<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earlier event reported): October 17, 1997
Computational Systems, Incorporated
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 0-26596 62-1198047
- ---------------------------- ---------------- ------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
835 Innovation Drive
Knoxville, Tennessee 37932
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(423) 675-2110
----------------------------------------------------
(Registrant's telephone number, including area code)
The Exhibit Index is located at page 4.
<PAGE> 2
Item 5. Other Events
On October 17, 1997, Computational Systems, Incorporated, a Tennessee
corporation (the "Company"), entered into an Agreement and Plan of Merger, dated
as of October 17, 1997, by and among the Company, EmerSub LVII, Inc., a Delaware
corporation ("Merger Subsidiary"), and Emerson Electric Co., a Missouri
corporation ("Emerson") (the "Merger Agreement"), pursuant to which Merger
Subsidiary will merge with and into the Company (the "Merger"), and the Company
will become a wholly owned subsidiary of Emerson. Emerson will pay $29.65 per
share for each share of the Company's outstanding common stock (the "Company
Stock") at the effective time of the Merger, of which $5.93 per share is payable
in cash, and the remaining $23.72 per share is payable in Emerson common stock.
Such consideration was determined on the basis of arm's length negotiations by
the parties.
In addition, on October 17, 1997, Ronald G. Canada, Chairman and Chief Executive
Officer of the Company, entered into a Stockholder Option Agreement with Emerson
whereby Mr. Canada granted to Emerson an irrevocable, unconditional option to
purchase any and all of his shares of the Company Stock (the "Option"). The
Option is exercisable upon the termination of the Merger Agreement as a result
of (i) the Company not obtaining stockholder approval of the Merger Agreement in
the case where prior to the Company's stockholder meeting a takeover proposal
has been announced, or (ii) the Company complying with its fiduciary duties
under applicable law. If the Option is not exercised, it will terminate on the
thirty first business day following the termination of the Merger Agreement.
Emerson engages principally in the worldwide design, manufacture and sale of a
broad range of electrical, electromechanical and electronic products and
systems. Other than the Option, Emerson has no material relationship with the
Company.
<PAGE> 3
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 thereunto duly authorized.
COMPUTATIONAL SYSTEMS, INCORPORATED
By: /s/ Ronald G. Canada
------------------------------
Ronald G. Canada
Chairman and Chief Executive
Officer
October 20, 1997
<PAGE> 4
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger, dated
as of October 17, 1997, by and among
Emerson Electric Co., Computational
Systems, Incorporated and Emersub
LVII, Inc.
10.1 Stockholder Option Agreement, dated
as of October 17, 1997, by and
between Ronald G. Canada and
Emerson Electric Co.
99.1 Press Release, dated October 17, 1996,
issued by Computational Systems,
Incorporated
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
October 17, 1997
among
COMPUTATIONAL SYSTEMS, INCORPORATED,
EMERSON ELECTRIC CO.
and
EMERSUB LVII, INC.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
THE MERGER
<S> <C>
SECTION 1.01. The Merger.......................................................................1
SECTION 1.02. Conversion of Shares.............................................................2
SECTION 1.03. Surrender and Payment............................................................2
SECTION 1.04. Stock Options....................................................................4
SECTION 1.05. Employee Stock Purchase Plan.....................................................4
SECTION 1.06. Adjustments......................................................................5
SECTION 1.07. Fractional Shares................................................................5
SECTION 1.08. Withholding Rights...............................................................5
SECTION 1.09. Lost Certificates................................................................5
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.01. Certificate of Incorporation.....................................................6
SECTION 2.02. Bylaws...........................................................................6
SECTION 2.03. Directors and Officers...........................................................6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power....................................................6
SECTION 3.02. Corporate Authorization..........................................................7
SECTION 3.03. Governmental Authorization.......................................................7
SECTION 3.04. Non-contravention................................................................7
SECTION 3.05. Capitalization...................................................................8
SECTION 3.06. Subsidiaries.....................................................................8
SECTION 3.07. SEC Filings......................................................................9
SECTION 3.08. Financial Statements............................................................10
SECTION 3.09. Disclosure Documents............................................................10
SECTION 3.10. Absence of Certain Changes......................................................11
SECTION 3.11. No Undisclosed Material Liabilities.............................................12
SECTION 3.12. Compliance with Laws and Court Orders...........................................13
SECTION 3.13. Litigation......................................................................13
SECTION 3.14. Finders' Fees...................................................................13
SECTION 3.15. Taxes...........................................................................13
SECTION 3.16. Employee Benefit Plans..........................................................15
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 3.17. Environmental Matters...........................................................16
SECTION 3.18. Opinion of Financial Advisor....................................................17
SECTION 3.19. Patents and Other Proprietary Rights............................................17
SECTION 3.20. Antitakeover Statutes...........................................................18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 4.01. Corporate Existence and Power...................................................19
SECTION 4.02. Corporate Authorization.........................................................19
SECTION 4.03. Governmental Authorization......................................................19
SECTION 4.04. Non-contravention...............................................................20
SECTION 4.05. Capitalization..................................................................20
SECTION 4.06. SEC Filings.....................................................................20
SECTION 4.07. Financial Statements............................................................21
SECTION 4.08. Disclosure Documents............................................................21
SECTION 4.09. Absence of a Material Adverse Change............................................22
SECTION 4.10. No Undisclosed Material Liabilities.............................................22
SECTION 4.11. Compliance with Laws and Court Orders...........................................22
SECTION 4.12. Litigation......................................................................23
SECTION 4.13. Stock Ownership.................................................................23
SECTION 4.14. Finders' Fees...................................................................23
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.01. Conduct of the Company..........................................................23
SECTION 5.02. Stockholder Meeting; Proxy Material.............................................24
SECTION 5.03. No Solicitation.................................................................24
SECTION 5.04. Access to Information; Confidentiality..........................................26
ARTICLE 6
COVENANTS OF PARENT
SECTION 6.01. Obligations of Merger Subsidiary................................................27
SECTION 6.02. Voting of Shares................................................................27
SECTION 6.03. Director and Officer Liability..................................................27
SECTION 6.04. Registration Statement; Form S-8................................................28
SECTION 6.05. Stock Exchange Listing..........................................................29
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
<S> <C>
SECTION 7.01. Reasonable Best Efforts.........................................................29
SECTION 7.02. Certain Filings.................................................................29
SECTION 7.03. Public Announcements............................................................29
SECTION 7.04. Further Assurances..............................................................29
SECTION 7.05. Notices of Certain Events.......................................................30
SECTION 7.06. Tax-free Reorganization.........................................................30
SECTION 7.07. Rule 145 Affiliates.............................................................30
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party.....................................30
SECTION 8.02. Conditions to the Obligations of Parent and Merger
Subsidiary............................................................................31
SECTION 8.03. Conditions to the Obligations of the Company....................................31
ARTICLE 9
TERMINATION
SECTION 9.01. Termination.....................................................................32
SECTION 9.02. Effect of Termination...........................................................33
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices........................................................................33
SECTION 10.02. Survival of Representations and Warranties.....................................34
SECTION 10.03. Amendments; No Waivers.........................................................35
SECTION 10.04. Expenses.......................................................................35
SECTION 10.05. Successors and Assigns.........................................................35
SECTION 10.06. Governing Law..................................................................35
SECTION 10.07. Jurisdiction...................................................................36
SECTION 10.08. Waiver of Jury Trial...........................................................36
SECTION 10.09. Counterparts; Effectiveness....................................................36
SECTION 10.10. Entire Agreement...............................................................36
SECTION 10.11. Third Party Beneficiaries......................................................36
SECTION 10.12. Captions.......................................................................36
SECTION 10.13. Severability...................................................................37
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 10.14. Specific Performance...........................................................37
SECTION 10.15. Definitions and Usage..........................................................37
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of October 17, 1997 among
Computational Systems, Incorporated, a Tennessee corporation (the "COMPANY"),
Emerson Electric Co., a Missouri corporation ("PARENT"), and Emersub LVII, Inc.,
a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER
SUBSIDIARY").
The parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger. (a) Subject to the terms and conditions of
this Agreement, at the Effective Time, Merger Subsidiary shall be merged (the
"MERGER") with and into the Company in accordance with the Tennessee Business
Corporation Act (the "TBCA") and the Delaware General Corporation Law (the
"DGCL"), whereupon the separate existence of Merger Subsidiary shall cease, and
the Company shall be the surviving corporation (the "SURVIVING CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger set forth herein the
Company and Merger Subsidiary will file articles of merger (the "ARTICLES OF
MERGER") with the Tennessee Secretary of State and a certificate of merger (the
"CERTIFICATE OF MERGER") with the Delaware Secretary of State and make all other
filings or recordings required by the TBCA and the DGCL in connection with the
Merger. The Merger shall become effective at such time (the "EFFECTIVE TIME") as
the Articles of Merger are duly filed with the Tennessee Secretary of State and
the Certificate of Merger is duly filed with the Delaware Secretary of State (or
at such later time as may be agreed in writing by the parties hereto and
specified in the Articles of Merger and the Certificate of Merger).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under the TBCA. The Merger shall have the
effects specified by the TBCA and the DGCL.
<PAGE> 7
SECTION 1.02. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof:
(a) each share of common stock, no par value per share, of the Company
("COMPANY STOCK") outstanding immediately prior to the Effective Time shall
(except as otherwise provided in Section 1.02(b)) be converted into the right to
receive (the "MERGER CONSIDERATION") (x) $5.93 in cash and (y) the number of
shares of common stock, $.50 par value per share, of Parent ("PARENT STOCK")
(rounded to the nearest ten-thousandth of a share) equal to the quotient
obtained by dividing (i) $23.72 by (ii) the average of the closing prices of a
share of Parent Stock as reported on the New York Stock Exchange (the "NYSE")
Composite Tape on each of the last ten trading days ending on the trading day
immediately preceding the date of the Effective Time; provided, however, that if
and to the extent necessary for the Merger to qualify as a reorganization under
Section 368(a)(2)(E) of the Code, the cash portion of the Merger Consideration
(as described in clause (x) above) shall be reduced and the stock portion of the
Merger Consideration (as described in clause (y) above) shall be increased;
(b) each share of Company Stock held by the Company as treasury stock
or owned by Parent or any of its subsidiaries immediately prior to the Effective
Time shall be canceled, and no payment shall be made with respect thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 1.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent reasonably acceptable to the Company (the
"EXCHANGE AGENT") for the purpose of exchanging certificates representing
Company Stock (the "CERTIFICATES") for the Merger Consideration. Parent will
make available to the Exchange Agent, as needed, the Merger Consideration to be
paid in respect of shares of Company Stock. Promptly after the Effective Time,
Parent will send, or will cause the Exchange Agent to send, to each holder of
shares of Company Stock at the Effective Time (other than the Company or Parent
or any of its subsidiaries) a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
for payment therefor.
2
<PAGE> 8
(b) Each holder of shares of Company Stock that have been converted
into the right to receive the Merger Consideration will be entitled to receive,
upon surrender to the Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, the Merger Consideration in respect of each
share of Company Stock represented by such Certificate. Until so surrendered,
each such Certificate shall, after the Effective Time, represent for all
purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person (as defined in Section 10.15) other than the person in whose name the
Certificate is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a person other than the registered holder of such Certificate or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no further registration
of transfers of shares of Company Stock. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and promptly exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.03(a) that remains unclaimed by the holders
of shares of Company Stock six months after the Effective Time shall be returned
to Parent upon demand, and any such holder who has not exchanged shares of
Company Stock for the Merger Consideration in accordance with this Section prior
to that time shall thereafter look only to Parent for payment of the Merger
Consideration in respect of such shares of Company Stock. Notwithstanding the
foregoing, Parent shall not be liable to any holder of shares of Company Stock
for any amount paid to a public official pursuant to applicable abandoned
property laws.
(f) No dividends, interest or other distributions with respect to
securities of Parent constituting part of the Merger Consideration shall be paid
to the holder of any unsurrendered Certificates until such Certificates are
surrendered as provided in this Section. Upon such surrender, there shall be
paid, without interest, to the person in whose name the securities of Parent
have been registered, all dividends, interest and other distributions payable in
respect of such securities on a date subsequent to, and in respect of a record
date after, the Effective Time.
