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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
------------------------
GOULDS PUMPS, INCORPORATED
(NAME OF SUBJECT COMPANY)
GEORGE ACQUISITION, INC.
ITT INDUSTRIES, INC.
(BIDDERS)
COMMON STOCK, $1.00 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
383550 10 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
VINCENT A. MAFFEO, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ITT INDUSTRIES, INC.
FOUR WEST RED OAK LANE
WHITE PLAINS, NEW YORK 10604
TELEPHONE: (914) 641-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
WILLIAM E. CURBOW, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
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This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule 14D-1 filed on April 25, 1997 (as amended, the "Schedule 14D-1")
relating to the offer by George Acquisition, Inc., a Delaware corporation (the
"Purchaser"), a wholly owned subsidiary of ITT Industries, Inc., an Indiana
corporation (the "Parent"), to purchase all of the outstanding shares of Common
Stock, par value $1.00 per share (the "Shares"), of Goulds Pumps, Incorporated,
a Delaware corporation (the "Company"), at a purchase price of $37 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated April 25, 1997 (the
"Offer to Purchase") and in the related Letter of Transmittal (which, together
with the Offer to Purchase, as amended from time to time, constitute the
"Offer").
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase dated April 25, 1997.
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
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2
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SIGNATURE
After due 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.
ITT INDUSTRIES, INC.
By: /s/ ROBERT W. BEICKE
------------------------------------
Name: Robert W. Beicke
Title: Vice President
GEORGE ACQUISITION, INC.
By: /s/ LAWRENCE J. SWIRE
------------------------------------
Name: Lawrence J. Swire
Title: Vice President
Date: April 29, 1997
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EXHIBIT INDEX
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EXHIBIT PAGE
NO. DESCRIPTION NO.
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(a)(1) Offer to Purchase dated April 25, 1997........................................
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees......................................................
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Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Goulds Pumps, Incorporated
at
$37.00 Net Per Share
by
George Acquisition, Inc.
a wholly owned subsidiary of
ITT Industries, Inc.
------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, MAY 22, 1997, UNLESS THE OFFER IS EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK WHICH, TOGETHER WITH ANY SHARES OWNED BY ITT
INDUSTRIES, INC. OR GEORGE ACQUISITION, INC. (THE "PURCHASER"), CONSTITUTES MORE
THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL
SECURITIES OF GOULDS PUMPS, INCORPORATED (THE "COMPANY") ENTITLED TO VOTE
GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER AND (II) THE EXPIRATION OR
TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1 AND 15.
------------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT THE
OFFER AND THE MERGER PURSUANT THERETO ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE HOLDERS OF SHARES AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES TO THE PURCHASER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) of the Company should either (1) complete and sign
the Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the
Depositary (as defined herein), and either deliver the certificates representing
the tendered Shares and any other required documents to the Depositary or tender
such Shares pursuant to the procedure for book-entry transfer set forth in
Section 3 or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to tender
Shares so registered.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to Morgan Stanley &
Co. Incorporated (the "Dealer Manager") or to Georgeson & Company Inc. (the
"Information Agent") at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may also be obtained from the Information Agent or the Dealer Manager,
or from brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
April 25, 1997
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION........................................................................ 1
THE TENDER OFFER.................................................................... 3
1. Term of the Offer; Expiration Date........................................... 3
2. Acceptance for Payment and Payment for Shares................................ 4
3. Procedure for Tendering Shares............................................... 5
4. Withdrawal Rights............................................................ 7
5. Certain Federal Income Tax Consequences...................................... 8
6. Price Range of Shares; Dividends............................................. 8
7. Certain Information Concerning the Company................................... 9
8. Certain Information Concerning the Purchaser and the Parent.................. 11
9. Source and Amount of Funds................................................... 12
10. Background of the Offer; Contacts with the Company........................... 13
11. The Merger Agreement......................................................... 16
12. Purpose of the Offer; the Merger; Plans for the Company...................... 26
13. Dividends and Distributions.................................................. 27
14. Effect of the Offer on the Market for the Shares, Nasdaq Listing and Exchange
Act Registration......................................................... 28
15. Certain Conditions of the Offer.............................................. 29
16. Certain Legal Matters and Regulatory Approvals............................... 31
17. Fees and Expenses............................................................ 33
18. Miscellaneous................................................................ 34
SCHEDULE I Certain Information Regarding the Directors and Executive Officers of the
Purchaser and the Parent.
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To: The Stockholders of
GOULDS PUMPS, INCORPORATED
INTRODUCTION
George Acquisition, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of ITT Industries, Inc., an Indiana corporation (the
"Parent"), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $1.00 per share (the "Shares"), of Goulds Pumps, Incorporated,
a Delaware corporation (the "Company"), at a purchase price of $37.00 per Share,
net to the seller in cash without interest thereon, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, as amended from time to time, together constitute the
"Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), which is acting as Dealer Manager for the Offer (in such
capacity, the "Dealer Manager"), The Bank of New York, which is acting as the
Depositary (in such capacity, the "Depositary") and Georgeson & Company Inc.,
which is acting as the Information Agent (in such capacity, the "Information
Agent"), incurred in connection with the Offer. See Section 17.
