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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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KYSOR INDUSTRIAL CORPORATION
(NAME OF SUBJECT COMPANY)
KYSOR INDUSTRIAL CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON SHARE PURCHASE RIGHTS)
AND
SERIES A CONVERTIBLE VOTING PREFERRED STOCK, STATED VALUE $24.375 PER SHARE
(TITLE OF EACH CLASS OF SECURITIES)
501566103 (COMMON STOCK)
(CUSIP NUMBER OF EACH CLASS OF SECURITIES)
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GEORGE R. KEMPTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
KYSOR INDUSTRIAL CORPORATION
ONE MADISON AVENUE
P.O. BOX 1000
CADILLAC, MICHIGAN 49601-9785
(616) 779-2200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
TRACY T. LARSEN, ESQ.
WARNER NORCROSS & JUDD LLP
900 OLD KENT BUILDING
111 LYON STREET, NW
GRAND RAPIDS, MICHIGAN 49503-2489
(616) 752-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Kysor Industrial Corporation, a Michigan
corporation (the "Company"). The address of the principal executive offices of
the Company is One Madison Avenue, Cadillac, Michigan 49601-9785. The titles
of the classes of equity securities to which this statement relates are the
Common Stock, par value $1.00 per share, of the Company, including the
associated common share purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of April 26, 1996, as amended, between the Company
and Harris Trust and Savings Bank, as successor Rights Agent (the "Rights
Agreement") (collectively, the "Common Shares"), and the Series A Convertible
Voting Preferred Stock, stated value $24.375 per share, of the Company (the
"Preferred Shares" and, together with the Common Shares, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a cash tender offer by K Acquisition Corp., a
Michigan corporation (the "Purchaser") and an indirect wholly-owned subsidiary
of Scotsman Industries, Inc., a Delaware corporation ("Parent"), to purchase
all outstanding Shares at a purchase price of $43.00 per Share (or any higher
price per Share paid in the Offer) (the "Offer Price"), net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated February 7, 1997 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which, together with the Offer to
Purchase and any amendments or supplements to the Offer to Purchase,
collectively constitute the "Offer"). The principal executive offices of both
Parent and the Purchaser are located at 775 Corporate Woods Parkway, Vernon
Hills, Illinois 60061-3112. The Offer is described in, and all statements made
in this paragraph are based on, a Tender Offer Statement filed pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on Schedule 14D-1, dated February 7, 1997.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above and here incorporated by reference.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of the Company's directors,
executive officers and affiliates are described in the Information Statement
of the Company attached to this statement as Annex I (the "Information
Statement"). The Information Statement is being furnished to the Company's
shareholders pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
issued under the Exchange Act in connection with the Purchaser's right (after
consummation of the Offer) to designate persons to the Board of Directors of
the Company other than at a meeting of the shareholders of the Company. The
Information Statement is here incorporated by reference.
Except as described in the Information Statement and as described under "The
Merger Agreement" and "Other Arrangements" below, to the knowledge of the
Company, there exists on the date hereof no material contract, agreement,
arrangement or understanding and no actual or potential conflict of interest
between the Company or its affiliates and (i) the Company or its executive
officers, directors or affiliates or (ii) Parent, the Purchaser or the
executive officers, directors or affiliates of Parent or the Purchaser.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of February 2, 1997 (the "Merger Agreement") among Parent, the Purchaser and
the Company. A copy of the Merger Agreement is filed as Exhibit 1 to this
statement and is here incorporated by reference. The Merger Agreement
provides, among other things, for the commencement of the Offer by the
Purchaser and further provides that, subject to the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into the Company (the "Merger"), with the Company surviving
the Merger as an indirect wholly-owned subsidiary of Parent (the "Surviving
Corporation"). In the Merger, each outstanding Share (other than Shares owned
by the Company, any subsidiary of the Company, Parent, the Purchaser, or any
other subsidiary of Parent) will be converted as of the date and time that the
Merger becomes effective (the "Effective Time") into the right to receive from
the Purchaser the Offer Price in cash, without interest and less any required
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withholding taxes and stock-transfer taxes (the "Merger Consideration"). If
the Purchaser acquires at least 90% of the outstanding shares of each class of
capital stock of the Company (and no Preferred Shares remain outstanding), the
Purchaser would be able to effect the Merger pursuant to the "short-form"
merger provisions of Section 450.1711 of the Michigan Business Corporation Act
("MBCA" ), without prior notice to, or any action by, any shareholder of the
Company. If the Purchaser consummates the Offer but does not acquire
sufficient Shares in the Offer to enable it to effect a short-form merger, the
Company will properly convene a meeting of its shareholders for the purpose of
obtaining shareholder approval of the Merger Agreement, including the Merger,
as soon as is practicable following the consummation of the Offer. In such
event, and assuming no Preferred Shares remain outstanding, the Purchaser will
own sufficient Shares to approve the Merger Agreement, including the Merger,
without the affirmative vote of any other shareholder of the Company. No
dissenter's rights will be available in connection with the Merger under the
MBCA because the holders of Shares will receive cash in the Merger.
Concurrently with the execution of the Merger Agreement, the Company and
certain of its domestic subsidiaries (the "Subsidiaries" and, together with
the Company, "Sellers") entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") dated as of February 2, 1997 with Transpro Group, Inc., a
Delaware corporation (the "Asset Purchaser"), and Kuhlman Corporation, a
Delaware corporation and sole stockholder of the Asset Purchaser (together
with the Asset Purchaser, "Kuhlman"). A copy of the Asset Purchase Agreement
is filed as Exhibit 2 to this statement and is here incorporated by reference.
Pursuant to the Asset Purchase Agreement, and subject to the terms and
conditions thereof, Kuhlman has agreed to purchase, and Sellers have agreed to
sell, substantially all of the assets associated with the Company's
transportation products group ("TPG"). Subject to certain exceptions,
consummation of the transactions contemplated by the Asset Purchase Agreement
is a condition precedent to the obligation of the Purchaser to purchase Shares
pursuant to the Offer.
A copy of the joint press release issued by the Company and Parent on
February 3, 1997 announcing the Offer and the execution of the Merger
Agreement and the Asset Purchase Agreement is filed as Exhibit 3 to this
statement and is here incorporated by reference.
The following is a summary of the material provisions of the Merger
Agreement, the Asset Purchase Agreement and certain other agreements described
under "Other Arrangements" below. Copies of the Merger Agreement, the Asset
Purchase Agreement and certain of those other agreements are filed as Exhibits
to this statement. The following summary does not purport to be complete and
is qualified in its entirety by reference to those Exhibits.
THE MERGER AGREEMENT
The Offer. The Purchaser commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, each of the Company, Parent and the Purchaser have agreed, subject
to certain exceptions, to use its reasonable best efforts to cause the
purchase of Shares pursuant to the Offer and the consummation of the Merger to
occur as soon as practicable. Without limiting the foregoing, each of the
Company, Parent and the Purchaser have agreed to use its reasonable best
efforts to take, or cause to be taken, all actions necessary to comply
promptly with all legal requirements that may be imposed on itself with
respect to the Offer and the Merger and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them in connection with the Offer and the Merger.
Notwithstanding the foregoing, the Company is not obligated to use its
reasonable best efforts to take any action pursuant to the Merger Agreement if
the Board of Directors of the Company concludes in good faith based on the
advice of its outside counsel that failure to take such action is necessary in
order to comply with fiduciary duties under applicable law. In addition,
neither Parent nor any of its subsidiaries is obligated in connection with
obtaining any required HSR Act (as defined below) or other governmental
approvals to divest or hold separate or to otherwise take or commit to take
any action that limits its freedom of action with respect to, or its ability
to retain, the Company or any of the businesses, product lines or assets of
Parent or any of its subsidiaries or that would have a material adverse effect
on Parent.
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The Merger. The Merger Agreement provides that, upon the terms and subject to
the conditions of the Merger Agreement, and in accordance with the MBCA, the
Purchaser will be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of the Purchaser will
cease and the Company will continue as the Surviving Corporation and will
succeed to and assume all the rights and obligations of the Purchaser in
accordance with the MBCA. At the Effective Time, the Articles of Incorporation
and By-Laws of the Purchaser will be the Articles of Incorporation and By-Laws
of the Surviving Corporation. The directors of the Purchaser will become the
directors of the Surviving Corporation and the officers of the Company will
become the officers of the Surviving Corporation.
Conversion of Securities. As of the Effective Time, by virtue of the Merger
and without any action on the part of the Purchaser, the Company or the holders
of any securities of the Purchaser or the Company, each outstanding Share
(other than Shares owned by any subsidiary of the Company, Parent, the
Purchaser, or any other subsidiary of Parent) will be converted into the right
to receive from the Surviving Corporation, in cash, without interest, the Offer
Price. Each share of stock of the Purchaser issued and outstanding immediately
prior to the Effective Time will, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of stock
of the Purchaser, be converted into and become one fully paid and nonassessable
share of Common Stock, $1.00 par value, of the Surviving Corporation.
Representations and Warranties. In the Merger Agreement, the Company has made
customary representations and warranties to Parent and the Purchaser. The
representations and warranties of the Company relate, among other things, to
its organization and qualification; subsidiaries; capital structure; authority
to enter into the Merger Agreement and the Asset Purchase Agreement and to
consummate the transactions contemplated thereby; required consents and
approvals; filings made by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
or the Exchange Act (including financial statements included in the documents
filed by the Company under these acts); the absence of any material adverse
change; the absence of certain violations and defaults; compliance with laws,
licenses and permits; termination, severance and employment agreements;
environmental matters; tax matters; litigation; the enforceability of certain
contracts; employee benefits; liabilities; intellectual property; propriety of
certain payments; the inapplicability of certain state takeover statutes and
the execution of an amendment to the Rights Agreement; and the Asset Purchase
Agreement and the transactions contemplated thereby.
The Purchaser and Parent have also made customary representations and
warranties to the Company. Representations and warranties of the Purchaser and
Parent relate, among other things, to their organization; authority to enter
into the Merger Agreement and to consummate the transactions contemplated
thereby; required consents and approvals; and financing.
Covenants Relating to the Conduct of Business. During the period from the
date of the Merger Agreement to such time as the Purchaser's designees
constitute a majority of the Board of Directors of the Company, the Company has
agreed that it will, and will cause its subsidiaries to, in all material
respects, carry on its business in, and not enter into any material
transactions other than in accordance with, the ordinary course of its business
as currently conducted and, to the extent consistent therewith, use reasonable
best efforts to preserve intact its current business organizations, keep
available the services of its current officers and key employees and preserve
its relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business will not be impaired.
The Company has agreed that during such period, except as otherwise expressly
contemplated by the Merger Agreement, the Asset Purchase Agreement or required
by law, the Company will not, and will not permit any of its subsidiaries to,
without the prior written consent of Parent (which consent shall not be
unreasonably withheld):
(i) (a) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such (other than regular quarterly dividends of not more than
$0.165 per share on the Common Shares and regular semi-annual dividends of
not more than $0.975 per share on the Preferred Shares, in each case
declared and paid on dates consistent with past practice), (b) split,
combine or reclassify
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any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, except the issuance of Common Shares upon conversion of any
Preferred Shares in accordance with the terms thereof, or (c) except as
required under existing employee benefit plans, agreements, policies,
awards or arrangements in effect on the date of the Merger Agreement,
purchase, redeem or otherwise acquire any shares of its capital stock or
those of any subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) except as required under existing employee benefit plans,
agreements, policies, awards or arrangements in effect on the date of the
Merger Agreement, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or
equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities, equity
equivalent or convertible securities (other than pursuant to the Rights
Agreement or the issuance of Common Shares upon the exercise of stock
options of the Company outstanding on the date of the Merger Agreement in
accordance with their current terms and the issuance of Common Shares upon
the conversion of any Preferred Shares Stock into Common Shares in
accordance with the terms thereof);
(iii) amend its Charter or By-laws or other similar organizational
documents;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than (a) the purchase of raw materials
and goods and services used in the manufacture of the products of the
businesses of the Company and its subsidiaries, in each case in the
ordinary course of business consistent with past practice and (b) other
transactions that are in the ordinary course of business consistent with
past practice and which in the aggregate involve assets having a purchase
price not in excess of $1,000,000;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than the sale of products of
the businesses of the Company and its subsidiaries, in each case in the
ordinary course of business consistent with past practice and other
transactions that are in the ordinary course of business consistent with
past practice and which in the aggregate involve assets having a fair
market value or book value not in excess of $500,000;
(vi) incur any new indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others or make any loans, advances or capital contributions
to, or other investments in, any other person, other than to or in the
Company or any wholly owned subsidiary of the Company and other than
customary travel and similar advances to employees in the ordinary course
of business consistent with past practice;
(vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the
Company or any subsidiary of the Company;
(viii) enter into or adopt, or amend any existing severance plan,
agreement or arrangement or enter into or amend any employee benefit plan
or employment or consulting agreement, other than as required by law;
(ix) except as required under existing plans, agreements, policies,
awards or arrangements in effect on the date of the Merger Agreement, or as
otherwise disclosed to Parent, increase the compensation payable or to
become payable to its officers or employees, except, in the case of
employees who are not officers, for increases in the ordinary course of
business consistent with past practice, pay or commit to pay any bonus, or
grant any severance or termination pay to, or enter into any employment or
severance agreement, or establish, adopt, enter into, or amend in any
material respect or take action to enhance in any material respect or
accelerate any rights or benefits under, any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, stock ownership,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except,
in each case, as may be required to comply with applicable law or
regulation;
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(x) violate or fail to perform any material obligation or duty imposed
upon it by any applicable federal, state or local law, rule, regulation,
guideline or ordinance;
(xi) redeem the Rights or amend the Rights Agreement;
(xii) breach in any material respect any of its material representations,
warranties, covenants or agreements contained in the Asset Purchase
Agreement (regardless of any provisions regarding notice or lapse of time,
or both) or waive any of its material rights under, amend or terminate the
Asset Purchase Agreement, other than a waiver of the condition regarding
the consummation of the Offer;
(xiii) make any material change in its accounting methods, policies or
procedures except as a result of any change in law or generally accepted
accounting principles;
(xiv) prepare or file any tax return inconsistent with past practice or,
on any such tax return, take any position, make any election or adopt any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar tax returns in prior periods, or give
certain approvals or consents under the Asset Purchase Agreement in respect
of the allocation of the purchase price for the TPG assets being sold
thereunder; or
(xv) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
No Solicitation. The Company has agreed in the Merger Agreement that, from
and after the date of the Merger Agreement, the Company will not, and will not
permit any of its or its subsidiaries' officers, directors or employees to, and
the Company will use its reasonable best efforts to cause all of its and its
subsidiaries' attorneys, financial advisors, agents and other representatives
not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing information) any Takeover Proposal (as defined
below), or engage in or continue discussions or negotiations relating thereto.
Notwithstanding the foregoing, the Company may engage in discussions or
negotiations with, or furnish information concerning the Company and its
business, properties or assets to, any third party with respect to a Takeover
Proposal if the Board of Directors of the Company concludes in good faith,
based on the advice of its outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties under applicable law. The Company
will promptly notify Parent of any Takeover Proposal, including the material
terms and conditions thereof and the identity of the person or group making
such Takeover Proposal, and will promptly notify Parent of any determination by
the Company's Board of Directors that a Superior Proposal (as defined below)
has been made. For purposes of the Merger Agreement, (i) "Takeover Proposal"
means any proposal or offer, other than a proposal or offer by Parent or any of
its subsidiaries, for a tender or exchange offer, a merger, consolidation or
other business combination involving the Company or any of its subsidiaries or
any proposal to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of (other than pursuant to the Asset Purchase
Agreement) the Company or any of its subsidiaries and (ii) "Superior Proposal"
means a bona fide proposal or offer made by a third party to acquire the
Company pursuant to a tender or exchange offer, a merger, consolidation or
other business combination or a sale of all or substantially all of the assets
of the Company and its subsidiaries (other than pursuant to the Asset Purchase
Agreement) on terms which a majority of the members of the Board of Directors
of the Company concludes in their good faith reasonable judgment to be more
favorable to the Company's shareholders than the transactions contemplated by
the Merger Agreement and for which any required financing is committed or which
a majority of such members reasonably concludes is reasonably capable of being
obtained by such third party.
The foregoing does not prohibit the Company or its Board of Directors from
taking or disclosing to its shareholders any position pursuant to Rules 14d-9
and 14e-2 under the Exchange Act or from making any disclosure to the Company's
shareholders if the Company's Board of Directors concludes in good faith based
on the advice of its outside counsel that it is necessary to do so in order to
comply with its fiduciary duties under applicable law.
Third Party Standstill Agreements. During the period from the date of the
Merger Agreement through the Effective Time, the Company has agreed not to
terminate, amend, modify or waive any provision of any
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confidentiality or standstill agreement to which the Company or any of its
subsidiaries is a party (other than any involving Parent, but solely in respect
of the Offer or any increase in the Offer Price), unless the Board of Directors
of the Company concludes in good faith based on the advice of its outside
counsel that it is necessary to do so in order to comply with its fiduciary
duties under applicable law. During such period, the Company has agreed to
enforce, to the fullest extent permitted under applicable law, the provisions
of any such agreements, including obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions thereof
in any court of the United States of America or any state thereof having
jurisdiction, unless the Board of Directors of the Company concludes in good
faith based on the advice of its outside counsel that failure to take such
action is necessary in order to comply with its fiduciary duties under
applicable law.
Options. (i) Prior to the commencement of the Offer, the Company has agreed
to adopt procedures pursuant to which each outstanding stock option of the
Company, stock appreciation right, and other stock based award ("Option") which
is exercisable immediately prior to the consummation of the Offer in accordance
with the terms of the applicable plan may be exercised or settled by the holder
thereof by the delivery to the Company of a notice of exercise or acceptance of
cash settlement prior to the consummation of the Offer. Upon the consummation
of the Offer, each Option so exercised or settled will be canceled and promptly
thereafter, the Company will deliver to the holder thereof a cash payment in an
amount equal to the product of (a) the number of Common Shares subject or
related to such Option and (b) the excess of the Offer Price over the exercise
or purchase price per Common Shares subject or related to such Option (such
payment to be net of applicable withholding taxes).
(ii) Prior to the commencement of the Offer, the Company has agreed to take
action in accordance with the Company's stock option plans to cause each Option
which is outstanding immediately following the consummation of the Offer,
whether or not then exercisable, to become fully exercisable. The Company also
has agreed to adopt procedures pursuant to which each Option may be exercised
or settled by the holder thereof by the delivery to the Company of a notice of
exercise or acceptance of cash settlement prior to the Effective Time. At the
Effective Time, each such Option so exercised or settled will be canceled and
promptly thereafter the Company will deliver to the holder thereof cash in an
amount equal to the product of (a) the number of Common Shares subject or
related to such Option and (b) the excess of the Offer Price over the exercise
or purchase price per Common Shares subject or related to such Option (such
payment to be net of applicable withholding taxes).
(iii) Parent has agreed to provide the Company sufficient funds for the
Company to meet its payment obligations set forth in the preceding two
paragraphs and, notwithstanding any provisions of the Merger Agreement to the
contrary, the Company is permitted to borrow such funds to the extent they are
not so provided by Parent.
(iv) Following the Effective Time, each Option which has not theretofore been
exercised or settled by the holder thereof will be canceled and promptly
thereafter Parent will deliver to the holder thereof cash in an amount equal to
the product of (a) the number of Common Shares subject or related to such
Option and (b) the excess of the Offer Price over the exercise or purchase
price per Common Shares subject or related to such Option (such payment to be
net of applicable withholding taxes).
Restricted Stock. Prior to the commencement of the Offer, the Company has
agreed to cause the restrictions on restricted Common Shares under the
Company's compensation plans and arrangements to lapse effective upon the
consummation of the Offer and to adopt procedures to enable all holders thereof
to tender such Common Shares pursuant to the terms of the Offer.
Indemnification. From and after the consummation of the Offer, Parent has
agreed to (and to cause the Company or the Surviving Corporation to) exculpate,
indemnify and hold harmless all past and present officers, directors, employees
and agents of the Company and its subsidiaries to the same extent such persons
are currently exculpated and indemnified by the Company or any of its
subsidiaries pursuant to the Company's or any such subsidiary's Charter or By-
laws (or similar organizational documents), agreements in effect as of the date
of the Merger Agreement or applicable law for acts or omissions, or alleged
acts or omissions, occurring at or prior to
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the Effective Time, and Parent has agreed to (and to cause the Company or the
Surviving Corporation to), honor all such obligations of the Company
(including, if necessary, providing the Company or the Surviving Corporation
sufficient funds), including obligations to advance expenses to such persons
arising pursuant to the Company's or any such subsidiary's Charter or By-laws
(or similar organizational documents), agreements in effect as of the date of
the Merger Agreement or applicable law. However, Parent is not obligated to
exculpate, indemnify or hold harmless any person who becomes an employee of
Kuhlman or any of its subsidiaries in connection with the Asset Purchase
Agreement, or the transactions contemplated thereby, for any acts or omissions
occurring at or prior to the Effective Time in respect of the business
previously conducted by the Company using the TPG assets (the "Excluded
Matters"). Parent will cause the Surviving Corporation to provide, for an
aggregate period of not less than six years from the Effective Time, the
Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the Company's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage. Notwithstanding the foregoing, the Surviving
Corporation will not be required to pay an annual premium for the D&O
Insurance in excess of 200% of the last annual premium paid prior to the date
of the Merger Agreement but in such case will purchase as much coverage as
possible for such amount.
Employee Benefits. Parent has agreed that it will provide or cause the
Surviving Corporation to provide benefits for the employees of the Company
from and after the Effective Time either under the employee benefits plans of
the Company and its subsidiaries ("Company Plans") or under other employee
benefit plans established by Parent or the Surviving Corporation. As soon as
reasonably practicable after the Effective Time, employer contributions to the
Company's Employee Stock Ownership Plan will be discontinued and such plan
will be merged into another qualified defined contribution plan maintained by
Parent or its affiliates.
Board Representation. The Merger Agreement provides that promptly after such
time as the Purchaser acquires Shares pursuant to the Offer, the Purchaser
will be entitled to designate at its option up to that number of directors,
rounded to the nearest whole number, of the Company's Board of Directors,
subject to compliance with Section 14(f) of the Exchange Act, as will make the
percentage of the Company's directors designated by the Purchaser equal to the
aggregate voting power of the Shares held by Parent or any of its subsidiaries
(assuming the exercise of all outstanding options to purchase shares of the
Company's capital stock). However, in the event that the Purchaser's designees
are elected to the Board of Directors of the Company, until the Effective
Time, such Board of Directors will have at least three directors who are
directors on the date of the Merger Agreement (of which at least two directors
are not officers of the Company) (the "Independent Directors"). If the number
of Independent Directors is reduced below three for any reason whatsoever, the
remaining Independent Directors will designate a person to fill such vacancy
who will be deemed to be an Independent Director for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors of
the Company as of the date of the Merger Agreement will designate three
persons to fill such vacancies who will not be officers or affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent or any
of its subsidiaries, and such persons will be deemed to be Independent
Directors for purposes of the Merger Agreement. In connection with the
foregoing, the Company will promptly, at the option of Parent, either increase
the size of the Company's Board of Directors and/or obtain the resignation of
such number of its current directors as is necessary to enable the Purchaser's
designees to be elected or appointed to the Company's Board of Directors as
provided above. In no event, however, will the size of the Company's Board of
Directors be larger than 10 persons (thereby limiting to seven the number of
directors who may be designated by Parent pending the consummation of the
Merger).
Severance, Employment and Benefit Agreements. Parent has agreed to timely
honor, and following the consummation of the Offer and the Merger,
respectively, to cause the Company or the Surviving Corporation, as the case
may be, to timely honor (including by providing sufficient funds therefor), in
accordance with their terms, certain specified severance, employment and
benefit agreements, plans and arrangements with the Company's directors,
officers and employees that have previously been disclosed by the Company to
Parent.
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Conditions to the Offer. Notwithstanding any other term of the Offer or the
Merger Agreement, the Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the Securities and
Exchange Commission, including Rule 14e-l(c) under the Exchange Act (relating
to the Purchaser's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless: (i) there has been validly tendered and not
withdrawn prior to the expiration of the Offer such number of Shares that
would constitute a majority of the outstanding Shares at the expiration of the
Offer (assuming the exercise of all options to purchase Shares outstanding at
the expiration of the Offer) (the "Minimum Condition"); (ii) any waiting
period under the HSR Act applicable to the purchase of Shares pursuant to the
Offer has expired or been terminated; (iii) the Company and Kuhlman have
consummated the transactions contemplated by the Asset Purchase Agreement or
Kuhlman has waived any conditions to consummate the Asset Purchase Agreement,
agreeing to consummate the transactions contemplated thereby contemporaneously
with or immediately following the consummation of the Offer; and (iv) there
has been validly tendered and not withdrawn prior to the expiration of the
Offer all outstanding Preferred Shares, unless the Company has called all
outstanding Preferred Shares for redemption on a date that is not later than
one business day after the consummation of the Offer. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser will not be required to accept for payment or, subject as aforesaid,
to pay for any Shares not theretofore accepted for payment or paid for, and
may terminate the Offer if, at any time on or after the date of the Merger
Agreement and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exists (other than as a result of
any action or inaction of Parent or any of its subsidiaries that constitutes a
breach of the Merger Agreement):
(a) there shall be instituted by any governmental entity and pending as
of the expiration of the Offer any suit, action or proceeding (1) seeking
to prohibit or limit the acquisition by Parent or the Purchaser of any
Shares pursuant to the Offer, seeking to prohibit or limit the making or
consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by the Merger Agreement or the Asset
Purchase Agreement, or seeking to obtain from the Company, Parent or the
Purchaser any damages that are material in relation to the Company and its
subsidiaries taken as a whole; (2) seeking to prohibit or limit the
ownership or operation by the Company, Parent or any of their respective
subsidiaries of any material portion of the business or assets of the
Company and its subsidiaries, or Parent and its subsidiaries, or to compel
the Company or Parent to dispose of or hold separate any material portion
of the business or assets of the Company and its subsidiaries, or Parent
and its subsidiaries, as a result of the Offer, the Merger or any of the
other transactions contemplated by the Merger Agreement; (3) seeking to
impose limitations on the ability of Parent or the Purchaser to acquire or
hold, or exercise full rights of ownership of, any Shares to be accepted
for payment pursuant to the Offer, including, without limitation, the right
to vote such Shares on all matters properly presented to the shareholders
of the Company; or (4) prohibiting Parent or any of its subsidiaries from
effectively controlling any material portion of the business or operations
of the Company or its subsidiaries (provided, that, in the case of clauses
(1) through (4) above, Parent must have used its reasonable best efforts to
resolve or eliminate same);
(b) as of the expiration date of the Offer, there shall be enacted,
entered, enforced, promulgated or deemed applicable to the Offer or the
Merger by any governmental entity, any statute, rule, regulation, judgment,
order or injunction, other than the application to the Offer, the Merger or
the transactions contemplated by the Asset Purchase Agreement of applicable
waiting periods under the HSR Act, that would reasonably be expected to
result, directly or indirectly, in any of the consequences referred to in
clauses (1) through (4) of paragraph (a) above;
(c) the Board of Directors of the Company or any committee thereof shall
have withdrawn or modified in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Takeover Proposal;
(d) any of the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct in any respect, in each
case as if such representations and warranties were made as of such time,
except for (1) failures to be true and correct that would not reasonably be
expected to result in
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a material adverse effect on the Company and (2) failures to comply that
are capable of being and are cured within 20 days after written notice from
Parent to the Company of such failure (in which case Parent has agreed to,
and to cause the Purchaser to, extend the Expiration date of the Offer to
two business days following the end of such cure period or, if earlier, the
date of cure, unless the Offer would otherwise not expire prior thereto);
(e) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant of the Company to be performed or complied
with by it under the Merger Agreement, except for (1) failures to so
perform or comply that would not reasonably be expected to result in a
material adverse effect on the Company and (2) failures to perform or
comply that are capable of being and are cured within 20 days after written
notice from Parent to the Company of such failure (in which case Parent has
agreed to, and to cause the Purchaser to, extend the expiration date of the
Offer to two business days following the end of such cure period or, if
earlier, the date of cure, unless the Offer would otherwise not expire
prior thereto);
(f) there shall have occurred and be continuing as of the expiration date
of the Offer (1) any general suspension of trading in, or limitation on
prices for, securities on a national securities exchange in the United
States (excluding any coordinated trading halt triggered solely as a result
of a specified decrease in a market index); (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States; (3) any limitation (whether or not mandatory) by any governmental
entity on, or other event that materially adversely affects, the extension
of credit by banks or other lending institutions; (4) a commencement of a
war or armed hostilities or other national or international calamity
directly or indirectly involving the United States which in any case is
reasonably expected to have a material adverse effect on the Company or to
materially adversely affect Parent's or the Purchaser's ability to complete
the Offer or the Merger; or (5) in case of any of the foregoing existing on
the date of the Merger Agreement, material acceleration or worsening
thereof which in any case is reasonably expected to have a material adverse
effect on the Company or to materially adversely affect Parent's or the
Purchaser's ability to complete the Offer or the Merger; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions, other than the Minimum Condition, are for the sole
benefit of Parent and the Purchaser and may, subject to the terms of the
Merger Agreement, be waived by Parent and the Purchaser in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent
or the Purchaser at any time to exercise any of the foregoing rights will not
be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances will not be deemed a waiver with
respect to any other facts and circumstances and each such right will be
deemed an ongoing right that may be asserted at any time and from time to
time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not previously accepted for payment shall promptly be returned
to the tendering shareholders.
Conditions to the Merger. The respective obligations of each party to effect
the Merger will be subject to the fulfillment at or prior to the Effective
Time of the following conditions: (i) if required by applicable law, the
shareholders of the Company must have approved the Merger Agreement (provided
that Parent and the Purchaser vote all of their Shares entitled to vote
thereon in favor of the Merger); (ii) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other governmental entity preventing the consummation of the Merger must be in
effect (provided that each of the parties must have used its reasonable best
efforts to prevent the entry of any such temporary restraining order,
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered); (iii) the Purchaser must have previously
accepted for payment and paid for Shares pursuant to the Offer (this condition
being deemed satisfied with respect to the obligations of Parent or the
Purchaser if the Purchaser fails to accept for payment and pay for any Shares
pursuant to the Offer in
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violation of the terms of the Merger Agreement); and (iv) any waiting period
(and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), applicable to the Merger must have
expired or been terminated.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time, whether before or after the approval of the
shareholders of the Company: (i) by mutual written consent of Parent and the
Company; (ii) by either Parent or the Company: (a) if (1) as a result of the
failure of any of the conditions to the Offer as set forth in the Offer to
Purchase, the Offer is terminated or expires in accordance with its terms
without the Purchaser having accepted for payment any Shares pursuant to the
Offer or (2) all of the conditions to the Offer set forth in the Offer to
Purchase have not been satisfied prior to June 30, 1997 or such later date as
the parties may agree to (provided that the right to terminate the Merger
Agreement described in this clause (ii)(a) will not be available to any party
whose failure to perform any of its obligations under the Merger Agreement
results in the failure of any such condition to the Offer or if the failure of
such condition to the Offer results from facts or circumstances that
constitute a breach of representation or warranty under the Merger Agreement
by such party); or (b) if any governmental entity issues an order, decree or
ruling or takes any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by the Merger Agreement
and such order, decree or ruling or other action becomes final and
nonappealable, provided that the party seeking to terminate the Merger
Agreement must have used its reasonable best efforts to lift or vacate such
order, decree or ruling; (iii) by Parent or the Purchaser prior to the
purchase of Shares pursuant to the Offer in the event of a breach by the
Company of any representation, warranty, covenant or other agreement contained
in the Merger Agreement which (a) would reasonably be expected to result in a
material adverse effect on the Company or (b) cannot be or has not been cured
within 20 days after the giving of written notice to the Company; (iv) by
Parent or the Purchaser if the Board of Directors of the Company or any
committee thereof withdraws or modifies in any manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approves or recommends any Takeover Proposal; (v) by the
Company if the Board of Directors of the Company reasonably determines that a
Takeover Proposal constitutes a Superior Proposal and the Board of Directors
of the Company determines in good faith based on the advice of its outside
counsel that termination of the Merger Agreement is necessary in order to
comply with its fiduciary duties under applicable law; (vi) by the Company, if
(a) any of the representations or warranties of Parent or the Purchaser set
forth in the Merger Agreement that are qualified as to materiality are not
true and correct in any respect or any such representations or warranties that
are not so qualified are not true and correct in any material respect, or (b)
Parent or the Purchaser fail to perform in any material respect any obligation
or to comply in any material respect with any agreement or covenant of Parent
or the Purchaser to be performed or complied with by it under the Merger
Agreement and, in the case of (a) or (b), such untruth or incorrectness or
failure cannot be or has not been cured within 20 days after the giving of
written notice to Parent or the Purchaser, as applicable; or (vii) by the
Company, if the Offer has not been timely commenced. Notwithstanding the
foregoing, the Company may not terminate the Merger Agreement pursuant to
clause (v) unless and until five business days have elapsed following delivery
to Parent of a written notice (a "Section 9.1(e) Notice") of the conclusion by
the Board of Directors of the Company described in clause (v) and, during such
five business day period, the Company has cooperated fully with Parent,
including informing Parent of the terms and conditions of the Takeover
Proposal and the identity of the person making the Takeover Proposal, with the
intent of enabling Parent to agree to a modification of the terms and
conditions of the Merger Agreement so that the transactions contemplated
thereby may be effected. Furthermore, the Company may not terminate the Merger
Agreement pursuant to clause (v) unless at the end of such five business day
period the Board of Directors of the Company continues reasonably to believe
its prior conclusion that the Takeover Proposal constitutes a Superior
Proposal and simultaneously with such termination the Company pays to Parent
the Expenses (as defined below). In connection with the foregoing, the
Purchaser is required to extend the Offer by the earlier of seven business
days following a Section 9.1(e) Notice or the termination by the Company under
clause (v) above and by up to two business days following the 20-day cure
period described in clause (iii) above. In the event of a termination of the
Merger Agreement by either the Company or Parent, the Merger Agreement will
forthwith become void (except for certain specified provisions, including
those pertaining to the payment of certain expenses and fees and except for
certain confidentiality obligations of the parties) and the Offer and the
Merger terminated and abandoned and
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there will be no liability or obligation on the part of Parent, the Purchaser
or the Company or their respective officers, directors, employees or agents,
other than liability for any willful or bad faith breach.
Fees and Expenses. Except as provided in the Merger Agreement, whether or not
the Merger is consummated, all costs and expenses incurred by a party to the
Merger Agreement in connection with the Merger Agreement and the transactions
contemplated thereby, including the fees and disbursements of counsel,
financial advisors and accountants, will be paid by the party incurring such
costs and expenses.
The Company has agreed in the Merger Agreement that it will pay, or cause to
be paid, in same day funds to Parent, up to $1,750,000 of Expenses if: (i)
Parent or the Purchaser terminates the Merger Agreement under clause (iv) set
forth under "Termination" above; or (ii) the Company terminates the Merger
Agreement pursuant to clause (v) set forth under "Termination" above.
"Expenses" means documented out-of-pocket fees and expenses reasonably incurred
or paid by or on behalf of Parent or its subsidiaries in connection with the
Offer, the Merger or the consummation of any of the transactions contemplated
by the Merger Agreement, including all reasonable fees and expenses of law
firms, commercial banks, investment banking firms, accountants, experts and
consultants to Parent or any of its subsidiaries.
If Expenses are payable, or have been paid, as described in the preceding
paragraph and within 365 days after a termination described in such paragraph a
Takeover Proposal with a third party is consummated (other than a Takeover
Proposal relating to the sale of all or substantially all of the Company's
TPG), the Company has agreed to pay to Parent, simultaneously with the
consummation of such Takeover Proposal, the additional sum of $9,000,000.
THE ASSET PURCHASE AGREEMENT
Sale and Purchase of Assets; Consideration. In the Asset Purchase Agreement,
Sellers have agreed to sell to Kuhlman, and Kuhlman has agreed to purchase from
Sellers, on the terms and subject to the conditions set forth therein, all
right, title and interest that Sellers possess and have the right to transfer
in all of the properties, assets, rights, claims and goodwill relating
exclusively to the business of the TPG (the "Business"), including all of the
outstanding capital stock owned by the Company in certain foreign subsidiaries
constituting part of the TPG (the "Foreign Subsidiaries") (collectively the
"Purchased Assets"). As consideration for the transfer of the Purchased Assets
and Sellers' other undertakings in the Asset Purchase Agreement, including
certain restrictive covenants, Kuhlman has agreed to pay to Sellers at closing
$86,000,000 in cash. As additional consideration for the transfer of the
Purchased Assets and Sellers' other undertakings in the Asset Purchase
Agreement, Kuhlman has agreed to assume and fully pay, satisfy and discharge
when due (other than in the case of any good faith disputes) all of Sellers'
respective liabilities and obligations to the extent relating to the Business
other than specified liabilities expressly excluded in the Asset Purchase
Agreement.
Representations and Warranties. The Asset Purchase Agreement contains
customary representations and warranties of Sellers with respect to the
Business. The representations and warranties of Sellers relate to, among other
things: Sellers' organization and qualification; Sellers' authority to enter
into the Asset Purchase Agreement and to consummate the transactions
contemplated thereby; the absence of conflicts and required consents and
approvals; filings made by the Company with the Securities and Exchange
Commission under the Securities Act or Exchange Act (including financial
statements included in the documents filed by the Company under those acts);
the absence of any material adverse change; litigation; compliance with laws;
tax matters; termination, severance and employment agreements; employee benefit
plans; environmental matters; labor matters; title to the Purchased Assets;
real property; intellectual property; material contracts; and broker's fees.
The Asset Purchase Agreement also contains customary representations and
warranties of Kuhlman with respect to, among other things: Kuhlman's
organization; authority to enter into the Asset Purchase Agreement and to
consummate the transactions contemplated thereby; the absence of potential
conflicts and required consents and approvals; broker's fees; acceptance of the
Purchased Assets; and financing.
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Survival of Representations, Warranties and Covenants. None of the
representations or warranties of Sellers and Kuhlman in the Asset Purchase
Agreement will survive the closing, other than Sellers' representations and
warranties with respect to broker's fees, title to the Purchased Assets and
authority to enter into and consummate the transactions contemplated by the
Asset Purchase Agreement, which will survive forever. The post-closing
covenants and agreements of the parties, including the indemnification
covenants described in "Indemnification" below, will survive the closing
without limitation, except for those that, by their terms, contemplate a
shorter survival period. Except for the covenants and agreements of Sellers
described in "Interim Operations of Sellers" below, which will survive for two
years after the closing, all pre-closing covenants and agreements of the
parties will not survive the closing.
Interim Operations of Sellers. The Asset Purchase Agreement provides that,
except as contemplated thereby or as expressly agreed to in writing by Kuhlman,
during the period from the date of the Asset Purchase Agreement to the closing:
(i) each Seller will conduct its operations relating to the Business in the
ordinary course of business consistent with past practices; (ii) each Seller
will exercise its reasonable best efforts to preserve intact the present
business organizations and personnel relating to the Business, preserve the
present goodwill of the Business with all persons having business dealings with
it and comply with all laws applicable to the conduct of the Business; (iii)
Sellers will not take, or agree in writing or otherwise to take, any action
that would make any of the representations or warranties of Sellers contained
in the Asset Purchase Agreement untrue or incorrect in any material respect as
of the date when made; and (iv) the Foreign Subsidiaries will not transfer any
cash or cash equivalents to the Company.
Termination. The Asset Purchase Agreement may be terminated: (i) by either
the Company or Kuhlman if a court or other governmental body has taken action
to prohibit the transactions contemplated thereby or if the transactions
contemplated by the Asset Purchase Agreement have not closed by June 30, 1997;
(ii) by Kuhlman upon certain breaches of the Asset Purchase Agreement by
Sellers, following notice to, and an opportunity to cure such breaches by, the
Company; (iii) by the Company upon certain breaches of the Asset Purchase
Agreement by Kuhlman, following notice to, and an opportunity to cure such
breaches by, Kuhlman; and (iv) by the Company if the Merger Agreement is
terminated for any reason. If the Company terminates the Asset Purchase
Agreement pursuant to the immediately preceding clause (iv), it has agreed to
pay Kuhlman the sum of $100,000 within three business days of termination,
provided that Kuhlman is not in material breach of its representations,
warranties or obligations under the Asset Purchase Agreement.
Restrictive Covenants. Subject to certain exceptions, Sellers and their
respective subsidiaries have agreed not to compete with the Business or
solicit, divert or accept orders from certain customers of the Business for
five years following the closing of the transactions contemplated by the Asset
Purchase Agreement. In addition, Sellers and their respective subsidiaries have
agreed not to solicit certain employees of the Business for three years
following the closing. The foregoing covenants will not restrict the right of a
Seller or any subsidiary to own up to 5% of the outstanding capital stock of
certain publicly traded companies or to acquire a business any unit of which
engages in any activity restricted by the foregoing covenants, provided that
not more than 15% of the consolidated revenues of the acquired business is
derived from the unit and the acquired business divests itself of the unit
within one year after the purchase. The Parent has entered into a Joinder dated
February 2, 1997 under which it agrees, effective as of the consummation of the
Offer, to be responsible for Sellers' compliance with the restrictive covenants
described above. A copy of the Joinder is filed as Exhibit 4 to this statement
and is here incorporated by reference.
Conditions to the Transaction. The obligations of the parties to consummate
the transactions contemplated by the Asset Purchase Agreement are subject to
the satisfaction or waiver of certain conditions, including that no statutes,
rules, regulations or actions by governmental authorities must have been
enacted or taken that make illegal or prohibit the consummation of such
transactions or otherwise would materially adversely affect the Business. The
obligations of Kuhlman to consummate the transactions contemplated by the Asset
Purchase Agreement are subject to the satisfaction or waiver of certain
additional conditions, including that Sellers are not in breach of their
representations, warranties or covenants under the Asset Purchase Agreement
(subject to certain materiality standards and cure periods) and the absence of
certain developments with respect to the Business that
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have had or may reasonably be expected to have a material adverse effect on
the Business. The obligation of Sellers to consummate the transactions
contemplated by the Asset Purchase Agreement are subject to the satisfaction
or waiver of certain additional conditions, including that Kuhlman is not in
breach of its representations, warranties or covenants under the Asset
Purchase Agreement (subject to certain materiality standards and cure periods)
and that the Offer must have been consummated.
Indemnification. Sellers have agreed to defend, indemnify and hold harmless
Kuhlman and certain related parties against certain losses and expenses
resulting from or relating to, among other things: (i) any breach of any
representation, warranty, covenant or agreement made by Sellers in the Asset
Purchase Agreement that survives the closing or any breach or nonperformance
of any agreement entered into by any Seller at closing; and (ii) any
liabilities of Sellers not assumed by the Asset Purchaser pursuant to the
Asset Purchase Agreement.
Kuhlman has agreed to defend, indemnify and hold harmless each Seller and
certain related parties against certain losses and expenses resulting from or
relating to, among other things: (i) any breach or nonperformance of any
covenant or agreement made by Kuhlman in the Asset Purchase Agreement that
survives the closing or any agreement entered into by Kuhlman at closing; (ii)
liabilities assumed by Kuhlman in the Asset Purchase Agreement, and (iii) the
conduct of the Business and the use of the Purchased Assets after closing.
The Asset Purchase Agreement limits in certain respects the indemnification
obligations of Sellers. In particular, except with respect to post-closing
covenants and agreements of Sellers and other limited matters set forth in the
Asset Purchase Agreement, Sellers will not be liable to Kuhlman for any
indemnification claims until the aggregate amount of the claims exceeds
$500,000 (the "Basket Amount"), and upon reaching the Basket Amount Sellers
will be liable to Kuhlman for all indemnification claims in excess of the
Basket Amount up to a maximum aggregate amount of $8,000,000.
Parent has entered into a Joinder dated February 2, 1997 under which it
agrees, effective as of the consummation of the Offer, to be responsible for
Sellers' performance of their indemnification obligations under the Asset
Purchase Agreement. A copy of the Joinder is filed as Exhibit 4 to this
statement and is here incorporated by reference.
OTHER ARRANGEMENTS
Upon consummation of the Offer, Parent has agreed to engage George R.
Kempton, Chairman of the Board and Chief Executive Officer of the Company,
Peter W. Gravelle, President and Chief Operating Officer of the Company, and
Timothy D. Peterson, Vice President--Marketing and International of the
Company (the "Consultants") to act as consultants to Parent with respect to
Parent's operations and business development activities. In connection with
their engagement by Parent, the Consultants have agreed to refrain from
engaging in any activity in competition with Parent and to provide certain
consulting services for Parent. Under the consulting agreements, Mr. Kempton
will receive $49,400 per month for 36 months, Mr. Gravelle will receive
$44,600 per month for 72 months and Mr. Peterson will receive $14,100 per
month for 72 months. Copies of the consulting agreements are filed as Exhibits
5(a), 5(b) and 5(c) to this statement and are here incorporated by reference.
This summary of the consulting agreements is qualified in its entirety by
reference to those Exhibits.
The Company has entered into various agreements and arrangements with its
directors and executive officers which are described under "EXECUTIVE
COMPENSATION" in the Information Statement. That description is here
incorporated by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors. The Board of Directors of the
Company recommends that all holders of Shares accept the Offer and tender
their Shares pursuant to the Offer.
The Board of Directors of the Company has unanimously adopted the Merger
Agreement and approved the transactions contemplated thereby, including the
Offer and the Merger, and determined that the consideration to be paid for
each Share in the Offer and the Merger is fair to the shareholders of the
Company and that the Offer and the Merger are otherwise in the best interests
of the Company and its shareholders. A copy of a letter to the
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shareholders of the Company from George R. Kempton, on behalf of the Board,
communicating the Board of Directors' recommendation is filed as Exhibit 6 to
this statement and is here incorporated by reference.
(b) Background; Reasons For the Board's Recommendation.
Background. On June 4, 1996, George R. Kempton, Chairman of the Board and
Chief Executive Officer of the Company, wrote to Richard C. Osborne, Chairman
and Chief Executive Officer of Parent, suggesting that the parties meet to
discuss a possible strategic alliance. On June 18, 1996, the chairmen of the
respective companies met and, following the execution of a mutual
Confidentiality and Standstill Agreement dated June 18, 1996, a copy of which
is filed as Exhibit 7 to this statement and is here incorporated by reference,
discussed potential synergistic advantages that might be obtainable through a
combination of the companies' respective product and marketing capabilities.
At the time of the meeting, the market price for the Company's Common Shares
was approximately $25 per share.
On June 19, 1996, Mr. Kempton wrote Mr. Osborne outlining several reasons
why an alliance of the Company and Parent may be mutually beneficial. The
reasons outlined by Mr. Kempton included: (i) the Company's walk-in cooler and
deli case product lines complemented Parent's product lines for the food
service industry (restaurants, fast food chains and convenience stores); (ii)
Parent's ice machines and food preparation work stations complemented the
Company's display case product lines for the supermarket industry; (iii) there
was little or no product overlap between the two companies; (iv) purchasing
trends of customers in the food service and supermarket industries suggested a
desire of those customers to reduce their numbers of individual suppliers and
to enter into longer-term supply relationships with full-line suppliers that
could provide acceptable quality, delivery and price; and (v) the companies'
manufacturing operations geographically complemented each other on a global
basis, particularly in light of Parent's strong presence and experience in the
European markets and the Company's market position in Australia and its
expansion in Southeast Asian markets.
Additional correspondence was exchanged by the parties during the month
following their initial meeting and another meeting between certain executive
officers of the companies was held on July 24, 1996. At that meeting the
parties continued to explore the potential advantages of combining the
Company's commercial products business with the commercial products business
of Parent.
At the Company's regularly scheduled Board of Directors' meeting held July
26, 1996, Mr. Kempton reported to the Board on the meetings that had been held
with Parent and inquired whether the Board desired Mr. Kempton to explore
further a possible business combination with Parent. The Board authorized the
Company's management to continue dialogue with Parent to determine whether a
proposal could be obtained which would provide a premium value to the
Company's shareholders, although the Board emphasized that it was not making
any decision to sell the Company.
Following the July 26, 1996 Board meeting, Mr. Osborne contacted Mr. Kempton
and indicated that Parent had a continuing interest in a possible acquisition
of the Company's commercial products business. Mr. Osborne also informed Mr.
Kempton that Parent would engage the investment banking firm of Morgan Stanley
& Co. Incorporated ("Morgan Stanley") to assist in Parent's evaluation of the
Company.
On September 6, 1996, Mr. Kempton and other executive officers of the
Company met with representatives of Parent and Morgan Stanley and continued
discussions concerning the possible acquisition of the Company by Parent. In
that meeting, Mr. Osborne stated that Parent had no interest in acquiring the
Company's TPG and he inquired whether the Company might be willing to sell its
commercial products group business separately. Due to the cyclical nature of
the Company's TPG, Mr. Kempton indicated that he did not believe it would be
beneficial to the Company's shareholders to retain the TPG, as it was
currently constituted, as a stand-alone business entity, but he acknowledged
that a sale of the TPG to a third party in connection with the acquisition of
the Company by Parent might maximize value to the Company's shareholders.
Also in September 1996, the Company engaged a regional investment banking
firm to conduct an evaluation of each of the Company's nine operating
divisions to assist the Company's management and Board of Directors
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in its long-range strategic planning. The investment banking firm reported to
the Company's management on various potential strategic alternatives to enhance
the value of the Company to its shareholders, including: (i) maintaining the
status quo and carrying out current operating plan strategies; (ii)
implementing an aggressive campaign to increase the investing community's
awareness of the Company; (iii) issuing letter stock to reflect the value of
one of the Company's two product groups; (iv) spinning off one of the Company's
two products groups in the form of a dividend to existing shareholders; (v)
partially divesting the TPG and retaining isolated product lines (such as the
fan and fan clutch cooling product lines); (vi) divesting the TPG in its
entirety; (vii) divesting the Company's commercial products business; and
(viii) selling the entire Company.