3
<PAGE> 9
SECTION 1.04. Stock Options. At the Effective Time, each option to
purchase shares of Company Stock outstanding under any employee stock option or
compensation plan or arrangement of the Company, whether or not exercisable, and
whether or not vested, shall be deemed to constitute an immediately exercisable
option to acquire, on substantially the same terms and conditions as were
applicable to the original option to which it relates (a "SUBSTITUTE OPTION"),
the same number of shares of Parent Stock as the holder of such option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time, at a price per
share of Parent Stock computed in compliance with the requirements of Section
424(a) of the Internal Revenue Code of 1986 (the "CODE"); provided, however,
that the number of shares of Parent Stock that may be purchased upon exercise of
such Parent stock option shall not include any fractional share and, upon
exercise of such Parent stock option, a cash payment shall be made for any
fractional share based upon the closing price of a share of Parent Stock on the
NYSE on the last trading day of the calendar month immediately preceding the
date of exercise. Prior to the Effective Time, the Company will use its best
efforts to obtain such consents, if any, as may be necessary to give effect to
the transactions contemplated by this Section. In addition, prior to the
Effective Time, the Company will use its best efforts to make any amendments to
the terms of such stock option or compensation plans or arrangements that are
necessary to give effect to the transactions contemplated by this Section;
provided, however, that the Company shall not be required to make any such
amendment if the effect thereof would be to change the treatment of any stock
option or stock option plan under the Code; provided, further, that in the event
an optionee expressly waives the accelerated vesting or exercisability of an
option, whether provided for by this Agreement or otherwise, the Substitute
Option shall provide for a vesting and exercisability schedule as if the
transactions contemplated by this Agreement had not occurred. Except as
contemplated by this Section, the Company will not, after the date hereof,
without the written consent of Parent, amend any outstanding options to purchase
shares of Company Stock.
SECTION 1.05. Employee Stock Purchase Plan. As of the Effective Time,
the Company's 1995 Employee Stock Purchase Plan shall be terminated. The rights
of participants in such Plan with respect to any offering period then underway
under such Plan shall be determined by treating the last business day prior to
the Effective Time as the last day of such offering period and by making such
other pro-rata adjustments as may be necessary to reflect the reduced offering
period but otherwise treating such offering period as a fully effective and
completed offering period for all purposes of such Plan. Prior to the Effective
Time, the Company shall take all actions (including, if appropriate, amending
the terms of the Company's Employee Stock Purchase Plan) that are necessary to
give effect to the transactions contemplated by this Section.
4
<PAGE> 10
SECTION 1.06. Adjustments. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Parent shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration shall be adjusted appropriately.
SECTION 1.07. Fractional Shares. No fractional shares of Parent Stock
shall be issued in the Merger, but in lieu thereof each holder of shares of
Company Stock otherwise entitled to receive as a result of the Merger a
fractional share of Parent Stock will be entitled to receive a cash payment
representing such holder's proportionate interest in the net proceeds resulting
from the sale (after deduction of all expenses resulting from such sale) on the
NYSE through one or more of its member firms of the fractional shares of Parent
Stock all holders of shares of Company Stock would otherwise be entitled to
receive as a result of the Merger.
SECTION 1.08. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article such amounts as it is required to
deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
SECTION 1.09. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to be paid in respect of the shares of
Company Stock represented by such Certificates as contemplated by this Article.
5
<PAGE> 11
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.01. Certificate of Incorporation. At the Effective Time and
without any further action on the part of the Company or Merger Subsidiary, the
certificate of incorporation of Merger Subsidiary in effect at the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
until amended in accordance with applicable law, except that Article 1 shall be
amended to read "The name of the company is Computational Systems,
Incorporated".
SECTION 2.02. Bylaws. At the Effective Time and without any further
action on the part of the Company or Merger Subsidiary, the bylaws of Merger
Subsidiary in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 2.03. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (i) the directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation and (ii) the officers
of the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that, except as disclosed
in writing by the Company to Parent prior to the date hereof:
SECTION 3.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Tennessee and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not, individually or
in the aggregate, have a material adverse effect (as defined in Section 10.15)
on the Company. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a material
adverse effect on the Company.
6
<PAGE> 12
The Company has heretofore delivered to Parent true and complete copies of the
certificate of incorporation and bylaws of the Company as currently in effect.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby and thereby are within the Company's corporate
powers and, except for the required approval of the Company's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action. The affirmative vote of the holders of a majority of
the outstanding shares of Company Stock is the only vote of the holders of any
of the Company's capital stock necessary in connection with the consummation of
the Merger. No other vote of the holders of the Company's capital stock is
necessary in connection with this Agreement or the consummation of the
transactions contemplated hereby. This Agreement constitutes a valid and binding
agreement of the Company.
(b) The Company's Board of Directors, at a meeting duly called and
held, has (i) determined that this Agreement and the transactions contemplated
hereby (including the Merger) are fair to and in the best interests of the
Company's stockholders, (ii) approved and adopted this Agreement and the
transactions contemplated hereby (including the Merger), and (iii) resolved
(subject to Section 5.03(b)) to recommend approval and adoption of this
Agreement and the Merger by its stockholders.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any governmental body, agency, official or authority other than
(a) the filing of the Articles of Merger in accordance with the TBCA, (b) the
filing of the Certificate of Merger in accordance with the DGCL, (c) compliance
with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 ("HSR ACT"), the Securities Act of 1933 ("1933 ACT"), the Securities
Exchange Act of 1934 ("1934 ACT"), foreign or state securities or Blue Sky laws,
and (d) any other filings, approvals or authorizations which, if not obtained,
would not, individually or in the aggregate, have a material adverse effect on
the Company or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
SECTION 3.04. Non-contravention. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) violate the
certificate of incorporation or bylaws of the Company, (ii) assuming compliance
with the matters referred to in Section 3.03, violate any applicable
7
<PAGE> 13
law, rule, regulation, judgment, injunction, order or decree, (iii) require any
consent or other action by any person under, constitute a default under, or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of the Company or any of its subsidiaries or to a loss of any benefit
to which the Company or any of its subsidiaries is entitled under any provision
of any agreement or other instrument binding upon the Company or any of its
subsidiaries or any license, franchise, permit, certificate, approval or other
similar authorization affecting, or relating in any way to, the assets or
business of the Company or any of its subsidiaries or (iv) result in the
creation or imposition of any Lien on any asset of the Company or any of its
subsidiaries except, in the case of clauses (ii), (iii) and (iv), for such
matters as would not, individually or in the aggregate, have a material adverse
effect on the Company or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement. "LIEN" means, with
respect to any property or asset, any mortgage, lien, pledge, charge, security
interest, encumbrance or other adverse claim of any kind in respect of such
property or asset.
SECTION 3.05. Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Company Stock and 5,000,000 shares of
preferred stock, no par value per share. No shares of preferred stock have been
issued. As of October 14, 1997, there were outstanding 5,052,173 shares of
Company Stock and options to purchase an aggregate of 639,517 shares of Company
Stock at an average exercise price of $13.80 per share (of which options to
purchase an aggregate of 229,211 shares of Company Stock were exercisable). All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. Except as set forth in
this Section, except as disclosed in writing by the Company to Parent prior to
the date hereof and except for changes since October 14, 1997 resulting from the
exercise of employee stock options outstanding on such date, there are no
outstanding (i) shares of capital stock or voting securities of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or (iii) options or other
rights to acquire from the Company or other obligation of the Company to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company. There are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any securities referred to in clauses (i), (ii) or
(iii) above.
SECTION 3.06. Subsidiaries. (a) Each subsidiary (as defined in Section
10.15) of the Company is a corporation or other entity duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all corporate or other powers
and all governmental licenses, authorizations, permits, consents and approvals
required to
8
<PAGE> 14
carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not,
individually or in the aggregate, have a material adverse effect on the Company.
Each subsidiary of the Company is duly qualified to do business and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified would not, individually or
in the aggregate, have a material adverse effect on the Company. All material
subsidiaries of the Company and their respective jurisdictions of incorporation
or organization are identified in the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1996 ("COMPANY 10-K").
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each subsidiary of the Company is owned by
the Company, directly or indirectly, free and clear of any Lien and free of any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other voting securities or
ownership interests), other than any restrictions imposed under the 1933 Act.
Except as set forth in this Section, there are no outstanding (i) shares of
capital stock or other voting securities or ownership interests in any of the
Company's subsidiaries, (ii) securities of the Company or any of its
subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any of the Company's
subsidiaries or (iii) options or other rights to acquire from the Company or any
of its subsidiaries, or other obligation of the Company or any of its
subsidiaries to issue, any capital stock or other voting securities or ownership
interests in, or any securities convertible into or exchangeable for any capital
stock or other voting securities or ownership interests in, any of the Company's
subsidiaries. There are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the securities
referred to in clauses (i), (ii) or (iii) above.
SECTION 3.07. SEC Filings. (a) The Company has delivered or made
available to Parent (i) the Company's annual report on Form 10-K for its fiscal
year ended December 31, 1996, (ii) its quarterly reports on Form 10-Q for its
fiscal quarters ended after December 31, 1996, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of the Company held since December 31, 1996 and (iv) all of its
other reports, statements, schedules and registration statements filed with the
Securities and Exchange Commission ("SEC") since December 31, 1996 (the
documents referred to in this Section being referred to collectively as the
"COMPANY SEC FILINGS") . The Company's quarterly report on Form 10-Q for its
fiscal quarter ended June 30, 1997 is referred to herein as the "COMPANY 10-Q".
9
<PAGE> 15
(b) As of its filing date, each Company SEC Filing complied as to form
in all material respects with the applicable requirements of the 1933 Act and
the 1934 Act.
(c) As of its filing date, each Company SEC Filing filed pursuant to
the 1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the 1933 Act did not, as of the date such
statement or amendment became effective, 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 not misleading.
SECTION 3.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Filings fairly present, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of the Company and its subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments and the absence of footnote disclosure
in the case of any unaudited interim financial statements). For purposes of this
Agreement, "COMPANY BALANCE SHEET" means the consolidated balance sheet of the
Company as of June 30, 1997 set forth in the Company 10-Q and "COMPANY BALANCE
SHEET DATE" means June 30, 1997.
SECTION 3.09. Disclosure Documents. (a) The proxy statement/ prospectus
of the Company to be filed with the SEC in connection with the Merger (the
"COMPANY PROXY STATEMENT") and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the 1934 Act. At the time the Company Proxy Statement or any
amendment or supplement thereto is first mailed to stockholders of the Company
and at the time such stockholders vote on the approval of this Agreement and the
Merger, the Company Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing representations and warranties will not apply to statements included
in or omissions from the Company Proxy Statement or any amendment or supplement
thereto based upon information furnished to the Company by Parent for use
therein.
10
<PAGE> 16
(b) None of the information furnished or to be furnished by the
Company to Parent for use in (or incorporation by reference in) the Registration
Statement (as defined in Section 4.08(a)) or any amendment or supplement thereto
will contain, at the time the Registration Statement or any amendment or
supplement thereto becomes effective or at the Effective Time, 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 contained therein
not misleading.
SECTION 3.10. Absence of Certain Changes. Since the Company Balance
Sheet Date, the business of the Company and its subsidiaries has been conducted
in the ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which would, individually or in the aggregate, have a material adverse
effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its subsidiaries;
(c) any amendment of any material term of any outstanding security of
the Company or any of its subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of
its subsidiaries of any material indebtedness for borrowed money other than in
the ordinary course and in amounts and on terms consistent with past practices;
(e) any creation or other incurrence by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary course
consistent with past practices;
(f) any making of any material loan, advance or capital contributions
to or investment in any person other than loans, advances or capital
contributions to or investments in wholly-owned subsidiaries of the Company made
in the ordinary course consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any of
its subsidiaries which would, individually or in the aggregate, have a material
adverse effect on the Company;
11
<PAGE> 17
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its subsidiaries of any contract or
other right, in either case, material to the Company and its subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course
consistent with past practices and those contemplated by this Agreement;
(i) any change in any method of accounting, method of tax accounting,
or accounting practice by the Company or any of its subsidiaries, except for any
such change required by reason of a concurrent change in generally accepted
accounting principles or Regulation S-X;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any of its subsidiaries, (ii) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements, (iii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the Company or any of its
subsidiaries, (iv) establishment, adoption or amendment (except as required by
applicable law) of any collective bargaining, bonus, profit sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any director,
officer or employee of the Company or any of its subsidiaries, or (v) increase
in compensation, bonus or other benefits payable to directors, officers or
employees other than in the ordinary course consistent with past practices;
(k) any material labor dispute, other than routine individual
grievances, or, to the knowledge of the Company, any activity or proceeding by a
labor union or representative thereof to organize any employees of the Company
or any of its subsidiaries, which employees were not subject to a collective
bargaining agreement at the Company Balance Sheet Date, or any material
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees; or
(l) any tax election, other than those consistent with past practice,
not required by law or any settlement or compromise of any tax liability in
either case that is material to the Company and its subsidiaries, taken as a
whole.