The Board of Directors of the Company (the "Board of Directors") has
unanimously approved the Merger Agreement (as defined below) and the
transactions contemplated thereby, and determined that the Offer and the Merger
(as defined below) are fair to, and in the best interests of, the holders of the
Shares and recommends that the stockholders of the Company accept the Offer and
tender their Shares to the Purchaser.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
SECTION 1) A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY THE
PARENT OR THE PURCHASER, CONSTITUTES MORE THAN 50% OF THE VOTING POWER
(DETERMINED ON A FULLY-DILUTED BASIS), ON THE DATE OF PURCHASE, OF ALL THE
SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF
DIRECTORS OR IN A MERGER (THE "MINIMUM CONDITION") AND (ii) THE EXPIRATION OR
TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"). SEE SECTIONS 1
AND 15. IF THE PURCHASER PURCHASES NOT LESS THAN THAT NUMBER OF SHARES NEEDED TO
SATISFY THE MINIMUM CONDITION, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER OF THE COMPANY. SEE SECTION 12.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 20, 1997 (the "Merger Agreement"), among the Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement and the Delaware General Corporation Law (the "DGCL"), the
Purchaser will be merged with and into the Company (the "Merger"). Following the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and become a wholly owned subsidiary of the Parent, and the
separate corporate existence of the Purchaser will cease. See Section 12.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company and each Share owned by the Parent,
the Purchaser or any other direct or indirect subsidiary of the Parent or of the
Company, which shall be cancelled, and other than Shares, if any (collectively,
"Dissenting Shares"), held by stockholders who have not voted in favor of or
consented to the Merger and who have delivered a written demand for appraisal of
such Shares in the time and manner provided in Section 262 of the DGCL will be
cancelled, extinguished and converted into the right to receive $37.00 in cash
(the "Merger Consideration"), payable to the holder thereof, without interest,
upon surrender of the certificate formerly representing such Share, less any
required withholding taxes.
The Company has represented to the Parent that (i) as of April 16, 1997,
there were 21,381,593 Shares issued and outstanding and 1,689,829 Shares
reserved for issuance upon the exercise of outstanding stock
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options and (ii) between April 16, 1997 and the date of the Merger Agreement, no
Shares have been issued by the Company (except upon exercise of such options).
Under the terms of the Merger Agreement, the Company has reserved the right to
issue up to an additional 60,000 Shares pursuant to an existing employment
agreement and a non-employee director plan pursuant to which non-employee
directors are paid a portion of their annual retainer in Shares and, as a
result, all of such additional Shares (whether or not issued) will be assumed to
be outstanding for purposes of determining whether the Minimum Condition is
satisfied. Based upon the foregoing, the Purchaser believes that approximately
11,565,712 Shares constitute a majority of the outstanding Shares on a
fully-diluted basis.
The Company has advised the Purchaser that, to the knowledge of the
Company, all the directors of the Company intend to tender their Shares pursuant
to the Offer.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERM OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment and pay for all Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Thursday, May 22,
1997, unless and until the Purchaser, in its sole discretion (but subject to the
terms and conditions of the Merger Agreement), shall have extended the period
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION AND CERTAIN OTHER CONDITIONS. SEE SECTION 15, WHICH SETS FORTH
IN FULL THE CONDITIONS TO THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER
AGREEMENT AND THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), THE PURCHASER RESERVES THE RIGHT, IN ITS
SOLE DISCRETION, TO WAIVE ANY OR ALL CONDITIONS TO THE OFFER (OTHER THAN THE
MINIMUM CONDITION) AND TO MAKE ANY OTHER CHANGES IN THE TERMS AND CONDITIONS OF
THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER AGREEMENT, INCLUDING THE
PROVISIONS OF THE MERGER AGREEMENT SET FORTH IN THE NEXT PARAGRAPH, AND THE
APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, IF BY THE EXPIRATION DATE
ANY OR ALL OF SUCH CONDITIONS TO THE OFFER HAVE NOT BEEN SATISFIED, THE
PURCHASER RESERVES THE RIGHT (BUT SHALL NOT BE OBLIGATED) TO (i) TERMINATE THE
OFFER AND RETURN ALL TENDERED SHARES TO TENDERING STOCKHOLDERS, (ii) WAIVE SUCH
UNSATISFIED CONDITIONS AND PURCHASE ALL SHARES VALIDLY TENDERED OR (iii) EXTEND
THE OFFER AND, SUBJECT TO THE TERMS OF THE OFFER (INCLUDING THE RIGHTS OF
STOCKHOLDERS TO WITHDRAW THEIR SHARES), RETAIN THE SHARES WHICH HAVE BEEN
TENDERED, UNTIL THE TERMINATION OF THE OFFER, AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 shall have occurred, to
(i) extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary and (ii) amend the Offer in
any respect by giving oral or written notice of such amendment to the
Depositary. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares. Under the terms of
the Merger Agreement, however, unless previously approved by the Company in
writing, the Purchaser will not change the Minimum Condition or decrease the
price per Share payable in the Offer, change the form of consideration payable
in the Offer (other than by adding consideration), reduce the maximum number of
Shares to be purchased in the Offer, or amend the terms or conditions to the
Offer or impose conditions or terms to the Offer in addition to those set forth
in Section 15 which, in either case, are adverse to the holders of Shares. The
Purchaser shall have no obligation to pay interest on the purchase price of
tendered Shares. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer pursuant to Section
15.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, and such announcement in
the case of an extension will be made in accordance with Rule 14e-1(d) no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which the
Purchaser may choose to make any public announcement, except as provided by
applicable law (including Rules 14d-4(c) and 14(d)-6(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which require that
material changes be promptly disseminated to holders of Shares), the Purchaser
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to the Dow Jones News
Service.