In late September 1996, Mr. Osborne contacted Mr. Kempton and reemphasized
that Parent would not make any acquisition proposal for the Company unless the
TPG could be sold to a third party in a prearranged transaction. Mr. Osborne
requested and received permission to contact a third party that had acquired
several transportation components companies to see if that party had an
interest in acquiring the TPG. Mr. Osborne subsequently informed Mr. Kempton
that the third party expressed an interest in the possible acquisition of the
TPG assets in a transaction in which the Company would receive a cash payment
of up to $85 million, although Mr. Osborne understood that the third party's
proposal would not include the assumption of pre-closing liabilities associated
with the TPG, other than perhaps current trade payables. The parties agreed
that they would continue to investigate whether a more advantageous sales
opportunity might be available for the TPG.
At its regularly scheduled meeting held October 24, 1996, Mr. Kempton updated
the Board on his discussions with Mr. Osborne. The Board also reviewed and
discussed the report of the regional investment banking firm concerning
possible alternatives to maximize value to the Company's shareholders and
additional discussions on this topic were scheduled for the Board's January
1997 meeting. The Board also authorized Mr. Kempton to discuss with two
executive managers of the TPG (the "MBO Proponents") whether they had an
interest in investigating a possible management buy-out of the TPG.
During late November and early December 1996, the MBO Proponents met with
independent financial advisers to determine the feasibility of a management-led
acquisition of the TPG. The MBO Proponents reported to Mr. Kempton that they
did have an interest in bidding for the TPG and that, based upon the meetings
held with their financial advisers, they believed that a transaction could be
structured providing a purchase price of approximately $90 million ($85 million
in cash and $5 million in notes). The MBO Proponents indicated, however, that
any offer they would make would be conditioned upon the Company retaining
responsibility for pre-closing liabilities associated with the TPG, other than
trade payables and certain other designated liabilities, and upon obtaining
necessary financing.
On December 17, 1996, the Company's executive management, including the MBO
Proponents, met again with representatives of Parent and Morgan Stanley and
continued discussions concerning the possible acquisition of the Company by
Parent. The MBO Proponents were given an opportunity at that meeting to outline
their interest in acquiring the TPG and the proposed structure of a
transaction. In a subsequent conversation with Mr. Kempton, Mr. Osborne
expressed concerns as to the financing uncertainties associated with the MBO
Proponents' proposal and certain of the suggested terms of the proposal.
A special meeting of the Company's Board of Directors was held on December
17, 1996 to review and discuss the status of discussions with Parent, the
interest expressed by the MBO Proponents in the TPG and the response of Parent
to the MBO Proponents' proposal. Mr. Kempton noted that, within the preceding
month, Kuhlman had made an unsolicited inquiry as to whether the Company might
wish to explore some strategic alliance involving the TPG. He also noted that
several years earlier the Company had engaged in discussions with Schwitzer,
Inc. ("Schwitzer") concerning a possible business combination, and that after
the termination of those discussions Schwitzer had been acquired by Kuhlman. It
was determined that Mr. Kempton would contact Kuhlman to investigate whether it
might be interested in acquiring the TPG in a transaction that would facilitate
an acceptable proposal by Parent for the entire Company.
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At its December 17, 1996 meeting, the Board also constituted a committee (the
"Special Committee") comprised of the non-employee directors serving on the
Board's Acquisition, Divestiture and Merger Committee (Messrs. Grant C. Gentry
(Chair), Robert W. Navarre and Robert J. Ratliff), together with Mr. Kempton
(ex-officio) and Paul K. Gaston, to assist the Board in evaluating any proposal
that might be made for the Company or the TPG. The Special Committee held its
first meeting on December 20, 1996.
Discussions continued with Parent during the remainder of December 1996, and
on December 26, 1996, Mr. Kempton and another executive officer of the Company
met with Gary G. Dillon, the Chairman, President and Chief Executive Officer of
Schwitzer, to discuss a possible acquisition of the TPG by Kuhlman. Based upon
preliminary evaluation materials made available pursuant to a mutual
Confidentiality and Standstill Agreement executed at that meeting, a copy of
which is filed as Exhibit 8 to this statement and is here incorporated by
reference, Mr. Dillon expressed a substantial interest in pursuing an
acquisition transaction.
On December 27, 1996, legal counsel for the Company and Parent met and
discussed possible transaction structures, timing and due diligence.
Mr. Dillon visited various of the TPG facilities during the first week of
January 1997, and on January 6, 1997, contacted Mr. Kempton and confirmed
Kuhlman's interest in acquiring the TPG. At the time, Kuhlman was not aware
that the Company was discussing a possible sale transaction with Parent. Mr.
Kempton and Mr. Osborne discussed the preliminary indications of value
expressed by Mr. Dillon and they agreed that a three-way meeting should be held
among the parties to determine whether an acceptable proposal for the TPG could
be structured. Mr. Osborne indicated that Parent's valuation of the Company
would be adversely affected by any continuing exposure of the Company to
liabilities associated with the TPG.
On January 13, 1997, the Special Committee met to review and discuss the
status of discussions with Parent and Kuhlman. At that meeting, the Special
Committee authorized the engagement of the investment banking firm of William
Blair & Co., L.L.C. ("William Blair") to evaluate the fairness from a financial
point of view to the Company's shareholders of the consideration to be received
by such shareholders in any offer that might be made by Parent, taking into
consideration the possible sale of the TPG as part of such a proposal. The
scope of William Blair's engagement was subsequently enlarged to include
assisting the Company in its negotiations with Parent.
From January 20, 1997 through February 1, 1997, the Company engaged in
extensive negotiations with Parent and Kuhlman concerning the terms of the
definitive agreements under which Parent would acquire the Shares and Kuhlman
would acquire the TPG. Between January 21 and January 23, 1997, representatives
of each of the parties held extended meetings at the offices of the Company's
legal counsel, including a meeting held January 23, 1997 among Mr. Kempton, Mr.
Osborne and Mr. Dillon. The contractual terms negotiated with Parent during
this period included, among others, the terms of the Offer, the representations
and warranties to be made by the Company in the Merger Agreement (which is
described in detail in Item 3 in this statement), the conditions to the
Purchaser's obligations to consummate the Offer and the Merger, and the size of
the termination fee and instances in which such fee would be payable in the
event the transactions contemplated by the Merger Agreement were not
consummated. The terms negotiated with Kuhlman concerning the Asset Purchase
Agreement (which is described in Item 3 of this statement) included, among
others, the liabilities to be assumed by Kuhlman as part of the transaction,
the representations and warranties to be made by the Company in the Asset
Purchase Agreement and the obligations of the Company with respect to such
representations and warranties following the closing and the conditions to
Kuhlman's obligations to consummate the Asset Purchase Agreement.
The terms of the respective definitive agreements and the ongoing
negotiations with respect to such agreements were reviewed by the Special
Committee in meetings held on January 30 and 31, 1997, and by the Company's
Board of Directors in a meeting on January 31, 1997. At the January 31, 1997
meeting, the Board of Directors also received a preliminary report from William
Blair. On January 31, 1997 and February 1, 1997, Parent also negotiated with
certain of the Company's key executive officers mutually acceptable consulting
and noncompetition agreements (which are attached to this statement as Exhibits
5(a), 5(b), and 5(c)), and
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modifications of existing agreements between such individuals and the Company,
each of which was a condition to Parent entering into the Merger Agreement.
All substantive terms of the Merger Agreement and the Asset Purchase
Agreement were resolved on February 1, 1997, and the Company's Board of
Directors convened to review the terms of the respective agreements. At that
meeting, William Blair delivered its opinion to the Board of Directors, as
described below, to the effect that the consideration to be received by the
Company's shareholders in the Offer and the Merger is fair from a financial
point of view and the Board unanimously approved both the Merger Agreement and
the Asset Purchase Agreement, subject to the fulfillment of certain conditions
which were subsequently satisfied.
On February 2, 1997, the Merger Agreement and the Asset Purchase Agreement
were executed by the respective parties, and press releases announcing the
execution of such agreements and the transactions contemplated thereunder were
issued on the morning of February 3, 1997 before the opening of the New York
Stock Exchange, Inc. A copy of the joint press release issued by the Company
and Parent is filed as Exhibit 3 to this statement and is here incorporated by
reference.
Reasons for the Board's Recommendation; Factors Considered by the Board. In
making its decision and concluding to recommend that holders of Shares tender
their Shares pursuant to the Offer as described in Item 4(a) above, the
directors of the Company considered a number of factors, including, among
others, the following material considerations:
(i) the directors' familiarity with and review of the business, financial
condition, results of operations and prospects of the Company and the
Company's competitive position in its business, as well as general economic
and stock market conditions;
(ii) the advantages of a strategic combination with Parent in enhancing
the Company's growth prospects and competitive position and the advantages
of a strategic combination with Kuhlman in enhancing the growth prospects
and competitive position of the TPG;
(iii) the possible alternatives to the Offer and the Merger, including,
among others, continuing to operate the Company as an independent entity
and the risks associated therewith;
(iv) the historical and recent market prices and trading volumes for the
Shares and the premium represented by the $43.00 per Share payable in the
Offer over those market prices;
(v) the anticipated costs associated with restructuring the Company or
pursuing other strategic alternatives;
(vi) the directors' belief that $43.00 payable in the Offer represented
the highest price per Share that could be negotiated with Parent;
(vii) the presentations by William Blair, including the opinion of
William Blair, a copy of which is filed as Exhibit 9 to this statement, to
the effect that, as of February 1, 1997, the $43.00 per Share in cash to be
received by holders of Shares (other than Parent or any of its affiliates)
in the Offer and the Merger is fair to those holders from a financial point
of view;
(viii) the timing of the sale of the Company and premiums currently being
obtained in comparable transactions;
(ix) the proposed structure of the transaction involving an immediate
cash tender offer for all outstanding Shares to be followed by a merger,
thereby enabling the shareholders to obtain cash for their Shares with
relatively little delay, and the tax effects of the transaction on the
Company's shareholders;
(x) the terms and conditions of the Merger Agreement, including, among
others, the right of the Company's Board of Directors (a) in connection
with the discharge of the Board's fiduciary duties to the Company and its
shareholders, to withdraw, modify or amend its recommendation to
shareholders to accept the Offer and/or to pursue a Takeover Proposal from
another party, and (b) in certain circumstances to terminate the Merger
Agreement (in which case, under certain conditions, the Company would be
obligated to pay Parent up to $1,750,000 of expenses incurred by Parent and
the Purchaser in connection with the Offer, the Merger and the other
transactions contemplated by the Merger Agreement and, if a Takeover
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Proposal (other than a Takeover Proposal relating to the sale of the TPG)
were consummated within 365 days after such termination, an additional fee
of $9,000,000);
(xi) the terms and conditions of the Asset Purchase Agreement, including,
among others, the closing condition (which the Company can waive) that the
Offer must have been consummated;
(xii) that all of the Company's shareholders will receive the same price
and consideration for their Shares;
(xiii) the financial strength of Parent and the absence of any financing
condition in the Offer or in the Merger Agreement; and
(xiv) the regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
The Company's directors also recognized that, while consummation of the Offer
and the Merger will result in all shareholders being entitled to receive $43.00
net in cash for each of their Shares, it will eliminate the opportunity for
current shareholders to participate in the benefit of increases, if any, in the
value of the Company's business and properties following the Merger.
Accordingly, the directors gave consideration to the Company's future
prospects, as well as its historical results of operations.
The Board of Directors of the Company did not assign relative weights to the
foregoing factors or determine that any factor was of specific importance
relative to any other factor. Rather, the Board viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it.
The full text of the opinion of William Blair dated February 1, 1997 is filed
as Exhibit 9 to this statement and is here incorporated by reference. Item 5 of
this statement includes a description provided by William Blair of the
assumptions made, matters considered, analyses used and limitations on the
review undertaken by William Blair in connection with the opinion. SHAREHOLDERS
ARE URGED TO READ THE OPINION AND THE RELATED DESCRIPTION IN ITEM 5 IN THEIR
ENTIRETY. The Company's Board of Directors was aware that William Blair would
be entitled to receive certain fees described in Item 5 below upon the
consummation of the transactions contemplated by the Merger Agreement.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter dated January 27, 1997 (the "Engagement
Letter"), the Company retained William Blair to render certain financial
advisory and investment banking services to the Company in connection with the
transactions contemplated by the Merger Agreement, including rendering an
opinion, if it was able, as to the fairness, from a financial point of view, of
the consideration to be received by the Company's shareholders (other than
Parent or any affiliates) with respect to the Shares pursuant to the Merger
Agreement. William Blair is a nationally recognized firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with merger transactions and
other types of strategic combinations and acquisitions. The Company retained
William Blair as its financial advisor on the basis of William Blair's
experience and expertise in transactions similar to the Merger and its
reputation in the investment banking community.
As consideration for William Blair's services, the Company paid William Blair
a retainer fee of $35,000 upon execution of the Engagement Letter, is obligated
to pay William Blair an additional fee of $80,000 in connection with the
rendering of its fairness opinion and is obligated to pay William Blair an
additional fee of $70,000 upon the dissemination of this statement. The Company
further agreed in the Engagement Letter that if it consummated the transactions
contemplated by the Merger Agreement, then the Company would pay William Blair
an additional fee equal to the sum of (i) 0.15% of the total consideration
received by the Company's shareholders with respect to the Shares in such
transaction, less amounts previously paid or payable to William Blair as
described in the preceding sentence, and (ii) 5.0% of the amount by which such
total consideration exceeds the product of $40.00 times the number of Shares
outstanding calculated on a fully diluted basis, provided that in no event will
the aggregate fees paid to William Blair exceed 0.75% of the total
consideration received by the Company's shareholders with respect to the
Shares. In addition, the Company has agreed to
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reimburse William Blair for its reasonable out-of-pocket expenses, including
the reasonable fees and expenses of its legal counsel, incurred in connection
with the performance of its duties under the Engagement Letter, and has agreed
to indemnify William Blair against certain liabilities, including liabilities
arising under applicable securities laws.
As noted above, as part of its engagement the Company asked William Blair to
render an opinion, if it was able, as to the fairness, from a financial point
of view, of the consideration to be received by the Company's shareholders
(other than Parent or any of its affiliates) pursuant to the Merger Agreement.
The following is a summary provided by William Blair of certain of the
assumptions made, matters considered, financial analyses used and limitations
on the review undertaken by William Blair in connection with providing its oral
opinion (confirmed in writing) to the Board of Directors of the Company on
February 1, 1997, that the consideration to be received by the Company's
shareholders pursuant to the Merger Agreement as of such date is fair to the
Company's shareholders from a financial point of view. William Blair's opinion
does not constitute a recommendation by William Blair to any shareholder of the
Company as to whether to tender Shares pursuant to the Offer. William Blair has
in the past and may in the future render investment banking services to Parent.
The full text of the opinion of William Blair, dated February 1, 1997, is filed
as Exhibit 9 to this statement and is here incorporated by reference.
In connection with its opinion, William Blair reviewed, among other things:
(i) a draft of the Merger Agreement and a draft of the Asset Purchase
Agreement, including the financial terms thereof; (ii) audited financial
statements of the Company for the four fiscal years ended December 31, 1995,
1994, 1993 and 1992; (iii) the unaudited financial statements of the Company
for the fiscal year ended December 31, 1996; (iv) certain internal information
and forecasts for the Company prepared by its management; and (v) certain other
publicly available information on the Company. William Blair also held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects.
In addition, William Blair reviewed the reported price and trading activity for
the Common Shares, compared certain financial and stock market information for
the Company with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the commercial refrigeration products and
transportation components industries specifically and in other industries
generally and performed such other studies and analyses as it considered
appropriate. William Blair was not requested to, nor did it, seek alternative
participants for a proposed transaction.
In connection with its review, William Blair assumed and relied upon the
accuracy and completeness of all such information and did not attempt to verify
independently any of such information. In addition, William Blair did not make
or obtain an independent valuation, appraisal or physical inspection of any of
the assets, properties or liabilities of the Company. With respect to financial
projections, William Blair assumed that the projections had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance of
the Company, and that such projections provided a reasonable basis upon which
William Blair could form an opinion. William Blair assumed no responsibility
for, and expresses no view as to, such forecasts or the assumptions on which
they were based. William Blair's opinion is necessarily based solely upon
information available to William Blair and business, market, economic and other
conditions as they existed on, and could be evaluated as of, February 1, 1997.
William Blair also assumed that the Offer and the Merger could be consummated
on the terms described in the Merger Agreement without any waiver of any
material terms or conditions by the Company.
The following presentation provided by William Blair summarizes certain
financial analyses performed by William Blair in arriving at its opinion dated
February 1, 1997, which analyses William Blair discussed with the Board of
Directors of the Company.
Implied Future Share Price Analysis. Using the projections by the Company's
management of future earnings and a discount rate equal to the Company's
estimated cost of equity of 14%, William Blair examined possible projected
future stock prices for the Company's Common Shares and determined that at the
Company's current price to earnings multiple the present value of the Company's
implied or projected future stock price (plus dividends received during the
relevant periods) in 1997, 1998 or 1999 would not equal or exceed the Offer
Price of $43.00.
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Comparable Company Analysis. William Blair compared selected historical and
projected operating information, stock market data and financial ratios for
the Company to selected historical and projected operating information, stock
market data and financial ratios of certain other publicly traded commercial
refrigeration products and transportation component companies. For companies
used as comparables to the commercial refrigeration products segment: (i) an
analysis of current stock prices to most recent twelve months earnings per
share yielded a range of 10.9 to 17.2 times earnings with a median of 14.0
times earnings; (ii) an analysis of current stock price to projected calendar
1996 earnings per share yielded a range for comparable companies of 12.6 to
23.3 times earnings with a median of 16.4 times earnings; and (iii) an
analysis of current stock price to projected calendar 1997 earnings per share
yielded a range for comparable companies of 11.6 to 18.2 times earnings with a
median of 13.5 times earnings. For companies used as comparables to the
transportation components segment: (i) an analysis of current stock prices to
most recent twelve months earnings per share yielded a range of 10.8 to 23.8
times earnings with a median of 14.2 times earnings; (ii) an analysis of
current stock price to projected calendar 1996 earnings per share yielded a
range for comparable companies of 10.4 to 18.5 times earnings with a median of
13.3 times earnings; and (iii) an analysis of current stock price to projected
calender 1997 earnings per share yielded a range for comparable companies of
9.0 to 13.9 times earnings with a median of 11.5 times earnings. William Blair
indicated that the price to last twelve months, estimated calendar 1996 and
estimated calendar 1997 earnings multiples calculated for the Company based on
the financial terms of the Offer and the Merger were within the ranges of
multiples of the comparable companies in both segments and above the medians
for price to projected 1997 earnings in the commercial refrigeration segment
and all the multiples of the transportation components segment. Among the
other information considered were multiples of revenues and earnings before
interest and taxes ("EBIT"). William Blair indicated that the price paid per
Share implied the following multiples: total transaction value (defined as
transaction equity value adjusted by adding long-term debt and subtracting
cash and short-term investments) ("Total Transaction Value") of 0.9 times the
latest twelve month's revenue (compared to a median multiple of 1.04 and a
range of 0.69 to 1.53 for the commercial refrigeration products group and a
median multiple of 0.77 and a range of 0.34 to 1.84 for the transportation
components group) and a Total Transaction Value of 11.4 times the latest
twelve month's EBIT (compared to a median multiple of 9.51 and a range of 7.03
to 15.21 for the commercial refrigeration products group and a median multiple
of 9.85 and a range of 7.57 to 15.55 for the transportation components group).
Stock Price Analysis. William Blair examined the history of the trading
prices and volume for the Common Shares over a two-year period. This analysis
revealed that between January 26, 1995 and January 28, 1997, over 92% of the
Common Shares trading volume had been at or below $34.00 per Common Share and
100% had been traded at or below $38.00 per Common Share. Further analysis
revealed that none of the volume that had traded above $34.00 had occurred
until after January 1, 1997.
Comparable Acquisitions Analysis. William Blair reviewed numerous mergers
and acquisitions involving commercial refrigeration product and transportation
component companies during the period from January 1, 1993 to January 27,
1997. In examining these transactions, William Blair analyzed certain income
statement and balance sheet parameters of the acquired companies relative to
the consideration paid. Multiples analyzed included Total Transaction Value as
a multiple of the last twelve months revenues, last twelve months earnings
before interest, taxes, depreciation and amortization ("EBITDA") and last
twelve months EBIT. In certain cases, complete financial data were not
publicly available for these transactions and only partial information was
used in such instances. An analysis of these ratios as applied to the
Company's results implied a median range of value for the Common Shares of
between $37.59 and $45.95, as compared to the Offer Price of $43.00.
Discounted Cash Flow Analysis. William Blair performed a discounted cash
flow analysis of the Company as a whole, and separate discounted cash flow
analysis for each of the commercial refrigeration products and transportation
components groups. The analysis was performed on various sets of projections,
assuming differing growth rates in each of the Company's two business
segments, based on information provided by the Company's management. Using
assumed weighted average costs of capital between 11.0% and 13.0%, the Offer
Price of $43.00 was within the range of values calculated in William Blair's
discounted cash flow analyses.
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The foregoing summary set forth above does not purport to be a complete
description of the analysis performed by William Blair. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances. Therefore, such an opinion is not readily
susceptible to summary description. The preparation of a fairness opinion does
not involve a mathematical evaluation or weighing of the results of the
individual analyses performed, but required William Blair to exercise its
professional judgment, based on its experience and expertise in considering a
wide variety of analyses taken as a whole. Each of the analyses conducted by
William Blair was carried out in order to provide a different perspective on
the Merger and add to the total mix of information available. William Blair did
not form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to fairness. Rather, in
reaching its conclusion, William Blair considered the results of the analyses
in light of each other and ultimately reached its opinion based on the results
of all analyses taken as a whole. William Blair did not place particular
reliance or weight on any particular analysis, but instead concluded its
analyses taken as a whole, supported its determination. Accordingly,
notwithstanding the separate factors summarized above, William Blair believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and the factors considered by it, without considering all analyses
and factors, may create an incomplete view of the evaluation process underlying
its opinion. In performing its analyses, William Blair made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. The analyses performed by William Blair are not
necessarily indicative of future actual values and future results, which may be
significantly more or less favorable than suggested by such analyses.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in this statement, no transactions in the Shares have
been effected during the past 60 days by the Company or, to the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company.
The Company has established a 401(k) defined contribution plan that includes
Common Shares as an investment option. Executive officers of the Company who
participate in the plan have acquired less than 300 Common Shares in the
aggregate during the past 60 days pursuant to previously existing investment
elections made with respect to investment options under the plan.
The Company has established a dividend reinvestment plan. Directors and
executive officers of the Company who have Common Shares enrolled in the plan
have acquired during the past 60 days less than 20 Common Shares in the
aggregate pursuant to standard reinvestment-of-dividend terms applicable to
participants in the plan.
The Company has established an employee stock purchase plan. Pursuant to
regular payroll deductions, Peter W. Gravelle, President and Chief Operating
Officer of the Company, has acquired approximately 24 Common Shares during the
past 60 days through the plan.
The Company has established an employee stock ownership plan ("ESOP"). In the
normal course of administering the ESOP, the ESOP trustee disposed of not more
than 2,100 Common Shares during the past 60 days in connection with
distributions to various participants and to obtain cash for distributions to
participants in lieu of fractional shares.
(b) The Company does not know of any commitments to tender Shares in the
Offer. Based on the best information available to the Company as of the date of
this statement, the Company presently believes that, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's
directors, executive officers and affiliates (other than the ESOP) who own
Shares currently intend to tender such Shares to the Purchaser pursuant to the
Offer, although they are under no obligation to do so. The determination of
whether Shares held by the ESOP will be tendered in the Offer is subject to the
individual directions of participants and the terms of the ESOP. Under the
terms of the Merger Agreement, any Shares owned by any wholly-owned subsidiary
of the Company will be canceled and retired at the Effective Time and will
cease to exist.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this statement, the Company is not engaged in any
negotiation in response to the Offer or the Merger which relates to or would
result in: (i) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company. At its February 1, 1997
meeting, the Board of Directors of the Company determined not to declare the
regularly scheduled dividend in light of the Offer and the Merger. In
addition, the Company, by order of its Board of Directors, has called for
redemption, or intends to promptly call for redemption, all Preferred Shares
not tendered in the Offer at the stated value of $24.375 per share.
(b) Except as set forth in this statement, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer or the Merger that relate to or would result in one or more of the
events referred to in Item 7(a) above. As discussed in Item 7(a) above, the
Company has called for redemption, or intends to promptly call for redemption,
all Preferred Shares not tendered in the Offer at the stated value of $24.375
per share.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Company's Articles of Incorporation contain two provisions that impose a
greater than majority voting requirement and may delay, defer or prevent a
takeover of the Company. Article X of the Company's Articles of Incorporation
requires an affirmative vote of 80% of the outstanding shares of the Company's
voting stock to approve certain business combination transactions between the
Company or any subsidiary of the Company and any 5% or greater shareholder
("Interested Shareholder") of the Company. Article XII of the Company's
Articles of Incorporation requires an affirmative vote of 80% of all
outstanding shares of the Company's voting stock, excluding shares held by
Interested Shareholders, for the approval of certain business combinations
between the Company or any subsidiary of the Company and an Interested
Shareholder, unless the business combination meets certain "fair price"
provisions. The supermajority vote provisions of Articles X and XII do not
apply to any transaction approved by a majority of the Board of Directors. The
Board of Directors of the Company has approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger.
Accordingly, the supermajority vote provisions of Articles X and XII do not
apply to the transactions contemplated by the Merger Agreement, including the
Offer and the Merger.
Fair Price Act. Chapter 7A of the MBCA (the "Fair Price Act") establishes a
statutory scheme similar to the supermajority and fair price provisions found
in many corporate charters (see the preceding paragraph regarding similar
provisions found in the Company's Articles of Incorporation). The Fair Price
Act provides that a supermajority vote of 90% of the shareholders and no less
than two-thirds of the votes of noninterested shareholders must approve a
"business combination." The Fair Price Act defines a "business combination" to
encompass any merger, consolidation, share exchange, sale of assets, stock
issue, liquidation or reclassification of securities involving an "interested
shareholder" or certain "affiliates." An "interested shareholder" is generally
any person who owns 10% or more of the outstanding voting shares of the
corporation. An "affiliate" is a person who directly or indirectly controls,
is controlled by or is under common control with a specified person.
The supermajority vote required by the Fair Price Act does not apply to
business combinations that satisfy certain conditions. These conditions
include, among others: (i) the purchase price to be paid for the shares of the
corporation in the business combination must be at least equal to the highest
of either (a) the market value of the shares or (b) the highest per share
price paid by the interested shareholder within the preceding two-year period
or in the transaction in which the shareholder became an interested
shareholder, whichever is higher; and (ii) once becoming an interested
shareholder, the person may not become the beneficial owner of any additional
23
<PAGE>
shares of the corporation except as part of the transaction which resulted in
the interested shareholder becoming an interested shareholder or by virtue of
proportionate stock splits or stock dividends.
In addition, the requirements of the Fair Price Act do not apply to business
combinations with an interested shareholder that the board of directors has
approved or exempted from the requirements of the Fair Price Act by resolution
prior to the time that the interested shareholder first became an interested
shareholder. The Board of Directors of the Company has given its prior approval
to the Merger Agreement and the transactions contemplated thereby, including
the Offer and the Merger, for purposes of the Fair Price Act. Accordingly, the
restrictions of the Fair Price Act do not apply to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger.
Control Share Act. Chapter 7B of the MBCA (the "Control Share Act") regulates
the acquisition of "control shares" of large public Michigan corporations,
including the Company, and establishes procedures governing "control share
acquisitions." A control share acquisition is defined as an acquisition of
shares by an acquirer which, when combined with other shares held by that
person or entity, would give the acquirer voting power at or above any of the
following thresholds: 20%, 33 1/3% or 50%. Under the Control Share Act, an
acquirer may not vote "control shares" unless the corporation's disinterested
shareholders (defined to exclude the acquiring person, officers of the target
corporation and directors of the target corporation who are also employees of
the corporation) vote to confer voting rights on the control shares. The
Control Share Act does not affect the voting rights of shares owned by an
acquiring person prior to the control share acquisition.
The Control Share Act entitles corporations to redeem control shares from an
acquiring person under certain circumstances. In other cases, the Control Share
Act confers dissenters' rights upon all of a corporation's shareholders except
the acquiring person.
On February 1, 1997, the Board of Directors of the Company adopted an
amendment to the Company's By-laws pursuant to Section 794 of the MBCA
providing that the Control Share Act will not apply to the acquisition of any
shares of classes of the Company's capital stock. Accordingly, the Control
Share Act will not apply to the transactions contemplated by the Merger
Agreement, including the Offer and the Merger.
Rights Agreement. Under the Rights Agreement, one Right is associated with
and represented by each outstanding Common Share. Each Right entitles the
holder to purchase one Common Share from the Company at a price of $100 per
share (subject to adjustment to prevent dilution). A Right is exercisable upon
the earlier to occur of (i) 10 days following public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person"), other
than the Company, any wholly-owned subsidiary or employee benefit plan of the
Company, or any entity holding Common Shares for or pursuant to the terms of an
employee benefit plan of the Company, acquires, or obtains the right to
acquire, beneficial ownership of 20% or more of all outstanding Common Shares,
or (ii) 10 days following the commencement or announcement of an intention to
commence a tender or exchange offer that would result in beneficial ownership
by a person of 30% or more of all outstanding Common Shares.
If the Company is acquired in a merger or other business combination
transaction, or if 50% or more of its assets or earning power are sold, each
holder of a Right will have the right to receive shares of the acquiring
company with a market value of two times the exercise price of the Right. In
addition, if the Company is the surviving corporation in a merger with an
Acquiring Person and its common stock is not changed or exchanged, an Acquiring
Person engages in one or more "self dealing" transactions considered to be
unfair to the Company, or an Acquiring Person becomes the beneficial owner of
more than 40% of the then outstanding Common Shares (except pursuant to an
offer for all outstanding Shares), each holder of a Right, other than the
Acquiring Person (whose Rights will become void), will have the right to
receive Common Shares with a market value of two times the exercise price of
the Right. The Company is entitled to redeem the Rights for $.01 each at any
time until 30 days after the Acquiring Person acquires or obtains the right to
acquire 20% or more of all outstanding Common Shares.
24
<PAGE>
The Company and the Rights Agent have amended the Rights Agreement pursuant
to Amendment No. 2 to Rights Agreement dated as of February 1, 1997, a copy of
which is filed as Exhibit 10 to this statement and is here incorporated by
reference. The amendment provides that neither Parent nor the Purchaser will
become an "Acquiring Person," that no "Shares Acquisition Date" or
"Distribution Date" (as those terms are defined in the Rights Agreement) will
occur and that Section 11 and Section 13 of the Rights Agreement will not be
triggered, as a result of the announcement, commencement or consummation of
the Offer, the execution or delivery of the Merger Agreement or any amendment
thereto, the consummation of the Merger, or the consummation of any other
transactions contemplated by the Merger Agreement. Under the Merger Agreement,
the Company has agreed that, without Parent's prior written consent or unless
required by applicable law, the Company will not redeem the Rights or amend
the Rights Agreement until the Purchaser's designees constitute a majority of
the Board of Directors of the Company.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<C> <S>
1 --Agreement and Plan of Merger dated as of February 2, 1997
between Parent, the Purchaser and the Company.
2 --Asset Purchase Agreement dated as of February 2, 1997 among
Kuhlman, the Asset Purchaser, the Company and the
Subsidiaries.
3 --Joint Press Release issued on February 3, 1997 by the
Company and Parent.
4 --Joinder dated February 2, 1997 made by Parent.
5(a) --Consulting and Noncompetition Agreement dated as of February
2, 1997 between Parent and George R. Kempton.
5(b) --Consulting and Noncompetition Agreement dated as of February
2, 1997 between Parent and Peter W. Gravelle.
5(c) --Consulting and Noncompetition Agreement dated as of February
2, 1997 between Parent and Timothy D. Peterson.
6* --Letter dated February 7, 1997 from George R. Kempton, on
behalf of the Board of Directors, to shareholders of the
Company.
7 --Confidentiality and Standstill Agreement dated June 18, 1996
between Parent and the Company.
8 --Confidentiality and Standstill Agreement dated December 26,
1996 between Kuhlman and the Company.
9* --Opinion of William Blair dated February 1, 1997.
10 --Amendment No. 2 to Rights Agreement, dated as of February 1,
1997, between the Company and the Rights Agent.
11* --Information Statement required by Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder in connection with
the designation by Parent of persons to the Board of
Directors of the Company. Attached as Annex I to this
statement and here incorporated by reference.
12** --Letter dated February 7, 1997 to participants in the Company
Savings Plan and 401(k) Plan.
13** --Letter dated February 7, 1997 to participants in the Company
Employee Stock Purchase Plan.
14** --Letter dated , 1997 to participants in the
Company Employee Stock Ownership Plan.***
15** --Letter dated February 7, 1997 to participants in the Company
Dividend Reinvestment Plan.
</TABLE>
- --------
*Included in materials mailed to all shareholders.
**Included in materials mailed to participants in the applicable plan.
***To be filed by amendment.
25
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Kysor Industrial Corporation
/s/ George R. Kempton
By __________________________________
George R. Kempton
Chairman of the Board and
Chief Executive Officer
Dated: February 7, 1997
26
<PAGE>
Exhibit 1
AGREEMENT AND PLAN OF MERGER
AMONG
SCOTSMAN INDUSTRIES, INC.,
K ACQUISITION CORP.
AND
KYSOR INDUSTRIAL CORPORATION
DATED AS OF FEBRUARY 2, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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Page
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<S> <C> <C>
ARTICLE I
THE OFFER................................ 2
SECTION 1.1 The Offer..................................................... 2
SECTION 1.2 Company Actions............................................... 4
ARTICLE II
THE MERGER................................ 6
SECTION 2.1 The Merger.................................................... 6
SECTION 2.2 Closing....................................................... 6
SECTION 2.3 Effective Time................................................ 6
SECTION 2.4 Effects of the Merger......................................... 7
SECTION 2.5 Articles of Incorporation and By-laws; Officers and Directors. 7
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES........... 7
SECTION 3.1 Effect on Capital Stock....................................... 7
SECTION 3.2 Surrender of Certificates..................................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 10
SECTION 4.1 Organization.................................................. 10
SECTION 4.2 Subsidiaries.................................................. 11
SECTION 4.3 Capital Structure............................................. 11
SECTION 4.4 Authority..................................................... 12
SECTION 4.5 Consent and Approvals; No Violations.......................... 13
SECTION 4.6 SEC Documents and Other Reports............................... 14
SECTION 4.7 Absence of Certain Changes or Events.......................... 15
SECTION 4.8 Information Supplied.......................................... 15
SECTION 4.9 No Existing Violation, Default, Etc........................... 16
SECTION 4.10 Licenses and Permits.......................................... 17
SECTION 4.11 Termination, Severance and Employment Agreements.............. 18
SECTION 4.12 Environmental Matters......................................... 19
SECTION 4.13 Tax Matters................................................... 19
SECTION 4.14 Actions and Proceedings....................................... 20
SECTION 4.15 Contracts..................................................... 20
SECTION 4.16 ERISA......................................................... 21
SECTION 4.17 Liabilities................................................... 22
SECTION 4.18 Intellectual Properties....................................... 22
SECTION 4.19 Propriety of Past Payments.................................... 23
SECTION 4.20 Opinion of Financial Advisor.................................. 23
</TABLE>
i
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<TABLE>
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<S> <C> <C>
SECTION 4.21 State Takeover Statutes; Rights Agreement; Charter Provisions. 23
SECTION 4.22 Asset Purchase Agreement...................................... 24
SECTION 4.23 Brokers....................................................... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............ 26
SECTION 5.1 Organization.................................................. 26
SECTION 5.2 Authority..................................................... 26
SECTION 5.3 Consents and Approvals; No Violations......................... 26
SECTION 5.4 Information Supplied.......................................... 27
SECTION 5.5 Interim Operations of Sub..................................... 28
SECTION 5.6 Brokers....................................................... 28
SECTION 5.7 Financing..................................................... 28
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS................ 28
SECTION 6.1 Conduct of Business by the Company Pending the Merger......... 28
SECTION 6.2 No Solicitation............................................... 31
SECTION 6.3 Third Party Standstill Agreements............................. 32
SECTION 6.4 Other Actions................................................. 33
ARTICLE VII
ADDITIONAL AGREEMENTS.......................... 33
SECTION 7.1 Shareholder Approval; Preparation of Proxy Statement.......... 33
SECTION 7.2 Access to Information......................................... 34
SECTION 7.3 Fees and Expenses............................................. 35
SECTION 7.4 Options....................................................... 36
SECTION 7.5 Public Announcements.......................................... 37
SECTION 7.6 Real Estate Transfer Tax...................................... 37
SECTION 7.7 State Takeover Laws........................................... 38
SECTION 7.8 Indemnification; Directors and Officers Insurance............. 38
SECTION 7.9 Notification of Certain Matters............................... 39
SECTION 7.10 Board of Directors............................................ 39
SECTION 7.11 Reasonable Best Efforts....................................... 40
SECTION 7.12 Certain Litigation............................................ 41
SECTION 7.13 Employee Benefits............................................. 42
SECTION 7.14 Employee Stock Ownership Plan and Trust....................... 42
SECTION 7.15 Severance..................................................... 42
</TABLE>
ii
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE VIII
CONDITIONS PRECEDENT........................... 42
SECTION 8.1 Conditions to Each Party's Obligation to Effect the Merger.... 42
ARTICLE IX
TERMINATION AND AMENDMENT......................... 43
SECTION 9.1 Termination................................................... 43
SECTION 9.2 Effect of Termination......................................... 45
SECTION 9.3 Amendment and Certain Other Actions........................... 45
SECTION 9.4 Extension; Waiver............................................. 46
ARTICLE X
GENERAL PROVISIONS............................ 46
SECTION 10.1 Non-Survival of Representations and Warranties................ 46
SECTION 10.2 Notices....................................................... 47
SECTION 10.3 Interpretation................................................ 47
SECTION 10.4 Counterparts.................................................. 48
SECTION 10.5 Entire Agreement; No Third-Party Beneficiaries................ 48
SECTION 10.6 Governing Law................................................. 48
SECTION 10.7 Assignment.................................................... 49
SECTION 10.8 Severability.................................................. 49
SECTION 10.9 Enforcement of this Agreement................................. 49
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of February 2, 1997 (this
"Agreement"), among SCOTSMAN INDUSTRIES, INC., a Delaware corporation
("Parent"), K ACQUISITION CORP., a Michigan corporation and a wholly owned
subsidiary of Parent ("Sub"), and KYSOR INDUSTRIAL CORPORATION, a Michigan
corporation (the "Company") (Sub and the Company being hereinafter collectively
referred to as the "Constituent Corporations").
W I T N E S S E T H:
--------------------
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have unanimously approved the acquisition of the Company by Parent
pursuant to a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") by Sub for (i) all of the outstanding shares
of Common Stock, $1.00 par value (the "Common Stock"), together with the related
Rights (as defined in Section 4.3), and (ii) all of the outstanding shares of
Series A Convertible Voting Preferred Stock, $24.375 stated value per share (the
"ESOP Preferred Stock"), of the Company, each at a price of $43.00 per share
(the "Offer Price"), net to the seller in cash, without interest thereon,
followed by a merger (the "Merger") of Sub with and into the Company upon the
terms and subject to the conditions set forth herein (the shares of Common
Stock, together with all associated Rights (except as the context otherwise
requires), and ESOP Preferred Stock subject to the Offer are hereinafter
referred to collectively as the "Shares");
WHEREAS, the Company has advised the Parent and Sub that, simultaneous
with the execution and delivery of this Agreement, the Company and certain of
its Subsidiaries are entering into an Asset Purchase Agreement dated as of the
date hereof (the "Asset Purchase Agreement") with Kuhlman Corporation, a
Delaware corporation ("Kuhlman"), and Transpro Group, Inc., a Delaware
corporation (together with Kuhlman, the "Private Buyer"), pursuant to which the
Company has agreed to sell to the Private Buyer, and the Private Buyer has
agreed to purchase from the Company, on a going concern basis, substantially all
of the assets and properties of the transportation products business conducted
by the Company (the "TPG Assets"), all on the terms and subject to the
conditions set forth in the Asset Purchase Agreement;
<PAGE>
WHEREAS, the Board of Directors of the Company has (i) determined that
the consideration to be paid for each Share in the Offer and for the TPG Assets
by the Private Buyer under the Asset Purchase Agreement are fair to and in the
best interests of the shareholders of the Company, (ii) approved and adopted
this Agreement and the Asset Purchase Agreement and the transactions
contemplated hereby and thereby and (iii) adopted resolutions unanimously
determining that, subject to the terms and provisions of this Agreement, the
Offer, the Merger, this Agreement and the Asset Purchase Agreement, and the
transactions contemplated thereby, are advisable, approving such transactions
and recommending that the Company's shareholders accept the Offer and, if
required by applicable law, approve this Agreement and the Merger; and
WHEREAS, pursuant to the Merger, each issued and outstanding share of
Company Capital Stock (as defined in Section 3.1) not owned directly or
indirectly by Parent or the Company will be converted into the right to receive
the consideration paid per Share pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE OFFER
---------
SECTION 1.1 The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of this
Agreement, Sub shall, and Parent shall cause Sub to, commence the Offer. The
obligation of Sub to, and of Parent to cause Sub to, commence the Offer and
accept for payment, and pay for, any Shares tendered pursuant to the Offer shall
be subject only to the conditions set forth in Exhibit A (the "Offer
Conditions") (any of which may be waived in whole or in part by Sub in its sole
discretion, provided that, without the consent of the Company, Sub shall not
waive the Minimum Condition (as defined in Exhibit A)). Sub expressly reserves
the right to modify the terms of the Offer, except that, without the consent of
the Company, Sub shall not (i) reduce the number of Shares subject to the Offer,
(ii) reduce the Offer Price, (iii) modify or add to the Offer Conditions (other
than to waive any Offer Conditions to the extent permitted by this Agreement),
(iv) except as provided in the next sentence, extend the Offer, (v) change the
form of consideration payable in
2
<PAGE>
the Offer or (vi) amend, waive or add any other term of the Offer in any manner
adverse to the Company or the holders of Shares. Notwithstanding the foregoing,
Sub may, without the consent of the Company, (i) extend the Offer if at the
scheduled or extended expiration date of the Offer any of the Offer Conditions
shall not be satisfied or waived until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or the staff thereof applicable to the Offer, (iii) extend the Offer
on one or more occasions for an aggregate period of not more than five business
days beyond the scheduled or extended expiration date if as of such expiration
date sufficient Shares have not been tendered in order for the Merger to be
effected without a vote of the Company's shareholders pursuant to Section
450.1711 of the MBCA and (iv) extend the Offer for any reason on one or more
occasions for an aggregate period of not more than five business days beyond the
latest expiration date that would otherwise be permitted under clause (i), (ii)
or (iii) of this sentence. So long as this Agreement is in effect and the Offer
Conditions have not been satisfied or waived, Sub shall, and Parent shall cause
Sub to, cause the Offer not to expire. In the event that the Company delivers to
Parent a Section 9.1(e) Notice (as defined in Section 9.1(e)), Sub shall extend
the Offer to the earlier of (i) a date that is not earlier than seven business
days following the date of such delivery, unless the Offer would otherwise not
expire prior thereto, or (ii) the termination of this Agreement by the Company
pursuant to Section 9.1(e). In the event that Parent delivers to the Company the
notice contemplated in paragraph (d) or (e) of Exhibit A, Sub shall extend the
Offer to a date not earlier than two business days following the end of the 20-
day cure period contemplated in such paragraph (d) or (e) or, if earlier, the
date on which the breach or failure to perform or comply, as the case may be, is
cured, unless the Offer would otherwise not expire prior thereto. Subject to the
terms and conditions of the Offer and this Agreement, Sub shall, and Parent
shall cause Sub to, accept for and pay for, all Shares validly tendered and not
withdrawn pursuant to the Offer that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-
1") with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1 and
the documents included therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "Offer Documents").
Parent, Sub and the Company each agrees
3
<PAGE>
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Parent and Sub further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the
SEC and the other Offer Documents as so corrected to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the shareholders of the Company. Parent and Sub
agree to provide the Company and its counsel any comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Prior to the expiration of the Offer, Parent shall provide or
cause to be provided to Sub all funds necessary to accept for payment, and pay
for, any Shares that Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
SECTION 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, at which all directors were present, has,
subject to the terms and provisions of this Agreement, duly and unanimously
adopted resolutions approving this Agreement, the Offer, the Merger and the
Asset Purchase Agreement and the transactions contemplated hereby and thereby,
determining that the Offer, the Merger and the transactions contemplated by this
Agreement and the Asset Purchase Agreement are advisable and that the terms of
the Offer, the Merger and the Asset Purchase Agreement are fair to, and in the
best interests of, the Company's shareholders and recommending that holders of
Shares accept the Offer and, if required by applicable law, that the Company's
shareholders approve this Agreement and the Merger; provided, however, that such
approval, determination, recommendation or other action may be withdrawn,
modified or amended at any time or from time to time if the Board of Directors
of the Company concludes in good faith based on the advice of its outside
counsel that it is necessary to do so in order to comply with its fiduciary
duties under applicable law. The Company represents that its Board of Directors
has received the opinion of William Blair & Company, LLC (the "Financial
Advisor") that the proposed consideration to be received by Company's common
shareholders pursuant to the Offer and the Merger is fair to the Company's
common shareholders (other than Parent or any of its affiliates) from a
financial point of view. The Company has been authorized by Financial Advisor to
permit, subject to prior review and consent by
4
<PAGE>
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of such fairness opinion (or a reference thereto) in the Offer Documents and in
the Schedule 14D-9 referred to below. The Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Company's Board of
Directors described in this Section 1.2(a), subject to the immediately preceding
proviso. The Company has been advised by each of its directors and executive
officers that each such person intends, as of the date of this Agreement, to
tender, or cause the tender of, all Shares owned by such person pursuant to the
Offer, including any shares of ESOP Preferred Stock over which such person has
the power to direct the tender, regardless of whether such shares are allocated
to such person's account.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) above (subject to the proviso in Section 1.2(a)) and shall mail a
copy of the Schedule 14D-9 to the shareholders of the Company. Each of the
Company, Parent and Sub agrees promptly to correct any information provided by
it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or supplement the Schedule
14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to the Company's shareholders, in each case as and
to the extent required by applicable federal securities laws. Parent and its
counsel shall be given reasonable opportunity to review and comment upon the
Schedule 14D-9 prior to its filing with the SEC or dissemination to shareholders
of the Company. The Company agrees to provide Parent and its counsel any
comments the Company or counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of shares of Common Stock as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of shareholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Sub such information and assistance (including updated lists of
shareholders, security position listings and computer files) as Parent or Sub
may reasonably request in communicating the Offer to the Company's
5
<PAGE>
shareholders. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent and Sub and their agents
shall hold in confidence the information contained in any such labels, listings
and files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request, deliver,
and will use their reasonable best efforts to cause their agents to deliver, to
the Company all copies of such information then in their possession or control.
(d) The Company shall use its reasonable best efforts to assist the
trustee (the "ESOP Trustee") under the Employee Stock Ownership Trust between
the Company and Old Kent Bank and Trust Company dated January 1, 1989, as
amended (the "ESOP Trust"), in the solicitation of directions from the
participants in the Company's Employee Stock Ownership Plan (the "Employee Stock
Plan") with respect to the tender of the shares of the ESOP Preferred Stock held
thereunder in accordance with the terms of the ESOP Trust and the Employee Stock
Plan.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Business Corporation Act of the State of
Michigan (the "MBCA"), Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 2.3). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the "rights and obligations of Sub in accordance with the MBCA." The
name of the Surviving Corporation shall be "Kysor Industrial Corporation".
SECTION 2.2 Closing. The closing of the Merger will take place at
10:00 a.m. on a date to be specified by Parent or Sub, which shall be no later
than the second business day after satisfaction or waiver of the conditions set
forth in Article VIII (the "Closing Date"), at the offices of Sidley & Austin,
One First National Plaza, Chicago, Illinois 60603, unless another date, time or
place is agreed to in writing by the parties hereto.
SECTION 2.3 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the MBCA, is accepted by the administrator (as
defined in the
6
<PAGE>
MBCA, the "Administrator"); provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 10 days after the date the
Certificate of Merger is delivered to the Administrator. When used in this
Agreement, the term "Effective Time" shall mean the later of the date and time
at which the Certificate of Merger is accepted by the Administrator or such
later time established by the Certificate of Merger. The filing of the
Certificate of Merger shall be made as soon as practicable after the
satisfaction or waiver of the conditions to the Merger set forth herein.
SECTION 2.4 Effects of the Merger. The Merger shall have the effects
set forth in Section 450.1724 of the MBCA.
SECTION 2.5 Articles of Incorporation and By-laws; Officers and
Directors. (a) Subject to Section 2.1, the Articles of Incorporation of Sub, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The By-Laws of the Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by the Articles of
Incorporation of the Surviving Corporation or by applicable law.
(c) The directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, until the next annual
meeting of shareholders (or the earlier of their death, resignation or removal)
and until their respective successors are duly elected and qualified, as the
case may be.