SECTION 3.11. No Undisclosed Material Liabilities. There are no
liabilities of the Company or any of its subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and
12
<PAGE> 18
there is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other than:
(a) liabilities or obligations provided for in the Company Balance
Sheet or disclosed in the notes thereto;
(b) other liabilities or obligations (including, without limitation,
liabilities and obligations incurred in the ordinary course of business), which
would not, individually or in the aggregate, have a material adverse effect on
the Company; and
(c) liabilities or obligations under this Agreement.
SECTION 3.12. Compliance with Laws and Court Orders. The Company and
each of its subsidiaries is and has been in compliance with, and to the
knowledge of the Company, is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for such matters as would not, individually or in the aggregate, have a material
adverse effect on the Company.
SECTION 3.13. Litigation. Except as set forth in the Company SEC
Filings prior to the date hereof, there is no action, suit, investigation, audit
or proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its subsidiaries or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official which would reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the Company.
SECTION 3.14. Finders' Fees. Except for McDonald & Company, a copy of
whose engagement agreement has been provided to Parent, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Company or any of its subsidiaries who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 3.15. Taxes. Except as set forth in the Company Balance Sheet
(including the notes thereto) and except as would not, individually or in the
aggregate, have a material adverse effect on the Company, (i) all tax returns,
statements, reports and forms (collectively, the "COMPANY RETURNS") required to
be filed with any taxing authority by, or with respect to, the Company and its
subsidiaries have been filed in accordance with all applicable laws; (ii) as of
the time of filing, the Company Returns correctly reflected the facts regarding
the
13
<PAGE> 19
income, business, assets, operations, activities and the status of the Company
and its subsidiaries; (iii) the Company and its subsidiaries have timely paid
all taxes (including withholding tax on payments made by the Company and its
subsidiaries) due and payable with respect to all Company Returns which have
been filed; (iv) the Company and its subsidiaries have made adequate provision
for all taxes payable by the Company and its subsidiaries for which no Company
Return has yet been filed; (v) the charges, accruals and reserves for taxes with
respect to the Company and its subsidiaries reflected on the Company Balance
Sheet are adequate under United States generally accepted accounting principles
("GAAP") to cover the tax liabilities accruing through the date thereof; (vi)
there is no action, suit, proceeding, audit or claim now proposed or pending
against or with respect to the Company or any of its subsidiaries in respect of
any tax; (vii) neither the Company nor any of its subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code; (viii) neither the Company nor any of its subsidiaries has been a
member of an affiliated, consolidated, combined or unitary group other than one
of which the Company was the common parent; (ix) neither the Company nor any of
its subsidiaries has any obligation under any tax sharing agreement, tax
allocation agreement, tax indemnification agreement or any other agreement or
arrangement pursuant to which the Company or any subsidiary is or might be
required to make any payment in respect of any tax of any person (other than the
Company or such subsidiary); (x) there are no requests for rulings or
determinations in respect of any tax or tax asset pending between the Company or
any subsidiary and any taxing authority; (xi) neither the Company nor any
subsidiary, nor any other person on behalf of the Company or any subsidiary, has
entered into any agreement or consent pursuant to Section 341(f) of the Code;
(xii) neither the Company nor any subsidiary will be required to include any
adjustment in taxable income for any post-closing tax period under Section
481(c) of the Code (or any similar provision of the tax laws of any
jurisdiction) as a result of a change in method of accounting for a pre-closing
tax period or pursuant to the provisions of any agreement entered into with any
taxing authority with regard to the tax liability of the Company or any
subsidiary for any pre-closing tax period; (xiii) except with respect to Company
Returns with a taxable year ended after December 31, 1993, all Company Returns
have been examined by the appropriate taxing authority or the period for
assessment of the taxes in respect of which such tax returns were required to be
filed has expired; (xiv) all deficiencies asserted or assessments made as a
result of any examination of any Company Return by any taxing authority have
been paid in full; (xv) none of the property owned by the Company or any of its
subsidiaries is "tax-exempt use property" within the meaning of Section 168(h)
of the Code; and (xvi) there are no Liens for taxes upon the assets of the
Company or any of its subsidiaries except Liens for current taxes not yet due.
14
<PAGE> 20
For purposes of this Section:
"POST-CLOSING TAX PERIOD" means any tax period (or portion thereof)
beginning after the close of business on the date on which the Effective Time
occurs;
"PRE-CLOSING TAX PERIOD" means any tax period (or portion thereof)
ending on or before the close of business on the date on which the Effective
Time occurs; and
"TAX ASSET" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce taxes (including without limitation deductions and
credits related to alternative minimum taxes).
SECTION 3.16. Employee Benefit Plans. (a) The Company has provided
Parent with a list identifying each material "employee benefit plan", as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), each material employment, severance or similar contract, plan,
arrangement or policy applicable to any director or officer of the Company and
each material plan or arrangement (written or oral) providing for compensation,
bonuses, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by the Company or any of its
affiliates (as defined in Section 10.15) and covers any employee or former
employee of the Company or any of its affiliates, or under which the Company or
any of its affiliates has any liability. Copies of such "employee benefit plans"
(and, if applicable, related trust agreements) and all amendments thereto and
written interpretations thereof have been furnished to Parent together with the
most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with any such plan. Such plans are referred to
collectively herein as the "COMPANY EMPLOYEE PLANS".
(b) Each Company Employee Plan has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations (including but not limited to ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a material adverse effect on the Company.
15
<PAGE> 21
(c) At no time has the Company or any person who was at that time an
affiliate of the Company maintained an employee benefit plan subject to Title IV
of ERISA.
(d) Each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified and, to the best knowledge of the Company, has been so
qualified during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code.
(e) No director or officer or, to the knowledge of the Company, other
employee of the Company or any of its subsidiaries will become entitled to any
retirement, severance or similar benefit or enhanced or accelerated benefit
solely as a result of the transactions contemplated hereby. Without limiting the
generality of the foregoing, no amount required to be paid or payable to or with
respect to any employee of the Company or any of its subsidiaries in connection
with the transactions contemplated hereby (either solely as a result thereof or
as a result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(f) No Company Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of the Company
or any of its subsidiaries.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its affiliates
relating to, or change in employee participation or coverage under, any Company
Employee Plan which would increase materially the expense of maintaining such
Company Employee Plan above the level of the expense incurred in respect thereof
for the 12 months ended on the Company Balance Sheet Date.
(h) At no time has the Company or any person that was at that time an
affiliate of the Company contributed to or been obligated to contribute to a
"multiemployer plan" (as defined in Section 3(37) of ERISA).
SECTION 3.17. Environmental Matters. (a) Except as set forth in the
Company SEC Filings prior to the date hereof and except as would not,
individually or in the aggregate, have a material adverse effect on the Company,
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been
filed, no penalty has been assessed, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of
the Company, is
16
<PAGE> 22
threatened by any governmental entity or other person relating to or
arising out of any Environmental Law;
(ii) the Company is and has been in compliance with all
Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities of or relating to the Company
or any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising
under or relating to any Environmental Law and there are no facts,
conditions, situations or set of circumstances which could reasonably
be expected to result in or be the basis for any such liability.
(b) Neither the Company nor any of its subsidiaries owns or leases or
has owned or leased any real property in New Jersey or Connecticut.
(c) The following terms shall have the meaning set forth below:
"COMPANY" and "ITS SUBSIDIARIES" shall, for purposes of this Section,
include any entity which is, in whole or in part, a corporate predecessor of the
Company or any of its subsidiaries.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority or
other third party, relating to human health and safety or the environment or to
hazardous substances, wastes or materials.
"ENVIRONMENTAL PERMITS" means, with respect to any person, all permits,
licenses, franchises, certificates, approvals and other similar authorizations
of governmental authorities relating to or required by Environmental Laws and
affecting, or relating in any way to, the business of such person as currently
conducted.
SECTION 3.18. Opinion of Financial Advisor. The Company's Board of
Directors has received the opinion of McDonald & Company, financial advisor to
the Company, to the effect that, as of the date of this Agreement, the Merger
Consideration is fair to the Company's stockholders from a financial point of
view.
SECTION 3.19. Patents and Other Proprietary Rights. The Company and
its subsidiaries have rights to use, whether through ownership, licensing or
17
<PAGE> 23
otherwise, all patents, trademarks, service marks, trade names, copyrights,
trade secrets and other proprietary rights and processes of which the Company is
aware that are material to its business as now conducted (collectively the
"COMPANY INTELLECTUAL PROPERTY RIGHTS"). Except for such matters as would not,
individually or in the aggregate, have a material adverse effect on the Company,
(a) the Company and its subsidiaries have not assigned, hypothecated or
otherwise encumbered any of the Company Intellectual Property Rights and (b)
none of the licenses included in the Company Intellectual Property Rights
purports to grant sole or exclusive licenses to another person including,
without limitation, sole or exclusive licenses limited to specific fields of
use. The patents owned by the Company and its subsidiaries are valid and
enforceable and any patent issuing from patent applications of the Company and
its subsidiaries will be valid and enforceable, except as such invalidity or
unenforceability would not, individually or in the aggregate, have a material
adverse effect on the Company. The Company has no knowledge of any infringement
by any other person of any of the Company Intellectual Property Rights, and the
Company and its subsidiaries have not entered into any agreement to indemnify
any other party against any charge of infringement of any of the Company
Intellectual Property Rights, except for such matters as would not, individually
or in the aggregate, have a material adverse effect on the Company. The Company
and its subsidiaries have not and do not violate or infringe any intellectual
property right of any other person, and neither the Company nor any of its
subsidiaries have received any communication alleging that it violates or
infringes the intellectual property right of any other person, except for such
matters as would not, individually or in the aggregate, have a material adverse
effect on the Company. Except for such matters as would not, individually or in
the aggregate, have a material adverse effect on the Company, the Company and
its subsidiaries have not been sued for infringing any intellectual property
right of another person. None of the Company Intellectual Property Rights or
other know-how relating to the business of the Company and its subsidiaries, the
value of which to the Company is contingent upon maintenance of the
confidentiality thereof, has been disclosed by the Company or any affiliate
thereof to any person other than those persons who are bound to hold such
information in confidence pursuant to confidentiality agreements or by operation
of law.
SECTION 3.20. Antitakeover Statutes. The Board of Directors of the
Company has approved this Agreement and the transactions contemplated hereby,
and such approval satisfies the prior approval requirements of the Tennessee
Business Combination Act, and neither the Tennessee Control Share Acquisition
Act nor any other antitakeover or similar statute or regulation applies or
purports to apply to the transactions contemplated hereby or thereby.
18
<PAGE> 24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
SECTION 4.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and Parent has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not, individually or in the aggregate, have a material
adverse effect on Parent. Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a material
adverse effect on Parent. Parent has heretofore delivered to the Company true
and complete copies of the certificate of incorporation and bylaws of Parent and
Merger Subsidiary as currently in effect. Since the date of its incorporation,
Merger Subsidiary has not engaged in any activities other than in connection
with or as contemplated by this Agreement.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority other than (a) the filing of the Articles of
Merger in accordance with the TBCA, (b) the filing of the Certificate of Merger
in accordance with the DGCL, (c) compliance with any applicable requirements of
the HSR Act, the 1933 Act, the 1934 Act, foreign or state securities or Blue Sky
laws, and (d) any other filings, approvals or authorizations which, if not
obtained, would not, individually or in the aggregate, have a material adverse
effect on Parent or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement.