If the Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer material and extend the Offer to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which
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an offer must remain open following material changes in the terms of the offer,
other than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances, including the materiality, of the
changes. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought, a minimum ten business day period
from the day of such change is generally required to allow for adequate
dissemination to stockholders. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday, or a federal holiday and consists of the
time period from 12:01 A.M. through 12:00 Midnight, New York City time.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment and will pay for all Shares validly tendered
and not properly withdrawn on or prior to the Expiration Date as soon as
practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions of the Offer set forth in Section 15,
including without limitation the expiration or termination of the waiting period
applicable to the acquisition of Shares pursuant to the Offer and the Merger
under the HSR Act, and satisfaction of any applicable foreign regulatory
requirements. In addition, subject to applicable rules of the Commission, the
Purchaser expressly reserves the right to delay acceptance for payment of or
payment for Shares pending receipt of any other regulatory approvals specified
in Section 16. Any such delays will be effected in compliance with Rule 14e-1(c)
under the Exchange Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Certificates for such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility" and,
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined below) in connection with a book-entry transfer,
and (iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT. If for any reason whatsoever acceptance for
payment of or payment for any Shares tendered pursuant to the Offer is delayed
or the Purchaser is unable to accept for payment or pay for Shares tendered
pursuant to the Offer, then without prejudice to the Purchaser's
4
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rights set forth herein, the Depositary may nevertheless, on behalf of the
Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain tendered
Shares and such Shares may not be withdrawn except to the extent that the
tendering stockholder is entitled to and duly exercises withdrawal rights as
described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase all
or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURE FOR TENDERING SHARES. Valid Tenders. Except as set forth
below, in order for Shares to be validly tendered pursuant to the Offer, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase on or
prior to the Expiration Date and either (i) Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures described below must be complied with.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facilities for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of any
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
such Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not
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completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instructions 1 and 5 of the Letter
of Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or Share
Certificates not accepted for payment or not tendered are to be returned, to a
person other than the registered holder, the Share Certificates must be endorsed
or accompanied by appropriate stock powers, in either case, signed exactly as
the name of the registered holder appears on such certificates, with the
signatures on such certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 of the Letter of Transmittal.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) must accompany each such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available, or such stockholder cannot deliver the Share Certificates and all
other required documents to reach the Depositary on or prior to the Expiration
Date, or such stockholder cannot complete the procedure for delivery by
book-entry transfer on a timely basis, such Shares may nevertheless be tendered,
provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by the Purchaser is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation),
representing all tendered Shares in proper form for transfer, together with
the Letter of Transmittal (or a facsimile thereof) properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the Depositary within three
Nasdaq National Market trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution and a representation that the
stockholder owns the Shares tendered within the meaning of, and that the tender
of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act,
each in the form set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time and will depend upon when Share Certificates or Book-Entry Confirmations of
such Shares are received into the Depositary's account at a Book-Entry Transfer
Facility.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser and each of them as
such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date hereof). All such powers of attorney and proxies
shall be considered irrevocable and coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent that,
the Purchaser accepts such Shares for payment. Upon such acceptance for payment,
all prior powers of attorney and proxies given by such stockholder with respect
to such Shares (and such other Shares
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<PAGE> 9
and securities) will be revoked without further action, and no subsequent powers
of attorney and proxies may be given nor any subsequent written consents
executed (and, if given or executed, will not be deemed effective). The
designees of the Purchaser will, with respect to the Shares (and such other
Shares and securities) for which such appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. The Purchaser reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's payment for such Shares, the Purchaser must be able to
exercise full voting rights with respect to such Shares and other securities,
including voting at any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
of the conditions of the Offer or any defect or irregularity in any tender of
Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of the Purchaser, the Parent, any of their
affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding.
Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the payor of such
cash with such stockholder's correct taxpayer identification number ("TIN") on a
substitute Form W-9 and certify, under penalties of perjury, that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such stockholder and payment of cash to such stockholder pursuant
to the Offer may be subject to backup withholding of 31%. All stockholders
surrendering Shares pursuant to the Offer should complete and sign the
substitute Form W-9 included in the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Depositary). Certain stockholders (including among others all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
Other Requirements. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after June 23, 1997. If the Purchaser extends the Offer, is delayed in its
acceptance for payment of Shares or is unable to purchase Shares validly
tendered pursuant to the Offer for any reason, then without prejudice to the
Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf
of the Purchaser, retain tendered Shares and such Shares may not be withdrawn
except to the extent that tendering
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<PAGE> 10
stockholders are entitled to withdrawal rights as described in this Section 4.
Any such delay in acceptance for payment will be accompanied by an extension of
the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signatures on the notice of withdrawal must
be guaranteed by an Eligible Institution unless such Shares have been tendered
for the account of an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer as set forth in Section 3, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, any of their affiliates or assigns, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax
consequences set forth below is for general information only and is based on the
law as currently in effect. The tax treatment of each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, stockholders who acquired their Shares through
the exercise of an employee stock option or otherwise as compensation, and
persons who received payments in respect of options to acquire Shares. ALL
STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign income or other tax laws. Generally, for Federal income tax
purposes, a tendering stockholder will recognize gain or loss in an amount equal
to the difference between the cash received by the stockholder pursuant to the
Offer or the Merger and the stockholder's adjusted tax basis in the Shares
tendered by the stockholder and purchased pursuant to the Offer or the Merger.
For Federal income tax purposes, such gain or loss will be a capital gain or
loss if the Shares are a capital asset in the hands of the stockholder, and a
long-term capital gain or loss if the stockholder's holding period is more than
one year as of the date the Purchaser accepts such Shares for payment pursuant
to the Offer or the effective date of the Merger, as the case may be. There are
limitations on the deductibility of capital losses.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on
the Nasdaq National Market under the symbol "GULD". The following table sets
forth, for the quarters indicated, the high and low sales prices per Share on
the Nasdaq National Market as reported in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (the "1996 Annual Report") with
respect to periods occurring in 1995
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<PAGE> 11
and 1996 and as reported by the Dow Jones News Service thereafter, and the
amount of cash dividends paid or declared per share for each quarter based on
publicly available sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
Year Ended December 31, 1995:
First Quarter.................................... $24.25 $19.63 $ .20
Second Quarter................................... 25.50 20.38 .20
Third Quarter.................................... 23.63 21.00 .20
Fourth Quarter................................... 26.00 22.63 .20
Year Ended December 31, 1996:
First Quarter.................................... 25.13 20.88 .20
Second Quarter................................... 25.88 20.00 .20
Third Quarter.................................... 25.88 21.13 .20
Fourth Quarter................................... 25.00 20.38 .20
Year Ended December 31, 1997:
First Quarter.................................... 24.88 22.63 .20
Second Quarter (through April 24, 1997).......... 24.25 22.75 .20
</TABLE>
On March 24, 1997, the last full trading day prior to the date that the
Parent sent a letter to the Company expressing interest in acquiring the
Company, the closing sale price per Share reported on the Nasdaq National Market
was $23.00. On April 18, 1997, the last full trading day prior to announcement
of the Offer, the closing sale price per Share reported on the Nasdaq National
Market was $22.88. On April 24, 1997, the last full trading day before
commencement of the Offer, the closing sale price per Share reported on the
Nasdaq National Market was $36.25. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
Pursuant to the Merger Agreement, the Company has agreed not to declare,
set aside, make or pay any dividend or other distribution, other than regular
quarterly dividends consistent with past practice, in an amount not to exceed
$.20 per share, and the distribution of the Rights pursuant to the Rights Plan
(as defined in Section 11).
