<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
RULE INDUSTRIES, INC.
-----------------------------------------------------------
(Name of Issuer)
COMMON STOCK
------------------------------------------------------
(Title of Class of Securities)
781355-10-2
--------------------------------------------
(CUSIP Number)
GARY L. WELLER
-------------------------
470 OLD EVANS ROAD
-------------------------
EVANS, GEORGIA 30803-2587
-------------------------
(706) 650-4218
-------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
August 11, 1995
-----------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
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Check the following box if a fee is being paid with the statement / / . (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
--------------------- ----------------------
CUSIP No. 781355-10-2 Page 3 of Pages
--------------------- ----------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Greenfield Industries, Inc.
04-2917072
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, BK
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS / /
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
630,000 shares of Common Stock, par value $.01
-----------------------------------------------------------------
NUMBERS OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 0
OWNED BY EACH -----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
630,000 shares of Common Stock, par value $.01
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
-----------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
630,000 shares of Common Stock, par value $.01
--------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES /X/
12 CERTAIN SHARES*
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 19.3%
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 CO
--------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
This Amendment No. 1 relates to the Schedule 13D filed by the undersigned,
Greenfield Industries, Inc. ("Greenfield"), on July 28, 1995 to report the
beneficial ownership of the Common Stock, $0.01 par value per share (the "Common
Stock"), of Rule Industries, Inc. ("Rule" or the "Issuer"). Unless otherwise
specified, all capitalized terms used herein have the meanings assigned in the
Schedule 13D.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 is hereby amended to substitute the following for the
information previously reported:
Greenfield has paid no cash consideration in connection with the
acquisition of beneficial ownership described in Item 5 hereof and incorporated
herein by reference thereto.
In the event the option described pursuant to Item 5 hereof becomes
exercisable and is thereafter exercised by Greenfield (as to which Greenfield
has made no determination), Greenfield anticipates that it will utilize working
capital and/or the proceeds from bank borrowings made in the ordinary course of
business pursuant to an Amended and Restated Credit Facilities Reimbursement
Agreement (the "Credit Agreement") dated November 8, 1994 by and among
Greenfield, as Borrower, NationsBank of Georgia, National Association, Wachovia
Bank of Georgia, National Association, Trust Company Bank, CommerzBank AG,
Atlanta Agency and National City Bank, Kentucky, as Lenders, and NationsBank of
Georgia, National Association, as Agent to finance such purchases and will
utilize borrowing availability under the Credit Agreement and/or other borrowing
facilities to be established in the future to finance the purchase of securities
pursuant to the merger contemplated by the Merger Agreement described herein.
Item 4. PURPOSE OF TRANSACTION.
Item 4 is hereby amended to substitute the following for the
information previously reported:
The securities described as beneficially owned in Item 5 hereof have
been acquired, as more fully described in Item 5 hereof, in connection with the
execution of an Agreement and Plan of Merger (the "Merger Agreement") dated
August 11, 1995 by and among Greenfield, Rule Acquisition Corporation and Rule
pursuant to which all of Rule's outstanding Common Stock will be acquired by
Greenfield. In the event the merger contemplated thereby is consummated,
Greenfield anticipates that it would be able to and would (i) make changes to
the Board of Directors and management of Rule, (ii) make changes to Rule's
charter and by-laws, (iii)
<PAGE>
cause Rule's Common Stock to cease to be quoted on the Nasdaq National Market,
and (iv) cause Rule's Common Stock to be eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934, as amended. No specific plans with respect to the foregoing have yet been
formulated by Greenfield. Except as set forth above, Greenfield has no present
plans or intent that would relate to or result in a sale or transfer of a
material amount of assets of Rule or any material change in Rule's business or
corporate structure.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 is hereby amended to add the following at the end thereof:
On August 11, 1995, in connection with, and pursuant to the Merger
Agreement, Rule and Greenfield entered into a Stock Option Agreement dated
August 11, 1995 (the "Option Agreement") whereby Rule granted Greenfield an
option (the "Irrevocable Option") to purchase 630,000 shares of Rule Common
Stock at a purchase price of $8.00 per share. The Irrevocable Option supersedes
and replaces the option granted in the Letter of Intent. There has been no
change in beneficial ownership by Greenfield of Rule's Common Stock as a result
of the grant of the Irrevocable Option in lieu of the prior option. If the
Irrevocable Option is exercised, Greenfield would have the sole power to vote or
direct the vote and sole power to dispose or direct the disposition of the
Common Stock received through such exercise.
The Common Stock reported as beneficially owned hereby excludes 100
shares of Common Stock beneficially owned by Peter S. Finley, a director of
Greenfield, as to which Greenfield disclaims beneficial ownership.
Except as disclosed hereby there have been no transactions by
Greenfield in the Common Stock of Rule since the filing of the Schedule 13D.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER.
Item 6 is hereby amended to substitute the following for the
information previously reported:
On July 20, 1995, Greenfield and Rule entered into a Letter of Intent
providing for the acquisition of Rule by Greenfield in a merger in which Rule
shareholders would receive $15.30 per share in cash. The Letter of Intent,
which was
<PAGE>
summarized in Item 4 and 5 of the Schedule 13D, also provided for the grant of
an option to Greenfield to purchase 630,000 shares of Rule Common Stock,
exercisable under certain circumstances, at a price of $8.00 per share.
On August 11, 1995, Greenfield, Rule Acquisition Corporation ("RAC")
and Rule entered into the Merger Agreement, a copy of which is attached hereto
as Exhibit (e) and incorporated herein by reference thereto. The Merger
Agreement provides that RAC, a wholly-owned subsidiary of Greenfield, will be
merged with and into the Registrant and all shareholders of the Registrant
(other than shareholders validly exercising dissenting rights or Greenfield or
RAC) shall be entitled to receive $15.30 per share of Rule Common Stock in cash.
The Merger Agreement also provides that all outstanding options and warrants to
purchase Rule Common Stock shall be cancelled at the effective time of the
merger and all holders thereof shall be entitled to receive the positive
difference, if any, between $15.30 and the exercise price for each such option
or warrant. The Merger Agreement further provides that the Articles of
Incorporation, By-Laws and Board of Directors of RAC shall be the operative
articles of incorporation, by-laws and board of directors, respectively, of the
surviving corporation.
The Merger Agreement contains various representations and warranties,
made by each of the parties thereto, convenants and conditions precedent to the
consummation of the transactions contemplated thereby, as well as various other
miscellaneous provisions which are incorporated herein by reference to the
Merger Agreement. The foregoing summary of the Merger Agreement is qualified in
its entirety by reference thereto.
In connection with the execution of the Merger Agreement, Rule and
Greenfield also entered into the Option Agreement pursuant to which Rule granted
Greenfield the Irrevocable Option. The Irrevocable Option may be exercised by
Greenfield, or a permitted assignee, in whole or in part on or before the
earliest to occur of (a) the Effective Time of the Merger Agreement (as defined
therein), (b) the closing of an Acquisition Transaction (as defined in Section
7.4 of the Merger Agreement), (c) the termination of the Merger Agreement
pursuant to Section 11.2 thereof or (d) June 30, 1996. All proceeds received by
Rule upon exercise of the Irrevocable Option may be used only to pay interest
and principal on Rule's senior indebtedness. The foregoing summary of the
Option Agreement is qualified in its entirety by reference thereto, which is
filed herewith as Exhibit (f) and incorporated herein by reference thereto.
<PAGE>
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 is hereby amended to add the following at the end thereof:
(d) Press Release of Greenfield Industries, Inc. dated August 11,
1995
(e) Agreement and Plan of Merger dated August 11, 1995 by and among
Greenfield Industries, Inc., Rule Acquisition Corporation and Rule Industries,
Inc.
(f) Stock Option Agreement dated August 11, 1995 by and between Rule
Industries, Inc. and Greenfield Industries, Inc.
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.
Dated: August 18, 1995 GREENFIELD INDUSTRIES, INC.
By: /s/ Gary L. Weller
-------------------------------------
Gary L. Weller
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT (d)
FOR IMMEDIATE RELEASE:
Friday, August 11, 1995
CONTACT: CONTACT:
Greenfield Industries, Inc. Rule Industries, Inc.
Dianne Steele John Geishecker, Jr.
Manager - Investor & Public Relations Vice President
(706) 650-4134 (617) 272-7400
GREENFIELD INDUSTRIES, INC. AND RULE INDUSTRIES, INC. REACH
MERGER AGREEMENT AS NEXT STEP IN ACQUISITION PROCESS
AUGUSTA, GEORGIA, August 11, 1995 - Greenfield Industries, Inc. (NASDAQ--GFII)
and Rule Industries, Inc. (NASDAQ--RULE) announced today that they have reached
a definitive merger agreement providing for the acquisition of Rule Industries,
Inc. by Greenfield. This agreement follows the previously announced signing of
a letter of intent on July 20, 1995.
Under the terms of the merger agreement Greenfield will pay $15.30 per share for
the outstanding shares of common stock of Rule and assume debt of approximately
$39 million. As was previously stated, Rule has granted Greenfield an option to
purchase 630,000 shares of Rule common stock at an exercise price of $8.00 per
share. Rule has 2,640,532 common shares outstanding, excluding shares issuable
upon the exercise of Greenfield's option and 491,500 options and warrants which
may become exercisable with the completion of this transaction.
Completion of the transaction is subject to certain conditions, including
approval by Rule's shareholders and termination of applicable waiting periods
under the antitrust laws. In addition to each company's right to terminate
under customary circumstances, Greenfield has the option to terminate the
agreement prior to September 8, 1995 under certain limited circumstances.
Rule Industries is a leading manufacturer of consumer and industrial cutting
tools including various types of consumer saws and other hardware items.
Additionally, Rule is an international leader in a variety of marine products
such as pumps, anchors, compasses, and paint and chemical products for pleasure
boats. For the nine month period ended May 31, 1995, Rule reported total
revenues of $52.8 million, of which consumer and industrial hardware products
represented $35.4 million.
"We are extremely pleased at the progress we have made since our July 20
announcement and we're enthusiastic about the opportunities this merger will
provide to expand our presence in the global cutting tools industry,
particularly in the consumer markets where Rule's products are highly regarded,"
says Paul W. Jones, president and chief executive officer of Greenfield.
Greenfield Industries is a leading world-wide manufacturer of expendable cutting
tools and related products used in a variety of industrial, electronics,
oilfield equipment, mining and wear parts and consumer markets.
###
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
Greenfield Industries, Inc.,
Rule Acquisition Corporation
and
Rule Industries, Inc.
August 11, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I--DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Interpretive Rules . . . . . . . . . . . . . . . . . . 5
ARTICLE II--THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Effective Time of the Merger . . . . . . . . . . . . . 6
Section 2.3 Effect of Merger . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Articles of Organization . . . . . . . . . . . . . . . 6
Section 2.5 By-laws. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.6 Directors and Officers . . . . . . . . . . . . . . . . 7
Section 2.7 Purpose. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.8 Authorized Shares. . . . . . . . . . . . . . . . . . . 7
Section 2.9 Conversion of Shares . . . . . . . . . . . . . . . . . 7
Section 2.10 Cancelation of Stock Options
and Warrants . . . . . . . . . . . . . . . . . . . . . 8
Section 2.11 Dissenters' Rights . . . . . . . . . . . . . . . . . . 8
Section 2.12 Closing of Rule Transfer Books . . . . . . . . . . . . 9
Section 2.13 Supplementary Action . . . . . . . . . . . . . . . . . 9
ARTICLE III--MERGER CONSIDERATION; CLOSING . . . . . . . . . . . . . . . 9
Section 3.1 Merger Consideration . . . . . . . . . . . . . . . . . 9
Section 3.2 Payment of Merger Consideration. . . . . . . . . . . . 9
Section 3.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLES IV--OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Grant of Parent Option . . . . . . . . . . . . . . . . 11
Section 4.2 Disston Arbitration. . . . . . . . . . . . . . . . . . 12
ARTICLE V--REPRESENTATIONS AND WARRANTIES OF RULE. . . . . . . . . . . . 12
Section 5.1 Corporate Organization . . . . . . . . . . . . . . . . 12
Section 5.2 Valid and Binding Agreement. . . . . . . . . . . . . . 13
Section 5.3 No Violation . . . . . . . . . . . . . . . . . . . . . 13
Section 5.4 Consents and Approvals . . . . . . . . . . . . . . . . 14
Section 5.5 Capitalization . . . . . . . . . . . . . . . . . . . . 14
Section 5.6 Subsidiaries and Affiliates. . . . . . . . . . . . . . 15
Section 5.7 Financial Statements . . . . . . . . . . . . . . . . . 15
Section 5.8 Absence of Undisclosed Liabilities . . . . . . . . . . 15
Section 5.9 Interim Operations and
Absence of Certain Changes . . . . . . . . . . . . . . 16
Section 5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.11 Employee Benefit Plans . . . . . . . . . . . . . . . . 19
Section 5.12 Compliance with Law. . . . . . . . . . . . . . . . . . 21
Section 5.13 Litigation; Claims . . . . . . . . . . . . . . . . . . 21
Section 5.14 Contracts and Commitments. . . . . . . . . . . . . . . 22
Section 5.15 Intellectual Property Rights . . . . . . . . . . . . . 23
Section 5.16 Liens. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . 24
i
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Section 5.18 Tangible Personal Property . . . . . . . . . . . . . . 24
Section 5.19 Real Property. . . . . . . . . . . . . . . . . . . . . 24
Section 5.20 Environmental Matters. . . . . . . . . . . . . . . . . 25
Section 5.21 Employees. . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.22 Employee Relations . . . . . . . . . . . . . . . . . . 28
Section 5.23 Customers and Vendors. . . . . . . . . . . . . . . . . 28
Section 5.24 Governmental Authorizations. . . . . . . . . . . . . . 29
Section 5.25 Broker's or Finder's Fees. . . . . . . . . . . . . . . 29
Section 5.26 Certain Transactions . . . . . . . . . . . . . . . . . 29
Section 5.27 Absence of Questionable Payments . . . . . . . . . . . 30
Section 5.28 SEC Documents. . . . . . . . . . . . . . . . . . . . . 30
Section 5.29 Proxy Statement. . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI--REPRESENTATIONS AND WARRANTIES OF PARENT
AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.1 Corporate Organization . . . . . . . . . . . . . . . . 30
Section 6.2 Valid and Binding Agreement. . . . . . . . . . . . . . 31
Section 6.3 No Violation . . . . . . . . . . . . . . . . . . . . . 31
Section 6.4 Consents and Approvals . . . . . . . . . . . . . . . . 31
ARTICLE VII--COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.1 Compliance with Law. . . . . . . . . . . . . . . . . . 32
Section 7.2 Operation of Business Prior to Closing . . . . . . . . 32
Section 7.3 Access . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.4 No Solicitation. . . . . . . . . . . . . . . . . . . . 36
Section 7.5 Stockholders' Meeting. . . . . . . . . . . . . . . . . 36
Section 7.6 Proxy Statement. . . . . . . . . . . . . . . . . . . . 37
Section 7.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . 37
Section 7.8 Press Releases . . . . . . . . . . . . . . . . . . . . 37
Section 7.9 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.10 Solicitation of Employees. . . . . . . . . . . . . . . 37
Section 7.11 Vote of Parent and Sub . . . . . . . . . . . . . . . . 38
ARTICLE VIII--CONDITIONS PRECEDENT TO OBLIGATIONS OF
PARENT AND SUB . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.1 Representations and Warranties . . . . . . . . . . . . 38
Section 8.2 Covenants, Agreements and Conditions . . . . . . . . . 38
Section 8.3 No Material Adverse Effect . . . . . . . . . . . . . . 38
Section 8.4 Corporate Proceedings. . . . . . . . . . . . . . . . . 39
Section 8.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . 39
Section 8.6 Proceedings. . . . . . . . . . . . . . . . . . . . . . 39
Section 8.7 Governmental Approvals . . . . . . . . . . . . . . . . 39
Section 8.8 HSR Act Requirements . . . . . . . . . . . . . . . . . 39
Section 8.9 Deliveries . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.11 Tax Status Certification . . . . . . . . . . . . . . . 40
Section 8.12 Stockholder Approval . . . . . . . . . . . . . . . . . 40
Section 8.13 Status of Stock Options and Warrants . . . . . . . . . 40
ARTICLE IX--CONDITIONS PRECEDENT TO OBLIGATIONS
OF RULE . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.1 Representations and Warranties . . . . . . . . . . . . 41
ii
<PAGE>
Section 9.2 Covenants, Agreements and Conditions . . . . . . . . . 41
Section 9.3 Corporate Proceedings. . . . . . . . . . . . . . . . . 41
Section 9.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . 41
Section 9.5 Proceedings. . . . . . . . . . . . . . . . . . . . . . 41
Section 9.6 Governmental Approvals . . . . . . . . . . . . . . . . 41
Section 9.7 HSR Act Requirements . . . . . . . . . . . . . . . . . 42
Section 9.8 Deliveries . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE X--OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.1 Confidentiality . . . . . . . . . . . . . . . . . . . 42
Section 10.2 Further Assurances. . . . . . . . . . . . . . . . . . 42
Section 10.3 Indemnification of Directors and. . . . . . . . . . . 42
Officers
Section 10.4 Continuation of Comparable Benefit. . . . . . . . . . 44
Plans
ARTICLE XI--TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.1 Methods of Termination. . . . . . . . . . . . . . . . 44
Section 11.2 Termination Based on Environmental. . . . . . . . . . 45
Site Assessments
Section 11.3 Procedure Upon Termination. . . . . . . . . . . . . . 46
ARTICLE XII--MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 46
Section 12.1 Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . 46
Section 12.2 Service of Process. . . . . . . . . . . . . . . . . . 47
Section 12.3 Notices . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . 48
Section 12.5 Modification; Waiver. . . . . . . . . . . . . . . . . 48
Section 12.6 Entire Agreement. . . . . . . . . . . . . . . . . . . 48
Section 12.7 Assignment; Successors and Assigns. . . . . . . . . . 48
Section 12.8 Severability. . . . . . . . . . . . . . . . . . . . . 49
Section 12.9 No Third Party Beneficiary. . . . . . . . . . . . . . 49
Section 12.10 Expenses. . . . . . . . . . . . . . . . . . . . . . . 49
Section 12.11 Execution in Counterpart . . . . . . . . . . . . . . 49
EXHIBITS AND SCHEDULES
Exhibit A -- Senior Executives
Exhibit B -- Form of Parent Option Agreement
Exhibit C -- Form of Opinion of Foley, Hoag & Eliot
Exhibit D -- Form of Opinion of Dickstein, Shapiro & Morin,
L.L.P.