(d) The officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, for a term of one year
(or until the earlier of their death, resignation or removal) and until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES
---------------------------------------------------
SECTION 3.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on
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the part of Sub, the Company or the holders of any securities of the Constituent
Corporations:
(a) Capital Stock of Sub. Each issued and outstanding share of stock
of Sub shall be converted into and become one fully paid and nonassessable
shares of Common Stock, $1.00 par value, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
share of capital stock of the Company (including, without limitation, the
Shares purchased pursuant to the Offer) owned by the Company or any
Subsidiary of the Company, Parent, Sub or any other Subsidiary (as defined
in Section 10.3) of Parent (other than the shares into which the
outstanding shares of capital stock of Sub were converted pursuant to
Section 3.1(a)) automatically shall be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each share of (i) the Common Stock, together
with the related Right, or (ii) the ESOP Preferred Stock (the Common Stock
and the ESOP Preferred Stock are hereinafter collectively referred to as
the "Company Capital Stock"), in each case, that is issued and outstanding
(other than shares to be canceled in accordance with Section 3.1(b)), shall
be converted into the right to receive from the Surviving Corporation in
cash, without interest, the price paid per share of Common Stock in the
Offer (the "Merger Consideration"). As of the Effective Time, all such
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(e) Company Stock Options. Each Company Stock Option (as defined in
Section 4.3) that is outstanding shall be canceled and converted into the
right to receive the amount of cash specified in Section 7.4.
SECTION 3.2 Surrender of Certificates. (a) Paying Agent. Prior to the
Effective Time, Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as paying agent in the Merger (the "Paying
Agent"), and prior to the Effective Time, Parent shall deposit in trust with, or
cause the Surviving Corporation to deposit in trust with, the Paying Agent cash
in amounts necessary for the payment of the Merger
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Consideration upon surrender of certificates representing Shares as part of the
Merger (it being understood that any and all interest earned on funds made
available to the Paying Agent pursuant to this Agreement shall be turned over to
Parent). If the amount of cash deposited with the Paying Agent pursuant to this
Section 3.2 is insufficient to pay all of the amounts required to be paid
pursuant to Section 3.1, Parent from time to time after the Effective Time shall
take all steps necessary to enable or cause the Surviving Corporation to deposit
with the Paying Agent additional cash in an amount sufficient to make all such
payments.
As soon as reasonably practicable after the Effective Time, the Paying
Agent shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented Shares (the "Certificates"),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in a form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the Paying Agent
shall, and Parent shall cause the Paying Agent to, pay the holder of such
Certificate in exchange therefor the amount of cash into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 3.2, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of capital
stock theretofore represented by such Certificate shall have been converted
pursuant to Section 3.1. No interest will be paid or will accrue on the cash
payable upon the surrender of any Certificate.
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(c) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article III shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of capital stock theretofore represented by such Certificates. At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of capital stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article III.
(d) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Any funds deposited with the Paying Agent that remain unclaimed by the
shareholders of the Company on the first anniversary of the Effective Time shall
be repaid to the Surviving Corporation (including, without limitation, all
interest and other income received by the Paying Agent in respect of all such
funds), and thereafter shareholders of the Company shall look only to Parent or
the Surviving Corporation (subject to the terms of this Agreement, abandoned
property, escheat and other similar laws) as general creditors thereof with
respect to any Merger Consideration that may be payable upon due surrender of
the Certificates held by them.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows,
except that the following representations and warranties (other than those
contained in Section 4.22) do not pertain to, and the Company Letter (as defined
in Section 4.2) need not include, matters included among the Purchased Assets or
Assumed Liabilities (as defined in the Asset Purchase Agreement) (it being
understood that the inclusion of such matters shall not be interpreted to mean
that by implication such matters are not included among such Purchased Assets or
Assumed Liabilities):
SECTION 4.1 Organization. The Company and each of its Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, validly existing or in good standing would
not have a Material Adverse Effect (as defined in Section
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10.3) on the Company or prevent or materially delay the consummation of the
Offer or the Merger. The Company and each of its Subsidiaries is duly qualified
or licensed to do business and in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Offer or the Merger. The Company has,
or will prior to consummation of the Offer, deliver to Parent complete and
correct copies of its Articles of Incorporation and By-laws and the Articles of
Incorporation and By-laws (or similar organizational documents) of its
Subsidiaries.
SECTION 4.2 Subsidiaries. Item 4.2 of the letter from the Company to
Parent dated the date hereof, which letter relates to this Agreement and is
designated therein as the Company Disclosure Letter (the "Company Letter"),
lists each Subsidiary of the Company existing as of the date hereof. Except as
set forth in Section 4.2 of the Company Letter, all the outstanding shares of
capital stock of each Subsidiary of the Company are owned by the Company, by
another wholly owned Subsidiary of the Company or by the Company and another
wholly owned Subsidiary of the Company, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"), and are duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in Item 4.2 of the Company
Letter and except for the capital stock of its Subsidiaries, the Company does
not own, directly or indirectly, any capital stock or other ownership interest
in any corporation, partnership, joint venture or other entity.
SECTION 4.3 Capital Structure. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock (the "Preferred Stock"), of which 820,513 shares of Preferred
Stock have been designated as the ESOP Preferred Stock. At the close of business
on January 31, 1997, (i) 5,961,665 shares of Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, and (ii) 786,869.1221 shares of ESOP Preferred Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date of this Agreement,
except for (i) the rights to purchase shares of Common Stock (the "Rights")
issued pursuant to the Rights Agreement dated as of April 26, 1996 (the "Rights
Agreement"), between the Company and State Street Bank, as Rights Agent; (ii)
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the rights of holders of shares of ESOP Preferred Stock to convert such shares
into shares of Common Stock; and (iii) stock options covering not in excess of
1,550,670 shares of Common Stock, including shares offered under the Company's
1980 Nonqualified Stock Option Plan, Stock Option and Stock Appreciation Rights
Plan of 1980, 1983 Incentive Stock Option Plan, 1984 Stock Option Plan, 1987
Stock Option and Restricted Stock Plan and 1993 Long-Term Incentive Plan
(collectively, the "Company Stock Options"), there are no options, warrants,
calls, rights or agreements to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any Subsidiary or
obligating the Company or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right or agreement.
Except as set forth in the Company Letter and except in respect of the
ESOP Preferred Stock, as of the date of this Agreement, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries (i) to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or (ii) to vote or to dispose of any shares of the capital stock of any
of the Company's Subsidiaries.
SECTION 4.4 Authority. The Board of Directors of the Company has
approved and adopted this Agreement and the Asset Purchase Agreement and the
transactions contemplated hereby and thereby and adopted resolutions unanimously
determining that, subject to the terms and provisions of this Agreement, the
Offer, the Merger, this Agreement and the Asset Purchase Agreement, and the
transactions contemplated thereby, are advisable, approving such transactions
and recommending that the Company's shareholders accept the Offer and, if
required by applicable law, approve this Agreement and the Merger; and the
Company has all requisite corporate power and authority to enter into this
Agreement and the Asset Purchase Agreement and, subject to approval by the
shareholders of the Company of this Agreement and the Merger (if required), to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Asset Purchase Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to approval by the shareholders of the
Merger (if required). This Agreement and the Asset Purchase Agreement have been
duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Sub and of
the Asset Purchase Agreement
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by the Private Buyer) constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms. The only shareholder action required in order to effect the Merger is
approval of the Merger by the holders of a majority of the shares of the Company
Capital Stock outstanding as of the record date for the Shareholders Meeting (as
defined in Section 7.1), all holders of each of the Common Stock and the ESOP
Preferred Stock voting separately as a class to the extent any ESOP Preferred
Stock is outstanding as of such record date; provided, however, that if Sub
purchases an amount of Shares pursuant to the Offer sufficient to permit the
Merger to be effected in accordance with Section 450.1711 of the MBCA (which
would include all of the outstanding shares of ESOP Preferred Stock, unless the
same were converted into Common Stock pursuant to the terms thereof or
redeemed), no shareholder approval will be required. No action by the
shareholders of the Company is required under the MBCA or the Company's Articles
of Incorporation or By-laws in order to effect the transactions contemplated by
the Asset Purchase Agreement.
SECTION 4.5 Consent and Approvals; No Violations. Except as set forth
in Item 4.5 of the Company Letter, the execution and delivery of this Agreement
do not, and the consummation by the Company and its shareholders of the
transactions contemplated hereby and compliance with the provisions hereof will
not, result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries under, any provision of (i) the Articles of Incorporation or
By-laws of the Company, (ii) any provision of the Articles of Incorporation, By-
laws or other organizational documents of any of its Subsidiaries, (iii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties or assets, other than, in
the case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
losses or Liens that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Offer or the Merger. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
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to the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or is necessary for the consummation
of the Offer, the Merger and the other transactions contemplated by this
Agreement, except for (i) in connection, or in compliance, with the provisions
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), (ii) the
filing of a Certificate of Merger with the Administrator and appropriate
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Offer, the Merger or the other transactions contemplated by
this Agreement, (iv) such filings, authorizations, orders and approvals as may
be required by state takeover laws (the "State Takeover Approvals"), (v) such
filings as may be required in connection with the taxes described in Section
7.6, (vi) filings with and approvals of the New York Stock Exchange, Inc. and
the SEC with respect to the delisting and deregistration of the Common Stock,
(vii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country in which the Company or any of its Subsidiaries conducts any business or
owns any property or assets and (viii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or prevent or materially delay the consummation of
the Offer or the Merger.
SECTION 4.6 SEC Documents and Other Reports. The Company has filed
all required documents with the SEC since January 1, 1993 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and as
of their respective dates none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as of
their respective dates as to form in all material respects with their applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of
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the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial position
of the Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to the
lack of footnotes thereto, to normal year-end audit adjustments and to any other
adjustments described therein). The Company has not, since December 31, 1995,
made any change in the accounting practices or policies applied in the
preparation of its financial statements.
SECTION 4.7 Absence of Certain Changes or Events. Except as disclosed
in Item 4.7 of the Company Letter or in the Company SEC Documents filed and
publicly available prior to the date of this Agreement (the "Company Filed SEC
Documents") and except for the transactions contemplated by the Asset Purchase
Agreement, since December 31, 1995, (A) the Company and its Subsidiaries have
not incurred any material liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or other
material transaction, that is not in the ordinary course of business or that
could reasonably be expected to result in a Material Adverse Effect on the
Company; (B) the Company and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had or
that could reasonably be expected to have a Material Adverse Effect on the
Company; (C) there has been no material change in the indebtedness of the
Company and its Subsidiaries, no change in the capital stock of the Company,
except for the issuance of shares of Common Stock pursuant to Company Stock
Options or pursuant to conversion rights in existence at the date of this
Agreement, and no dividend or distribution of any kind declared, paid or made by
the Company on any class of its stock, except for regular semi-annual dividends
of not more than $0.975 per share on the ESOP Preferred Stock, regular quarterly
dividends of not more than $0.165 per share on the Common Stock and the
distribution of the Rights; and (D) there has been no event causing a Material
Adverse Effect on the Company, nor any development that could, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect
on the Company.
SECTION 4.8 Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the
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Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") or (iv) the proxy statement (together with any
amendments or supplements thereto, the "Proxy Statement") relating to the
Shareholders Meeting will, in the case of the Offer Documents, the Schedule 14D-
9 and the Information Statement, at the respective times the Offer Documents,
the Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's shareholders, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to the
Company's shareholders or at the time of the Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Schedule 14D-9, the Information Statement and the Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, except that no representation or warranty
is made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent or Sub specifically
for inclusion or incorporation by reference therein.
SECTION 4.9 No Existing Violation, Default, Etc. Except as disclosed
in Item 4.9 of the Company Letter or the Company Filed SEC Documents, neither
the Company nor any of its Subsidiaries is in violation of (A) its Articles of
Incorporation, By-Laws or other organizational documents, (B) any applicable
law, ordinance, administrative or governmental rule or regulation or (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
the Company or any of its Subsidiaries, except, in each case, for any violations
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Company or prevent or materially delay the consummation of the Offer or
the Merger. Except as disclosed in Item 4.9 of the Company Letter or the Company
Filed SEC Documents, the properties, assets and operations of the Company and
its Subsidiaries are in compliance in all material respects with all applicable
federal, state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety
(collectively, "Worker Safety Laws") and the protection and clean-up of the
environment and activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal, transportation
or release of hazardous materials (collectively, "Environmental Laws"), except
for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Offer or the Merger. Except as disclosed in Item 4.9 of the
Company Letter or the Company Filed
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SEC Documents, with respect to such properties, assets and operations, including
any previously owned, leased or operated properties, assets or operations, to
the Company's knowledge, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance in all material respects with
applicable Worker Safety Laws or Environmental Laws, other than any such
interference or prevention as would not, individually or in the aggregate with
any such other interference or prevention, have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Offer or the
Merger.
Except as set forth in the Company Letter or the Company Filed SEC
Documents, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or, upon
the consummation by the Company of the transactions contemplated by this
Agreement, will exist under (i) any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, or any guarantee of any
agreement or instrument for borrowed money or (ii) any lease, permit, license or
other agreement or instrument, in each case, to which the Company or any of its
Subsidiaries is a party or by which the Company or any such Subsidiary is bound
or to which any of the properties, assets or operations of the Company or any
such Subsidiary is subject, other than, in the case of clause (ii), any events
of default that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company or prevent or materially delay the consummation of
the Offer or the Merger.
SECTION 4.10 Licenses and Permits. Except as set forth in Item 4.10 of
the Company Letter or the Company Filed SEC Documents, the Company and its
Subsidiaries have such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate Governmental
Entities (the "Company Licenses") as are necessary to own, lease or operate
their properties and to conduct their businesses in the manner described in the
Company SEC Documents and as currently owned or leased and conducted, and all
such Company Licenses are valid and in full force and effect, except such
licenses which the failure to have or to be in full force and effect,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or prevent or materially delay the consummation of the Offer or the
Merger. Except as set forth in Item 4.10 of the Company Letter or the Company
Filed SEC Documents, the Company and its Subsidiaries are in compliance in all
material respects with their respective obligations under the Company Licenses,
with such exceptions as, individually or in the
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aggregate, would not have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Offer or the Merger, and, to the
Company's knowledge, no event has occurred that allows, or after notice or lapse
of time would allow, revocation or termination of the Company Licenses, other
than such revocations or terminations that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company or prevent or materially
delay the consummation of the Offer and the Merger.
SECTION 4.11 Termination, Severance and Employment Agreements. The
Company has provided to Parent a complete and accurate list and a copy of each
of the following as it relates to the businesses conducted by the Company and
its Subsidiaries: (a) employment or severance agreement or arrangement (whether
written or oral) with any director, executive officer or other key employee that
is not terminable without material liability or obligation (either individually
or collectively) on 60 days' or less notice; (b) agreement of employment with
any director, executive officer or other key employee that provides any term of
employment or other compensation guarantee or extending severance benefits or
other benefits after termination of employment not comparable to benefits
generally available to employees of the Company and its Subsidiaries; (c)
agreement, plan or arrangement (whether written or oral) of employment with any
director, executive officer or other key employee under which that person may
receive payments that may be subject to tax imposed by (Section) 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or included in the
determination of that person's "parachute payment" under (Section) 280G of the
Code; and (d) agreement or arrangement (whether written or oral) or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, with or affecting any director, executive
officer or other key employee any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the Asset Purchase
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement or the Asset
Purchase Agreement. Except as set forth in Item 4.11 of the Company Letter or
the Company Filed SEC Documents, since December 31, 1995, neither the Company or
any of its Subsidiaries has entered into or amended in any material respect, any
employment or severance agreement or arrangement (whether written or oral) with,
or granted any severance or termination pay to, any director, executive officer
or other key employee of the Company or any of its Subsidiaries. As used in this
Agreement, "key employee" means an employee whose aggregate annual compensation
in 1996 or 1997 exceeded, or is scheduled to exceed, $100,000.
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SECTION 4.12 Environmental Matters. Except as set forth in the
Company Filed SEC Documents or Item 4.12 of the Company Letter, and except, in
each case, for matters that would not have a Material Adverse Effect on the
Company, neither the Company nor any of its Subsidiaries is the subject of any
federal, state, local or foreign investigation, and neither the Company nor any
of its Subsidiaries has received any notice or claim (or is aware of any facts
that would form a reasonable basis for any claim), or entered into any
negotiations or agreements with any third party, and there are not facts or
conditions associated with the properties or operations of the businesses of the
Company and its Subsidiaries, giving rise or relating to any material liability
or remedial action or potential material liability or remedial action under any
Environmental Laws, nor are there any pending, reasonably anticipated or, to the
knowledge of the Company, threatened actions, suits or proceedings against or
affecting the Company, any of its Subsidiaries or any of their properties,
assets or operations seeking any such liability or remedial action in connection
with any Environmental Laws.
SECTION 4.13 Tax Matters. Except as may be disclosed in Item 4.13 of
the Company Letter or in the Company Filed SEC Documents and except for matters
that individually or in the aggregate would not have a Material Adverse Effect
on the Company, (i) the Company and each Subsidiary have filed all Tax Returns
required to have been filed and have paid all Taxes shown to be due on such Tax
Returns; (ii) all Tax Returns filed by the Company and each Subsidiary are
complete and accurate and disclose all Taxes required to be paid by the Company
and each Subsidiary for the periods covered thereby; (iii) neither the Company
nor any Subsidiary has waived any statute of limitations in respect of Taxes of
the Company or such Subsidiary; (iv) the Tax Returns referred to in clause (i)
relating to federal income Taxes have been examined by the Internal Revenue
Service or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired; (v) no issues that have been
raised by the relevant taxing authority in connection with the examination of
the Tax Returns referred to in clause (i) are currently pending; (vi) no taxing
authority has proposed any adjustments to tax against the Company or any
Subsidiary; (vii) all deficiencies asserted or assessments made as a result of
any examination of the Tax Returns referred to in clause (i) by a taxing
authority have been paid in full; (viii) there are no Liens for Taxes upon the
assets of the Company or any Subsidiary except Liens relating to current Taxes
not yet due; and (ix) all Taxes which the Company or any Subsidiary are required
by law to withhold or to collect for payment have been duly withheld and
collected, and have been paid or accrued, reserved against and
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entered on the books of the Company. For purposes of this Agreement (a) "Tax"
(and, with correlative meaning, "Taxes" and "Taxable") means, any federal,
state, local or foreign income, gross receipts, property, sales, use, goods and
services, license, excise, franchise, employment, payroll, withholding,
alternative or added minimum, ad valorem, value added, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed by
any governmental authority, and (b) "Tax Return" means any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
SECTION 4.14 Actions and Proceedings. Except as set forth in the
Company Filed SEC Documents or Item 4.14 of the Company Letter, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its Subsidiaries,
any of its or their present or former directors, officers, employees,
consultants, agents or shareholders, as such, or any of its or their properties,
assets or business or any Company Plan (as defined in Section 4.17) that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Offer or the
Merger. Except as set forth in the Company Filed SEC Documents or Item 4.14 of
the Company Letter, as of the date of this Agreement, there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the knowledge of the Company, threatened against
or involving the Company or any of its Subsidiaries or any of its or their
present or former directors, officers, employees, consultants, agents or
shareholders, as such, or any of its or their properties, assets or business or
any Company Plan that, individually or in the aggregate, would have a Material
Adverse Effect on the Company or prevent or materially delay the consummation of
the Offer or the Merger.
SECTION 4.15 Contracts. Except as disclosed in Item 4.15 of the
Company Letter, all of the material contracts of the Company and its
Subsidiaries that are required to be described in the Company SEC Documents or
to be filed as exhibits thereto have been described in the Company SEC Documents
or filed as exhibits thereto. Neither the Company or any of its Subsidiaries
nor, to the knowledge of the Company, any other party is in breach of or default
under any material contracts which are currently in effect, except for such
breaches and defaults as in the aggregate have not had or would not have a
Material Adverse Effect on the
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Company or prevent or materially delay the consummation of the Offer or the
Merger.
SECTION 4.16 ERISA. Prior to the consummation of the Offer, the
Company will deliver to Parent a complete and accurate list of each Company Plan
and each Company Multiemployer Plan. Except as to matters which would not have a
Material Adverse Effect on the Company, each Company Plan complies with the
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code and all other applicable statutes and
governmental rules and regulations, and (i) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company Plan,
(ii) neither the Company nor any of its ERISA Affiliates has withdrawn,
completely or partially, from any Company Multiemployer Plan (as hereinafter
defined in this Section 4.16) or instituted, or is currently considering taking,
any action to do so, and (iii) no action has been taken, or is currently being
considered other than as contemplated by this Agreement, to terminate any
Company Plan subject to Title IV of ERISA. Except as provided in the Company
Filed SEC Documents, no Company Plan, nor any trust created thereunder, has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, which would have a Material Adverse Effect on the
Company. There are no actions, suits or claims pending or, to the knowledge of
the Company, threatened (other than routine claims for benefits) with respect to
any Company Plan which would have a Material Adverse Effect on the Company.
Neither the Company nor any of its ERISA Affiliates has incurred or reasonably
expects to incur any liability under or pursuant to Title IV of ERISA which
would have a Material Adverse Effect on the Company. No prohibited transactions
described in Section 406 of ERISA or Section 4975 of the Code have occurred
which would have a Material Adverse Effect on the Company. All Company Plans
that are intended to be qualified under Section 401(a) of the Code have been
determined by the Internal Revenue Service to be so qualified, and the Company
is not aware of any reason why any Company Plan is not so qualified in
operation. Neither the Company nor any of its ERISA Affiliates has been notified
by any Company Multiemployer Plan that such Company Multiemployer Plan is
currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Company Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA. As used herein,
(i) "Company Plan" means a "pension plan" (as defined in Section 3(2) of ERISA
(other than a Company Multiemployer Plan)) or a "welfare plan" (as defined in
Section 3(1) of ERISA) established or maintained by the Company or any of its
ERISA Affiliates or as to which the Company or any of its ERISA Affiliates has
contributed or otherwise may have any liability; (ii) "Company Multiemployer
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Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability; and (iii) "ERISA Affiliate"
means (A) any corporation which at any time on or before the Effective Time is
or was a member of the same controlled group of corporations (within the meaning
of Section 414(b) of the Code) as the Company, (B) any partnership, trade or
business (whether or not incorporated) which at any time on or before the
Effective Time is or was under common control (within meaning of Section 414(c)
of the Code) with the Company and (C) any entity which at any time on or before
the Effective Time is or was a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as either the Company, any
corporation described in clause (A) of this clause (iii) or any partnership,
trade or business described in clause (B) of this clause (iii). Except as set
forth in Item 4.16 of the Company Letter or the Company Filed SEC Documents, no
Company Plan (i) provides health, life insurance, or other welfare benefits to
former employees (or their dependents or beneficiaries) after retirement or
termination of employment except as required by section 601 et seq. of ERISA,
and (ii) no Company Plan provides additional benefits or contains other
provisions that would become effective upon or as a result of the consummation
of any of the transactions contemplated by this Agreement.
SECTION 4.17 Liabilities. Except as fully reflected or reserved
against in the financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, or disclosed in the footnotes
thereto, the Company and its Subsidiaries had no liabilities (including, without
limitation, tax liabilities) at the date of such financial statements, absolute
or contingent, that are of a nature required under generally accepted accounting
principles to be recorded or reflected on such financial statements that have
had or would reasonably be expected to have a Material Adverse Effect on the
Company. Except as so reflected, reserved or disclosed or as disclosed in Item
4.17 of the Company Letter or the Company Filed SEC Documents, the Company and
its Subsidiaries have no commitments which have had or would reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 4.18 Intellectual Properties. Except as disclosed in Item
4.18 of the Company Letter and matters which would not have a Material Adverse
Effect on the Company, the Company and its Subsidiaries own or have a valid
license to use all inventions, patents, trademarks, service marks, trade names,
copyrights, trade secrets, software, mailing lists and other intellectual
property rights (collectively, the "Company Intellectual Property") necessary to
carry on their respective
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businesses as currently conducted; and, to the knowledge of the Company, neither
the Company nor any such Subsidiary has received any notice of infringement of
or conflict with, and there are no infringements of or conflicts with, the
rights of others with respect to the use of any of the Company Intellectual
Property that, in either such case, has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
SECTION 4.19 Propriety of Past Payments. Since January 1, 1991, (i) no
funds or assets of the Company or any of its Subsidiaries have been used for
illegal purposes, (ii) no unrecorded fund or assets of the Company or any of its
Subsidiaries has been established for any purpose, (iii) no accumulation or use
of the corporate funds of the Company or any of its Subsidiaries has been made
without being properly accounted for in the respective books and records of the
Company or such Subsidiary, (iv) all payments by or on behalf of the Company or
any of its Subsidiaries have been duly and properly recorded and accounted for
in the books and records of the Company and its Subsidiaries, (v) no false or
artificial entry has been made in the books and records of the Company or any of
its Subsidiaries for any reason, (vi) no payment has been made by or on behalf
of the Company or any of its Subsidiaries with the understanding that any part
of such payment is to be used for any purpose other than that described in the
documents supporting such payment and (vii) neither the Company nor any of its
Subsidiaries has made any illegal contributions to any political party or
candidate, either domestic or foreign, except for such uses, payments,
contributions or actions described in clauses (i) through (vii) which, or the
cessation of which, would not have a Material Adverse Effect on the Company or
result in material adverse publicity for the Company.
SECTION 4.20 Opinion of Financial Advisor. The Company has received
the opinion of Financial Advisor, dated the date hereof, to the effect that, as
of the date hereof, the consideration to be received in the Offer and the Merger
by the Company's common shareholders is fair to the Company's common
shareholders (other than Parent or any of its affiliates) from a financial point
of view, a copy of which opinion has been delivered to Parent.
SECTION 4.21 State Takeover Statutes; Rights Agreement; Charter
Provisions. The Company has taken all actions necessary to provide that the
provisions of the Stacey, Bennett, and Randall Shareholder Equity Act, Sections
450.1790 et seq. of the MBCA, do not apply to the Company and the transactions
contemplated by this Agreement and the Asset Purchase Agreement. Chapter 7A of
the MBCA does not apply to this Agreement and the
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transactions contemplated hereby by reason of the prior approval requirements of
Section 450.1782(1)(b) of the MBCA. The Company has heretofore provided Parent
with a complete and correct copy of the Rights Agreement, including all
amendments and exhibits thereto. The Board of Directors of the Company has
approved an amendment to the Rights Agreement (which amendment will be presented
to the Rights Agent with directions to execute promptly following the execution
of this Agreement) to provide that a Shares Acquisition Date, a Distribution
Date, any of the events set forth in Section 11(a)(ii) of the Rights Agreement
or a Section 13 Event (as such terms are defined in the Rights Agreement) shall
not occur or be deemed to occur, the Rights shall not separate from the shares
of the Common Stock, the Rights shall not be become exercisable, and neither
Parent nor Sub shall become an Acquiring Person (as defined in the Rights
Agreement) as a result of the execution, delivery or performance of this
Agreement, the announcement, making or consummation of the Offer, the
acquisition of shares of capital stock of the Company pursuant to the Offer or
the Merger, the consummation of the Merger or any other transactions
contemplated by this Agreement. The Board of Directors has taken all actions
necessary to exempt this Agreement and the Asset Purchase Agreement, and the
transactions contemplated hereby and thereby, from the provisions of Articles X
and XII of the Company's Articles of Incorporation.
SECTION 4.22 Asset Purchase Agreement. The Asset Purchase Agreement
has been duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of the Asset Purchase Agreement by the
Private Buyer) constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Except as set
forth in Item 4.22 of the Company Letter, the execution and delivery by the
Company of the Asset Purchase Agreement do not, and the consummation by the
Company of the transactions contemplated thereby and compliance with the
provisions thereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
benefit under, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries under, any provision of (i)
the Articles of Incorporation or By-laws of the Company, (ii) any provision of
the Articles of Incorporation, By-laws or other organizational documents of any
of its Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to
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the Company or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clauses (ii), (iii) or (iv), any such
violations, defaults, rights, losses or Liens that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the transactions contemplated by the Asset
Purchase Agreement. No filing or registration with, or authorization, consent or
approval of, any Governmental Entity is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and delivery
of the Asset Purchase Agreement by the Company or is necessary for the
consummation of the transactions contemplated thereby, except for (i) in
connection, or in compliance, with the provisions of the HSR Act, (ii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the transactions contemplated by the Asset Purchase
Agreement, (iii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of any
foreign country in which the Company or any of its Subsidiaries conducts any
business or owns any property or assets and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or prevent or materially delay the consummation of
the transactions contemplated by the Asset Purchase Agreement. The
representations and warranties of the Company set forth in the Asset Purchase
Agreement are true and correct in all material respects, and, immediately prior
to the consummation of the Offer, the Company will have complied in all material
respects with all material agreements or covenants of the Company to be
performed or complied with by it under the Asset Purchase Agreement by such
time. The Company has delivered to Parent a complete and correct copy of the
Asset Purchase Agreement.
SECTION 4.23 Brokers. No broker, investment banker, financial advisor
or other person, other than Financial Advisor, the fees and expenses of which
will be paid by the Company (and are reflected in an agreement between Financial
Advisor and the Company, a copy of which has been furnished to Parent), is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
-----------------
Parent and Sub represent and warrant to the Company as follows:
SECTION 5.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, validly existing or in good standing would not have
a Material Adverse Effect on Parent or Sub or prevent or materially delay the
consummation of the Offer or the Merger.
SECTION 5.2 Authority. Parent and Sub have all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and (assuming the valid authorization,
execution and delivery of this Agreement by the Company) constitutes a valid and
binding obligation of each of Parent and Sub enforceable against each
respectively in accordance with its terms.
SECTION 5.3 Consents and Approvals; No Violations. The execution and
delivery by Parent and Sub of this Agreement do not, and the consummation by
Parent and Sub of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
benefit under, or result in the creation of any Lien upon any of the properties
or assets of Parent or any of its Subsidiaries under, any provision of (i) the
Certificate of Incorporation, By-laws or comparable organizational documents of
Parent, Sub or any other Subsidiaries of Parent, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or any
of its Subsidiaries (other than any agreement or note that will be paid or
discharged in full at or prior to the consummation of the Offer) or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
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applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such
violations, defaults, rights, losses or Liens that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent or Sub or prevent
or materially delay the consummation of the Offer or the Merger. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent or Sub or
is necessary for the consummation of the Offer, the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the HSR Act and the Exchange Act, (ii) the
filing of Certificate of Merger with the Administrator and appropriate documents
with the relevant authorities of other states in which Parent or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by the
Offer, the Merger or the other transactions contemplated by this Agreement, (iv)
such filings, authorizations, orders and approvals as may be required to obtain
the State Takeover Approvals, (v) such filings as may be required in connection
with the taxes described in Section 7.6, (vi) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the laws of any foreign country in which Parent or any of its Subsidiaries
conducts any business or owns any property or assets and (vii) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or Sub or prevent or
materially delay the consummation of the Offer or the Merger.
SECTION 5.4 Information Supplied. None of the information supplied or
to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in the case of the Offer
Documents, the Schedule 14D-9 and the Information Statement, at the respective
times the Offer Documents, the Schedule 14D-9 and the Information Statement are
filed with the SEC or first published, sent or given to the Company's
shareholders, or, in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
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under which they are made, not misleading. The Offer Documents will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no representation or warranty is
made by Parent or Sub with respect to statements made or incorporated by
reference therein based on information supplied by the Company specifically for
inclusion or incorporation by reference therein.
SECTION 5.5 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
SECTION 5.6 Brokers. No broker, investment banker, financial advisor
or other person, other than Morgan Stanley & Co. Incorporated, the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
SECTION 5.7 Financing. Scotsman Group Inc. has entered into, and
furnished to the Company a copy of, the Financing Commitment Letter with First
Chicago Capital Markets, Inc. (the "Lender"). Subject to the terms and condition
specified therein, the Financing Commitment Letter will provide Sub funds
sufficient in amount to consummate the Offer and Merger pursuant to this
Agreement. The Financing Commitment Letter is in full force and effect as of the
date of the Agreement.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
SECTION 6.1 Conduct of Business by the Company Pending the Merger.
Except for actions reasonably necessary to effect the consummation of the
transactions contemplated by, and in accordance with the terms of, the Asset
Purchase Agreement, during the period from the date of this Agreement until such
time as Parent's designees shall constitute a majority of the Board of Directors
of the Company, the Company shall, and shall cause each of its Subsidiaries to,
in all material respects carry on its business in, and not enter into any
material transaction other than in accordance with, the ordinary course of its
business as currently conducted and, to the extent consistent therewith, use
reasonable best efforts to preserve intact its current business organizations,
keep available the services of its current officers and key employees and
preserve its relationships with customers, suppliers and others having business
dealings with it
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to the end that its goodwill and ongoing business shall not be impaired. Without
limiting the generality of the foregoing, and except as referred to in Item 6.1
of the Company Letter or as otherwise expressly contemplated by this Agreement
or the Asset Purchase Agreement or required by law, during such period, the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld):
(a) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its shareholders in their capacity as
such (other than regular quarterly dividends of not more than $0.165 per share
on the Common Stock and regular semi-annual dividends of not more than $0.975
per share on the ESOP Preferred Stock, in each case declared and paid on dates
consistent with past practice), (x) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
except the issuance of shares of Common Stock upon conversion of any share of
ESOP Preferred Stock in accordance with the terms thereof, or (y) except as
required under existing employee benefit plans, agreements, policies, awards or
arrangements in effect on the date of this Agreement, purchase, redeem or
otherwise acquire any shares of its capital stock or those of any Subsidiary or
any other securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(b) except as required under existing employee benefit plans,
agreements, policies, awards or arrangements in effect on the date of this
Agreement, issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to acquire
any such shares, voting securities, equity equivalent or convertible securities
(other than pursuant to the Rights Agreement or the issuance of shares of Common
Stock upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms and the issuance of shares of
Common Stock upon the conversion of any shares of ESOP Preferred Stock into
shares of Common Stock in accordance with the terms thereof);
(c) amend its Articles of Incorporation or By-laws or other similar
organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the
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assets of or equity in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, other than the purchase of raw
materials and goods and services used in the manufacture of the products of the
businesses of the Company and its Subsidiaries, in each case in the ordinary
course of business consistent with past practice, and other transactions that
are in the ordinary course of business consistent with past practice and which
in the aggregate involve assets having a purchase price not in excess of
$1,000,000;
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than the sale of products of the
businesses of the Company and its Subsidiaries, in each case in the ordinary
course of business consistent with past practice, and other transactions that
are in the ordinary course of business consistent with past practice and which
in the aggregate involve assets having a fair market value or book value not in
excess of $500,000;
(f) incur any new indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others or make any loans, advances or capital contributions to, or
other investments in, any other person, other than to or in the Company or any
wholly owned Subsidiary of the Company and other than customary travel and
similar advances to employees in the ordinary course of business consistent with
past practices;
(g) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company or
any Subsidiary;
(h) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or employment
or consulting agreement, other than as required by law;
(i) except as required under existing plans, agreements, policies,
awards or arrangements in effect on the date of this Agreement or as described
in Item 6.1 of the Company Letter, increase the compensation payable or to
become payable to its officers or employees, except, in the case of employees
who are not officers, for increases in the ordinary course of business
consistent with past practice, pay or commit to pay any bonus, or grant any
severance or termination pay to, or enter into any employment or severance
agreement, or establish, adopt, enter into, or amend in any material respect or
take action to
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enhance in any material respect or accelerate any rights or benefits under, any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, stock ownership, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee, except, in each case, as may be required to comply with applicable law
or regulation;
(j) violate or fail to perform any material obligation or duty imposed
upon it by any applicable federal, state or local law, rule, regulation,
guideline or ordinance;
(k) redeem the Rights or amend the Rights Agreement;
(l) breach in any material respect any of its material
representations, warranties, covenants or agreements contained in the Asset
Purchase Agreement (regardless of any provisions regarding notice or lapse of
time, or both) or waive any of its material rights under, amend or terminate the
Asset Purchase Agreement, other than a waiver of the condition regarding the
consummation of the Offer contained in Section 5.3(d) of the Asset Purchase
Agreement;
(m) make any material change in its accounting methods, policies or
procedures, except as a result of any change in law or generally accepted
accounting principles;
(n) prepare or file any Tax Return inconsistent with past practice or,
on any such Tax Return, take any position, make any election or adopt any method
that is inconsistent with positions taken, elections made or methods used in
preparing or filing similar Tax Returns in prior periods, or give any approval
or consent under Section 4.13, or agree to any allocation under Section 1.2(c),
of the Asset Purchase Agreement without the prior written consent of Parent; or
(o) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
The Company shall promptly advise Parent orally and in writing of any
change or event having, or which could reasonably be expected to have, a
Material Adverse Effect on the Company or which could prevent or materially
delay the consummation of the Offer or the Merger.
SECTION 6.2 No Solicitation. From and after the date hereof, the
Company shall not, and shall not permit any of its or its Subsidiaries'
officers, directors or employees to, and the
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Company shall use its reasonable best efforts to cause all of its and its
Subsidiaries' attorneys, financial advisors, agents and other representatives
not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing information) any Takeover Proposal (as
hereinafter defined in this Section 6.2), or engage in or continue discussions
or negotiations relating thereto; provided, however, that the Company may engage
in discussions or negotiations with, or furnish information concerning the
Company and its business, properties or assets to, any third party with respect
to a Takeover Proposal if the Board of Directors of the Company concludes in
good faith based on the advice of its outside counsel that it is necessary to do
so in order to comply with its fiduciary duties under applicable law. The
Company promptly will notify Parent of any Takeover Proposal, including the
material terms and conditions thereof and the identity of the person or group
making such Takeover Proposal, and will promptly notify Parent of any
determination by the Company's Board of Directors that a Superior Proposal (as
hereinafter defined in this Section 6.2) has been made. As used in this
Agreement, (i) "Takeover Proposal" shall mean any proposal or offer, other than
a proposal or offer by Parent or any of its Subsidiaries, for a tender or
exchange offer, a merger, consolidation or other business combination involving
the Company or any of its Subsidiaries or any proposal to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets of, the
Company or any of its Subsidiaries and (ii) "Superior Proposal" shall mean a
bona fide proposal or offer made by a third party to acquire the Company
pursuant to a tender or exchange offer, a merger, consolidation or other
business combination or a sale of all or substantially all of the assets of the
Company and its Subsidiaries on terms which a majority of the members of the
Board of Directors of the Company concludes in their good faith reasonable
judgment to be more favorable to the Company's shareholders than the
transactions contemplated hereby and for which any required financing is
committed or which a majority of such members reasonably concludes is reasonably
capable of being obtained by such third party. Notwithstanding anything else in
this Agreement, including this Section 6.2, to the contrary, the Company and its
Board of Directors shall not be prohibited from taking or disclosing to its
shareholders any position pursuant to Rules 14d-9 and 14e-2 under the Exchange
Act or from making any disclosure to the Company's shareholders if the Company's
Board of Directors concludes in good faith based on the advice of its outside
counsel that it is necessary to do so in order to comply with its fiduciary
duties under applicable law.
SECTION 6.3 Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any
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provision of any confidentiality or standstill agreement to which the Company or
any of its Subsidiaries is a party (other than any involving Parent, including
the standstill agreement included in the Confidentiality Agreement dated June
18, 1996, between Parent and the Company, which standstill agreement the parties
hereto acknowledge the Company has waived only in respect of the Offer
(including any Offer involving any increase in the Offer Price), the Merger and
the other transactions contemplated hereby), unless the Board of Directors of
the Company concludes in good faith based on the advice of its outside counsel
that it is necessary to do so in order to comply with its fiduciary duties under
applicable law. During such period, the Company agrees to enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreements, including, without limitation, obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States of America or any state thereof having
jurisdiction, unless the Board of Directors of the Company concludes in good
faith based on the advice of its outside counsel that failure to take such
action is necessary in order to comply with its fiduciary duties under
applicable law.
SECTION 6.4 Other Actions. Except as expressly contemplated or
permitted by this Agreement or except as set forth in the Company Letter, the
Company shall not, and shall not permit any of its Subsidiaries to, take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of the Company set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the Offer Conditions not being satisfied
(subject to the Company's right to take actions specifically permitted by
Section 6.2).
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
SECTION 7.1 Shareholder Approval; Preparation of Proxy Statement. (a)
If approval of this Agreement and the Merger by shareholders of the Company (the
"Company Shareholder Approval") is required by law, the Company shall, as soon
as practicable following the consummation of the Offer, duly call, give notice
of, convene and hold a meeting of its shareholders (the "Shareholders Meeting")
for the purpose of obtaining the Company Shareholder Approval. The Shareholders
Meeting shall be held as soon as practicable following the purchase of Shares
pursuant to the Offer. The Company shall, through its Board of Directors,
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but subject to the fiduciary duties of its Board of Directors under applicable
law as determined by the Board of Directors in good faith based on the advice of
the Company's outside counsel, recommend to its shareholders that the Company
Shareholder Approval be given. Notwithstanding the foregoing, if Sub or any
other Subsidiary of Parent shall acquire ownership of not less than 90% of the
outstanding shares of each class of the Company, the parties shall, at the
request of Parent, take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without a Shareholders Meeting in accordance with Section 450.1711 of the MBCA.
(b) If the Company Shareholder Approval is required by law, the
Company shall, as soon as practicable following the consummation of the Offer,
prepare and file a preliminary Proxy Statement with the SEC and shall use its
reasonable best efforts to respond to any comments of the SEC or its staff and
to cause the Proxy Statement to be mailed to the Company's shareholders as
promptly as practicable after responding to all such comments to the
satisfaction of the staff. The Company shall notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Shareholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company promptly shall prepare and mail to its shareholders such
an amendment or supplement. Except as required by law, the Company shall not
mail any Proxy Statement, or any amendment or supplement thereto, to which
Parent reasonably objects without first attempting in good faith to resolve such
objections. Parent shall cooperate with the Company in the preparation of the
Proxy Statement or any amendment or supplement thereto.
(c) Parent agrees to cause all shares of the Company Capital Stock
purchased pursuant to the Offer entitled to vote on the Merger owned by Parent
or any Subsidiary of Parent to be voted in favor of the Company Shareholder
Approval. Parent also agrees that if the transactions contemplated by the Asset
Purchase Agreement have not been consummated prior to consummation of the Offer,
Parent shall take all actions as are reasonably required to consummate such
transactions.
SECTION 7.2 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to the Company, the Company shall,
and shall cause each of its
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Subsidiaries to, afford to Parent and to the officers, employees, accountants,
counsel, actuaries, financial advisors and other representatives of Parent
reasonable access to, and permit them to make such inspections as they may
reasonably require of, during normal business hours during the period from the
date of this Agreement through the Effective Time, all their respective
properties, books, contracts, commitments and records (including, without
limitation, the work papers of independent accountants and actuaries) and,
during such period, the Company shall, and shall cause each of its Subsidiaries
to, promptly furnish to Parent (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request; provided, however, that no invasive soil or groundwater tests may be
performed without the prior written consent of the Company, which shall not be
unreasonably withheld. No investigation pursuant to this Section 7.2 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto. All information obtained
by Parent pursuant to this Section 7.2 shall be kept confidential in accordance
with the Confidentiality Agreement dated June 18, 1996, between Parent and the
Company.
SECTION 7.3 Fees and Expenses. (a) Except as provided in this Section
7.3 and Section 7.6, regardless of whether the Merger is consummated, all costs
and expenses incurred by a party hereto in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, the fees
and disbursements of counsel, financial advisors and accountants, shall be paid
by the party incurring such costs and expenses.
(b) The Company shall pay, or cause to be paid, in same day funds by
wire transfer to an account specified by Parent up to $1,750,000 of Expenses (as
hereinafter defined in this Section 7.3) if: (i) Parent or Sub terminates this
Agreement under Section 9.1(d) or (ii) the Company terminates this Agreement
pursuant to Section 9.1(e). If Expenses are payable, or have been paid, under
the preceding sentence and within 365 days after a termination described in such
sentence a Takeover Proposal with a third party is consummated (other than a
Takeover Proposal relating to the sale of all or substantially all of the
Company's transportation products group), the Company shall pay to Parent,
simultaneously with the consummation of such Takeover Proposal, by wire transfer
of same day funds, the additional sum of $9,000,000.
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"Expenses" shall mean documented out-of-pocket fees and expenses
reasonably incurred or paid by or on behalf of Parent or its Subsidiaries in
connection with the Offer, the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all reasonable fees and
expenses of law firms, commercial banks, investment banking firms, accountants,
experts and consultants to Parent or any of its Subsidiaries.
SECTION 7.4 Options. (a) Prior to the commencement of the Offer, the Board
of Directors of the Company or the Compensation Committee of the Board of
Directors of the Company (the "Committee") shall adopt procedures pursuant to
which each outstanding Company Stock Option, stock appreciation right and other
stock based award (an "Option") which is exercisable immediately prior to the
consummation of the Offer in accordance with the terms of the applicable plan
(collectively, the "Stock Option Plans"), may be exercised or settled by the
holder thereof by the delivery to the Company of a notice of exercise or
acceptance of cash settlement prior to the consummation of the Offer. Upon the
consummation of the Offer, each Option so exercised or settled shall be canceled
and promptly thereafter the Company shall deliver to the holder thereof cash in
an amount equal to (i) the product of (x) the number of shares of Common Stock
subject or related to such Option and (y) the excess, if any, of the Merger
Consideration over the exercise or purchase price per share of Common Stock
subject or related to such Option, minus (ii) all applicable federal, state,
local and other Taxes required to be withheld by the Company.
(b) Prior to the commencement of the Offer, the Board of Directors of
the Company or the Committee shall take action in accordance with the terms of
the Stock Option Plans to cause each Option outstanding immediately following
the consummation of the Offer, whether or not then exercisable, to become fully
exercisable. The Board of Directors of the Company or the Committee shall also
adopt procedures pursuant to which each such Option may be exercised or settled
by the holder thereof by the delivery to the Company of a notice of exercise or
acceptance of cash settlement prior to the Effective Time. At or prior to the
Effective Time, each such Option so exercised or settled shall be canceled and
promptly thereafter the Company shall deliver to the holder thereof cash in an
amount equal to (i) the product of (x) the number of shares of Common Stock
subject or related to such Option and (y) the excess, if any, of the Merger
Consideration over the exercise or purchase price per share of Common Stock
subject or related to such Option minus (ii) all applicable federal, state,
local and other Taxes required to be withheld by the Company.
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(c) Following the Effective Time, each outstanding Option which has
not theretofore been exercised or settled by the holder thereof shall be
canceled (whether or not such holder has delivered the acknowledgment referred
to in the proviso to this sentence), and promptly thereafter Parent shall
deliver to the holder thereof cash in an amount equal to (i) the product of (x)
the number of shares of Common Stock subject or related to such Option and (y)
the excess, if any, of the Merger Consideration over the exercise or purchase
price per share of Common Stock subject or related to such Option, minus (ii)
all applicable federal, state, local and other Taxes required to be withheld by
the Company; provided, however, that any such payment to a holder of an Option
so canceled shall be conditioned upon the delivery to Parent by such holder of a
receipt in writing acknowledging the receipt by such holder of such payment in
exchange for the cancellation of all Options held by such holder. No further
options shall be granted under any Stock Option Plan after the date of this
Agreement. The Company shall take such actions as may be reasonably requested by
Parent in connection with the cancellation of the Options pursuant to the Merger
and this Agreement.
(d) Prior to the commencement of the Offer, the Board of Directors of
the Company or the Committee shall take action in accordance with the terms of
the Stock Option Plans and pursuant to all other plans and agreements providing
for the award of restricted Common Stock to cause the restrictions on the shares
of restricted Common Stock granted under such plans and agreements to lapse
effective upon the consummation of the Offer and to adopt procedures to enable
all holders thereof to tender such shares of Common Stock pursuant to the terms
of the Offer.
(e) Parent shall provide the Company sufficient funds for the Company
to meet its payment obligations set forth in Sections 7.4(a) and 7.4(b) and,
notwithstanding any provisions of this Agreement to the contrary, the Company
may borrow such funds to the extent they are not provided by Parent pursuant to
this Section 7.4(e).
SECTION 7.5 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 7.6 Real Estate Transfer Tax. Parent and the Company agree
that the Company (or, following the Merger, the
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Surviving Corporation) shall pay any state or local tax which is attributable to
the transfer of the beneficial ownership of the Company's or its Subsidiaries'
real property, if any (collectively, the "Transfer Taxes"), to Parent and any
penalties or interest with respect to the Transfer Taxes, payable in connection
with the consummation of the Offer and the Merger. The Company agrees to
cooperate with Parent in the filing of any returns with respect to the Transfer
Taxes, including supplying in a timely manner a complete list of all real
property interests held by the Company and its Subsidiaries and any information
with respect to such property that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real property of the
Company and its Subsidiaries shall be determined by Parent in its reasonable
discretion. The shareholders of the Company shall be deemed to have agreed to
be bound by the allocation established pursuant to this Section 7.6 in the
preparation of any return with respect to the Transfer Taxes.
SECTION 7.7 State Takeover Laws. If any "fair price" or "control
share acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, Parent and the Company and
their respective Boards of Directors shall use their reasonable best efforts to
grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to minimize the effects of
any such statute or regulation on the transactions contemplated hereby.
