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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
Rule Industries, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
781355-10-2
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(CUSIP Number)
Gary L. Weller
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470 Old Evans Road
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Evans, Georgia 30803-2587
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(706) 650-4218
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
July 20, 1995
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(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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Page 2 of 10 Pages
Check the following box if a fee is being paid with the statement /X/. (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
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CUSIP NO. 781355-10-2 PAGE 3 OF PAGES
----- -----
- ------------------------- --------------------------
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Greenfield Industries, Inc.
04-2917072
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC, BK
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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
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7 SOLE VOTING POWER
630,000 shares of Common Stock, par value $.01
NUMBER OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY EACH 0
REPORTING --------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
630,000 shares of Common Stock, par value $.01
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
630,000 shares of Common Stock, par value $.01
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / /
CERTAIN SHARES*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.3%
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14 TYPE OF REPORTING PERSON*
CO
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*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.
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Page 4 of 10 Pages
Item 1. SECURITY AND ISSUER.
This Schedule 13D relates to the beneficial ownership by the
undersigned of the common stock, $.01 par value per share (the "Common Stock"),
of Rule Industries, Inc., a Massachusetts corporation ("Rule" or the "Issuer"),
whose principal executive offices are located at 70 Blanchard Road, Burlington,
Massachusetts 01803.
Item 2. NAME AND ADDRESS.
This Schedule 13D is filed by Greenfield Industries, Inc.
("Greenfield"). Greenfield is a Delaware corporation. Its principal executive
offices are located at 470 Old Evans Road, Evans, Georgia 30809. Greenfield is
a leading worldwide manufacturer of expendable cutting tools and related
products used in a variety of industrial, electronics, oilfield equipment,
mining and wear parts and consumer markets.
The following are the names and positions with Greenfield of the
directors and executive officers of Greenfield and the present principal
occupation and principal business and address of each such person and of any
corporation or other organization employing such person:
John W. Burge, Jr. - Director
Principal
John W. Burge & Associates
(a management consulting firm)
11711 Chanticlear Court
Pensacola, FL 32507-9166
Roger B. Farley
Vice President - Human Resources
Greenfield Industries, Inc.
470 Old Evans Road
Evans, GA 30809
Peter S. Finley - Director
Senior Vice President, Corporate Development
Harbour Group Industries, Inc.
(a company which provides
corporate development services)
7701 Forsyth Blvd., Suite 600
St. Louis, MO 63105
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Page 5 of 10 Pages
James C. Janning - Director
President
Harbour Group Ltd.
(a company which provides
operations management services)
7701 Forsyth Blvd., Suite 600
St. Louis, MO 63105
Paul W. Jones - Director
President and Chief Executive Officer
Greenfield Industries, Inc.
470 Old Evans Road
Evans, GA 30809
Robert E. Lefton - Director
President and Chief Executive Officer
Psychological Associates, Inc.
(an international consulting, training
and development firm)
8112 Maryland Avenue, Suite 300
St. Louis, MO 63105
Donald E. Nickelson - Director
Vice Chairman - Harbour Group Industries, Inc.
7701 Forsyth Blvd., Suite 600
St. Louis, MO 63105
Robert W. Pratt, Jr. - Director
Strategic Management Consultant
c/o Michael Allen Co.
1 Gorham Island
Westport, CT 06880
Julian M. Seeherman - Director
Chairman
Venture Stores, Inc.
(a retail chain of mass merchandising stores)
2001 E. Terra Lane
O'Fallon, MO 63366-0110
Dennis W. Sheehan - Director
Chairman of the Board, President and
Chief Executive Officer
AXIA, Incorporated
(a manufacturer of commercial and
industrial products)
2001 Spring Road, Suite 300
Oak Brook, IL 60521
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Page 6 of 10 Pages
Gary L. Weller - Senior Vice President and Chief
Financial Officer
Greenfield Industries, Inc.