Schedule 5.1 Foreign Qualifications
Schedule 5.3 Conflicts; Defaults
Schedule 5.5 Capitalization
Schedule 5.6 Subsidiaries and Affiliates
Schedule 5.8 Liabilities and Obligations
Schedule 5.9 Changes During Interim Operations
iii
<PAGE>
Schedule 5.10 Tax Matters
Schedule 5.11 Employee Benefit Plans
Schedule 5.13 Litigation; Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.15 Intellectual Property
Schedule 5.16 Liens
Schedule 5.17 Insurance
Schedule 5.18 Leased Tangible Personal Property
Schedule 5.19 Real Property
Schedule 5.19A Leased Real Property
Schedule 5.20 Environmental Matters
Schedule 5.21 Employees
Schedule 5.22 Employee Relations
Schedule 5.23 Customers and Vendors
Schedule 5.24 Governmental Authorizations
Schedule 5.25 Broker's or Finder's Fees
Schedule 5.26 Certain Transactions
Schedule 7.2 Operation of Business Prior to Closing
Schedule 8.6 Threatened Proceedings
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
August 11, 1995, by and among Greenfield Industries, Inc., a Delaware
corporation (the "Parent"), Rule Acquisition Corporation, a Massachusetts
corporation and wholly owned subsidiary of Parent (the "Sub"), and Rule
Industries, Inc., a Massachusetts corporation ("Rule").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and Rule
have approved the merger of Sub with and into Rule (the "Merger"), pursuant to
and subject to the conditions set forth herein; and
WHEREAS, Parent, Sub and Rule desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are to be made and performed by
the respective parties, it is hereby agreed as follows:
ARTICLE I--DEFINITIONS
SECTION 1.1 DEFINITIONS.
The following terms when used in this Agreement have the meanings set
forth below:
(a) "Acquisition Transaction" shall have the meaning set forth in
Section 7.4.
(b) "Affiliate" shall mean any Person now or hereinafter controlling,
controlled by or under common control with another Person.
(c) "Articles of Merger" shall have the meaning set forth in Section
2.2.
(d) "CERCLA" shall have the meaning set forth in Section 5.20(a).
<PAGE>
(e) "CERCLIS" shall have the meaning set forth in Section 5.20(f).
(f) "Certificate" shall have the meaning set forth in Section 3.2.
(g) "Closing" shall have the meaning set forth in Section 3.3.
(h) "Closing Date" shall mean the date specified pursuant to Section
3.3 hereof as the date on which the parties hereto shall close the transactions
contemplated herein.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Commission" shall mean the Securities and Exchange Commission.
(k) "Constituent Corporations" shall mean Sub and Rule.
(l) "Dissenting Stock" shall have the meaning set forth in Section
2.11.
(m) "Disston" shall mean The Disston Company, a North Carolina
corporation.
(n) "Disston Arbitration" shall have the meaning set forth in Section
4.2.
(o) "Effective Time" shall have the meaning set forth in Section 2.2.
(p) "ENSR" shall have the meaning set forth in Section 11.2.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(r) "Environmental Laws" shall have the meaning set forth in Section
5.20(c).
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(t) "Exchange Agent" shall have the meaning set forth in Section 3.2.
(u) "Exchange Fund" shall have the meaning set forth in Section 3.2.
(v) "GAAP" shall mean generally accepted accounting principles of the
United States applied in a manner consistent with past practice of Rule.
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(w) "Hazardous Materials" has the meaning set forth in Section
5.20(a).
(x) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
(y) "Intellectual Property" means any and all inventions, Marks
(including trademarks, service marks, certification marks, collective marks, and
collective membership marks whether word, logo, or other forms of Marks, all of
the foregoing collectively referred to as "Marks"), trade names, copyrights,
applications therefor, patents thereon, registrations thereof and licenses
thereof, royalty rights, any and all goodwill associated with the business or
represented by the assets of Rule and the Subsidiaries, trade secrets, secret
processes and procedures, engineering, production, assembly design and
installation encompassed in any and all embodiments including, but not limited
to technical drawings and specifications, working notes and memos, market
studies, consultants' reports, technical and laboratory data, competitive
samples, engineering prototypes, and confidential information, know-how, and all
similar property of any nature, tangible or intangible, including, but not
limited to, all property listed or described on Schedule 5.15.
(z) "IRS" shall mean the Internal Revenue Service.
(aa) "Improvements" shall have the meaning set forth in Section
5.19(a).
(ab) "Knowledge" shall mean the actual knowledge of the senior
executives of Rule listed on Exhibit A.
(ac) "Leased Improvements" shall have the meaning set forth in Section
5.19(b).
(ad) "Leased Property" shall have the meaning set forth in Section
5.19(b).
(ae) "Libby" shall mean Henry G. Libby.
(af) "Material Adverse Effect" shall mean, with respect to any Person,
any event, fact, condition, occurrence or effect which is materially adverse to
the business, properties, assets, liabilities, capitalization, stockholders
equity, financial condition, operations, licenses or other franchises, results
of operations or prospects of such Person.
(ag) "MBCL" shall mean the Business Corporation Law of the
Commonwealth of Massachusetts, as amended.
(ah) "Merger Consideration" shall have the meaning set forth in
Section 3.1.
(ai) "Operating Agreements" shall have the meaning set forth in
Section 5.14.
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(aj) "Parent Option" shall have the meaning set forth in Section 4.1.
(ak) "Pension Plans" shall have the meaning set forth in Section
5.11(c)(i).
(al) "Person" shall mean and include an individual, a partnership, a
joint venture, a corporation or trust, an unincorporated organization, a group
or a government or other department or agency thereof.
(am) "Plans" shall have the meaning set forth in Section 5.11(a).
(an) "Proxy Statement" shall mean the proxy statement of Rule together
with any supplements thereto sent to the Stockholders to solicit their votes in
connection with this Agreement.
(ao) "Real Property" shall have the meaning set forth in Section
5.19(a).
(ap) "Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments, including pre-emptive rights,
which obligate an entity to issue or dispose of any of its capital stock.
(aq) "Rule Financial Statements" shall mean the consolidated balance
sheets of Rule at each of August 31, 1994 and 1993 and the related consolidated
statements of income, cash flows and changes in stockholders' equity (including
related notes thereto) for each of the three fiscal years ended August 31, 1994,
1993 and 1992 as filed by Rule in SEC Documents.
(ar) "Rule Interim Financial Statements" shall mean the consolidated
balance sheets of Rule and related consolidated statements of income, cash flows
and changes in stockholders' equity (including related notes) as filed by Rule
in SEC Documents with respect to periods ended subsequent to August 31, 1994.
(as) "Rule Residual Trust" shall have the meaning set forth in Section
4.2.
(at) "Rule Stock Option" and "Rule Stock Options" shall have the
meaning set forth in Section 2.10(a).
(au) "Rule Warrant" and "Rule Warrants" shall have the meaning set
forth in Section 2.10(a).
(av) "SEC Documents" shall mean all reports, proxy statements and
registration statements filed, or required to be filed, by a party hereto
pursuant to the Securities Laws.
(aw) "Securities Act" shall mean the Securities Act of 1933, as
amended.
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(ax) "Securities Laws" shall mean the Securities Act; the Exchange
Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act
of 1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules
and regulations of the Commission.
(ay) "Stock" shall mean the common stock of Rule, par value $0.01 per
share.
(az) "Stockholders" shall mean the stockholders of Rule.
(ba) "Stock Option Plans" shall have the meaning set forth in Section
2.10(a).
(bb) "Subsidiaries" shall mean Rule Cutting Tools, Inc., a
Massachusetts corporation, Rule Manufacturing, Inc., a Massachusetts
corporation, RemGrit Abrasive Tools, Inc., a Massachusetts corporation, Rule
Paint & Chemical, Inc., a Massachusetts corporation, Rule Corporation, a
Delaware corporation, Disston-Canada, Inc., a Canadian corporation, and Rule
International, Inc. (FSC), a U.S. Virgin Islands corporation.
(bc) "Surviving Corporation" shall have the meaning set forth in
Section 2.1.
(bd) "Tax" shall mean any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, gains, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
(be) "Taxing Authority" shall have the meaning set forth in Section
5.10(a).
(bf) "Tax Return" shall mean any return, declaration, report, claim
for refund, information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
SECTION 1.2 INTERPRETIVE RULES.
For purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires: (a) defined terms include the
plural as well as the singular and the use of any gender shall be deemed to
include the other genders; (b) references to "Articles," "Sections" and other
subdivisions and to "Schedules" and "Exhibits" without reference to a document,
are to Schedules and Exhibits to this Agreement; (c) the use of the term
"including" means "including but not
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limited to"; and (d) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision.
ARTICLE II--THE MERGER
SECTION 2.1 THE MERGER.
At the Effective Time, Sub shall be merged with and into Rule in
accordance with the applicable provisions of the laws of the Commonwealth of
Massachusetts and the separate existence of Sub shall thereupon cease, and Rule,
as the surviving corporation in the Merger (the "Surviving Corporation"), shall
continue its corporate existence in accordance with the MBCL under the name Rule
Industries, Inc.
SECTION 2.2 EFFECTIVE TIME OF THE MERGER.
At the Closing, Parent shall cause the Merger to be consummated by
filing with the Secretary of State of the Commonwealth of Massachusetts
appropriate articles of merger (the "Articles of Merger"), duly executed in
accordance with this Agreement and the MBCL. The date and time at which the
Articles of Merger are filed is referred to herein as the "Effective Time."
SECTION 2.3 EFFECT OF MERGER.
The Merger shall have the effect provided therefor by the MBCL,
including, without limitation, all of the estate, property, rights, privileges,
powers and franchises of the Constituent Corporations and all of their property,
real, personal and mixed, and all the debts due on whatever account to any of
them, as well as all stock subscriptions and other choses in action belonging to
any of them, shall be transferred to and vested in the Surviving Corporation,
without further act or deed, and all claims, demands, property and other
interest shall be the property of the Surviving Corporation, and the title to
all real estate vested in either of the Constituent Corporations shall not
revert or be in any way impaired by reason of the Merger, but shall be vested in
the Surviving Corporation.
SECTION 2.4 ARTICLES OF ORGANIZATION.
The Articles of Organization of Rule as in effect at the Effective
Time shall be the Articles of Organization of the Surviving Corporation.
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SECTION 2.5 BY-LAWS.
The By-laws of Sub as in effect at the Effective Time shall be the By-
laws of the Surviving Corporation.
SECTION 2.6 DIRECTORS AND OFFICERS.
The directors of the Surviving Corporation at the Effective Time shall
be the directors of Sub in office immediately prior to the Effective Time, to
serve in accordance with the By-laws of the Surviving Corporation. The officers
of the Surviving Corporation at the Effective Time shall be the officers of Sub
in office immediately prior to the Effective Time, to serve in accordance with
the By-laws of the Surviving Corporation.
SECTION 2.7 PURPOSE.
The purpose of the Surviving Corporation shall be, as set forth in its
Articles of Organization, to develop, manufacture, process, buy, sell and lease
products of all kinds; to apply for and own patents relating to such products
and their component parts; to hold or grant licenses under patents relating to
such products; and, in general, to carry on any other lawful business permitted
by the laws of the Commonwealth of Massachusetts to a corporation organized
under Chapter 156B of the MBCL.
SECTION 2.8 AUTHORIZED SHARES.
The Surviving Corporation, as set forth in its Articles of
Organization, shall be authorized to issue five million (5,000,000) shares of
common stock, par value $0.01 per share, and one hundred thousand (100,000)
shares of preferred stock, par value $100.00 per share.
SECTION 2.9 CONVERSION OF SHARES.
At the Effective Time, by virtue of the Merger and without any action
on the part of the holder of any securities of the Constituent Corporations:
(a) each share of Stock then outstanding, other than Stock that is
Dissenting Stock and Stock to be canceled pursuant to Section 2.9(b), and all
rights with respect thereto shall be converted into and represent the right to
receive $15.30 in cash, payable as provided in Section 3.2;
(b) each share of Stock, if any, held in Rule's treasury or owned
beneficially by Parent or Sub or by any Subsidiary of Rule shall be canceled and
retired without payment of any consideration therefor and shall cease to exist;
and
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(c) each issued and outstanding share of common stock, $0.01 par value
per share, of Sub outstanding immediately prior to the Effective Time shall
remain outstanding and unchanged as a share of common stock of the Surviving
Corporation.
SECTION 2.10 CANCELATION OF STOCK OPTIONS AND WARRANTS.
(a) Immediately prior to the Effective Time, each option to purchase
shares of Stock (individually, a "Rule Stock Option" and collectively, the "Rule
Stock Options") issued pursuant to Rule's 1987 Incentive Stock Option Plan and
its 1987 Non-Statutory Stock Option Plan (collectively, the "Stock Option
Plans") and issued pursuant to the Non-Qualified Stock Option Agreement between
Rule and Libby, and each outstanding warrant to purchase shares of Stock
(individually, a "Rule Warrant" and collectively, the "Rule Warrants"), which
are then outstanding and exercisable in full, shall be canceled and the holder
thereof shall be entitled to receive from Parent at the Effective Time an amount
in cash equal to the excess, if any, of (i) $15.30 multiplied by the number of
shares of Stock subject to the Rule Stock Option or Rule Warrant over (ii) the
exercise price of the Rule Stock Option or Rule Warrant multiplied by the number
of shares of Stock subject thereto. Appropriate arrangements shall be made for
reduction of the amount to be paid to each holder of canceled Rule Stock Options
for any applicable withholding taxes or other amounts required by law to be paid
or withheld, either through reducing the amount paid to or by obtaining a cash
payment from, such holder. Prior to the Effective Time, the Board of Directors
of Rule shall take such action, including without limitation, actions ensuring
that all Rule Stock Options and Rule Warrants outstanding as of the Effective
Date shall be exercisable, as may be required under the Stock Option Plans, the
governing option agreements and warrant agreements or otherwise to effectuate
the foregoing.
(b) At the Effective Time, following the cancelation of Rule Stock
Options pursuant to Section 2.10(a), all of Rule's obligations with respect to
options granted under its Stock Option Plans shall be terminated in accordance
with such Stock Option Plans.
SECTION 2.11 DISSENTERS' RIGHTS.
Any issued and outstanding Stock held by a Person who objects to the
Merger and complies with all provisions of the MBCL concerning the right of such
person to dissent from the Merger and demand appraisal of such Stock (the
"Dissenting Stock") shall not be converted as described in Section 2.9(a) but
shall from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due to such holder of Dissenting Stock
pursuant to Sections 86 through 98 of the MBCL; PROVIDED, HOWEVER, that Stock
outstanding immediately prior to the
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Effective Time and held by a dissenting holder who shall, after the Effective
Time, withdraw the demand for appraisal or lose the right of appraisal, in
either case pursuant to the MBCL, of such shares shall be deemed to be
converted, as of the Effective Time, into the right to receive the Merger
Consideration, as applicable, as specified in Section 2.9(a) without interest.
SECTION 2.12 CLOSING OF RULE TRANSFER BOOKS.
At the Effective Time, the stock transfer books of Rule shall be
closed and there shall be no further registration of transfers of Stock, Rule
Stock Options or Rule Warrants thereafter.
SECTION 2.13 SUPPLEMENTARY ACTION.
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either of the Constituent Corporations, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
respective Constituent Corporations, in the name of and on behalf of the
appropriate Constituent Corporation, to execute and deliver any and all things
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise carry out the purposes and
provisions of this Agreement.
ARTICLE III--MERGER CONSIDERATION; CLOSING
SECTION 3.1 MERGER CONSIDERATION.
The aggregate merger consideration shall be $15.30 in cash per share
of Stock as set forth in Section 2.9(a) PLUS amounts payable in cash upon the
cancelation of Rule Stock Options and Rule Warrants pursuant to Section
2.10(a)(the "Merger Consideration").
SECTION 3.2 PAYMENT OF MERGER CONSIDERATION.