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. The summary
information concerning the Company in this Section 7 and elsewhere in this Offer
to Purchase is derived from the 1996 Annual Report and other publicly available
information. The summary information set forth below is qualified in its
entirety by reference to such reports (which may be obtained and inspected as
described below) and should be considered in conjunction with the more
comprehensive financial and other information in such reports and other publicly
available reports and documents filed by the Company with the Commission and
other publicly available information. Although the Purchaser and the Parent do
not have any knowledge that would indicate that any statements contained herein
based upon such reports are untrue, neither the Purchaser nor the Parent assumes
any responsibility for the accuracy or completeness of the information contained
therein, or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to the Purchaser and the Parent.
General. The Company started business in 1848 and was later incorporated
in 1864 under the laws of New York State as Downs & Co. Manufacturing Company.
In 1869, the Company's name was changed to The Goulds Manufacturing Company and
in 1926 the name was changed to Goulds Pumps, Incorporated. Effective December
31, 1984, the Company was reincorporated under the laws of the State of Delaware
by virtue of a merger transaction. The Company's principal executive offices are
located at 300 WillowBrook Office Park, Fairport, New York 14450. The telephone
number of the Company at such offices is (716) 387-6600.
The Company designs, manufactures, sells and repairs centrifugal pumps and
accessories for diverse applications. The Company's pumps are used in the
following worldwide markets: residential, chemical,
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<PAGE> 12
commercial, pulp and paper, general industry, sewage/drainage, oil refining and
gas processing, agriculture/irrigation and power generation. The Company is
organized into two divisions: Industrial Products and Water Technologies.
Financial Information. Set forth below are certain selected consolidated
financial data for the Company's last three fiscal years which were derived from
the 1996 Annual Report. More comprehensive financial information is included in
the reports (including management's discussion and analysis of financial
condition and results of operations) and other documents filed by the Company
with the Commission, and the following financial data is qualified in its
entirety by reference to such reports and other documents including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained from the
offices of the Commission and the Nasdaq National Market in the manner set forth
below.
GOULDS PUMPS, INCORPORATED
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.................................................. $774,420 $718,763 $585,476
Cost and expenses.......................................... 720,518 693,667 555,833
Earnings before income taxes............................... 53,902 25,096 29,643
Income taxes............................................... 19,195 7,024 11,442
Net earnings............................................... 34,707 18,072 18,201
Net earnings per common share.............................. 1.63 .85 .86
Weighted average number of common shares outstanding....... 21,313 21,240 21,175
BALANCE SHEET DATA (AT PERIOD END)
Total assets............................................... $554,871 $553,986 $457,241
Total liabilities.......................................... 343,765 363,672 265,954
Total stockholders' equity................................. 211,106 190,314 191,287
</TABLE>
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and in
accordance therewith is obligated to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
such proxy statements and distributed to the Company's stockholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such
material should also be available for inspection at the library of the Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. Except as otherwise
noted in this Offer to Purchase, all of the information with respect to the
Company set forth in this Offer to Purchase has been derived from publicly
available information.
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<PAGE> 13
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. The
Purchaser, a Delaware corporation and a wholly owned subsidiary of the Parent,
was organized in connection with the Offer and has not carried on any activities
to date other than those incident to its formation and the commencement of the
Offer.
The Parent, an Indiana corporation incorporated on September 5, 1995 as,
and originally named, ITT Indiana, Inc., is the successor pursuant to a
statutory merger of ITT Corporation, a Delaware corporation ("ITT Delaware"),
into Parent effective December 20, 1995. ITT Delaware, originally incorporated
in Maryland in 1920 as International Telephone and Telegraph Corporation, was
reincorporated in Delaware in 1968 and changed its name to ITT Corporation in
1983. On December 19, 1995, ITT Delaware made a distribution (the
"Distribution") to its stockholders consisting of all the shares of common stock
of ITT Destinations, Inc., a Nevada corporation ("ITT Destinations"), and all
the shares of common stock of ITT Hartford Group, Inc., a Delaware corporation,
both of which were wholly owned subsidiaries of ITT Delaware. Immediately prior
to the Distribution, ITT Destinations changed its name to ITT Corporation.
The Parent has its World Headquarters at Four West Red Oak Lane, White
Plains, NY 10604 and has approximately 59,000 employees based in over 40
countries. The telephone number for the Parent is (914) 641-2000. The address
and telephone number for the Purchaser is the same as that for the Parent.
The Parent, with 1996 sales of approximately $8.7 billion, is a worldwide
enterprise engaged directly and through its subsidiaries in the design and
manufacture of a wide range of engineered products, focused on the three
principal business segments of ITT Automotive, ITT Defense & Electronics and ITT
Fluid Technology.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history of each of the directors and
executive officers of the Purchaser and the Parent and certain other information
are set forth in Schedule I hereto.
Set forth below are certain selected consolidated financial data relating
to the Parent and its subsidiaries for the Parent's last three fiscal years
which have been derived from the financial statements contained in the Parent's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 filed by
the Parent with the Commission. More comprehensive financial information is
included in the reports (including management's discussion and analysis of
financial condition and results of operations) and other documents filed by the
Parent with the Commission, and the following financial data is qualified in its
entirety by reference to such reports and other documents, including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained from the
offices of the Commission and the New York Stock Exchange, Inc. (the "NYSE") in
the manner set forth below.
