SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
December 30, 1996
MFRI, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-18370 36-3922969
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
7720 LEHIGH AVENUE, NILES, ILLINOIS 60714
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (847) 966-1000
<PAGE>
Item 1. Changes in Control of Registrant.
See Item 2.
Item 2. Acquisition or Disposition of Assets.
Effective December 30, 1996, pursuant to an Agreement for
Merger (the "Merger Agreement") dated October 25, 1996, by
and between MFRI, Inc. ("MFRI" or the "Company") and
Midwesco, Inc. ("Midwesco"), as amended, the Company
acquired through the merger (the "Merger") of Midwesco with
and into the Company, certain specified assets of Midwesco
(the "Acquired Assets"), namely, the inventory, equipment,
intellectual property, prepaid expenses, accounts
receivable, causes of action, claims for refund, goodwill,
certain books and records and all other assets of Midwesco
relating to Midwesco's Thermal Care business; Midwesco's
rights under its lease (the "Niles Lease") for the Niles,
Illinois office and manufacturing facility that serves as
the principal offices of the Company and Midwesco and
related leasehold improvements; Midwesco's rights under
leases for warehouse and office space located respectively
in Niles, Illinois and Riverside, California, and related
leasehold improvements; the deferred tax assets of Midwesco;
and 1,717,666 shares of the common stock of the Company
("MFRI Common Stock") owned by Midwesco. The Company
acquired the Acquired Assets subject to certain specified
liabilities (the "Assumed Liabilities"), namely, all
liabilities relating to the Thermal Care business, all
liabilities relating to three lawsuits arising from warranty
obligations relating to the Company's Perma-Pipe business
(the "Pending Suits"), indebtedness for borrowed funds
aggregating $5 million, and all obligations under the Niles
Lease and leases for the Niles and Riverside warehouse and
office facilities, and all automobiles and equipment used in
the Thermal Care business.
At the effective time of the Merger (the "Effective Time"),
each outstanding share of capital stock of Midwesco
("Midwesco Stock") was converted into 183.7 shares of MFRI
Common Stock. Each share of MFRI Common Stock owned by
Midwesco immediately prior to the Effective Time was
cancelled. As a consequence of the foregoing an aggregate
of 2,124,298 shares of MFRI Common Stock (plus a nominal
amount of cash in lieu of fractional shares) were issued to
the shareholders of Midwesco. An aggregate of 300,000 of
such shares were placed in an escrow account to support
Midwesco's indemnification obligations under the Merger
Agreement, and an aggregate of 66,890 of such shares were
placed in a special escrow related to the Pending Suits.
For additional information regarding the principle followed
in determining the amount of consideration for the Acquired
Assets, the source of funds used for the Merger, the nature
of any material relationship between Midwesco and the
Company and certain of its directors and officers, the
nature of the Thermal Care business, and additional
information concerning the Merger, see (i) the information
set forth under the captions "Summary -- Interest of Certain
Persons," "The Merger -- Terms of the Merger, -- Background
of the Merger and Recommendation of the MFRI Board of
Directors, and -- Business of Thermal Care," "Management's
Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources of the
Company," and "Principal Stockholders and Security Ownership
of Management" set forth in the Company's Proxy Statement
dated November 12, 1996 relating to the Special Meeting of
Stockholders of MFRI, Inc. held on December 16, 1996; and
(ii) the information set forth under the caption
"Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital
Resources" set forth in the Company's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1996; which are
hereby incorporated by reference.
Item 7. Financial Statements, PRO FORMA Financial Information and
Exhibits.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Incorporated by reference to the information set forth under
the caption "Midwesco, Inc. and Subsidiaries Consolidated
Financial Statements" commencing on page F-1 of the
Company's Proxy Statement dated November 12, 1996 relating
to the Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 (SEC File No. 1-18370).
(b) PRO FORMA FINANCIAL INFORMATION
Incorporated by reference to the information set forth under
the caption "Unaudited Pro Forma Combined Financial
Statements" in the Company's Proxy Statement dated November
12, 1996 relating to the Special Meeting of Stockholders of
MFRI, Inc. held on December 16, 1996 (SEC File No. 1-18370).