(A) EXCHANGE AGENT. On the Closing Date, Parent shall deposit with a
mutually agreeable exchange agent (the "Exchange Agent"), a cash amount equal to
the aggregate Merger Consideration to which holders of shares of Stock, Rule
Stock Options and Rule Warrants shall be entitled upon consummation of the
Merger, to be held for the benefit of and distributed to such holders in
accordance with this Section 3.2. The Exchange Agent shall agree to hold such
funds (such funds, together with earnings thereon,
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being referred to herein as the "Exchange Fund") for delivery as contemplated by
this Section 3.2 and upon such additional terms as may be agreed upon by the
Exchange Agent, Rule and Parent before the Closing Date. If for any reason
(including losses) the Exchange Fund is inadequate to pay the cash amounts to
which holders of shares of Stock, Rule Stock Options and Rule Warrants shall be
entitled, Parent shall make available to the Exchange Agent additional funds for
the payment thereof.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of a certificate of certificates which immediately prior to the Effective
Time represented outstanding shares of Stock, Rule Stock Options and Rule
Warrants (collectively, the "Certificates") whose shares, options or warrants
are converted pursuant to Sections 2.9 or 2.10, as the case may be, into the
right to receive the Merger Consideration (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 Exchange
Agent and shall be in such form and have such other provisions as the Surviving
Corporation 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 cancelation to the Exchange Agent, together
with such letter of transmittal duly executed and completed in accordance with
its terms, the holder of such Certificate shall be entitled to receive in
exchange therefor a check representing the Merger Consideration per share of
Stock, Rule Stock Option or Rule Warrant, as the case may be, represented
thereby which such holder has the right to receive pursuant to the provision of
this Article III, and the Certificate so surrendered shall forthwith be
canceled. In no event shall the holder of any Certificate be entitled to
receive interest on any funds to be received in the Merger. In the event of a
transfer of ownership of Stock, Rule Stock Option or Rule Warrant which is not
registered in the transfer records of Rule, the Merger Consideration may be
issued to a transferee if the Certificate representing such Stock, Rule Stock
Option or Rule Warrant is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable transfer taxes have been paid. 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
Merger Consideration per share of Stock, Rule Stock Option or Rule Warrant, as
the case may be, represented thereby as contemplated by this Article III.
(c) NO FURTHER OWNERSHIP RIGHTS IN STOCK. All cash paid upon the
surrender of shares of Stock, Rule Stock Options or Rule Warrants in accordance
with the terms hereof shall be deemed to have been paid in full satisfaction of
all rights pertaining to such shares of Stock, Rule Stock Options or Rule
Warrants, as the
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case may be. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 3.2.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the stockholders of Rule or holders of Rule Stock
Options or Rule Warrants for one hundred twenty (120) days after the Effective
Time shall be delivered to the Surviving Corporation, upon demand, and any
stockholders of Rule or holders of Rule Stock Options or Rule Warrants who have
not theretofore complied with this Section 3.2 shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) as general creditors for payment of their claim for the Merger
Consideration. Neither Parent nor the Surviving Corporation shall be liable to
any holder of shares of Stock or holders of Rule Stock Options or Rule Warrants
for cash representing the Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If
outstanding Certificates are not surrendered, or cash payment therefor not
claimed prior to six years after the Effective Time (or, in any particular case,
prior to such earlier date on which such cash payment would otherwise escheat to
or become the property of any governmental unit or agency), the unclaimed
amounts shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
SECTION 3.3 CLOSING.
The closing of the transactions contemplated hereby (the "Closing")
shall take place at the offices of Foley, Hoag & Eliot, One Post Office Square,
Boston, Massachusetts 02109 no later than the third business day after written
notice from either party to the other of the satisfaction or waiver of all
conditions set forth in Article VIII and Article IX hereof, or at such other
place, time or date as may be agreed upon in writing by the parties hereto (the
"Closing Date").
ARTICLE IV--OTHER AGREEMENTS
SECTION 4.1 GRANT OF OPTION.
On the date hereof, Rule is granting an option to Parent (the "Parent
Option"), in the form attached hereto as Exhibit C, for the purchase of six
hundred thirty thousand (630,000) shares of Stock with an exercise price of
eight dollars ($8.00) per share.
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SECTION 4.2 DISSTON ARBITRATION.
Prior to the Effective Date, Rule may transfer all of its right, title
and interest in any recoveries it may be entitled to as a result of the pending
arbitration proceedings between Disston and Sandvik, Inc. (the "Disston
Arbitration") to a liquidating trust or similar entity (the "Rule Residual
Trust"). Rule shall enter into an agreement, reasonably satisfactory to Parent,
with Disston confirming the understanding with respect to the prosecution of the
Disston Arbitration and the rights and obligations of Rule thereunder. The
instrument or other documentation establishing and governing the Rule Residual
Trust shall contain, among other things, provisions relating to: the
contributions to the Rule Residual Trust to finance the trust's operations; the
reimbursement of any such amounts expended, as well as amounts expended pursuant
to the agreement between Rule and Disston referenced above, prior to
disbursement of any net proceeds to the beneficiaries of the Rule Residual
Trust; and the responsibitlty of the Rule Residual Trust for any (i) costs,
expenses and liabilities arising out of or relating to the Disston Arbitration,
or the facts underlying the Disston Arbitration, including, without limitation,
any costs, expenses or liabilities under federal or state securities laws, (ii)
any liabilities under environmental laws, or (iii) any liabilities of the
Surviving Corporation for taxes related to the Disston Arbitration, in each case
incurred within the earlier of (A) the date six months following receipt of full
and final payment of any amounts arising from the Disston Arbitration and (B)
the date eighteen (18) months from the Effective Date. The form of the Rule
Residual Trust shall be reasonably satisfactory to Parent and Rule.
ARTICLE V--REPRESENTATIONS AND WARRANTIES OF RULE
Rule hereby represents and warrants, as to itself and each of its
Subsidiaries, to each of Parent and Sub as follows, and both Parent and Sub in
agreeing to consummate the transactions contemplated by this Agreement have
relied upon such representations and warranties, that:
SECTION 5.1 CORPORATE ORGANIZATION.
(a) Each of Rule and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite power and authority (corporate and other) to
own, lease and operate its properties and to carry on its business as now being
conducted.
(b) Each of Rule and its Subsidiaries is qualified as a foreign
corporation and is in good standing in each state of the United States and in
each foreign jurisdiction in which the conduct of its business or the ownership
or leasing of its
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properties requires such qualification and is not required to be qualified as a
foreign corporation in any other jurisdiction, except where such failure to be
qualified would not have a Material Adverse Effect on Rule. Schedule 5.1 hereto
sets forth a true and complete list of all jurisdictions in which Rule and its
Subsidiaries are qualified and licensed to do business as foreign corporations.
(c) The copies of the articles of incorporation and all amendments
thereto of each of Rule and its Subsidiaries as certified by the appropriate
authorities of its jurisdiction of incorporation, and the by-laws, as amended to
date, of each of Rule and its Subsidiaries, as certified by its secretary, which
have heretofore been delivered to Parent and Sub, are true, complete and correct
copies of the articles of incorporation and by-laws of each of Rule and its
Subsidiaries, as amended and in effect on the date hereof, and will be true,
complete and correct as of the Closing Date.
(d) The minute books and records of each of Rule and its Subsidiaries,
copies of which have been delivered to Parent and Sub prior to the date hereof,
are the original minute books and records of such company; contain all
proceedings of the stockholders, the Board of Directors and any committees
thereof with respect to such company; are true, correct and complete in all
material respects; and there have been no changes, alterations or additions
thereto which have not been furnished to counsel for Parent and Sub prior to the
date hereof.
SECTION 5.2 VALID AND BINDING AGREEMENT.
Rule has the full right, capacity and power to enter into this
Agreement. All necessary action on the part of Rule, other than approval by the
Stockholders, has been taken to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Rule, and will constitute a valid and binding
obligation enforceable against Rule in accordance with its terms, subject to
bankruptcy, insolvency, reorganization or similar laws or equitable principles
relating to creditors' rights generally and the availability of equitable
remedies.
SECTION 5.3 NO VIOLATION.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by Rule
with any of the provisions hereof will (a) violate or conflict with any
provision of the articles of incorporation or by-laws of Rule or its
Subsidiaries, (b) violate or conflict with any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Rule or
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its Subsidiaries, except where such violation or conflict would not have a
Material Adverse Effect on Rule, or (c) violate or conflict with, or result
in a breach of any provision of, or constitute a default (or any event which,
with or without due notice or lapse of time, or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon the Stock or any of the properties
or assets of Rule or its Subsidiaries under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation of Rule or its
Subsidiaries, except as set forth in Schedule 5.3 and except where such
violation, conflict or other above stated event would not have a Material
Adverse Effect on Rule.
SECTION 5.4 CONSENTS AND APPROVALS.
Other than pursuant to the HSR Act, the Securities Laws and
Stockholder approval, and except for permits, consents, approvals or
authorizations which, if not received, or declarations, filings or registrations
which, if not made, would not have a Material Adverse Effect on Rule, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or third party is required to be
made or obtained by Rule or its Subsidiaries in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 5.5 CAPITALIZATION.
(a) The authorized capital stock of Rule consists of (i) 5,000,000
shares of common stock, par value $0.01 per share, of which 2,640,532 shares are
issued and outstanding; and (ii) 100,000 shares of preferred stock, par value
$100 per share, of which no shares are issued and outstanding. The issued and
outstanding shares of common stock are duly authorized, validly issued, fully
paid and nonassessable, and none of the issued and outstanding shares of common
stock were issued in violation of the preemptive rights of any present or former
stockholder of Rule.
(b) Except as set forth in Section 5.5(a) or Schedule 5.5, (i) there
are no shares of capital stock or other equity securities (as the term "equity
security" is defined in the Exchange Act) of Rule or its Subsidiaries
outstanding, (ii) there are no outstanding Rights to purchase or acquire any
equity securities of Rule or its Subsidiaries, (iii) no equity securities of
Rule or its Subsidiaries are reserved for issuance for any purpose, and
(iv) there are no contracts, commitments, agreements, understandings,
arrangements or restrictions to which Rule or its Subsidiaries are a party or by
which Rule or its Subsidiaries are
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bound relating to any shares of the capital stock or other equity securities of
Rule (including the Stock) or its Subsidiaries, whether or not outstanding.
SECTION 5.6 SUBSIDIARIES AND AFFILIATES.
Except as set forth on Schedule 5.6, neither Rule nor any of its
Subsidiaries owns any capital stock or other equity securities of any other
corporation or has any other type of interest (whether ownership or other) in
any other corporation, partnership, joint venture or other business organization
or entity. The interests of Rule in any Person as set forth on Schedule 5.6 are
owned by Rule free and clear of all liens, options, claims or encumbrances
(including without limitation, rights of first refusal or similar rights) with
respect to the ownership thereof. Neither Rule nor any of its Subsidiaries are
subject to any obligation or requirement to provide funds for, or to make any
investment (in the form of a loan, capital contribution or otherwise) to or in,
any Person, except as set forth on Schedule 5.6.
SECTION 5.7 FINANCIAL STATEMENTS.
The Rule Financial Statements (i) present fairly the financial
position and results of operations of Rule and its Subsidiaries, as of the
statement dates and for the periods indicated, and (ii) have been prepared in
accordance with GAAP consistently applied throughout and among the periods
indicated. The Rule Interim Financial Statements (i) present fairly the
financial position and results of operations of Rule and its Subsidiaries, as of
the statement date(s) and for the period(s) indicated, and (ii) have been
prepared in accordance with GAAP consistently applied.
SECTION 5.8 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on Schedule 5.8, neither Rule nor any of its
Subsidiaries has any liability or obligation (absolute, accrued, contingent or
otherwise), including any guaranty with respect to any obligation, except
(a) such liabilities or obligations as are fully reflected or reserved against
in the Rule Financial Statements or the Rule Interim Financial Statements,
(b) such liabilities or obligations which are identified in any Schedule to this
Agreement or which are not required to be so identified, and (c) such
liabilities or obligations as have been incurred in the ordinary course of
business, consistent with past practice, since May 31, 1995.
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SECTION 5.9 INTERIM OPERATIONS AND ABSENCE OF CERTAIN CHANGES.
Since May 31, 1995, except as set forth on Schedule 5.9, Rule and its
Subsidiaries have conducted their business in the ordinary course and consistent
with past practice and Rule and its Subsidiaries did not:
(a) incur any indebtedness or other liabilities (whether absolute,
accrued, contingent or otherwise) or guarantee any such indebtedness, except in
the usual and ordinary course of their businesses, consistent with past
practice;
(b) (i) suffer any damage, destruction or loss of tangible assets
covered by insurance in excess of $5,000,000 or (ii) through the date hereof,
suffer any damage, destruction or loss of tangible assets not covered by
insurance in excess of $100,000;;
(c) suffer any change in their financial condition, assets,
liabilities or business or suffer any other event or condition of any character
which individually or in the aggregate had or has a Material Adverse Effect on
Rule;
(d) pay, discharge or satisfy any claims, liabilities or obligations
in excess of $50,000 (whether absolute, accrued, contingent or otherwise) except
in each case in the ordinary course of business;
(e) cancel any debts in excess of $50,000 or waive any claims or
rights of substantial value, except in each case in the ordinary course of
business;
(f) pledge or permit the imposition of any lien on or sell, assign,
transfer or otherwise dispose of any of their tangible assets, except in the
ordinary course of business;
(g) sell, assign or otherwise transfer any patents, trademarks, trade
names, copyrights, licenses or other intangible assets;
(h) make any change in any method of accounting or accounting
principle or practice;
(i) write up or down the value of inventory or determine as
collectible any notes or accounts receivable that were previously considered to
be uncollectible;
(j) grant any general increase in the compensation payable or to
become payable to their officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment) or
any special increase in the compensation payable or to become payable to any
officer or employee, except for (i) normal merit and cost of living increases in
the ordinary course of business and in
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accordance with past practice and (ii) increases pursuant to collective
bargaining agreements;
(k) declare, pay or set aside for payment any dividend or other
distribution on any shares of their capital stock;
(l) make any loans which in the aggregate exceed $5,000 to any
employee or make any loans to any stockholder, officer or director;
(m) make capital expenditures or commitments for same in excess of
$250,000 in the aggregate; or
(n) agree, whether in writing or otherwise, to take any action
described in this Section 5.9.
SECTION 5.10 TAXES
(a) Each of Rule and its Subsidiaries has duly and timely filed all
Tax Returns required to be filed with any federal, state, local or foreign
governmental entity or other authority ("Taxing Authority"). All such Tax
Returns were true, correct and complete in all material respects. Each of Rule
and its Subsidiaries has paid all material Taxes, which have become due and
payable (whether or not shown on any Tax Return). Adequate reserves and
accruals in accordance with GAAP have been established to provide for the
payment of all Taxes which are not yet due and payable with respect to any of
Rule and its Subsidiaries for taxable periods or portions thereof ending on or
before the Closing Date. There are no liens for Taxes upon any of the assets of
any of Rule and its Subsidiaries except liens for current Taxes not yet due.
Rule has delivered or made available to Parent correct and complete copies of
all Tax Returns filed with respect to any of Rule and its Subsidiaries for the
five (5) most recently completed taxable years, all examination reports by any
Taxing Authority, and any statements of deficiencies proposed or assessed
against or agreed to by any of Rule and its Subsidiaries. No audit,
examination, investigation, proceeding, action or claim with respect to the
Taxes of any of Rule and its Subsidiaries is pending, proposed or threatened,
and, to the Knowledge of Rule, there is no basis for the assessment or
collection of additional Taxes against any of Rule and its Subsidiaries. Except
as set forth on Schedule 5.10, there has never been an examination or notice of
potential examination of the Tax Returns of any of Rule and its Subsidiaries by
any Taxing Authority. No extension is in effect for any of Rule and its
Subsidiaries with respect to the filing of any Tax Return, the payment of any
Taxes, or any limitation period regarding the assessment or collection of any
Taxes.
(b) All material Taxes that are required to have been withheld or
collected by any of Rule and its Subsidiaries have
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been duly withheld or collected, and to the extent required, have been properly
paid or deposited as required by applicable laws.
(c) Schedule 5.10 lists each jurisdiction in which any of Rule and its
Subsidiaries either files Tax Returns or pays Taxes with respect to which no
returns are required to be filed. Except as set forth on Schedule 5.10, no claim
has ever been made by any Taxing Authority in a jurisdiction where any of Rule
and its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(d) No property of any of Rule and its Subsidiaries is property that
it is or will be required to treat as owned for tax purposes by another person,
or is "tax-exempt use property" as defined in Code section 168(h).
(e) None of Rule and its Subsidiaries has ever agreed to or been
required to make any adjustment pursuant to Code section 481(a) by reason of any
change in accounting method initiated by it; the IRS has not proposed any such
adjustment or change in accounting method; and none of Rule and its Subsidiaries
has any application pending with any Taxing Authority requesting permission for
any change in accounting method.
(f) None of Rule and its Subsidiaries has been a United States real
property holding corporation as defined in Code section 897(c)(2) during the
applicable period specified in Code section 897(c)(1)(A)(ii).
(g) None of Rule and its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code section 280G.
(h) None of Rule and its Subsidiaries has filed any consent under Code
section 341(f).