SECTION 7.8 Indemnification; Directors and Officers Insurance. From
and after the consummation of the Offer, Parent shall, and agrees to cause the
Company or the Surviving Corporation to, exculpate, indemnify and hold harmless
all past and present officers, directors, employees and agents of the Company
and its Subsidiaries (the "Indemnified Parties") to the same extent such persons
are currently exculpated and indemnified by the Company or any of its
Subsidiaries pursuant to the Company's or any such Subsidiary's Articles of
Incorporation or By-Laws (or similar organizational documents), agreements in
effect as of the date hereof or applicable law for acts or omissions, or alleged
acts or omissions, occurring at or prior to the Effective Time, and Parent
shall, and shall cause the Company or the Surviving Corporation to, honor all
such obligations of the Company (including, if necessary, providing the Company
or the Surviving Corporation sufficient funds), including, without limitation,
obligations to advance expenses to such Indemnified Parties arising pursuant to
the Company's or any such Subsidiary's Articles of Incorporation or By-laws (or
similar organizational documents), agreements in effect as of the date
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hereof or applicable law; provided, however, that Parent shall not be obligated
to exculpate, indemnify or hold harmless any Indemnified Party who shall become
an employee of the Private Buyer or any of its Subsidiaries in connection with
the Asset Purchase Agreement, or the transactions contemplated thereby, for any
acts or omissions occurring at or prior to the Effective Time in respect of the
business previously conducted by the Company using the TPG Assets (the "Excluded
Matters"); and, provided, further, that this Section 7.8 shall not be deemed to
limit, modify or affect any rights of indemnification, including the advancement
of expenses, under any provisions of the Company's or any of its Subsidiaries'
Articles of Incorporation or By-laws (or similar organizational documents), any
agreements in effect on the date hereof or applicable law with respect to the
Excluded Matters. Parent shall cause the Surviving Corporation to provide, for
an aggregate period of not less than six years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O Insurance"), that is no less favorable than the Company's existing policy
or, if substantially equivalent insurance coverage is unavailable, the best
available coverage; provided, however, that the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 200
percent of the last annual premium paid prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount.
SECTION 7.9 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of:
(i) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause (x) any material representation or
warranty contained in this Agreement that is not qualified as to materiality to
be untrue or inaccurate in any material respect, (y) any material representation
or warranty contained in this Agreement that is qualified as to materiality to
be untrue or inaccurate in any respect or (z) any material covenant, condition
or agreement contained in this Agreement not to be complied with or satisfied;
and (ii) any failure of Parent, Sub or the Company, as the case may be, to
comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 7.9 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 7.10 Board of Directors. Promptly after such time as Sub
acquires Shares pursuant to the Offer, Sub shall be entitled to designate at its
option up to that number of
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directors, rounded to the nearest whole number, of the Company's Board of
Directors, subject to compliance with Section 14(f) of the Exchange Act, as
shall make the percentage of the Company's directors designated by Sub equal to
the aggregate voting power of the Shares held by Parent or any of its
Subsidiaries (assuming the exercise of all outstanding options to purchase, and
the conversion or exchange of all securities convertible or exchangeable into
shares of the Company Capital Stock); provided, however, that the size of the
Company's Board of Directors shall not be larger than 10 persons; provided,
further, that in the event that Sub's designees are elected to the Board of
Directors of the Company, until the Effective Time, such Board of Directors
shall have, and Parent shall cause the Board to have, at least three directors
who are directors on the date of this Agreement (of which at least two directors
are not officers of the Company) (collectively, the "Independent Directors");
and provided, further that, in such event, if the number of Independent
Directors shall be reduced below three for any reason whatsoever, the remaining
Independent Directors shall designate a person to fill such vacancy who shall be
deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors of the Company as of the
date of this Agreement shall designate three persons to fill such vacancies who
shall not be officers or affiliates of the Company or any of its Subsidiaries,
or officers or affiliates of Parent or any of its Subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action requested by Parent
that is reasonably necessary to effect any such election, including mailing to
its shareholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Sub shall have provided to the Company on a timely basis all
information required to be included in the Information Statement with respect to
Sub's designees). In connection with the foregoing, the Company promptly shall,
at the option of Parent, either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current directors
as is necessary to enable Sub's designees to be elected or appointed to the
Company's Board of Directors as provided above.
SECTION 7.11 Reasonable Best Efforts. Subject to the terms and
provisions of this Agreement and applicable law, each of the Company, Parent and
Sub agrees to use its reasonable best efforts to cause the purchase of Shares
pursuant to the Offer and the consummation of the Merger to occur as soon as
practicable. Without limiting the foregoing, (a) each of the Company, Parent and
Sub agree to use its reasonable best efforts to take, or
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cause to be taken, all actions necessary to comply promptly with all legal
requirements that may be imposed on itself with respect to the Offer, the Merger
and the transactions contemplated by the Asset Purchase Agreement (which actions
shall include furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
shall promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of their
Subsidiaries in connection with the Offer, the Merger and the transactions
contemplated by the Asset Purchase Agreement and (b) each of the Company, Parent
and Sub shall, and shall cause its Subsidiaries to, use its reasonable best
efforts to obtain (and shall cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, Sub, the Company or any of their Subsidiaries in
connection with the Offer, the Merger and the transactions contemplated by the
Asset Purchase Agreement or the taking of any action contemplated thereby or by
this Agreement. Notwithstanding anything to the contrary contained in this
Agreement, (i) the Company shall not be obligated to use its reasonable best
efforts or to take any action pursuant to this Section 7.11 if the Board of
Directors of the Company shall conclude in good faith based on the advice of its
outside counsel that such action is necessary in order to comply with its
fiduciary duties under applicable law, and (ii) in connection with any filing or
submission required or action to be taken by Parent, the Company or any of their
respective Subsidiaries to consummate the Offer, the Merger or the other
transactions contemplated in this Agreement or the Asset Purchase Agreement, the
Company shall not, without Parent's prior written consent, commit to any
divestiture transaction and neither Parent nor any of its Subsidiaries shall be
required to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to, or its ability to
retain, the Company or any of the businesses, product lines or assets of Parent
or any of its Subsidiaries or that would have a Material Adverse Effect on
Parent.
SECTION 7.12 Certain Litigation. The Company agrees that it shall not
settle any litigation commenced after the date hereof against the Company or any
of its directors by any shareholder of the Company relating to the Offer, the
Merger, this Agreement or the Asset Purchase Agreement without the prior written
consent of Parent, which shall not be unreasonably withheld.
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SECTION 7.13 Employee Benefits. Parent shall provide or shall cause
the Surviving Corporation to provide benefits for the employees of the Company
from and after the Effective Time either under the Company Plans or under other
employee benefit plans established by Parent or the Surviving Corporation;
provided, however, that this Section 7.13 shall not be deemed to affect in any
way any rights of the employees of the Company under the Company Plans that are
vested as of the Effective Time.
SECTION 7.14 Employee Stock Ownership Plan and Trust. As soon as
reasonably practicable after the Effective Time, employer contirbutions to the
Employee Stock Plan shall be discontinued and the Employee Stock Plan shall be
merged into another qualified defined contribution plan maintained by Parent or
the Surviving Corporation.
SECTION 7.15 Severance, Employment and Benefit Agreements. Parent
shall timely honor, and following the consummation of the Offer and the Merger
(respectively) shall cause the Company or the Surviving Corporation, as the case
may be, to timely honor (including by providing sufficient funds therefor), in
accordance with their terms, all severance, employment and benefit agreements,
plans and arrangements, including, without limitation, those arrangements
referred to in Item 7.15 of the Company Letter (other than any Company Plans or
other employee benefit plans, which are addressed in Section 7.13), with the
Company's directors, officers and employees that are disclosed in the Company
Letter or the Company Filed SEC Documents.
ARTICLE VIII
CONDITIONS PRECEDENT
--------------------
SECTION 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Company Shareholder Approval. If required by applicable law, the
Company Shareholder Approval shall have been obtained; provided, however,
that Parent and Sub shall vote all of their shares of capital stock of the
Company entitled to vote thereon in favor of the Merger.
(b) No Injunction or Restraint. No statute, rule, regulation,
executive order, decree, temporary
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restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other Governmental Entity
preventing the consummation of the Merger shall be in effect; provided,
however, that each of the parties shall have used its reasonable best
efforts to prevent the entry of any such temporary restraining order,
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for payment
and paid for Shares pursuant to the Offer; provided, however, that this
condition will be deemed satisfied with respect to the obligations of
Parent or Sub if Sub fails to accept for payment and pay for any Shares
pursuant to the Offer in violation of the terms of this Agreement.
(d) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
ARTICLE IX
TERMINATION AND AMENDMENT
-------------------------
SECTION 9.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after the Company
Shareholder Approval (if required by applicable law):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions set forth in Exhibit A the Offer shall have terminated or
expired in accordance with its terms without Sub having accepted for
payment any Shares pursuant to the Offer or (y) all of the Offer
Conditions have not been satisfied prior to June 30, 1997 or such
later date as the parties may agree to; provided, however, that the
right to terminate this Agreement pursuant to this Section 9.1(b)(i)
shall not be available to any party whose failure to perform any of
its obligations under this Agreement results in the failure of any
such Offer
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Condition or if the failure of such Offer Condition results from facts
or circumstances that constitute a breach of representation or
warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree or ruling or other action shall
have become final and nonappealable, provided that the party seeking
to terminate this Agreement shall have used its reasonable best
efforts, subject to Section 7.11, to lift or vacate such order, decree
or ruling;
(c) by Parent or Sub prior to the purchase of Shares pursuant to the
Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in this Agreement which (i)
would give rise to the failure of a condition set forth in paragraph (d) or
(e) of Exhibit A and (ii) cannot be or has not been cured within 20 days
after the giving of written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraph
(c) of Exhibit A to this Agreement;
(e) by the Company if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a Superior
Proposal and the Board of Directors of the Company concludes in good faith
based on the advice of its outside counsel that termination of this
Agreement is necessary in order to comply with its fiduciary duties under
applicable law; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 9.1(e) unless and until five business
days have elapsed following delivery to Parent of a written notice (a
"Section 9.1(e) Notice") of such conclusion by the Board of Directors of
the Company and during such five business day period the Company has
cooperated fully with Parent, including, without limitation, informing
Parent of the terms and conditions of the Takeover Proposal and the
identity of the Person making the Takeover Proposal, with the intent of
enabling Parent to agree to a modification of the terms and conditions of
this
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Agreement so that the transactions contemplated hereby may be effected; and
provided, further, that the Company may not terminate this Agreement
pursuant to this Section 9.1(e) unless at the end of such five business day
period the Board of Directors of the Company continues reasonably to
believe its prior conclusion that the Takeover Proposal constitutes a
Superior Proposal and simultaneously with such termination the Company pays
to Parent the Expenses specified under Section 7.3(b);
(f) by the Company, if (i) any of the representations or warranties of
Parent or Sub set forth in this Agreement that are qualified as to
materiality shall not be true and correct in any respect or any such
representations or warranties that are not so qualified shall not be true
and correct in any material respect, or (ii) Parent or Sub shall have
failed to perform in any material respect any obligation or to comply in
any material respect with any agreement or covenant of Parent or Sub to be
performed or complied with by it under this Agreement and, in the case of
(i) or (ii), such untruth or incorrectness or failure cannot be or has not
been cured within 20 days after the giving of written notice to Parent or
Sub, as applicable; or
(g) by the Company, if the Offer has not been timely commenced in
accordance with Section 1.1.
SECTION 9.2 Effect of Termination. In the event of a termination of
this Agreement by either the Company or Parent as provided in Section 9.1, this
Agreement shall forthwith become void and the Offer and the Merger terminated
and abandoned and there shall be no liability or obligation on the part of
Parent, Sub or the Company or their respective officers, directors, employees or
agents, except with respect to the last sentence of Section 1.2(c), Section
4.23, Section 5.6, the last sentence of Section 7.2, Section 7.3, this Section
9.2 and Section 10.7 (which designated Section or sentence shall survive any
termination), and each of the parties hereto hereby releases and waives any
claim that may otherwise exist upon such termination; provided, however, that
nothing herein shall relieve any party for liability for any willful or bad
faith breach hereof.
SECTION 9.3 Amendment and Certain Other Actions. Subject to applicable
law, this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors at any time before or after
obtaining the Company Shareholder Approval (if required by law), but, after the
45
<PAGE>
purchase of Shares pursuant to the Offer no amendment shall be made which
decreases the Merger Consideration and after the Company Shareholder Approval no
amendment shall be made which by law requires further approval by the
shareholders of the Company without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto. Following the election or appointment of the
Sub's designees pursuant to Section 7.10 and prior to the Effective Time, the
affirmative vote of a majority of the Independent Directors then in office shall
be required by the Company to (i) amend or terminate this Agreement by the
Company, (ii) exercise or waive any of the Company's rights or remedies under
this Agreement, (iii) extend the time for performance of Parent and Sub's
respective obligations under this Agreement or (iv) give or authorize any
consent, approval, authorization or recommendation of the Company or its Board
of Directors required hereunder.
SECTION 9.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (i) subject to the
provisions of Section 9.3, extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) subject to the
provisions of Section 9.3, waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) subject to the provisions of Section 9.3, waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE X
GENERAL PROVISIONS
------------------
SECTION 10.1 Non-Survival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time, or, in
the case of the Company, shall survive the consummation of the Offer. The
covenants and agreements of the parties hereto and the Surviving Corporation
shall survive the Effective Time without limitation (except for those that, by
their terms, contemplate a shorter survival period).
46
<PAGE>
SECTION 10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Scotsman Industries, Inc.
775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Telecopy: (847) 634-8823
Attention: Richard C. Osborne,
Chairman, President and
Chief Executive Officer
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Telecopy: (312) 853-7036
Attn: Thomas A. Cole, Esq. and
Frederick C. Lowinger, Esq.
(b) if to the Company, to
Kysor Industrial Corporation
One Madison Avenue
Cadillac, Michigan 49601
Telecopy: (616) 775-2661
Attention: George R. Kempton,
Chairman and
Chief Executive Officer
with a copy to:
Warner Norcross & Judd LLP
900 Old Kent Building
111 Lyon Street, N.W.
Grand Rapids, Michigan 49503
Telecopy: (616) 752-2500
Attention: Tracy T. Larsen, Esq. and
R. Paul Guerre, Esq.
SECTION 10.3 Interpretation. When a reference is made in this
Agreement to a Section or Exhibit, such reference shall be to a Section or
Exhibit of this Agreement unless otherwise
47
<PAGE>
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term "subsidiary"
or "Subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
As used in this Agreement, "Material Adverse Change" or "Material Adverse
Effect" means, when used in connection with the Company or Parent, as the case
may be, any change or effect (or any development that, insofar as can reasonably
be foreseen, is likely to result in any change or effect) that is materially
adverse to the business, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole or Parent and
its Subsidiaries taken as a whole, as the case may be. As used in this
Agreement, "consummation of the Offer" means the purchase of Shares pursuant to
the Offer. As used in this Agreement, "to the Company's knowledge" (or words of
similar import) and references to the Company's awareness of certain facts mean
or refer to the actual knowledge of a director or executive officer of the
Company.
SECTION 10.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 10.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, and the Confidentiality Agreement referred to in the last sentence of
Section 7.2, constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof. This Agreement, except for the provisions of
Sections 7.8 and 7.15 (which shall be for the benefit of, and shall be
enforceable by, the described beneficiaries thereto and their heirs, legal
representations, successors and assigns), is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
SECTION 10.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the
48
<PAGE>
State of Michigan, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
SECTION 10.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned Subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 10.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
SECTION 10.9 Enforcement of this Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity.
49
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
SCOTSMAN INDUSTRIES, INC.
By: /s/ Richard C. Osborne
-------------------------
Name: Richard C. Osborne
Title: Chairman, President and
Chief Executive Officer
Attest:
/s/ Donald D. Holmes
- --------------------------
Name: Donald D. Holmes
Title: Vice President-Finance
and Secretary
K ACQUISITION CORP.
By: /s/ Richard C. Osborne
-------------------------
Name: Richard C. Osborne
Title: Chairman, President and
Chief Executive Officer
Attest:
/s/ Donald D. Holmes
- -------------------------------------
Name: Donald D. Holmes
Title: Vice President-Finance
and Secretary
KYSOR INDUSTRIAL CORPORATION
By: /s/ George R. Kempton
------------------------
Name: George R. Kempton
Title: Chairman & Chief
Executive Officer
Attest:
/s/ David W. Crooks
- -------------------------
Name: David W. Crooks
Title: Vice President, General
Counsel and Secretary
50
<PAGE>
EXHIBIT A
---------
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares that would constitute
a majority of the outstanding shares of Company Capital Stock at the date of the
expiration of the Offer (assuming the exercise of all options to purchase, and
the conversion or exchange of all securities convertible or exchangeable into,
shares of the Company Capital Stock outstanding at the expiration date of the
Offer) (the "Minimum Condition"), (ii) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have expired or
been terminated, (iii) the Company and the Private Buyer shall have consummated
the transactions contemplated by the Asset Purchase Agreement or the Private
Buyer shall have waived any conditions to consummate the Asset Purchase
Agreement, agreeing to consummate the transactions contemplated thereby
contemporaneously with or immediately following the consummation of the Offer
and (iv) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer all outstanding shares of ESOP Preferred Stock, unless
the Company shall have called all outstanding shares of ESOP Preferred Stock for
redemption on a date that is not later than one business day after the
consummation of the Offer. Furthermore, notwithstanding any other term of the
Offer or this Agreement, Sub shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for payment
or paid for, and may terminate the Offer if, at any time on or after the date of
this Agreement and before the acceptance of such Shares for payment or the
payment therefor, any of the following conditions exists (other than as a result
of any action or inaction of Parent or any of its Subsidiaries that constitutes
a breach of this Agreement):
(a) there shall be instituted by any Governmental Entity and pending
as of the expiration date of the Offer any suit, action or proceeding (i)
seeking to prohibit or limit the acquisition by Parent or Sub of
<PAGE>
any Shares pursuant to the Offer, seeking to restrain or prohibit the
making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by this Agreement or the Asset
Purchase Agreement, or seeking to obtain from the Company, Parent or Sub
any damages that are material in relation to the Company and its
Subsidiaries taken as a whole, (ii) seeking to prohibit or limit the
ownership or operation by the Company, Parent or any of their respective
Subsidiaries of any material portion of the business or assets of the
Company and its Subsidiaries, or Parent and its Subsidiaries, or to compel
the Company or Parent to dispose of or hold separate any material portion
of the business or assets of the Company and its Subsidiaries or Parent and
its Subsidiaries, as a result of the Offer, the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Parent or Sub to acquire or hold, or exercise
full rights of ownership of, any Shares to be accepted for payment pursuant
to the Offer, including, without limitation, the right to vote such Shares
on all matters properly presented to the shareholders of the Company, or
(iv) prohibiting Parent or any of its Subsidiaries from effectively
controlling any material portion of the business or operations of the
Company or its Subsidiaries provided, however, that, in the case of clauses
(i) through (iv) above, Parent shall have used its reasonable best efforts,
subject to Section 7.11, to resolve or eliminate the same;
(b) as of the expiration date of the Offer, there shall be enacted,
entered, enforced, promulgated or deemed applicable to the Offer or the
Merger by any Governmental Entity any statute, rule, regulation, judgment,
order or injunction, other than the application to the Offer, the Merger or
the transactions contemplated by the Asset Purchase Agreement of applicable
waiting periods under the HSR Act, that would reasonably be expected to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above;
(c) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, the Merger or this
A-2
<PAGE>
Agreement, or approved or recommended any Takeover Proposal;
(d) any of the representations and warranties of the Company set forth
in this Agreement shall not be true and correct in any respect, in each
case as if such representations and warranties were made as of such time,
except for (i) failures to be true and correct that would not reasonably be
expected to result in a Material Adverse Effect on the Company and (ii)
failures to comply that are capable of being and are cured within 20 days
after written notice from Parent to the Company of such failure (in which
case Parent shall, and shall cause Sub to, extend the expiration date of
the Offer to two business days following the end of such cure period or, if
earlier, the date of cure, unless the Offer would otherwise not expire
prior thereto);
(e) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant of the Company to be performed or
complied with by it under this Agreement, except for (i) failures to so
perform or comply that would not reasonably be expected to result in a
Material Adverse Effect on the Company and (ii) failures to perform or
comply that are capable of being and are cured within 20 days after written
notice from Parent to the Company of such failure (in which case Parent
shall, and shall cause Sub to, extend the expiration date of the Offer to
two business days following the end of such cure period or, if earlier, the
date of cure, unless the Offer would otherwise not expire prior thereto);
(f) there shall have occurred and be continuing as of the expiration
date of the offer (i) any general suspension of trading in, or limitation
on prices for, securities on a national securities exchange in the United
States of America (excluding any coordinated trading halt triggered solely
as a result of a specified decrease in a market index), (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States of America, (iii) any limitation (whether or not
mandatory) by any Governmental Entity on, or other event that materially
adversely affects, the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or
A-3
<PAGE>
indirectly involving the United States of America which in any case is
reasonably expected to have a Material Adverse Effect on the Company or to
materially adversely affect Parent's or Sub's ability to complete the Offer
or the Merger or (v) in case of any of the foregoing existing on the date
of this Agreement, material acceleration or worsening thereof which in any
case is reasonably expected to have a Material Adverse Effect on the
Company or to materially adversely affect Parent's or Sub's ability to
complete the Offer or the Merger; or
(g) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions, other than the Minimum Conditions, are for
the sole benefit of Parent and Sub and may, subject to the terms of this
Agreement, be waived by Parent and Sub in whole or in part at any time and from
time to time in their sole discretion. The failure by Parent or Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-4
<PAGE>
Exhibit 2
ASSET PURCHASE AGREEMENT
among
KUHLMAN CORPORATION,
TRANSPRO GROUP, INC.,
KYSOR INDUSTRIAL CORPORATION,
and certain subsidiaries of
KYSOR INDUSTRIAL CORPORATION
dated as of
February 2, 1997
<PAGE>
TABLE OF CONTENTS
----- -- --------
<TABLE>
<CAPTION>
ARTICLE I
<S> <C> <C>
THE BASIC TRANSACTION................................................... 1
Section 1.1. Agreement to Purchase and Sell Assets..................... 1
Section 1.2. Purchase Price; Allocation................................ 3
Section 1.3. Closing................................................... 4
Section 1.4. Deliveries at Closing..................................... 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS............................... 5
Section 2.1. Organization.............................................. 5
Section 2.2. Authority................................................. 5
Section 2.3. No Violations; Consents and Approvals..................... 6
Section 2.4. Financial Statements...................................... 6
Section 2.5. SEC Documents............................................. 7
Section 2.6. Absence of Certain Changes................................ 7
Section 2.7. Litigation................................................ 7
Section 2.8. Compliance with Applicable Law............................ 7
Section 2.9. Taxes..................................................... 8
Section 2.10. Termination, Severance and Employment Agreements.......... 8
Section 2.11. Employee Benefit Plans; ERISA............................. 9
Section 2.12. Environmental Matters..................................... 10
Section 2.13. Labor Matters............................................. 10
Section 2.14. Title to and Condition of the Purchased Assets............ 11
Section 2.15. Real Property............................................. 11
Section 2.16. Intellectual Property..................................... 11
Section 2.17. Contracts................................................. 11
Section 2.18. Broker's Fees............................................. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER.............. 12
Section 3.1. Organization.............................................. 12
Section 3.2. Authority................................................. 12
Section 3.3. No Violations; Consents and Approvals..................... 12
Section 3.4. Broker's Fees............................................. 13
Section 3.5. Acceptance of Purchased Assets............................ 13
Section 3.6. Financing................................................. 13
ARTICLE IV
COVENANTS............................................................... 13
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.1. Conduct of Business....................................... 13
Section 4.2. Names..................................................... 14
Section 4.3. Access to Information..................................... 14
Section 4.4. Reasonable Best Efforts................................... 14
Section 4.5. Public Announcements...................................... 14
Section 4.6. Notification of Certain Matters........................... 15
Section 4.7. Expenses.................................................. 15
Section 4.8. HSR Filing................................................ 15
Section 4.9. Employees................................................. 15
Section 4.10. Preparation of Financial Statements....................... 15
Section 4.11. Post-Closing Access to Records............................ 15
Section 4.12. Bulk Transfer Laws........................................ 16
Section 4.13. Section 338 Election; Tax Returns......................... 16
Section 4.14. Consents.................................................. 16
Section 4.15. Litigation Matters........................................ 16
Section 4.16. Insurance Matters......................................... 17
Section 4.17. Collectively Bargained Qualified Plans.................... 18
Section 4.18. Other Qualified Plans..................................... 19
Section 4.19. Welfare Plans............................................. 20
Section 4.20. Further Assurances........................................ 21
Section 4.21. Restrictive Covenants..................................... 22
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES............................ 22
Section 5.1. Conditions to Obligations of the Parties.................. 22
Section 5.2. Additional Conditions to Obligations of Parent
and the Purchaser......................................... 22
Section 5.3. Additional Conditions to Obligations of Sellers........... 23
ARTICLE VI
TERMINATION............................................................. 24
Section 6.1. Termination............................................... 24
Section 6.2. Termination by Parent..................................... 24
Section 6.3. Termination by Kysor...................................... 24
Section 6.4. Notice of Termination..................................... 25
Section 6.5. Effect of Termination..................................... 25
Section 6.6. Termination Fee........................................... 25
ARTICLE VII
INDEMNIFICATION AND RELATED MATTERS..................................... 25
Section 7.1. Survival of Representations, Warranties and Covenants..... 25
Section 7.2. Indemnity by Sellers...................................... 26
Section 7.3. Indemnity by Parent and the Purchaser..................... 26
Section 7.4. Limits on Indemnification................................. 26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Section 7.5. Third Party Claims.........................................27
ARTICLE VIII
MISCELLANEOUS............................................................28
<S> <C> <C>
Section 8.1. Modification and Waiver....................................28
Section 8.2. Notices....................................................28
Section 8.3. Assignment.................................................29
Section 8.4. Governing Law..............................................29
Section 8.5. Counterparts...............................................30
Section 8.6. Interpretation.............................................30
Section 8.7. Entire Agreement...........................................30
Section 8.8. Severability...............................................30
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of February 2, 1997
by and among KUHLMAN CORPORATION, a Delaware corporation ("Parent"), TRANSPRO
GROUP, INC., a Delaware corporation and wholly owned subsidiary of Parent (the
"Purchaser"), KYSOR INDUSTRIAL CORPORATION, a Michigan corporation ("Kysor"),
and the corporations listed on Annex A, each a direct or indirect wholly owned
domestic subsidiary of Kysor (each individually a "Subsidiary" and collectively
the "Subsidiaries"). Kysor and the Subsidiaries are sometimes collectively
referred to as "Sellers" and individually as a "Seller." Sellers, Parent and
the Purchaser are sometimes collectively referred to as the "Parties" and
individually as a "Party."
Kysor, through the Subsidiaries, certain direct or indirect wholly owned
foreign subsidiaries listed on Annex B (the "Foreign Subsidiaries"), and certain
divisions of its own ("Divisions") (collectively, "TPG"), designs, manufactures
and markets engine-performance systems, engine-protection systems and components
and accessories for heavy-duty trucks, other commercial vehicles and marine
equipment (the "Business"). This Agreement sets forth the terms and conditions
under which Sellers are willing to sell to the Purchaser, and the Purchaser is
willing to purchase from Sellers, with respect to the Divisions and Subsidiaries
located in the United States, substantially all of the Divisions' and
Subsidiaries' respective assets relating to the Business, including all of the
capital stock of the Foreign Subsidiaries.
ACCORDINGLY, the Parties agree as follows:
ARTICLE I
THE BASIC TRANSACTION
Section 1.1. Agreement to Purchase and Sell Assets. On the terms and
subject to the conditions of this Agreement, at the Closing (defined below) the
Purchaser will purchase from Sellers, and Sellers will sell and transfer to the
Purchaser, all of the right, title and interest that Sellers possess and have
the right to transfer in all of the properties, assets, rights, claims and
goodwill relating exclusively to the Business (collectively, the "Purchased
Assets"), including without limitation the following:
(a) Current Assets. All accounts and notes receivable, prepaid
expenses, deposits, rights or claims to refunds or rebates of any kind and
all other current assets;
(b) Inventory. All inventories of raw materials, work-in-process,
finished goods (including all inventories consigned to dealers, sales
representatives and others) and supplies, wherever located;
<PAGE>
(c) Equipment. All machinery, equipment, tooling, dies, molds, tools,
fixtures, furniture, office equipment, computer equipment and software,
showroom models and displays, automobiles, trucks, trailers, other
vehicles, fuel, spare parts and leasehold improvements, together with all
express and implied warranties by the manufacturers or sellers of those
items, and all maintenance records, brochures, catalogues and other
documents relating to those items or to the installation or functioning of
those items;
(d) Real Property. The real property owned by Sellers described on
attached Exhibit 1.1(d) (the "Real Property"), together with all related
land rights, easements, rights of way and other appurtenances to the
property, and all blueprints, building drawings, architectural
specifications and other documents relating to the property;
(e) Real Property Leases. The real property leases listed on attached
Exhibit 1.1(e), and any leasehold improvements and security or similar
deposits relating to those leases;
(f) Contracts. All customer and supplier purchase orders, personal
property leases and other contracts, agreements and commitments, and any
security or similar deposits relating to those contracts, agreements and
commitments;
(g) Intellectual Property. All registered and unregistered domestic
and foreign patents, patent applications, inventions upon which patent
applications have not yet been filed, service marks, trade names,
trademarks, trademark registrations and applications, logos, copyrighted
works, copyright registrations and applications, trade secrets, formulae,
technology, designs, processes, inventions, know-how and other intellectual
property rights (collectively, the "Intellectual Property Assets");
(h) Records. All records, customer and supplier lists, payroll and
personnel records, product information, product drawings, production
documentation, material specifications, equipment lists, formulae,
specifications, drawings, plans, reports, data, notes, correspondence,
contracts, labels, catalogues, brochures, art work, photographs,
advertising materials, marketing and production literature, files and other
records and documents, including books of account, ledgers, and other
financial records;
(i) Permits and Licenses. All permits, licenses, orders, franchises,
and approvals to the extent transferable;
(j) Intangible Property Rights. All suits, claims, actions,
proceedings or investigations and other intangible property rights;
-2-
<PAGE>
(k) Insurance Policies. The life insurance policies upon the life of
Timothy Campbell, William Cobb and William Venema and all insurance
policies solely relating to the Business or the Purchased Assets to the
extent assignable; and
(l) Foreign Subsidiaries. All of the issued and outstanding capital
stock of the Foreign Subsidiaries.
Notwithstanding the foregoing, the Purchased Assets do not include those
assets set forth on attached Exhibit 1.1(m) (the "Excluded Assets"). The
Purchased Assets will be transferred to the Purchaser free and clear of all
claims, liens, mortgages, security interests, encumbrances, charges,
obligations, rights of third parties and other restrictions ("Liens"), except
for those Liens described on attached Exhibit 1.1(n) (the "Permitted Liens").
Section 1.2 Purchase Price; Allocation.
(a) In consideration of the transfer of the Purchased Assets to the
Purchaser and Sellers' other undertakings set forth in this Agreement, the
Purchaser will, and Parent will cause the Purchaser to (including providing
sufficient funds), pay to Sellers an aggregate of Eighty-Six Million
Dollars ($86,000,000) (collectively, the "Purchase Payment"), payable at
Closing by wire transfer of immediately available funds to an account or
accounts designated by Sellers.
(b) As additional consideration for the transfer of the Purchased
Assets to the Purchaser and Sellers' other undertakings set forth in this
Agreement, at Closing the Purchaser will, and Parent will cause the
Purchaser to (including providing sufficient funds), assume and fully pay,
satisfy and discharge when due (other than in the case of any good faith
disputes) all of Sellers' respective liabilities and obligations to the
extent relating to the Business (whether due or to become due, known or
unknown, absolute or contingent, or liquidated or unliquidated), including
without limitation all liabilities for taxes (other than income taxes
imposed on any Seller relating to the Business and other than income taxes
imposed on any Foreign Subsidiary with respect to taxable periods ending
prior to the Closing and, with respect to any taxable periods beginning
before and ending after the Closing, the portion of such taxable periods
ending on and including the Closing, determined on the basis of a "closing
of the books" as of the time of Closing but with items determined on an
annual basis (such as depreciation) allocated pro rata on a daily basis and
with any net operating loss carryforwards allocated first to reduce income
allocable to the period prior to the Closing), all liabilities and
obligations in respect of any Litigation Claim (as defined below)
constituting an Assumed Liability, all employee benefit and welfare
obligations and other employment-related liabilities, including any
severance obligations to employees of the Divisions and the Subsidiaries
not hired
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by the Purchaser and obligations to Timothy Campbell, William Cobb and
William Venema under their respective Supplemental Executive Retirement
Plans with Kysor, as amended, all employee benefit-related obligations to
the extent provided in Sections 4.17, 4.18 and 4.19 below, all liabilities
and obligations arising under the contracts, agreements and other
commitments included in the Purchased Assets, obligations under that
certain Indemnity Agreement between Kysor and Timothy Campbell with respect
to acts or omissions occurring at or prior to the Closing with respect to
the Business, and all environmental liabilities and all other liabilities
associated with the Business, in each case regardless of whether disclosed
to Parent or the Purchaser and regardless of whether consistent with the
representations and warranties of Sellers in this Agreement (collectively,
the "Assumed Liabilities"). Notwithstanding the foregoing, (i) the Assumed
Liabilities will not include those liabilities described in attached
Exhibit 1.2(b), and (ii) Kysor, on the one hand, will be liable for one-
half of all sales, use, excise, transfer, documentary, recording and other
taxes and fees associated with the transfer of the Purchased Assets to the
Purchaser (the "Transfer Taxes") and Parent and the Purchaser, on the other
hand, will be liable for one-half of all Transfer Taxes, and the Parties
will reimburse each other as appropriate to effect the foregoing allocation
of responsibility. The Parties acknowledge and agree that the Assumed
Liabilities include any environmental liabilities to the extent they relate
to properties owned, operated or utilized, or to which any materials or
substances were sent or disposed of, by or with respect to the Business, in
each case before or after Closing. The Purchase Payment and the Assumed
Liabilities are collectively referred to in this Agreement as the "Purchase
Price."
(c) The Purchase Price will be allocated among the Purchased Assets as
mutually determined by the Parties not later than the Closing in accordance
with Section 1060 of the Code (as defined below) and the regulations
thereunder, which allocation will be binding on the Parties for tax
purposes.
Section 1.3. Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place in the office of Rudnick & Wolfe,
203 North LaSalle Street, Chicago, Illinois 60601 at 10 a.m. local time on the
second business day after the satisfaction of the conditions set forth in
Article V below. The Closing will be effective as of the close of business on
the actual day of Closing, and possession of the Purchased Assets shall be
delivered to Purchaser immediately after the Closing on the Closing Date.
Section 1.4. Deliveries at Closing. At the Closing: (a) Sellers will (i)
deliver to Parent and the Purchaser the various certificates, instruments and
documents referred to in Section 5.2 below, (ii) execute, acknowledge (if
appropriate) and deliver to the Purchaser instruments of sale, transfer,
conveyance and assignment (in form and substance acceptable to the Purchaser)
sufficient to transfer the Purchased Assets to the Purchaser, provided that no
such instrument shall expand in any manner the representations and warranties
made by Sellers in this Agreement, (iii) deliver to the Purchaser resignations
of members of the respective Boards of
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Directors of each Foreign Subsidiary as requested by the Purchaser before
Closing, and (iv) deliver to Parent and the Purchaser any other documents
required under this Agreement or reasonably requested by Parent or the Purchaser
so long as they do not expand in any manner the representations and warranties
made by Sellers in this Agreement; and (b) Parent and/or the Purchaser, as
applicable, will (i) deliver to Sellers the Purchase Payment, (ii) execute,
acknowledge (if appropriate) and deliver to Sellers an instrument or instruments
(in form and substance acceptable to Sellers) effecting the assumption of the
Assumed Liabilities, provided, that no such instrument will expand in any manner
the assumption of obligations of Parent and Purchaser in this Agreement, (iii)
deliver to Sellers the various certificates, instruments and other documents
referred to in Section 5.3 below, and (iv) deliver to Sellers any other
documents required under this Agreement or reasonably requested by any Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers (which for purposes of this Article II are deemed to include the
Foreign Subsidiaries) represent and warrant to Parent and the Purchaser, jointly
and severally, as follows, except as previously disclosed by Sellers in an SEC
Document (defined in Section 2.5 below) or in a disclosure letter dated of the
date of this Agreement and delivered to Parent and the Purchaser on the date
hereof, including the materials referenced in that letter (the "Disclosure
Letter"):
Section 2.1. Organization. Each Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Seller has all requisite corporate power
and authority to own, lease and operate its properties relating to the Business
and to conduct its operations relating to the Business as now being conducted.
Each Seller is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it with
respect to the Business or the nature of its operations relating to the Business
makes such qualification necessary, except in those jurisdictions where the
failure to be duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, assets or condition of Sellers taken as a whole with
respect to the Business (a "Seller Material Adverse Effect"). Complete copies
of each Seller's charter and bylaws, including all amendments, will be delivered
to the Purchaser before the Closing. Kysor owns directly or indirectly all of
the outstanding capital stock of each Subsidiary.
Section 2.2. Authority. Each Seller has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly and validly authorized and approved by the Board of
Directors of each Seller and the shareholder of each Subsidiary and no other
corporate proceedings are necessary to authorize this Agreement or the
consummation of the transactions
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contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by each Seller and, assuming this Agreement constitutes a
legal, valid and binding agreement of Parent and the Purchaser, it constitutes a
legal, valid and binding agreement of each Seller, enforceable against it in
accordance with its terms.
Section 2.3. No Violations; Consents and Approvals.
(a) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement nor
compliance by any Seller with any of the provisions of this Agreement will
(i) violate any provision of any Seller's charter or bylaws, (ii) result in
a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, any of the terms, conditions or
provisions of any license, franchise, permit or agreement, or (iii) violate
any statute, rule, regulation, order or decree of any public body or
authority by which any Seller or any of the Purchased Assets are bound,
excluding from the foregoing clauses (ii) and (iii) any violations,
breaches, defaults or rights that either would not have a Seller Material
Adverse Effect or materially impair any Seller's ability to consummate the
transactions contemplated by this Agreement or for which any Seller has
received, or on or before Closing will have received, appropriate consents
or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required in connection
with the execution and delivery of this Agreement by Sellers, or the
consummation by Sellers of the transactions contemplated by this Agreement,
except (i) expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) any
filings and consents that may be required under any environmental law
pertaining to any notification, disclosure or required approval triggered
by the transactions contemplated by this Agreement, (iii) any filings,
consents or approvals as may be required under the laws of any foreign
country in which Sellers, or any of them, conduct business or own any
property or assets and (iv) any other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings not
obtained or made before the Closing the failure of which to be obtained or
made would not have a Seller Material Adverse Effect.
Section 2.4. Financial Statements. Copies of unaudited consolidated
financial statements of Sellers with respect to the Business for the fiscal
years ending December 31, 1996 and 1995 (collectively, the "Financial
Statements") have been provided to Parent and the Purchaser. The Financial
Statements, including all notes and schedules to the Financial Statements, if
any, are in accordance with Sellers' books and records relating to the Business,
accurately and fairly reflect Sellers' transactions, assets and liabilities
relating to the Business, and present fairly Sellers' financial position with
respect to the Business as of the respective dates indicated and the results of
Sellers' operations and changes in cash flows with respect to
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the Business for the respective periods then ended, in conformity with generally
accepted accounting principles (except as may be indicated in the notes
accompanying the Financial Statements).
Section 2.5. SEC Documents. Kysor has made available to Parent and the
Purchaser accurate and complete copies of each registration statement, report,
proxy statement, information statement or schedule, together with all
amendments, that were required to be filed with the Securities and Exchange
Commission ("SEC") by Kysor since January 1, 1994 (the "SEC Documents"), each of
which was timely filed with the SEC. As of their respective dates, the SEC
Documents complied, or will comply, in all material respects with the applicable
requirements of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, as the case may be, and none of the SEC
Documents contained, or will contain, any untrue statement of a material fact or
omitted, or will omit, to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were or are made, not misleading.
Section 2.6. Absence of Certain Changes. Since December 31, 1996, no
Seller has (a) incurred any liabilities or obligations of any nature, whether
accrued, contingent or otherwise, or suffered any event or occurrence that would
have a Seller Material Adverse Effect, or (b) made any changes in accounting
methods, principles or practices with respect to the Business. Since December
31, 1996, each Seller has operated the Business according to its ordinary course
of business consistent with past practice.
Section 2.7. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Sellers, threatened against any
Seller, with respect to the Business, before any court or governmental entity
that would have a Seller Material Adverse Effect or prevent or delay the
consummation of the transactions contemplated by this Agreement. No Seller is
subject to any outstanding order, writ, injunction or decree that, to the extent
reasonably foreseen, in the future would have a Seller Material Adverse Effect
or would prevent or delay the consummation of the transactions contemplated by
this Agreement.
Section 2.8. Compliance with Applicable Law. With respect to the
Business:
(a) Sellers hold all permits, licenses, variances, exemptions, orders and
approvals of all governmental entities necessary for the lawful conduct of
the Business (the "Permits"), except for failures to hold any Permits that
would not have a Seller Material Adverse Effect;
(b) Each Seller is in compliance with the Permits applicable to it, except
where the failure to comply would not have a Seller Material Adverse
Effect;
(c) The operations of the Business have not been and are not being
conducted in violation of any law, ordinance, rule or regulation of any
governmental entity,
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except for violations or possible violations that do not and, insofar as
reasonably can be foreseen, in the future will not have a Seller Material
Adverse Effect; and
(d) No investigation or review by any governmental entity with respect to
any Seller is pending or, to the knowledge of Sellers, threatened nor, to
the knowledge of Sellers, has any governmental entity indicated an
intention to conduct the same, other than, in each case, those that would
not have a Seller Material Adverse Effect.
Section 2.9. Taxes. Each Seller, with respect to the Business, has filed
or caused to be filed all federal, state, local and foreign income and other
material tax returns required to be filed by them, and has paid or withheld or
caused to be paid or withheld all taxes of any nature whatsoever, with any
related penalties, interest and liabilities (any of the foregoing being referred
to in this Agreement as a "Tax") that are shown on those tax returns as due and
payable or otherwise required to be paid, other than Taxes being contested in
good faith and for which adequate reserves have been established, except where
the failure to file, pay or withhold would not have a Seller Material Adverse
Effect. There are no material claims, assessments or audits pending or, to
Sellers' knowledge, threatened against any Seller with respect to the Business
for any alleged deficiency in any Tax that, if upheld, would have a Seller
Material Adverse Effect, and no Seller knows of any threatened Tax claims or
assessments against any Seller that if upheld would have a Seller Material
Adverse Effect. There are no waivers or extensions of any applicable statute of
limitations to assess any Taxes relating to the Business. All returns filed
with respect to Taxes relating to the Business are true and correct, except
where any failure to be true and correct would not have a Seller Material
Adverse Effect. There are no outstanding requests for any extension of time
within which to file any return or within which to pay any Taxes shown to be due
on any return. There are no Liens for any Taxes upon the assets of the Business
(other than statutory Liens for Taxes not yet due and payable and Liens for real
estate taxes being contested in good faith) which would have a Seller Material
Adverse Effect.
Section 2.10. Termination, Severance and Employment Agreements. Sellers
have provided to Parent or the Purchaser a complete and accurate list of each of
the following as it relates to the Business: (a) employment or severance
agreement with any director, officer or other key employee that is not
terminable without material liability or obligation (either individually or
collectively) on 60 days' or less notice; (b) agreement with any director,
officer or other key employee that provides any term of employment or other
compensation guarantee or extending severance benefits or other benefits after
termination not comparable to benefits generally available to employees of the
Business; (c) agreement, plan or arrangement with any director, officer or other
key employee under which that person may receive payments that may be subject to
tax imposed by (Section) 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or included in the determination of that person's "parachute
payment" under (Section) 280G of the Code; and (d) agreement, plan or
arrangement with or affecting any director, officer or other key employee any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of
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the transactions contemplated by this Agreement. Since December 31, 1996, no
Seller has entered into or amended, in any material respect, any employment or
severance agreement with, or granted any severance or termination pay to, any
director, officer or other key employee of the Business. For purposes of this
Agreement, "key employee" means an employee whose aggregate annual compensation
in 1996 or 1997 exceeded, or is expected to exceed, $100,000.
Section 2.11. Employee Benefit Plans; ERISA.
(a) With respect to the Business: (i) each "employee benefit plan" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and all other employee benefit, bonus,
incentive, stock option (or other equity-based), severance, change in
control, welfare (including post-retirement medical and life insurance) and
fringe benefit plans (whether or not subject to ERISA) maintained or
sponsored by any Seller or any trade or business, whether or not
incorporated, that would be deemed a "single employer" within the meaning
of Section 4001 of ERISA (an "ERISA Affiliate"), for the benefit of any
employee or former employee of a Division or Subsidiary or any of Sellers'
ERISA Affiliates (the "Plans") has been operated in accordance with its
terms and is in compliance (including the making of governmental filings)
with all applicable laws, including ERISA and the applicable provisions of
the Code, except for failures that would not have a Seller Material Adverse
Effect, (ii) each of the Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code (the "Qualified Plans") has been
determined by the Internal Revenue Service to be so qualified, and, since
the date of such determination, no event has occurred that would adversely
effect a Plan's qualified status, (iii) no "reportable event," as that term
is defined in Section 4043(c) of ERISA (for which the 30-day notice
requirement to the Pension Benefit Guaranty Corporation ("PBGC") has not
been waived), has occurred with respect to any Plan that is subject to
Title IV of ERISA that presents a risk of liability to any governmental
entity or other person that would have a Seller Material Adverse Effect,
and (iv) there are no pending or, to Sellers' knowledge, threatened claims
(other than routine claims for benefits) audits, investigations or
litigation by, on behalf of, against or relating to, any of the Plans or
any trusts related thereto that would have a Seller Material Adverse
Effect. No Plan is a "multiemployer plan" (within the meaning of Sections
3(37) or 4001(a)(3) of ERISA) nor has any Seller or any ERISA Affiliate
ever contributed or been required to contribute to any multiemployer plan.
(b) (i) No Plan relating to the Business has incurred an "accumulated
fund deficiency" (as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived and (ii) neither any Seller nor any ERISA
Affiliate has incurred any liability under Title IV of ERISA except for
required premium payments to the PBGC, which payments have been made when
due, and no events have occurred that are reasonably likely to give rise to
any liability of any
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Seller or an ERISA Affiliate under Title IV of ERISA or that could
reasonably be anticipated to result in any claims being made against the
Purchaser by the PBGC that present a risk of liability that would have a
Seller Material Adverse Effect.
(c) With respect to each Plan relating to the Business that is subject
to Title IV of ERISA, (i) Sellers have provided to Parent or the Purchaser
copies of the most recent actuarial valuation report prepared for the Plan
before the date of this Agreement, (ii) the assets and liabilities in
respect of the accrued benefits as set forth in the most recent actuarial
valuation report prepared by the Plan's actuary fairly presented the funded
status of the Plan in all material respects, and (iii) since the date of
the valuation report there has been no adverse change in the funded status
of any of those Plans that would have a Seller Material Adverse Effect.
(d) Neither any Seller nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan relating to the Business that has
resulted or could result in the imposition of a lien or the posting of a
bond or other security under ERISA or the Code that would have a Seller
Material Adverse Effect.
Section 2.12. Environmental Matters. Each Seller, with respect to the
Business, has obtained and is in compliance with the terms and conditions of all
required permits, licenses, registrations and other authorizations required
under Environmental Laws (as defined below), except for failures that would not
have a Seller Material Adverse Effect. Each Seller, with respect to the
Business, is in compliance with all Environmental Laws, except for failures to
comply that would not have a Seller Material Adverse Effect. No Seller, with
respect to the Business, has received notice of any past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
that have resulted in or threaten to result in any liability, or otherwise form
the basis of any claim, action, suit, proceeding, hearing or investigation
under, any Environmental Laws that would have a Seller Material Adverse Effect.
For purposes of this Section 2.12, (a) "Environmental Laws" mean applicable
federal, state, local and foreign laws, regulations and codes relating in any
respect to human health and safety, pollution or protection or the environment
and (b) "Hazardous Substances" means any toxic, caustic or otherwise dangerous
substance (whether or not regulated under federal, state or local environmental
statutes, rules, ordinances, or orders), including (i) "hazardous substance" as
defined in 42 U.S.C. (Section) 9601, and (ii) petroleum products, derivatives,
byproducts and other hydrocarbons.
Section 2.13. Labor Matters. Since January 1, 1995, no Seller, with
respect to the Business, (a) has been subject to, or to Sellers' knowledge
threatened with, any strike, lockout or other labor dispute or engaged in any
unfair labor practice, the result of which had or constituted, or could
reasonably be expected to have or constitute, a Seller Material Adverse Effect,
or (b) has received notice of any pending petition for certification before the
National Labor Relations Board with respect to any material group of employees
of any Subsidiary or
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Division who are not currently organized. Sellers have provided to Parent or the
Purchaser true, correct and complete copies of each collective bargaining
agreement to which employees of any Subsidiary or Division are subject.
Section 2.14. Title to and Condition of the Purchased Assets. Each Seller
has or will have by Closing good, valid and marketable title to the Purchased
Assets (including the outstanding capital stock of the Foreign Subsidiaries)
purported to be owned by that Seller, free and clear of all Liens other than the
Permitted Liens. All of the capital stock of the Foreign Subsidiaries is owned
directly or indirectly by Kysor, and there are no outstanding options, warrants,
rights or agreements respecting the issuance, disposition or acquisition of any
such capital stock. With respect to the condition of the Purchased Assets, all
of the Purchased Assets will be transferred to the Purchaser on an "AS IS, WHERE
IS" basis, and SELLERS MAKE NO AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PURCHASED ASSETS, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 2.15. Real Property. No building or improvement on the Real
Property encroaches on any easement or property owned by another and no building
or improvement owned by another encroaches on the Real Property, other than any
encroachment that would not have a Seller Material Adverse Effect. The Real
Property, and the applicable Seller's use of the Real Property, comply in all
respects with all laws, regulations, rules, orders, zoning ordinances and
requirements applicable to the Real Property, other than any failure to comply
that would not have a Seller Material Adverse Effect. There are no pending or,
to Sellers' knowledge, threatened condemnation proceedings against any portion
of the Real Property which if adversely determined would have a Seller Material
Adverse Effect.