19
<PAGE> 25
SECTION 4.04. Non-contravention. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) violate the certificate of incorporation or
bylaws of Parent or Merger Subsidiary, (ii) assuming compliance with the matters
referred to in Section 4.03, violate any applicable law, rule, regulation,
judgment, injunction, order or decree, (iii) require any consent or other action
by any person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Parent
or any of its subsidiaries or to a loss of any benefit to which Parent or any of
its subsidiaries is entitled under any provision of any agreement or other
instrument binding upon Parent or any of its subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Parent or any of
its subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of Parent or any of its subsidiaries except, in the case of clauses (ii),
(iii) and (iv), for such matters as would not, individually or in the aggregate,
have a material adverse effect on Parent or materially impair the ability of
Parent to consummate the transactions contemplated by this Agreement.
SECTION 4.05. Capitalization. (a) The authorized capital stock of
Parent consists of 1,200,000,000 shares of Parent Stock, and 5,400,000 shares of
preferred stock, $2.50 par value per share. No shares of preferred stock have
been issued. As of September 30, 1997, there were outstanding 440,803,685 shares
of Parent Stock and options to purchase an aggregate of 6,697,920 shares of
Parent Stock at an average exercise price of $34.77 per share. All outstanding
shares of capital stock of Parent have been duly authorized and validly issued
and are fully paid and non-assessable.
(b) The shares of Parent Stock to be issued as part of the Merger
Consideration have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and non-assessable and the issuance thereof is not subject to
any preemptive or other similar right.
SECTION 4.06. SEC Filings. (a) Parent has delivered or made available
to the Company (i) its annual report on Form 10-K for its fiscal year ended
September 30, 1996 (the "PARENT 10-K"), (ii) its quarterly reports on Form 10-Q
for its fiscal quarters ended after September 30, 1996, (iii) its proxy or
information statements relating to meetings of or actions taken without a
meeting by Parent's stockholders held since September 30, 1996, and (iv) all of
its other reports, statements, schedules and registration statements filed with
the SEC since September 30, 1996 (the documents referred to in this Section
being referred to
20
<PAGE> 26
collectively as the "PARENT SEC FILINGS"). The Parent's quarterly report on Form
10-Q for its fiscal quarter ended June 30, 1997 is referred to herein as the
"PARENT 10-Q".
(b) As of its filing date, each Parent SEC Filing complied as to form
in all material respects with the applicable requirements of the 1933 Act and
the 1934 Act.
(c) As of its filing date, each Parent SEC Filing filed pursuant to
the 1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement as amended or supplemented, if
applicable, filed pursuant to the 1933 Act did not, as of the date such
statement or amendment became effective, 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 not misleading.
SECTION 4.07. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
included in the Parent SEC Filings fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of Parent
and its subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments and the absence of footnote disclosure in the case of any unaudited
interim financial statements). For purposes of this Agreement, "PARENT BALANCE
SHEET" means the consolidated balance sheet of Parent as of June 30, 1997 set
forth in the Parent 10-Q and "PARENT BALANCE SHEET DATE" means June 30, 1997.
SECTION 4.08. Disclosure Documents. (a) The registration statement of
Parent to be filed with the SEC with respect to the offering of Parent Stock in
connection with the Merger (the "REGISTRATION STATEMENT") and any amendments or
supplements thereto will, when filed, comply as to form in all material respects
with the applicable requirements of the 1933 Act. At the time the Registration
Statement or any amendment or supplement thereto becomes effective and at the
Effective Time, the Registration Statement, as amended or supplemented, if
applicable, shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements contained therein not misleading. The foregoing
representations and warranties will not apply to statements or omissions
included in the Registration
21
<PAGE> 27
Statement or any amendment or supplement thereto based upon information
furnished to Parent or Merger Subsidiary by the Company for use therein.
(b) None of the information furnished or to be furnished by Parent to
the Company for use in (or incorporation by reference in) the Company Proxy
Statement or any amendment or supplement thereto will contain, at the time the
Company Proxy Statement or any amendment or supplement thereto is first mailed
to stockholders of the Company or at the time the stockholders vote on the
approval of this Agreement and the Merger, any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading.
SECTION 4.09. Absence of a Material Adverse Change. Since the Parent
Balance Sheet Date, the business of Parent and its subsidiaries has been
conducted in the ordinary course consistent with past practices, and there has
not been any event, occurrence, development or state of circumstances or facts
which would, individually or in the aggregate, have a material adverse effect on
Parent.
SECTION 4.10. No Undisclosed Material Liabilities. There are no
liabilities of Parent or any of its subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other than:
(a) liabilities or obligations provided for in the Parent Balance Sheet
or disclosed in the notes thereto;
(b) other liabilities or obligations (including, without limitation,
liabilities and obligations incurred in the ordinary course of business), which
would not, individually or in the aggregate, have a material adverse effect on
Parent; and
(c) liabilities or obligations under this Agreement.
SECTION 4.11. Compliance with Laws and Court Orders. Parent and each of
its subsidiaries is and has been in compliance with, and to the knowledge of
Parent, is not under investigation with respect to and has not been threatened
to be charged with or given notice of any violation of, any applicable law,
rule, regulation, judgment, injunction, order or decree, except for such matters
as would not, individually or in the aggregate, have a material adverse effect
on Parent.
22
<PAGE> 28
SECTION 4.12. Litigation. Except as set forth in the Parent SEC Filings
prior to the date hereof, there is no action, suit, investigation, audit or
proceeding pending against, or to the knowledge of Parent threatened against or
affecting, Parent or any of its subsidiaries or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which would reasonably be expected to have, individually or in the
aggregate, a material adverse effect on Parent.
SECTION 4.13. Stock Ownership. As of the date of this Agreement, Parent
does not, directly or indirectly, beneficially own any shares of Company Stock
other than shares of Company Stock, if any, held in employee benefit plans.
SECTION 4.14. Finders' Fees. No investment banker, broker, finder or
other intermediary who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement has been retained by or is
authorized to act on behalf of Parent or any of its subsidiaries.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. Conduct of the Company. The Company agrees that from the
date hereof until the Effective Time, except with the prior written consent of
Parent, the Company and its subsidiaries shall conduct their business in the
ordinary course consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organizations and relationships
with third parties and to keep available the services of their present officers
and employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time:
(a) the Company will not adopt or propose any change in its certificate
of incorporation or bylaws;
(b) the Company will not, and will not permit any of its subsidiaries
to, merge or consolidate with any other person or acquire a material amount of
assets of any other person;
(c) the Company will not, and will not permit any of its subsidiaries
to, sell, lease, license or otherwise dispose of any material assets or property
except
23
<PAGE> 29
(i) pursuant to existing contracts or commitments and (ii) in the ordinary
course consistent with past practice;
(d) the Company will not, and will not permit any of its subsidiaries,
to take any action that would make any representation and warranty of the
Company hereunder materially inaccurate in any respect at, or as of any time
prior to, the Effective Time;
(e) the Company will not, and will not permit any of its subsidiaries
to enter into any licensing agreement or other similar arrangement with respect
to any Company Intellectual Property Right; or
(f) the Company will not, and will not permit any of its subsidiaries
to, agree or commit to do any of the foregoing.
SECTION 5.02. Stockholder Meeting; Proxy Material. The Company shall
cause a meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval of this Agreement and the Merger. In connection with such
meeting, the Company will (i) subject to Section 5.03(b), recommend approval and
adoption of this Agreement and the Merger by the Company's stockholders, (ii)
promptly prepare and file with the SEC, use its reasonable best efforts to have
cleared by the SEC and thereafter mail to its stockholders as promptly as
practicable the Company Proxy Statement and all other proxy materials for such
meeting, (iii) use its reasonable best efforts to obtain the necessary approvals
by its stockholders of this Agreement and the transactions contemplated hereby
and (iv) otherwise comply with all legal requirements applicable to such
meeting.
SECTION 5.03. No Solicitation. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage the submission of any
Takeover Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to the Company
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to a Takeover
Proposal; provided, however, that if the Board of Directors of the Company
determines in good faith, based on the advice of outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Company may in response to any bona fide,
written or publicly announced Takeover Proposal which was not solicited by it
and which did not otherwise result from a breach of this Section, and subject to
providing prior written notice
24
<PAGE> 30
of its decision to take such action to Parent and compliance with Section
5.03(c), (x) furnish information with respect to the Company pursuant to a
customary confidentiality agreement (as determined by the Company based on the
advice of its outside counsel) and (y) participate in negotiations regarding
such Takeover Proposal. For purposes of this Agreement, "TAKEOVER PROPOSAL"
means any proposal or offer for, or any expression of interest (by public
announcement or otherwise) by any person other than Parent or its affiliates in,
a merger or other business combination involving the Company or any of its
subsidiaries or any proposal or offer to acquire in any manner (including
through a joint venture with the Company), directly or indirectly, an equity
interest in not less than 30% of the outstanding voting securities of the
Company, or assets representing not less than 30% of the annual revenues or net
earnings of, the Company and its subsidiaries, taken as a whole.
(b) Except as expressly permitted by this Section, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Merger Subsidiary, the approval or recommendation by such Board of Directors or
any such committee of the Merger or this Agreement, (ii) approve or recommend,
or propose publicly to approve or recommend, any Takeover Proposal or (iii)
cause the Company or any of its subsidiaries to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
an "ACQUISITION AGREEMENT") with respect to any Takeover Proposal.
Notwithstanding the foregoing, the Board of Directors of the Company, to the
extent that it determines in good faith, based on the advice of outside counsel,
that in light of a Superior Proposal it is necessary to do so in order to comply
with its fiduciary duties to the Company' stockholders under applicable law, may
terminate this Agreement solely in order to concurrently enter into an
Acquisition Agreement with respect to any Superior Proposal, but only at a time
that is after the fifth business day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company is prepared to
accept a Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal. For
purposes of this Agreement, a "SUPERIOR PROPOSAL" means any bona fide Takeover
Proposal on terms which the Board of Directors of the Company determines in its
good faith reasonable judgment, based on the written opinion of McDonald &
Company or another financial advisor of nationally recognized reputation (which
opinion shall be provided promptly to Parent), to be more favorable to the
Company's stockholders than the Merger and for which financing, to the extent
required, is then committed. Nothing contained herein shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the 1934 Act.
25
<PAGE> 31
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section, the Company shall immediately advise
Parent orally and in writing of any request for information or of any Takeover
Proposal, or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry, and the identity of the person making any such Takeover Proposal or
inquiry and shall keep Parent fully informed of the status and material details
of any such Takeover Proposal, inquiry or request.
SECTION 5.04. Access to Information; Confidentiality. (a) From the date
hereof until the Effective Time, the Company will give Parent, its counsel,
financial advisors, auditors and other authorized representatives reasonable
access to the offices, properties, books and records of the Company and its
subsidiaries and such financial and operating data and other information as such
persons may reasonably request and will instruct the Company's employees,
counsel and financial advisors to cooperate with Parent in its investigation of
the business of the Company and its subsidiaries; provided that no investigation
pursuant to this Section shall affect any representation or warranty given by
the Company to Parent hereunder. If as a result of any such investigation,
Parent concludes that the Company has breached any of its representations and
warranties hereunder, it will so notify the Company; provided, however that
failure by Parent to so notify the Company will not affect any of the rights or
obligations hereunder of any of the parties hereto. Without limiting the
foregoing, such failure will not operate as a waiver of any of Parent's rights
under this Agreement, including, without limitation, Parent's right to refuse to
close pursuant to Section 8.02(a) or Parent's right to terminate pursuant to
Section 9.01.