(i) None of Rule and its Subsidiaries has ever been (i) a member of an
affiliated, consolidated, unitary or combined group filing a consolidated,
unitary or combined Tax Return (other than a group the common parent of which
was Rule), or (ii) a party to any tax allocation, sharing or reimbursement
agreement or arrangement.
(j) None of Rule and its Subsidiaries has any liability for the Taxes
of any Person (other than any of Rule and its Subsidiaries) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(k) Except as set forth on Schedule 5.10, none of Rule and its
Subsidiaries is an obligor on, and none of its assets has been financed directly
or indirectly by, any tax-exempt bonds.
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(l) None of Rule and its Subsidiaries has executed, become subject to,
or entered into any closing agreement pursuant to Code section 7121 or any
predecessor provision thereof or any similar provision of state, local or
foreign law.
(m) None of Rule and its Subsidiaries has pending any ruling requests
with any Taxing Authority.
SECTION 5.11 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.11 is a true and complete list of all annuity, bonus,
cafeteria, stock option, stock purchase, profit sharing, savings, pension,
retirement, incentive, group insurance, disability, employee welfare, prepaid
legal, nonqualified deferred compensation including, without limitation, excess
benefit plans, top-hat plans, deferred bonuses, rabbi trusts, secular trusts,
nonqualified annuity contracts, insurance arrangements, nonqualified stock
options, phantom stock plans or golden parachute payments, or other similar
fringe benefit plans, and all other employee benefit funds or programs (within
the meaning of Section 3(3) of ERISA), covering employees or former employees of
Rule and its Subsidiaries (the "Plans"). Except as set forth on Schedule 5.11,
Rule and its Subsidiaries are not parties to any employee agreement,
understanding, plan, policy, procedure or arrangement, whether written or oral,
which provide compensation or fringe benefits to employees and Rule and its
Subsidiaries are in compliance with their obligations under all such Plans.
Except for changes required by applicable law, there are no negotiations,
demands, commitments or proposals that are pending or that have been made that
concern matters now covered, or that would be covered by the type of agreements
described on Schedule 5.11 or this paragraph.
(b) With respect to each Plan listed on Schedule 5.11, true and
complete copies of (i) all Plan documents (including all amendments and
modifications thereof), and related agreements including, without limitation,
the trust agreement and amendments thereto, insurance contracts and investment
management agreements; (ii) the last three filed Form 5500 series and Schedules
A, B, P and/or SSA, as applicable, and Forms PBGC-1, if any; (iii) summary plan
descriptions; (iv) summary of material modifications, if any; (v) the most
recent auditor's report, and copies of any and all tax qualification
correspondence including, without limitation, private letter rulings,
applications for determination and determination letters issued with respect to
the Plans; and (vi) the most recent annual and periodic accounting of related
Plan assets, have been delivered to Parent and Sub.
(c) With respect to the Plans listed on Schedule 5.11 which are
subject to ERISA:
(i) Except as set forth on Schedule 5.11, the Plans are in
material compliance with the applicable provisions of ERISA and each of the
employee pension benefit plans, within the meaning
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of Section 3(2) of ERISA (the "Pension Plans"), which are intended to be
qualified under Section 401(a) of the Code, have been determined by the IRS to
be so qualified or a request for such determination has been timely filed with
the IRS (and to the Knowledge of Rule, nothing has occurred to cause the IRS to
revoke such determination and the IRS has not indicated any disapproval of any
request for such a determination);
(ii) Except as set forth on Schedule 5.11 and except as would not
have a Material Adverse Effect on Rule, each Plan has been operated in
accordance with its terms and all required filings that are due prior to the
date hereof, including, without limitation, the Forms 5500, for all Plans have
been made;
(iii) Except as set forth on Schedule 5.11 and except as would
not have a Material Adverse Effect on Rule, no prohibited transactions, as
defined by Section 406 of ERISA or Section 4975 of the Code, have occurred with
respect to any of the Plans;
(iv) Except as set forth on Schedule 5.11, neither Rule nor its
Subsidiaries have engaged in any transaction in connection with which Rule or
its Subsidiaries could be subjected to a criminal or civil penalty under ERISA;
(v) Except as set forth on Schedule 5.11, none of the Plans, nor
any trust which serves as a funding medium for any of such Plans, nor any issue
relating thereto is currently under examination by or pending before the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation or any court,
other than applications for determinations pending before the IRS;
(vi) Except as set forth on Schedule 5.11, none of the Pension
Plans is a defined benefit plan within the meaning of Section 414(j) of the
Code;
(vii) Except as set forth on Schedule 5.11, none of the Plans is
a "multiemployer plan" as that term is defined in Section 3(37) of ERISA and
Section 411(f) of the Code, nor a plan maintained by more than one employer
(hereinafter referred to as an "multiple employer plan"), nor a single employer
plan under a multiple controlled group within the meaning of Section 4063 of
ERISA, and neither Rule nor its Subsidiaries nor any entity required to be
aggregated with Rule under Section 414(b), (c), (m), or (o) of the Code has
incurred any material withdrawal liability with respect to any single,
multiemployer or multiple employer plan, which liability could constitute a
liability of Parent, Sub or the Surviving Corporation;
(viii) Except as set forth on Schedule 5.11, no benefit claims
(except those submitted in the ordinary course of administration of such Plan)
are currently pending against any Plan;
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(ix) Except as set forth on Schedule 5.11, no Plan provides for
retiree medical or retiree life insurance benefits for former employees of Rule
or its Subsidiaries, and there is no material liability for taxes with respect
to disqualified benefits under Section 4976 of the Code; and
(x) Except as set forth on Schedule 5.11, no Pension Plan has
been terminated by Rule or its Subsidiaries, and there is no material liability
for taxes with respect to a reversion of qualified plan assets under Section
4980 of the Code.
(d) Except as set forth on Schedule 5.11 and except where such failure
would not have a Material Adverse Effect on Rule, there have been no failures to
comply with the continuation coverage provisions required by Sections 601-608 of
ERISA and Section 4980B of the Code under any Plan.
(e) Except as set forth on Schedule 5.11, there are no employee
benefit plans which cover employees of Rule or its Subsidiaries which are
required to comply with the provisions of any foreign law.
(f) Except as set forth on Schedule 5.11, all excess contributions, if
any (together with any income allocable thereto), have been distributed (or, if
forfeitable, forfeited) before the close of the first two and one half (2-1/2)
months of the following plan year; and there is no liability for excise tax
under Section 4979 of the Code with respect to such excess contributions, if
any, for any Plan.
(g) There is no material liability for taxes with respect to: (i) an
accumulated fiduciary deficiency under Section 4971 of the Code and/or (ii)
nondeductible contribution under Section 4972 of the Code.
SECTION 5.12 COMPLIANCE WITH LAW.
Rule and its Subsidiaries have been and are in compliance with all
applicable laws (including duties imposed by common law), rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities
(federal, state, local and foreign), the noncompliance with which would be
likely to have a Material Adverse Effect on Rule.
SECTION 5.13 LITIGATION; CLAIMS.
Schedule 5.13 hereto contains a complete and accurate list of (a) all
claims, actions, suits, proceedings or investigations pending or (to the
Knowledge of Rule) threatened by or against Rule or its Subsidiaries, and
(b) all judgments, decrees, arbitration awards or orders binding upon Rule or
its Subsidiaries, in each case which would reasonably be expected to have a
value of at least $50,000. Except as set forth on Schedule 5.13, no material
claims, including, without limitation, product
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liability claims, have been asserted against Rule or its Subsidiaries during the
past five (5) years, and Rule and its Subsidiaries are neither aware nor have
any reason to be aware of any basis for any material claim, action, suit,
proceeding or investigation involving Rule or its Subsidiaries, other than as
set forth on Schedule 5.13 which would reasonably be expected to have a Material
Adverse Effect on Rule.
SECTION 5.14 CONTRACTS AND COMMITMENTS.
Schedule 5.14 contains a complete and accurate list of all contracts,
agreements and commitments (other than the agreements or arrangements set forth
in Schedules 5.11, 5.15, 5.17, 5.18, 5.19A, 5.21, 5.22, 5.23 and 5.26), whether
written or oral, of Rule and its Subsidiaries that involve commitments in excess
of $150,000, have a term of six (6) months or more or that are not in the
ordinary course of business.
The agreements set forth in Schedules 5.11, 5.14, 5.15, 5.17, 5.18, 5.19A,
5.21, 5.22, 5.23 and 5.26 are hereinafter referred to collectively as the
"Operating Agreements." None of the Operating Agreements has been assigned or
is the subject of any security agreement, except as set forth on Schedule 5.14.
Except as otherwise set forth on Schedule 5.14, (a) each of the Operating
Agreements is a valid and binding obligation of Rule or its Subsidiaries and (to
the Knowledge of Rule) the other party or parties thereto, enforceable in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws or equitable principles relating to
creditors' rights generally and the availability of equitable remedies;
(b) except as would not have a Material Adverse Effect on Rule, neither Rule nor
its Subsidiaries nor (to the Knowledge of Rule) any other party thereto, has
terminated, canceled, modified or waived any material term or condition of any
Operating Agreement; and (c) neither Rule nor its Subsidiaries nor (to the
Knowledge of Rule) any other party to any Operating Agreement is in default or
alleged in writing to be in default in any material respect under any Operating
Agreement and there exists no event, condition or occurrence that, after notice
or lapse of time, or both, would constitute such a default by Rule or its
Subsidiaries or any party to any such Operating Agreement. None of such
Operating Agreements contains any covenant or other restriction preventing or
limiting the consummation of the transactions contemplated hereby. Neither Rule
nor its Subsidiaries have any outstanding powers of attorney except routine
powers of attorney relating to the representation of Rule or its Subsidiaries
before governmental agencies or given in connection with qualification to
conduct business or customs matters. Rule and its Subsidiaries have delivered
or made available to each of Parent and Sub a copy of each of the written
Operating Agreements and a description of the terms and conditions of any oral
Operating Agreements.
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SECTION 5.15 INTELLECTUAL PROPERTY RIGHTS.
Schedule 5.15 contains a correct and complete list of the following
assets and related matters: (a) all patents and applications for patents, all
Marks and registration of Marks and applications for registration of Marks, all
copyright registrations and applications for copyright registration, and all
trade names, owned or used (pursuant to license agreements or otherwise) by Rule
or its Subsidiaries, and in the case of any such Intellectual Property that is
so owned, the jurisdictions in or by which such assets or any of them have been
registered, filed or issued and (b) to the extent not listed on Schedule
5.14, all contracts, agreements or understandings pursuant to which Rule or its
Subsidiaries has authorized any Person to use any of the Intellectual Property
which is so owned. Rule and its Subsidiaries own, possess or license and as of
the Closing Date will own, possess or license, all right, title and interest in
and to the items of Intellectual Property that are required to conduct their
businesses as now conducted without conflict with the rights of others, except
where the absence of such ownership, possession or license would not have a
Material Adverse Effect on Rule. Except as set forth in Schedule 5.15: (i) Rule
and its Subsidiaries have the right to use and, to Rule's Knowledge, the sole
and exclusive right to use, the Intellectual Property (including applications
for any of the foregoing) used in connection with the business of Rule and its
Subsidiaries, except where the failure to have such rights would not have a
Material Adverse Effect on Rule, and, to Rule's Knowledge, none of the past or
present employees, officers or directors of Rule and its Subsidiaries, or anyone
else, has any rights with respect thereto; (ii) the consummation of the
transactions contemplated hereby will not alter or impair any such rights,
except where the alteration or impairment of such rights would not have a
Material Adverse Effect on Rule; (iii) none of Rule or its Subsidiaries has
received any notice or claim of infringement or any claim challenging or
questioning the validity or effectiveness of any of the items of Intellectual
Property, except where any such claim would not have a Material Adverse Effect
on Rule or any of its Subsidiaries, and there is no valid basis for any such
claim; and (iv) none of Rule or its Subsidiaries is liable, nor have they made
any material contract or arrangement whereby they may become liable, to any
Person for any royalty or other compensation for use of any of the items of
Intellectual Property.
SECTION 5.16 LIENS.
Except as set forth on Schedule 5.16, none of the properties or
assets, whether real, personal or mixed, or tangible or intangible, owned or
leased by Rule or its Subsidiaries are subject to any mortgage, lien,
encumbrance or other security interest, except for (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good
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faith by appropriate proceedings; (b) liens in respect of pledges or deposits
under workmen's compensation laws or similar legislation, carriers',
warehousemen's, mechanics', laborers' and materialmen's and similar liens, if
the obligations secured by such liens are not then delinquent or are being
contested in good faith by appropriate proceedings; and (c) liens incidental to
the conduct of the business.
SECTION 5.17 INSURANCE.
All insurance policies and fidelity bonds relating to the assets of
Rule and its Subsidiaries, including summary descriptions and the termination
dates thereof, are set forth on Schedule 5.17. Except as set forth on Schedule
5.17, Rule and its Subsidiaries have not been refused any insurance with respect
to their business or any of their assets, nor has coverage been limited by any
insurance carrier to which they have applied for insurance or with which they
have carried insurance, during the last two (2) years.
SECTION 5.18 TANGIBLE PERSONAL PROPERTY.
(a) Except as set forth on Schedule 5.16 and except for the leased
tangible personal property set forth on Schedule 5.18, Rule has good and valid
title to all of its tangible personal property.
(b) Schedule 5.18 lists all tangible personal property leased by Rule
or its Subsidiaries with annual lease payments in excess of $25,000 and the
location thereof. None of such leases contains any covenant or restriction
preventing or limiting the consummation of the transactions contemplated
hereunder.
(c) All of the material tangible personal property owned by Rule and
its Subsidiaries and all of the leased tangible personal property listed in
Schedule 5.18 is in good operating condition, subject to ordinary wear and tear.
SECTION 5.19 REAL PROPERTY.
(a) Schedule 5.19 contains a correct and complete list of all the real
property (including a general description of the improvements thereon) that is
owned by Rule or its Subsidiaries or that Rule or its Subsidiaries have agreed
(or have an option) to purchase, sell or lease, or may be obligated to purchase,
sell or lease to a third party in connection with their business and any title
insurance or guarantee policies with respect thereto. Such real property is
hereinafter referred to as the "Real Property," and the improvements and
fixtures thereon are hereinafter referred to as the "Improvements."
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(b) Schedule 5.19A identifies all of the real property that Rule or
its Subsidiaries lease, have agreed to lease or have an obligation to lease in
connection with their business (including a general description of the
improvements thereon). Such leased real property is hereinafter referred to as
the "Leased Property," and the improvements and fixtures thereon are hereinafter
referred to as the "Leased Improvements."
(c) Except as set forth on Schedule 5.19, Rule or one of its
Subsidiaries is the sole legal and equitable owner of the Real Property, the
Improvements and all interests therein and possesses good and marketable fee
simple title to the Real Property and the Improvements, good of record and in
fact, free and clear of all conditions, exceptions, reservations, liens (except
for liens with respect to taxes not yet due and payable), restrictions, rights-
of-way, easements, encumbrances and other matters affecting title.
(d) Except as set forth on Schedule 5.19, there are no adverse or
other parties in possession of the Real Property, the Improvements, the Leased
Property, the Leased Improvements or any portion or portions thereof. On the
Closing Date the Real Property, the Improvements and the leasehold interests in
the Leased Property and the Leased Improvements will be free and clear of any
and all leases, licensees, occupants or tenants except as set forth on
Schedule 5.19. To the Knowledge of Rule, there are no pending or threatened
condemnation, eminent domain or similar proceedings, or litigation or other
proceedings affecting the Real Property, the Improvements, the Leased Property,
the Leased Improvements or any portion or portions thereof. To the Knowledge of
Rule, there are no pending or threatened requests, applications or proceedings
to alter or restrict any zoning or other use restrictions applicable to the Real
Property, the Improvements, the Leased Property or the Leased Improvements that
would interfere with the conduct of the business of Rule or its Subsidiaries or
the use of the assets consistent with past practice, which interference would
have a Material Adverse Effect on the business of Rule.
SECTION 5.20 ENVIRONMENTAL MATTERS.
(a) As used in this Agreement "Hazardous Material" shall mean:
(i) any "hazardous substance" as now defined pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
42 U.S.C. Section 9601(14), or any substance listed or identified by any
characteristic in any regulation adopted pursuant to any statute referred to or
incorporated into such definition, all as in effect on the date hereof; (ii) any
petroleum, including crude oil and any fraction thereof; (iii) natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel;
(iv) any "hazardous
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chemical" as defined pursuant to 29 C.F.R. Part 1910; and (v) any asbestos,
polychlorinated biphenyl ("PCB"), or isomer of dioxin.
(b) Except as indicated in Schedule 5.20 and in the environmental
reports identified in Schedule 5.20, Rule has no knowledge of any Hazardous
Material within, under, originating from or relating to any real property
interest or other location geologically or hydrologically connected to such
properties owned, operated or controlled by Rule or its Subsidiaries or their
predecessors in interest where the presence of such Hazardous Material is likely
to have a Material Adverse Effect on Rule.