Section 2.16. Intellectual Property. To Sellers' knowledge, there is no
infringement or unlawful use by any person or entity of any of the Intellectual
Property Assets, other than any infringement or use that would not have a Seller
Material Adverse Effect. No Seller, with respect to the Business, has
manufactured or sold products that conflict with or infringe upon any
proprietary rights of others, except where the conflict or infringement would
not have a Seller Material Adverse Effect.
Section 2.17. Contracts. All material contracts, leases and other
agreements included in the Purchased Assets (the "Assigned Contracts") are
valid, binding and enforceable in all material respects in accordance with their
terms. Each Seller that is a party to an Assigned Contract and, to Sellers'
knowledge, each other party to that Assigned Contract, has complied and is
complying in all material respects with the terms of that Assigned Contract, and
to Sellers' knowledge no event has occurred or circumstances exist that (with or
without notice or lapse of time) may contravene, conflict with or result in a
violation or breach of, or give any Seller or any other person or entity the
right to declare a default under, any Assigned Contract that would have a Seller
Material Adverse Effect.
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Section 2.18. Broker's Fees. Neither Sellers nor anyone acting on any
Seller's behalf have incurred any liability for any broker's fees, commissions
or financial advisory or finder's fees in connection with any of the
transactions contemplated by this Agreement for which Parent or the Purchaser
would become liable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant, jointly and severally, to
each Seller as follows:
Section 3.1. Organization. Each of Parent and the Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
Section 3.2. Authority. Each of Parent and the Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly and validly authorized and approved by the
respective Boards of Directors of Parent and the Purchaser and no other
corporate proceedings are necessary to authorize this Agreement or the
consummation of the transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by Parent and the Purchaser
and, assuming this Agreement constitutes a legal, valid and binding agreement of
Sellers, it constitutes a legal, valid and binding agreement of Parent and the
Purchaser, enforceable against each of them in accordance with its terms.
Section 3.3. No Violations; Consents and Approvals.
(a) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement nor
compliance by Parent and the Purchaser with any of the provisions of this
Agreement will (i) violate any provision of its charter or bylaws, (ii)
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, any of the terms,
conditions or provisions of any license, franchise, permit or agreement to
which Parent or the Purchaser is a party or by which Parent or the
Purchaser or any of its properties is bound, or (iii) violate any statute,
rule, regulation, order or decree of any public body or authority by which
Parent or the Purchaser or any of its properties is bound, excluding from
the foregoing clauses (ii) and (iii) violations, breaches, defaults or
rights that, either individually or in the aggregate, would not have a
material adverse effect on
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Parent's or the Purchaser's ability to perform its obligations pursuant to
this Agreement or consummate the transactions contemplated by this
Agreement (a "Parent Material Adverse Effect") or for which Parent or the
Purchaser has received or on or before Closing will have received
appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by Parent or
the Purchaser in connection with the execution and delivery of this
Agreement, or the consummation by Parent or the Purchaser of the
transactions contemplated by this Agreement, except (i) expiration of the
waiting period under the HSR Act and (ii) any other consents, orders,
authorizations, registrations, declarations and filings not obtained or
made before Closing the failure of which to be obtained or made would not
have a Parent Material Adverse Effect.
Section 3.4. Broker's Fees. Neither Parent, the Purchaser nor anyone
acting on their behalf has incurred any liability for any broker's fees,
commissions or financial advisory or finder's fees in connection with any of the
transactions contemplated by this Agreement for which any Seller could become
liable.
Section 3.5. Acceptance of Purchased Assets. Parent and the Purchaser
accept the Purchased Assets in their present condition on an "AS IS, WHERE IS"
basis.
Section 3.6. Financing. The Purchaser has available to it committed funds
sufficient to allow it to timely consummate the transactions contemplated by
this Agreement.
ARTICLE IV
COVENANTS
Section 4.1. Conduct of Business. Except as contemplated by this
Agreement or as expressly agreed to in writing by Parent, during the period from
the date of this Agreement to the Closing: (a) each Seller will conduct its
operations relating to the Business in the ordinary course of business
consistent with past practices; (b) each Seller will exercise its reasonable
best efforts to maintain and preserve its assets included in the Purchased
Assets, keep its insurance with respect to the Business in full force and
effect, preserve intact the present business organizations and personnel
relating to the Business, preserve the present goodwill of the Business with all
persons having business dealings with it and comply with all laws applicable to
the conduct of the Business; (c) Sellers will not take, or agree in writing or
otherwise to take, any action that would make any of the representations or
warranties of Sellers contained in this Agreement untrue or incorrect in any
material respect as of the date when made; and (d) the Foreign Subsidiaries will
not transfer any cash or cash equivalents to Kysor.
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Section 4.2. Names. Effective as of the Closing, Kysor hereby grants to
Parent and the Purchaser a royalty-free perpetual license to use in connection
with the Business the name "Kysor" (and any derivatives of that name) in the
form currently used by Sellers in connection with the Business. As soon as
practicable after the Closing, Kysor International Distribution Company will
amend its articles of incorporation to change its corporate name to a name that
does not include "Kysor."
Section 4.3. Access to Information. From the date of this Agreement to
the Closing, Sellers will give Parent, the Purchaser and their authorized
representatives (including legal counsel, environmental and other consultants,
financial advisors, accountants, banks, financial institutions and auditors)
full access during normal business hours to all facilities, personnel and books
and records of the Divisions and the Subsidiaries, will permit Parent and the
Purchaser to make any inspections that Parent and the Purchaser reasonably
require and will cause their respective officers to furnish Parent and the
Purchaser with any financial and operating data and other information (of which
Parent and the Purchaser will have the right to make copies at their own
expense) with respect to the Business that Parent and the Purchaser may from
time to time reasonably request; provided, however, that no invasive soil or
groundwater tests may be performed without the prior written consent of Kysor,
which consent will not be unreasonably withheld. All of the foregoing
information will be held in confidence in accordance with the terms of the
Confidentiality Agreement (the "Confidentiality Agreement") between Parent and
Kysor dated December 26, 1996, the terms of which are incorporated by reference
in this Agreement and which will survive the termination of this Agreement.
Section 4.4. Reasonable Best Efforts. Subject to the terms and conditions
in this Agreement and applicable law, each Party will use its reasonable best
efforts promptly to take, or cause to be taken, all actions and do, or cause to
be done, all things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using reasonable best efforts to (i) obtain necessary
consents, approvals or waivers under its material contracts relating to the
Business, (ii) cooperate in making available information and personnel to the
lenders to the Purchaser with respect to any financing for the transactions
contemplated by this Agreement and (iii) lift any legal bar to the transactions
contemplated by this Agreement.
Section 4.5. Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to this Agreement, the
Parties will consult with each other as to its form and substance and will not
issue the press release or make the public statement before such consultation,
except in either case as may be required by law or any obligations pursuant to
any listing agreement with any national securities exchange.
Section 4.6. Notification of Certain Matters. Prior to Closing, Kysor and
Parent will give prompt notice to the other of (a) the occurrence, or non-
occurrence, of any event the occurrence, or non-occurrence, of which would be
likely to cause either (i) any representation or warranty of any Party contained
in this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Closing, or (ii) any condition set forth
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in Article V to be unsatisfied at any time from the date of this Agreement to
the Closing, (b) any material failure of any Party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, and (c) any capital expenditure made by any Seller with respect
to the Business in excess of $500,000. The delivery of any notice pursuant to
this Section 4.6 will not limit or otherwise affect the remedies available prior
to Closing under this Agreement to the Party receiving the notice.
Section 4.7. Expenses. Except as expressly provided in this Agreement,
each Party will each bear its own expenses incurred in connection with the
preparation, execution and performance of this Agreement and the transactions
contemplated by this Agreement.
Section 4.8. HSR Filing. Each Party will use its reasonable best efforts
to file as promptly as practicable after the date of this Agreement its pre-
merger notification under the HSR Act and to respond as promptly as practicable
to all inquiries and requests resulting from the filing. Each Party will
furnish to the other a copy of its filing and will cooperate with each other and
keep each other informed concerning the status of its filing and communications
with any governmental authorities with respect to its filing.
Section 4.9. Employees. Effective as of the date of Closing, the
Purchaser will hire and continue the employment of such numbers of employees of
the Divisions and the Subsidiaries and on such terms, and will take all other
steps, that may be necessary to eliminate any obligation of Sellers under the
Worker Adjustment and Retraining Notification Act of 1988, including any
obligation to give notice of the transfer of operations or any loss of
employment or loss of pay or termination benefits. The Parties agree that the
provisions of this Section 4.9 are solely between and for the benefit of the
Parties and do not inure to the benefit of or confer rights upon any third
party, including any employees of the Parties.
Section 4.10. Preparation of Financial Statements. After Closing Sellers
will use their reasonable best efforts to cooperate with Parent and the
Purchaser to cause the preparation and delivery to the Purchaser of audited
consolidated financial statements of Sellers with respect to the Business for
the fiscal years ending December 31, 1996 and 1995 within 45 days after Closing.
The expenses associated with such preparation will be shared equally between
Kysor and the Parent, except that Parent's responsibility will not exceed
$75,000.
Section 4.11. Post-Closing Access to Records. The Parties will preserve
until December 31, 2002 all business records relating to the Purchased Assets,
the Assumed Liabilities and the transactions contemplated by this Agreement.
Each Party will afford the other Parties and their representatives and agents,
during normal business hours and upon reasonable advance notice, reasonable
access to (and the right to copy at the other's expense) those records for any
legitimate purpose, including a tax audit, governmental inquiry or litigation.
Section 4.12. Bulk Transfer Laws. Parent and the Purchaser waive
compliance with any bulk sale and transfer laws applicable to the transactions
contemplated by this Agreement.
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Section 4.13. Section 338 Election; Tax Returns. Without the prior
written consent of Kysor, neither Parent, the Purchaser nor any affiliate
thereof will make any election under Section 338 of the Code, or any similar
provision of state, local or foreign law, in connection with the transactions
contemplated by this Agreement. Parent and the Purchaser agree that no income
tax return of any Foreign Subsidiary with respect to any taxable period (or
portion thereof) prior to the Closing shall be filed or amended after the
Closing without the prior review and written approval of Kysor.
Section 4.14. Consents. The Parties will use their reasonable best
efforts to cooperate with each other to obtain any consents to assignment or
transfer of the Purchased Assets to the Purchaser. If consent to assignment is
not obtained or if such assignment is not permitted irrespective of consent,
Sellers will use their reasonable best efforts to cooperate with the Purchaser
in any reasonable arrangement designed to provide for the Purchaser all benefits
under such Purchased Assets, including enforcement for the benefit of the
Purchaser of any and all rights of the applicable Seller against any other
person with respect to the Purchased Assets; provided, however, that the
Purchaser will bear all costs and expenses relating to such enforcement.
Section 4.15. Litigation Matters. Following the Closing, the Purchaser
will assume the defense of or settle, to the extent permitted under applicable
Policies (as defined below) covering the Insured Claim (as defined below), each
Litigation Claim included among the Assumed Liabilities (the "Defendant Claims")
and will use its reasonable best efforts to cause Kysor and its affiliates
(other than the Foreign Subsidiaries) to be removed as named parties therefrom,
provided such removal would not prejudice any rights or any potential remedies
or recoveries. Following the Closing, the Purchaser shall, in its sole
discretion, prosecute, settle, compromise or cause to be dismissed each
Litigation Claim included among the Purchased Assets (the "Plaintiff Claims")
and will use its reasonable best efforts to cause Kysor and its affiliates
(other than the Foreign Subsidiaries) to be removed as named parties therefrom,
provided such removal would not prejudice any rights or any potential remedies
or recoveries. Whether or not Parent effects the removal of Kysor and its
affiliates (other than the Foreign Subsidiaries) from any such Defendant Claim
or Plaintiff Claim, and in furtherance and not limitation of the provisions of
Article VII, Parent and the Purchaser will defend, indemnify and hold harmless
each Seller and its directors, officers, employees, shareholders,
representatives and agents pursuant to Section 7.3 against any Indemnified Loss
(as defined below) in respect of any Defendant Claim or Plaintiff Claim.
Section 4.16. Insurance Matters.
(a) Kysor will use its reasonable best efforts, consistent with past
practice, to maintain in full force and effect after the Closing Date its
liability insurance policies, including without limitation product
liability, general liability, workers' compensation and environmental
liability policies (collectively, the "Policies" and, individually, a
"Policy") that relate to the Business in respect of acts, events or
conditions that occurred or existed prior to the Closing (the
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"Insured Claims") and will not, without the prior written consent of
Parent, waive any rights of Parent or Purchaser as insureds (or, if Parent
or the Purchaser is not permitted to be an insured under a Policy, any
rights or benefits that the Parent or the Purchaser would have under that
Policy if it were so permitted (an "Intended Insured Party")) under the
Policies. At Parent's or the Purchaser's request in its discretion, Kysor
will use its reasonable best efforts to cause Parent and the Purchaser to
be named as additional insureds under the Policies in respect of the
Insured Claims; provided, however, that Parent and the Purchaser will be
liable for any additional premiums or other charges and will be responsible
for any other obligations to the extent related to naming Parent and the
Purchaser as additional insureds. Parent and the Purchaser may elect to
discontinue coverage as an insured under any Policy upon written notice to
that effect to Kysor.
(b) To the extent that as of the Closing the aggregate deductible,
retention, reimbursement or similar liability (collectively, the "Aggregate
Retention") for any Policy described in the first sentence of Section
4.16(a) above with respect to any Policy year or other applicable period
has not been fully met, the remaining portion (the "Remaining Portion") of
such Aggregate Retention shall, to the extent of claims made thereafter in
respect of such Policy year or period, be borne one-half by Sellers, on the
one hand, and one-half by Parent and the Purchaser (as insured party or
Intended Insured Party), on the other hand (it being understood that in no
event shall Sellers, on the one hand, or Parent and the Purchaser (as
insured parties or Intended Insured Parties), on the other hand, bear a
portion of the Aggregate Retention in excess of its or their, as the case
may be, claims). Subject to the foregoing, each insured party (or Intended
Insured Party) will bear all individual per-claim deductibles, retentions,
reimbursement and similar liabilities in respect of each claim by such
insured party or Intended Insured Party in accordance with the terms of the
Policy. If by reason of the timing of claims made after the Closing with
respect to such Policy, the Remaining Portion of any Aggregate Retention is
borne other than in accordance with the principles reflected in the first
sentence of this Section 4.16(b), then the appropriate party will make such
arrangements to compensate the other party or parties that have borne the
disproportionate amount of such Remaining Portion as is reasonably
acceptable to such latter party or parties (it being understood that such
latter party or parties shall be placed in the same economic position as
intended by the first sentence of this Section 4.16(b)).
(c) The aggregate amount of insurance coverage available as of the
Closing under a Policy with respect to any year or other applicable period
thereunder shall be shared one-half by Sellers, on the one hand, and one-
half by Parent and the Purchaser (as insured party or Intended Insured
Party ), on the other hand. Any allocable portion of insurance coverage
available as of the Closing under any Policy with respect to any year or
other applicable period
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thereunder that is not used by Sellers, on the one hand, or Parent and the
Purchaser (as insured party or Intended Insured Party ), on the other hand,
may be used by the other party. If with respect to any year or other
applicable period under a Policy the aggregate amount of insurance coverage
available thereunder as of the Closing shall have been exhausted and
Sellers or Parent and the Purchaser, as the case may be, shall have
exhausted a portion of the aggregate amount of such insurance coverage
greater than its allocable share as determined in accordance with the
second preceding sentence, Sellers or Parent and the Purchaser, as the case
may be, shall promptly make such arrangements to compensate such party for
its loss of insurance coverage as are reasonably acceptable to such party
(it being understood that such party shall be put in the same economic
position as if the sharing of aggregate insurance coverage provided in this
Section 4.16(c) had initially occurred). Notwithstanding the foregoing, the
Parent and the Purchaser shall share in the aggregate insurance coverage
described above solely in respect of claims relating to the Business.
(d) Each Party agrees that it shall comply with the terms of each
Policy in respect of any Insured Claim, including the claims administration
procedures thereof.
(e) After Closing Sellers, on the one hand, and Parent and the
Purchaser, on the other hand, shall provide information reasonably
requested by the other regarding the status of claims, utilization of
coverage, exhaustion of all deductibles, retentions, reimbursement and
similar liabilities, and other matters regarding the Policies.
Section 4.17. Collectively Bargained Qualified Plans. This Section 4.17
applies to all Qualified Plans sponsored or maintained by a Seller solely
relating to employees in a collective bargaining agreement covering TPG.
Sellers have disclosed all such Qualified Plans covered by this Section 4.17 to
Purchaser and will furnish a list of such Qualified Plans prior to the Closing
Date. With respect to all such plans, effective as of the Closing Date: (a)
each Seller sponsoring such a plan shall take any and all action necessary under
the plan and applicable law to transfer the sponsorship of the plan to the
Purchaser; (b) all records relating to the operation and administration of such
a plan shall be delivered to the Purchaser; (c) Sellers shall secure the
resignation or removal of all trustees or fiduciaries of such a plan, unless
Purchaser specifically informs Sellers in writing that it desires to continue
the appointment of a trustee or other fiduciary; and (d) Sellers shall, or shall
cause any other applicable named fiduciary under such a plan to, direct the
trustee of the plan to transfer all assets to a successor trustee designated by
the Purchaser.
Section 4.18. Other Qualified Plans. This Section 4.18 applies to all
Qualified Plans sponsored or maintained by a Seller relating to TPG employees
which also cover employees of that Seller who are not related to TPG. The
Sellers have disclosed to Purchaser all such
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Qualified Plans covered by this Section 4.18 and will furnish a list of such
Qualified Plans prior to the Closing Date.
(a) Defined Benefit Pension Plans. With respect to all such defined
benefit pension plans, effective as of the Closing Date: (i) each Seller
sponsoring such a plan shall take necessary action to prepare a successor
plan document in contemplation of a spin-off of assets and liabilities for
current and former employees relating to TPG into a separate and successor
plan with terms that are substantially similar to the original plan; (ii) a
list of such current and former employees shall be furnished to Purchaser
prior to the Closing Date; (iii) each Seller shall take all other necessary
action to transfer assets and liabilities to each successor plan (including
the Applicable Percentage of any Excess Assets (both as defined in Code
section 414(1)(2)), and the calculation of the present value of the
liabilities transferred to a successor plan shall be based on the mortality
tables used by the original plans as of January 1, 1997 and the interest
rates used by the PBGC for terminations of defined benefit pension plans as
of the first day of the month that the transfer takes place; (iv) each
Seller sponsoring a successor plan shall take all action necessary under
the successor plan and applicable law to transfer the sponsorship of the
plan to the Purchaser; (v) all records corresponding to the original plans
relating to the operation and administration of the successor plans shall
be delivered to the Purchaser; (vi) Sellers shall secure the resignation or
removal of all trustees or fiduciaries of the successor plans, unless the
Purchaser specifically informs Sellers in writing that it desires to
continue the appointment of a trustee or other fiduciary; and (vii) Sellers
shall, or shall cause any other applicable named fiduciary under the plan
to, direct the trustee of a successor plan to transfer all assets to a
successor trustee designated by the Purchaser.
(b) Defined Contribution Plans. For each Qualified Plan covered by
this Section 4.18 that is a defined contribution plan, except an employee
stock ownership plan, effective as of the Closing Date: (i) each Seller
sponsoring such a plan shall take necessary action to prepare a successor
plan document in contemplation of a spin-off of assets and liabilities for
current and former employees relating to TPG into a separate and successor
plan with terms that are substantially similar to the original plan; (ii) a
list of such current and former employees shall be furnished to the
Purchaser prior to the Closing Date; (iii) each Seller shall take all other
necessary action to transfer assets and liabilities to each successor plan
attributable to current and former employees relating to TPG; (iv) each
Seller sponsoring a successor plan shall take all action necessary under
the successor plan and applicable law to transfer sponsorship of the plan
to the Purchaser; (v) all records corresponding to the original plans
relating to the operation and administration of the successor plans shall
be delivered to the Purchaser; (vi) Sellers shall secure the resignation or
removal of all trustees or fiduciaries of the successor plans, unless the
Purchaser specifically informs
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Sellers in writing that it desires to continue the appointment of a trustee
or other fiduciary; and (vii) Sellers shall, or shall cause any other
applicable named fiduciary under the plan to, direct the trustee of a
successor plan to transfer all assets to a successor trustee designated by
the Purchaser.
(c) Employee Stock Ownership Plan. Effective as of the Closing Date,
the Sellers shall: (i) take all action necessary to permanently discontinue
employer contributions to the employee stock ownership plan ("ESOP")
sponsored by a Seller and to fully vest the accounts of all participants;
(ii) take all action necessary to make final allocations of all unallocated
amounts, in accordance with terms of the ESOP document (which allocations
shall include all participants who are active TPG employees at the Closing
Date); (iii) submit the ESOP to the Internal Revenue Service for a
determination that the allocation of ESOP unallocated assets on the basis
of account balances does not adversely affect the ESOP's qualification
under Sections 401(a) and 4975(e)(7) of the Code; and (iv) after receipt of
the favorable determination letter, provide for the distribution of
benefits from the ESOP to the participants as soon as reasonable feasible.
Provided, however, if the Internal Revenue Service does not issue a
favorable determination letter with respect to allocation of ESOP
unallocated assets on the basis of account balances, or if all of the ESOP
unallocated assets cannot be allocated during 1997, if requested by
Purchaser, Sellers shall prepare a successor plan document for TPG
participants and take necessary action to transfer assets and liabilities
attributable to the TPG participants (including a percentage of the
unallocated assets that would be allocable to TPG participants under
Section 5.6(a) of the ESOP as in effect January 1, 1997) to the successor
plan, in accordance with clauses (i)-(vii) of Section 4.18(b), and such
successor plan shall be assumed by Purchaser.
Section 4.19. Welfare Plans.
(a) Medical Benefits Provided to Active Employees by the Purchaser.
Effective immediately after the Closing Date, the Purchaser shall make
available group medical plan coverage to all TPG active employees (and
their dependents and beneficiaries who had such coverage under a group
medical plan sponsored by Sellers on the Closing Date. The group medical
plan coverage provided by the Purchaser under this Section 4.19(a) shall,
to the extent permissible under applicable law, be based on such terms and
conditions as the Purchaser deems appropriate, in its sole discretion;
provided, however, that any such plan shall not preclude an employee from
receiving coverage for a preexisting illness or other medical condition to
the extent that the employee had coverage for that particular medical
condition under a group health plan maintained by a Seller on the Closing
Date.
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(b) Medical Benefits Provided to Retired Employees by the Purchaser.
Effective immediately after the Closing Date, the Purchaser shall assume
the obligation of Sellers to provide medical coverage to those TPG
employees (and their dependents and beneficiaries) who retired prior to the
Closing Date and as of the Closing Date were provided with retiree medical
benefits (other than COBRA coverage) by a Seller. A list of such employees
will be furnished to the Purchaser prior to the Closing Date.
(c) Benefits Provided by Sellers. Except with respect to a plan
described in Section 4.19(e) below, any claim incurred by a TPG employee
under any Welfare Plan (as defined below) sponsored or maintained by a
Seller on or prior to the Closing Date shall remain the sole liability and
responsibility of the Sellers and/or its particular Welfare Plan. A TPG
employee covered by a Welfare Plan maintained by a Seller on or before the
Closing Date shall have 180 days (or such longer or, in the case of a plan
not self-funded by such Seller, shorter period of time that applies under
the Seller's Welfare Plan) to submit a claim for benefits under the
Seller's Welfare Plan. "Welfare Plan" means an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA maintained by a Seller for the
benefit of any TPG employee.
(d) COBRA Requirements. After the Closing Date: (i) Sellers shall be
responsible for providing the COBRA Coverage for all TPG employees (and
their dependents and beneficiaries) who incur a COBRA qualifying event on
or prior to the Closing Date; and (ii) the Purchaser shall be responsible
for providing COBRA Coverage for all TPG employees (and their dependents
and beneficiaries) who incur a COBRA qualifying event after the Closing
Date.
(e) Section 125 Plan. The provisions of this Section 4.19(e) shall
apply to any Plan maintained by a Seller under Code section 125 covering
TPG employees. Effective as of the Closing Date, Sellers shall take all
action necessary to: (i) spin-off that portion of such a plan covering TPG
employees into a separate plan with substantially similar terms and
conditions that are contained in the original plan; (ii) transfer an
appropriate amount of assets consisting of all unreimbursed salary
reduction contributions to the successor plan; and (iii) transfer
sponsorship of the successor plan to the Purchaser.
Section 4.20. Further Assurances. After Closing each Party will use its
reasonable best efforts to cooperate with each other to further effect the
transfer of the Purchased Assets to, and the assumption of the Assumed
Liabilities by, the Purchaser and the other transactions contemplated by this
Agreement, including (a) remitting to the Purchaser (i) payments received by
Sellers with respect to accounts receivables included in the Purchased Assets
and (ii) invoices and other bills received by Sellers with respect to
liabilities included in the Assumed Liabilities, and (b) providing each other
notice of any claim, obligation or liability for which the Party to be notified
is responsible under this Agreement. Within three business days after Closing,
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Parent will cause the Foreign Subsidiaries to pay and satisfy all inter-company
accounts or liabilities to Kysor and any other Seller.
Section 4.21. Restrictive Covenants. After Closing the Parties agree to
abide by the provisions set forth in Exhibit 4.21.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
Section 5.1. Conditions to Obligations of the Parties. The obligations of
each Party to consummate the transactions contemplated by this Agreement will be
subject to the satisfaction at or before Closing of each of the following
conditions unless waived in writing by that Party:
(a) No statute, rule or regulation will have been promulgated,
enacted, entered or enforced, and no other legally binding, final and
nonappealable action will have been taken, by any domestic, foreign or
supranational government or governmental, administrative or regulatory
authority or agency of competent jurisdiction or by any court or tribunal
of competent jurisdiction, domestic, foreign or supranational, that in any
of the foregoing cases has the effect of (i) making illegal or directly or
indirectly prohibiting or significantly restricting the consummation of the
transactions contemplated by this Agreement, or (ii) that otherwise would
materially adversely affect Sellers or the Business taken as a whole;
provided, however, that Parent, the Purchaser and each Seller must have
complied with Section 4.4 of this Agreement;
(b) Any waiting period applicable to the transactions contemplated by
this Agreement under the HSR Act must have terminated or expired and all
other material consents and approvals of, and filings with any other
governmental entities or other third parties must have been received or
made, as applicable; and
(c) This Agreement must not have been terminated by any Party in
accordance with its terms.
Section 5.2. Additional Conditions to Obligations of Parent and the
Purchaser. The obligations of Parent and the Purchaser to consummate the
transactions contemplated by this Agreement will be subject to the satisfaction
at or before Closing of each of the following additional conditions unless
otherwise waived in writing by the Purchaser:
(a) the representations or warranties of Sellers contained in this
Agreement that are qualified by materiality must be true and correct in all
respects, and those that are not so qualified must be true and correct in
all material respects, when made and at the Closing as if made again at
that time,
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except in each case for failures to comply that are capable of being and
are cured (other than by mere disclosure of the breach) within 10 days
after written notice from Parent to Kysor of the failure but in any event
before Closing;
(b) Sellers must have complied in all material respects with their
obligations under this Agreement, except for failures to comply that are
capable of being and are cured within 10 days after written notice from
Parent to Kysor of the failure but in any event before Closing;
(c) there must not have occurred on or after the date of this
Agreement any development or developments with respect to the Business that
have had or may reasonably be expected to have a Seller Material Adverse
Effect; and
(d) Kysor must have delivered to Parent and the Purchaser an officer's
certificate certifying that as of the Closing all the conditions set forth
in Sections 5.1 and Sections 5.2(a), (b) and (c) have been complied with.
Section 5.3. Additional Conditions to Obligations of Sellers. The
obligations of each Seller to consummate the transactions contemplated by this
Agreement will be subject to the satisfaction at or before the Closing of each
of the additional following conditions unless otherwise waived in writing by
Sellers:
(a) the representations or warranties of Parent and the Purchaser
contained in this Agreement that are qualified by materiality must be true
and correct in all respects, and those that are not so qualified must be
true and correct in all material respects, when made and at the Closing as
if made again at that time, except in each case for failures to comply that
are capable of being and are cured (other than by mere disclosure of the
breach) within 10 days after written notice from Kysor to Parent of the
failure but in any event before Closing;
(b) Parent and the Purchaser must have complied with their obligations
under this Agreement, except for failures to comply that are capable of
being and are cured within 10 days after written notice from Kysor to
Parent but in any event before Closing;
(c) Parent and the Purchaser must have delivered to each Seller an
officer's certificate certifying that as of the Closing all the conditions
set forth in Section 5.1 and Section 5.3(a) and (b) have been complied
with; and
(d) The cash tender offer for all of the outstanding capital stock of
Kysor by Scotsman Industries, Inc. ("Scotsman") or a subsidiary thereof
must have been consummated.
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ARTICLE VI
TERMINATION
Section 6.1. Termination. This Agreement may be terminated at any time
before the Closing:
(a) by mutual written consent of Kysor and Parent;
(b) by either Kysor or Parent if any court of competent jurisdiction
in the United States or other governmental body in the United States has
issued an order (other than a temporary restraining order), decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and the order,
decree, ruling or other action has become final and nonappealable; provided
that the party seeking to terminate this Agreement will have used its
reasonable best efforts to remove or lift the order, decree or ruling; or
(c) by either Kysor or Parent if the Closing has not occurred by June
30, 1997.
Section 6.2. Termination by Parent. This Agreement may be terminated by
Parent at any time before Closing if (a) the representations or warranties of
Sellers contained in this Agreement are not true and correct as if made at and
as of that time, except for (i) failures to be true and correct that could not
reasonably be expected to result in a Seller Material Adverse Effect and (ii)
failures to comply that are capable of being and are cured (other than by mere
disclosure of the breach) within 10 days after written notice from Parent to
Kysor of the failure; or (b) Sellers have failed to comply with their
obligations under this Agreement, except for (i) failures to comply that could
not reasonably be expected to result in a Seller Material Adverse Effect and
(ii) failures to comply that are capable of being and are cured within 10 days
after written notice from Parent to Kysor of the failure.
Section 6.3. Termination by Kysor. This Agreement may be terminated by
Kysor (a) if the Agreement and Plan of Merger dated as of February 2, 1997
among Kysor, Scotsman and K Acquisition Corp. is terminated for any reason; or
(b) at any time before the Closing if (i) the representations and warranties of
Parent and the Purchaser contained in this Agreement are not true and correct as
if made at and as of that time, except for (A) failures to be true and correct
that could not reasonably be expected to result in a Parent Material Adverse
Effect and (B) failures to comply that are capable of being and are cured (other
than by mere disclosure of the breach) within 10 days after written notice from
Kysor to Parent of the failure; or (ii) Parent or the Purchaser has failed to
comply with its obligations under this Agreement, except for (A) failures to
comply that could not reasonably be expected to result in a Parent Material
Adverse Effect and (B) failures to comply that are capable of being and are
cured within 10 days after written notice from Kysor to Parent of the failure.
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Section 6.4. Notice of Termination. If Parent or Kysor terminates this
Agreement pursuant to this Article VI, that Party will promptly give written
notice to that effect to the other Party.
Section 6.5. Effect of Termination. In the event of termination of this
Agreement pursuant to this Article VI, this Agreement will become void, except
as provided in the last sentence of Section 4.3 and in Sections 4.7 and 6.6
(which provisions will survive any termination of this Agreement), without
liability on the part of any Party or its affiliates, directors, officers,
employees, stockholders, representatives or agents; provided, however, that the
foregoing will not release a party for liability for any willful or bad faith
breach of any obligation or undertaking under this Agreement. Each of the
Parties by this Agreement waives and releases any other claim that may otherwise
exist upon the termination.
Section 6.6. Termination Fee. If this Agreement is terminated by Kysor
(a) due to the failure of the condition set forth in Section 5.3(d) or (b) under
Section 6.3(a), Kysor will promptly pay to Parent (but in any event within three
business days after termination) the sum of $100,000, provided that the fee will
not be payable if Parent or the Purchaser is in material breach of any of its
material representations, warranties or obligations under this Agreement as of
the date of termination.
ARTICLE VII
INDEMNIFICATION AND RELATED MATTERS
Section 7.1. Survival of Representations, Warranties and Covenants. The
representations and warranties contained in this Agreement and any agreement,
document, instrument or certificate delivered under this Agreement will
terminate and expire at the Closing, except for the representations and
warranties set forth in Section 2.2, Section 2.14 and Section 2.18, all of which
will survive the Closing forever. The post-Closing covenants and agreements of
the Parties, including the indemnification covenants set forth in this Article
VII, will survive the Closing without limitation (except for those that, by
their terms, contemplate a shorter survival period). Except for the covenants
and agreements of Sellers in Section 4.1, which will survive for two years after
the Closing, all pre-Closing covenants and agreements of the Parties will not
survive the Closing. This Article VII constitutes the sole and exclusive remedy
of the Parties with respect to any subject matters addressed in this Agreement,
and each Party hereby waives and releases the other Parties from any and all
claims and other causes of action, including claims for contribution, relating
to those subject matters, other than claims for intentional fraud and for
injunctive relief. The making of a claim for indemnification under this Article
VII (a "Claim") will toll the running of the limitation period with respect to
that Claim. For purposes of the preceding sentence, a Claim will be deemed made
upon the commencement of an independent judicial proceeding with respect to a
matter or receipt by the indemnifying Party of a written notice of a Claim
setting forth in detail the factual and contractual bases for the Claim.
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<PAGE>
Section 7.2. Indemnity by Sellers. Sellers, jointly and severally, will
defend, indemnify and hold harmless Parent, the Purchaser and their respective
directors, officers, employees, shareholders, representatives and agents against
any loss, cost, damage, liability, obligation, claim or expense (including
reasonable attorney fees and court costs but excluding any consequential,
incidental, exemplary or similar damages) (collectively the "Indemnified
Losses") resulting from or relating to (a) any breach of any representation,
warranty, covenant or agreement made by Sellers in this Agreement that under
Section 7.1 survives the Closing or any breach or nonperformance of any
agreement entered into by any Seller at Closing, (b) any liabilities of Sellers
not assumed by the Purchaser pursuant to this Agreement, and (c) the successful
enforcement of Sellers' indemnification obligations under the Agreement.
Section 7.3. Indemnity by Parent and the Purchaser. Parent and the
Purchaser, jointly and severally, will defend, indemnify and hold harmless each
Seller and its directors, officers, employees, shareholders, representatives and
agents against any Indemnified Losses resulting from or relating to (a) any
breach or nonperformance of any covenant or agreement made by Parent or the
Purchaser in this Agreement that under Section 7.1 survives the Closing or any
agreement entered into by Parent or the Purchaser at Closing, (b) the Assumed
Liabilities, (c) the conduct of the Business and the use of the Purchased Assets
after Closing, and (d) the successful enforcement of Parent's and the
Purchaser's indemnification obligations under this Agreement.
Section 7.4. Limits on Indemnification. The indemnification obligations
of the Parties will be limited as follows:
(a) Sellers will not be liable to Parent or Purchaser for Claims until
the aggregate amount of Claims exceeds Five Hundred Thousand Dollars
($500,000) (the "Basket Amount"). Upon reaching the Basket Amount Sellers
will be liable to Parent and the Purchaser for all Claims in excess of the
Basket Amount up to an aggregate amount of Eight Million Dollars
($8,000,000) (the "Maximum Amount"). Under no circumstances will the
aggregate amount of Sellers' indemnification obligations exceed the Maximum
Amount. Notwithstanding the foregoing, nothing in this Section 7.4(a) will
limit Seller's obligations under Section 4.1(d) or with respect to any
post-Closing covenants and agreements of Sellers, including the
indemnification covenants set forth in this Article VII, or with respect to
any claims for intentional fraud.
(b) Any amounts recoverable by an Indemnitee will be net of any tax
benefits, insurance proceeds or other recoveries or reimbursements obtained
by the Indemnitee. To the extent the tax benefits, insurance proceeds or
other recoveries or reimbursements are incurred or received after any
recovery pursuant to this Article VII, there will be a corresponding
adjustment among the Parties without regard to the time limitations imposed
under this Article VII. The Parties agree that all indemnification payments
will be treated for tax purposes as an adjustment to the Purchase Price.
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<PAGE>
Section 7.5. Third Party Claims. If any action, suit, investigation or
proceeding (including negotiations with federal, state, local or foreign tax
authorities) (the "Action") is threatened or commenced by a third party in
respect of which a Party or other person described in Section 7.2 and Section
7.3 (an "Indemnitee") may make a Claim under this Agreement, the Indemnitee will
notify the Party obligated to indemnify that Party (the "Indemnitor") to that
effect with reasonable promptness (so as to not prejudice the Indemnitor's
rights) after the commencement or threatened commencement of the Action, and the
Indemnitor will have the opportunity to defend against the Action (or, if the
Action involves to a significant extent matters beyond the scope of the
indemnity agreement contained in this Article VII, those claims that are covered
hereby) subject to the limitations set forth below. If the Indemnitor elects to
defend against any Action (or, as described in the preceding parenthetical, one
or more claims relating thereto), the Indemnitor will notify the Indemnitee to
that effect with reasonable promptness. In that case, the Indemnitee will have
the right to employ its own counsel and participate in the defense of the
Action, but the fees and expenses of such counsel will be at the expense of the
Indemnitee unless the employment of such counsel at the expense of the
Indemnitor is authorized in writing by the Indemnitor. Any Party granted the
right to direct the defense of a threatened or actual Action under this Section
7.5 will: (a) keep the other Parties fully informed of material developments in
the Action at all stages of the Action; (b) promptly submit to the other Parties
copies of all pleadings, responsive pleadings, motions and other similar legal
documents and papers received in connection with the Action; (c) permit the
other Parties and their counsel, to the extent practicable, to confer on the
conduct of the defense of the Action; and (d) to the extent practicable, permit
the other Parties and their counsel an opportunity to review all legal papers to
be submitted prior to their submission. The Parties will make available to each
other and each other's counsel and accountants all of their books and records
relating to the Action, and each Party will render to the other Parties any
assistance that may be reasonably required in order to insure the proper and
adequate defense of the Action. The Parties will use their respective good
faith efforts to avoid the waiver of any privilege of any Party. The assumption
of the defense of any matter by an Indemnitor will not constitute an admission
of responsibility to indemnify or in any manner impair or restrict that party's
rights to later seek to be reimbursed its costs and expenses if indemnification
with respect to the matter was not required. An Indemnitor may elect to assume
the defense of a matter at any time during the pendency of the matter, even if
initially the Party did not elect to assume the defense, so long as the
assumption at the later time would not prejudice the rights of the Indemnitee.
No settlement of a matter by the Indemnitee will be binding on an Indemnitor for
purposes of the Indemnitor's indemnification obligations. No settlement of a
matter by the Indemnitor will be binding on an Indemnitee without the prior
written consent of the Indemnitee (which consent will not be unreasonably
withheld) unless the settlement involves only the payment of money that
Indemnitor pays simultaneously with such settlement. Notwithstanding the
foregoing, with respect to any Action for which a claim has been or may be made
under any insurance policy, the Parties will comply with any procedures in such
policy for filing, maintaining or prosecuting such claim, and to the extent the
procedures in such policy are inconsistent with this Section 7.5, the procedures
in such policy will control.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Modification and Waiver. At any time before the Closing,
subject to applicable law, this Agreement may be amended, modified or
supplemented only by the written agreement (referring specifically to this
Agreement) of the Parties. At any time before the Closing, Parent and the
Purchaser, on the one hand, and Sellers, on the other hand, may (a) extend the
time for the performance of any of the obligations or other acts of the other,
(b) waive any inaccuracies in the representations and warranties of the other
contained in this Agreement or in any documents delivered pursuant to this
Agreement and (c) waive compliance by the other with any of the agreements or
conditions contained in this Agreement that may legally be waived. Any
extension or waiver will be valid only if set forth in an instrument in writing
specifically referring to this Agreement and signed on behalf of the extending
or waiving Party.
Section 8.2. Notices. All notices and other communications under this
Agreement will be in writing and will be delivered personally or by next-day
courier or telecopied with confirmation of receipt, to the Parties at the
addresses specified below (or at any other address for a Party that will be
specified by like notice; provided that any notice of a change of address will
be effective only upon actual receipt of the notice). Any notice will be
effective upon receipt, if personally delivered or telecopied, or one day after
delivery to a courier for next day delivery.
(a) if to any Seller:
Kysor Industrial Corporation
One Madison Avenue
Cadillac, Michigan 49601-9785
Fax: (616) 775-2661
Attention: General Counsel
with a copy to:
Tracy T. Larsen, Esq.
Warner, Norcross & Judd LLP
900 Old Kent Building
111 Lyon Street, NW
Grand Rapids, Michigan 49503
Fax: (616) 752-2500
(b) if to Parent or the Purchaser:
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Kuhlman Corporation
Three Skidaway Village Square
Savannah, Georgia 31411
Fax: (912) 598-0737
Attention: Richard A. Walker, Esq.
with a copy to:
Stephen A. Landsman, Esq.
Rudnick & Wolfe
203 North LaSalle Street
Chicago, Illinois 60601
(312) 236-7516
Section 8.3. Assignment. This Agreement and all of the provisions of
this Agreement will be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns. In addition, this Agreement
will inure to the benefit of and be enforceable by any person or entity
acquiring beneficial ownership of 50% or more of Kysor's outstanding capital
stock, whether by tender offer, merger or otherwise, and such person's or
entity's successors or assigns; provided that such person or entity assumes and
agrees to perform the obligations of Kysor under Article VII. Neither this
Agreement nor any of the rights, interests or obligations under this Agreement
will be assigned by any of the Parties without the prior written consent of the
other Parties. No assignment will relieve any Party of its obligations under
this Agreement. Except for the individuals identified in Article VII as
entitled to indemnification under the terms of that Article, this Agreement is
not intended to confer any rights or remedies upon any other person or entity
except the Parties.
Section 8.4. Governing Law. This Agreement will be governed by the laws
of the State of Michigan as to all matters, including matters of validity,
construction, effect, performance and remedies, without regard to conflict of
law principles.
Section 8.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
Section 8.6. Interpretation. The Article and Section headings contained
in this Agreement are solely for convenience of reference, are not part of the
agreement of the Parties and will not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, the term"including"
and words of similar import will mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified, the term "to the
knowledge of Sellers" (or words of similar import) will mean to the knowledge of
any executive officer of any Seller, and the term "Litigation Claim" means any
pending or threatened suit, action, proceeding or investigation, whether as a
plaintiff or as a defendant, and whether existing on or after the date of this
Agreement.
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<PAGE>
Section 8.7. Entire Agreement. This Agreement, the Disclosure Letter and
the Confidentiality Agreement (collectively, the "Transaction Documents")
embody the entire agreement and understanding of the Parties in respect of the
subject matter contained in the Transaction Documents and supersede all prior
agreements and understandings among the Parties with respect to that subject
matter. There are no representations, promises, warranties, covenants or
undertakings in respect of that subject matter, other than those expressly set
forth or referred to in the Transaction Documents.
Section 8.8. Severability. The invalidity or unenforceability of any
particular provision of this Agreement will be construed in all respects as if
the invalid or unenforceable provision were omitted. All provisions of this
Agreement will be enforced to the fullest extent permitted by law.
* * * * * * *
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<PAGE>
The Parties have caused this Agreement to be signed by their respective
duly authorized officers as of the date first written above.
KUHLMAN CORPORATION
By: /s/ Robert S. Jepson, Jr.
-----------------------------------
Name: Robert S. Jepson, Jr.
Title: Chairman and Chief
Executive Officer
"Parent"
TRANSPRO GROUP, INC.
By: /s/ Robert S. Jepson, Jr.
-----------------------------------
Name: Robert S. Jepson, Jr.
Title: Chairman and Chief
Executive Officer
"Purchaser"
KYSOR INDUSTRIAL CORPORATION
By: /s/ George R. Kempton
-----------------------------------
Name: George R. Kempton
Title: Chairman & CEO
"Kysor"
KYSOR INTERNATIONAL DISTRIBUTION
COMPANY
By: /s/ George R. Kempton
-----------------------------------
Name: George R. Kempton
Title: President
"Subsidiary"
AUSTIN TRAILER EQUIPMENT COMPANY
By: /s/ George R. Kempton
-----------------------------------
Name: George R. Kempton
Title: President
"Subsidiary"
WESTRAN CORPORATION
By: /s/ George R. Kempton
-----------------------------------
Name: George R. Kempton
Title: President
"Subsidiary"
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<PAGE>
ANNEX A
SUBSIDIARIES
------------
Kysor International Distribution Company, a Michigan corporation
Austin Trailer Equipment Company, a Michigan corporation
Westran Corporation, a Michigan corporation
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<PAGE>
ANNEX B
FOREIGN SUBSIDIARIES
------- ------------
Kysor Europe Ltd., a United Kingdom corporation
Kysor/Asia Ltd., a Korean corporation
Dynair, Ltd., a United Kingdom corporation
Kysor Industries, S.A., a Belgium corporation
Kysor Do Brasil LTDA, a Brazilian corporation
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<PAGE>
EXHIBIT 1.1(d)
OWNED REAL PROPERTY
----- ---- --------
1. Plant, warehouse and office located in Byron, Illinois
2. Plant and office located in Scottsburg, Indiana
3. The following Michigan properties:
(a) Cadillac: Plant, warehouse and office
(b) Spring Lake: Plant and office
(c) Rothbury: Plant, warehouse and office
(d) Walker: Plant and office
(e) White Pigeon: Plant and office
4. Plant and office in Charlotte, North Carolina
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<PAGE>
EXHIBIT 1.1(e)
REAL PROPERTY LEASES
---- -------- ------
Leases respecting the following facilities:
(a) Plant and office located in Hengoed, South Wales
(b) Plant and office located in Nailsworth, England
(c) Plant and office located in Changwon, South Korea
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<PAGE>
EXHIBIT 1.1(m)
EXCLUDED ASSETS
-------- ------
The Purchased Assets do not include the following assets of Sellers:
(a) except for that which exists within the Foreign Subsidiaries, any cash,
investments and other cash equivalents, (b) inter-company accounts (except with
respect to the Foreign Subsidiaries, which will be settled within three business
days after Closing), (c) the corporate charter, corporate records, seals, stock
transfer books, blank stock certificates, minute books and other documents
relating to the organization, maintenance and existence of each Seller as a
corporation, (d) all qualifications to transact business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, (e) any assets of
Sellers relating to their respective operations exclusive of the Business, (f)
the equity interest of any Seller in the cogeneration facility located in
Cadillac, Michigan, or any proceeds from the sale thereof, (g) the name "Kysor"
and any derivatives of that name, and (h) the following amounts received or to
be received in connection with the settlement of insurance claims with respect
to environmental matters: (i) approximately $500,000 received from Wausau in
1996 (global settlement), (ii) approximately $1,350,000 received from Royal
Globe Insurance in January, 1997 (global settlement), and (iii) amounts to be
received from Firemen's Fund (global settlement except with respect to Cadillac,
MI superfund site (settlement for past costs only)).
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<PAGE>
EXHIBIT 1.1(n)
PERMITTED LIENS
--------- -----
"Permitted Liens" means (a) Liens for water, sewage and similar
charges and current taxes and assessments not yet due and payable or being
contested in good faith, (b) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar Liens arising or incurred in the
ordinary course of business, (c) Liens arising or resulting from any action
taken by Parent or the Purchaser, (d) easements, rights of way, restrictions and
other similar Liens that do not materially interfere with the ordinary conduct
of the operations of any Division or any Subsidiary, (e) any Liens set forth in
any leases, agreements or other documents included in the Purchased Assets that
evidence the applicable Seller's rights in or to title to a particular Purchased
Asset, (f) any Liens associated with the Assumed Liabilities, (g) minor
imperfections or defects in title which do not effect the value or use of the
Purchased Assets and (h) any other Liens to which Parent or the Purchaser
consents in writing.
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<PAGE>
EXHIBIT 1.2(b)
EXCLUDED LIABILITIES
-------- -----------
The following liabilities are Excluded Liabilities: (a) except as
provided in Section 1.2(b), any severance or benefit obligations respecting
central staff (headquarters) employees of Kysor, (b) liabilities arising under
the Termination Agreement between Kysor and Timothy Campbell, (c) liabilities
associated with Kysor's equity interest in the cogeneration facility located in
Cadillac, Michigan, (d) Sellers' expenses associated with the transactions
contemplated by this Agreement to the extent not specifically allocated to
Parent or the Purchaser, (e) Sellers' post-Closing contractual obligations under
this Agreement, and (f) inter-company accounts (except with respect to the
Foreign Subsidiaries, which will be settled within three business days after
Closing).