(b) Prior to the Effective Time and after any termination of this
Agreement, Parent will hold, and will use its reasonable best efforts to cause
its officers, directors, employees, accountants, counsel, consultants, advisors
and agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning the Company and its subsidiaries furnished
to Parent in connection with the transactions contemplated by this Agreement,
except to the extent that such information can be shown to have been (a)
previously known on a nonconfidential basis by Parent, (b) in the public domain
through no fault of Parent, (c) independently developed by Parent without
reference to Company information or (d) later lawfully acquired by Parent from
sources other than the Company, which sources Parent believed, after reasonable
inquiry, not to be prohibited from disclosing such information by a contractual,
legal or fiduciary obligation; provided that Parent may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such
26
<PAGE> 32
persons are informed by Parent of the confidential nature of such information
and are directed by Parent to treat such information confidentially. The
obligation of Parent to hold any such information in confidence shall be
satisfied if it exercises the same care with respect to such information as it
would take to preserve the confidentiality of its own similar information. If
this Agreement is terminated, Parent will, and will use its reasonable best
efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Company, upon
request, all documents and other materials, and all copies thereof, obtained by
it or on its behalf from the Company in connection with this Agreement that are
subject to such confidence.
(c) Simultaneously with the execution of this Agreement, the parties
agree that the confidentiality agreement dated June 23, 1997 between Parent and
the Company will terminate.
ARTICLE 6
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.01. Obligations of Merger Subsidiary. Parent will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 6.02. Voting of Shares. Parent agrees to vote all shares of
Company Stock beneficially owned by it in favor of adoption of this Agreement at
the Company Stockholder Meeting.
SECTION 6.03. Director and Officer Liability. (a) For six years after
the Effective Time, Parent will indemnify and hold harmless the present and
former officers and directors of the Company and its subsidiaries in respect of
acts or omissions occurring prior to the Effective Time to the extent provided
under the Company's certificate of incorporation and bylaws in effect on the
date hereof; provided, however, that if any claim or claims are asserted or made
within such six-year period, all rights to indemnification in respect of such
claims shall continue until the final disposition of any and all such claims.
For six years after the Effective Time, Parent will cause the Surviving
Corporation to use its best efforts to provide officers' and directors'
liability insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such person
27
<PAGE> 33
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and amount no less favorable than those
of such policy in effect on the date hereof; provided that in satisfying its
obligation under this Section, Parent shall not be obligated to cause the
Surviving Corporation to pay premiums in excess of 150% of the amount per annum
the Company paid in the 12 months ended December 31, 1996, which amount has been
disclosed by the Company to Parent prior to the date of this Agreement.
(b) Parent shall cause the Surviving Corporation to keep in effect in
its by-law or charter provisions for a period of not less than six years after
the Effective Time (or, in the case of matters occurring prior to the Effective
Time which have not been resolved prior to the sixth anniversary of the
Effective Time, until such matters are finally resolved) which provide for
exculpation of director and officer liability and indemnification (and
advancement of expenses related thereto) of the past and present officers and
directors of the Company in respect of acts or omissions occurring prior to the
Effective Time to the fullest extent permitted by the TBCA which provisions
shall not be amended except as required by applicable law or except to make
changes permitted by law that would enhance the rights of past or present
officers and directors to indemnification or advancement of expenses in respect
of acts or omissions occurring prior to the Effective Time.
(c) If, after the Effective Time, Parent or Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any person, then, in each such
case, proper provisions shall be made so that the successors and assigns of
Parent or Surviving Corporation, as the case may be, shall assume all of the
obligations set forth in this Section. The provisions of this Section are
intended for the benefit of and shall be enforceable by each person who is now
or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, an officer or director of the Company or any of its
subsidiaries.
SECTION 6.04. Registration Statement; Form S-8. Parent shall promptly
prepare and file with the SEC under the 1933 Act the Registration Statement (and
Registration Statements on Form S-8 as necessary to register shares of Parent
Stock underlying Substitute Options), and shall use its reasonable best efforts
to cause the Registration Statement (and such Registration Statements on Form
S-8) to be declared effective by the SEC as promptly as practicable. Parent
shall promptly take any action required to be taken under foreign or state
securities or Blue Sky laws in connection with the issuance of Parent Stock in
the Merger or pursuant to Substitute Options.
28
<PAGE> 34
SECTION 6.05. Stock Exchange Listing. Parent shall use its reasonable
best efforts to cause the shares of Parent Stock to be issued in connection with
the Merger (and the shares of Parent Stock underlying Substitute Options) to be
listed on the NYSE, subject to official notice of issuance.
ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.01. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 7.02. Certain Filings. The Company and Parent shall cooperate
with one another (i) in connection with the preparation of the Company Proxy
Statement and the Registration Statement, (ii) in determining whether any action
by or in respect of, or filing with, any governmental body, agency, official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(iii) in taking such actions or making any such filings, furnishing information
required in connection therewith or with the Company Proxy Statement or the
Registration Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 7.03. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
SECTION 7.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to
29
<PAGE> 35
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets of the Company acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.
SECTION 7.05. Notices of Certain Events. Each of the Company and
Parent shall promptly notify the other party hereto of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any breach of a representation or warranty given by such party.
SECTION 7.06. Tax-free Reorganization. (a) Prior to the Effective
Time, each party shall use its reasonable efforts to cause the Merger to
qualify as a reorganization qualifying under the provision of Section
368(a)(2)(E) of the Code.
(b) The Company shall use reasonable best efforts to obtain the
opinion referred to in Section 8.03(b).
SECTION 7.07. Rule 145 Affiliates. Within 45 days following the date of
this Agreement, the Company shall deliver to Parent a letter identifying all
known persons who may be deemed affiliates of the Company under Rule 145 of the
1933 Act. The Company shall use its reasonable best efforts to obtain prior to
the Effective Time a written agreement from each person who may be so deemed,
substantially in the form of Exhibit A hereto.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
30
<PAGE> 36
(a) this Agreement and the Merger shall have been approved by the
stockholders of the Company in accordance with the TBCA;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(d) the Registration Statement shall have been declared effective and
no stop order suspending the effectiveness of the Registration Statement shall
be in effect and no proceedings for such purpose shall be pending before or
threatened by the SEC; and
(e) the shares of Parent Stock to be issued in the Merger (as well as
the shares of Parent Stock to be issued upon exercise of Substitute Options)
shall have been approved for listing on the NYSE, subject to official notice of
issuance, if applicable.
SECTION 8.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, and the representations and warranties of the Company contained
in this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time; and
(b) Ronald G. Canada and Kenneth R. Piety shall have entered into
employment agreements with the Company in form and substance reasonably
satisfactory to Parent.
SECTION 8.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, and the representations and warranties of
Parent and Merger Subsidiary contained in this Agreement and in any certificate
or other writing delivered by Parent or Merger Subsidiary pursuant hereto shall
be true in
31
<PAGE> 37
all material respects at and as of the Effective Time as if made at and as of
such time; and
(b) the Company shall have received an opinion of Jones, Day, Reavis &
Pogue in form and substance reasonably satisfactory to the Company, on the basis
of certain facts, representations and assumptions set forth in such opinion,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization qualifying under the provisions
of Section 368(a) of the Code and that each of Parent, Merger Subsidiary and the
Company will be a party to the reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, such counsel shall be entitled to
rely upon certain representations from the Company and certain shareholders of
the Company, in each case in form and substance reasonably satisfactory to such
counsel, and upon representations from Parent, substantially in the form of
Exhibit B hereto.
ARTICLE 9
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the Board of Directors of the Company or
Parent or the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if
(i) the Merger has not been consummated on or before April 30,
1998; provided that the right to terminate this Agreement pursuant to
this Section shall not be available to any party whose breach of any
provision of this Agreement results in the failure of the Merger to be
consummated by such time;
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining any party from
consummating the Merger is entered and such judgment, injunction, order
or decree shall have become final and non-appealable; or
32
<PAGE> 38
(iii) this Agreement shall not have been approved and adopted
in accordance with the TBCA by the Company's stockholders at the
Company Stockholder Meeting (including any adjournment thereof); or
(c) by the Company in accordance with Section 5.03(b); provided that in
order for the termination of this Agreement pursuant to this paragraph (c) to be
deemed effective, the Company shall have complied with all provisions of Section
5.03, including the notice provisions therein.
(d) by Parent if there is a breach of any representation, warranty,
covenant or agreement of the Company, which breach cannot be cured and would
cause the conditions set forth in Section 8.02(a) to be incapable of being
satisfied.
(e) by the Company if there is a breach of any representation,
warranty, covenant or agreement of Parent, which breach cannot be cured and
would cause the conditions set forth in Section 8.03(a) to be incapable of being
satisfied.
The party desiring to terminate this Agreement pursuant to this Section (other
than pursuant to Section 9.01(a)) shall give notice of such termination to the
other party.
SECTION 9.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (i) the agreements
contained in Sections 5.04(b), 10.04, 10.06, 10.07 and 10.08 shall survive the
termination hereof and (ii) no such termination shall release any party of any
liabilities or damages resulting from any willful or grossly negligent breach by
that party of any provision of this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Parent or Merger Subsidiary, to:
33
<PAGE> 39
Emerson Electric Co.
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
Fax: (314) 553-3851
Attention: Robert M. Levy
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Christopher Mayer, Esq.
if to the Company, to:
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
Fax: (423) 675-5532
Attention: Ronald G. Canada
with a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Fax: (216) 579-0212
Attention: Christopher M. Kelly, Esq.
or such other address or fax number as such party may hereafter specify for the
purpose by notice to the other parties hereto. All such notices, requests and
other communications shall be deemed received on the date of receipt by the
recipient thereof if received prior to 5 p.m. in the place of receipt and such
day is a business day in the place of receipt. Otherwise, any such notice,
request or communication shall be deemed not to have been received until the
next succeeding business day in the place of receipt.
SECTION 10.02. Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time. This
34
<PAGE> 40
Section shall not limit any covenant or agreement of the parties hereto, which
by its terms contemplates performance after the Effective Time.
SECTION 10.03. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
approval of this Agreement by the stockholders of the Company, there shall be
made no amendment that by law requires the further approval of the stockholders
of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege 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, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.04. Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
(b) The Company agrees to pay Parent in immediately available funds by
wire transfer an amount equal to the sum of Parent's reasonable out-of-pocket
expenses incurred in connection with this transaction (but not to exceed $1
million) and an amount equal to $5 million promptly, but in no event later than
two business days, after the termination of this Agreement pursuant to (A)
Section 9.01(b)(iii); provided that a Takeover Proposal shall have been publicly
announced at any time prior to the date of the Company's stockholder vote or (B)
Section 9.01(c).
SECTION 10.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Parent or Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of their affiliates, the right to enter into the transactions
contemplated by this Agreement, but any such transfer or assignment will not
relieve Parent or Merger Subsidiary of its obligations hereunder.
SECTION 10.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware.
35
<PAGE> 41
SECTION 10.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal court located in the State of Delaware or any Delaware state court,
and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10.01 shall be deemed
effective service of process on such party.
SECTION 10.08. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.09. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto. No
provision of this Agreement is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 10.10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
SECTION 10.11. Third Party Beneficiaries. Except for the agreements set
forth in Article 1 and Section 6.03, nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries.
SECTION 10.12. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
36
<PAGE> 42
SECTION 10.13. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any parts. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
SECTION 10.14. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 10.15. Definitions and Usage. (a) For purposes of this
Agreement:
"AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control with
such person.
"KNOWLEDGE" of any person which is not an individual means the
knowledge of such person's officers after reasonable inquiry.
"MATERIAL ADVERSE EFFECT" means, when used in connection with Parent or
the Company, any change, effect, event, occurrence or state of facts that has
had, or would reasonably be expected to have, a material adverse effect on the
business, operations, assets, liabilities, condition (financial or otherwise) or
results of operations of Parent and its subsidiaries, taken as a whole, or the
Company and its subsidiaries, taken as a whole, as the case may be.
"OFFICER" means in the case of Parent and the Company, any executive
officer of Parent or the Company, as applicable, within the meaning of Rule 3b-7
of the 1934 Act.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
37
<PAGE> 43
"SUBSIDIARY" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such person.