(c) Except as indicated on Schedule 5.20, neither Rule nor its
Subsidiaries nor any of their predecessors in interest has any liability,
matured or not matured, absolute or contingent, assessed or unassessed, imposed
or based upon any provision under any foreign, federal, state or local law,
rule, or regulation or common law, or under any code, order, decree, judgment or
injunction applicable to Rule or its predecessors in interest, nor has Rule
received any notice, or request for information issued, promulgated, approved or
entered thereunder, or under the common law, or any tort, nuisance or absolute
liability theory, relating to public health or safety, worker health or safety,
or pollution, damage to or protection of the environment including without
limitation, laws relating to emissions, discharges, releases or threatened
releases of Hazardous Material into the environment (including without
limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, generation, disposal, transport or handling of any
Hazardous Material (hereinafter collectively referred to as "Environmental
Laws") where the resulting liability could have a Material Adverse Effect on
Rule.
(d) Rule and its Subsidiaries possess and are in compliance in all
material respects with all permits, licenses, certificates, franchises and other
authorizations relating to the Environmental Laws necessary to conduct its
business or required by environmental regulations.
(e) Except as indicated in Schedule 5.20, neither Rule nor its
Subsidiaries have, during the past 5 years, been subject to any civil, criminal
or administrative action, suit, claim, hearing, notice of violation,
investigation, inquiry or proceeding for failure to comply with, or received
notice of any violation or potential liability under the Environmental Laws
where such could have a Material Adverse Effect on Rule, nor is Rule aware of
any information, whether or not confirmed or reported, which could give rise to
any such potential liability.
(f) Except as indicated in Schedule 5.20 and in the environmental
reports identified in Schedule 5.20, no real property, site or facility (as
defined in CERCLA, 42 U.S.C. Section 9601(9)) owned or operated by Rule or its
Subsidiaries is
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(i) listed or proposed for listing on the National Priority List or (ii) listed
on the Comprehensive Environmental Response, Compensation, Liability Information
System List ("CERCLIS") promulgated pursuant to CERCLA, or any comparable list
maintained by any foreign, state or local government authority.
(g) Except as indicated in Schedule 5.20 and in the environmental
reports identified in Schedule 5.20, there are no underground storage tanks
owned or operated by Rule or its Subsidiaries, and Rule further warrants and
represents that any prior use and operation of underground storage tanks owned
or operated by Rule or its Subsidiaries has been in compliance with all
Environmental Laws.
(h) Rule has provided to Parent and Sub an opportunity to inspect its
facilities, review and copy documents, and Rule has delivered to Parent and Sub
true, complete and correct copies of results of any reports, together with
supporting studies, analyses and tests in the possession of or initiated by
Rule or its Subsidiaries pertaining to the existence of Hazardous Material and
any other environmental concerns relating to any of their facilities, or sites
or real property owned, leased, operated, used or controlled by Rule or its
Subsidiaries or any of their predecessors in interest, or concerning compliance
with or liability under the Environmental Laws.
(i) Except as indicated on Schedule 5.20 and in the environmental
reports listed on Schedule 5.20, Rule has no knowledge of any PCBs in or at any
premises owned, leased, operated or controlled by Rule or its Subsidiaries and
their prior use, handling, storage, transport or disposal of PCBs has been in
compliance with all Environmental Laws.
(j) Except as indicated on Schedule 5.20 and in the environmental
reports listed on Schedule 5.20, Rule has no knowledge of any friable asbestos
and asbestos containing materials from the properties and assets owned, leased,
operated or controlled by Rule or its Subsidiaries and the facilities on such
properties comply with the Environmental Laws including but not limited to,
Occupational Safety and Health Act regulations with respect to ambient air
exposure to asbestos.
(k) Except as indicated on Schedule 5.20, neither Rule nor its
Subsidiaries has, by contract, agreed to assume the liability of any other
person or entity pursuant to any of the Environmental Laws.
SECTION 5.21 EMPLOYEES.
Schedule 5.21 sets forth a complete and accurate list of all employees
of Rule and its Subsidiaries with an annual salary of $75,000 or greater showing
for each: name, current job title or description, current salary level
(including any bonus or
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deferred compensation arrangements) and any bonus, commission or other
remuneration paid during fiscal 1994, and describing any existing contractual
arrangement with such employee.
SECTION 5.22 EMPLOYEE RELATIONS.
Except as set forth on Schedule 5.22, within the last five (5) years
Rule and its Subsidiaries have not experienced any material labor disputes or
any work stoppage or slowdowns due to labor disagreements. Except as set forth
on Schedule 5.22, (a) Rule and its Subsidiaries are in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice which could have a Material Adverse Effect
on Rule; (b) there is no unfair labor practice charge or complaint against Rule
or its Subsidiaries, or (to the Knowledge of Rule) threatened before the
National Labor Relations Board or any foreign authority; (c) there is no labor
strike, dispute, request for representation, slowdown or stoppage actually
pending or (to the Knowledge of Rule) threatened against or affecting Rule or
its Subsidiaries; (d) no question concerning representation has been raised or
is (to the Knowledge of Rule) threatened respecting the employees of Rule or its
Subsidiaries; (e) no grievance that might have a Material Adverse Effect on
Rule, nor any arbitration proceeding arising out of or under any collective
bargaining agreement, is pending and no claims therefor exist; and (f) no
collective bargaining agreement that is binding on Rule or its Subsidiaries
restricts any such company from relocating, closing or subcontracting any of its
operations.
SECTION 5.23 CUSTOMERS AND VENDORS.
Schedule 5.23 sets forth correct and complete lists of the twenty-five
(25) largest (by dollar volume) customers and vendors of Rule and its
Subsidiaries during the most recently completed fiscal year, indicating the
existing contractual arrangements, if any, with each such customer or vendor.
Except as set forth in Schedule 5.23, there are no outstanding material disputes
with any customer or vendor listed thereon and no customer or vendor listed
thereon has refused to continue to do business with Rule and its Subsidiaries or
has stated its intention not to continue to do business with Rule and its
Subsidiaries. Since May 31, 1995, there has not been any material shortage or
unavailability of the raw materials necessary to manufacture the products sold
by Rule and its Subsidiaries and, to the Knowledge of Rule, there is no current
shortage or unavailability which may lead to such shortages.
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SECTION 5.24 GOVERNMENTAL AUTHORIZATIONS.
(a) Except for licenses, permits or authorizations the lack of which
would not have a Material Adverse Effect on Rule, Rule and its Subsidiaries have
all licenses, permits or other authorizations from governmental, regulatory or
administrative agencies or authorities required for the production and sale of
its products and the conduct of its business, each of which is now and will be
in full force and effect on the Closing Date.
(b) Except as specified on Schedule 5.24, no registrations, filings,
applications, notices, transfers, consents, approvals, orders, qualifications,
waivers or other actions of any kind are required by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby (i) to avoid the loss of any material license, permit or other
governmental, regulatory or administrative authorization or the violation,
breach or termination of, or any default under, or the creation of encumbrances
on the assets of Rule or its Subsidiaries, pursuant to the terms of, any law,
regulation, order or other requirement of law, or (ii) to enable the Surviving
Corporation to continue the operation of the business of Rule substantially as
presently conducted.
SECTION 5.25 BROKER'S OR FINDER'S FEES.
Except as set forth in Schedule 5.25 no agent, broker, investment
banker, Person or firm acting on behalf of Rule or its Subsidiaries or under the
authority of Rule or its Subsidiaries or any Stockholder is or will be entitled
to any broker's or finder's fee or any other commission or similar fee directly
or indirectly from Rule or its Subsidiaries in connection with any of the
transactions contemplated hereby. Schedule 5.25 sets forth a summary of all
such broker's or finder's fees and other commissions or fees payable by Rule or
its Subsidiaries in connection with any of the transactions contemplated hereby.
SECTION 5.26 CERTAIN TRANSACTIONS.
Except as set forth on Schedule 5.26, none of the Stockholders or the
directors or officers of Rule is currently a party to any transaction with Rule
(other than for services as employees, directors and officers), including,
without limitation, any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, any such
Person, or to or from any corporation, partnership, trust or other entity in
which any such Person owns in excess of five percent (5%) of the outstanding
equity interest.
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SECTION 5.27 ABSENCE OF QUESTIONABLE PAYMENTS.
To the Knowledge of Rule, neither Rule nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on their behalf
has (i) used any corporate or other funds for unlawful contributions, payments,
gifts or entertainment, or made any unlawful expenditures relating to political
activity to government officials or others or established or maintained any
unlawful or unrecorded funds in violation of Section 30A of the Exchange Act, as
amended, or any other applicable foreign, federal or state law; or (ii) accepted
or received any unlawful contributions, payments, expenditures or gifts.
SECTION 5.28 SEC DOCUMENTS.
Rule has timely filed within the last 12 months all SEC Documents
required by the Securities Laws and such SEC Documents complied in all material
respects with the Securities Laws and no such SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements contained therein not misleading.
SECTION 5.29 PROXY STATEMENT.
The information contained in the Proxy Statement at the time the Proxy
Statement is mailed to Stockholders up to and including the time of Rule's
Stockholders' meeting to vote upon the Merger, (i) shall comply in all material
respects with the applicable provisions of the Securities Laws, and (ii) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VI--REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to Rule, and Rule in agreeing to
consummate the transactions contemplated by this Agreement has relied upon such
representations and warranties, that:
SECTION 6.1 CORPORATE ORGANIZATION.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
power and authority (corporate and other) to own, lease and operate its
properties and to carry on its business as now being conducted.
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(b) Sub is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the
requisite power and authority (corporate and other) to own, lease and operate
its properties and to carry on its business as now being conducted.
SECTION 6.2 VALID AND BINDING AGREEMENT.
Each of Parent and Sub has the full right, capacity and power to enter
into this Agreement. All necessary action on the part of each of Parent and Sub
has been taken to authorize the execution and delivery of this Agreement, the
performance of their obligations hereunder and the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Parent and Sub, and will constitute a valid and
binding obligation enforceable against Parent and Sub in accordance with its
terms, subject to bankruptcy, insolvency, reorganization or similar laws or
equitable principles relating to creditors' rights generally and the
availability of equitable remedies.
SECTION 6.3 NO VIOLATION.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by each of
Parent or Sub with any of the provisions hereof will (a) violate or conflict
with any provision of the certificate of incorporation or by-laws of Parent or
the articles of incorporation or by-laws of Sub or any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Parent or Sub, or (b) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or any event which, with or without due
notice or lapse of time, or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
the creation of any lien, security interest, charge or other encumbrance upon
the stock or any of the properties or assets of Parent or Sub under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation of Parent or
Sub.
SECTION 6.4 CONSENTS AND APPROVALS.
Except under the HSR Act, and except for permits, consents, approvals
or authorizations which, if not received, or declarations, filings or
registrations which, if not made, would not have a Material Adverse Effect on
either Parent or Sub, no permit, consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or third party is required to be made or obtained by Parent or Sub in
connection with the execution, delivery and
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performance of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE VII--COVENANTS
SECTION 7.1 COMPLIANCE WITH LAW.
From the date hereof through the Closing Date, Rule and its
Subsidiaries will promptly comply in all material respects with all laws and
regulations (including without limitation, those relating to the protection of
the environment and employee benefits) applicable to Rule's and its
Subsidiaries' business and all laws and regulations with which compliance is
required for the valid consummation of the transactions contemplated hereby and
will promptly notify each of Parent and Sub of any legal, administrative or
other proceedings, investigations, inquiries, complaints, notices of violation
or other asserted claims, judgments, injunctions or restrictions, pending,
outstanding or, to the Knowledge of Rule, threatened or contemplated, which
could have a Material Adverse Effect on Rule.
SECTION 7.2 OPERATION OF BUSINESS PRIOR TO CLOSING.
Except as set forth on Schedules 5.9 or 7.2, during the period from
the date hereof through the Closing Date, Rule agrees that (except as expressly
contemplated or permitted by this Agreement or to the extent that Parent and Sub
shall otherwise consent in writing):
(a) Rule and its Subsidiaries shall carry on their business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and shall use all reasonable efforts to preserve intact
their present business organizations, keep available the services of their
present officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing business shall not be impaired in any material respect at
the Closing Date.
(b) Rule and its Subsidiaries shall not amend or propose to amend
their articles of incorporation or by-laws.
(c) Rule and its Subsidiaries shall not: (i) increase the
compensation payable or to become payable to their officers or employees, except
for cash bonuses consistent with past practice as to the amount and category of
employees, increases in salaries and wages of employees consistent with past
practice, or grant any severance or termination pay to or enter into any
employment or severance agreement with any of their directors, officers or other
employees; (ii) except as otherwise contemplated by this Agreement, establish,
adopt, enter into or make any new grants or
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awards under or amend any employee benefit plan or other arrangement, plan or
policy between Rule or any of its Subsidiaries and one or more of its directors,
officers or employees; or (iii) except as otherwise contemplated by this
Agreement, establish, adopt, enter into or amend any Plan.
(d) Rule and its Subsidiaries shall not settle or compromise any
material claims or litigation or, except in the ordinary and usual course of
business, modify, amend or terminate any of their material contracts or waive,
release or assign any material rights or claims.
(e) Rule and its Subsidiaries shall not permit any material insurance
policy to be canceled or terminated without notice to Parent and Sub, except in
the ordinary and usual course of business.
(f) Rule and its Subsidiaries shall not fail to confer on a regular
and frequent basis with one or more representatives of Parent and Sub to report
material operational matters and the general status of ongoing operations.
(g) Rule and its Subsidiaries shall not commit a breach of, or default
under, any material contract, agreement, license or instrument to which they are
a party or to which any of their assets may be subject, or violate any
applicable law, regulation, ordinance, order, injunction or decree or any other
requirement of any governmental body or court, relating to their assets or
business if such breach, default or violation is reasonably likely to result in
a Material Adverse Effect on Rule.
(h) Rule and its Subsidiaries shall not, except in the ordinary course
of business, (i) factor, discount or otherwise accept less than full payment
with regard to accounts receivable or other amounts due; (ii) delay payment on,
or otherwise alter the payment terms of, accounts payable or pay the amounts due
thereunder later than the stated date for payment thereof; or (iii) sell any
inventory at less than fair market value or make any bulk sale of such
inventory, or fail to maintain inventory at ordinary, customary levels,
consistent with the Rule Financial Statements and the Rule Interim Financial
Statements and past practice.
(i) Rule and its Subsidiaries shall not, except as expressly permitted
by this Agreement, take any action that would or is reasonably likely to result
in any of their representations and warranties set forth in this Agreement being
untrue in any material respect, or in any of the conditions in this Agreement
set forth in Article VIII not being satisfied.
(j) Rule and its Subsidiaries shall not (i) authorize capital
expenditures in excess of $250,000 or make any acquisition of, or investment in,
assets or stock of any other Person; (ii) acquire (by merger, consolidation or
acquisition of stock or
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assets) any corporation, partnership or other business organization or division
thereof; (iii) assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person or make any loans or
advances; (iv) enter into any material contract or agreement other than in the
ordinary course of business; or (v) enter into or amend in any respect any
material contract, agreement, commitment or arrangement with respect to any of
the matters set forth in this Section 7.2(j).
(k) Rule and its Subsidiaries shall not issue, sell, pledge, lease,
dispose of, encumber, or authorize the issuance, sale, pledge, lease,
disposition or encumbrance of, (i) any shares of capital stock of any class, or
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other ownership interest, or (ii)
any assets that are material, alone or in the aggregate, to Rule except for the
sale of products in the ordinary course of business and consistent with past
practice.
(l) Rule and its Subsidiaries shall not make any tax election or
settle or compromise any material federal, state, local or foreign income tax
liability.
(m) Neither Rule nor any of its Subsidiaries shall (i) declare or pay
any dividends on or make other distributions in respect of any of its capital
stock, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (iii) repurchase or
otherwise acquire any shares of its capital stock.
(n) Neither Rule nor any of its Subsidiaries shall incur or assume any
indebtedness or other liabilities (whether absolute, accrued, contingent or
otherwise) or guarantee any indebtedness or commitments for the same, except
liabilities (other than indebtedness or guarantees of indebtedness) in the usual
and ordinary course of its business, and in amounts and on terms consistent with
past practice.
(o) Except in the ordinary course of business, neither Rule nor any of
its Subsidiaries shall pay, loan or advance any amount to, or sell, transfer or
lease any property or asset to, or enter into any agreement or arrangement with,
any of its stockholders, officers, employees or directors.
(p) Neither Rule nor any of its Subsidiaries shall enter into any
employment agreement, sales agency agreement or other contract for the
performance of personal services which is not terminable without liability upon
no more than thirty (30) days' notice or grant any increase in the rate of
compensation or in the benefits payable or to become payable to any officer or
other employee or to any agent or consultant over the levels in effect
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on the date hereof other than normal merit increases of officers and employees
or increases required by applicable law.
(q) Rule and its Subsidiaries shall maintain their real and personal
properties in as good a state of operating condition and repair as they are on
the date of this Agreement, except for ordinary wear and tear.
(r) Rule and its Subsidiaries shall not terminate or modify in any
material respects any material leases, contracts, governmental licenses,
permits, or other authorizations or agreements affecting their real and/or
personal properties or the operation thereof or enter into any additional lease
or contract of any nature affecting such properties or the operation thereof.
