person, other than the parties hereto and their
permitted successors and assigns, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any of
the provisions herein contained, this Agreement and all provisions
and conditions hereof being intended to be, and being, for the
sole and exclusive benefit of such parties, and permitted
successors, heirs and assigns and for the benefit of no other
person or entity.
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9.8 Governing Law; Consent to Jurisdiction. This
Agreement is made pursuant to, and shall be construed and enforced
in accordance with, the laws of the Commonwealth of Pennsylvania
(and United States federal law, to the extent applicable),
irrespective of the principal place of business, residence or
domicile of the parties hereto, and without giving effect to
otherwise applicable principles of conflicts of law. Any legal
action, suit or proceeding arising out of or relating to this
Agreement may be instituted in any federal court in the Northern
District of California, and each party waives any objection which
such party may now or hereafter have to the laying of the venue of
any such action, suit or proceeding, and irrevocably submits to
the jurisdiction of any such court. Any and all service of
process and any other notice in any such action, suit or
proceeding shall be effective against any party if given as
provided herein. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any jurisdiction other than
California. Nothing contained herein or in any Transaction
Document shall prevent or delay Parent from seeking, in any court
of competent jurisdiction, specific performance or other equitable
remedies in the event of any breach or intended breach by NII or
any Principal Shareholder of any of his or its obligations
hereunder.
9.9 Section Headings and Defined Terms. The section
headings contained herein are for reference purposes only and
shall not in any way affect the meaning and interpretation of this
Agreement. The terms defined herein and in any agreement executed
in connection herewith include the plural as well as the singular
and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as other-
wise indicated, all agreements defined herein refer to the same as
from time to time amended or supplemented or the terms thereof
waived or modified in accordance herewith and therewith.
-63-
9.10 Severability. The invalidity or unenforceability
of any particular provision, or part of any provision, of this
Agreement shall not affect the other provisions or parts hereof,
and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions or parts were omitted.
9.11 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an orig-
inal; and any person may become a party hereto by executing a
counterpart hereof, but all of such counterparts together shall be
deemed to be one and the same instrument. It shall not be neces-
sary in making proof of this Agreement or any counterpart hereof
to produce or account for any of the other counterparts.
9.12 Entire Agreement. This Agreement, together with
the NII Disclosure Statement and the agreements, exhibits,
schedules and certificates referred to herein or delivered
pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings. The submission
of a draft of this Agreement or portions or summaries thereof does
not constitute an offer to purchase or sell the NII Common Shares,
it being understood and agreed that no party hereto shall be
legally obligated with respect to such a purchase or sale or to
any other terms or conditions set forth in such draft or portion
-64-
or summary unless and until this Agreement has been duly executed
and delivered by all parties.
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement, all as of the date first above written.
SELAS CORPORATION OF AMERICA
By:/s/ Stephen F. Ryan
Name: Stephen F. Ryan
Title: President and CEO
By:/s/ Robert W. Ross
Name: Robert W. Ross
Title: Secretary
SELAS ACQUISITION CORPORATION
By:/s/ Stephen F. Ryan
Name: Stephen F. Ryan
Title: President and CEO
By:/s/ Robert W. Ross
Name: Robert W. Ross
Title: Secretary
NII, INCORPORATED
By:/s/ William D. McEntire
Name: William D. McEntire
Title: President and CEO
By:/s/ Suzanne M. McEntire
Name: Suzanne M. McEntire
Title: Secretary
-65-
PRINCIPAL SHAREHOLDERS:
WIDMAR, INC.
By:/s/ William D. McEntire
Name: William D. McEntire
Title: President
/s/ Ronald E. Erickson
/s/ Elaine B. Erickson
Ronald E. Erickson and Elaine B.