A reference in this Agreement to any statute shall be to such statute
as amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
1933 Act............................................... 3.03
1934 Act............................................... 3.03
Acquisition Agreement.................................. 5.03(b)
Articles of Merger..................................... 1.01(b)
Certificate of Merger.................................. 1.01(b)
Certificates........................................... 1.03(a)
Code................................................... 1.04
Company................................................ preamble
Company 10-K........................................... 3.06(a)
Company 10-Q........................................... 3.07(a)
Company Balance Sheet.................................. 3.08
Company Balance Sheet Date............................. 3.08
Company Employee Plan.................................. 3.16(a)
Company Intellectual Property Rights................... 3.19
Company Proxy Statement................................ 3.09(a)
Company Returns........................................ 3.15
Company SEC Filings.................................... 3.07(a)
Company Stock.......................................... 1.02(a)
Company Stockholder Meeting............................ 5.02
DGCL................................................... 1.01(a)
Effective Time......................................... 1.01(b)
Environmental Laws..................................... 3.17(c)
Environmental Permits.................................. 3.17(c)
ERISA.................................................. 3.16(a)
Exchange Agent......................................... 1.03(a)
GAAP................................................... 3.15
HSR Act................................................ 3.03
Lien................................................... 3.04
Merger................................................. 1.01(a)
</TABLE>
38
<PAGE> 44
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Merger Consideration................................... 1.02(a)
Merger Subsidiary...................................... preamble
NYSE................................................... 1.02(a)
Parent................................................. preamble
Parent 10-K............................................ 4.06(a)
Parent 10-Q............................................ 4.06(a)
Parent Balance Sheet................................... 4.07
Parent Balance Sheet Date.............................. 4.07
Parent SEC Filings..................................... 4.06(a)
Parent Stock........................................... 1.02(a)
Registration Statement................................. 4.08(a)
SEC.................................................... 3.07(a)
Stock Price............................................ 1.02(a)
Substitute Option...................................... 1.04
Superior Proposal...................................... 5.03(b)
Surviving Corporation.................................. 1.01(a)
Takeover Proposal...................................... 5.03(a)
TBCA................................................... 1.01(a)
</TABLE>
39
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EMERSON ELECTRIC CO.
By: /s/ Robert M. Levy
---------------------------------------
Robert M. Levy
Assistant Vice President-Development
EMERSUB LVII, INC.
By: /s/ Robert M. Levy
---------------------------------------
Robert M. Levy
President
COMPUTATIONAL SYSTEMS,
INCORPORATED
By: /s/ Ronald G. Canada
---------------------------------------
Ronald G. Canada
Chairman of the Board and Chief
Executive Officer
<PAGE> 46
EXHIBIT A
AFFILIATE'S LETTER
(______________________________________)
____________, 1997
Emerson Electric Co.
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
Computational Systems, Incorporated
835 Innovation Drive
Knoxville, Tennessee 37932
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of Computational Systems,
Incorporated, a Tennessee corporation ("COMPANY"), as the term "affiliate" is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "RULES AND REGULATIONS") of the Securities and Exchange
Commission (the "COMMISSION") under the Securities Act of 1933, as amended (the
"ACT"). Pursuant to the terms of the Agreement and Plan of Merger dated as of
October 17, 1997 (the "AGREEMENT") among the Company, Emerson Electric Co., a
Missouri corporation ("PARENT"), and Emersub LVII, Inc., a Delaware corporation
and a wholly owned subsidiary of Parent ("MERGER SUBSIDIARY"), Merger Subsidiary
will be merged with and into Company with Company to be the surviving
corporation in the merger (the "MERGER").
As a result of the Merger, the undersigned will receive shares of
Common Stock, $.50 par value per share, of Parent (the "PARENT COMMON STOCK") in
exchange for shares owned by the undersigned of Common Stock, no par value per
share, of Company (the "COMPANY COMMON STOCK").
The undersigned represents, warrants and covenants to Parent and
Company that as of the date the undersigned receives any Parent Common Stock as
a result of the Merger:
<PAGE> 47
A. The undersigned shall not make any sale, transfer or other
disposition of the Parent Common Stock in violation of the Act or the Rules and
Regulations.
B. The undersigned has carefully read this letter and the Agreement
and discussed the requirements of such documents and other applicable
limitations upon the undersigned's ability to sell, transfer or otherwise
dispose of the Parent Common Stock to the extent the undersigned felt necessary
with the undersigned's counsel or counsel for Company.
C. The undersigned has been advised that the issuance of Parent
Common Stock to the undersigned pursuant to the Merger will be registered with
the Commission under the Act on a Registration Statement on Form S-4. However,
the undersigned has also been advised that, since at the time the Merger is
submitted for a vote of the stockholders of Company, the undersigned may be
deemed to be an affiliate of Company, the undersigned may not sell, transfer or
otherwise dispose of the Parent Common Stock issued to the undersigned in the
Merger unless (i) such sale, transfer or other disposition has been registered
under the Act, (ii) such sale, transfer or other disposition is made in
conformity with Rule 145 promulgated by the Commission under the Act, or (iii)
in the opinion of counsel reasonably acceptable to Parent, or pursuant to a "no
action" letter obtained by the undersigned from the staff of the Commission,
such sale, transfer or other disposition is otherwise exempt from registration
under the Act; provided, however, that in any such case, such sale, assignment
or transfer shall only be permitted if, in the opinion of counsel for Parent,
such transaction would not have, directly or indirectly, any adverse
consequences for Parent with respect to the treatment of the Merger for tax
purposes.
D. The undersigned understands that Parent is under no obligation to
register the sale, transfer or other disposition of the Parent Common Stock by
the undersigned or on the undersigned's behalf under the Act or to take any
other action necessary in order to enable such sale, transfer or other
disposition by the undersigned in compliance with an exemption from such
registration.
E. The undersigned also understands that there will be placed on the
certificates for the Parent Common Stock issued to the undersigned or any
substitution thereof, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE WERE ISSUED IN A TRANSACTION
INVOLVING COMPUTATIONAL SYSTEMS,
INCORPORATED TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
A-2
<PAGE> 48
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH THE TERMS OF A LETTER
AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND PARENT, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF PARENT."
F. The undersigned also understands that unless the transfer by the
undersigned of the undersigned's Parent Common Stock has been registered under
the Act or is a sale made in conformity with the provisions of Rule 145 under
the Act, Parent reserves the right to put the following legend on the
certificates issued to the undersigned's transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION INVOLVING
COMPUTATIONAL SYSTEMS, INCORPORATED TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SECURITIES HAVE NOT BEEN
ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend if (i) the securities represented thereby have been registered for sale
by the undersigned under the 1933 Act or (ii) Parent has received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to Parent, or a "no-action" letter obtained by the undersigned from the staff of
the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
G. The undersigned further understands and agrees that the
representations, warranties, covenants and agreements of the undersigned set
forth
A-3
<PAGE> 49
herein are for the benefit of Parent, Company and the Surviving Corporation (as
defined in the Merger Agreement) and will be relied upon by such entities and
their respective counsel and accountants.
H. The undersigned understands and agrees that this letter agreement
shall apply to all shares of the capital stock of Parent and Company that are
deemed to be beneficially owned by the undersigned pursuant to applicable
federal securities laws.
Execution of this letter should not be considered an admission on the
part of the undersigned that the undersigned is an "affiliate" of Company as
described in the first paragraph of this letter or as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
By:
-------------------------------
Name:
Title:
Accepted this ____ day of _________________, 1997.
EMERSON ELECTRIC CO.
By:
-----------------------------------------------
Name:
Title:
A-4
<PAGE> 50
EXHIBIT B
PARENT CORPORATION REPRESENTATION LETTER
[Effective Time]
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to Section
8.03(b) of the Agreement and Plan of Merger (the "AGREEMENT")(1) dated
October 17, 1997, among Emerson Electric Co., a Missouri corporation
("PARENT"), Emersub LVII, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("MERGER SUBSIDIARY"), and Computational Systems,
Incorporated, a Tennessee corporation ("COMPANY"), the undersigned officers of
Parent and Merger Subsidiary hereby certify and represent as to Parent and
Merger Subsidiary that the facts relating to the merger (the "MERGER") of
Merger Subsidiary with and into Company pursuant to the Agreement and as
described in the Company Proxy Statement dated ________, 1997 (the "PROXY
STATEMENT"), are true, correct and complete in all respects at the date hereof
and will be true, correct and complete in all respects at the Effective Time
and that:
1. The consideration to be received in the Merger by holders of
Company Stock was determined by arm's length negotiations between the
managements of Parent and Company.
2. Immediately after the Merger, to the knowledge of the management
of Parent, Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
Merger Subsidiary and Company immediately prior to the Merger. For purposes of
this representation, amounts paid by Company or Merger Subsidiary to pay
expenses in connection with the Merger, and all redemptions and distributions
(if any, except for regular, normal dividends) made by Company in contemplation
of the
- --------
(1) References contained in this Certificate to the Agreement include,
unless the context otherwise requires, each document attached as an exhibit or
annex thereto.
<PAGE> 51
Merger will be included as assets of Company or Merger Subsidiary, respectively,
immediately prior to the Merger.
3. Prior to the Merger, Parent will be in control of Merger
Subsidiary within the meaning of Section 368(c) of the Internal Revenue Code of
1986, as amended (the "CODE"). Merger Subsidiary was formed in 1996, and at no
time has or will Merger Subsidiary conduct any business activities or other
operations of any kind other than the issuance of its stock to Parent prior to
the Effective Time.
4. Following the Merger, Parent has no present plan or intention to
cause Company to issue additional shares of stock that would result in Parent
losing control of Company within the meaning of Section 368(c) of the Code.
5. Parent has no present plan or intention to liquidate Company, to
merge Company with or into another corporation, to sell, exchange, transfer or
otherwise dispose of any stock of Company or to cause Company to sell, exchange,
transfer or otherwise dispose of a substantial portion of its assets, except for
(i) dispositions made in the ordinary course of business, (ii) transfers
described in Section 368(a)(2)(C) of the Code, or (iii) asset dispositions to
the extent that all such dispositions, sale, transfer or exchange of assets will
not, in the aggregate, violate paragraph 2 of this letter.
6. In the Merger, Merger Subsidiary will have no liabilities (other
than immaterial liabilities, if any, related to its incorporation) assumed by
Company and will not transfer to Company any assets subject to liabilities.
7. Parent has no present plan or intention to cause Company,
following the Merger, (i) to cease to operate its historic business or (ii) to
cease to use a significant portion of its historic business assets in a
business.
8. Parent and Merger Subsidiary each will pay its or their own
expenses, if any, incurred in connection with or as part of the Merger or
related transactions. Neither Parent nor Merger Subsidiary has paid or will pay,
directly or indirectly, any expenses (including transfer taxes) incurred by any
holder of Company Stock in connection with or as part of the Merger or any
related transactions. Except as otherwise provided under Section 6.03 of the
Merger Agreement, neither Parent nor Merger Subsidiary has agreed to assume, nor
will it directly or indirectly assume, any expense or other liability, whether
fixed or contingent, of any holder of Company Stock.
B-2
<PAGE> 52
9. There is no intercorporate indebtedness existing between Parent and
Company or between Merger Subsidiary and Company that was issued, acquired or
will be settled at a discount.
10. Neither Parent nor Merger Subsidiary is an "investment company"
within the meaning of Section 368(a)(2)(F) of the Code.
11. The payment of cash in lieu of fractional shares of Parent Stock
in the Merger is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that will
be paid in the Merger by Parent or the Merger Subsidiary to holders of Company
Stock instead of issuing fractional shares of Parent Stock will not exceed 1% of
the total consideration that will be issued in the Merger to holders of Company
Stock. The fractional share interests of each holder of Company Stock will be
aggregated and, to the knowledge of the management of Parent, no holder of
Company Stock will receive cash in an amount equal to or greater than the value
of one full share of Parent Stock.
12. None of the employee compensation received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock to be surrendered in the
Merger. None of the shares of Parent Stock to be received by any
shareholder-employee of Company in the Merger is or will be separate
consideration for, or allocable to, any employment, consulting or similar
arrangement. Any compensation paid or to be paid to any shareholder of Company
who will be an employee of or perform advisory services for Parent, Merger
Subsidiary, Company, or any affiliate thereof after the Merger, will be
determined by bargaining at arm's length.
13. During the past 5 years, none of Parent or any subsidiary thereof
has owned or owns, beneficially or of record, any class of stock of Company or
any securities of Company or any instrument giving the holder the right to
acquire any such stock or securities (other than the Stockholder Option
Agreement between Parent and the Stockholder referred to therein).