470 Old Evans Road
Evans, GA 30809
Neither Greenfield, nor any of Greenfield's directors or executive
officers, have, during the past five years (i) been convicted in a criminal
proceeding (exclusive of traffic violations or similar misdemeanors) or (ii)
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding been subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
All of the directors and executive officers of Greenfield listed above
are U.S. citizens
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
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. As set forth more fully in Item 5, Greenfield has
obtained the right to acquire an aggregate of 630,000 shares of Common Stock, of
Rule in connection with its execution of a letter of intent dated July 20, 1995
between Greenfield and Rule (the "Letter of Intent") providing for the
acquisition of Rule by Greenfield at a substantial premium to the market price
for Rule's Common Stock prevailing immediately prior to execution of such Letter
of Intent. Exercise of the option to acquire beneficial ownership is subject to
the satisfaction of certain conditions more fully described in Item 5. To the
knowledge of the undersigned, the conditions to exercise of the option have not
been satisfied and accordingly, such option is not currently exercisable.
In the event the option 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,
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Page 7 of 10 Pages
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 Letter of Intent described in Items 4
and 5 hereof.
Item 4. PURPOSE OF TRANSACTION.
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 the Letter of Intent. The Letter of Intent provides, INTER ALIA,
for the negotiation and execution of a definitive merger agreement (the "Merger
Agreement") whereby all of Rule's outstanding Common Stock would be acquired by
Greenfield. In the event the merger contemplated by the Letter of Intent 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) make changes to Rule's present capitalization
and/or dividend policy, (iv) cause Rule's Common Stock to cease to be quoted on
the Nasdaq National Market, and (v) 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.
Greenfield may be deemed to be the beneficial owner of 630,000 shares
of Rule Common Stock, or 19.3% of Rule's Common Stock to be outstanding upon the
issuance of such shares, based upon the grant to Greenfield by Rule of an option
to purchase all such shares at a price of $8.00 per share in the Letter of
Intent. As set forth in the Letter of Intent, the option has been granted in
connection with Greenfield's proposal to acquire all of the capital stock of
Rule in a transaction in which Rule's stockholders would receive a purchase
price of $15.30 per share, payable in cash.
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Page 8 of 10 Pages
The option becomes immediately exercisable, in whole only, on the
tender of the exercise price in cash, upon a breach by the Issuer of certain of
its obligations to Greenfield under the Letter of Intent. Specifically, the
option is exercisable if the Issuer (a) enters into a binding agreement with a
party other than Greenfield or its subsidiaries or affiliates relating to any
transaction (an "Extraordinary Transaction") involving (i) the sale of a
material number of shares of its capital stock, (ii) a sale of all or
substantially all of its assets or (iii) a merger, consolidation or other
business combination or (b) enters into a definitive agreement for an
Extraordinary Transaction after providing any party with nonpublic information,
engaging in discussions or negotiations or otherwise soliciting any person with
respect to an Extraordinary Transaction. The option terminates upon the earlier
of (a) the execution and delivery of a Merger Agreement or (b) December 31,
1995.
The Letter of Intent also provides that, upon the execution of a
Merger Agreement, Rule will grant Greenfield an option to purchase 630,000
shares of Common Stock at a price of $8.00 per share which will replace the
option granted in the Letter of Intent, which option terminates upon the
execution of such Merger Agreement. The Letter of Intent contemplates that such
option would be immediately exercisable and would terminate (a) upon the
consummation of the merger, (b) the termination of the Merger Agreement under
certain circumstances to be specified in the Merger Agreement or (c) June 30,
1996. The Issuer also agreed that all proceeds from the exercise of such option
would be used exclusively to reduce its indebtedness.
Greenfield has sole power to exercise the option granted in the Letter
of Intent. If exercised, Greenfield would have sole power to vote or direct the
vote and sole power to dispose or to direct the disposition of the Common Stock
received through such exercise.