<PAGE>
(c) EXHIBITS
2.1 Agreement for Merger, dated October 25, 1996, by and
between MFRI, Inc. and Midwesco, Inc. [Incorporated by
reference to Appendix A of the Company's Proxy
Statement dated November 12, 1996 relating to the
Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 (SEC File No. 1-18370)]
2.2 Agreement and Plan of Merger, as amended, dated October
25, 1996, by and between MFRI, Inc. and Midwesco, Inc.
23.1 Consent of Deloitte & Touche LLP
99.1 The information set forth under the caption
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and
Capital Resources" set forth in the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31,
1996 [Incorporated by reference (SEC File No. 1-18370)]
99.2 The information set forth under the caption "Midwesco,
Inc. and Subsidiaries Consolidated Financial
Statements" commencing on page F-1 of the Company's
Proxy Statement dated November 12, 1996 relating to the
Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 [Incorporated by reference (SEC File
No. 1-18370)]
99.3 The information set forth under the caption "Unaudited
Pro Forma Combined Financial Statements" in the
Company's Proxy Statement dated November 12, 1996
relating to the Special Meeting of Stockholders of
MFRI, Inc. held on December 16, 1996 [Incorporated by
reference (SEC File No. 1-18370)]
99.4 The information set forth under the captions "Summary
-- Interest of Certain Persons," "The Merger -- Terms
of the Merger, -- Background of the Merger and
Recommendation of the MFRI Board of Directors, and --
Business of Thermal Care," and "Principal Stockholders
and Security Ownership of Management" in the Company's
Proxy Statement dated November 12, 1996 relating to the
Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 [Incorporated by reference (SEC File
No. 1-18370)]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: January 9, 1997 MFRI, INC.
By:/S/ MICHAEL D. BENNETT
Michael D. Bennett
Vice President
<PAGE>
EXHIBITS
EXHIBIT NO.
2.1 Agreement for Merger, dated October 25, 1996, by and
between MFRI, Inc. and Midwesco, Inc. [Incorporated by
reference to Appendix A of the Company's Proxy
Statement dated November 12, 1996 relating to the
Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 (SEC File No. 1-18370)]
2.2 Agreement and Plan of Merger, as amended, dated October
25, 1996, by and between MFRI, Inc. and Midwesco, Inc.
23.1 Consent of Deloitte & Touche LLP
99.1 The information set forth under the caption
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and
Capital Resources" set forth in the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31,
1996 [Incorporated by reference (SEC File No. 1-18370)]
99.2 The information set forth under the caption "Midwesco,
Inc. and Subsidiaries Consolidated Financial
Statements" commencing on page F-1 of the Company's
Proxy Statement dated November 12, 1996 relating to the
Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 [Incorporated by reference (SEC File
No. 1-18370)]
99.3 The information set forth under the caption "Unaudited
Pro Forma Combined Financial Statements" in the
Company's Proxy Statement dated November 12, 1996
relating to the Special Meeting of Stockholders of
MFRI, Inc. held on December 16, 1996 [Incorporated by
reference (SEC File No. 1-18370)]
99.4 The information set forth under the captions "Summary -
Interest of Certain Persons," "The Merger -- Terms of
the Merger, -- Background of the Merger and
Recommendation of the MFRI Board of Directors, and --
Business of Thermal Care," and "Principal Stockholders
and Security Ownership of Management" in the Company's
Proxy Statement dated November 12, 1996 relating to the
Special Meeting of Stockholders of MFRI, Inc. held on
December 16, 1996 [Incorporated by reference (SEC File
No. 1-18370)]
<PAGE>
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
AS AMENDED
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement and Plan of
Merger"), dated as of October 25, 1996, is by and among MFRI, INC., a
Delaware corporation ("MFRI") and MIDWESCO, INC., an Illinois corporation
("Midwesco").
RECITALS
WHEREAS, MFRI is a corporation duly organized and existing under the
laws of the State of Delaware;
WHEREAS, Midwesco is a corporation duly organized and existing under
the laws of the State of Illinois;
WHEREAS, Midwesco desires to merge with and into MFRI, and MFRI
desires to merge with Midwesco upon the terms and subject to the
conditions of this Agreement and Plan of Merger and in accordance with the
applicable provisions of the laws of the States of Delaware and Illinois;
and
WHEREAS, the respective Boards of Directors of MFRI and Midwesco deem
it advisable and in the best interests of each such corporation and their
respective stockholders that Midwesco be merged with and into MFRI as
provided herein, and they have accordingly adopted resolutions approving
this Agreement and Plan of Merger and direct the submission of this
Agreement and Plan of Merger to the stockholders of MFRI and of Midwesco.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, MFRI and Midwesco
hereby agree as follows:
ARTICLE 1.