(s) No liens, encumbrances, obligations or liabilities relating to
Rule or its Subsidiaries, whether absolute or contingent (including litigation
claims), shall be discharged, satisfied or paid, other than liabilities shown on
the Rule Financial Statements or the Rule Interim Financial Statements and
liabilities incurred after the date thereof in the ordinary course of business,
and no such discharge, satisfaction or payment shall be effected other than in
accordance with the ordinary payment terms relating to the liability discharged,
satisfied or paid.
(t) Rule will timely file all SEC Documents and all such documents
shall comply in all material respects with the requirements of the Securities
Laws and none of such documents shall contain an untrue statement of material
fact or omit to state a material fact required, under the circumstances, to make
the statements contained therein not misleading.
(u) Rule and its Subsidiaries shall not make any changes in accounting
methods, principles or practices.
SECTION 7.3 ACCESS.
Prior to the Closing Date, and upon reasonable advance notice, Rule
and its Subsidiaries shall provide Parent and Sub and their representatives
during normal business hours with full access to, and will make available for
inspection and review, all properties, personnel, books, records and accounts of
Rule and its Subsidiaries in order that Parent and Sub may have full opportunity
to make such investigation as each shall desire to make of the affairs of Rule
and its Subsidiaries. It is understood that Parent and Sub shall be permitted
to maintain personnel on the premises of Rule and its Subsidiaries during
customary business hours to observe all aspects of the operations of Rule and
its Subsidiaries and to confer with their management, attorneys and other third
parties reasonably requested for verification of any information obtained
pursuant to such observations. Rule also consents to the examination by Price
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Waterhouse LLP of workpapers and other records of Deloitte & Touche LLP
pertaining to Rule and its Subsidiaries.
SECTION 7.4 NO SOLICITATION.
Rule agrees that without the written consent of Parent, prior to the
Effective Time, it shall not, and it shall use its best efforts to cause its
directors, officers, employees, agents and representatives and those of any of
its Subsidiaries not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing non-public information) inquiries or proposals
concerning any merger, consolidation or acquisition or purchase with or by any
third party (other than Parent, Sub or their Affiliates) of all or any
substantial portion of the assets or capital stock of Rule or any of its
Subsidiaries (an "Acquisition Transaction") or negotiate, explore or otherwise
engage in substantive discussions with any such third party with respect to any
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement; provided,
however, that, notwithstanding any other provision of this Agreement, Rule may
engage in discussions or negotiations with, and may furnish information
concerning Rule and its business, properties and assets to, a third party who
makes a written proposal of an Acquisition Transaction that is reasonably
capable of being consummated and is financially more favorable to the
Stockholders than is the Merger, as determined in each case in good faith by
Rule's board of directors after consultation with Rule's financial advisors and
outside legal counsel and that failing to take such action would create a
reasonable possibility of a breach of the fiduciary duties of the board of
directors. Rule shall promptly advise Parent of any inquiries or proposals it
receives or attempts to negotiate relating to an Acquisition Transaction, and
any such notice shall include a description of the terms and conditions of any
such proposal, or the nature of any inquiry or attempts to negotiate.
SECTION 7.5 STOCKHOLDERS' MEETING.
In order to consummate the Merger, Rule, acting through its board of
directors and subject to the fiduciary duties of the board of directors, as
determined in good faith by the board of directors after consultation with
Rule's financial advisors and outside legal counsel, shall in accordance with
its Articles of Organization and By-laws and applicable law:
(a) duly call, give notice of and hold a meeting of its Stockholders
as soon as practicable following the date hereof;
(b) include in the Proxy Statement the recommendation of its board of
directors that the Stockholders vote in favor of the
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Agreement and use its best efforts to solicit votes and proxies in favor of the
adoption and approval of this Agreement; and
(c) obtain and furnish any information, with respect to Rule, required
to be included in the Proxy Statement and cause the Proxy Statement to be mailed
to the Stockholders with reasonable promptness.
SECTION 7.6 PROXY STATEMENT.
As promptly as practicable after the date hereof, Parent and Rule
shall cooperate in the preparation of the Proxy Statement to be mailed to the
Stockholders of Rule in connection with the Merger.
SECTION 7.7 BEST EFFORTS.
Parent and Rule shall each use its respective best efforts in good
faith, and each of them shall cause its subsidiaries to use their respective
best efforts in good faith, to take or cause to be taken all actions, and to do
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations so as to permit consummation of the Merger in accordance
with this Agreement as promptly as reasonably practicable.
SECTION 7.8 PRESS RELEASES.
Parent and Rule shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and shall consult each other as to the form and substance
of other public disclosures related thereto, provided, however, that nothing
contained herein shall prohibit any party, following notification to the other
parties, from making any disclosure which its counsel deems necessary.
SECTION 7.9 HSR ACT.
Each of Parent and Rule will as promptly as reasonably practicable
file the notification and report form, and any supplemental information
requested thereafter, required pursuant to the HSR Act to consummate the
transactions contemplated hereby. Parent and Rule agree to furnish to the other
such necessary information and reasonable assistance as each may request in
connection with any necessary filings or submissions required pursuant to the
HSR Act.
SECTION 7.10 SOLICITATION OF EMPLOYEES.
Prior to the Closing, Parent and Sub shall not, directly or
indirectly, knowingly solicit or encourage to leave the
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employment of Rule or any Subsidiary, any employee of Rule or any Subsidiary.
SECTION 7.11 VOTE OF PARENT AND SUB.
Parent and Sub agree to vote all shares of Stock held by them in favor
of the Merger.
ARTICLE VIII--CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARENT AND SUB
All obligations of each of Parent and Sub that are to be discharged
under this Agreement at the Closing are subject to Rule's fulfillment, at the
Closing or effective as of the Closing Date, of each of the following conditions
(unless expressly waived in writing by Parent and Sub at any time at or prior to
the Closing) and Rule shall use its reasonable efforts to cause each of such
conditions to be satisfied:
SECTION 8.1 REPRESENTATIONS AND WARRANTIES.
On the Closing Date, the representations and warranties of Rule set
forth in Article V of this Agreement shall be true and correct in all material
respects as though such representations and warranties had been made by Rule on
and as of the Closing Date, and Parent and Sub shall have received at the
Closing a certificate, dated the Closing Date, signed by the President or a Vice
President of Rule to such effect.
SECTION 8.2 COVENANTS, AGREEMENTS AND CONDITIONS.
Rule shall have performed and complied in all material respects with
all covenants, agreements and conditions contained in this Agreement required to
be performed by or complied with by it on or prior to the Closing Date, and
Parent and Sub shall have received at the Closing a certificate, dated the
Closing Date, signed by the President or a Vice President of Rule to such
effect.
SECTION 8.3 NO MATERIAL ADVERSE EFFECT.
During the period from the date hereof through the Closing Date, there
shall not have been any change which has a Material Adverse Effect on the
condition (financial or otherwise) or earnings of Rule.
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SECTION 8.4 CORPORATE PROCEEDINGS.
All corporate and other proceedings to be taken and all consents to be
obtained by Rule or its Subsidiaries in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to Parent and Sub and their
counsel, Dickstein, Shapiro & Morin, L.L.P., each of whom shall have received
all such originals or certified or other copies of such documents as either may
reasonably request.
SECTION 8.5 OPINION OF COUNSEL.
Parent and Sub shall have received a written opinion dated the Closing
Date from Foley, Hoag & Eliot, counsel to Rule, substantially in the form
attached as Exhibit C hereto.
SECTION 8.6 PROCEEDINGS.
Except as set forth in Schedule 8.6, no action or proceeding shall be
pending or threatened, nor shall any statute, rule, regulation, executive order,
decree or injunction have been enacted, entered, promulgated or enforced by any
court or governmental authority, to restrain or prevent the consummation of the
transactions contemplated hereby.
SECTION 8.7 GOVERNMENTAL APPROVALS.
Except for the filing and approval of the Proxy Statement, there shall
have been received all necessary governmental consents or authorizations
required in connection with the transactions contemplated hereby.
SECTION 8.8 HSR ACT REQUIREMENTS.
Any "waiting periods" (and any extensions thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or shall have
been terminated.
SECTION 8.9 DELIVERIES.
Rule shall have delivered to Parent and Sub the following items:
(a) the stock books, stock ledgers, minute books and corporate seals
of Rule and its Subsidiaries and stock certificates evidencing Rule's ownership
of its Subsidiaries;
(b) certificates from appropriate authorities, dated as of or about
the Closing Date, as to the good standing, qualification to do business of, and
payment of taxes by Rule and
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its Subsidiaries in each jurisdiction where any such entity is so qualified;
(c) the resignation of each director of Rule and its Subsidiaries and
the officers of Rule and its Subsidiaries for whom Parent has previously
requested in writing such resignations; and
(d) a certificate of the Secretary or Assistant Secretary of Rule,
certifying as to the Articles of Organization, By-Laws, resolutions of the board
of directors, and incumbency and signature of officers of Rule.
SECTION 8.10 INSURANCE.
Rule and its Subsidiaries shall have maintained in full force and
effect the insurance coverage described on Schedule 5.17 hereto or policies
providing substantially equivalent coverage.
SECTION 8.11 TAX STATUS CERTIFICATION.
Parent and Sub shall have received a certification, signed by an
authorized officer of Rule and dated within 15 days of Closing, pursuant to
Section 1445(b) of the Code and Treasury Regulation Section 1.897-2 to the
effect that Rule is not a "United States real property holding corporation" as
defined in Section 897 of the Code.
SECTION 8.12 STOCKHOLDER APPROVAL.
This Agreement and the Merger shall have been duly approved and
adopted by an affirmative vote or written consent of the Stockholders to the
extent, and only to the extent, required by the MBCL or Rule's Articles of
Organization.
SECTION 8.13 STATUS OF STOCK OPTIONS AND WARRANTS.
All of the Rule Stock Options and Rule Warrants shall have been either
exercised or canceled.
ARTICLE IX--CONDITIONS PRECEDENT TO OBLIGATIONS OF RULE
All obligations of Rule that are to be discharged under this Agreement
at the Closing are subject to Parent's and Sub's fulfillment, at the Closing or
effective as of the Closing Date, of each of the following conditions (unless
expressly waived in writing by Rule at any time at or prior to the Closing) and
each of Parent and Sub shall use its reasonable efforts to cause each of such
conditions to be satisfied:
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SECTION 9.1 REPRESENTATIONS AND WARRANTIES.
On the Closing Date, the representations and warranties of each of
Parent and Sub set forth in Article VI of this Agreement shall be true and
correct in all material respects as though such representations and warranties
had been made by Parent and Sub on and as of the Closing Date, and Rule shall
have received at the Closing a certificate, dated the Closing Date, signed by
the President or a Vice President of each of Parent and Sub to such effect.
SECTION 9.2 COVENANTS, AGREEMENTS AND CONDITIONS.
Parent and Sub shall have performed and complied in all material
respects with all covenants, agreements and conditions contained in this
Agreement required to be performed by or complied with by them on or prior to
the Closing Date, and Rule shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of each of
Parent and Sub to such effect.
SECTION 9.3 CORPORATE PROCEEDINGS.
All corporate and other proceedings to be taken and all consents to be
obtained by Parent or Sub in connection with the transactions contemplated by
this Agreement and all documents incident thereto shall be reasonably
satisfactory in form and substance to Rule and its counsel, Foley, Hoag & Eliot,
each of whom shall have received all such originals or certified or other copies
of such documents as either may reasonably request.
SECTION 9.4 OPINION OF COUNSEL.
Rule shall have received a written opinion dated the Closing Date from
Dickstein, Shapiro & Morin, L.L.P., counsel to each of Parent and Sub,
substantially in the form attached as Exhibit D hereto.
SECTION 9.5 PROCEEDINGS.
No action or proceeding shall be pending or threatened, nor shall any
statute, rule, regulation, executive order, decree or injunction have been
enacted, entered, promulgated or enforced by any court or governmental
authority, to restrain or prevent the consummation of the transactions
contemplated hereby.
SECTION 9.6 GOVERNMENTAL APPROVALS.
Except for the filing and approval of the Proxy Statement, there shall
have been received all necessary governmental consents or authorizations
required in connection with the transactions
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contemplated hereby.
SECTION 9.7 HSR ACT REQUIREMENTS.
Any "waiting periods" (and any extensions thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or shall have
been terminated.
SECTION 9.8 DELIVERIES.
Each of Parent and Sub shall have delivered to Rule a certificate of
the Secretary or Assistant Secretary, certifying as to the Articles of
Incorporation, By-Laws, resolutions of the board of directors, and incumbency
and signature of officers of such company.
ARTICLE X--OTHER MATTERS
SECTION 10.1 CONFIDENTIALITY.
Notwithstanding the termination of this Agreement, each party hereto
and its respective accountants, attorneys, employees and other agents, will keep
confidential all information, oral and written, obtained from any other party
hereto or its Affiliates and refrain from using in any manner all information
set forth above not otherwise publicly available.
SECTION 10.2 FURTHER ASSURANCES.
Each party hereto shall cooperate with the others, and execute and
deliver, or cause to be executed and delivered, all such other instruments,
including instruments of conveyance, assignment and transfer, and take all such
other actions as may be reasonably requested by the other parties hereto from
time to time, consistent with the terms of this Agreement, to effectuate the
purposes and provisions of this Agreement.
SECTION 10.3 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Upon consummation of the Merger and for a period of six years
after the Effective Time, to the fullest extent permitted by law, Parent and the
Surviving Corporation, jointly and severally, shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, a director (whether elected
or appointed), officer or employee of Rule or any Subsidiary or serves or has
served at the request of Rule or any Subsidiary in any capacity with any other
Person (collectively, the "Indemnitees") against any and all claims, damages,
liabilities, losses, costs, charges, expenses (including, without
42
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limitation, reasonable costs of investigation, and the reasonable fees and
disbursement of legal counsel and other advisors and experts as incurred),
judgments, fines, penalties and amounts paid in settlement, asserted against,
incurred by or imposed upon any Indemnitee, (i) in connection with, arising out
of or relating to any threatened, pending or completed claim, action, suit or
proceeding (whether civil, criminal, administrative or investigative),
including, without limitation, any and all claims, actions, suits, proceedings
or investigations by or on behalf of or in the right of or against Rule or of
any Subsidiary or their affiliates, or by any present or former shareholder of
Rule or of any Subsidiary (collectively, "Claims"), including, without
limitation, any Claim which is based upon, arises out of or in any way relates
to the Merger, the solicitation of the approval of the Stockholders contemplated
by Section 7.5, this Agreement, any of the transactions contemplated by this
Agreement (including, without limitation, any schedule or exhibit hereto), the
Indemnitee's service as a member of Rule's or any Subsidiary's Board of
Directors or any committee of Rule's or any Subsidiary's Board of Directors, the
events leading up to the execution of this Agreement or related thereto and any
breach of any duty in connection with any of the foregoing, and (ii) in
connection with, arising out of or relating to the enforcement of the
obligations of Parent or the Surviving Corporation set forth in this Section
10.3, in each case to the fullest extent permitted by law under such Indemnitee
or Rule's or any Subsidiary's articles of organization or similar document or
by-laws (and shall also advance expenses as incurred to the fullest extent
permitted under any thereof).
(b) Upon consummation of the Merger and from and after the Effective
Time, to the fullest extent permitted by law, Parent and the Surviving
Corporation shall assume and honor any obligation of Rule or any Subsidiary
immediately prior to the Effective Time with respect to the indemnification of
the Indemnitees arising out of Rule's or any Subsidiary's articles of
organization or similar document or by-laws as if such obligations were pursuant
to a contract or arrangement between Parent or the Surviving Corporation and
such Indemnitees.
(c) In the event either Parent or the Surviving Corporation or any of
their respective successors or assigns (i) reorganizes or consolidates with or
merges into or enters into another business combination transaction with any
other person or entity and is not the resulting, continuing or surviving
corporation or entity of such consolidation, merger or transaction, or (ii)
liquidates, dissolves or transfers all or substantially all of its properties
and assets to any person or entity, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, assume the obligations set forth in
this Section 10.3.
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(d) This Section 10.3 shall be construed as an agreement, as to which
the Indemnitees are intended to be third-party beneficiaries, between Parent and
the Surviving Corporation and the Indemnitees, as unaffiliated third parties,
and is not subject to any limitations to which Parent or the Surviving
Corporation may be subject in indemnifying its own directors, officers,
employees, agents and other persons who serve at the request of Parent or the
Surviving Corporation.
SECTION 10.4 CONTINUATION OF COMPARABLE BENEFIT PLANS.
Parent and the Surviving Corporation will maintain for a period of one
year after the Closing Date employee compensation and employee benefit plans or
arrangements that will provide benefits to the employees of the Surviving
Corporation and the Subsidiaries that, in the aggregate, are no less favorable
than those provided pursuant to the employee compensation and employee benefit
plans and arrangements in effect on the date hereof as disclosed on Schedule
5.11. (other than any employee benefit plans and arrangements based on equity
securities or any equivalent thereof).
ARTICLE XI--TERMINATION
SECTION 11.1 METHODS OF TERMINATION.