In the Letter of Intent, Greenfield and Rule agree to use reasonable
efforts to enter into the Merger Agreement by August 31, 1995. The Letter of
Intent contains additional agreements between the parties relating to, among
other things, confidentiality, nonsolicitation, exclusivity of negotiations,
inspection and access to information by Greenfield, the exclusion of certain
assets from the merger and reimbursement of expenses under certain
circumstances. The Letter of Intent is attached hereto as Item 7(b) and
incorporated herein by reference thereto. The obligation of the parties to
enter into a Merger Agreement is subject to the following conditions: (a)
negotiation and execution of the Merger Agreement and related documents; (b)
completion, to its satisfaction, of Greenfield's due diligence;
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Page 9 of 10 Pages
(c) approval of the Merger Agreement by the parties' respective Boards of
Directors; and (d) agreement on employment terms for Mr. Libby.
Except as set forth above, there have been no transactions by
Greenfield in the Common Stock of Rule during the past 60 days.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER.
Reference is made to Items 4, 5 and 7(b) for a description of all
contracts, arrangements, understandings and relationships with respect to the
securities of Rule, which descriptions are incorporated herein by reference
thereto.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
(a) Press Release of Greenfield Industries, Inc. dated July 20, 1995.
(b) Letter of Intent dated July 20, 1995 between Greenfield
Industries, Inc. and Rule Industries, Inc.
(c) Amended and Restated Credit Facilities Reimbursement Agreement
dated November 8, 1994 by and among Greenfield Industries, Inc., 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 (filed with the
Securities and Exchange Commission as Exhibit 10.81 to the 1995 Annual
Registration Form 10-K [file no. 0-21828] and incorporated herein by
reference thereto).
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Page 10 of 10 Pages
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: July 28, 1995 GREENFIELD INDUSTRIES, INC.
By: /s/ Gary L. Weller
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Gary L. Weller
Senior Vice President
Chief Financial Officer
<PAGE>
EXHIBIT 7(a)
FOR IMMEDIATE RELEASE:
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THURSDAY, JULY 20, 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. TO ACQUIRE RULE INDUSTRIES, INC.
AUGUSTA, GEORGIA, July 20, 1995--Greenfield Industries, Inc. (NASDAQ--GFII) and
Rule Industries, Inc. (NASDAQ--RULE) announced today that they have signed a
letter of intent providing for the acquisition of Rule Industries, Inc. by
Greenfield Industries, Inc. Completion of the transaction is subject to
satisfaction of a number of conditions including the completion of a definitive
merger agreement and government and shareholder approvals.
According to the terms of the letter of intent, Greenfield will pay $15.30 per
share for the outstanding shares of common stock of Rule and assume debt of
approximately $39 million. Additionally, Rule has granted Greenfield an option
to purchase 630,000 shares of Rule common stock at $8.00 per share under certain
circumstances. As of July 20, 1995, 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 generally become exercisable with the
completion of this transaction.
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.
"Rule Industries has a strong heritage in the cutting tool industry and its
Disston brand of consumer power tool accessories, hand tools, and lawn and
garden products has a long-standing 150-year reputation for high quality
products in the retail market," says Paul W. Jones, president and chief
executive officer of Greenfield. "We're enthusiastic about the opportunities
this merger will provide to expand our presence in the global cutting tools
industry, particularly in the consumer market where Rule's products are highly
regarded."
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>
EXHIBIT 7(b)
[GREENFIELD LETTERHEAD]
July 20, 1995
Board of Directors
Rule Industries, Inc.
70 Blanchard Road
Burlington, Massachusetts 01803
Re: Acquisition of Rule Industries, Inc.
("Rule")
------------------------------------
Gentlemen:
This letter will serve to summarize our intention regarding the acquisition by
Greenfield Industries, Inc. ("Greenfield") of all of the capital stock of Rule
(the "Shares"), subject to and contingent upon the terms and conditions outlined
below.