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<PAGE>
EXHIBIT 4.21
------------
RESTRICTIVE COVENANTS
---------------------
Section 1. From and after the Closing, each Seller and each of their
respective subsidiaries (each, a "Restricted Party" and, collectively, the
"Restricted Parties") shall not, except on behalf of the Purchaser, either
directly or indirectly, on its own account, or as an independent contractor,
consultant, agent, partner, joint venture or owner of any other person, firm,
partnership, corporation or other entity, or in any other capacity, in any way:
(a) Throughout the period of five (5) years from and after the date
of this Agreement (the "Term") within the United States of America,
including its possessions and territories, or within any foreign country or
foreign jurisdiction in which TPG operates or sells any of its products,
conduct, engage in or aid or assist anyone in the conduct of a business (or
any portion thereof) which is substantially similar or directly competitive
with the Business (or any portion thereof), as currently conducted or as
currently planned to be conducted during the Term; or
(b) Throughout the Term solicit, divert, take away or accept orders
from, or attempt to solicit, divert, take away or accept orders from, any
person, firm, partnership, corporation or other entity, wherever located,
for whom any member of TPG performed any services or to whom any member of
TPG sold any product within the eighteen (18) month period immediately
preceding the date of this Agreement with respect to any product or service
which is the same or substantially similar (in either function or use) to
the products or services sold or provided during said eighteen (18) month
period by any member of TPG in respect of the Business; or
(c) Throughout the three (3) year period after the date of this
Agreement, solicit for employment any person who was employed by or engaged
by any Restricted Party with respect to the Business within the twelve (12)
month period immediately preceding the date of this Agreement (other than
in the course of a general hiring solicitation program which is not
specifically targeted, in whole or in part, to employees of the Business or
Purchaser); or
(d) Use for itself or for any other person, firm, corporation,
partnership, association or other entity, or divulge or disclose in any
manner to any person, firm, corporation, partnership, association or other
entity, the methods of operation, financial data, sources of supply, know-
how, pricing information, records, books, agreements, techniques,
procedures, systems or other trade secrets or confidential or proprietary
information included with the Purchased Assets (hereinafter referred to as
the "Confidential Information"). Notwithstanding anything to the contrary
contained in this Exhibit 4.21, the restrictions on disclosure and use of
the Confidential Information shall not apply to (i) information or
techniques which are or become available to the public other than through
disclosure (whether deliberate or inadvertent) by any Restricted Party
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<PAGE>
in violation of this Section 1 (d); (ii) disclosure of Confidential
Information in judicial or administrative proceedings or other
requirements of the law to the extent any Restricted Party is legally
compelled to disclose such information in the opinion of such Restricted
Party's counsel, provided that such Restricted Party shall have used its
reasonable efforts to obtain an appropriate protective order or other
assurance of confidential treatment for the information required to be so
disclosed; (iii) such Confidential Information becomes available to a
Restricted Party from a third party who is under no confidential or
fiduciary obligation to Purchaser with respect to such Confidential
Information or (iv) the disclosure of Confidential information in
connection with submitting proof or evidence in any legal or
administrative proceeding to enforce any rights or remedies of Sellers
under this Agreement or any of the documents contemplated hereby.
Notwithstanding the foregoing, nothing set forth in this Exhibit 4.21 shall
prohibit a Restricted Party from: (i) owning for investment purposes not in
excess of 5% in the aggregate of any class of capital stock of any corporation
if such capital stock is publicly traded and listed on any national or regional
stock exchange or quoted on the Nasdaq National Market; and (ii) purchasing, and
following such purchase, actively engaging in, any business that has a
subsidiary, division, group, franchise or segment that is engaged in any
activity that, without taking into account this sentence, cannot be engaged in
by a Restricted Party under this Exhibit 4.21, so long as (x) on the date of
such purchase not more than 15% of the consolidated revenues of such business
are derived from such activity and (y) such business divests itself of such
subsidiary, division, group, franchise or segment as soon as practicable after
the date of such purchase (but in any event within one year after the date of
such purchase).
Section 2. Each Restricted Party hereby agrees that the periods of
time, geographical scope and other limitations provided for in Section 1 above
are the minimum such terms necessary to protect the Purchaser and each of its
affiliates, successors and assigns in the use and employment of the goodwill
respecting the Business. Each Restricted Party further agrees that damages
cannot adequately compensate Purchaser in the event of its breach of any of the
covenants contained in Section 1 above. Accordingly, each Restricted Party
agrees that in the event of a breach of any of such covenants, Purchaser shall
be entitled to obtain injunctive relief against such Restricted Party, without
bond but upon due notice, in addition to such other relief as may appertain at
law or in equity. Obtainment of any such injunction by Purchaser shall not be
deemed an election of remedies or a waiver of any right to assert any other
remedies Purchaser may have at law or in equity. The existence of any claim or
cause of action of any Restricted Party against Purchaser, of whatever nature,
shall not constitute a defense of Purchaser's enforcement of the covenants
contained in Section 1 above. To the extent any of the covenants contained in
Section 1 above are deemed unenforceable by virtue of their scope, in terms of
geographical area or length of time or otherwise, but may be made enforceable by
limitations thereon, each Restricted Party agrees that the same shall be
enforceable to the fullest extent permissable under the laws and public policies
of the jurisdiction in which enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify or reduce the scope of
the covenants contained in Section 1 above to the extent necessary to make such
covenants enforceable.
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EXHIBIT 3
FOR IMMEDIATE RELEASE
- ---------------------
Contacts:
Donald Holmes Terry Murphy Paul Verbinnen/Judy Brennan
Scotsman Industries Kysor Industrial Sard Verbinnen & Co.
847-215-4600 616-779-2200 212-687-8080
SCOTSMAN INDUSTRIES AGREES TO ACQUIRE
KYSOR INDUSTRIAL CORPORATION
FOR $43.00 CASH PER SHARE
----------------
Strategic Transaction Will Increase Scotsman Revenues To Nearly $600 Million;
Reinforces Leadership As "Cold" Equipment Supplier
To Restaurants, Institutions, Supermarkets and Convenience Stores
----------------
Kysor Has Definitive Agreement For Simultaneous Sale
Of Kysor's Transportation Products Group To Kuhlman Corporation
----------------
VERNON HILLS, IL, and CADILLAC, MI, February 3, 1997 -- Scotsman
Industries, Inc. (NYSE: SCT), a leading international manufacturer of commercial
refrigeration products and food preparation workstations, and Kysor Industrial
Corporation (NYSE: KZ), a quality producer of commercial refrigeration systems,
today jointly announced they have signed a definitive agreement under which
Scotsman will acquire Kysor in a cash tender offer of $43.00 per Kysor common
and preferred share. The agreement has been unanimously approved by the boards
of directors of both companies.
The transaction, which is expected to close in the first quarter and will
also include the assumption of approximately $30 million in Kysor debt, is
expected to be non-dilutive to modestly accretive in 1997 and meaningfully
accretive in 1998 to Scotsman's earnings.
In a related transaction, Kysor announced it has entered into a definitive
agreement for the simultaneous sale of the assets of its Transportation Products
Group to Kuhlman Corporation for $86 million in cash with the assumption of the
liabilities associated with the unit.
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-2-
The acquisition of Kysor is subject to a majority of Kysor's shares being
tendered and not withdrawn, the closing of the sale of the Transportation
Products Group to Kuhlman, expiration of the Hart-Scott-Rodino Antitrust review
period, and other customary conditions.
Scotsman, which had 1995 net sales of $324 million, manufactures ice
machines, beverage dispensing systems, food preparation and storage equipment
and related foodservice products. The company markets primarily to commercial
customers in the foodservice, hospitality, beverage and health care industries.
Customers include leading restaurant chains such as McDonald's, Taco Bell, KFC,
Hardee's and Boston Market, supermarket chains such as Wal*Mart, Kroger and
Publix, convenience and specialty store chains such as 7-Eleven, and
institutional food service operators and soft drink bottlers including Coca-Cola
and Pepsi.
Kysor had 1995 sales of approximately $364 million. The Company's
Commercial Products Group had 1995 sales of $207 million and is a quality
producer of refrigerated display cases, commercial refrigeration systems and
insulated panels for supermarkets, convenience stores and the foodservice
industry. Major customers include Wal*Mart, Food Lion and Winn Dixie. The
Company's Transportation Products Group, which manufactures components for the
medium- and heavy-duty commercial vehicle market, accounted for $157 million of
Kysor's 1995 sales.
Said Richard C. Osborne, Chairman, President and Chief Executive Officer of
Scotsman: "This is an important strategic step which we believe puts Scotsman in
a new league. The Kysor acquisition underscores our commitment to stay focused
and grow strategically by acquiring companies that build on our strong position
in foodservice equipment and strengthens our position in the supermarket
industry. By acquiring the second largest commercial refrigeration equipment
provider to supermarkets and a significant supplier to the convenience store
market, we will expand the depth and breadth of both our product lines and
customer base."
Osborne continued: "This transaction makes strategic sense not only because
of excellent cross selling opportunities, but also because of the annual cost
savings we will achieve from reducing corporate overhead, leveraging material
purchases, and instilling best practices at all operations."
Said George R. Kempton, Chairman and Chief Executive Officer of Kysor: "In
an era of consolidation in our industry, this transaction makes great strategic
sense and results from our long-standing efforts to obtain maximum value for our
stakeholders."
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-3-
Scotsman's and Kysor's commercial products groups together had combined pro
forma 1996 annual revenue of approximately $600 million.
Morgan Stanley & Co. Incorporated is acting as financial advisor to
Scotsman and is acting as dealer manager for the tender offer. William Blair &
Co., LLC represents Kysor in this transaction.
Kysor Industrial Corporation is a quality producer of refrigerated display
cases, commercial refrigeration systems and insulated panels for the supermarket
and foodservice industry and a manufacturer of components for the medium- and
heavy-duty commercial vehicle market. The Company has 14 manufacturing
operations in 10 states as well as Great Britain and South Korea.
Scotsman Industries, Inc. is a leading international manufacturer of
refrigeration products -- ice machines, beverage dispensing systems, food
preparation and storage equipment and related products. The Company markets
primarily to commercial customers in the foodservice, hospitality, beverage and
health care industries. Scotsman's products are sold in more than 100 countries
through multiple distribution channels.
***
The press release contains forward looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
those projected. Forward looking statements are necessarily projections which
are subject to change upon the occurrence of events that may affect business.
The Company also points out that the acquisition involves a number of risks that
can cause actual results to be materially different from expected results.
###
<PAGE>
EXHIBIT 4
JOINDER
-------
Effective at the consummation of the tender offer contemplated by the
Agreement and Plan of Merger dated as of February 2, 1997 among Scotsman
Industries, Inc., a Delaware corporation ("Scotsman"), K Acquisition Corp., a
Michigan corporation, and Kysor Industrial Corporation, a Michigan corporation
("Kysor"), and in order to induce Kuhlman Corporation, a Delaware corporation
("Kuhlman"), and Transpro Group, Inc., a Delaware corporation ("Kuhlman Sub"),
to enter into the Asset Purchase Agreement dated as of February 2, 1997 (the
"Asset Purchase Agreement") among Kuhlman, Kuhlman Sub, Kysor and certain
subsidiaries of Kysor named therein, Scotsman hereby agrees to be bound by the
provisions of Section 4.21 and Exhibit 4.21 of the Asset Purchase Agreement as a
Restricted Party (as such term is defined therein) and by the provisions of
Article VII of the Asset Purchase Agreement.
Date: February 2, 1997 SCOTSMAN INDUSTRIES, INC.
By: /s/ Richard C. Osborne
-----------------------------------
Name: Richard C. Osborne
Title: Chairman, President and
Chief Executive Officer
<PAGE>
EXHIBIT 5(a)
CONSULTING AND NONCOMPETITION AGREEMENT
---------------------------------------
This Consulting and Noncompetition Agreement (this "Agreement") is entered
into as of February 2, 1997 between SCOTSMAN INDUSTRIES INC., a Delaware
corporation (the "Company"), and GEORGE KEMPTON (the "Consultant").
WHEREAS, the Consultant has acquired extensive knowledge of and experience
in the business conducted by the Company;
WHEREAS, the Company desires to obtain the benefit of the Consultant's
knowledge and experience by retaining the Consultant, and the Consultant desires
to accept such position, for the term and upon the other conditions hereinafter
set forth;
WHEREAS, concurrently herewith, the Company, K Acquisition Corp. and Kysor
Industrial Corporation are entering into an Agreement and Plan of Merger dated
as of the date hereof (the "Merger Agreement"), pursuant to which K Acquisition
Corp. is acquiring Kysor Industrial Corporation and Kysor Industrial Corporation
is becoming a wholly-owned subsidiary of the Company;
WHEREAS, the Consultant will cease to be Chairman of Kysor Industrial
Corporation's Board of Directors and Chief Executive Officer of Kysor Industrial
Corporation effective as of the consummation of the tender offer contemplated by
the Merger Agreement (the "Tender Offer"); and
WHEREAS, the Company has required as a condition to its entering into the
Merger Agreement that the Consultant (i) agree to certain modifications to his
existing employment agreement with Kysor Industrial Corporation (the "Employment
Agreement") and (ii) enter into this Agreement.
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company and the Consultant hereby agree as follows:
1. Consulting Services; Expenses. The Company hereby engages the
Consultant as a consultant, subject to the terms and conditions hereof, for the
period commencing at the consummation of the Tender Offer and ending on the date
which is the third anniversary of such consummation (the "Consulting Period"),
subject to earlier termination pursuant to Section 4 hereof; provided, however,
that this Agreement shall terminate and shall be of no further force or effect
if the Merger Agreement shall be terminated and the Tender Offer shall not be
consummated pursuant to the terms thereof. During the Consulting Period, the
Consultant shall make himself available to perform consulting services with
respect to the businesses conducted, or in development, by the Company, upon
reasonable advance notice. Such consulting services shall be related to such
matters as the Chief Executive Officer of the Company may designate from time to
time and as are commensurate with the Consultant's years of experience and level
of skill, and shall include consulting services to the Board of Directors of the
Company (the "Board") with respect to the businesses conducted by the Company.
The Consultant shall accommodate reasonable requests for the Consultant's
consulting services, and shall devote reasonable time and his reasonable best
efforts, skill and attention to the performance of such consulting services,
including travel reasonably required in the performance of such consulting
services. The parties will arrange consulting and travel dates and times so as
not to interrupt any pre-planned business or personal activities, or employment
obligations, of the Consultant. The Company shall reimburse the Consultant for
all necessary travel and
<PAGE>
other expenses incurred by the Consultant in providing such consulting services.
Notwithstanding the foregoing, the Consultant shall not be required to be
available more than three (3) days per month nor to travel on more than three
(3) occasions per year.
2. Independent Contractor. The Consultant shall perform the
consulting services described in Section 1 hereof as an independent contractor
without the power to bind or represent the Company for any purpose whatsoever.
The Consultant shall not, by virtue of being a consultant hereunder, be eligible
to receive any benefits for which officers or other employees of the Company are
eligible at any time, such as insurance, participation in the Company's pension
plans or other employee benefits. Consultant acknowledges that Company will not
make provision for federal or state withholding taxes or FICA.
3. Compensation. As compensation for the Consultant's agreement to
make himself reasonably available for consulting as provided in Section 1, and
for his covenants contained in Section 5 of this Agreement, the Company shall
pay to the Consultant on a monthly basis at the end of each month for each of
the thirty-six (36) months during the Consulting Period an amount equal to
$49,400 per month (the "Compensation"). Except in the event of termination of
this Agreement as provided in Section 4, such payments shall not be reduced,
withheld, discontinued, or subjected to setoff, for any reason whatsoever. If
the Company fails to make Compensation payments required by this Agreement, and
such failure continues for ten (10) days after Consultant notifies the Company
in writing of such breach, Consultant's obligations under this Agreement shall
continue, but Company shall be obligated to immediately pay to Consultant, in
one lump sum, all of the remaining unpaid Compensation that would have been
payable through the end of the Consulting Period; discounted, however, to the
then present value, using a discount rate of 7.5 percent. Notwithstanding any
failure by the Company to utilize the consulting services, or any disability of
the Consultant resulting in his inability to perform consulting services
hereunder, the remaining unpaid installments of the Compensation payable
pursuant to this Agreement shall be paid by the Company to the Consultant or to
his legal representative on the dates such payments otherwise would have been
paid hereunder. In the event of the death of the Consultant during the
Consulting Period, the then present value, using a discount rate of 7.5 percent,
of the remaining unpaid Compensation payable through the remainder of the
Consulting Period shall be paid by the Company as a death benefit to the
beneficiary or beneficiaries designated in writing by the Consultant, or if no
beneficiary is so designated, to the executor of the Consultant's estate.
4. Termination of Agreement. (a) The obligation of the Consultant set
forth in Section 1 of this Agreement may be terminated at any time by the
Consultant on thirty (30) days prior written notice to the Company. In the event
of such termination by the Consultant, the obligations of the Company to pay the
Consultant pursuant to Section 3 hereof shall cease, effective on the date of
such termination.
(b) The obligations of the Company set forth in Section 3 of this
Agreement may be terminated at any time by the Company upon written notice to
the Consultant in the event that the Consultant shall willfully be in material
breach of any covenant contained in Section 1 or 5 hereof and the Consultant
shall fail to cure such material breach within 30 days following such notice (in
the event
-2-
<PAGE>
of an alleged breach of Section 5, Consultant may cure any such breach by
ceasing the activities in question).
(c) This Agreement may be terminated by the Consultant upon ten (10)
days prior written notice to the Company in the event that the Company shall
breach any of its obligations under Section 3, 9 or 10 hereof; provided,
however, that the Consultant shall not be entitled to terminate this Agreement
pursuant to this Section 4(c) in the event that the Company shall cure any such
breach within such ten (10) day period. In the event of such termination by the
Consultant, the Company shall pay to the Consultant all remaining payments which
would have become due under this Agreement had it continued in effect until its
expiration date, within five (5) business days of such termination.
5. Noncompetition. During the Consulting Period, except with the
prior written consent of the Board, the Consultant shall not directly or
indirectly:
(a) engage in any activities, whether as employer, proprietor,
partner, stockholder (other than the holder of less than 5% of the stock of any
corporation the securities of which are traded on a national or regional
securities exchange or on the NASDAQ (National Market System) or over the
counter), director, officer, employee, consultant or otherwise, in competition
with the businesses conducted, or in development, by the Company at any time
during the Consulting Period, which covenant not to compete shall be on a
worldwide basis and shall include all industries in which the Company competes
at any time during the Consulting Period; or
(b) solicit, in competition with the Company, any person who is a
customer or prospective customer of the businesses conducted, or in development,
by the Company at any time during the Consulting Period.
6. Confidentiality. The Consultant shall not, at any time during the
Consulting Period or thereafter, make use of or disclose directly or indirectly,
any trade secret or other confidential or secret information of the Company or
Kysor Industrial Corporation or other technical, business, proprietary or
financial information of the Company or Kysor Industrial Corporation not
available to the public or to the competitors of the Company ("Confidential
Information"), except to the extent that such Confidential Information (a)
becomes a matter of public record or is published in a newspaper, magazine or
other periodical available to the general public, (b) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency, or (c) as the Board may so authorize in writing.
7. Nonsolicitation. During the Consulting Period except with the
prior written consent of the Board, the Consultant shall not directly or
indirectly induce or attempt to persuade any employee of the Company to
terminate his or her employment relationship with the Company.
8. Scope of Covenants: Remedies. The following provisions shall apply
to the covenants of the Consultant contained in Sections 5 and 6:
-3-
<PAGE>
(a) the covenants contained in Section 5 shall apply on a worldwide
basis, which is the basis on which the Company is actively engaged in conduct of
its businesses and in which customers are being solicited;
(b) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Consultant of the
covenants contained in Section 5, 6 and 7, it is expressly agreed by the
Consultant and the Company that such other remedies cannot fully compensate the
Company for any such violation and that the Company shall be entitled to
injunctive relief to prevent any such violation or any continuing violation
thereof;
(c) the Company and the Consultant each intends and agrees that the
covenants contained in Sections 5, 6 and 7 are reasonably designed to protect
the legitimate business interests of the Company without unnecessarily or
unreasonably restricting the Consultant's business opportunities during or after
the termination of the consulting Period, but that if in any action before any
court or agency legally empowered to enforce the covenants contained in Sections
5, 6 and 7 any term, restriction, covenant or promise contained therein is
found to be unreasonable and accordingly unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(d) the Company shall advise the Consultant in writing of all
businesses, industries and activities the Company believes are covered by the
prohibitions in Section 5, not so identified; provided, that neither the
Company's listing of a business, industry or activity as covered by Section 5
nor the Consultant's failure to specifically object to such listing shall be
conclusive as to such coverage. If Consultant notifies the Company in writing of
a specific business, industry or activity in which the Consultant proposes to
engage, the Company will notify Consultant promptly, in writing, of whether the
Company would consider such business, industry or other activity to violate
Section 5 and Consultant shall not be obliged to refrain from engaging in any
such business, industry or activity if Company fails to do so within 30 days.
Company agrees that Consultant may continue to serve as a director of Simpson
Industries, Inc. and JLG Industries, Inc. notwithstanding any other provision of
this Agreement.
9. Expenses. The Company shall promptly pay the Consultant for all
costs and expenses (including, without limitation, court costs and attorney's
fees) incurred by the Consultant as a result of any claim, action or proceeding
(including, without limitation, a claim, action or proceeding by the Consultant
against the Company to collect amounts due to the Consultant or to otherwise
enforce this Agreement) arising out of, or challenging the validity,
advisability or enforceability of, this Agreement or any provision hereof;
provided, however, that no such payment or reimbursement shall be made to the
Consultant if the Consultant is the plaintiff in such claim, action or
proceeding and a final nonappealable judgment is rendered against the Consultant
with respect to all his claims.
10. Indemnification. The Company shall defend, indemnify and hold
the Consultant harmless from and against all damages, costs and expenses
(including attorney's fees) as a result of claims made by third parties arising
out of the Consultant's performance of services under this agreement; provided,
however, that the Company shall not indemnify and hold the Consultant harmless
for conduct
-4-
<PAGE>
found by a final nonappealable judgment of a court of competent jurisdiction
that the damage, cost or expense results from the Consultant's own willful
misconduct.
11. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Consultant and by his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and by the Company and its respective successors and assigns.
12. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered, when delivered by courier or
overnight express service or five days after having been sent by certified or
registered mail, postage prepaid, addressed (a) if to the Consultant, to the
Consultant's address set forth in the records of the Company, or if to the
Company, to Scotsman Industries, Inc., 775 Corporate Woods Parkway, Vernon
Hills, Illinois 60061, Attention: Richard C. Osborne, with a copy to Sidley &
Austin, One First National Plaza, Chicago, Illinois 60603, Attention: Thomas A.
Cole, Esq., or (b) to such other address as either party may have furnished to
the other party in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
13. Governing Law; Validity; Jurisdiction and Venue. The
interpretation, construction and performance of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State
of Michigan without regard to the applicable principles of conflicts of laws.
The parties agree and agree to stipulate that the United States District Court
for the Western District of Michigan (Southern Division) shall be the proper
jurisdiction and venue for litigation of any claim arising out of or relating to
this Agreement. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any of the other
provisions of this Agreement, which other provisions shall remain in full force
and effect.
14. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and executed
by the Consultant and by a duly authorized officer of the Company. No waiver by
a party hereto at any time of any breach by the other party hereto of, or
failure to comply with, any condition or provision of this Agreement to be
performed or complied with by such other party shall be deemed a waiver of any
similar or dissimilar conditions or provisions at the same or at any prior or
subsequent time. This Agreement does not affect any other agreement between the
Consultant and the Company or any of its affiliates. Failure by the Consultant
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right which the Consultant or the Company may have
hereunder shall not be deemed to be a waiver of such provision or right or any
other provision of or right under this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Consultant has executed this
Agreement as of the day and year first above written.
SCOTSMAN INDUSTRIES INC.
By /s/ Richard Osborne
------------------------------------
Chairman and Chief Executive Officer
CONSULTANT:
/s/ George Kempton
--------------------------------------
George Kempton
<PAGE>
Exhibit 5(b)
CONSULTING AND NONCOMPETITION AGREEMENT
---------------------------------------
This Consulting and Noncompetition Agreement (this "Agreement") is
entered into as of February 2, 1997 between SCOTSMAN INDUSTRIES, INC., a
Delaware corporation (the "Company"), and PETER GRAVELLE (the "Consultant").
WHEREAS, the Consultant has acquired extensive knowledge of and
experience in the business conducted by the Company.
WHEREAS, the Company desires to obtain the benefit of the Consultant's
knowledge and experience by retaining the Consultant, and the Consultant desires
to accept such position, for the term and upon the other conditions hereinafter
set forth;
WHEREAS, concurrently herewith, the Company, K Acquisition Corp. and
Kysor Industrial Corporation are entering into an Agreement and Plan of Merger
dated as of the date hereof (the "Merger Agreement"), pursuant to which K
Acquisition Corp. is acquiring Kysor Industrial Corporation and Kysor
Industrial Corporation is becoming a wholly-owned subsidiary of the Company;
WHEREAS, the Consultant will cease to be the President and C.E.O. and
a Director of Kysor Industrial Corporation effective as of the consummation of
the tender offer contemplated by the Merger Agreement (the "Tender Offer"); and
WHEREAS, the Company has required as a condition to its entering into
the Merger Agreement that the Consultant (i) agree to certain modifications to
his existing employment agreement with Kysor Industrial Corporation (the
"Employment Agreement") and (ii) enter into this Agreement.
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company and the Consultant hereby agree as follows:
1. Consulting Services; Expenses. The Company hereby engages the
Consultant as a consultant, subject to the terms and conditions hereof, for the
period commencing at the consummation of the Tender Offer and ending on the
date which is the sixth anniversary of such consummation (the "Consulting
Period"), subject to earlier termination pursuant to Section 4 hereof; provided,
however, that this Agreement shall terminate and shall be of no further force or
effect if the Merger Agreement shall be terminated and the Tender Offer shall
not be consummated pursuant to the terms thereof. During the Consulting Period,
the Consultant shall make himself available to perform consulting services with
respect to the businesses conducted, or in development, by the Company, upon
reasonable advance notice. Such consulting services shall be related to such
matters as the Chief Executive Officer of the Company may designate from time to
time and as are commensurate with the Consultant's years of experience and level
of skill, and shall include consulting services to the Board of Directors of the
Company (the "Board") with respect to the businesses conducted by the Company.
The Consultant shall accommodate reasonable requests for the Consultant's
consulting services, and shall devote reasonable time and his reasonable best
efforts, skill and attention to the performance of such consulting services,
including travel reasonably required in the performance of such consulting
services. The parties will arrange consulting and travel dates and times so as
not to interrupt any pre-planned business or personal activities, or employment
obligations, of the Consultant. The Company shall reimburse the Consultant for
all necessary travel and
<PAGE>
other expenses incurred by the Consultant in providing such consulting services.
Notwithstanding the foregoing, the Consultant shall not be required to be
available more than three (3) days per month nor to travel on more than three
(3) occasions per year.
2. Independent Contractor. The Consultant shall perform the
consulting services described in Section 1 hereof as an independent contractor
without the power to bind or represent the Company for any purpose whatsoever.
The Consultant shall not, by virtue of being a consultant hereunder, be eligible
to receive any benefits for which officers or other employees of the Company are
eligible at any time, such as insurance, participation in the Company's pension
plans or other employee benefits. Consultant acknowledges that Company will not
make provision for federal or state withholding taxes or FICA.
3. Compensation. As compensation for the Consultant's agreement to
make himself reasonably available for consulting as provided in Section 1, and
for his covenants contained in Section 5 of this Agreement, the Company shall
pay to the Consultant on a monthly basis at the end of each month for each of
the seventy-two (72) months during the Consulting Period an amount equal to
$44,600 per month (the "Compensation"). Except in the event of termination of
the Agreement as provided in Section 4, such payments shall not be reduced,
withheld, discontinued, or subjected to setoff, for any reason whatsoever. If
the Company fails to make Compensation payments required by this Agreement, and
such failure continues for ten (10) days after Consultant notifies the Company
in writing of such breach, Consultant's obligations under this Agreement shall
continue, but Company shall be obligated to immediately pay to Consultant, in
one lump sum, all of the remaining unpaid Compensation that would have been
payable through the end of the Consulting Period; discounted, however, to the
then present value, using a discount rate of 7.5 percent. Notwithstanding any
failure by the Company to utilize the consulting services, or any disability of
the Consultant resulting in his inability to perform consulting services
hereunder, the remaining unpaid installments of the Compensation payable
pursuant to this Agreement shall be paid by the Company to the Consultant or to
his legal representative on the dates such payments otherwise would have been
paid hereunder. In the event of the death of the Consultant during the
Consulting Period, the then present value, using a discount rate of 7.5 percent,
of the remaining unpaid Compensation payable through the remainder of the
Consulting Period shall be paid by the Company as a death benefit to the
beneficiary or beneficiaries designated in writing by the Consultant, or if no
beneficiary is so designated, to the executor of the Consultant's estate.
4. Termination of Agreement. (a) The obligation of the Consultant
set forth in Section 1 of this Agreement may be terminated at any time by the
Consultant on thirty (30) days prior written notice to the Company. In the
event of such termination by the Consultant, the obligations of the Company to
pay the Consultant pursuant to Section 3 hereof shall cease, effective on the
date of such termination.
(b) The obligations of the Company set forth in Section 3 of this
Agreement may be terminated at any time by the Company upon written notice to
the Consultant in the event that the Consultant shall willfully be in material
breach of any covenant contained in Section 1 or 5 hereof and the Consultant
shall fail to cure such material breach within 30 days following such notice (in
the event)
-2-
<PAGE>
of an alleged breach of Section 5, Consultant may cure any such breach by
ceasing the activities in question).
(c) This Agreement may be terminated by the Consultant upon ten (10)
days prior written notice to the Company in the event that the Company shall
breach any of its obligations under Section 3, 9 or 10 hereof; provided,
however, that the Consultant shall not be entitled to terminate this Agreement
pursuant to this Section 4(c) in the event that the Company shall cure any such
breach within such ten (10) day period. In the event of such termination by the
Consultant, the Company shall pay to the Consultant all remaining payments which
would have become due under this Agreement had it continued in effect until its
expiration date, within five (5) business days of such termination.
5. Noncompetition. During the Consulting Period, except with the prior
written consent of the Board, the Consultant shall not directly or indirectly:
(a) engage in any activities, whether as employer, proprietor,
partner, stockholder (other than the holder of less than 5% of the stock of any
corporation the securities of which are traded on a national or regional
securities exchange or on the NASDAQ (National Market System) or over the
counter), director, officer, employee, consultant or otherwise, in competition
with the businesses conducted, or in development, by the Company at any time
during the Consulting Period, which covenant not to compete shall be on a
worldwide basis and shall include all industries in which the Company competes
at any time during the Consulting Period; or
(b) solicit, in competition with the Company, any person who is a
customer or prospective customer of the businesses conducted, or in development,
by the Company at any time during the Consulting Period.
(6) Confidentiality. The Consultant shall not, at any time during the
Consulting Period or thereafter, make use of or disclose directly or indirectly,
any trade secret or other confidential or secret information of the Company or
Kysor Industrial Corporation or other technical, business, proprietary or
financial information of the Company or Kysor Industrial Corporation not
available to the public or to the competitors of the Company ("Confidential
Information"), except to the extent that such Confidential Information (a)
becomes a matter of public record or is published in a newspaper, magazine or
other periodical available to the general public, (b) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency, or (c) as the Board may so authorize in writing.
7. Nonsolicitation. During the Consulting Period except with the prior
written consent of the Board, the Consultant shall not directly or indirectly
induce or attempt to persuade any employee of the Company to terminate his or
her employment relationship with the Company.
8. Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Consultant contained in Sections 5 and 6:
-3-
<PAGE>
(a) the covenants contained in Section 5 shall apply on a worldwide basis,
which is the basis on which the Company is actively engaged in conduct of its
businesses and in which customers are being solicited;
(b) without limiting the right of the Company to pursue all other legal
and equitable remedies available for violation by the Consultant of the
covenants contained in Section 5, 6 and 7, it is expressly agreed by the
Consultant and the Company that such other remedies cannot fully compensate the
Company for any such violation and that the Company shall be entitled to
injunctive relief to prevent any such violation or any continuing violation
thereof;
(c) the Company and the Consultant each intends and agrees that the
covenants contained in Sections 5, 6 and 7 are reasonably designed to protect
the legitimate business interests of the Company without unnecessarily or
unreasonably restricting the Consultant's business opportunities during or after
the termination of the consulting Period, but that if in any action before any
court or agency legally empowered to enforce the covenants contained in Sections
5, 6 and 7 any term restriction, covenant or promise contained therein is found
to be unreasonable and accordingly unenforceable, than such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency; and
(d) the Company shall advise the Consultant in writing of all businesses,
industries and activities the Company believes are covered by the prohibitions
in Section 5, not so identified; provided, that neither the Company's listing of
a business, industry or activity as covered by Section 5 not the Consultant's
failure to specifically object to such listing shall be conclusive as to such
coverage. If Consultant notifies the Company in writing of a specific business,
industry or activity in which the Consultant proposes to engage, the Company
will notify Consultant promptly, in writing, of whether the Company would
consider such business, industry or other activity to violate Section 5, and
Consultant shall not be obliged to refrain from engaging in any such business,
industry or activity if Company fails to do so within 30 days.
9. Expenses. The Company shall promptly pay the Consultant for all costs
and expenses (including, without limitation, court costs and attorney's fees)
incurred by the Consultant as a result of any claim, action or proceeding
(including, without limitation, a claim, action or proceeding by the Consultant
against the Company to collect amounts due to the Consultant or to otherwise
enforce this Agreement) arising out of, or challenging the validity,
advisability or enforceability of, this Agreement or any provision hereof;
provided, however, that no such payment or reimbursement shall be made to the
Consultant if the Consultant is the plaintiff in such claim, action or
proceeding and a final nonappealable judgment is rendered against the Consultant
with respect to all his claims.
10. Indemnification. The Company shall defend, indemnify and hold the
Consultant harmless from and against all damages, cost and expenses (including
attorneys' fees) as a result of claims made by third parties arising out of the
Consultant's performance of services under this agreement; provided, however,
that the Company shall not indemnify and hold the Consultant harmless for
conduct found by a final nonappealable judgment of a court of competent
jurisdiction that the damage, cost or expense results from the Consultant's own
willful misconduct.
-4-
<PAGE>
11. Successor. Binding Agreement. This Agreement shall insure to the
benefit of and be enforceable by the Consultant and by his personal or legal
representatives, executors, administrators, heirs, distributees, devises and
legatees and by the Company and its respective successors and assigns.
12. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered, when delivered by courier or
overnight express service or five days after having been sent by certified or
registered mail, postage prepaid, addressed (a) if to the Consultant, to the
Consultant's address set forth in the records of the Company, or if to the
Company, to Scotsman Industries, Inc., 775 Corporate Woods Parkway, Vernon
Hills, Illinois 60061, Attention: Richard C. Osborne, with a copy to
Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, Attention:
Thomas A. Cole, Esq., or (b) to such other address as either party may have
furnished to the other party in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
13. Governing Law: Validity: Jurisdiction and Venue. The
interpretation, construction and performance of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State
of Michigan without regard to the applicable principles of conflicts of laws.
The parties agree and agree to stipulate that the United States District Court
for the Western District of Michigan (Southern Division) shall be the proper
jurisdiction and venue for litigation of any claim arising out of or relating
to this Agreement. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any of the other
provisions of this Agreement, which other provisions shall remain in full force
and effect.
14. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original and both of which together shall
constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and executed
by the Consultant and by a duly authorized officer of the Company. No waiver by
a party hereto at any time of any breach by the other party hereto of, or
failure to comply with, any condition or provision of this Agreement to be
performed or complied with by such other party shall be deemed a waiver of any
similar or dissimilar conditions or provisions at the same or at any prior or
subsequent time. This Agreement does not affect any other agreement between the
Consultant and the Company or any of its affiliates. Failure by the Consultant
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right which the Consultant or the Company may have
hereunder shall not be deemed to be a waiver of such provision or right or any
other provision of or right under this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Consultant has executed this
Agreement as of the day and year first above written.
SCOTSMAN INDUSTRIES INC.
/s/ Richard Osborne
By ____________________________________
Chairman and Chief Executive Officer
CONSULTANT:
/s/ Peter Gravelle
_______________________________________
Peter Gravelle
-6-
<PAGE>
Exhibit 5(c)
CONSULTING AND NONCOMPETITION AGREEMENT
This Consulting and Noncompetition Agreement (this "Agreement") is
entered into as of February 2, 1997 between SCOTSMAN INDUSTRIES INC., a
Delaware corporation (the "Company"), and TIMOTHY PETERSON (the "Consultant").
WHEREAS, the Consultant has acquired extensive knowledge of and
experience in the business conducted by the Company;
WHEREAS, the Company desires to obtain the benefit of the Consultant's
knowledge and experience by retaining the Consultant, and the Consultant desires
to accept such position, for the term and upon the other conditions hereinafter
set forth;
WHEREAS, concurrently herewith, the Company, K Acquisition Corp. and
Kysor Industrial Corporation are entering into an Agreement and Plan of Merger
dated as of the date hereof (the "Merger Agreement"), pursuant to which K
Acquisition Corp. is acquiring Kysor Industrial Corporation and Kysor Industrial
Corporation is becoming a wholly-owned subsidiary of the Company;
WHEREAS, the Consultant will cease to be a Vice President of Kysor
Industrial Corporation effective as of the consummation of the tender offer
contemplated by the Merger Agreement (the "Tender Offer"); and
WHEREAS, the Company has required as a condition to its entering into
the Merger Agreement that the Consultant (i) agree to certain modifications to
his existing employment agreement with Kysor Industrial Corporation (the
"Employment Agreement") and (ii) enter into this Agreement.
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company and the Consultant hereby agree as follows:
1. Consulting Services; Expenses. The Company hereby engages the
Consultant as a consultant, subject to the terms and conditions hereof, for the
period commencing at the consummation of the Tender Offer and ending on the date
which is the sixth anniversary of such consummation (the "Consulting Period"),
subject to earlier termination pursuant to Section 4 hereof; provided, however,
that this Agreement shall terminate and shall be of no further force or effect
if the Merger Agreement shall be terminated and the Tender Offer shall not be
consummated pursuant to the terms thereof. During the Consulting Period, the
Consultant shall make himself available to perform consulting services with
respect to the businesses conducted, or in development, by the Company, upon
reasonable advance notice. Such consulting services shall be related to such
matters as the Chief Executive Officer of the Company may designate from time to
time and as are commensurate with the Consultant's years of experience and level
of skill, and shall include consulting services to the Board of Directors of the
Company (the "Board") with respect to the businesses conducted by the Company.
The Consultant shall accommodate reasonable requests for the Consultant's
consulting services, and shall devote reasonable time and his reasonable best
efforts, skill and attention to the performance of such consulting services,
including travel reasonably required in the performance of such consulting
services. The parties will arrange consulting and travel dates and times so as
not to interrupt any pre-planned business or personal activities, or employment
obligations, of the Consultant. The Company shall reimburse the Consultant for
all necessary travel and
<PAGE>
other expenses incurred by the Consultant in providing such consulting services.
Notwithstanding the foregoing, the Consultant shall not be required to be
available more than three (3) days per month nor to travel on more than three
(3) occasions per year.
2. Independent Contractor. The Consultant shall perform the
consulting services described in Section 1 hereof as an independent contractor
without the power to bind or represent the Company for any purpose whatsoever.
The Consultant shall not, by virtue of being a consultant hereunder, be eligible
to receive any benefits for which officers or other employees of the Company are
eligible at any time, such as insurance, participation in the Company's pension
plans or other employee benefits. Consultant acknowledges that Company will not
make provision for federal or state withholding taxes or FICA.
3. Compensation. As compensation for the Consultant's agreement to
make himself reasonably available for consulting as provided in Section 1, and
for his covenants contained in Section 5 of this Agreement, the Company shall
pay to the Consultant on a monthly basis at the end of each month for each of
the seventy-two (72) months during the Consulting Period an amount equal to
$14,100 per month (the "Compensation"). Except in the event of termination of
this Agreement as provided in Section 4, such payments shall not be reduced,
withheld, discontinued, or subjected to setoff, for any reason whatsoever. If
the Company fails to make Compensation payments required by this Agreement and
such failure continues for ten (10) days after Consultant notifies the Company
in writing of such breach, Consultant's obligations under this Agreement shall
continue, but Company shall be obligated to immediately pay to Consultant, in
one lump sum, all of the remaining unpaid Compensation that would have been
payable through the end of the Consulting Period; discounted, however, to the
then present value, using a discount rate of 7.5 percent. Notwithstanding any
failure by the Company to utilize the consulting services, or any disability of
the Consultant resulting in his inability to perform consulting services
hereunder, the remaining unpaid installments of the Compensation payable
pursuant to this Agreement shall be paid by the Company to the Consultant or to
his legal representative on the dates such payments otherwise would have paid
hereunder. In the event of the death of the Consultant during the Consulting
Period, the then present value, using a discount rate of 7.5 percent, of the
remaining unpaid Compensation payable through the remainder of the Consulting
Period shall be paid by the Company as a death benefit to the beneficiary or
beneficiaries designated in writing by the Consultant, or if no beneficiary is
so designated, to the executor of the Consultant's estate.
4. Termination of Agreement. (a) The obligation of the Consultant set
forth in Section 1 of this Agreement may be terminated at any time by the
Consultant on thirty (30) days prior written notice to the Company. In the
event of such termination by the Consultant, the obligations of the Company to
pay the Consultant pursuant to Section 3 hereof shall cease, effective on the
date of such termination.
(b) The obligations of the Company set forth in Section 3 of this
Agreement may be terminated at any time by the Company upon written notice to
the Consultant in the event that the Consultant shall willfully be in material
breach of any covenant contained in Section 1 or 5 hereof and the Consultant
shall fail to cure such material breach within 30 days following such notice (in
the event
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<PAGE>
of an alleged breach of Section 5, Consultant may cure any such breach by
ceasing the activities in question).
(c) This Agreement may be terminated by the Consultant upon ten (10)
days prior written notice to the Company in the event that the Company shall
breach any of its obligations under Section 3, 9 or 10 hereof; provided,
however, that the Consultant shall not be entitled to terminate this Agreement
pursuant to this Section 4(c) in the event that the Company shall cure any such
breach within such ten (10) day period. In the event of such termination by the
Consultant, the Company shall pay to the Consultant all remaining payments which
would have become due under this Agreement had it continued in effect until its
expiration date, within five (5) business days of such termination.
5. Noncompetition. During the Consulting Period, except with the
prior written consent of the Board, the Consultant shall not directly or
indirectly:
(a) engage in any activities, whether as employer, proprietor,
partner, stockholder (other than the holder of less than 5% of the stock of any
corporation the securities of which are traded on a national or regional
securities exchange or on the NASDAQ (National Market System) or over the
counter), director, officer, employee, consultant or otherwise, in competition
with the businesses conducted, or in development, by the Company at any time
during the Consulting Period, which covenant not to compete shall be on a
worldwide basis and shall include all industries in which the Company competes
at any time during the Consulting Period; or
(b) solicit, in competition with the Company, any person who is a
customer or prospective customer of the businesses conducted, or in development,
by the Company at any time during the Consulting Period.
6. Confidentiality. The Consultant shall not, at any time during the
Consulting Period or thereafter, make use of or disclose directly or indirectly,
any trade secret or other confidential or secret information of the Company or
Kysor Industrial Corporation or other technical, business, proprietary or
financial information of the Company or Kysor Industrial Corporation not
available to the public or to the competitors of the Company ("Confidential
Information"), except to the extent that such Confidential Information (a)
becomes a matter of public record or is published in a newspaper, magazine or
other periodical available to the general public, (b) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency, or (c) as the Board may so authorize in writing.
7. Nonsolicitation. During the Consulting Period except with the
prior written consent of the Board, the Consultant shall not directly or
indirectly induce or attempt to persuade any employee of the Company to
terminate his or her employment relationship with the Company.
8. Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Consultant contained in Sections 5 and 6;
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<PAGE>
(a) the covenants contained in Section 5 shall apply on a worldwide
basis, which is the basis on which the Company is actively engaged in conduct of
its businesses and in which customers are being solicited;
(b) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Consultant of the
covenants contained in Section 5, 6 and 7, it is expressly agreed by the
Consultant and the Company that such other remedies cannot fully compensate the
Company for any such violation and that the Company shall be entitled to
injunctive relief to prevent any such violation or any continuing violation
thereof;
(c) the Company and the Consultant each intends and agrees that the
covenants contained in Sections 5, 6 and 7 are reasonably designed to protect
the legitimate business interests of the Company without unnecessarily or
unreasonably restricting the Consultant's business opportunities during or after
the termination of the consulting Period, but that if in any action before any
court or agency legally empowered to enforce the covenants contained in Sections
5, 6 and 7 any term, restriction, covenant or promise contained therein is
found to be unreasonable and accordingly unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(d) the Company shall advise the Consultant in writing of all
businesses, industries and activities the Company believes are covered by the
prohibitions in Section 5, not so identified; provided, that neither the
Company's listing of a business, industry or activity as covered by Section 5
nor the Consultant's failure to specifically object to such listing shall be
conclusive as to such coverage. If Consultant notifies the Company in writing of
a specific business, industry or activity in which the Consultant proposes to
engage, the Company will notify Consultant promptly, in writing, of whether the
Company would consider such business, industry or other activity to violate
Section 5, and Consultant shall not be obliged to refrain from engaging in any
such business, industry or activity if Company fails to do so within 30 days.
9. Expenses. The Company shall promptly pay the Consultant for all
costs and expenses (including, without limitation, court costs and attorney's
fees) incurred by the Consultant as a result of any claim, action or proceeding
(including, without limitation, a claim, action or proceeding by the Consultant
against the Company to collect amounts due to the Consultant or to otherwise
enforce this Agreement) arising out of, or challenging the validity,
advisability or enforceability of, this Agreement or any provision hereof;
provided, however, that no such payment or reimbursement shall be made to the
Consultant if the Consultant is the plaintiff in such claim, action or
proceeding and a final nonappealable judgment is rendered against the Consultant
with respect to all his claims.
10. Indemnification. The Company shall defend, indemnify and hold
the Consultant harmless from and against all damages, costs and expenses
(including attorneys' fees) as a result of claims made by third parties arising
out of the Consultant's performance of services under this agreement; provided,
however, that the Company shall not indemnify and hold the Consultant harmless
for conduct found by a final nonappealable judgment of a court of competent
jurisdiction that the damage, cost or expense results from the Consultant's own
willful misconduct.
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<PAGE>
11. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Consultant and by his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and by the Company and its respective successors and assigns.
12. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered, when delivered by courier or
overnight express service or five days after having been sent by certified or
registered mail, postage prepaid, addressed (a) if to the Consultant, to the
Consultant's address set forth in the records of the Company, or if to the
Company, to Scotsman Industries, Inc., 775 Corporate Woods Parkway, Vernon
Hills, Illinois 60061, Attention: Richard C. Osborne, with a copy to Sidley &
Austin, One First National Plaza, Chicago, Illinois 60603, Attention: Thomas A.
Cole, Esq. or (b) to such other address as either party may have furnished to
the other party in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
13. Governing Law; Validity; Jurisdiction and Venue. The
interpretation, construction and performance of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State
of Michigan without regard to the applicable principles of conflicts of laws.
The parties agree and agree to stipulate that the United States District Court
for the Western District of Michigan (Southern Division) shall be the proper
jurisdiction and venue for litigation of any claim arising out of or relating to
this Agreement. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any of the other
provisions of this Agreement, which other provisions shall remain in full force
and effect.
14. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and executed
by the Consultant and by a duly authorized officer of the Company. No waiver by
a party hereto at any time of any breach by the other party hereto of, or
failure to comply with, any condition or provision of this Agreement to be
performed or complied with by such other party shall be deemed a waiver of any
similar or dissimilar conditions or provisions at the same or at any prior or
subsequent time. This Agreement does not affect any other agreement between the
Consultant and the Company or any of its affiliates. Failure by the Consultant
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right which the Consultant or the Company may have
hereunder shall not be deemed to be a waiver of such provision or right or any
other provision of or right under this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Consultant has executed this
Agreement as of the day and year first above written.
SCOTSMAN INDUSTRIES INC.
By /s/ Richard Osborne
------------------------------------
Chairman and Chief Executive Officer
CONSULTANT:
/s/ Timothy Peterson
--------------------------------------
Timothy Peterson
<PAGE>
[LETTERHEAD OF KYSOR INDUSTRIAL CORPORATION] EXHIBIT 6
February 7, 1997
Dear Shareholder:
I am pleased to inform you that on February 2, 1997, Kysor Industrial
Corporation entered into a merger agreement with Scotsman Industries, Inc.
pursuant to which a subsidiary of Scotsman has today commenced a cash tender
offer to purchase all outstanding shares of Kysor common and preferred stock at
a price of $43 per share. Under the merger agreement, the tender offer will be
followed by a merger of Scotsman's subsidiary into Kysor. Any Kysor shares that
are not acquired through the tender offer will be converted in the merger into
the right to receive $43 per share in cash.
YOUR BOARD OF DIRECTORS, BY UNANIMOUS VOTE, APPROVED THE MERGER AGREEMENT AND
DETERMINED THAT THE TENDER OFFER AND MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, KYSOR AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALL SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES TO SCOTSMAN'S SUBSIDIARY PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9,
including the opinion of William Blair & Company, L.L.C., the Company's
financial advisor (a copy of which is included as an exhibit to the Schedule
14D-9).
Accompanying this letter is the referenced Schedule 14D-9, the written
opinion of the Company's financial advisor, and the Offer to Purchase and
related materials of Scotsman and its subsidiary, including a Letter of
Transmittal for use in tendering your shares. These documents set forth the
terms and conditions of the tender offer and provide instructions as to how you
can tender your shares. I urge you to read the enclosed materials carefully.
On behalf of your Board of Directors and the Company's management, I thank
you for your continued support over Kysor's long history.