THE MERGER; EFFECTIVE TIME
1.1 THE MERGER. At the Effective Time (as hereinafter defined), MFRI
and Midwesco shall consummate the merger (the "Merger") in which:
(a) Midwesco shall be merged with and into MFRI and the separate corporate
existence of Midwesco shall thereupon cease; (b) MFRI shall be the
successor or surviving corporation in the Merger and shall continue to be
governed by the laws of the State of Delaware; (c) each outstanding share
of common stock of Midwesco shall be converted into 183.7 shares of common
stock of MFRI; and (d) the separate corporate existence of MFRI with all
of its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. MFRI as the corporation surviving the
Merger is sometimes hereinafter referred to as the "Surviving
Corporation". The Merger shall be pursuant to the provisions of and with
the effect provided in the Delaware General Corporation Law.
1.2 EFFECTIVE TIME. The effective date and time of the Merger shall
be referred to herein as the "Effective Time" and the date of filing the
Plan under Illinois law shall be referred to herein as the "Filing Date."
1.3 EFFECTS OF THE MERGER. At and after the Effective Time:
(a) title to all real, personal and mixed property owned by
Midwesco shall be vested in MFRI without reversion or impairment;
(b) MFRI shall have all of the liabilities of Midwesco, and all
debts due on whatever account, including subscriptions to shares of
capital stock, and all other choses in action and all and every other
interest of, or belonging to, or due Midwesco shall be deemed to be
transferred to and vested in MFRI without further act or deed;
(c) any proceeding pending against Midwesco may be continued as
if the Merger did not occur, or MFRI may be substituted in its place
in the proceeding;
(d) the assets and liabilities of Midwesco shall be recorded on
the books of MFRI in the amounts at which they are stated on the books
of Midwesco as of the Effective Time, subject to such adjustments as
may be required to effect comparability of accounting policies and
practices;
(e) the name of MFRI, the purposes for which MFRI is formed and
the nature of the business to be transacted by it, shall be as set
forth in the Certificate of Incorporation of MFRI. If at any time
after the Effective Time, MFRI shall consider, or be advised that any
further assignment or assurances in law or any other things are
necessary or desirable to vest, perfect or confirm, of record or
otherwise, in MFRI, its right, title or interest in, to or under any
of the rights, privileges, powers, franchises, properties or assets of
Midwesco, and otherwise to carry out the intent and purposes of this
Agreement and Plan of Merger, the proper officers and directors of
MFRI are fully authorized in the name of Midwesco or otherwise to take
any and all such action.
ARTICLE 2.
DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION
2.1 DIRECTORS. The directors of MFRI as of the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation
and By-Laws.
2.2 OFFICERS. The officers of MFRI as of the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving
Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and By-Laws.
ARTICLE 3.
MANNER AND BASIS OF CONVERSION OF SHARES
3.1 CONVERSION. At the Effective Time, each share of common stock of
Midwesco issued and outstanding (the "Midwesco Common Stock"), shall, by
virtue of the Merger and without any action on the part of any holder
thereof, be converted into 183.7 fully paid and nonassessable shares of
common stock of MFRI.
3.2 FRACTIONAL SHARES. No fractional share of MFRI Stock shall be
issued in the Merger. In lieu of any such fractional securities, each
holder of shares of Midwesco common stock who would otherwise have been
entitled to a fraction of a share of MFRI Stock upon surrender of Midwesco
certificates for exchange pursuant to this Article 3 will be paid an
amount in cash (without interest), rounded to the lowest full cent,
determined by multiplying (i) the aggregate value of MFRI shares on the
closing date (determined on a per share basis and based upon the Closing
Price) by (ii) the fractional interest to which such holder would
otherwise be entitled. For purposes of this Agreement, the Closing Price
shall mean the closing price on the Nasdaq Stock Market's National Market
("Nasdaq National Market") on the Effective Time and if the stock of MFRI
was not traded on such date, the closing price of the stock of MFRI on the
Nasdaq National Market on the day most recently preceding the Effective
Time that MFRI stock was traded on the Nasdaq National Market.