1. FORM OF SALE. Greenfield will purchase all of the capital stock
of Rule pursuant to a cash merger (the "Merger"). Greenfield
represents that it will have sufficient financial resources
available to it to complete the transaction on the terms and in
the time frame contemplated hereby.
2. PURCHASE PRICE. The purchase price will be $15.30 per share,
assuming that there are no more than 2,640,532 Shares outstanding
and not more than 491,500 Shares issuable upon exercise of
options, warrants or other securities convertible into Shares
(with an average exercise price of $9.18 per share). To the
extent practicable, each option, warrant or other convertible
security not exercised or converted prior to the closing of the
transaction shall be canceled as of the closing date or
substituted with a Greenfield equivalent security, exercisable or
convertible into an appropriate number of Greenfield shares at
the same aggregate price.
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Board of Directors
July 25, 1995
Page 2
3. FORM OF PAYMENT. The purchase price shall be paid in cash
immediately following consummation of the Merger.
4. MERGER AGREEMENT. Greenfield and Rule will employ their
reasonable efforts to sign a definitive cash merger agreement
(the "Merger Agreement") by August 31, 1995. The Merger
Agreement shall have the representations, warranties and
covenants customary in this type of transaction. In connection
with the execution of the Merger Agreement, Rule will grant
Greenfield an option to purchase 630,000 shares of Rule Common
Stock with an exercise price equal to $8 per share. Such option
will be immediately exercisable and will terminate upon the
earlier of consummation of the merger, termination of the Merger
Agreement under circumstances to be agreed upon by Greenfield and
Rule on June 30, 1996. All proceeds incurred from the exercise
of such option will be used exclusively to reduce indebtedness.
5. EXCLUDED ASSETS. Prior to consummation of the Merger, 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
proceeding with Sandvik AB to a liquidating trust (or similar
entity) for the benefit of Rule shareholders as of the effective
date of the Merger. In addition, Rule shall enter into an
agreement with Henry Libby and the Disston Company confirming its
understanding with Libby with respect to the prosecution of such
arbitration proceeding and the rights and obligations of Rule
thereunder. Such agreement, including the financial and other
obligations of Rule thereunder, shall be reasonably satisfactory
to Greenfield. Rule and/or Greenfield may contribute up to
$50,000 to such trust to finance its operations and Greenfield
shall be entitled to reimbursement of any such amounts expended
as well as amounts to be expended pursuant to the agreement
between Rule and Libby prior to disbursement of any net proceeds
to the trust's beneficiaries. In addition, such trust shall also
be responsible for any (i) costs, expenses and liabilities
arising out of or relating to such arbitration proceeding or the
facts underlying such proceeding including, without limitation,
any costs, expenses or liabilities under federal and state
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Board of Directors
July 25, 1995
Page 3
securities laws, (ii) any liabilities under environmental laws or
(iii) any liabilities for taxes related to such excluded assets
referred to in this paragraph, in each case incurred by
Greenfield within two years following the Merger.
6. INSPECTION AND ACCESS TO INFORMATION. From and after the date of
execution of this letter by Rule, Rule will permit full access
to, and will make available to Greenfield's representatives for
inspection and review, all properties, books, records, accounts,
and documents of or relating to Rule as may be reasonably
requested from time to time and make the attorneys of Rule
available for consultation. Greenfield will commission an
environmental consultant to conduct a complete analysis of
environmental issues.
7. CONDITIONS. The obligations of the parties to enter into a
definitive Merger Agreement shall be subject to fulfillment,
among other things, of the of the following conditions:
a. Negotiation and execution of the Merger Agreement and other
related documentation.
b. Completion of and satisfaction by Greenfield with the
inspection referred to in paragraph 6 and other normal due
diligence procedures. In particular, Greenfield will want
to confirm Rule's sales prospects with its major customers.