Very truly yours,
LOGO /s/ George R. Kempton
George R. Kempton
Chairman of the Board and
Chief Executive Officer
<PAGE>
Exhibit 7
[LETTERHEAD OF KYSOR INDUSTRIAL CORPORATION]
June 18, 1996
CONFIDENTIAL
Scotsman Industries, Inc.
c/o Mr. Richard C. Osborne
775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Gentlemen:
We have entered into preliminary discussions concerning a possible
negotiated business transaction between Kysor Industrial Corporation ("Kysor")
and Scotsman Industries, Inc. ("Scotsman"). In connection therewith, each party
has been, or may in the future be, furnished certain information concerning the
business, financial condition, operations, assets and liabilities of the other
from officers, directors, employees, representatives, advisors and/or agents of
such other party. In consideration of the foregoing, we each hereby agree to the
following (it being understood that we are also each agreeing to cause our
respective affiliates, including persons who may become our affiliate or a
successor to us or to a substantial portion of our business or assets after the
date hereof, to comply with all of the provisions hereof):
(I) Use of Evaluation Material. The Evaluation Material (as defined
below) will be used solely for the purpose of evaluating a possible negotiated
business transaction between Kysor and Scotsman. Unless and until we have
completed such a transaction pursuant to a definitive agreement (a "Definitive
Agreement"), all the Evaluation Material will be kept confidential by us and our
Representatives (as defined below); provided, however, that we may disclose the
Evaluation Material or portions thereof to those of our directors, officers,
employees, agents or advisors (the persons to whom such disclosure is
permissible being collectively called "Representatives") who need to know such
information for the sole purpose of evaluating a possible negotiated business
transaction between us and who, prior to the receipt of Evaluation Material,
agree to keep such information confidential. We each agree to be responsible for
compliance with this agreement by any of our respective Representatives, and we
each agree, at our sole expense, to take all reasonable measures (including but
not limited to court proceedings) to restrain our Representatives from
prohibited or unauthorized disclosure or use of the other's Evaluation Material.
<PAGE>
(2) Legally Required Disclosures. In the event that either of us or
any of our respective Representatives are requested or required (by deposition,
interrogatory, requests for information or documents in legal proceedings,
subpoena, civil investigative demand or similar process) to disclose any of the
Evaluation Material of the other, the party requested or required to make such
disclosure shall provide the other with prompt prior written notice of any such
request or requirements so that such other party may seek a protective order or
other appropriate remedy or, if appropriate, waive compliance with the terms of
this agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver, either of us or any of our respective Respresentatives are
nonetheless, in the written opinion of counsel, legally compelled to disclose
Evaluation Material of the other or else stand liable for contempt or suffer
other censure or penalty, such party or its Representatives may, without
liability hereunder, disclose that portion of the Evaluation Material of the
other which such counsel advises is legally required to be disclosed, provided
that the disclosing party shall exercise its best efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with the other party to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Evaluation Material by such tribunal, regulatory authority or other entity to
which such Evaluation Material is required to be disclosed.
(3) Definition of Evaluation Material. The term "Evaluation Material"
as used in this agreement shall mean, with respect to a particular party, all
information and documents concerning such party (whether prepared by such party,
its advisors or otherwise and irrespective of the form of communication) which
such party has furnished or disclosed now or in the future furnishes or other-
wise discloses to the other or any of its Representatives, together with all
notes, analyses, compilations, studies, interpretations or other documents,
records or data prepared by the receiving party or any of its Representatives
which contain, reflect or are otherwise based upon, in whole or in part, such
information and documents. The term "Evaluation Material" does not include any
information which:
i) at the time of disclosure or thereafter is generally available
to and known by the public or trade (other than as a result of a disclosure
by a receiving party or any of its Representatives),
ii) was within a receiving party's possession prior to its being
furnished to such party pursuant hereto, provided that the source of such
information was not known by the receiving party, after reasonable inquiry,
to be bound by a confidentiality agreement with or other contractual, legal
or fiduciary obligation of confidentiality to the disclosing party or any
other party with respect to such information,
iii) after disclosure hereunder becomes available to the
receiving party on a nonconfidential basis from a source other than the
disclosing party, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the disclosing party or any other party
with respect to such information, or
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<PAGE>
iv) has been independently acquired or developed by the
receiving party without violation of law or any obligation under this
agreement.
(4) Return or Destruction of Material. If either of us decides that
we do not wish to proceed with a business transaction, we will promptly inform
the other of that decision. In such case, or otherwise upon written request (a
"Return Notice"), we each agree to return to the other, within five business
days, all Evaluation Material (and all copies thereof) then in our possession or
in the possession of any of our respective Representatives; provided, however,
with respect to any Evaluation Material prepared by either of us or any of our
respective Representatives (including any analyses, compilations, studies or
other documents, records or data, and any material contained on any computer
tapes, computer disks or any other form of electronic or magnetic media) we each
agree to destroy within five business days, in lieu of returning to the other,
all such Evaluation Material, and we each agree to certify to the other in a
letter delivered within ten business days of receipt of a Return Notice that the
return required hereunder and/or such destruction have been accomplished.
Notwithstanding the return or destruction of the Evaluation Material, we each
agree to continue to be bound by our obligations of confidentiality and other
obligations hereunder, and we will not use any Evaluation Material for any
purpose or disclose any Evaluation Material to another person.
(5) Nondisclosure of Possible Transaction. Without the prior written
consent of the other, we will not, and will direct and cause our respective
Representatives not to, now or at any time in the future, disclose to any person
other than our respective Representatives, the fact that the Evaluation Material
has been made available, that any investigations, discussions or any of the
terms, conditions, status of discussions or other facts with respect to any such
possible transaction, provided that we may make such disclosure if we are
advised in the written opinion of our counsel that such disclosure must be made
in order that we not commit a violation of law, but only after notifying the
other of such opinion and advising the other of the substance of the
contemplated disclosure.
(6) Contacts with the Company and Personnel. Until the earliest of
(i) the execution by us of a Definitive Agreement; or (ii) three years from the
date of this agreement, we each agree not to initiate or maintain contact
(except for those contacts made in the ordinary course of business) with the
other, or any of the other's affiliates or advisors, regarding its business,
assets, operations, prospects, finances, or Evaluation Material, except with
the express permission of the Chief Executive Officers of our respective
companies. It is understood that all (i) communications regarding a possible
transaction between us and (ii) requests for additional information will be
submitted or directed to each other or our designated advisors on a confidential
bases. We each further agree that, for a period of three years from the date
hereof, we will not solicit for employment any of the officers, directors or key
employees of the other.
(7) No Representation or Warranty. We each understand and acknowledge
that neither the other nor any of its Representatives has made or makes any
representations or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material. We further each
3
<PAGE>
agree that neither the other nor its Representatives shall have any liability
relating to or resulting from the use of the Evaluation Material or any errors
therein or omissions therefrom. Only those representations or warranties that
are made in a Definitive Agreement when, as, and if one is executed, and subject
to such limitations and restrictions as may be specified in such Definitive
Agreement, will have any legal effect.
(8) Definitive Agreement. We each understand and agree that no
contract or agreement providing for any transaction involving Kysor and Scotsman
shall be deemed to exist between us unless and until a Definitive Agreement has
been executed and delivered, and we, except for breach of this agreement, hereby
waive, in advance, any claims, (including, without limitation, claims of breach
of contract) in connection with any transaction involving Kysor and Scotsman
unless and until we have entered into a Definitive Agreement. We also each agree
that unless and until a Definitive Agreement regarding a transaction between us
has been executed and delivered, neither of us will be under any legal
obligation of any kind whatsoever with respect to such a transaction by virtue
of this agreement, except for the matters specifically agreed to herein. We each
further acknowledge and agree that we each reserve the right to terminate
discussions and negotiations with the other at any time. Neither this paragraph
nor any other provision in this agreement can be waived or amended except by
written consent of both parties, which consent shall specifically refer to this
paragraph (or such other provision) and explicitly make such waiver or
amendment.
(9) Standstill Agreement. For a period of three years from the date
of this agreement, we each agree that we and our respective controlled
affiliates will not, directly or indirectly, except pursuant to a Definitive
Agreement:
(i)acquire or agree, offer, seek or propose to acquir e, or
cause to be acquired, ownership of any of the other party's assets or
businesses or any voting securities issued by the other party, or any other
rights or options to acquire such ownership (including from a third party),
(ii) seek or propose to influence or control the other party's
management or policies, or
(iii) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing.
The restrictions contained in this paragraph, shall not be applicable to
purchases solely for investment purposes aggregating less than 5% of the other's
outstanding voting securities.
(10) Remedies. We each agree that money damages would not be a
sufficient remedy for any breach of this agreement and that we each shall be
entitled to equitable relief, including injunction and specific performance, in
the event of any breach or threatened breach of the provisions of this agreement
by the other, in addition to all other remedies available at law or in equity.
4
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(11) No Waiver. No failure or delay in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
(12) Person. The term "person" as used in this agreement will be
interpreted broadly to include, without limitation, the media and any
corporation, company, group, partnership or other entity or individual.
(13) Governing Law. This agreement is for the benefit of Kysor and
Scotsman and our respective directors, officers, stockholders, owners,
affiliates and agents, and will be governed by and construed in accordance with
the laws of the State of Michigan, without giving effect to the choice of law
rules thereof. If any provision of this agreement is found to be contrary to
Michigan law or otherwise unenforceable, this agreement shall be construed as if
such unenforceable provision were absent from the agreement, but the remainder
of this agreement shall remain in full force and effect.
Very truly yours,
KYSOR INDUSTRIAL CORPORATION
By /s/ George R. Kempton
-----------------------------------
George R. Kempton
Chairman and CEO
-----------------------------------
AGREED AND ACCEPTED:
SCOTSMAN INDUSTRIES, INC.
By /s/ Richard C. Osborne
----------------------
Richard C. Osborne
Its Chairman of the Board, President
and Chief Executive Officer
Dated June 18, 1996
<PAGE>
Exhibit 8
[LETTERHEAD OF KYSOR INDUSTRIAL CORPORATION]
December 26, 1996
CONFIDENTIAL
Kuhlman Corporation
c/o Mr. Gary G. Dillon
Three Skidway Village Square
Savannah, Georgia 31411
Gentlemen:
We have entered into preliminary discussions concerning a possible
negotiated business transaction between Kysor Industrial Corporation ("Kysor")
and Kuhlman Corporation ("Kuhlman"). In connection therewith, each party has
been, or may in the future be, furnished certain information concerning the
business, financial condition, operations, assets and liabilities of the other
from officers, directors, employees, representatives, advisors and/or agents of
such other party. In consideration of the foregoing, we each hereby agree to the
following (it being understood that we are also each agreeing to cause our
respective affiliates, including persons who may become our affiliate or a
successor to us or to a substantial portion of our business or assets after the
date hereof, to comply with all of the provisions hereof):
(I) Use of Evaluation Material. The Evaluation Material (as defined
below) will be used solely for the purpose of evaluating a possible negotiated
business transaction between Kysor and Kuhlman. Unless and until we have
completed such a transaction pursuant to a definitive agreement (a "Definitive
Agreement"), all the Evaluation Material will be kept confidential by us and our
Representatives (as defined below); provided, however, that we may disclose the
Evaluation Material or portions thereof to those of our directors, officers,
employees, agents or advisors (the persons to whom such disclosure is
permissible being collectively called "Representatives") who need to know such
information for the sole purpose of evaluating a possible negotiated business
transaction between us and who, prior to the receipt of Evaluation Material,
agree to keep such information confidential. we each agree to be responsible for
compliance with this agreement by any of our respective Representatives, and we
each agree, at our sole expense, to take all reasonable measures (including but
not limited to court proceedings) to restrain our Representatives from
prohibited or unauthorized disclosure or use of the other's Evaluation Material.
<PAGE>
(2) Legally Required Disclosures. In the event that either of us or
any of our respective Representatives are requested or required (by deposition,
interrogatory, requests for information or documents in legal proceedings,
subpoena, civil investigative demand or similar process) to disclose any of the
Evaluation Material of the other, the party requested or required to make such
disclosure shall provide the other with prompt prior written notice of any such
request or requirement so that such other party may seek a protective order or
other appropriate remedy or, if appropriate, waive compliance with the terms of
this agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver, either of us or any of our respective Representatives are
nonetheless, in the written opinion of counsel, legally compelled to disclose
Evaluation Material of the other or else stand liable for contempt or suffer
other censure or penalty, such party or its Representatives may, without
liability hereunder, disclose that portion of the Evaluation Material of the
other which such counsel advises is legally required to be disclosed, provided
that the disclosing party shall exercise its best efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with the other party to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Evaluation Material by such tribunal, regulatory authority or other entity to
which such Evaluation Material is required to be disclosed.
(3) Definition of Evaluation Material. The term "Evaluation Material"
as used in this agreement shall mean, with respect to a particular party, all
information and documents concerning such party (whether prepared by such party,
its advisors or otherwise and irrespective of the form of communication) which
such party has furnished or disclosed now or in the future furnishes or
otherwise discloses to the other or any of its Representatives, together with
all notes, analyses, compilations, studies, interpretations or other documents,
records or data prepared by the receiving party or any of its Representatives
which contain, reflect or are otherwise based upon, in whole or in part, such
information and documents. The term "Evaluation Material" does not include any
information which:
i) at the time disclosure or thereafter is generally available
to and known by the public or trade (other than as a result of a disclosure
by a receiving party or any of its Representatives),
ii) was within a receiving party's possession prior to its being
furnished to such party pursuant hereto, provided that the source of such
information was not known by the receiving party, after reasonable inquiry,
to be bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the disclosing party or
any other party with respect to such information,
iii) after disclosure hereunder becomes available to the
receiving party on a nonconfidential basis from a source other than the
disclosing party, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the disclosing party or any other party
with respect to such information, or
2
<PAGE>
iv) has been independently acquired or developed by the receiving
party without violation of law or any obligation under this agreement.
(4) Return or Destruction of Material. If either of us decides that we
do not wish to proceed with a business transaction, we will promptly inform the
other of that decision. In such case, or otherwise upon written request (a
"Return Notice"), we each agree to return to the other, within five business
days, all Evaluation Material (and all copies thereof) then in our possession or
in the possession of any of our respective Representatives; provided however,
with respect to any Evaluation Material prepared by either of us or any of our
respective representatives (including any analyses, compilations, studies or
other documents, records or data, and any material contained on any computer
tapes, computer disks or any other form of electronic or magnetic media) we each
agree to destroy within five business days, in lieu of returning to the other,
all such Evaluation Material, and we each agree to certify to the other in a
letter delivered within ten business days of receipt of a Return Notice that the
return [required hereunder and/or such destruction have been accomplished.
Notwithstanding the return] or destruction of the Evaluation Material, we each
agree to continue to be bound by our obligations of confidentiality and other
obligations hereunder, and we will not use any Evaluation Material for any
purpose or disclose any Evaluation Material to another person.
(5) Nondisclosure of Possible Transaction. Without the prior written
consent of the other, we will not, and will direct and cause our respective
Representatives not to, now or at any time in the future, disclose to any person
other than our respective Representatives, the fact that the Evaluation Material
has been made available, that any investigations, discussions or any of the
terms, conditions, status of discussions or other facts with respect to any
such possible transaction, provided that we may make such disclosure if we are
advised in the written opinion of our counsel that such disclosure must be made
in order that we not commit a violation of law, but only after notifying the
other of such opinion and advising the other of the substance of the
contemplated disclosure.
(6) Contacts with the Company and Personnel. Until the earliest of (i)
the execution by us of a Definitive Agreement; or (ii) three years from the date
of this agreement, we each agree not to initiate or maintain contact (except for
those contacts made in the ordinary course of business) with the other, or any
of the other's affiliates or advisors, regarding its business, assets,
operations, prospects, finances, or Evaluation Material, except with the express
permission of the Chief Executive Officers of our respective companies. It is
understood that all (i) communications regarding a possible transaction between
us and (ii) requests for additional information will be submitted or directed to
each other or our designated advisors on a confidential basis. We each further
agree that, for a period of three years from the date hereof, we will not
solicit for employment any of the officers, directors or key employees of the
other.
(7) No Representation or Warranty. We each understand and acknowledge
that neither the other nor any of its Representatives has made or makes any
representations or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material. We further each
3
<PAGE>
agree that neither the other nor its Representatives shall have any liability
relating to or resulting from the use of the Evaluation Material or any errors
therein or omissions therefrom. Only those representations or warranties that
are made in a Definitive Agreement when, as, and if one is executed, and subject
to such limitations and restrictions as may be specified in such Definitive
Agreement, will have any legal effect.
(8) Definitive Agreement. We each understand and agree that no
contract or agreement providing for any transaction involving Kysor and Kuhlman
shall be deemed to exist between us unless and until a Definitive Agreement has
been executed and delivered, and we hereby waive, in advance, any claims,
(including, without limitation, claims of breach of contract) in connection with
any transaction involving Kysor and Kuhlman unless and until we have entered
into a Definitive Agreement. We also each agree that unless and until a
Definitive Agreement regarding a transaction between us has been executed and
delivered, neither of us will be under any legal obligation of any kind
whatsoever with respect to such a transaction by virtue of this agreement,
except for the matters specifically agreed to herein. We each further
acknowledge and agree that we each reserve the right to terminate discussions
and negotiations with the other at any time. Neither this paragraph nor any
other provision in this agreement can be waived or amended except by written
consent of both parties, which consent shall specifically refer to this
paragraph (or such other provision) and explicitly make such waiver or
amendment.
(9) Standstill Agreement. For a period of three years from the date of
this agreement, we each agree that we and our respective affiliates will not,
directly or indirectly, except pursuant to a Definitive Agreement:
(i) acquire or agree, offer, seek or propose to acquire, or cause
to be acquired, ownership of any of the other party's assets or businesses
or any voting securities issued by the other party, or any other rights or
options to acquire such ownership (including from a third party),
(ii) seek or propose to influence or control the other party's
management or policies, or
(iii) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing.
The restrictions contained in this paragraph, shall not be applicable to
purchases solely for investment purposes aggregating less than 5% of the other's
outstanding voting securities.
(10) Remedies. We each agree that money damages would not be a
sufficient remedy for any breach of this agreement and that we each shall be
entitled to equitable relief, including injunction and specific performance, in
the event of any breach or threatened breach of the provisions of this agreement
by the other, in addition to all other remedies available at law or in equity.
4
<PAGE>
(11) No Waiver. No failure or delay in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
(12) Person the term "person" as used in this agreement will be
interpreted broadly to include, without limitation, the media and any
corporation, company, group, partnership or other entity or individual.
(13) Governing Law. This agreement is for the benefit of Kysor and
Kuhlman and our respective directors, officers, stockholders, owners, affiliates
and agents, and will be governed by and construed in accordance with the laws of
the State of Michigan, without giving effect to the choice of law rules thereof.
If any provision of this agreement is found to be contrary to Michigan law or
otherwise unenforceable, this agreement shall be construed as if such
unenforceable provision were absent from the agreement, but the remainder of
this agreement shall remain in full force and effect.
Very truly yours,
KYSOR INDUSTRIAL CORPORATION
BY /s/ David W. Crooks
---------------------------
David W. Crooks
Its Vice President-General Counsel
and Secretary
-----------------------------
AGREED AND ACCEPTED:
KUHLMAN CORPORATION
By /s/ Gary G. Dillon
-------------------------
Gary G. Dillon
Its Chairman, President and
C.E.O., Schwitzer, Inc.
----------------------------
Dated: 12-26, 1996
<PAGE>
EXHIBIT 9
[LETTERHEAD OF WILLIAM BLAIR]
February 1, 1997
Kysor Industrial Corporation
One Madison Avenue
Cadillac, MI 49601-9785
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders (other than Scotsman Industries, Inc. or any of its
affiliates) (collectively the "Shareholders") of Kysor Industrial Corporation
(the "Company") of the consideration to be received pursuant to the terms of
the Agreement and Plan of Merger to be dated as of February 2, 1997 (the
"Merger Agreement") by and among, Scotsman Industries Inc., ("Scotsman") an
indirect wholly-owned subsidiary of Scotsman and the Company. The terms of the
Merger Agreement contemplate the acquisition of the Company by an indirect
wholly-owned subsidiary of Scotsman by means of a tender offer at $43.00 per
share for all outstanding shares of the Company (the "Consideration").
Simultaneously with entering into the Merger Agreement, the company will enter
into an Asset Purchase Agreement to be dated as of February 2, 1997 (the
"Asset Purchase Agreement") with Kuhlman Corporation providing for the sale of
the Company's transportation products group to a wholly-owned subsidiary of
Kuhlman Corporation for $86 million and the assumption of certain liabilities
associated with the transportation products group.
In connection with our review of the proposed transaction (the
"Transaction") and the preparation of our opinion herein, we have examined:
(a) a draft of the Merger Agreement and a draft of the Asset Purchase
Agreement; (b) audited financial statements of the Company for each of the
four fiscal years ended December 31, 1995; (c) the unaudited financial
statements of the Company for the year ended December 31, 1996; (d) certain
internal financial information and forecasts for the Company, prepared by
management of the Company; and (e) certain other publicly available
information on the Company. We have also held discussions with members of the
senior management of the Company to discuss the foregoing, and have considered
other matters which we have deemed relevant to our inquiry.
Although we have no reason to believe that any of the financial or other
information on which we have relied is not accurate or complete, we have
assumed the accuracy and completeness of all such information and have not
attempted to verify independently any of such information, nor have we made or
obtained an independent appraisal of the assets of the Company. With respect
to financial forecasts, we have assumed that such forecasts have been
reasonably prepared on the bases reflecting the best currently available
estimates and judgments of the Company's management, as the case may be, as to
the respective future financial performance of the Company. Our opinion herein
is based upon circumstances existing and disclosed to us and can be evaluated
as of February 1, 1997.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by the Company.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including (a) historical revenues, operating earnings, operating cash flows,
net income and capitalization, as to the Company and certain publicly held
companies; (b) the current financial position and results of operations of the
Company; (c) the historical market prices and trading volume of the Common
Stock of the Company; (d) financial information concerning selected actual and
proposed business combinations which we believe to be relevant; and (e) the
general condition of the securities markets. We were not requested to, nor did
we, seek alternative participants for the proposed Transaction. William Blair
has in the past and may in the future render investment banking services to
Scotsman.
<PAGE>
William Blair & Company has been engaged in the investment banking business
since 1935. We undertake the valuation of investment securities in connection
with public offerings, private placements, business combinations, estate and
gift tax valuations and similar transactions. For our services, including the
rendering of this opinion, the Company will pay us a fee and indemnify us
against certain liabilities.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Consideration is fair, from a
financial point of view, to the Shareholders of the Company.
Very truly yours,
/s/ William Blair & Company, L.L.C.
-------------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
<PAGE>
EXHIBIT 10
AMENDMENT NO. 2 TO RIGHTS AGREEMENT, dated as of February 2, 1997, between
KYSOR INDUSTRIAL CORPORATION, a Michigan corporation (the "Company"), and HARRIS
TRUST AND SAVINGS BANK (the "Rights Agent"), amending the Rights Agreement,
dated as of April 26, 1996, between the Company and the Rights Agent (the
"Rights Agreement").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has approved an Agreement
and Plan of Merger (the "Merger Agreement") by and among the Company, Scotsman
Industries, Inc., a Delaware corporation ("Scotsman"), and K Acquisition
Corporation, a Michigan corporation and a wholly-owned subsidiary of Scotsman
("K Acquisition"), providing for K Acquisition to commence an all-cash tender
offer for all outstanding shares of capital stock of the Company (the "Offer")
and for the subsequent merger of K Acquisition into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has determined that the
Offer and the Merger are fair to and in the best interests of the Company and
its shareholders;
WHEREAS, the willingness of Scotsman and K Acquisition to enter into the
Merger Agreement is conditioned on, among other things, the amendment of the
Rights Agreement on the terms set forth herein; and
WHEREAS, Section 26 of the Rights Agreement provides that, among other
things, prior to the Distribution Date and subject to the restrictions set forth
in the penultimate sentence of such Section, the Company may, and the Rights
Agent shall, if the Company so directs, supplement or amend any provisions of
the Rights Agreement without the approval of any holders of certificates
representing shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth in the Rights Agreement and this Amendment, the parties hereby agree as
follows:
1. Section 1 of the Rights Agreement is hereby amended by adding the
following definitions thereto:
"K Acquisition" shall mean K Acquisition Corporation, a Michigan
corporation and a wholly-owned subsidiary of Scotsman.
"Merger" shall mean the merger of K Acquisition into the Company as
countemplated by the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of
February 2, 1997, by and among Scotsman, K Acquisition and the Company, as the
same may be amended in accordance with the terms thereof.
"Offer" shall have the meaning set forth in the Merger Agreement.
"Scotsman" shall mean Scotsman Industries, Inc. a Delaware corporation.
<PAGE>
2. Section 1(a) of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"Notwithstanding anything to the contrary contained herein, neither
Scotsman nor K Acquisition shall be or become an "Acquiring Person" (and no
Shares Acquisition Date shall occur) as a result of (i) the announcement,
commencement or consummation of the Offer, or (ii) the execution of the Merger
Agreement (or any amendment thereto in accordance with the terms thereof) or the
consummation of the transactions comtemplated thereby (including, without
limitation, the Offer and the Merger)."
3. Section 3(a) of the Rights Agreement is hereby amended by adding to the
end thereof the following:
"Notwithstanding anything to the contrary contained herein, no Distribution
Date shall occur as a result of (i) the announcement, commencement or
consummation of the Offer, or (ii) the execution of the Merger Agreement (or any
amendment thereto in accordance with the terms thereof) or the consummation of
the transactions contemplated thereby (including, without limitation, the
Offer and the Merger), and no Distribution Date will, in any event, occur
prior to the effective time of the Merger or the earlier termination of the
Merger Agreement."
4. Section 7(a) of the Rights Agreement is hereby amended by replacing the
word "earlier" in its first occurrence with the word "earliest", by deleting the
word "or" immediately prior to the symbol "(ii)", and by replacing the words
"(the earlier of (i) and (ii), being herein referred to as the "Expiration
Date")" with the following:
"and (iii) immediately prior to the effective time of the Merger (the
earliest of (i), (ii) and (iii) being herein referred to as the "Expiration
Date")."
5. Section 11 of the Rights Agreement is hereby amended by adding to the
end thereof the following:
"(n) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 11 will not apply to or be triggered by (i) the
announcement, commencement or consummation of the Offer, or (ii) the execution
of the Merger Agreement (or any amendment thereto in accordance with the terms
thereof) or the consummation of the transactions contemplated thereby
(including, without limitation, the Offer and the Merger)."
6. Section 13 of the Rights Agreement is hereby amended by adding to the
end thereof the following:
"(d) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 13 will not apply to or be triggered by the execution
of the Merger Agreement or any amendment thereto or the consummation of the
transactions comtemplated thereby (including, without limitation, the Merger)."
-2-
<PAGE>
7. The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Amendment.
8. The term "Agreement" as used in the Rights Agreement shall be deemed to
refer to the Rights Agreement as amended by this Amendment No. 2.
9. Except as set forth herein, the Rights Agreement shall remain in full
force and effect and shall be otherwise unaffected hereby.
10. This Amendment No. 2 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to be duly executed, all as of the day and year first above written.
KYSOR INDUSTRIAL CORPORATION
By /s/ Peter W. Gravelle
------------------------------------------
Its President and Chief Operating Officer
-------------------------------------
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
By /s/ Keith A. Bradley
------------------------------------------
Its Assistant Vice President
-------------------------------------
-3-
<PAGE>
ANNEX I
KYSOR INDUSTRIAL CORPORATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AND RULE 14F-1 THEREUNDER
----------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is being furnished in connection with the
possible designation by K Acquisition Corp., a Michigan corporation (the
"Purchaser") and an indirect wholly-owned subsidiary of Scotsman Industries,
Inc., a Delaware corporation ("Parent"), after completion of the Offer
(defined below), of persons to serve on the Board of Directors (the "Board")
of Kysor Industrial Corporation, a Michigan corporation (the "Company"), other
than at a meeting of the shareholders of the Company pursuant to the Agreement
and Plan of Merger dated as of February 2, 1997 (the "Merger Agreement"),
among the Company, Parent and the Purchaser.
Pursuant to the Merger Agreement, the Purchaser has commenced a cash tender
offer to purchase all outstanding shares of Common Stock, $1.00 par value, of
the Company (the "Common Shares"), and the associated common share purchase
rights issued pursuant to a Rights Agreement dated as of April 26, 1996, as
amended, between the Company and Harris Trust and Savings Bank, as successor
Rights Agent (the "Rights" and, together with the Common Stock, the "Common
Shares"), and all outstanding shares of Series A Convertible Voting Preferred
Stock, $24.375 stated value per share (the "Preferred Shares" and, together
with the Common Shares, the "Shares"), at a purchase price of $43.00 per Share
(or any higher price per Share paid in the Offer) (the "Offer Price"), net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated February 7, 1997 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which, together with the Offer to Purchase
and any amendments or supplements thereto, collectively constitute the
"Offer"). Capitalized terms used but not otherwise defined in this Information
Statement have the meanings given to them in the Schedule 14D-9 to which this
Information Statement is attached. The Schedule 14D-9 is incorporated in this
Information Statement by reference.
Under the Merger Agreement, promptly after such time as the Purchaser
acquires Shares pursuant to the Offer, the Purchaser will be entitled to
designate at its option that number of directors, rounded to the nearest whole
number, of the Company's Board of Directors as to make the percentage of the
Company's directors designated by the Purchaser equal to the aggregate voting
power of the Shares held by Parent or any of its subsidiaries, including the
Purchaser (assuming the exercise of all outstanding options to purchase Common
Shares). The Company, Parent and the Purchaser have agreed that the size of
the Board of Directors will not be larger than 10 directors and Parent has
agreed that the Company may retain, and that Parent will cause to be retained,
at least three current directors until the time that the Merger becomes
effective (of whom at least two are not officers of the Company).
IF THE PURCHASER DOES NOT ACQUIRE ANY SHARES PURSUANT TO THE OFFER OR
TERMINATES THE OFFER, OR IF THE MERGER AGREEMENT IS TERMINATED IN ACCORDANCE
WITH ITS TERMS BY PARENT, THE PURCHASER OR THE COMPANY BEFORE THE APPOINTMENT
OF THE PURCHASER'S DESIGNEES, THE PURCHASER WILL NOT HAVE ANY RIGHT UNDER THE
MERGER AGREEMENT TO HAVE ITS DESIGNEES APPOINTED TO THE BOARD.
A-1
<PAGE>
VOTING SECURITIES
The Common Shares and Preferred Shares are the only classes of voting
securities of the Company outstanding. Each Common Share and Preferred Share
is entitled to one vote on each matter presented for shareholder action at a
meeting of the shareholders, including the election of directors. As of
January 31, 1997, there were 5,961,665 Common Shares and 786,869.1221
Preferred Shares outstanding.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of Common Shares and
Preferred Shares by each shareholder known to be the beneficial owner of more
than 5% of the outstanding Common Shares or Preferred Shares as of January 31,
1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------- --------------------- --------
<S> <C> <C> <C>
Common Shares Neumeier Investment Counsel 481,400 8.1%
26435 Carmel Rancho Blvd.
Carmel, California 93923 (1)
Common Shares Kysor Industrial Corporation 304,444 5.1
Employee Stock Ownership Plan
("ESOP"), Old Kent Bank, Trustee
One Vandenberg Center
Grand Rapids, Michigan 49503 (2)
Common Shares George R. Kempton 314,918 5.2
Kysor Industrial Corporation
One Madison Avenue
Cadillac, Michigan 49601 (3)
Preferred Shares Kysor Industrial Corporation 786,869 100.0
Employee Stock Ownership Plan
("ESOP"), Old Kent Bank, Trustee
One Vandenberg Center
Grand Rapids, Michigan 49503 (2)
</TABLE>
- --------
(1) As reported on Schedule 13G filed by Neumeier Investment Counsel in
February, 1997.
(2) Peter W. Gravelle, Richard G. De Boer and Kent J. Rosenau, all officers or
employees of the Company, are members of the Administrative Committee of
the ESOP trust. The Administrative Committee does not have any investment
or voting power with respect to these shares. The Preferred Shares may be
converted into Common Shares on a one-for-one basis by the Trustee. If a
conversion were made, the ESOP would own 1,091,313 Common Shares,
representing approximately 16.2% of the then outstanding Common Shares as
of January 31, 1997.
(3) Based on information provided by Mr. Kempton. The number of shares
reported for Mr. Kempton includes 123,600 shares subject to options that
could be exercised by Mr. Kempton within 60 days of January 31, 1997. The
number of shares reported does not include shares subject to options not
currently vested, and therefore not exercisable, which will become
immediately vested and exercisable upon a change in control of the Company
under the terms of the respective stock option agreements. Consummation of
the Offer would constitute a change in control for purposes of such
agreements.
A-2
<PAGE>
The following table shows certain information concerning the beneficial
ownership of the Company's Common Shares as of January 31, 1997, by each of
the Company's directors, each of the Purchaser's designees for appointment as
director, each of the named executive officers and all directors, designees
and executive officers as a group:
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE COMMON SHARES SUBJECT
BENEFICIAL OWNER OF BENEFICIAL PERCENT TO OPTIONS EXERCISABLE
OF COMMON SHARES OWNERSHIP(1) OF CLASS WITHIN 60 DAYS(2)
---------------- ----------------- -------- ----------------------
<S> <C> <C> <C>
Timothy J. Campbell 70,414(3) 1.2% 53,800
Stephen I. D'Agostino 2,800 -- 1,800
Thomas P. Forrestal, Jr.(5) 18,430(3) .3 4,500
Paul K. Gaston 43,800 .7 24,300
Grant C. Gentry 26,300 .4 24,300
Peter W. Gravelle 83,306(3) 1.4 36,740
Richard M. Holden(6) -- -- --
Donald D. Holmes(6) -- -- --
George R. Kempton 314,918(3)(4) 5.2 123,600
Terry M. Murphy 26,926(3) .4 22,500
Robert W. Navarre 7,319 .1 6,300
Richard C. Osborne(6) -- -- --
Robert J. Ratliff 3,300 .1 3,300
William J. Rotenberry(6) -- -- --
Robert W. Schult -- -- --
Frederick W. Schwier 45,300(4) .8 31,800
All directors, designees and
executive officers as a
group 852,799 14.1% 466,220
</TABLE>
- --------
(1) The number of shares stated in this column is based on information
furnished by the persons listed and includes shares personally owned of
record by each person and shares that, under applicable regulations, are
considered to be otherwise beneficially owned by each person. Under these
regulations, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power or investment power
with respect to the security. Voting power includes the power to vote or
direct the power to vote. Investment power includes the power to dispose
or direct the disposition of the security. A person is also considered the
beneficial owner of a security if the person has a right to acquire
beneficial ownership of the security within 60 days. The number of shares
stated includes shares which may be acquired through the exercise of stock
options within 60 days. Except as otherwise noted in the footnotes to the
table, single shareholders named have sole voting and investment power
with respect to all shares listed. Except as otherwise noted, joint
shareholders, as identified in the footnotes, share voting and investment
power with respect to all shares listed.
(2) The number of shares stated includes shares subject to options which may,
under certain circumstances, become immediately exercisable as of the date
of this Information Statement. The number of shares reported does not
include shares subject to options not currently vested, and therefore not
exercisable, which will become immediately vested and exercisable upon a
change in control of the Company under the terms of the respective stock
option agreements. Consummation of the Offer would constitute a change in
control for purposes of such agreements.
(3) The numbers shown for these individuals include an aggregate of 15,556
Common Shares held by the ESOP and allocated to the accounts of the named
individuals. Allocated shares for which no vote direction is given are
voted in accordance with the vote direction actually made by ESOP
participants, on a per capita basis, with each voting participant being
able to direct the vote of an equal number of unallocated shares and
allocated shares for which no vote direction is received.
A-3
<PAGE>
In addition to the Common Shares allocated to their accounts in the ESOP,
each of the named individuals has Preferred Shares held by the ESOP
allocated to his account. The named individuals, like all ESOP
participants, also direct the voting of unallocated Preferred Shares and
allocated Preferred Shares for which no vote direction is received in the
same manner as described in the preceding paragraph with respect to the
Common Shares held by the ESOP. The following table describes the
beneficial ownership of Preferred Shares by the named individuals and all
executive officers as a group. Directors who are not also executive
officers of the Company have no interest in the ESOP. The table assumes
that all ESOP participants direct the vote of Preferred Shares allocated to
their respective ESOP accounts:
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED PERCENT
PREFERRED PERCENT SHARES OVER OF CLASS
SHARES OF CLASS WHICH VOTING REPRESENTED
ALLOCATED TO REPRESENTED CONTROL MAY BY COLUMNS
ESOP ACCOUNT BY COLUMN 1 BE EXERCISED 1 AND 3
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Timothy J. Campbell 1,666 .2% 591 .3%
Thomas P. Forrestal, Jr. 1,903 .2 591 .3
Peter W. Gravelle 1,286 .2 591 .2
George R. Kempton 2,165 .3 591 .4
Terry M. Murphy 246 -- 591 .1
All executive officers as
a group 11,316 1.4% 4,728 2.0%
</TABLE>
Each Preferred Share entitles its holder to one vote on each matter
submitted for shareholder action at a meeting of the shareholders, as does
each Common Share. The named individuals have sole voting power, but no
dispositive power (other than the power to direct the tender of their
allocated shares in the event of a tender offer, including the Offer) over
the Common Shares and Preferred Shares held in the ESOP and allocated to
their respective ESOP accounts.
(4) The number of shares stated includes shares owned solely by the named
individual's spouse, but over which the named individual might share
voting and investment power by reason of the influence of their
relationship. Included is Priscilla Schwier (2,000 shares). All shares
(excluding shares subject to options and shares held in the ESOP allocated
to Mr. Kempton's account) reflected as beneficially owned by George R.
Kempton are held jointly with his wife, Joyce H. Kempton.
(5) Mr. Forrestal retired from his position as Group Vice President--Commercial
Products effective as of December 31, 1996.
(6) This individual has been designated by the Purchaser for appointment to the
Board of Directors subject to the consummation of the Offer.
CHANGE IN CONTROL
Pursuant to the Merger Agreement, Parent has caused the Purchaser to commence
the Offer to purchase the Shares, the terms of which are more fully described
in the Offer to Purchase and in the Schedule 14D-9 to which this Information
Statement is attached. According to information supplied by Parent, the total
amount of funds required by the Purchaser to consummate the Offer and the
Merger is expected to be approximately $330 million (before factoring in the
consideration to be received pursuant to the Asset Purchase Agreement), which
amount excludes related fees and expenses.
DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The current Board is divided into three classes. One class of directors is
elected each year at the annual meeting of shareholders. Once elected, absent
their death, resignation, retirement, disqualification or removal from office,
directors serve for terms of three years or until their successors are duly
elected and qualified.
A-4
<PAGE>
Under the Merger Agreement and as more fully described in the Schedule 14D-9
to which this Information Statement is attached, promptly after such time as
the Purchaser acquires Shares pursuant to the Offer, the Purchaser will be
entitled to designate a certain number of directors to the Company's Board of
Directors to be determined based on the number of Shares held by Parent or any
of its subsidiaries, including the Purchaser. The Company has agreed that the
size of the Board of Directors will not be larger than 10 directors and Parent
has agreed that the Company may retain, and that Parent will cause to be
retained, at least three current directors until the time that the Merger
becomes effective (of whom at least two are not officers of the Company). The
Board has designated Paul K. Gaston, Grant C. Gentry and George R. Kempton as
the three current directors who will continue as independent directors if the
Offer is consummated.
CERTAIN INFORMATION CONCERNING THE PURCHASER'S DESIGNEES
The Purchaser has provided the Company with the following information
concerning those persons who may be designated as directors of the Company
following consummation of the Offer. The Company assumes no responsibility for
the accuracy or completeness of such information. All persons listed below are
citizens of the United States of America and their business address is 775
Corporate Woods Parkway, Vernon Hills, Illinois 60061-3112.
<TABLE>
<CAPTION>
DESIGNEES PRINCIPAL OCCUPATION AND DIRECTORSHIPS(1)
--------- -----------------------------------------
<S> <C>
Richard M. Holden Mr. Holden is Vice President--Human Resources of
Age 46 Parent and has held that position since January
1990
Donald D. Holmes Mr. Holmes is Vice President--Finance and
Age 59 Secretary of Parent and has held those positions
since April 1989
Richard C. Osborne Mr. Osborne is Chairman of the Board of Parent
Age 53 and has held that position since May 1991; he is
also a director and President, Chief Executive
Officer of Parent and has held those positions
since April 1989
William J. Rotenberry Mr. Rotenberry is Vice President--Business
Age 42 Development of Parent, has been employed by
Parent since January 1996 and became a Vice
President of Parent in February 1996; from 1990
until January 1996, he was Director of Corporate
Development for Joslyn Corporation (diversified
manufacturer)
</TABLE>
- --------
(1) Parent is a holding company with subsidiaries engaged in the manufacture
and marketing of refrigeration products primarily for the food service
industry, including ice machines, food preparation and storage equipment
and drink dispensing equipment. Except as noted, no designee is a director
of any other company that has a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or subject to Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment Company
Act of 1940.
THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS
The following tables show certain information with respect to each director
and executive officer of the Company. As described above, if the Purchaser
acquires Shares pursuant to the Offer, the Purchaser will be entitled to
designate a certain number of directors to the Company's Board of Directors as
more fully described in the Schedule 14D-9 to which this Information Statement
is attached. Since the Merger Agreement limits the size of the Company's Board
of Directors to 10 directors, certain incumbent directors may be replaced with
the Purchaser's designees if the Purchaser becomes entitled to designate
directors. The Board has designated Messrs. Gaston, Gentry and Kempton as the
three current directors who will continue as independent directors if the
Offer is consummated.
A-5
<PAGE>
<TABLE>
<CAPTION>
INCUMBENT DIRECTORS
(TERMS EXPIRING 1999) PRINCIPAL OCCUPATION(1) DIRECTORSHIPS(2)
--------------------- ----------------------- ----------------
<S> <C> <C>
Paul K. Gaston Retired. Of counsel to Director of the Company
Age 63 Warner Norcross & Judd since 1984; also a
llp (law firm); former director of Lilly
Chairman of the Board of Industries, Inc.
Guardsman Products, Inc.
(diversified chemical
manufacturer) (3)
Grant C. Gentry Retired. Former Chairman Director of the Company
Age 72 of the Board and Chief since 1986; also a
Executive Officer of director of Bromar, Inc.
Pantry Pride, Inc. and Van Camp Seafood
(diversified retailer) Corp.
Peter W. Gravelle President and Chief Director of the Company
Age 59 (4) Operating Officer of the since 1991
Company (5)
<CAPTION>
INCUMBENT DIRECTORS
(TERMS EXPIRING 1998) PRINCIPAL OCCUPATION(1) DIRECTORSHIPS(2)
---------------------- ----------------------- ----------------
<S> <C> <C>
Stephen I. D'Agostino President and Chief Director of the Company
Age 63 Executive Officer of since 1995; also a
D'Agostino Enterprises director of SuperValu
(personal investment Inc. and Catalina
company) (6) Marketing Corp.
Robert J. Ratliff Chairman of the Board Director of the Company
Age 65 and Chief Executive since 1994; also a
Officer of AGCO director of AGCO
Corporation (agriculture Corporation
equipment
manufacturer) (7)
Frederick W. Schwier Chairman of the Board of Director of the Company
Age 73 Great Lakes since 1985
Communications, Inc.
(television
broadcasting)
<CAPTION>
INCUMBENT DIRECTORS
(TERMS EXPIRING 1997) PRINCIPAL OCCUPATION(1) DIRECTORSHIPS(2)
---------------------- ----------------------- ----------------
<S> <C> <C>
George R. Kempton Chairman of the Board Director of the Company
Age 63 (4) and Chief Executive since 1978; also a
Officer of the Company director of Simpson
Industries, Inc. and JLG
Industries, Inc.
Robert W. Navarre Chairman of the Board of Director of the Company
Age 63 Simpson Industries, Inc. since 1993; also a
(automotive supplier) director of Simpson
Industries, Inc. and
Webster Industries, Inc.
Robert W. Schult President and Chief Director of the Company
Age 47 Operating Officer, since 1996
Nestle USA, Inc. (food
processor) (8)
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS SERVED IN SAME
WHO ARE NOT DIRECTORS(4) PRINCIPAL OCCUPATION(1) OFFICE SINCE
- -------------------------- ----------------------- ------------------------
<S> <C> <C>
Timothy J. Campbell Group Vice President-- 1987
Age 54 Transportation Products
David W. Crooks Vice President--General 1991
Age 48 Counsel and
Secretary (9)
David R. Downs Vice President--Human 1996
Age 59 Resources (10)
Thomas P. Forrestal, Jr. Former (Retired) Group 1983
Age 60 Vice President--
Commercial Products (11)
Terry M. Murphy Vice President--Chief 1992
Age 48 Financial Officer (12)
Timothy D. Peterson Vice President-- 1983
Age 59 Marketing and
International
John B. Stevenson Vice President--Global 1996
Age 64 Manufacturing (13)
</TABLE>
- --------
(1) Except as noted, each person listed has been engaged in the same
principal occupation for over five years.
(2) Except as noted, no director is a director of any other company that has
a class of securities registered pursuant to Section 12 of the Exchange
Act or is subject to Section 15(d) of that act, or any company registered
as an investment company under the Investment Company Act of 1940.
(3) Of counsel to Warner Norcross & Judd LLP (law firm) since 1996;
previously Chairman of the Board of Guardsman Products, Inc. (1994-1996);
previously Partner in Warner Norcross & Judd LLP (Partner 1965-1993;
Managing Partner 1988-1992).
(4) The Company's executive officers are appointed annually by, and serve at
the pleasure of, the Board of Directors.
(5) Since 1995; previously Executive Vice President--Chief Operating Officer
(1992-1995); Vice President, Treasurer and Chief Financial Officer (1990-
1992).
(6) Since 1994; previously Chairman of the Board and Chief Executive Officer
of Lord Capital Corporation (investment banking firm) (1989-1994).
(7) Since 1993; previously President and Chief Executive Officer of AGCO
Corporation (1988-1993).
(8) Since 1991; previously Senior Vice President of Nestle USA, Inc. (1989-
1991).
(9) Since 1991; previously Vice President--General Counsel (1983-1991).
(10) Since January 1996; previously employed by Slayton, Inc. (executive
search firm) (1995-1996); self- employed retailer (auto repair and tires)
(1992-1994); Vice President--Human Resources for Interlake Corp.
(diversified manufacturer of metals, packaging and aerospace equipment)
(1984-1992).
(11) Mr. Forrestal retired from his position as Group Vice President--
Commercial Products as of December 31, 1996 and is no longer an employee
or officer of the Company.
(12) Since 1992; previously Vice President--Finance, Treasurer and Chief
Financial Officer of North-West Telecommunications, Inc.
(telecommunications service supplier) (1986-1992).
(13) Since January 1996; previously President/General Manager--Kysor/Cadillac
division (1987-1995).
ORGANIZATION OF THE BOARD
The Board of Directors, which is responsible for the overall management of
the business and affairs of the Company, held four regular meetings and one
special meeting during 1996. All directors attended more than 75% of the
aggregate of the total number of meetings of the Board and the total number of
meetings of
A-7
<PAGE>
committees of which they are members. The Board of Directors has four standing
committees: the Executive Committee, the Audit Committee, the Compensation and
Organization Committee and the Nominating Committee. Mr. Kempton is an ex
officio voting member of each of these standing committees except the Audit
Committee and the Compensation and Organization Committee. The Board of
Directors also has an Acquisition, Divestiture and Merger Committee.
EXECUTIVE COMMITTEE. The responsibilities of the Executive Committee include
all of the responsibilities of the Board of Directors except those
responsibilities that cannot be delegated by law. The Executive Committee acts
upon matters requiring Board action during periods between Board meetings.
Messrs. Gaston (Chairman), Navarre and Schwier presently are members of the
Executive Committee. The Executive Committee met one time in 1996.
AUDIT COMMITTEE. The responsibilities of the Audit Committee are to (i)
recommend the firm to be employed by the Company as its independent auditors,
(ii) review and approve the scope of the yearly audit plan and proposed budget
for audit fees, (iii) review the results of the annual audit with the
independent auditors, (iv) review the auditors' management letter with the
independent auditors and engage in appropriate follow-up with corporate staff,
(v) review with the independent auditors the Company's internal controls, (vi)
review activities of the internal auditors and (vii) report to the Board of
Directors on activities and findings of the committee and make recommendations
to the Board of Directors on such findings. Messrs. Ratliff (Chairman),
D'Agostino, Gaston, Gentry, Navarre and Schwier are members of the Audit
Committee. The Audit Committee met two times in 1996.
COMPENSATION AND ORGANIZATION COMMITTEE. The responsibilities of the
Compensation and Organization Committee include recommending to the Board of
Directors the salaries of each corporate officer and the retainer and
attendance fee for non-employee directors, making recommendations and
determinations concerning bonus compensation, administering stock option plans
(including those which permit the granting or award of other forms of equity-
based compensation) and reviewing compensation plans as they relate to key
employees. The Compensation and Organization Committee also reviews the
administration and results of operations of the Company's pension plans,
confers with and receives reports from the actuaries and investment managers of
the plans, makes recommendations related to such plans and reviews all material
proposed plan changes. Messrs. Schwier (Chairman), D'Agostino, Gentry and
Ratliff are members of the Compensation and Organization Committee. The
Compensation and Organization Committee met two times in 1996.
NOMINATING COMMITTEE. The responsibilities of the Nominating Committee are to
(i) develop and recommend to the Board of Directors criteria for the selection
of candidates for director, (ii) seek out and receive suggestions concerning
possible candidates, (iii) review and evaluate the qualifications of possible
candidates and (iv) recommend to the Board candidates for vacancies occurring
from time to time and for the slate of directors to be proposed on behalf of
the Board of Directors at the annual meeting of shareholders. The present
members of the Nominating Committee are Messrs. Navarre (Chairman), Gaston and
Gravelle. The Nominating Committee met two times during 1996. The Nominating
Committee will consider nominees recommended by shareholders. Article IX of the
Company's Restated Articles of Incorporation requires that a shareholder
desiring to nominate a director candidate submit to the Company the nominee's
name, age, business and residence address, principal occupation, the number of
shares of the Company's capital stock beneficially owned by the nominee and a
statement that the nominee is willing to be nominated. The information must be
provided to the Company not less than 120 days prior to the date of the annual
meeting of shareholders at which the nominee will be considered or, if he or
she is to be considered at a special meeting of shareholders, not more than
seven days following the notice of the special meeting. The names of any such
nominees and the other information required by the Company's Restated Articles
of Incorporation should be forwarded to the Company's Secretary, Kysor
Industrial Corporation, One Madison Avenue, Cadillac, Michigan 49601-9785, who
will submit the information to the Nominating Committee for its consideration.