ITT INDUSTRIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net sales................................................... $8,718.1 $8,884.2 $ 7,757.7
Operating income............................................ 508.4 446.2 417.7
Income from continuing operations........................... 222.6 20.7 201.6
Net income.................................................. 222.6 707.9 1,021.8
BALANCE SHEET DATA (AT PERIOD END)
Total assets................................................ $5,491.2 $5,879.2 $11,035.0
Total liabilities........................................... 4,692.0 5,252.5 5,576.0
Shareholders' equity........................................ 799.2 626.7 5,459.0
</TABLE>
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<PAGE> 14
The Parent is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obligated to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Parent's directors and officers, their remuneration,
options granted to them, the principal holders of the Parent's securities and
any material interest of such persons in transactions with the Parent is
required to be disclosed in such proxy statements and distributed to the
Parent's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission located in Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at prescribed rates at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Such reports, proxy statements and other information may also be
obtained at the Web site that the Commission maintains at http://www.sec.gov.
Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material is also available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
None of the Purchaser, the Parent nor, to the best knowledge of the
Purchaser and the Parent, any of the persons listed on Schedule I hereto or any
associate or majority-owned subsidiary of the Purchaser, the Parent or any of
the persons so listed, beneficially owns or has a right to acquire directly or
indirectly any Shares, and none of the Purchaser, the Parent nor, to the best
knowledge of the Purchaser and the Parent, any of the persons or entities
referred to above, or any of the respective executive officers, directors or
subsidiaries of any of the foregoing, has effected any transactions in the
Shares during the past 60 days.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay
fees and expenses related to the Offer and the proposed Merger is estimated to
be approximately $821 million. The Purchaser plans to obtain all funds needed
for the Offer and the Merger through a capital contribution and/or a loan which
will be made by the Parent to the Purchaser. The Parent plans to use funds it
has available in its cash accounts and by borrowing under its existing lines of
credit. The Parent expects that such borrowings would be repaid from cash flow
from the normal operations of the Parent's businesses. The Offer is not
conditioned on obtaining financing.
The revolving credit facility is provided by a group of lenders including
The Chase Manhattan Bank, as administrative agent (the "Agent"), and as a
lender. The revolving credit facility allows the Parent and its borrowing
subsidiaries (each a "Borrower") to borrow up to $1.5 billion through the
incurrence of revolving standby loans, competitive loans, local currency loans
or the issuance of letters of credit.
The commitments under the revolving credit facility terminate on November
10, 2000.
The amounts borrowed pursuant to the revolving credit facility bear
interest at the following rates per annum: (A) in the case of standby loans, at
the Borrower's option, either: (i) the LIBO Rate (as defined therein) plus an
amount ranging from .115% to .250% or (ii) the greater of the Prime Rate (as
defined therein) or the Federal Funds Effective Rate (as defined therein) plus
1/2 of 1%; (B) in the case of competitive loans, at the Borrower's option,
either: (i) the LIBO Rate plus an amount ranging from .115% to .250% or (ii) at
a fixed rate of interest offered by a lender in its bid and agreed to by the
Borrower; or (C) in the case of local currency loans, at the Borrower's option,
either: (i) the LIBO Rate plus an amount ranging from .115% to .250% or (ii)
that rate of interest specified in a local currency addendum to the revolving
credit agreement. The Parent has agreed to pay a quarterly facility fee to each
lender under the revolving credit facility, certain fees with respect to the
issuance of letters of credit and an annual administrative fee to the Agent.
The covenants in the revolving credit facility, among other things,
restrict the Parent and borrowing subsidiaries from consolidating or merging
with or into, or selling, leasing or transferring substantially all their assets
to, any other person other than pursuant to the revolving credit facility or
incurring liens other than pursuant to the revolving credit facility. In
addition, the revolving credit facility requires that the Parent and its
restricted subsidiaries, on a consolidated basis, satisfy an interest coverage
test. Borrowings under the revolving credit facility are guaranteed by the
Parent.
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<PAGE> 15
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. For more than one
year prior to the Offer, members of the Parent's senior management have
considered potential transactions which could enhance the value of the Parent
for its stockholders, including the possibility of a strategic acquisition of
another industrial company or business such as the Company. The Parent developed
an extensive list of potential acquisition candidates and then gradually
narrowed the list of potential candidates by applying various acquisition
criteria. Detailed analysis was then performed on a select group of companies to
help narrow the list of potential acquisition candidates even further. In
December 1996, the Parent's discussions regarding possible acquisitions began to
focus particularly on the Company and actions were taken to effect a more formal
analysis of the Company. In March 1997, after a presentation by management to
the Board of Directors of the Parent, the Board of Directors of the Parent
approved the initiation of contact with the Company to discuss the possibility
of a negotiated transaction.
On March 19, 1997, Richard Labrecque, President of ITT Fluid Technology
Corporation, contacted Thomas C. McDermott, Chairman, President and Chief
Executive Officer of the Company, to suggest in general terms the possibility of
an acquisition of the Company by the Parent. After some discussion, Mr.
McDermott indicated that the Company currently planned to carry out its existing
"Goulds 2000" strategic plan as an independent company.
On March 25, 1997, Travis Engen, Chairman, President and Chief Executive
Officer of the Parent, called Mr. McDermott to reiterate the Parent's interest
in acquiring the Company and to express his willingness to meet and discuss the
specific terms of the Parent's proposal. Mr. McDermott restated his view that
the Company wished to carry out its strategic plan and declined to meet with Mr.
Engen. Mr. Engen then informed Mr. McDermott that he would send Mr. McDermott a
letter containing the Parent's proposal. Later that day, Mr. Engen sent the
following letter to Mr. McDermott.
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<PAGE> 16
March 25, 1997
Mr. Thomas C. McDermott
Chairman, President and Chief Executive Officer
Goulds Pumps, Incorporated
300 WillowBrook Office Park
Fairport, New York 14450
Dear Mr. McDermott:
I enjoyed talking to you earlier today but I was disappointed that you have
continued your unwillingness to meet with us to discuss our proposal. Since we
are not able to meet with you in person to explain our thinking, I am sending
this letter.