All such contacts will occur pursuant to a process to be
mutually agreed to by Greenfield and Rule.
c. Approval of the Merger Agreement by the Boards of Directors
of Rule and Greenfield.
d. Agreement between Greenfield and Henry Libby on employment
terms for Mr. Libby.
8. COMPETING OFFERS. Subject to the fiduciary duties of the
directors of Rule under applicable law, during the period (the
"Due Diligence Period") from the execution and delivery of this
letter agreement through the first to occur of (a) August 31,
1995; (b) the execution and
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Board of Directors
July 25, 1995
Page 4
delivery of a definitive Merger Agreement; and (c) the
termination of negotiations between the parties by Greenfield in
writing or by mutual written consent:
(i) Rule shall not enter into a letter of intent or
other binding agreement for any transaction (an "Extraordinary
Transaction") involving (x) a sale of a material number of shares
of capital stock of Rule; (y) a sale of all or a substantial
portion of the assets of Rule; or (z) a merger, consolidation or
other business combination to which Rule or any subsidiary of
Rule is a party, in each case with a party other than Greenfield
or a subsidiary or affiliate of Greenfield; and
(ii) Rule shall not, and shall direct its officers,
directors, employees, agents and representatives not to, directly
or indirectly, provide any person with non-public confidential
information, engage in any discussions, or negotiations, afford
any person access to the properties, books or records of Rule or
any of its subsidiaries or otherwise solicit, encourage or assist
any person in regard to an Extraordinary Transaction.
9. OBLIGATION TO UPDATE. During the period between the date of
acceptance of this offer and the execution of a Merger Agreement,
Rule will advise Greenfield on a timely basis of all of Rule's
transactions, commitments or contingencies that may arise that
are of material significance to Rule or not in the ordinary
course of business of Rule. Such advice is for information
purposes only and further, Greenfield has no authority of
approval or disapproval and Rule is totally responsible for the
consequences of any actions that it elects to take during this
period.
10. CONFIDENTIALITY. As some of the information Rule and Greenfield
have received or are to receive regarding the other party is
proprietary and has not been made available to the public, each
party and its affiliates and representatives understand and agree
that such information is or was provided solely for the purpose
of evaluating the transaction contemplated herein and will not
disclose any of such information to any third
<PAGE>
Board of Directors
July 25, 1995
Page 5
party, except as required by applicable law or legal process,
without the prior written consent of the party to whom the
information relates; provided, however, that any such information
may be disclosed to a party's representatives who need to know
such information for the purpose of evaluating the transaction
contemplated herein and who agree to keep such information
confidential. The obligations of each party and its affiliates
and representatives under this paragraph shall not apply to
information which (a) is or becomes generally available to the
public other than as result of a breach of this letter of intent
by such party or its affiliates or representatives, (b) becomes
available to such party from a source other than the other party
or its representatives or agents, which source, to the knowledge
of the party obtaining the information, is not bound by a
confidentiality obligation, (c) is known to such party prior to
receiving such information, or (d) has been or subsequently is
independently developed by such party. The provisions of this
paragraph supersede any other understandings or agreements with
regard to confidentiality previously entered into between the
parties.
11. ANNOUNCEMENTS. The parties agree that they will make no public
announcement of this agreement or the discussions contemplated
hereby without the consent of each party hereto. Notwithstanding
the foregoing, the parties acknowledge that they may be required
by applicable law to issue a press release announcing the signing
of this letter of intent and related matters, including the price
provisions. The content of any such announcement will be subject
to the review and approval of the other party hereto, such review
to be timely and approval not to be unreasonably withheld.
12. EXPENSES. Except as provided in paragraph 15, whether or not the
transactions contemplated hereby are consummated, each party will
bear entirely the respective out-of-pocket expenses that it
incurs in connection with this transaction, including legal,
accounting and other fees.