14. The Merger Agreement and the documents described in the Merger
Agreement represent the entire understanding of Parent, Merger Subsidiary, and
Company with respect to the Merger.
15. Neither Parent nor Merger Subsidiary will take any position on any
Federal, state or local income or franchise tax return, or take any other tax
reporting position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise
B-3
<PAGE> 53
required by a "determination" (as defined in Section 1313(a)(1) of the Code) or
by applicable state or local income or franchise tax law.
16. Except pursuant to its pre-existing stock purchase program that
was commenced prior to 1997 and is scheduled to terminate in 2001 (although such
program may be extended by the board of directors of Parent), Parent has no
present plan or intention to reacquire any of its stock issued in the
transaction. Any stock reacquired pursuant to the stock purchase program will be
acquired (1) in the open market or from brokers or dealers and, although such
stock may include stock issued in the Merger, will not be knowingly acquired
from any shareholder of the Company or (2) from shareholders (other than any
shareholder of the Company) of Parent in privately negotiated transactions.
Very truly yours,
EMERSON ELECTRIC CO.
By:
------------------------------
Name:
Title:
EMERSUB LVII, INC.
By:
------------------------------
Name:
Title:
B-4
<PAGE> 1
Exhibit 10.1
STOCKHOLDER OPTION AGREEMENT
AGREEMENT dated as of October 17, 1997 between Emerson Electric Co., a
Missouri corporation ("BUYER"), and Ronald G. Canada (the "STOCKHOLDER").
W I T N E S S E T H:
WHEREAS, immediately prior to the execution of this Agreement, Buyer,
Computational Systems, Incorporated, a Tennessee corporation (the "COMPANY"),
and Emersub LVII, Inc., a Delaware corporation ("MERGER SUBSIDIARY"), have
entered into an Agreement and Plan of Merger (as such agreement may hereafter be
amended from time to time, the "MERGER AGREEMENT"), pursuant to which Merger
Subsidiary will be merged with and into the Company (the "MERGER"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Buyer has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
OPTION
SECTION 1.01. Grant of Option. The Stockholder hereby grants to Buyer
an irrevocable, unconditional option (the "OPTION") to purchase any and all of
the shares of common stock, no par value per share, of the Company beneficially
owned (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT")) by the Stockholder or with respect to which the
Stockholder has a contractual right to acquire, whether conditioned on continued
employment, payment of the purchase price therefor or otherwise (the "SHARES"),
at a purchase price of $29.65 per Share (the "PURCHASE PRICE").
SECTION 1.02. Exercise of Option. (a) Subject to the conditions set
forth in Section 1.05 hereof, the Option may be exercised by Buyer, in whole or
in part, at any time or from time to time after the termination of the Merger
Agreement pursuant to (x) Section 9.01(b)(iii) thereof; provided that a Takeover
Proposal (as
<PAGE> 2
defined in the Merger Agreement) shall have been publicly announced at any time
prior to the date of the Company's stockholder vote on the approval of the
Merger and the Merger Agreement, or (y) Section 9.01(c) thereof and, in each
case, prior to the 30th business day after such termination. In the event Buyer
wishes to exercise the Option for all or some of the Shares, Buyer shall send a
written notice (the "EXERCISE NOTICE") to the Stockholder and Escrow Agent (as
defined in Section 1.03) specifying the total number of Shares it wishes to
purchase pursuant to such exercise and the place, the date (not less than one
nor more than 20 business days from the date of the Exercise Notice), and the
time for the closing of such purchase, provided that such date and time may be
earlier than one day after the Exercise Notice if reasonably practicable. Each
closing of a purchase of Shares (a "CLOSING") shall take place at the place, on
the date and at the time designated by Buyer in its Exercise Notice, provided
that if, at the date of the Closing herein provided for, the conditions set
forth in Section 1.05 shall not have been satisfied (or waived by the
Stockholder), Buyer may postpone the Closing until a date within five business
days after such conditions are satisfied.
(b) Buyer shall not be under any obligation to deliver any Exercise
Notice and may allow the Option to terminate without purchasing any Shares
hereunder; provided however that once Buyer has delivered to the Stockholder an
Exercise Notice, subject to the terms and conditions of this Agreement, Buyer
shall be bound to effect the purchase as described in such Exercise Notice.
SECTION 1.03. Deposit in Escrow. Within five calendar days of the
execution and delivery of this Agreement, the Stockholder shall execute and
deliver to Buyer and the escrow agent (the "ESCROW AGENT") a copy of the Escrow
Agreement in the form attached hereto as Exhibit A (the "ESCROW AGREEMENT").
Concurrently with the execution and delivery of the Escrow Agreement, the
Stockholder shall deliver a certificate or certificates representing (or cause
to be made book entry delivery to an account designated by the Escrow Agent of)
all of the Shares to the Escrow Agent, duly endorsed or accompanied by stock
powers duly executed in blank. All Shares so delivered to the Escrow Agent shall
remain subject to the Escrow Agreement until the earlier of (i) the purchase of
any of such Shares by Buyer hereunder, or (ii) termination of this Agreement.
SECTION 1.04. Closing. At any Closing, (a) Buyer shall deliver to the
Stockholder a certified or bank cashier's check payable to or upon the order of
the Stockholder in an amount equal to (i) the number of the Shares being
purchased at such Closing multiplied by (ii) the Purchase Price (the "PURCHASE
AMOUNT"), and (b) upon receipt of the items enumerated in Section 2 of the
Escrow Agreement, the Escrow Agent shall deliver to Buyer a certificate or
certificates representing such Shares, duly endorsed or accompanied by stock
powers duly
2
<PAGE> 3
executed in blank, or make book entry delivery of such Shares to an account
designated by Buyer.
SECTION 1.05. Conditions to the Obligations of the Stockholder. The
obligations of the Stockholder to sell Shares at any Closing is subject to the
following conditions:
(a) The representations and warranties of Buyer contained in
Article 4 shall be true and correct in all material respects on the
date thereof.
(b) All waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR ACT") applicable to the
exercise of the Option shall have expired or been terminated.
(c) There shall be no preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency
or commission, nor any statute, rule, regulation or order promulgated
or enacted by any governmental authority, prohibiting or otherwise
restraining the exercise of the Option.
SECTION 1.06. Adjustment Upon Change in Capitalization or Merger. (a)
In the event of any change in the Company's capital stock by reason of stock
dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of the Company
which would have the effect of diluting or changing Buyer's rights hereunder,
the number and kind of shares or securities subject to the Option and the
purchase price per Share (but not the total purchase price) shall be
appropriately and equitably adjusted so that Buyer shall receive upon exercise
of the Option the number and class of shares or other securities or property
that Buyer would have received in respect of the Shares purchasable upon
exercise of the Option if the Option had been exercised immediately prior to
such event. The Stockholder shall take such steps in connection with such
consolidation, merger, liquidation or other such action as may be necessary to
assure that the provisions hereof shall thereafter apply as nearly as possible
to any securities or property thereafter deliverable upon any exercise of the
Option.
(b) In the event the consideration per Share to be paid by Buyer
pursuant to the Merger is increased, the Purchase Price shall be similarly
increased.
3
<PAGE> 4
ARTICLE 2
GRANT OF PROXY
The Stockholder hereby revokes any and all previous proxies granted
with respect to the Shares. By entering into this Agreement, the Stockholder
hereby grants a proxy appointing Buyer as his attorney-in-fact and proxy, with
full power of substitution, for and in such Stockholder's name, to vote the
Shares held of record by such Stockholder (a) in favor of the Merger Agreement
and the transactions contemplated by the Merger Agreement (including the Merger)
and any actions required in furtherance thereof; (b) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement; and (c) against any and all of the following actions
(other than the Merger and the transactions contemplated by the Merger
Agreement):
(i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the
Company or its subsidiaries;
(ii) any sale, lease or transfer of a material amount of
assets of the Company or its subsidiaries, or any share exchange,
reorganization, restructuring, recapitalization, special dividend,
dissolution or liquidation of the Company or its subsidiaries; or
(iii) (A) any change in a majority of the persons who
constitute the board of directors of the Company; (B) any material
change in the present capitalization of the Company including any
proposal to issue or sell a substantial equity interest in the Company
or its subsidiaries; (C) any amendment of the Company's certificate of
incorporation or by-laws; (D) any other change in the Company's
corporate structure or business; or (E) any other action which is
intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the Merger or the
transactions contemplated by this Agreement or the Merger Agreement.
The proxy granted by the Stockholder pursuant to this Article 2 is irrevocable,
is coupled with an interest and shall survive the death, disability, incapacity
or incompetency of the Stockholder and in all other circumstances; provided,
however, that such proxy shall be automatically revoked upon termination of this
Agreement in accordance with its terms. For Shares of which the Stockholder is
4
<PAGE> 5
the beneficial but not the record owner, the Stockholder shall use his best
efforts to cause any record owner of such Shares to grant to Buyer a proxy to
the same effect as that contained herein. The Stockholder shall perform such
further acts and execute such further documents as may be required to vest in
Buyer the sole power to vote such Shares during the term of the proxy granted
herein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to Buyer that:
SECTION 3.01. Valid Title. The Stockholder is the sole, true, lawful
and beneficial owner of the Shares purported to be owned by the Stockholder with
no restrictions on his voting rights or rights of disposition pertaining
thereto. At any Closing, the Stockholder will convey good and valid title to the
Shares being purchased free and clear of any and all claims, liens, charges,
encumbrances and security interests. None of the Shares is subject to any voting
trust or other agreement or arrangement with respect to the voting of such
Shares.
SECTION 3.02. Non-Contravention. The execution, delivery and
performance by the Stockholder of this Agreement and the consummation of the
transactions contemplated hereby do not and will not contravene or constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Stockholder or to a loss of any
benefit of the Stockholder under any provision of applicable law or regulation
or of any agreement, judgment, injunction, order, decree or other instrument
binding on the Stockholder or result in the imposition of any lien on any asset
of the Stockholder.
SECTION 3.03. Binding Effect. This Agreement is a valid and binding
Agreement of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally.
SECTION 3.04. Total Shares. As of the date of this Agreement, the
Stockholder beneficially owns 1,070,692 Shares (of which 1,066,652 of these
Shares are held of record) and has options to purchase an aggregate of 24,661
Shares (of which options to purchase an aggregate of 4,040 Shares are
exercisable). Except as set forth in this Section and except for 53,000 Shares
held of record by the Stockholder as trustee for the benefit of Kenneth R.
Piety's children, the Stockholder owns no securities of the Company or options
to
5
<PAGE> 6
purchase or rights to subscribe for or otherwise acquire any securities of the
Company and has no other interest in or voting rights with respect to any
securities of the Company.
SECTION 3.05. Finder's Fees. No investment banker, broker or finder is
entitled to a commission or fee from Buyer or the Company in respect of this
Agreement based upon any arrangement or agreement made by or on behalf of the
Stockholder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Stockholder:
SECTION 4.01. Corporate Power and Authority. Buyer has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
have been duly authorized by the board of directors of Buyer and no other
corporate action on the part of Buyer is necessary to authorize the execution,
delivery or performance by Buyer of this Agreement and the consummation by Buyer
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Buyer and is a valid and binding Agreement of Buyer,
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights generally.
SECTION 4.02. Acquisition for Buyer's Account. The Shares to be
acquired by Buyer upon any exercise of the Option will be acquired by Buyer for
its own account and not with a view to the public distribution thereof and will
not be transferred except in compliance with the Securities Act of 1933.
6
<PAGE> 7
ARTICLE 5
COVENANTS OF THE STOCKHOLDER
The Stockholder hereby covenants and agrees that:
SECTION 5.01. No Proxies for or Encumbrances on Shares. Except
pursuant to the terms of this Agreement, the Stockholder shall not, without the
prior written consent of Buyer, directly or indirectly, (i) grant any proxies or
enter into any voting trust or other agreement or arrangement with respect to
the voting of any of the Shares or (ii) acquire, sell, assign, transfer,
encumber or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the direct or indirect acquisition
or sale, assignment, transfer, encumbrance or other disposition of, any of the
Shares during the term of this Agreement. The Stockholder shall not seek or
solicit any such acquisition or sale, assignment, transfer, encumbrance or other
disposition or any such contract, option or other arrangement or assignment or
understanding and agrees to notify Buyer promptly and to provide all details
requested by Buyer if the Stockholder shall be approached or solicited, directly
or indirectly, by any person with respect to any of the foregoing.