ITT Industries, Inc. proposes to acquire Goulds Pumps, Incorporated
("Goulds") through a negotiated merger transaction in which Goulds' stockholders
would receive $34.00 in cash for each share of outstanding common stock. This
price is based on our review of public information and our assessment of the
benefits of combining our organizations. This proposal represents what we
believe is an excellent opportunity for you and ITT Industries to maximize value
for your stockholders at a price which represents a premium of approximately 48%
over the closing market price of Goulds' common stock yesterday. We are
confident that this price is at a level which your stockholders would
enthusiastically support.
As I am sure you are aware, ITT Industries is a leading supplier of pumps,
valves, heat exchangers, mixers, instruments and controls for the management of
fluids with annual sales in these areas in excess of $1.3 billion. ITT
Industries has, as Goulds does, an enviable reputation for the quality of its
products and service. We have been studying the benefits of a combination with
Goulds for some time. We strongly believe the complementary aspects of our
products, our production capabilities and technologies would be a perfect
strategic fit and would enable the combined operation to compete more
effectively in the global marketplace. For these reasons, a combination of
Goulds with our current fluid technology business has become a leading interest
of our management and the ITT Industries Board of Directors.
We envision that we would negotiate a mutually acceptable definitive merger
agreement on appropriate and customary terms and conditions. Our antitrust
counsel has conducted a preliminary review of the two businesses and we do not
believe that our proposal gives rise to any meaningful antitrust concerns.
Obviously given our financial strength, financing would not pose a problem for
the consummation of the transaction, and Morgan Stanley, our financial advisor,
concurs.
We hope that you will view this proposal as we do -- a unique opportunity
for Goulds' stockholders to realize full value for their shares in a transaction
that can quickly be consummated. We are prepared to meet with you and your
advisors to answer any questions that you may have about our proposal and to
proceed expeditiously to negotiate a definitive merger agreement with you.
My purpose in sending this letter is to provide you with more information
about our proposal and to express our sincere desire to work together with you
to reach agreement on a consensual basis. At this point, we are hoping that our
discussions can remain a private matter between us, although we would expect you
to share this proposal with the members of your Board of Directors. We seek to
move quickly on our proposal and would like to hear back from you as soon as
possible. Accordingly, unless we hear back from you before then, we will contact
you on Monday, March 31st to discuss the timing of your Board's response to our
proposal.
Sincerely,
Travis Engen
Chairman, President and Chief
Executive
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<PAGE> 17
On March 31, 1997, Mr. Engen called Mr. McDermott to discuss the proposal
contained in the letter. Mr. McDermott informed Mr. Engen that the Board of
Directors of the Company would be meeting on April 4, 1997 and would consider
the proposal at that meeting. Mr. Engen requested that Mr. McDermott promptly
respond to the proposal after the Board of Directors meeting on April 4th.
On April 4, 1997, the Board of Directors of the Company held a meeting with
management and its legal and financial advisors to consider the Parent's
proposal. Legal counsel advised the Board of Directors regarding its fiduciary
duties. Mr. McDermott outlined the chronology of events leading to the proposal.
Goldman, Sachs & Co. ("Goldman Sachs") then made a presentation to the Board of
Directors concerning the proposal, including background information on the
Parent and various financial analyses. The Board, recognizing the strategic fit
between the Company and the Parent's fluid technology business and taking into
account the advice and presentation of legal counsel and Goldman Sachs,
concluded by asking Mr. McDermott to schedule a meeting with Mr. Engen to
further discuss the proposal. The Board also authorized management and Goldman
Sachs to contact one other party that had previously contacted the Company to
determine their level of interest. The Board also considered the adoption of the
Rights Plan (as defined in Section 11).
On April 7, 1997, Mr. McDermott called Mr. Engen to inform him that the
Board of Directors of the Company had considered the proposal and that he was
available to discuss the proposal and the two agreed to meet on April 9th.
On April 8, 1997, a representative of Morgan Stanley discussed the proposal
contained in Mr. Engen's March 25 letter with a representative of Goldman Sachs.
Goldman Sachs indicated that the $34.00 per share price level included in the
letter was not at a level that would justify commencing a process that could
result in a sale of the Company.
On April 9, 1997, Mr. Engen, Mr. Labrecque, Mr. McDermott and John Murphy,
Vice President and Chief Financial Officer of the Company, met to discuss the
Parent's proposal. Mr. McDermott informed Mr. Engen and Mr. Labrecque that the
Company's preference was to remain independent but that he would be willing to
discuss with the Company's Board of Directors a possible acquisition by the
Parent at a price which the Board of Directors of the Company believed to be in
the best interests of the Company's stockholders. Mr. McDermott stated that he
thought the $34.00 per share price level indicated in the letter was too low but
did not indicate the specific price level he considered to be an adequate basis
for continued discussions with the Parent. After further discussion, Mr.
McDermott agreed with Mr. Engen that the Company's financial advisors be
available to discuss the valuation of the Company with the Parent's financial
advisors. In telephone calls on April 10 and April 11, 1997 a representative
from Morgan Stanley and a representative from Goldman Sachs discussed their
respective methodologies for valuing the Company, but were unable to reach any
agreements in furtherance of the discussions between the principals.
On April 14, 1997, Mr. Engen again spoke to Mr. McDermott. Mr. McDermott
continued to decline to specify a per share price for the Company and reiterated
that the Company was not for sale, but indicated that if the parties could come
to a preliminary understanding concerning a valuation range for the Company, he
believed that the Company would be willing to have discussions with the Parent
regarding the terms of a possible transaction, and, in that regard, to permit
the Parent to commence a due diligence review of the Company subject to entering
into an appropriate confidentiality agreement. Later that day, a representative
of Morgan Stanley indicated in a telephone conversation with a representative of
Goldman Sachs that the Parent would be willing to consider, subject to due
diligence and an acceptable process for discussing definitive terms of an
acquisition, an increase in the price included in the March 25 letter by up to
5%.