3.3 STOCK CERTIFICATES. After the Effective Time, each holder of an
outstanding certificate or certificates representing Midwesco Common Stock
shall surrender same to MFRI or to its agent for such purpose and such
holders shall be entitled upon such surrender to receive in exchange
therefor a certificate or certificate representing the number of full
shares of MFRI into which such shares of Midwesco have been converted,
less each such shareholder's prorata share of the number of MFRI shares
placed in two escrows ("Escrows") pursuant to the terms of that certain
Agreement for Merger between Midwesco and MFRI dated as of the date of
this Agreement. Each certificate of MFRI issued shall bear the following
legend:
"The transfer, sale, pledge, distribution or other
disposition of the shares evidenced by this certificate
is restricted by and subject to the terms and
conditions of that certain Agreement for Merger dated
as of October 25, 1996 by and between MFRI and
Midwesco, a copy of which is available for inspection
at the principal executive office of MFRI."
Until surrendered as provided in this Section 3.3 certificates
representing Midwesco shares shall represent solely the right to receive
shares of MFRI and any cash in lieu of fractional shares as contemplated
by Section 3.2 hereof. No dividends or other distributions that are
declared on MFRI shares after the Effective Time shall be paid on Midwesco
shares until the certificate or certificates representing such shares have
been surrendered as provided herein. No transfers of shares of Midwesco
shall be made on the stock transfer books of the Company after the
Effective Time and no shares of MFRI shall be issued to anyone who was not
the shareholder of Midwesco at the Effective Time.
ARTICLE 4.
STOCK OPTION PLANS
4.1 CONTINUATION OF MFRI PLANS. Each stock option plan of MFRI in
effect as of the Effective Time shall remain in full force and effect;
however, each outstanding option issued under any MFRI stock option plan
which is held by a person to be employed by Midwesco - Illinois, Inc.
("New Midwesco") shall be amended to terminate on the earlier of three
months after the termination of employment with New Midwesco or a
subsidiary of New Midwesco or the option's expiration date.
ARTICLE 5.
AMENDMENT AND TERMINATION
5.1 AMENDMENT. The board of directors of MFRI and Midwesco may amend
this Agreement and Plan of Merger at any time prior to the approval hereof
by the stockholders of MFRI.
5.2 TERMINATION. This Agreement and Plan of Merger may be terminated
and abandoned at any time before the Filing Date by the respective Board
of Directors of Midwesco or MFRI.
ARTICLE 6.
MISCELLANEOUS
6.1 This Agreement and Plan of Merger may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.2 This Agreement and Plan of Merger shall be governed in all
respects, including validity, interpretation and effect, by the laws of
the States of Illinois and Delaware.
6.3 This Agreement and Plan of Merger (a) shall not be waived, except
by an instrument in writing, signed by the party to be charged, and (b)
shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
6.4 The parties hereto each agree to execute and deliver such
instruments, and to take all such further action, including, without
limitation, the execution and filing of such instruments in the States of
Delaware and Illinois, as shall be necessary or desirable to carry out
this Agreement and Plan of Merger and to consummate and effect the Merger.
IN WITNESS WHEREOF, MFRI and Midwesco have caused this Agreement and
Plan of Merger to be executed on its behalf by its officers hereunto duly
authorized, all as of the date first written above.
MIDWESCO, INC., an Illinois corporation
By:/S/ MICHAEL D. BENNETT
Title: VICE PRESIDENT
ATTEST:
/S/ JOHN F. CONROY
Assistant Secretary
MFRI, INC., a Delaware corporation
By:/S/ MICHAEL D. BENNETT
Title: VICE PRESIDENT
ATTEST:
/S/JOHN F. CONROY
Assistant Secretary
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to incorporation by reference in Registration Statement
No. 333-08767 on Form S-8 and in Form 8-K Current Report of MFRI, Inc. dated
December 30, 1996 of our report dated May 28, 1996 relating to the financial
statements of Midwesco, Inc. and subsidiaries contained in the Proxy
Statement of MFRI, Inc. dated November 12, 1996 relating to its Special
Meeting of Shareholders held on December 16, 1996.
/s/ Deloitte & Touche LLP
Chicago, Illinois
January 10, 1997