This Agreement may be terminated at any time prior to the Closing,
notwithstanding stockholder approval:
(a) by the mutual consent of Parent and Rule;
(b) by Parent at any time after the date which is one hundred twenty
(120) days from the date of this Agreement if any of the conditions provided for
in Article VIII of this Agreement shall not have been met or waived prior to
such date;
(c) by Rule at any time after the date which is one hundred twenty
(120) days from the date of this Agreement if any of the conditions provided for
in Article IX of this Agreement shall not have been met or waived prior to such
date;
(d) at any time prior to the Effective Time by either Parent or Rule
if the Merger shall not have been consummated by December 31, 1995;
(e) by Parent or Rule, if any required approval of the Stockholders
shall not have been obtained by reason of failure to obtain the required vote at
a duly held meeting of Stockholders or at any adjournment thereof;
(f) by either Parent or Rule if any court of competent jurisdiction in
the United States or other governmental body in the United States shall have
issued an order (other than a temporary restraining order), decree or ruling or
taken any other
44
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action restraining, enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become final and nonappealable;
provided that the party seeking to terminate this Agreement shall have used its
best efforts to remove or lift such order, decree or ruling;
(g) at any time prior to the Effective Time, by action of the board of
directors of Rule, if the board of directors of Rule determines in good faith on
the advice of outside counsel that its fiduciary duties require it to approve an
Acquisition Transaction (other than the Merger);
(h) by Parent, at any time prior to the Effective Time, if (i) Rule
enters into a letter of intent or definitive agreement to enter into an
Acquisition Transaction (other than the Merger), (ii) the board of directors of
Rule withdraws, materially modifies its approval or recommendation of this
Agreement or the Merger in a manner materially adverse to Parent or Sub,
(iii) the board of directors of Rule recommends to the Stockholders any
Acquisition Transaction (other than the Merger) or (iv) the board of directors
of Rule resolves to do any of the foregoing; or
(i) by Parent, as set forth in Section 11.2.
SECTION 11.2 TERMINATION BASED ON ENVIRONMENTAL SITE ASSESSMENTS.
Parent has commissioned ENSR Consulting and Engineering ("ENSR") to
undertake and complete certain environmental site assessments, including soil
and groundwater sampling, at the Cape Ann Industrial Park and South Deerfield
properties of Rule. Rule shall provide access to both properties for the
purpose of allowing ENSR to conduct such sampling. In the event that the
environmental site assessment reports produced by ENSR disclose the existence of
one or more Hazardous Materials at levels above any Applicable Governmental
Standard, the remediation or clean-up of which is, in the opinion of ENSR,
likely to cost at least $4 million, Parent may, by written notice to Rule,
terminate this Agreement without penalty. Rule shall have three (3) days
following its receipt of such notice of termination during which Rule may serve
Parent with written notification of Rule's intent to dispute such termination.
In the event of such a dispute, within three (3) days thereof, the parties
shall, by mutual agreement, select an environmental consultant who shall be
instructed to determine within fourteen (14) days whether ENSR's estimated
remediation and clean-up costs are reasonable in light of the available
information. The determination of such environmental consultant shall be final
and not appealable. As used in this Section 11.2, "Applicable Governmental
Standard" means, with respect to the presence of any Hazardous Materials in any
environmental medium or media, any clean-up or remediation levels that would be
applied by the Massachusetts Department of Environmental Protection or the U.S.
Environmental Protection
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Agency. Parent's right to terminate this Agreement pursuant to this Section
11.2 shall expire on September 8, 1995.
SECTION 11.3 PROCEDURE UPON TERMINATION.
In the event of termination by Parent, Rule or both, pursuant to this
Article XI, written notice thereof shall promptly be given to the other party or
parties and the obligations of Parent and Sub and Rule under this Agreement
shall terminate without further action. Upon any such termination:
(a) each party will redeliver all documents, workpapers and other
materials of the other party or parties relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party or parties furnishing the same;
(b) all information received by any of the parties shall be kept
confidential in accordance with Section 10.1;
(c) except as provided in Section 11.3(d), no party shall have any
liability or further obligation to any other party, except for such legal and
equitable rights and remedies as any party may have under this Agreement or
otherwise, by reason of any breach or violation of this Agreement by the other
party; and
(d) in the event of termination pursuant to Section 11.1(b), 11.1(e)
(except if the failure to obtain the required vote resulted directly from the
failure of Parent to exercise the Parent Option and to vote the shares of Stock
acquired upon such exercise in favor of the Merger), 11.1(g), 11.1(h) or 11.2,
Rule shall reimburse Parent and Sub for all of their out-of-pocket expenses
reasonably incurred in connection with the transactions contemplated hereby
within fifteen (15) business days after Parent provides Rule with a listing of
its out-of-pocket expenses; provided, however, that Rule shall not be obligated
to reimburse more than $450,000 ($200,000 in the case of termination pursuant to
Section 11.2) in expenses hereunder.
ARTICLE XII--MISCELLANEOUS
SECTION 12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Parent, Sub and Rule contained
in Articles V and VI herein and in any certificate executed and delivered by
either Parent, Sub or Rule in connection with this Agreement shall terminate and
expire at the Effective Time; provided that no such representations or
warranties shall be deemed to be terminated or extinguished so as to deprive
Parent, Sub or Rule (or any director, officer or controlling person thereof) of
any defense in law or equity which otherwise would be available against the
claims of any person, including without limitation the Stockholders, the
aforesaid representations and
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warranties being material inducements to the consummation by Parent, Sub and
Rule of the transactions contemplated herein.
SECTION 12.2 SERVICE OF PROCESS.
Service of process on Rule or Parent or Sub for any claim, legal
action or proceeding under this Agreement may be made in the manner set forth in
Section 12.3.
SECTION 12.3 NOTICES.
All notices, requests, consents and other communications hereunder
shall be deemed given if delivered personally (including by courier), telecopied
(confirmation of such receipt by confirmed facsimile transmission being deemed
receipt of communication sent by facsimile) or mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses or to
other such addresses as may be furnished in writing by one party to the others:
(a) if to Rule (prior to Closing):
Rule Industries, Inc.
70 Blanchard Road
Burlington, Massachusetts 01803
Attention: John A. Geishecker, Jr.
with copies to:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attention: Robert L. Birnbaum, Esquire
and to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: John A. Healy, Esquire
(b) if to Parent, Sub or Surviving Corporation:
Greenfield Industries, Inc.
470 Old Evans Road
Evans, Georgia 30809
Attention: Chief Executive Officer
47
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with a copy to:
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
Attention: Ira H. Polon, Esquire
SECTION 12.4 GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without regard to such
jurisdiction's conflict of laws principles.
SECTION 12.5 MODIFICATION; WAIVER.
This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by each of Parent and Sub and Rule.
Any party may waive any misrepresentation by any other party, or any breach of
warranty by, or failure to perform any covenant, obligation or agreement of, any
other party, PROVIDED that mere inaction or failure to exercise any right,
remedy or option under this Agreement, or delaying in exercising the same, will
not operate as nor shall be construed as a waiver, and no waiver will be
effective unless set forth in writing and only to the extent specifically stated
therein.
SECTION 12.6 ENTIRE AGREEMENT.
This Agreement, the Schedules and Exhibits hereto and any other
agreements or certificates delivered pursuant hereto constitute the entire
agreement of the parties hereto with respect to the matters contemplated hereby
and supersede all previous written or oral negotiations, commitments,
representations and agreements.
SECTION 12.7 ASSIGNMENT; SUCCESSORS AND ASSIGNS.
This Agreement may not be assigned by Rule without the prior written
consent of each of Parent and Sub. Prior to the Closing Date, this Agreement
may not be assigned by Parent or Sub without the prior written consent of Rule.
After the Closing, each of Parent and the Surviving Corporation may assign this
Agreement; provided, however, no such assignment shall relieve Parent or
Surviving Corporation of its indemnification obligations pursuant to Section
10.3. All covenants, representations, warranties and agreements of the parties
contained herein shall be binding upon and inure to the benefit of their
respective successors and permitted assigns.
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SECTION 12.8 SEVERABILITY.
The provisions of this Agreement are severable, and in the event that
any one or more provisions are deemed illegal or unenforceable, the remaining
provisions shall remain in full force and effect.
SECTION 12.9 NO THIRD PARTY BENEFICIARY.
This Agreement is intended and agreed to be solely for the benefit of
the parties hereto and Rule Stockholders and holders of Rule Stock Options and
Rule Warrants, and no other party shall accrue any benefit, claim or right of
any kind whatsoever pursuant to, under, by or through this Agreement.
SECTION 12.10 EXPENSES.
Except as otherwise expressly provided herein, each party to this
Agreement will pay his, her or its own expenses in connection with the
negotiation of this Agreement, the performance of its obligations hereunder, and
the consummation of the transactions contemplated herein.
SECTION 12.11 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger as of the date first written above.
GREENFIELD INDUSTRIES, INC.
By: /s/ Paul W. Jones
------------------------
Name: Paul W. Jones
Title: President and
Chief Financial
Officer
RULE ACQUISITION CORPORATION
By: /s/ GARY L. WELLER By: /s/ PAUL W. JONES
-------------------------- ------------------------
Name: Gary L. Weller Name: Paul W. Jones
Title: Treasurer Title: President
(SEAL)
RULE INDUSTRIES, INC.
By: /S/ JOHN A. GEISHECKER, JR. By: /S/ GARY M. SABLE
---------------------------- -----------------------
Name: John A. Geishecker, Jr. Name: Gary M. Sable
Title: Treasurer Title: Executive Vice
President
(SEAL)
<PAGE>
EXHIBIT A
CERTAIN SENIOR EXECUTIVES
John Geishecker, Jr.
Robert Grant
Ralph Flaherty
Henry Libby
Gary Sable
<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated August 11, 1995,
by and between Rule Industries, Inc., a Massachusetts corporation ("Rule"), and
Greenfield Industries, Inc., a Delaware corporation ("Parent").
WHEREAS, Rule, Parent and Rule Acquisition Corporation, a
Massachusetts corporation and wholly owned subsidiary of Parent ("Sub"), have
entered into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"), providing for the Merger of Sub with and into Rule; and
WHEREAS, to induce Parent to enter into the Merger Agreement, Rule has
agreed to grant the Stock Option (as hereafter defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein and in the Merger Agreement, the parties hereby agree
as follows:
1. GRANT OF STOCK OPTION. Rule hereby irrevocably grants to Parent an
option (the "Stock Option") to purchase up to 630,000 shares (the "Shares") of
common stock of Rule, par value $0.01 per share (the "Stock"), at $8.00 per
Share (the "Exercise Price").
2. EXERCISE OF STOCK OPTION. The Stock Option may be exercised by
Parent or its permitted assignee, in whole or in part, at any time or from time
to time, on or before the termination of this Agreement (the "Termination
Date"). The Termination Date shall be the earlier of (i) the Effective Time (as
defined in Section 2.2 of the Merger Agreement), (ii) the closing of an
Acquisition Transaction (as defined in Section 7.4 of the Merger Agreement),
(iii) the termination of the Merger Agreement pursuant to Section 11.2 thereof
or (iv) June 30, 1996. In the event Parent wishes to exercise the Stock Option,
Parent shall send a written notice to Rule specifying the total number of Shares
it will purchase and a place and date not later than ten business days from the
date such notice is given for the closing of such purchase. Rule agrees to use
all proceeds received upon exercise of the Stock Option to pay down any
principal and interest owed on its senior indebtedness.
3. PAYMENT AND DELIVERY OF CERTIFICATE(S). At any closing hereunder,
Parent or its permitted assignee shall make payment to Rule of the aggregate
Exercise Price for the Shares so purchased by certified or official bank check
or wire transfer, and Rule shall deliver to Parent or its permitted assignee a
certificate or certificates in form satisfactory to Parent
<PAGE>
EXHIBIT B
representing the number of Shares being purchased in the denominations
designated by Parent in its notice of exercise.
4. RULE RESIDUAL TRUST. The ownership of the Shares acquired upon
exercise of the Stock Option granted hereunder shall not entitle Parent to
participate in or otherwise receive proceeds from the Rule Residual Trust (as
defined in Section 4.2 of the Merger Agreement).
5. REPRESENTATIONS AND WARRANTIES OF RULE. Rule hereby represents and
warrants to Parent as follows:
a. DUE ORGANIZATION. Rule is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the requisite corporate power to enter into and perform
this Agreement.
b. DUE AUTHORIZATION. This Agreement has been duly authorized by
all necessary corporate action on the part of Rule and constitutes a valid and
binding obligation of Rule enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally.
c. STOCK OPTION SHARES. Rule has taken all necessary corporate
and other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof through the Termination Date will keep reserved for
issuance upon exercise of the Stock Option, 630,000 shares of Stock, all of
which, upon issuance pursuant hereto, shall be duly and validly issued, fully
paid and nonassessable, and shall be delivered free and clear of all charges,
claims, liens, encumbrances, security interests or rights of others, including
any preemptive rights.
d. NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the Articles of Organization or By-Laws of Rule or of
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to Rule.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents
and warrants to Rule as follows:
(a) DUE ORGANIZATION. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to enter into and perform this Agreement.
2
<PAGE>
EXHIBIT B
(b) DUE AUTHORIZATION. This Agreement has been duly authorized
by all necessary corporate action on the part of Parent.
(c) NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the Certificate of Incorporation or By-Laws of Parent
or of any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to Parent.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in the Shares by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
the number and kind of shares or securities subject to the Stock Option and the
Exercise Price per Share shall be appropriately adjusted.
8. MISCELLANEOUS.
a. EFFECT AND ASSIGNMENT OF AGREEMENT. This Agreement shall be
binding upon and enforceable by and against the parties hereto and their
respective successors and assigns; provided that this Agreement may be assigned
only to a direct or indirect wholly owned subsidiary of Parent.
b. NOTICES. All notices, requests, consents and other
communications hereunder shall be deemed given if delivered personally
(including by courier), telecopied (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communication sent by facsimile)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses or to such other addresses as may be
furnished in writing by one party to the other:
(i) if to Rule:
Rule Industries, Inc.
70 Blanchard Road
Burlington, Massachusetts 01803
Attention: John A. Geishecker, Jr.
with copies to:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attention: Robert L. Birnbaum, Esq.
3
<PAGE>
EXHIBIT B
and to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: John A. Healy, Esquire
(ii) if to Parent:
Greenfield Industries, Inc.
470 Old Evans Road
Evans, Georgia 30809
Attention: Chief Executive Officer
with a copy to:
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
Attention: Ira H. Polon, Esquire
(c) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without regard to such jurisdiction's conflict of laws principles.
(d) MODIFICATION; WAIVER. This Agreement shall not be
altered or otherwise amended except pursuant to an instrument in writing signed
by each of Parent and Rule. Either party may waive any misrepresentation by the
other party, or any breach of warranty by, or failure to perform any covenant,
obligation or agreement of, the other party, PROVIDED that mere inaction or
failure to exercise any right, remedy or option under this Agreement, or
delaying in exercising the same, will not operate as nor shall be construed as a
waiver, and no waiver will be effective unless set forth in writing and only to
the extent specifically stated therein.
(e) ENTIRE AGREEMENT. This Agreement, and any other agreements
or certificates delivered pursuant hereto constitute the entire agreement of the
parties hereto with respect to the matters contemplated hereby and supersede all
previous written or oral negotiations, commitments, representations and
agreements.
(f) SEVERABILITY. The provisions of this Agreement are
severable, and in the event that any one or more provisions are deemed illegal
or unenforceable, the remaining provisions shall remain in full force and
effect.
4
<PAGE>
EXHIBIT B
(g) EXPENSES. Except as otherwise expressly provided herein,
each party to this Agreement will pay its own expenses in connection with the
negotiation of this Agreement, the performance of its obligations hereunder, and
the consummation of the transactions contemplated herein.
(h) EXECUTION IN COUNTERPART. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Parent and Rule have caused this Agreement to take
effect as of the date set forth above.
GREENFIELD INDUSTRIES, INC.
By:________________________________
Name:
Title:
RULE INDUSTRIES, INC.
By:________________________________
Name:
Title:
5
<PAGE>
EXHIBIT C
[LETTERHEAD OF FOLEY, HOAG & ELIOT]
_________ __, 1995
Greenfield Industries, Inc.
470 Old Evans Road
Evans, Georgia 30809
Rule Acquisition Corporation
470 Old Evans Road
Evans, Georgia 30809
Ladies and Gentlemen:
We have acted as counsel to Rule Industries, Inc., a Massachusetts
corporation ("Rule"), in connection with the merger (the "Merger") of Rule
Acquisition Corporation, a Massachusetts corporation ("Sub") and a wholly owned
subsidiary of Greenfield Industries, Inc., a Delaware corporation ("Parent"),
with and into Rule pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement") dated August 11, 1995, by and among Rule, Parent and Sub.
This opinion is being delivered to you pursuant to Section 8.5 of the
Merger Agreement. Capitalized terms not defined herein shall have the
respective meanings set forth in the Merger Agreement.
We have examined the Articles of Organization and By-Laws of Rule and
the corporate proceedings of Rule in connection with the transactions
contemplated by the Merger Agreement. Also, we have examined such matters of
law, and examined and relied upon originals, or copies, certified or otherwise
identified to our satisfaction, of such documents, certificates of public
officials and others, and other instruments and documents, as in our judgment
are necessary or appropriate to enable us to render the opinions expressed
below. Except as indicated in the previous sentence with respect to
certificates of public officials, we have not made inquiries of third parties,
other than Rule and its officers, nor have we searched the files or records of
any governmental agency or authority.
<PAGE>
Greenfield Industries, Inc.