On April 15, 1997, the Board of Directors of the Company had a telephone
meeting with Company management and its legal and financial advisors to update
the directors on developments. After discussion, the Board authorized management
and its advisors (subject to further approval by the Board in the event that a
definitive agreement could be concluded with the Parent) to proceed with
negotiations, including the provision of confidential information, if the Parent
indicated its willingness to pay a price of not less than $37.00 per Share.
Representatives of Goldman Sachs thereafter contacted representatives of Morgan
Stanley and stated that the Company would be willing to provide the Parent with
access to the Company for due diligence
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<PAGE> 18
purposes and to have discussions with the Parent for a short time period if the
Parent would be willing to consider a price level of not less than $37.00 per
Share.
On April 16, 1997, Morgan Stanley advised Goldman Sachs that the Parent was
prepared to move forward on the bases suggested by the Company. On April 17,
1997, the Parent and the Company executed a confidentiality letter and the
Parent began its due diligence review of the Company, which it completed on
April 19, 1997.
Negotiations of the terms of the merger agreement were conducted in a
series of meetings and telephone conversations held between April 18 and April
20, 1997.
On April 20, 1997, the Board of Directors of the Company met to consider
the results of that negotiation process and, after considering reports from
management and the Company's financial and legal advisors, unanimously voted to
enter into the Merger Agreement and to recommend that stockholders accept the
Offer and tender their Shares. The Board also decided to adopt the Rights Plan
in order to prevent any stockholder or group of stockholders from accumulating
sufficient shares to trigger a condition under the Offer or payments to
employees by causing a change in control (as defined in various employee plans
and arrangements) to occur. The Board of Directors of the Parent also had a
telephonic meeting to approve the Merger Agreement on April 20th.
Following the approval of the Board of Directors of the Company and the
Parent, on April 20, 1997, the Company, the Parent and the Purchaser entered
into the Merger Agreement.
11. THE MERGER AGREEMENT. The following is a summary of the Merger
Agreement, which summary is qualified in its entirety by reference to the Merger
Agreement which is filed as an exhibit to the Tender Offer Statement on Schedule
14D-1.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as reasonably practicable after the date of the Merger Agreement, but in
no event later than five business days from the date of public announcement of
the execution of the Merger Agreement. The obligation of the Purchaser to accept
for payment Shares tendered pursuant to the Offer is subject only to the
satisfaction or waiver by the Purchaser of the conditions described in Section
15. Under the Merger Agreement, the Purchaser expressly reserves the right, in
its sole discretion, to waive any such condition (other than the Minimum
Condition) and make any other changes in the terms and conditions of the Offer;
provided, that, unless previously approved by the Company in writing, no change
may be made which (a) changes the Minimum Condition, (b) decreases the price per
Share payable in the Offer, (c) changes the form of consideration payable in the
Offer (other than by adding consideration), (d) reduces the maximum number of
Shares to be purchased in the Offer, or (e) amends the terms or Offer Conditions
or imposes conditions or terms to the Offer in addition to those set forth in
the Merger Agreement which, in either case, are adverse to holders of the
Shares. Pursuant to the Merger Agreement, the Purchaser agrees that, unless it
is permitted to terminate the Merger Agreement pursuant to certain applicable
termination provisions in the Merger Agreement, it can terminate the Offer only
on a scheduled expiration date. The Purchaser further agrees that: (A) in the
event it would otherwise be entitled to terminate the Offer at any scheduled
expiration thereof due to the failure of one or more of the conditions set forth
in paragraphs (a), (b), (c), (d)(i), (e) or (h) of the Offer Conditions to be
satisfied or waived, it shall give the Company notice thereof and, at the
request of the Company, extend the Offer until the earlier of (1) such time as
such condition is or conditions are satisfied or waived and (2) the date chosen
by the Company which shall not be later than (x) the Outside Date applicable to
the condition or conditions with respect to which the extension is requested or
(y) the earliest date on which the Company reasonably believes such condition or
conditions will be satisfied; provided that if such condition is not or
conditions are not satisfied by any date chosen by the Company pursuant to
clause (y), the Company may request further extensions of the Offer in
accordance with the terms of this paragraph; and (B) in the event that it would
otherwise be entitled to terminate the Offer at the initial scheduled expiration
date thereof due solely to the failure of the Minimum Condition to be satisfied
or waived, it shall, at the request of the Company (which request may be made by
the Company only on one occasion), extend the Offer for up to five business days
from such initial scheduled expiration date. The Merger Agreement provides that,
subject to the terms and
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<PAGE> 19
conditions of the Merger Agreement, including but not limited to the Offer
Conditions, the Purchaser will accept for payment and pay for Shares as soon as
it is permitted to do so under applicable law.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the DGCL, at the Effective
Time, the Purchaser shall be merged with and into the Company (the "Surviving
Corporation"). As a result of the Merger, the separate corporate existence of
the Purchaser will cease and the Company will continue as the surviving
corporation. At the Parent's election, any direct or indirect subsidiary of the
Parent other than the Purchaser may be merged with and into the Company instead
of the Purchaser.
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time (unless otherwise provided for) will be cancelled,
extinguished and converted into the right to receive $37 in cash or any higher
price that may be paid pursuant to the Offer, payable to the holder thereof,
without interest, upon surrender of the certificate formerly representing such
Share in the manner described in the Merger Agreement, less any required
withholding taxes.
The Merger Agreement provides that, immediately prior to the Effective
Time, each outstanding stock option and any related stock appreciation right
granted to employees and non-employee directors of the Company and its
subsidiaries (together, an "Option"), whether or not then exercisable, will be
cancelled by the Company, and the holder thereof will be entitled to receive at
the Effective Time or as soon as practicable thereafter from the Company in
consideration for such cancellation an amount in cash equal to the product of
(a) the number of Shares previously subject to such Option and (b) the excess,
if any, of the Merger Consideration over the exercise price per Share previously
subject to such Option.