Nominations made other than in accordance with Article IX of the Company's
Restated Articles of Incorporation are void.
ACQUISITION, DIVESTITURE AND MERGER COMMITTEE. The responsibilities of the
Acquisition, Divestiture and Merger Committee are to review and evaluate
proposals received from other companies or made by management
A-8
<PAGE>
relating to the acquisition or divestiture by the Company of subsidiaries,
divisions or other substantial business operations and to make recommendations
to the Board of Directors relating to such proposals. Messrs. Gentry
(Chairman), Gravelle, Navarre and Ratliff are members of the Acquisition,
Divestiture and Merger Committee. This committee met two times during 1996.
EXECUTIVE COMPENSATION
The Company's compensation for executive officers consists of four
components: a base salary, a profit-sharing incentive bonus, an intermediate-
term incentive, and a long-term incentive historically provided through the
Company's stock option plans.
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid by the Company to
the Chief Executive Officer and each of its four highest paid executive
officers other than the Chief Executive Officer during each year in the three-
year period ended December 31, 1996. The following table includes amounts that
the named individuals may have deferred pursuant to the Company's 401(k)
Savings Plan. No Company contributions are made to the Savings Plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------- ---------- --------
OTHER NUMBER OF
NAME AND ANNUAL SECURITIES ALL OTHER
PRINCIPAL COMPEN- UNDERLYING LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION OPTIONS PAYOUTS SATION(1)
--------- ---- -------- -------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
George R.
Kempton 1996 $344,450 $206,670 $ 5,951 10,000 $137,780 $26,036
Chairman of
the Board 1995 333,800 199,261 14,745(2) 10,000 137,780 24,360
Chief Execu-
tive Officer
& 1994 323,140 183,883 4,234 10,000 115,984 28,699
Director
Peter W. Gra-
velle 1996 $252,399 $138,820 $ 4,661 8,750 $ 88,340 $13,611
President,
Chief Operat-
ing 1995 240,842 133,843 5,779 8,750 88,340 12,958
Officer & Di-
rector 1994 214,725 112,007 4,116 8,750 67,437 17,378
Thomas P. For-
restal, Jr. 1996 $206,400 $103,200 $ 480 7,500 $ 61,920 $17,423
Former (Re-
tired) Group 1995 204,920 99,500 5,191(2) 7,500 61,920 16,184
Vice Presi-
dent-- 1994 197,520 91,649 16,780 7,500 52,027 19,908
Commercial
Products
Timothy J.
Campbell 1996 $186,460 $ 94,823 $ 516 7,500 $ 56,894 $14,240
Group Vice
President-- 1995 180,333 87,738 3,405 7,500 54,600 13,368
Transportation
Products 1994 168,295 79,808 252 7,500 45,305 16,115
Terry M. Mur-
phy 1996 $159,167 $ 82,500 $ 4,222 7,500 $ 49,500 $ 8,513
Vice Presi-
dent--Chief 1995 153,333 76,168 4,838 7,500 47,400 8,541
Financial Of-
ficer 1994 148,750 69,600 4,670 7,500 39,510 1,278
</TABLE>
- --------
(1) "All Other Compensation" for 1996 includes imputed income from premiums
paid for group life insurance above $50,000 ($10,287 for Mr. Kempton,
$3,548 for Mr. Gravelle, $3,515 for Mr. Forrestal, $2,058 for Mr.
Campbell and $1,313 for Mr. Murphy) and amounts allocated to each named
officer under the ESOP based on shares allocated in 1996 for 1995 service
($15,749 for Mr. Kempton, $10,063 for Mr. Gravelle, $13,908 for Mr.
Forrestal, $12,182 for Mr. Campbell and $7,200 for Mr. Murphy).
A-9
<PAGE>
(2) Includes $11,889 for Mr. Kempton and $4,701 for Mr. Forrestal which the
Company paid on their behalf for the employee portion of Medicare tax due
on the present value of the vested benefits related to Messrs. Kempton's
and Forrestal's vesting under the Supplemental Executive Retirement Plan
and an amount to cover income taxes due on the income imputed to them as a
result of this payment.
RETIREMENT PLANS
The following table shows the estimated annual benefits payable upon
retirement under the Company's Administrative Pension Plan for various years of
service classifications, assuming retirement at age 65 in 1996:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ---------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000 $36,105 $48,140 $60,174 $72,209 $75,959
</TABLE>
The executive officers referred to above are participants in the Company's
Administrative Pension Plan. The Administrative Pension Plan is a qualified
defined benefit retirement plan. All salaried employees are eligible to
participate after they meet vesting requirements. Amounts expensed for
retirement plan benefits cannot be readily determined for specific individuals
since payments to the plan are computed on an actuarial basis. Payments under
the plan are based on the levels of compensation, not to exceed $150,000, and
years of service of an individual at retirement. Compensation covered by the
plan for this purpose is determined in the same fashion as for determination of
social security taxes. Except for the $150,000 cap, this compensation for 1996
does not vary by more than 10% from the amounts shown under the heading "Annual
Compensation" in the Summary Compensation Table above.
The executive officers referred to above have the following years of credited
service for qualification under The Company's Administrative Pension Plan:
<TABLE>
<S> <C>
George R. Kempton 18
Thomas P. Forrestal, Jr. 16
Peter W. Gravelle 6
Timothy J. Campbell 12
Terry M. Murphy 4
</TABLE>
In addition to the above, the Company has an unfunded Supplemental Executive
Retirement Plan (the "Supplemental Plan") that covers all of the executive
officers named in the Summary Compensation Table shown above. To achieve
minimum qualification in the Supplemental Plan, a participant must have
attained the age of 57 and completed at least 10 years of credited service, and
the sum of the participant's age plus years of credited service must equal 72.
A person is fully qualified under the Supplemental Plan following 15 years of
credited service and having attained the age of 62. Once a person achieves full
qualification, the Supplemental Plan provides an additional annual benefit
which, together with benefits payable under the Administrative Pension Plan,
benefits payable by each and every former employer and 50% of benefits under
Social Security, will equal 65% of the participant's average annual cash
compensation for the three years in which his or her cash compensation was
highest during the final five complete years of the persons's active employment
at the time of retirement or termination of employment. For this purpose,
compensation does not vary by more than 10% from the amounts shown under the
heading "Annual Compensation" in the Summary Compensation Table above. The 65%
is reduced proportionately for each month the participant's termination date
precedes his or her 62nd birthday and for each month less than 15 years of
credited service. Benefits are payable commencing on the participants's 57th
birthday or the date of his or her termination of employment, whichever occurs
later. Participants may apply to receive an actuarially reduced lump-sum
payment of benefits payable under the Supplemental Plan at the time such
benefits would otherwise first become payable under the plan, subject to
A-10
<PAGE>
approval by the committee that administers the Supplemental Plan. The
Supplemental Plan also provides participants with health care coverage at
least equal to that provided under the basic plan.
If the participant has attained the minimum eligibility requirements, but
dies either before or after his or her actual retirement date, the Company
will pay benefits under the Supplemental Plan to the person's spouse for the
remainder of the spouse's life, but the benefits are reduced by one-third. In
addition, minimum age requirements are waived for qualification purposes if
the participant becomes totally disabled while in the Company's employ, but
benefits payable will be reduced accordingly. If the participant has not
attained age 57 at the time of disability, then disability benefits terminate
upon the participant's death.
Minimum eligibility requirements are inapplicable in the case of involuntary
termination (actual or constructive without cause occurring within five years
after a change in control of the Company (as that term is defined in the
section entitled "Management Transactions; Termination of Employment and
Change in Control Arrangements"). In that event, benefits payable are
calculated using compensation for the highest consecutive 12 calendar months
out of the last complete 60 calendar months of active employment and by using
the age the participant would have attained and the complete calendar months
of credited service he or she would have attained as of the date which is five
years after a change in control.
Consummation of the Offer would constitute a change in control under the
Supplemental Plan. If the Offer is consummated, the executive officers covered
under the Supplemental Plan would receive payments under the Supplemental Plan
if their employment is involuntarily terminated in connection with the Offer
that have been estimated to be approximately as follows (discounted to present
value): $3,960,000 for Mr. Kempton; $2,752,000 for Mr. Gravelle; $1,764,000
for Mr. Campbell; $670,000 for Mr. Murphy; $774,000 for Mr. Crooks; $1,550,000
for Mr. Peterson; and $1,228,000 for Mr. Stevenson. The foregoing amounts
include sums which, for certain executives, are already vested under the
applicable Supplemental Plan agreement. In addition, the calculations are
based upon certain assumptions and are subject to verification. The amounts
may be over-stated in certain respects because they do not reflect amounts
deductible under the individual offset provisions of the Supplemental Plan
agreements relating to amounts received from former employers (as described
above). Mr. Forrestal retired as of December 31, 1996 and his payments under
the Supplemental Plan would not be altered as a result of consummation of the
Offer.
The Company has also approved irrevocable trusts for each participant to
hold any Company contributions required by the Supplemental Plan. The Company
has an obligation to make contributions to such trusts upon a change in
control of the Company sufficient to meet all future obligations to each
participant under the Supplemental Plan as determined from time to time by an
actuary enrolled with the Internal Revenue Service in accordance with
standards provided in the Supplemental Plan. The Company may, at its option,
satisfy any funding obligations by contributing a life insurance policy on the
life of each participant having a cash surrender value equal to any required
contribution amount. The Company maintains life insurance policies on the
lives of the executive referenced in the preceding paragraph, which currently
have cash surrender values aggregating approximately $3,668,000.
A-11
<PAGE>
STOCK OPTION PLANS
The following table summarizes options granted under the Company's 1993 Long-
Term Incentive Plan during the last fiscal year:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT
- ---------------------------------------------------------------------- ASSUMED ANNUAL
PERCENT OF RATES OF
NUMBER OF TOTAL OPTIONS EXERCISE STOCK PRICE
SECURITIES GRANTED TO OR BASE APPRECIATION
UNDERLYING EMPLOYEES IN PRICE FOR OPTION TERM
OPTIONS FISCAL (PER EXPIRATION -----------------
NAME GRANTED YEAR SHARE) DATE 5% 10%
---- ---------- ------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
George R. Kempton 10,000 4.2% $22.3125 1/26/06 $140,322 $355,604
Peter W. Gravelle 8,750 3.7 22.3125 1/26/06 122,782 311,153
Thomas P. Forrestal, Jr. 7,500 3.1 22.3125 1/26/06 105,242 266,703
Timothy J. Campbell 7,500 3.1 22.3125 1/26/06 105,242 266,703
Terry M. Murphy 7,500 3.1 22.3125 1/26/06 105,242 266,703
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Pursuant to its 1993 Long-Term Incentive Plan, its 1987 Stock Option and
Restricted Stock Plan, its 1984 Stock Option Plan, its 1983 Incentive Stock
Option Plan and its 1980 Stock Option and Stock Appreciation Rights Plan
(collectively, the "Plans"), the Company has granted certain of its directors,
executive officers and key employees options to purchase Common Shares over a
ten-year period at prices equal to the fair market value of the shares on the
dates the options were granted. All options granted since 1990 vest and become
exercisable at the rate of 20% for each of the first four years after the date
of grant and the remaining 20% only vests and becomes exercisable if all vested
options (i.e. the first 80%) are exercised in full and all of the shares are
held by the optionee for a period of one year. Options terminate, subject to
certain limited exercise provisions, in the event of death, retirement or other
termination of employment. In the event of a "business transaction" or "change
in control," as defined in an addendum of amendment to the stock option
agreements, all unexercised options become fully vested and may be immediately
exercised. Consummation of the Offer would constitute a change in control for
purposes of the stock option agreements. The Plans are administered by the
Compensation and Organization Committee consisting of four directors. Although
authorized, no stock appreciation rights or restricted stock have been granted
under the Plans. The 1980 Stock Option and Stock Appreciation Rights Plan
terminated on April 25, 1990, the 1983 Incentive Stock Option Plan terminated
on April 22, 1993 and the 1984 Stock Option Plan terminated on July 27, 1994,
although certain options granted under those plans remain outstanding.
The Plans permit option exercise loans or installment purchase agreements to
encourage the exercise of options and thereby advance the purposes of the
Plans. In 1989, the Compensation and Organization Committee implemented a
program to provide for installment payments upon the exercise of stock options.
The installment purchase program was available for a period of six months
(ended October 30, 1989) for the exercise of non-qualified stock options. Non-
qualified options for 157,128 Common Shares were exercised under the
installment purchase program. The purchase obligations relating to those
options are secured by the stock acquired upon exercise of each option and
related dividends, but are otherwise non-recourse obligations. Interest is
charged at a rate of 4.5% per annum and will be offset in whole or in part by
dividends paid on the Common Shares purchased pursuant to the program. In
October 1995, the Compensation and Organization Committee authorized that the
terms of the outstanding loans be extended an additional four years to December
31, 1999.
The Company will receive a tax deduction in connection with the exercise of
the options equal to the difference between the option price and the mean
market price on the date of exercise. The optionee would recognize income in a
corresponding amount.
A-12
<PAGE>
The following table summarizes stock options exercised by the listed
individuals during the last fiscal year and the total number of options held
by each listed individual as of December 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
OF SHARES END AT FISCAL YEAR-END
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George R. Kempton -- $ -- 121,600 22,900 $2,206,898 $362,819
Peter W. Gravelle 36,000 585,750 34,980 13,060 564,144 153,274
Thomas P. Forrestal, Jr. 11,200 126,588 4,500 11,200 55,313 131,456
Timothy J. Campbell 18,750 229,687 52,300 20,200 870,356 348,581
Terry M. Murphy -- -- 21,000 12,000 273,656 142,406
</TABLE>
LONG-TERM INCENTIVE COMPENSATION
The following table summarizes all awards of incentive compensation under
the Company's Intermediate-Term Incentive Plan to the listed individuals
during the last fiscal year:
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OF SHARES, OR OTHER NON-STOCK PRICE-BASED PLANS
UNITS OR PERIOD UNTIL (2)
OTHER MATURATION --------------------------------
NAME (1) RIGHTS (2) OR PAYOUT (3) THRESHOLD TARGET MAXIMUM
-------- ---------- ------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
George R. Kempton 40 Two Years $ 68,890 $ 103,335 $ 137,780
Peter W. Gravelle 35 Two Years 44,170 66,255 88,340
Timothy J. Campbell 30 Two Years 28,447 42,670 56,894
Terry M. Murphy 30 Two Years 24,750 37,125 49,500
</TABLE>
- --------
(1) Mr. Forrestal is omitted from the table because, due to his retirement
effective as of December 31, 1996, he will not earn or receive any payment
under the Intermediate-Term Incentive Plan.
(2) Under the Intermediate-Term Incentive Plan, the Company's executive
officers may earn incentive compensation based upon two performance
objectives: primary earnings per share ("PEPS") and return on investment
("ROI"). The executive officers may be granted "performance units"
intended to equal 1% of the applicable officer's salary if maximum
performance objectives are satisfied. The maximum number of units that may
be granted to each of the named executives are as follows: Mr. Kempton--
40% of base salary; Mr. Gravelle--35% of base salary; and Messrs.
Forrestal, Campbell and Murphy--30% of base salary. The actual value of
such performance units will be based on actual two-year PEPS and ROI
averages, subject to the satisfaction of minimum plan thresholds.
Performance units are to be paid two years after they are granted.
(3) The award is calculated for fiscal years 1996 and 1997. The two-year
average PEPS and ROI results will determine the actual value of the
performance units to be paid.
A-13
<PAGE>
MANAGEMENT TRANSACTIONS; TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has entered into an Employment Agreement with George R. Kempton,
Chairman of the Board and Chief Executive Officer of the Company. Under the
Employment Agreement, Mr. Kempton will receive a salary as may be determined
from time to time by the Company's Board of Directors, provided that in no
event will Mr. Kempton's salary for any given calendar year be less than the
salary received by Mr. Kempton during the prior calendar year. Notwithstanding
this provision, Mr. Kempton has elected in the past to receive a salary less
than the salary received by him in the prior calendar year when he and other
corporate executive officers recommended to the Board of Directors and accepted
a salary cut in response to then-current business conditions. In addition, Mr.
Kempton is entitled to bonuses under the Company's present bonus plans (subject
to the terms of such plans), or any subsequent plans, and other fringe benefits
in an amount not less favorable than those presently enjoyed by Mr. Kempton. If
Mr. Kempton's employment is terminated involuntarily by the Company without
cause (termination for cause requiring a two-thirds vote of the Board of
Directors) or by Mr. Kempton for good reason, Mr. Kempton is entitled to
receive severance pay for the remainder of the term of the Employment
Agreement. Severance pay includes payments under the Supplemental Executive
Retirement Plan described above and those items (other than item (v)) listed
below in the description of certain other corporate officer Termination
Agreements. Mr. Kempton's Employment Agreement has a term of five years and is
automatically renewed for one additional year each January 1 unless either the
Company or Mr. Kempton notifies the other in writing that it or he does not
choose to extend the period of employment. No such notification has been
provided. The Employment Agreement was unanimously approved by the Board of
Directors. In connection with the transactions contemplated by the Merger
Agreement, Mr. Kempton has agreed to amend his Employment Agreement to limit
monthly payments pursuant to item (i) in the description of severance pay set
forth below to $60,000 for a total of 23 months. This amendment will only be
effective if the Offer is consummated. If the Offer is consummated, Mr. Kempton
would be eligible to receive under his Employment Agreement (as amended)
aggregate benefits (discounted to present value) that have been estimated to be
approximately $1,480,000. The foregoing calculation is based upon certain
assumptions and is subject to verification. The amount does not include any
benefit associated with a Tax Reimbursement (defined below).
The Company has also entered into termination agreements ("Termination
Agreements") with Peter W. Gravelle, President and Chief Operating Officer;
Timothy J. Campbell, Group Vice President-Transportation Products; Terry M.
Murphy, Vice President-Chief Financial Officer; and other corporate officers.
Mr. Forrestal retired from his position of Group Vice President-Commercial
Products as of December 31, 1996, and is no longer an employee or executive
officer of the Company. The Termination Agreements provide for separation pay
and benefits if a change in control of the Company occurs. The Termination
Agreements were unanimously approved by the Board of Directors. If an
executive's employment is terminated involuntarily by the Company without cause
or by an executive for good reason within five years after a change in control
of the Company has occurred, the executive will be entitled to receive
severance pay for the period remaining between the date of the termination and
60 months after the change in control of the Company. The Termination
Agreements define "good reason" to include certain demotions, relocations,
losses of benefits and other changes. A change in control means a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A issued under the Exchange Act, provided
that, without limitation, a change in control will be considered to have
occurred if (i) any "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities or (ii)
during any period of two consecutive years, individuals who at the beginning of
the period constitute the Board of Directors cease for any reason to constitute
at least a majority thereof (unless the election or nomination for election by
the Company's shareholders of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period).
Severance pay includes the following: (i) monthly payments equal to the
executive's monthly salary for the last full month immediately preceding the
executive's termination plus one-twelfth of 55% to 80% (for certain corporate
officers other than those named in the paragraph above), 80% (for Timothy J.
Campbell and Terry M. Murphy), 90% (for Peter W. Gravelle) and 100% (for George
R. Kempton (see above)) of the total salary paid to the executive during the
one-year period immediately preceding his or her termination; (ii) continued
treatment
A-14
<PAGE>
of the executive as an "employee" under any stock option, employee benefit or
other long-term compensation arrangement for the term of the compensation
period; (iii) reasonable outplacement services selected by the executive; (iv)
continued treatment of the executive as an employee under each employee welfare
benefit plan in which the executive was entitled to participate immediately
prior to the date of his or her termination; (v) payment of a supplemental
retirement benefit offset by any amount payable under the Administrative
Pension Plan; (vi) payment by the Company of all reasonable legal fees and
expenses incurred by the executive as a result of his or her termination of
employment by the Company; (vii) the right to immediately exercise, in full,
all stock options held by the executive; (viii) an option to sell his or her
principal residence to the Company at the greater of its then fair market value
or the executive's aggregate capital investment in the residence; and (ix) an
option to purchase his or her automobile from the Company at its then wholesale
value. The Agreements also provide that the Company will reimburse, on a non-
deductible basis, each executive for the 20% excise tax payable pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, including
additional tax due with respect to the reimbursement, in connection with any
compensation or benefits received or payable in connection with a change in
control of the Company (a "Tax Reimbursement"). Consummation of the Offer would
constitute a change in control under the Termination Agreements. If the Offer
is consummated and the employment of the following executives is involuntarily
terminated by the Company or voluntarily terminated by the executive for good
reason (as defined above), the aggregate benefits (discounted to present value)
that such individuals would be eligible to receive under the Termination
Agreements have been estimated to be approximately as follows: $142,000 for Mr.
Gravelle; $1,916,000 for Mr. Campbell; $1,538,000 for Mr. Murphy; $1,586,000
for Mr. Crooks; and $618,000 for Mr. Peterson. The foregoing calculations are
based upon certain assumptions and are subject to verification. The above
amounts do not include any benefit associated with a Tax Reimbursement.
The Board of Directors believes that the agreements described above assure
fair treatment of the covered executives and, by assuring the executives of
some financial security, protect the shareholders by tending to neutralize any
bias of these executives in considering proposals to acquire the Company.
In connection with the transactions contemplated by the Merger Agreement,
certain of the executive officers of the Company have entered into amendments
of certain agreements with the Company that limit benefits otherwise payable by
the Company. Mr. Gravelle has agreed to amend his Supplemental Plan agreement
to limit the amount of the present value of his increased payments under the
Supplemental Plan upon consummation of the Offer to $1,232,400. Mr. Gravelle
has also agreed to waive all rights to monthly benefit payments (described in
items (i) and (v) above in the description of severance pay) under his
Termination Agreement. Mr. Peterson has agreed to limit his monthly benefit
payments (described in item (i) above) to $22,900 for 15 months under his
Termination Agreement. Certain additional executive officers have indicated
that they will amend their Termination Agreements to provide that continued
treatment as an "employee" under item (ii) above for purposes of stock option,
employee benefit and other long term compensation arrangements will not entitle
the executive to additional grants or awards under such arrangements. All
amendments become effective only if the Offer is consummated.
The stock option agreements entered into between the Company and its
directors and officers, as well as other employees, with respect to outstanding
stock options provide for accelerated vesting of all outstanding but
unexercised stock options upon the occurrence of, among other things, a change
in control of the Company. For purposes of these agreements, "change in
control" is defined as (i) the failure of the individuals who were directors at
the time the applicable option plan was adopted and those whose election or
nomination to the Board of Directors was approved by a two-thirds vote of the
directors then still in office who were directors at the time the applicable
option plan was adopted to constitute a majority of the Board of Directors;
(ii) the acquisition by certain persons or groups of 20% or more of the
Company's Common Shares or the combined voting power of the Company's
outstanding voting securities; (iii) the approval by the shareholders of a
reorganization, merger or consolidation (except with certain permitted
entities); or (iv) the approval by the shareholders of a complete liquidation
or dissolution of the Company or the sale or disposition of all or
substantially all of the assets of the Company (other than to certain permitted
entities). If the Offer is consummated, the acquisition of Shares by the
Purchaser pursuant to the Offer would constitute a change in control for
purposes of the stock option agreements and would cause all outstanding stock
options to become immediately vested and fully exercisable.
A-15
<PAGE>
If the Offer is consummated, the Company will offer cash payments in full
settlement of all outstanding options at a price equal to the difference
between $43.00 and the exercise price of each outstanding option. The
executive officers of the Company would receive the following amounts in the
event of such a cash payment for outstanding options: $4,157,029 for Mr.
Kempton; $1,293,046 for Mr. Gravelle; $349,656 for Mr. Forrestal; $2,037,217
for Mr. Campbell; $824,531 for Mr. Murphy; $1,300,061 for Mr. Crooks; $147,499
for Mr. Downs; $1,338,686 for Mr. Peterson; and $1,835,436 for Mr. Stevenson.
In 1987, the Company entered into an Indemnity Agreement with each of the
Company's directors and executive officers and the Company has entered into a
similar agreement with each individual who has become a director or executive
officer of the Company since that time. The Indemnity Agreements, which were
ratified by the Company's shareholders at the 1987 annual meeting of
shareholders, are designed to provide the maximum indemnification protection
allowed under the MBCA. An indemnitee's rights under an Indemnity Agreement
are not exclusive of any other rights that he or she may have under the MBCA,
the Company's Restated Articles of Incorporation or Bylaws, liability
insurance presently maintained or purchased in the future or otherwise. A copy
of the form of the Indemnity Agreement was included as an exhibit to the
Company's 1987 Proxy Statement.
INTERESTS OF CERTAIN EXECUTIVE OFFICERS
As described above, consummation of the Offer will constitute a "change in
control" under various plans and agreements described above (see "EXECUTIVE
COMPENSATION--Retirement Plans", "--Stock Option Plans" and "--Management
Transactions; Termination of Employment and Change in Control Arrangements").
Under these plans and agreements taken as a whole, and including sums payable
in settlement of outstanding stock options and amounts which, for certain
executives, are already vested under their Supplemental Plan agreements, it
has been estimated that the following executive officers would be eligible to
receive the approximate aggregate benefits indicated (discounted to present
value) if the Offer is consummated and their employment is involuntarily
terminated by the Company or voluntarily terminated for good reason (as
described above) by the executive: George R. Kempton--$9,597,000; Peter W.
Gravelle--$4,187,000; Timothy J. Campbell--$5,717,000; Terry M. Murphy--
$3,032,000; David W. Crooks--$3,595,000; David R. Downs--$148,000; Timothy D.
Peterson--$3,507,000; and John B. Stevenson--$3,063,000. The foregoing
calculations are based upon certain assumptions and are subject to
verification. The amounts may be overstated in certain respects due to the
individual offset provisions in the Supplemental Plan agreements. The amounts
do not include any benefit associated with a Tax Reimbursement. These amounts
indicated with respect to Messrs. Kempton, Gravelle and Peterson do not
include amounts payable by Parent under their respective consulting agreements
described below (see "CONSULTING AGREEMENTS"). As noted above, under the
Supplemental Plan agreements of the listed executives, a portion of the
foregoing amounts which relate to the respective executive's Supplemental Plan
agreements may, at the option of the Company, be funded using the cash
surrender values on life insurance policies maintained by the Company on the
lives of such executives, which cash surrender values currently aggregate
approximately $3,668,000.
DIRECTOR COMPENSATION
Director fees are paid to those directors who are not employees of the
Company. During 1996, each director was paid $4,000 per quarter plus an
additional $1,000 for attendance at each regular or special meeting of the
Board of Directors. In addition, Board committee chairmen were paid $1,000 for
each committee meeting attended and Board committee members were paid $800 for
each committee meeting attended. The Company provides each non-employee
director a death benefit in the amount of $25,000, which is paid to his or her
designated beneficiary if the director dies while a director. Directors of the
Company may also elect to participate in the Company's health care benefit
plan.
The Company has a deferred compensation plan for non-employee directors.
Each member of the Board of Directors who is not an employee of the Company is
eligible to participate in the plan by directing that all or any part of the
compensation that would be payable for services as a director be credited to a
deferred
A-16
<PAGE>
compensation account. When a participating director ceases to be a director of
the Company, he or she will be paid an amount in cash equal to the amount of
compensation deferred, plus an additional amount of compensation equivalent to
interest computed on the director's deferred compensation balance at an annual
percentage rate to be determined by the Compensation and Organization Committee
at the time of any election.
Under the Company's retirement plan for directors, annual retirement benefits
are payable to retired directors who have five or more years of service as a
director under specified circumstances equal to one-fifteenth of the annual
retainer at the time of retirement or the year before a change in control of
the Company, times years of service on the Board of Directors (not to exceed 15
years). One-fourth of the annual benefit is payable each calendar quarter.
Payments cease upon the death of a director or 15 years following retirement,
whichever occurs first. To qualify for these benefits, a retired director must
agree to be available to provide consultation and advice to the Company
following his or her retirement.
Directors who are not employees of the Company or any of its subsidiaries
have been granted options to purchase Common Shares semiannually pursuant to a
formula specified in the 1993 Long-Term Incentive Plan. Pursuant to this
formula, each non-employee director was awarded options to purchase an
aggregate of 2,000 Common Shares semi-annually during 1996. Options are awarded
pursuant to the formula on the first Thursday following 10 days after the
release by the Company of earnings information in the months of April and
October each year. The per share exercise price of options granted to non-
employee directors under the 1993 Long-Term Incentive Plan is 100% of the
market value of Common Shares on the date each option is granted. The term of
each option is 10 years from the date of grant. All options granted under the
plan are subject to delayed vesting and become exercisable at the rate of 20%
for each of the first 4 years after the date of grant, and the remaining 20%
only vests and becomes exercisable if all vested options (i.e. the first 80%)
are exercised in full and all of the shares are held by the director for a
period of one year. If the Offer is consummated, it would constitute a change
in control under the stock option agreements and amendments thereto and would
cause all outstanding stock options to become immediately vested and
exercisable.
If the Offer is consummated, the Company will offer cash payments in full
settlement of all outstanding stock options at a price equal to the difference
between $43.00 and the exercise price of each outstanding option. The directors
of the Company would receive the following amounts in the event of a cash
payment for outstanding options: $113,000 for Mr. D'Agostino; $914,000 for Mr.
Gaston; $807,000 for Mr. Gentry; $276,000 for Mr. Navarre; $173,000 for Mr.
Ratliff; $28,000 for Mr. Schult; and $1,129,000 for Mr. Schwier.
CERTAIN TRANSACTIONS AND INDEBTEDNESS OF MANAGEMENT
In the ordinary course of business, the Company engages in certain
transactions with, or with affiliates of, organizations with which certain
directors are associated. During the past year, the Company utilized the
services of Warner Norcross & Judd LLP, a law firm in which Mr. Gaston, a
director, became of counsel on January 1, 1997. The Company anticipates
continuing such relationship during the current year.
Mr. Kempton, Chairman of the Board and Chief Executive Officer of the
Company, and Mr. Gaston, a director, were indebted to the Company in 1996 in
amounts exceeding $60,000 for credit extended to them to exercise stock options
pursuant to the Company's various stock option plans, as described elsewhere in
this Information Statement (see "EXECUTIVE COMPENSATION--Stock Option Plans"
and "DIRECTOR COMPENSATION"). The shares acquired pursuant to the exercise of
these options are pledged to the Company to secure payment of the indebtedness,
which is without recourse except to the pledged shares. Interest is charged on
the indebtedness at a rate of 4.5% per annum. Mr. Kempton owed the Company
$949,453 at December 31, 1996. The largest amount owed by Mr. Kempton since
January 1, 1996 was $957,148. Mr. Gaston owed the Company $97,250 at December
31, 1996. The largest amount owed by Mr. Gaston since January 1, 1996 was
$97,592.
A-17
<PAGE>
[LETTERHEAD OF KYSOR INDUSTRIAL CORPORATION]
EXHIBIT 12
February 7, 1997
To: Participants in the Kysor Industrial Corporation
Savings Plan and 401(k) Plan:
As you are aware, K Acquisition Corp., a Michigan corporation and indirect
wholly-owned subsidiary of Scotsman Industries, Inc., a Delaware corporation,
has commenced a tender offer to purchase all outstanding shares of Common Stock,
par value $1 per share, and the associated common share purchase rights, and
Series A Convertible Voting Preferred Stock, $24.375 stated value per share, of
Kysor Industrial Corporation (the "Company") at $43.00 per share net to the
seller in cash (without interest). The tender offer commenced February 7, 1997
and will expire on March 7, 1997, unless extended.
As a result of this tender offer for all of the Company's shares, no new
investments or transfers into the Kysor Common Stock Fund will be permitted
effective as of February 6, 1997. Participants in the Savings Plan and 401(k)
Plan will not be permitted to increase their investments in the Kysor Common
Stock Fund from February 6, 1997 through March 7, 1997, or a later date to
coincide with the expiration of the tender offer.
Throughout this suspension period, all contributions and loan repayments
allocated to the Kysor Common Stock Fund will be redirected by The Principal
Financial Group (the administrator of the Savings Plan and 401(k) Plan) into the
Money Market Fund. You may contact The Principal Financial Group via TeleTouch
to change your investment direction for all future contributions. The Company
will notify all Savings Plan and 401(k) Plan participants at a later date if new
investments and transfers into the Kysor Common Stock Fund are again permitted.
If you hold shares of the Company's Common Stock in your Savings Plan or
401(k) Plan account, you will be receiving materials from Bankers Trust Company
(the holder of record of the Common Stock in the Savings Plan and 401(k) Plan)
regarding whether you wish to accept or reject the $43.00 offer. PLEASE REVIEW
THESE MATERIALS CAREFULLY AND RETURN THE INSTRUCTION PAGE TO BANKERS TRUST
COMPANY BY WEDNESDAY, MARCH 5, 1997.
Sincerely,
/s/ Terry M. Murphy
Terry M. Murphy
Vice President,
Chief Financial Officer
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
and
Series A Convertible Voting Preferred Stock
of
Kysor Industrial Corporation
at
$43.00 Net Per Share
by
K Acquisition Corp.,
an indirect wholly owned subsidiary of
Scotsman Industries, Inc.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME ON FRIDAY, MARCH 7, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
February 7, 1997
To Participants in the Kysor Industrial Corporation
Savings Plan and 401(k) Plan:
Enclosed for your consideration are the Offer to Purchase, dated
February 7, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), relating to an offer by K
Acquisition Corp., a Michigan corporation (the "Offeror") and an indirect wholly
owned subsidiary of Scotsman Industries, Inc., a Delaware corporation
("Parent"), to purchase all outstanding shares of common stock, $1.00 par value,
of Kysor Industrial Corporation, a Michigan corporation (the "Company"),
including the associated common share purchase rights, issued pursuant to the
Rights Agreement dated as of April 26, 1996, as amended, between the Company and
Harris Trust and Savings Bank, as successor Rights Agent (collectively, the
"Common Shares"), and all outstanding shares of Series A Convertible Voting
Preferred Stock, $24.375 stated value per share (the "ESOP Preferred Shares" and
together with the Common Shares, the "Shares") at a purchase price of $43.00 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer. The Offer is being made in connection
with the Agreement and Plan of Merger dated as of February 2, 1997, among
Parent, the Offeror and the Company (the "Merger Agreement").
WE ARE THE HOLDER OF RECORD OF COMMON SHARES HELD FOR YOUR ACCOUNT AS
A PARTICIPANT IN THE COMPANY'S SAVINGS PLAN OR 401(K) PLAN (THE "PLANS"). A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD IN
ACCORDANCE WITH THE TERMS OF THE PLANS, TO THE EXTENT CONSISTENT WITH APPLICABLE
LAWS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY
AND CANNOT BE USED BY YOU TO TENDER SHARES HELD IN YOUR PLAN ACCOUNT.
<PAGE>
Accordingly, we request information as to whether you wish to have us
tender any or all of the Common Shares held in your Plan account, upon the terms
and conditions set forth in the Offer.
Please note the following:
1. The tender price is $43.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on March 7, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there having
been validly tendered and not withdrawn prior to the expiration of the
Offer such number of Shares which would constitute a majority of the
outstanding Shares at the date of the expiration of the Offer (assuming the
exercise of all options to purchase Shares outstanding at the expiration
date of the Offer). The Offer is also subject to the other terms and
conditions in the enclosed Offer to Purchase. The Offeror reserves the
right (but shall not be obligated), in accordance with applicable rules and
regulations of the United States Securities and Exchange Commission and
subject to the limitations set forth in the Merger Agreement, to waive any
of the conditions to the Offer.
5. Common Shares in Plan accounts as to which we have not received
instructions from Participants will not be tendered in the Offer.
If you wish to have us tender any or all of the Common Shares held in your
Plan account, please so instruct us by completing, executing, detaching and
returning to us the instruction form contained in this letter. An envelope to
return your instruction to us is enclosed. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise indicated in such
instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US SO THAT THEY ARE
RECEIVED BY US NO LATER THAN 5:00 P.M. NEW YORK TIME, ON MARCH 5, 1997, TO
ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION
OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making or acceptance thereof would not
be in compliance with the securities, blue sky or other laws of such
jurisdiction. In any jurisdiction where the securities, blue sky, or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offeror by Morgan Stanley & Co. Incorporated
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Very truly yours,
/s/ Bankers Trust Company
Bankers Trust Company
<PAGE>
INSTRUCTION WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
KYSOR INDUSTRIAL CORPORATION
To Bankers Trust Company:
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated February 7, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"), in
connection with the offer by K Acquisition Corp., a Michigan corporation (the
"Offeror") and an indirect wholly owned subsidiary of Scotsman Industries, Inc.,
a Delaware corporation, to purchase all outstanding shares of common stock,
$1.00 par value, of Kysor Industrial Corporation, a Michigan corporation (the
"Company"), including the associated common stock purchase rights, issued
pursuant to the Rights Agreement dated as of April 26, 1996, as amended, between
the Company and Harris Trust and Savings Bank, as successor Rights Agent
(collectively the "Common Shares"), and all outstanding shares of Series A
Convertible Voting Preferred Stock, $24.375 stated value per share.
This will instruct you to tender to the Offeror the number of Common Shares
indicated below (or if no number is indicated below, all Common Shares) which
are held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in the Offer.
NOTE: Shares in Plan accounts as to which we have not received instructions
will not be tendered in the Offer.
Number of Shares to be Tendered:/1/ _____ SIGN HERE
____________________________________
____________________________________
Signature(s)
____________________________________
____________________________________
Print Name(s)
____________________________________
Area Code and Telephone Number(s)
____________________________________
Taxpayer Identification or Social
Security Number(s)
- -------------------
/1/Unless otherwise indicated, it will be assumed that all Common
Shares held by us for your account are to be tendered.
<PAGE>
[LETTERHEAD OF KYSOR INDUSTRIAL CORPORATION]
EXHIBIT 13
February 7, 1997
To: Employee Stock Purchase Plan Participants:
As you are aware, K Acquisition Corp., a Michigan corporation and
indirect wholly-owned subsidiary of Scotsman Industries, Inc., a Delaware
corporation, has commenced a tender offer to purchase all outstanding shares of
Common Stock, par value $1 per share, and the associated common share purchase
rights, and Series A Convertible Voting Preferred Stock, $24.375 stated value
per share, of Kysor Industrial Corporation (the "Company") at $43.00 per share
net to the seller in cash (without interest). The tender offer commenced
February 7, 1997 and will expire on March 7, 1997, unless extended.
As a result of this tender for all of the Company's shares, any
amounts withheld under the Employee Stock Purchase Plan by employees for pay
periods ending from February 7, 1997 through March 7, 1997, or a later date
to coincide with the expiration of the tender offer, will be held by the
Company, as Plan Trustee, in each employee's cash account. Upon expiration of
the tender offer, the Plan Trustee will notify all Employee Stock Purchase Plan
participants of the outcome of the tender offer and request instructions
regarding the disposition of each participant's cash account.
During this suspension period, participants are permitted to sell
shares of the Company's Common Stock from their accounts as described in the
Employee Stock Purchase Plan.
If you held shares of the Company's Common Stock in your Employee
Stock Purchase Plan account on February 6, 1997, you will find materials
enclosed from Old Kent Bank (the Plan Administrator) regarding whether you wish
to accept or reject the $43.00 offer. PLEASE REVIEW THESE MATERIALS CAREFULLY
AND RETURN THE INSTRUCTION PAGE TO OLD KENT BANK BY WEDNESDAY, MARCH 5, 1997.
Sincerely,
/s/ Terry M. Murphy
Terry M. Murphy
Vice President,
Chief Financial Officer
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
KYSOR INDUSTRIAL CORPORATION
AT
$43.00 NET PER SHARE
BY
K ACQUISITION CORP.,
an indirect wholly owned subsidiary of
SCOTSMAN INDUSTRIES, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME ON FRIDAY, MARCH 7, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
February 7, 1997
To Participants in the Kysor Industrial Corporation
Employee Stock Purchase Plan:
Enclosed for your consideration are the Offer to Purchase, dated February
7, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer"), relating to an offer by K Acquisition Corp., a
Michigan corporation (the "Offeror") and an indirect wholly owned subsidiary of
Scotsman Industries, Inc., a Delaware corporation ("Parent"), to purchase all
outstanding shares of common stock, $1.00 par value, of Kysor Industrial
Corporation, a Michigan corporation (the "Company"), including the associated
common share purchase rights, issued pursuant to the Rights Agreement dated as
of April 26, 1996, as amended, between the Company and Harris Trust and Savings
Bank, as successor Rights Agent (collectively, the "Common Shares"), and all
outstanding shares of Series A Convertible Voting Preferred Stock, $24.375
stated value per share (the "ESOP Preferred Shares" and together with the Common
Shares, the "Shares") at a purchase price of $43.00 per Share, net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in the Offer. The Offer is being made in connection with the Agreement and
Plan of Merger dated as of February 2, 1997, among Parent, the Offeror and the
Company (the "Merger Agreement").
WE ARE THE HOLDER OF RECORD OF COMMON SHARES HELD FOR YOUR ACCOUNT AS A
PARTICIPANT IN THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN (THE "PLAN"). A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD IN ACCORDANCE WITH
THE TERMS OF THE PLAN, TO THE EXTENT CONSISTENT WITH APPLICABLE LAWS. THE LETTER
OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED
BY YOU TO TENDER SHARES HELD IN YOUR PLAN ACCOUNT.
<PAGE>
Accordingly, we request information as to whether you wish to have us
tender any or all of the Common Shares held in your Plan account, upon the terms
and conditions set forth in the Offer.
Please note the following:
1. The tender price is $43.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight,
Michigan time, on March 7, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there having
been validly tendered and not withdrawn prior to the expiration of the Offer
such number of Shares which would constitute a majority of the outstanding
Shares at the date of the expiration of the Offer (assuming the exercise of all
options to purchase Shares outstanding at the expiration date of the Offer). The
Offer is also subject to the other terms and conditions in the enclosed Offer to
Purchase. The Offeror reserves the right (but shall not be obligated), in
accordance with applicable rules and regulations of the United States Securities
and Exchange Commission and subject to the limitations set forth in the Merger
Agreement, to waive any of the conditions to the Offer.
5. Common Shares in Plan accounts as to which we have not received
instructions from Participants will not be tendered in the Offer.
If you wish to have us tender any or all of the Common Shares held in
your Plan account, please so instruct us by completing, executing, detaching and
returning to us the instruction form contained in this letter. An envelope to
return your instruction to us is enclosed. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise indicated in such
instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US SO THAT THEY ARE
RECEIVED BY US NO LATER THAN 5:00 P.M. MICHIGAN TIME, ON MARCH 5, 1997, TO
ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION
OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making or acceptance thereof would not
be in compliance with the securities, blue sky or other laws of such
jurisdiction. In any jurisdiction where the securities, blue sky, or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offeror by Morgan Stanley & Co. Incorporated
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Very truly yours,
/s/ Old Kent Bank
Old Kent Bank
<PAGE>
INSTRUCTION WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
KYSOR INDUSTRIAL CORPORATION
To Old Kent Bank:
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated February 7, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"), in
connection with the offer by K Acquisition Corp., a Michigan corporation (the
"Offeror") and an indirect wholly-owned subsidiary of Scotsman Industries, Inc.,
a Delaware corporation, to purchase all outstanding shares of Common Stock,
$1.00 par value, of Kysor Industrial Corporation, a Michigan
corporation (the "Company"), including the associated common share purchase
rights, issued pursuant to the Rights Agreement dated as of April 26, 1996, as
amended, between the Company and Harris Trust and Saving Bank, as successor
Rights Agent (collectively, the "Common Shares") and all outstanding shares of
Series A Convertible Voting Preferred Stock, $24.375 stated value per share.
This will instruct you to tender to the Offeror the number of Common Shares
indicated below (or if no number is indicated below, all Common Shares) which
are held by you for the account of the undersigned upon the terms and subject to
the conditions set forth in the Offer.
NOTE: Shares in Plan accounts as to which we have not received instructions
will NOT be tendered in the Offer.
Number of Shares to be Tendered: /1/ _____ SIGN HERE
---------------------------------
---------------------------------
Signature(s)
---------------------------------
---------------------------------
Print Name(s)
---------------------------------
Area Code and Telephone Number(s)
---------------------------------
Taxpayer Identification or Social
Security Number(s)
- -----------------------------
/1/ Unless otherwise indicate, it will be assumed that all Common
Shares held by us for your account are to be tendered.
<PAGE>
EXHIBIT 15
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
KYSOR INDUSTRIAL CORPORATION
AT
$43.00 NET PER SHARE
BY
K ACQUISITION CORP.,
an indirect wholly owned subsidiary of
SCOTSMAN INDUSTRIES, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME ON FRIDAY, MARCH 7, 1997, UNLESS THE OFFER IS
EXTENDED.
- --------------------------------------------------------------------------------
February 7, 1997
To Participants in the Kysor Industrial Corporation Dividend Reinvestment Plan:
Enclosed for your consideration are the Offer to Purchase, dated
February 7, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), relating to an offer by K
Acquisition Corp., a Michigan corporation (the "Offeror") and an indirect wholly
owned subsidiary of Scotsman Industries, Inc., a Delaware corporation
("Parent"), to purchase all outstanding shares of common stock, $1.00 par value,
of Kysor Industrial Corporation, a Michigan corporation (the "Company"),
including the associated common share purchase rights, issued pursuant to the
Rights Agreement dated as of April 26, 1996, as amended, between the Company and
Harris Trust and Savings Bank, as successor Rights Agent (collectively, the
"Common Shares"), and all outstanding shares of Series A Convertible Voting
Preferred Stock, $24.375 stated value per share (the "ESOP Preferred Shares" and
together with the Common Shares, the "Shares") at a purchase price of $43.00 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer. The Offer is being made in connection
with the Agreement and Plan of Merger dated as of February 2, 1997, among
Parent, the Offeror and the Company (the "Merger Agreement").
WE ARE THE HOLDER OF RECORD OF COMMON SHARES HELD FOR YOUR ACCOUNT AS
A PARTICIPANT IN THE COMPANY'S DIVIDEND REINVESTMENT PLAN (THE "PLAN"). A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD IN
ACCORDANCE WITH THE TERMS OF THE PLAN, TO THE EXTENT CONSISTENT WITH APPLICABLE
LAWS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY
AND CANNOT BE USED BY YOU TO TENDER SHARES HELD IN YOUR PLAN ACCOUNT.
<PAGE>
Accordingly, we request information as to whether you wish to have us
tender any or all of the Common Shares held in your Plan account, upon the terms
and conditions set forth in the Offer.
Please note the following:
1. The tender price is $43.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight,
Chicago time, on March 7, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there having
been validly tendered and not withdrawn prior to the expiration of the
Offer such number of Shares which would constitute a majority of the
outstanding Shares at the date of the expiration of the Offer (assuming the
exercise of all options to purchase Shares outstanding at the expiration
date of the Offer). The Offer is also subject to the other terms and
conditions in the enclosed Offer to Purchase. The Offeror reserves the
right (but shall not be obligated), in accordance with applicable rules and
regulations of the United States Securities and Exchange Commission and
subject to the limitations set forth in the Merger Agreement, to waive any
of the conditions to the Offer.
5. Common Shares in Plan accounts as to which we have not received
instructions from Participants will not be tendered in the Offer.
If you wish to have us tender any or all of the Common Shares held in your
Plan account, please so instruct us by completing, executing, detaching and
returning to us the instruction form contained in this letter. An envelope to
return your instruction to us is enclosed. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise indicated in such
instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US SO THAT THEY ARE
RECEIVED BY US NO LATER THAN 5:00 P.M. CHICAGO TIME, ON MARCH 5, 1997, TO ALLOW
US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF
THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making or acceptance thereof would not
be in compliance with the securities, blue sky or other laws of such
jurisdiction. In any jurisdiction where the securities, blue sky, or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offeror by Morgan Stanley & Co. Incorporated
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Very truly yours,
Harris Trust and Savings Bank
<PAGE>
INSTRUCTION WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
KYSOR INDUSTRIAL CORPORATION
To Harris Trust and Savings Bank:
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated February 7, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"), in
connection with the offer by K Acquisition Corp., a Michigan corporation (the
"Offeror") and an indirect wholly-owned subsidiary of Scotsman Industries, Inc.,
a Delaware corporation, to purchase all outstanding shares of common stock,
$1.00 par value, of Kysor Industrial Corporation, a Michigan corporation (the
"Company"), including the associated common share purchase rights, issued
pursuant to the Rights Agreement dated as of April 26, 1996, as amended, between
the Company and Harris Trust and Savings Bank, as successor Rights Agent
(collectively the "Common Shares"), and all outstanding shares of Series A
Convertible Voting Preferred Stock, $24.375 stated value per share.
This will instruct you to tender to the Offeror the number of Common Shares
indicated below (or if no number is indicated below, all Common Shares) which
are held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in the Offer.
NOTE: Shares in Plan accounts as to which we have not received instructions
will not be tendered in the Offer.
Number of Shares to be Tendered:/1/ _____ SIGN HERE
----------------------------------
----------------------------------
Signature(s)
----------------------------------
----------------------------------
Print Name(s)
----------------------------------
----------------------------------
Area Code and Telephone Numbers(s)
----------------------------------
Taxpayer Identification or Social
Security number(s)
- ------------------
/1/Unless otherwise indicated, it will be assumed that all Common Shares held by
us for your account are to be tendered.