Rule Acquisition Corporation
______________________ __, 1995
Page 2
Based upon and subject to the foregoing and further subject to the
limitations and qualifications set forth below, it is our opinion that:
(1) Rule is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(2) Rule has full corporate power and authority to enter into the
Merger Agreement, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by Rule of, and
the performance of Rule's obligations under, the Merger Agreement have been duly
authorized by all necessary corporate action on the part of Rule and its
stockholders, and no other corporate proceedings on the part of Rule or its
stockholders are necessary to authorize the execution, delivery and performance
of the Merger Agreement by Rule and the consummation by Rule of the transactions
contemplated thereby, and neither the execution and delivery thereof by Rule,
nor the consummation by Rule of the transactions contemplated thereby, nor
compliance by Rule with any of the terms thereof;
(a) violates the provisions of any applicable law, statute, rule
or regulation;
(b) violates or conflicts with the Articles of Organization or
By-Laws of Rule;
(c) violates any order of any court or regulatory body, of which
we have knowledge, binding on Rule or any writ, judgment, injunction, decree,
determination or award, of which we have knowledge, presently in effect and
applicable to Rule; or
(d) will result in a breach of, will constitute a default under,
or will result in the imposition of any lien, charge or encumbrance under, any
material contract to which, to the best of our knowledge, Rule is a party.
(3) The Merger Agreement has been duly and validly executed and
delivered by Rule and constitutes the legal, valid and binding obligations of
Rule, enforceable against Rule, in accordance with its terms, except as the
enforceability thereof may be limited by
<PAGE>
Greenfield Industries, Inc.
Rule Acquisition Corporation
______________________ __, 1995
Page 3
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights generally.
(4) Prior to the Effective Time of the Merger, the authorized capital
stock of Rule consisted of 5,000,000 shares of common stock, of which 2,640,532
shares were issued and outstanding, and 100,000 shares of preferred stock, of
which no shares were issued and outstanding. The issued and outstanding shares
of common stock were duly authorized, validly issued, fully paid and
nonassessable.
(5) No consent, approval or other action by, or any notice to or
filing with any governmental authority is required in connection with the
execution and delivery of the Merger Agreement or the consummation of the
Merger, except for filings under the HSR Act and except for the filing of the
Articles of Merger with the Secretary of the Commonwealth of Massachusetts.
(6) The Merger has been consummated in accordance with the Business
Corporation Law of the Commonwealth of Massachusetts, and the Effective Time is
________ __, 1995.
The opinions set forth herein are subject to the following
qualifications, reservations and assumptions:
(a) We have assumed the legal capacity of all natural persons;
the genuineness of the signatures on all documents, the authenticity of all
documents submitted to us as originals, the conformity to originals of documents
submitted to us as copies thereof; and the continued accuracy of all
certificates and telegrams from public officials dated earlier than the date of
this letter.
(b) We have assumed (i) the Merger Agreement constitutes the
legal, valid and binding obligation of the parties thereto other than Rule,
enforceable in accordance with its terms, (ii) the requisite corporate power and
authority relative to the Merger Agreement of the parties thereto other than
Rule and (iii) the due authorization, execution and delivery of the Merger
Agreement by the parties thereto other than Rule.
<PAGE>
Greenfield Industries, Inc.
Rule Acquisition Corporation
______________________ __, 1995
Page 4
(c) No opinion is expressed as to (i) any specific remedy that
may be granted, imposed or rendered and, in particular, no opinion is expressed
as to the availability of equitable remedies as such for the enforcement of any
provision of the Merger Agreement, and (ii) the legality, validity, binding
effect or enforceability of choice of law provisions of the Merger Agreement or
provisions purporting to confer jurisdiction on courts.
(d) With respect to any factual matters involved which are
material to this opinion, we have relied upon certificates or statements of
officers and other representatives of Rule and the representations of Rule
contained in the Merger Agreement.
(e) We express no opinion and assume no responsibility as to the
effect of, or consequences resulting from, any fact or circumstance, including
without limitation, legislative or other changes in the law, occurring
subsequent to the date of this letter.
This opinion is limited to the laws of the Commonwealth of
Massachusetts and the federal laws of the United States, and we express no
opinion as to the laws of any other jurisdiction.
This opinion is being furnished to you pursuant to the Merger
Agreement solely for your benefit and may be relied upon by you in connection
therewith, but may not be relied upon for any other purpose or by any other
person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT D
[LETTERHEAD OF DICKSTEIN, SHAPIRO & MORIN, L.L.P.]
_________ ___, 1995
Rule Industries, Inc.
70 Blanchard Road
Burlington, Massachusetts
Ladies and Gentlemen:
We have acted as counsel to Greenfield Industries, Inc., a Delaware
corporation ("Parent"), and its wholly owned subsidiary, Rule Acquisition
Corporation, a Massachusetts corporation ("Sub"), in connection with the merger
(the "Merger") of Sub with and into Rule Industries, Inc., a Massachusetts
corporation ("Rule"), pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement") dated August 11, 1995, by and among Parent, Sub and Rule.
This opinion is being delivered to you pursuant to Section 9.4 of the
Merger Agreement. Capitalized terms not defined herein shall have the
respective meanings set forth in the Merger Agreement.
We have examined the Certificate of Incorporation and By-Laws of
Parent and the Articles of Organization and By-Laws of Sub and the corporate
proceedings of each of Parent and Sub in connection with the transactions
contemplated by the Merger Agreement. Also, we have examined such matters of
law, and examined and relied upon originals, or copies, certified or otherwise
identified to our satisfaction, of such documents, certificates of public
officials and others, and other instruments and documents, as in our judgment
are necessary or appropriate to enable us to render the opinions expressed
below. Except as indicated in the previous sentence with respect to
certificates of public officials, we have not made inquiries of third parties,
other than Parent, Sub and their officers, nor have we searched the files or
records of any governmental agency or authority.
<PAGE>
Rule Industries, Inc.
_____________ __, 1995
Page 2
Based upon and subject to the foregoing and further subject to the
limitations and qualifications set forth below, it is our opinion that:
(1) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(2) Parent has full corporate power and authority to enter into the
Merger Agreement, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by Parent of, and
the performance of Parent's obligations under, the Merger Agreement have been
duly authorized by all necessary corporate action on the part of Parent, and no
other corporate proceedings on the part of Parent or its stockholders are
necessary to authorize the execution, delivery and performance of the Merger
Agreement by Parent and the consummation by Parent of the transactions
contemplated thereby, and neither the execution and delivery thereof by Parent,
nor the consummation by Parent of the transactions contemplated thereby, nor
compliance by Parent with any of the terms thereof;
(a) violates the provisions of any applicable law, statute, rule
or regulation;
(b) violates or conflicts with the Certificate of Incorporation
or By-Laws of Parent;
(c) violates any order of any court or regulatory body, of which
we have knowledge, binding on Parent or any writ, judgment, injunction, decree,
determination or award, of which we have knowledge, presently in effect and
applicable to Parent; or
(d) will result in a breach of, will constitute a default under,
or will result in the imposition of any lien, charge or encumbrance under, any
material contract to which, of which we have knowledge, Parent is a party.
(3) The Merger Agreement has been duly and validly executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent, in accordance with its terms, except as the
enforceability thereof
<PAGE>
Rule Industries, Inc.
_____________ __, 1995
Page 3
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights.
(4) Sub is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(5) Sub has full corporate power and authority to enter into the
Merger Agreement, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by Sub of, and the
performance of Sub's obligations under, the Merger Agreement has been duly
authorized by all necessary corporate action on the part of Sub, and no other
corporate proceedings on the part of Sub or its stockholder are necessary to
authorize the execution, delivery and performance of the Merger Agreement by Sub
and the consummation by Sub of the transactions contemplated thereby, and
neither the execution and delivery thereof by Sub, nor the consummation by Sub
of the transactions contemplated thereby, nor compliance by Sub with any of the
terms thereof;
(a) violates the provisions of any law, statute, rule or
regulation;
(b) violates or conflicts with the Articles of Organization or
By-Laws of Sub;
(c) violates any order of any court or regulatory body, of which
we have knowledge, binding on Sub or any writ, judgement, injunction, decree,
determination or award, of which we have knowledge, presently in effect and
applicable to Sub; or
(d) will result in a breach of, will constitute a default under,
or will result in the imposition of any lien, charge or encumbrance under, any
material contract to which, to the best of our knowledge, Sub is a party.
(6) The Merger Agreement has been duly and validly executed and
delivered by Sub and constitutes the legal, valid and binding obligation of Sub,
enforceable against Sub, in accordance with its terms, except as the
enforceability thereof may be limited by
<PAGE>
Rule Industries, Inc.
_____________ __, 1995
Page 4
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights generally.
(7) No consent, approval or other action by, or any notice to or
filing with any governmental authority is required in connection with the
execution and delivery of the Merger Agreement or the consummation of the
Merger, except for filings under the HSR Act.
The opinions set forth herein are subject to the following
qualifications, reservations and assumptions:
(a) We have assumed the legal capacity of all natural persons;
the genuineness of the signatures on all documents, the authenticity of all
documents submitted to us as originals, the conformity to originals of documents
submitted to us as copies thereof; and the continued accuracy of all
certificates and telegrams from public officials dated earlier than the date of
this letter.
(b) We have assumed (i) the Merger Agreement constitutes the
legal, valid and binding obligation of Rule, enforceable in accordance with its
terms, (ii) the requisite corporate power and authority relative to the Merger
Agreement of Rule and (iii) the due authorization, execution and delivery of the
Merger Agreement by Rule.
(c) No opinion is expressed as to (i) any specific remedy that
may be granted, imposed or rendered and, in particular, no opinion is expressed
as to the availability of equitable remedies as such for the enforcement of any
provision of the Merger Agreement, and (ii) the legality, validity, binding
effect or enforceability of choice of law provisions of the Merger Agreement or
provisions purporting to confer jurisdiction on courts.
(d) With respect to any factual matters involved which are
material to this opinion, we have relied upon certificates or statements of
officers and other representatives of each of Parent and Sub and the
representations of each of Parent and Sub contained in the Merger Agreement.
(e) We express no opinion and assume no responsibility as to the
effect of, or consequences resulting
<PAGE>
Rule Industries, Inc.
_____________ __, 1995
Page 5
from, any fact or circumstance, including without limitation, legislative or
other changes in the law, occurring subsequent to the date of this letter.
This opinion is limited to the laws of the District of Columbia, the
General Corporation Law of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the laws of any other
jurisdiction. With respect to our opinion in paragraphs 3,6 and 7, we have
assumed with your permission that the laws of the Commonwealth of Massachusetts
are the same as the laws of the District of Columbia.
This opinion is being furnished to you pursuant to the Merger
Agreement solely for your benefit and may be relied upon by you in connection
therewith, but may not be relied upon for any other purpose or by any other
person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT (f)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated August 11, 1995,
by and between Rule Industries, Inc., a Massachusetts corporation ("Rule"), and
Greenfield Industries, Inc., a Delaware corporation ("Parent").
WHEREAS, Rule, Parent and Rule Acquisition Corporation, a
Massachusetts corporation and wholly owned subsidiary of Parent ("Sub"), have
entered into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"), providing for the Merger of Sub with and into Rule; and
WHEREAS, to induce Parent to enter into the Merger Agreement, Rule has
agreed to grant the Stock Option (as hereafter defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein and in the Merger Agreement, the parties hereby agree
as follows:
1. GRANT OF STOCK OPTION. Rule hereby irrevocably grants to Parent
an option (the "Stock Option") to purchase up to 630,000 shares (the "Shares")
of common stock of Rule, par value $0.01 per share (the "Stock"), at $8.00 per
Share (the "Exercise Price").
2. EXERCISE OF STOCK OPTION. The Stock Option may be exercised by
Parent or its permitted assignee, in whole or in part, at any time or from time
to time, on or before the termination of this Agreement (the "Termination
Date"). The Termination Date shall be the earlier of (i) the Effective Time (as
defined in Section 2.2 of the Merger Agreement), (ii) the closing of an
Acquisition Transaction (as defined in Section 7.4 of the Merger Agreement),
(iii) the termination of the Merger Agreement pursuant to Section 11.2 thereof
or (iv) June 30, 1996. In the event Parent wishes to exercise the Stock Option,
Parent shall send a written notice to Rule specifying the total number of Shares
it will purchase and a place and date not later than ten business days from the
date such notice is given for the closing of such purchase. Rule agrees to use
all proceeds received upon exercise of the Stock Option to pay down any
principal and interest owed on its senior indebtedness.
3. PAYMENT AND DELIVERY OF CERTIFICATE(S). At any closing
hereunder, Parent or its permitted assignee shall make payment to Rule of the
aggregate Exercise Price for the Shares so purchased by certified or official
bank check or wire transfer, and Rule shall deliver to Parent or its permitted
assignee a certificate or certificates in form satisfactory to Parent
<PAGE>
representing the number of Shares being purchased in the denominations
designated by Parent in its notice of exercise.
4. RULE RESIDUAL TRUST. The ownership of the Shares acquired upon
exercise of the Stock Option granted hereunder shall not entitle Parent to
participate in or otherwise receive proceeds from the Rule Residual Trust (as
defined in Section 4.2 of the Merger Agreement).
5. REPRESENTATIONS AND WARRANTIES OF RULE. Rule hereby represents
and warrants to Parent as follows:
(a) DUE ORGANIZATION. Rule is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the requisite corporate power to enter into and perform
this Agreement.
(b) DUE AUTHORIZATION. This Agreement has been duly authorized
by all necessary corporate action on the part of Rule and constitutes a valid
and binding obligation of Rule enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally.
(c) STOCK OPTION SHARES. Rule has taken all necessary
corporate and other action to authorize and reserve and to permit it to issue,
and at all times from the date hereof through the Termination Date will keep
reserved for issuance upon exercise of the Stock Option, 630,000 shares of
Stock, all of which, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid and nonassessable, and shall be delivered free and clear of
all charges, claims, liens, encumbrances, security interests or rights of
others, including any preemptive rights.
(d) NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the Articles of Organization or By-Laws of Rule or of
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to Rule.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to Rule as follows:
(a) DUE ORGANIZATION. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to enter into and perform this Agreement.
2
<PAGE>
(b) DUE AUTHORIZATION. This Agreement has been duly authorized
by all necessary corporate action on the part of Parent.
(c) NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the Certificate of Incorporation or By-Laws of Parent
or of any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to Parent.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in the Shares by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
the number and kind of shares or securities subject to the Stock Option and the
Exercise Price per Share shall be appropriately adjusted.
8. MISCELLANEOUS.
(a) EFFECT AND ASSIGNMENT OF AGREEMENT. This Agreement shall be
binding upon and enforceable by and against the parties hereto and their
respective successors and assigns; provided that this Agreement may be assigned
only to a direct or indirect wholly owned subsidiary of Parent.
(b) NOTICES. All notices, requests, consents and other
communications hereunder shall be deemed given if delivered personally
(including by courier), telecopied (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communication sent by facsimile)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses or to such other addresses as may be
furnished in writing by one party to the other:
(i) if to Rule:
Rule Industries, Inc.
70 Blanchard Road
Burlington, Massachusetts 01803
Attention: John A. Geishecker, Jr.
with copies to:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attention: Robert L. Birnbaum, Esq.
3
<PAGE>
and to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: John A. Healy, Esquire
(ii) if to Parent:
Greenfield Industries, Inc.
470 Old Evans Road
Evans, Georgia 30809
Attention: Chief Executive Officer
with a copy to:
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
Attention: Ira H. Polon, Esquire
(c) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without regard to such jurisdiction's conflict of laws principles.
(d) MODIFICATION; WAIVER. This Agreement shall not be altered
or otherwise amended except pursuant to an instrument in writing signed by each
of Parent and Rule. Either party may waive any misrepresentation by the other
party, or any breach of warranty by, or failure to perform any covenant,
obligation or agreement of, the other party, PROVIDED that mere inaction or
failure to exercise any right, remedy or option under this Agreement, or
delaying in exercising the same, will not operate as nor shall be construed as a
waiver, and no waiver will be effective unless set forth in writing and only to
the extent specifically stated therein.
(e) ENTIRE AGREEMENT. This Agreement, and any other agreements
or certificates delivered pursuant hereto constitute the entire agreement of the
parties hereto with respect to the matters contemplated hereby and supersede all
previous written or oral negotiations, commitments, representations and
agreements.
(f) SEVERABILITY. The provisions of this Agreement are
severable, and in the event that any one or more provisions are deemed illegal
or unenforceable, the remaining provisions shall remain in full force and
effect.
4
<PAGE>
(g) EXPENSES. Except as otherwise expressly provided herein,
each party to this Agreement will pay its own expenses in connection with the
negotiation of this Agreement, the performance of its obligations hereunder, and
the consummation of the transactions contemplated herein.
(h) EXECUTION IN COUNTERPART. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Parent and Rule have caused this Agreement to take
effect as of the date set forth above.
GREENFIELD INDUSTRIES, INC.
By: /s/ Gary L. Weller
----------------------------
Name: Gary L. Weller
Title: Senior Vice President and
Chief Financial Officer
RULE INDUSTRIES, INC.
By: /s/ John A. Geishecker, Jr.
----------------------------
Name: John A. Geishecker. Jr.
Title: Vice President
5