SECTION 5.02. No Shopping. The Stockholder shall not directly or
indirectly (i) solicit, initiate or knowingly encourage (or authorize any person
to solicit, initiate or knowingly encourage) the submission of any Takeover
Proposal or (ii) subject to the fiduciary duty of the Stockholder as a director
of the Company under applicable law, participate in any discussions or
negotiations regarding, or furnish to any person any information with respect to
the Company, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected to lead to a
Takeover Proposal. The Stockholder shall promptly advise Buyer of the terms of
any communications it may receive relating to any of the foregoing.
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 6.02. Further Assurances. In the event any exercise of the
Option occurs, each of Buyer and the Stockholder will execute and deliver or
cause to be executed and delivered all further documents and instruments and use
7
<PAGE> 8
its best efforts to secure such consents and take all such further action as may
be reasonably necessary in order to consummate the transactions contemplated
hereby or to enable Buyer to exercise and enjoy all benefits and rights of the
Stockholder with respect to the Shares to be acquired upon such exercise of the
Option.
SECTION 6.03. Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or bound,
to consummate and make effective the transactions contemplated by this
Agreement, to obtain all necessary waivers, consents and approvals and effect
all necessary registrations and filings, including, but not limited to, filings
under the HSR Act, responses to requests for additional information related to
such filings, and submission of information requested by governmental
authorities, and to rectify any event or circumstances which could impede
consummation of the transactions contemplated hereby.
SECTION 6.04. Specific Performance. Buyer and the Stockholder agree
that Buyer would be irreparably damaged if for any reason the Stockholder failed
to sell the Shares (or other securities deliverable pursuant to Section 1.06) to
be purchased upon any exercise of the Option or to perform any of its other
obligations under this Agreement, and that Buyer would not have an adequate
remedy at law for money damages in such event. Accordingly, Buyer shall be
entitled to specific performance and injunctive and other equitable relief to
enforce the performance of this Agreement by the Stockholder. This provision is
without prejudice to any other rights that Buyer may have against the
Stockholder for any failure to perform his obligations under this Agreement.
SECTION 6.05. Notices. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram or telex, or by registered or certified
mail (postage prepaid, return receipt requested) to such party at its address
set forth on the signature page hereto.
SECTION 6.06. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares to be acquired by Buyer upon any exercise
of the Option.
8
<PAGE> 9
SECTION 6.07. Amendments; Termination. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This Agreement
will automatically terminate upon the termination of the Merger Agreement in
accordance with its terms, except that if the termination of the Merger
Agreement results in the Option becoming exercisable as provided in Section 1.02
hereof, then this Agreement shall automatically terminate on the 31st business
day after such termination. Such termination will not adversely affect any
rights that have accrued hereunder prior to the date of such termination.
SECTION 6.08. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto.
SECTION 6.09. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of Delaware without giving effect to the
principles of conflicts of laws thereof.
SECTION 6.10. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective on October 18, 1997 when each
party hereto shall have received counterparts hereof signed by all of the other
parties hereto.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
EMERSON ELECTRIC CO.
By: /s/ Robert M. Levy
----------------------------------
Robert M. Levy
Assistant Vice President-Development
Emerson Electric Co.
8000 W. Florissant Avenue
St. Louis, Missouri 63136
/s/ Ronald G. Canada
----------------------------------
Ronald G. Canada
835 Innovation Drive
Knoxville, Tennessee 37932
<PAGE> 11
EXHIBIT A
ESCROW AGREEMENT
AGREEMENT dated as of October __, 1997 among Emerson Electric Co., a
Missouri corporation ("BUYER"), Ronald G. Canada (the "STOCKHOLDER") and
___________ (the "ESCROW AGENT").
The parties hereto hereby agree as follows:
1. Pursuant to Section 1.03 of the Stockholder Option Agreement, the
Stockholder hereby delivers to the Escrow Agent a certificate or certificates
representing the Shares (the "CERTIFICATES"). The Escrow Agent hereby
acknowledges receipt of the Certificate or Certificates in escrow pursuant to
the terms and conditions of this Agreement.
2. (a) Upon receipt of (i) a certificate of Buyer stating that (x) all
conditions set forth in the Stockholder Option Agreement have been met or waived
pursuant to the terms thereof and (y) Buyer has tendered the Purchase Amount as
provided therein and (ii) evidence from Buyer that the Purchase Amount has been
so tendered and received by the Stockholder, the Escrow Agent will deliver to
Buyer the Certificates.
(b) The Escrow Agent will deliver the Certificates to Buyer upon
receipt of the certificate and evidence provided for in paragraph 2(a) above,
notwithstanding any claim given to, or demand made upon, the Escrow Agent or any
action taken or threatened to be taken by any other person or entity. The Escrow
Agent's obligation to so deliver such Certificates shall survive the death,
disability, incapacity, incompetence or other circumstance relating to the
Stockholder.
(c) Buyer will deliver simultaneously to the Stockholder a copy of all
certificates, evidences and instructions delivered to the Escrow Agent
hereunder.
3. Except pursuant to the terms and conditions of this Agreement or by
joint written instructions signed by all parties hereto, the Escrow Agent shall
not sell, transfer or otherwise dispose of in any manner the Shares held in
escrow by it.
4. The duties and obligations of the Escrow Agent shall be determined
solely by the express provisions of this Agreement and the Escrow Agent shall
not
<PAGE> 12
be liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement.
5. The Escrow Agent is not a party to, and is not bound by or charged
with notice of, any agreement out of which this escrow may arise, including but
not limited to the Stockholder Option Agreement.
6. The Escrow Agent shall not be responsible for any failure or
inability of the other parties hereof, or any one of them, to perform or comply
with the provisions of this Agreement or the Stockholder Option Agreement.
7. In the performance of its duties hereunder, the Escrow Agent shall
be entitled to rely upon any document, instrument or signature believed by it in
good faith to be genuine and signed by any party hereto or an authorized officer
or agent thereof, and shall not be required to investigate the truth or accuracy
of any statement contained in any such document or instrument. The Escrow Agent
may assume that any person purporting to give any notice in accordance with the
provisions hereof has been duly authorized to do so.
8. The Escrow Agent shall not be liable for any error of judgment, or
any action taken, suffered or omitted to be taken hereunder except in the case
of its gross negligence or willful misconduct, nor shall it be liable for the
default or misconduct of any employee, agent or attorney appointed by it who
shall have been selected with reasonable care.
9. The Escrow Agent shall have no responsibility as to the validity or
value of the escrowed Shares. The Escrow Agent shall have no duty as to the
collection or protection of the Shares held in escrow by it or income thereon,
nor as to the preservation of any rights pertaining thereto, beyond the safe
custody of any such securities actually in its possession.
10. The Escrow Agent or any successor to it as escrow agent hereafter
appointed may at any time resign and be discharged of the duties imposed
hereunder by giving notice to each of the parties hereto, such resignation to
take effect upon a successor escrow agent's acceptance of appointment.
11. Upon execution of this Agreement the Escrow Agent shall receive an
acceptance fee in the amount to which the Escrow Agent and Buyer have heretofore
agreed together with reasonable attorney's fees incurred in connection with the
preparation of this Agreement.
12. Buyer will reimburse and indemnify the Escrow Agent for, and hold
it harmless against, any loss, liability or expense, including, but not limited
to,
2
<PAGE> 13
reasonable attorney's fees, incurred without gross negligence or willful
misconduct on the part of the Escrow Agent arising our of or in connection with
the acceptance of, or the performance of its duties and obligations under, this
Agreement, as well as the reasonable costs and expenses of defending itself
against any claim or liability arising out of or relating to this Agreement.
13. All notices, requests, demands and other communications provided
for by this Agreement (unless otherwise specified herein) shall be in writing
and delivered by mail, telegram, telex or personal delivery and shall be given
to all persons specified below, and shall be deemed given, if by telegram, telex
or personal delivery when received, and if mailed, two business days after being
mailed postage prepaid, registered or certified mail, and addressed to the
respective parties as set forth below or at such other address as any party may
specify to the other parties in writing (such change of address to become
effective only upon receipt of such notification in writing).
If to the Stockholder:
Ronald G. Canada
835 Innovation Drive
Knoxville, Tennessee 37932
Fax: (423) 675-5532
If to Buyer:
Emerson Electric Co.
8000 W. Florissant Avenue
P.O. Box 4100
St. Louis, Missouri 63136
Fax: (314) 553-3851
Attention: Robert M. Levy
If to the Escrow Agent:
________________
________________
________________
14. This Agreement shall terminate upon the earlier of (a) the
transfer of all the Shares by the Escrow Agent to Buyer as provided in Section 2
of this Agreement or (b) the termination of the Stockholder Option Agreement as
provided therein. The Stockholder and Buyer shall give notice to the Escrow
3
<PAGE> 14
Agent of a termination of this Agreement pursuant to clause 14(b) above and,
upon receipt of both such notices, any Shares held by the Escrow Agent pursuant
hereto shall be returned immediately to the Stockholder.
15. This Agreement shall be governed by and construed and enforced in
accordance with the law of the State of Delaware.
16. This Agreement may be amended, modified, superseded or canceled,
and any of the terms hereof may be waived, only by written instrument executed
by the parties hereto or, in the case of a waiver, by the party waiving
compliance. The failure of any party at any time to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any breach of any term contained in this
Agreement shall be deemed to be or construed as a further or continuing waiver
of any such breach in any subsequent instance or a waiver of any breach of any
other term contained in this Agreement.
17. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
4
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
EMERSON ELECTRIC CO.
By:____________________________________
Robert M. Levy
Assistant Vice President-Development
[ESCROW AGENT]
By:____________________________________
Name:
Title:
____________________________________
Ronald G. Canada
5
<PAGE> 1
Exhibit 99.1
Contact: Michele Ciechon
423-675-2110
FOR IMMEDIATE RELEASE
---------------------
COMPUTATIONAL SYSTEMS, INC. ANNOUNCES
-------------------------------------
MERGER AGREEMENT WITH EMERSON ELECTRIC CO.
------------------------------------------
KNOXVILLE, Tenn., October 17, 1997 -- Computational Systems, Inc., a
leading developer and producer of predictive maintenance hardware and software,
announced today that it has signed an agreement and plan of merger with Emerson
Electric Co., and upon completion of the merger will become a wholly owned
subsidiary of Emerson.
The agreement, which is subject to certain conditions, including regulatory
and CSI's stockholders' approval, calls for Emerson to pay $29.65 a share for
each share of CSI's outstanding common stock, of which $5.93 per share is
payable in cash, and the remaining $23.72 per share is payable in Emerson common
stock in a tax free exchange. The Emerson common stock will be valued based on
the average of its closing prices over the ten trading days ending one day prior
to the merger. In addition, Ronald G. Canada, Chairman and Chief Executive
Officer of CSI, who owns approximately 22% of CSI's outstanding stock, has
granted an option to Emerson relating to his CSI shares.
"The technologies in our business continue to evolve," said Ron Canada,
chairman of the board and chief executive officer. "We are determined to remain
a leader and, with Emerson's global reach and resources, CSI can continue to
grow and increase its presence worldwide."
"Continued product development is essential to CSI's future," added Ken
Piety, vice chairman and chief technology officer. "This partnership with
Emerson, which has a longstanding commitment to engineering and development,
will help keep CSI on the leading edge of condition monitoring."
Based in St. Louis, Emerson Electric manufactures a broad range of
electronic, electrical and related products for commercial, industrial and
consumer markets worldwide. Sales for fiscal 1996 totaled $11.1 billion.
Computational Systems, founded in 1984 and based in Knoxville, Tennessee,
is the world's leading designer, producer and marketer of condition-monitoring
products and services for large, continuous process manufacturers and utilities.
These products reduce or eliminate equipment downtime. Company revenues in 1996
were approximately $50 million.