<PAGE>
Board of Directors
July 25, 1995
Page 6
13. NO SECURITIES TRANSACTIONS. Except as provided in paragraph 14
hereof, unless and until a transaction with Greenfield has been
publicly announced or abandoned, as set forth in a writing from
one party hereto to the other, the parties hereto will not, and
will use their best efforts to assure their officers, directors,
employees, agents, and representatives, and affiliates thereof,
who have or may gain knowledge of the existence of this letter
agreement will not, buy or sell or enter into any agreement or
understanding to buy or sell any securities of Greenfield or
Rule.
14. OPTION. In consideration of Greenfield making the offer to
acquire Rule at a substantial premium to the market price of
Rule, Rule hereby grants to Greenfield an option to purchase
630,000 shares of Rule common stock at an exercise price of $8
per share. Such option may be exercised only in the event either
(i) Rule breaches its obligations under clause (i) of paragraph 8
without regard to the fiduciary duty provisions of the first
sentence of paragraph 8, or (ii) Rule breaches its obligation
under clause (ii) of paragraph 8 without regard to the fiduciary
duty provisions of the first sentence of paragraph 8 and
thereafter Rule enters into a definitive agreement for an
Extraordinary Transaction. The option may be exercised in whole
only, by written notice to Rule, together with tender of the
aggregate option exercise price in cash in immediately available
funds. Such option will expire and have no further force and
effect, if not theretofore exercised, on the earlier of (i) the
execution and delivery of a definitive Merger Agreement or (ii)
December 31, 1995.
15. CERTAIN REIMBURSEMENT RIGHTS. If, (i) prior to the end of the
Due Diligence Period, Rule notifies Greenfield in writing that it
is terminating discussions with Greenfield concerning the
transaction proposed by Greenfield or (ii) prior to the 180th day
following the end of the Due Diligence Period Rule enters into an
agreement with a party other than Greenfield or a subsidiary of
Greenfield with respect to the sale of all or substantially all
the assets or capital stock in Rule, then Rule shall reimburse
Greenfield for all out-of-pocket expenses reasonably incurred in
making
<PAGE>
Board of Directors
July 25, 1995
Page 7
its due diligence investigation within 5 business days after
Greenfield provides Rule with a listing of its out-of-pocket
expenses; provided however, that Rule shall not be obligated to
reimburse more than $200,000 in expenses hereunder and provided,
further, that Rule shall not be obligated to reimburse Greenfield
hereunder if negotiations between Rule and Greenfield are
terminated by Greenfield in writing or by mutual written consent.
16. BINDING EFFECT. Notwithstanding anything else wherein to the
contrary, in consideration of the costs that the parties will
incur in pursuing this transaction, paragraphs 6, 8, 9, 10, 11,
12, 13, 14 and 15 shall be binding on the parties. However, if a
Merger Agreement has not been executed prior to the expiration of
the Due Diligence Period, this letter of intent shall become null
and void as of such date, except for paragraphs 10, 11, 12, 13,
14 and 15. Nothing contained herein shall constitute a legally
binding obligation to consummate the Merger and, except as
expressly provided in this paragraph, no party shall be legally
bound to the others unless and until a Merger Agreement shall
have been executed and delivered by the parties.
17. COUNTERPARTS. This letter of intent may be executed in one or
more counterpart copies, and each of such copies shall together
constitute a single document.
If the foregoing terms and conditions are acceptable to you, please so indicate
by signing and dating both of the enclosed copies of this letter where indicated
and returning one to the undersigned.
Yours very truly,
GREENFIELD INDUSTRIES, INC.
By /s/ Gary L. Weller
---------------------------
Senior Vice President and
Chief Financial Officer
<PAGE>
Board of Directors
July 25, 1995
Page 8
Date: July 20, 1995
AGREED TO AND ACCEPTED
RULE INDUSTRIES, INC.
/s/ John Geishecker, Jr.
------------------------
Vice President
By /s/ Gary M. Sable
------------------------
Vice President
Date: July 20, 1995