Erickson, as trustees of the
Erickson 1994 Revocable Trust
dated April 15, 1994
/s/ Ronald E. Erickson
Ronald E. Erickson
/s/ Bernie A. Fredrick
Bernie A. Fredrick
/s/ Rhonda Fredrick
Rhonda Fredrick
/s/ Robert E. Tambeau
Robert E. Tambeau
/s/ Jimmi Roberts
Jimmi Roberts
/s/ James Roberts
James Roberts
/s/ Richard J. McEntire
Richard J. McEntire
/s/ Suzanne M. McEntire
Suzanne M. McEntire
/s/ William D. McEntire
William D. McEntire
-66-
APPENDIX
Index of Defined Terms
Where
Term Defined
Accounts Receivable . . . . . . . . . . . . . . . . . . . 10
Acquired Companies . . . . . . . . . . . . . . . . . . . . 2
Acquired Company . . . . . . . . . . . . . . . . . . . . . 3
Acquiror Representatives . . . . . . . . . . . . . . . . 36
Acquiror Transaction Documents . . . . . . . . . . . . . 31
Affiliated Persons . . . . . . . . . . . . . . . . . . . 23
Authorizations . . . . . . . . . . . . . . . . . . . . . . 7
Business . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer Indemnified Persons . . . . . . . . . . . . . . . . 54
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . 25
CGCL . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Competing Business . . . . . . . . . . . . . . . . . . . 23
Contracts . . . . . . . . . . . . . . . . . . . . . . . . 15
Damages . . . . . . . . . . . . . . . . . . . . . . . . . 54
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Effective Time . . . . . . . . . . . . . . . . . . . . . . 2
Employee Benefit Plans . . . . . . . . . . . . . . . . . 19
Employment Agreements . . . . . . . . . . . . . . . . . . 49
Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . 3
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . 3
Erickson Trust . . . . . . . . . . . . . . . . . . . . . . 1
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Escrow Agreement . . . . . . . . . . . . . . . . . . . . 38
Escrow Deposit . . . . . . . . . . . . . . . . . . . . . 58
ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ESOP Solicitation . . . . . . . . . . . . . . . . . . . . 42
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . 4
Existing NII Financial Statements . . . . . . . . . . . . . 8
Former Real Property . . . . . . . . . . . . . . . . . . 24
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
GAAP Statements . . . . . . . . . . . . . . . . . . . . . . 9
Group . . . . . . . . . . . . . . . . . . . . . . . . . . 43
HIPAA . . . . . . . . . . . . . . . . . . . . . . . . . . 22
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Intellectual Property . . . . . . . . . . . . . . . . . . 13
Interim CSI Balance Sheet . . . . . . . . . . . . . . . . . 9
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Agreement . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . 1
-67-
MRL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Multiemployer Plan . . . . . . . . . . . . . . . . . . . 21
NII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NII Common Shares . . . . . . . . . . . . . . . . . . . . . 3
NII Disclosure Statement . . . . . . . . . . . . . . . 3, 51
NII Shareholder List . . . . . . . . . . . . . . . . . . 42
NII Shareholders' Meeting . . . . . . . . . . . . . . . . 39
NII Transaction Documents . . . . . . . . . . . . . . . . . 4
Orders . . . . . . . . . . . . . . . . . . . . . . . . . . 8
OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Common Shares . . . . . . . . . . . . . . . . . . 33
Parent Material Adverse Effect . . . . . . . . . . . . . 32
Parent Preferred Shares . . . . . . . . . . . . . . . . . 33
Parent Shareholders Meeting . . . . . . . . . . . . . . . 39
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Pension Plan . . . . . . . . . . . . . . . . . . . . . . 19
Person . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Premises . . . . . . . . . . . . . . . . . . . . . . . . 23
Principal Shareholders . . . . . . . . . . . . . . . . . . 1
Proxy Statement . . . . . . . . . . . . . . . . . . . . . 30
Registration Statement . . . . . . . . . . . . . . . . . 30
Representative . . . . . . . . . . . . . . . . . . . . . 59
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 33
Securities Act . . . . . . . . . . . . . . . . . . . . . . 4
Selas Option . . . . . . . . . . . . . . . . . . . . . . 52
Shareholder Signatories . . . . . . . . . . . . . . . . . 58
Stock Acquisition . . . . . . . . . . . . . . . . . . . . . 1
Takeover Proposal . . . . . . . . . . . . . . . . . . . . 36
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 38
Welfare Plan . . . . . . . . . . . . . . . . . . . . . . 19
Western . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Widmar . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Widmar Percentage . . . . . . . . . . . . . . . . . . . . 45
Widmar Shareholders . . . . . . . . . . . . . . . . . . . . 1
-68-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Selas Corporation of America for the six months
ended September 30, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,031,872
<SECURITIES> 0
<RECEIVABLES> 35,413,042
<ALLOWANCES> 696,410
<INVENTORY> 9,605,982
<CURRENT-ASSETS> 50,653,351
<PP&E> 33,971,623
<DEPRECIATION> 16,946,992
<TOTAL-ASSETS> 84,851,921
<CURRENT-LIABILITIES> 31,657,561
<BONDS> 7,696,204
0
0
<COMMON> 5,577,324
<OTHER-SE> 34,403,599
<TOTAL-LIABILITY-AND-EQUITY> 84,851,921
<SALES> 86,334,612
<TOTAL-REVENUES> 86,334,612
<CGS> 67,931,495
<TOTAL-COSTS> 67,931,495
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,081
<INTEREST-EXPENSE> 764,952
<INCOME-PRETAX> 6,066,130
<INCOME-TAX> 2,385,789
<INCOME-CONTINUING> 3,680,341
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,680,341
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.68
</TABLE>