The Merger Agreement provides that Shares that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have not voted in favor of or consented to the Merger and shall have delivered a
written demand for appraisal of such Shares in the time and manner provided in
Section 262 of the DGCL and shall not have failed to perfect or shall not have
effectively withdrawn or lost their rights to appraisal and payment under the
DGCL shall not be converted into the right to receive the Merger Consideration,
but shall be entitled to receive the consideration as shall be determined
pursuant to Section 262 of the DGCL; provided, however, that if such holder
shall have failed to perfect or shall have effectively withdrawn or lost his,
her or its right to appraisal and payment under the DGCL, such holder's Shares
shall thereupon be deemed to have been converted, at the Effective Time, into
the right to receive the Merger Consideration as described above
The Merger Agreement also provides that at the Effective Time and without
any further action on the part of the Company and the Purchaser, the Restated
Certificate of Incorporation (the "Certificate of Incorporation") of the
Company, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until thereafter and
further amended as provided therein and under the DGCL. At the Effective Time
and without any further action on the part of the Company and the Purchaser, the
By-Laws of the Purchaser shall be the By-Laws of the Surviving Corporation and
thereafter may be amended or repealed in accordance with their terms or the
Certificate of Incorporation of the Purchaser and as provided by law. The Merger
Agreement provides that the directors of the Purchaser immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-Laws
of the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed (as the case may be) and qualified.
Agreements of the Parent, the Purchaser and the Company.
Stockholders Meeting. Pursuant to the Merger Agreement, the Company, if
required, shall, in accordance with and subject to applicable law and the
Company's Certificate of Incorporation and By-Laws, (i) duly call, give notice
of, convene and hold a meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby (the
"Stockholders Meeting") and (ii) subject to the fiduciary duties of
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<PAGE> 20
the Company's Board of Directors under applicable law, (A) include in the Proxy
Statement (as defined below) the unanimous recommendation of the Board of
Directors that the stockholders of the Company vote in favor of the approval of
the Merger Agreement and the transactions contemplated thereby and the written
opinion of the Financial Adviser (as defined in the Merger Agreement) that the
consideration to be received by the stockholders of the Company pursuant to the
Offer and the Merger is fair to such stockholders and (B) use its reasonable
best efforts to obtain the necessary approval of the Merger Agreement and the
transactions contemplated thereby by its stockholders. At the Stockholders
Meeting, the Parent and the Purchaser shall cause all Shares then owned by them
and their subsidiaries to be voted in favor of approval of the Merger Agreement
and the transactions contemplated thereby.
The Merger Agreement provides that, notwithstanding the foregoing, in the
event that the Purchaser shall acquire at least 90% of the outstanding Shares,
the Company agrees, at the request of the Purchaser, subject to the Merger
Agreement, to take all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's stockholders, in accordance with Section 253
of the DGCL.
Proxy Statement. The Merger Agreement provides that, if required by
applicable law, as soon as practicable following the Parent's request, the
Company will file with the Commission under the Exchange Act and the rules and
regulations promulgated thereunder, and will use its reasonable best efforts to
have cleared by the Commission the proxy statement with respect to the
Stockholders' Meeting (the "Proxy Statement").
Company Board Representation. The Merger Agreement provides that, promptly
upon the purchase by the Purchaser of Shares pursuant to the Offer, and from
time to time thereafter, the Purchaser will be entitled to designate up to such
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as will give the Purchaser representation on the Board
of Directors equal to the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by the
Purchaser or any affiliate of the Purchaser bears to the total number of Shares
then outstanding, and the Company shall, at such time, promptly take all action
necessary to cause the Purchaser's designees to be so elected, including either
increasing the size of the Board of Directors or securing the resignations of
incumbent directors or both. At such times, the Company will use its reasonable
best efforts to cause persons designated by the Purchaser to constitute the same
percentage as is on the board of (i) each committee of the Board of Directors,
(ii) each board of directors of each subsidiary of the Company and (iii) each
committee of each such board, in each case only to the extent permitted by law.
The Company's obligations to appoint designees to its Board of Directors shall
be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.
Following the election or appointment of the Purchaser's designees pursuant
to the Merger Agreement and prior to the Effective Time, any amendment, or
waiver of any term or condition, of the Merger Agreement or the Certificate of
Incorporation or By-Laws of the Company, any termination of the Merger Agreement
by the Company, any extension by the Company of the time for the performance of
any of the obligations or other acts of the Purchaser or waiver or assertion of
any of the Company's rights thereunder, and any other consent or action by the
Board of Directors with respect to the Merger Agreement, will require only the
concurrence of a majority of the directors of the Company then in office who are
neither designated by the Purchaser nor are employees of the Company (the
"Disinterested Directors") and such concurrence shall constitute the
authorization of the Board of Directors of the Company and no other action by
the Company, including any action by any other director of the Company, shall be
required for purposes of the Merger Agreement. The number of Disinterested
Directors shall be not less than two.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, the Company shall, and shall cause
its subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of the Parent, and
financing sources who shall agree to be bound by the provisions of such section
of the Merger Agreement as though a party thereto, complete access, consistent
with applicable law, at all reasonable times to its officers, employees, agents,
properties, offices, plants and other facilities and to all books and records,
and will furnish the Parent
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<PAGE> 21
and such financing sources with all financial, operating and other data and
information as the Parent, through its officers, employees or agents, or such
financing sources may from time to time reasonably request.
The Merger Agreement further provides that each of the Parent and the
Purchaser will hold and will cause its officers, employees, auditors and other
agents to hold in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all documents and
information concerning the Company and its subsidiaries furnished to the Parent
or the Purchaser in connection with the transactions contemplated in the Merger
Agreement (except to the extent that such information can be shown to have been
generally available to the Parent or the Purchaser on a non-confidential basis
prior to the date thereof; provided that the source of such information was not
known by the Parent or the Purchaser to be bound by a confidentiality agreement
and will not release or disclose such information to any other person, except
(1) the officers, directors, employees, counsel, investment bankers and other
representatives of the Parent and the Purchaser who need to know such
information for the purposes of evaluating the Merger and the other transactions
contemplated by the Merger Agreement and (2) any other person after the Company
has provided written consent to such disclosure). If the transactions
contemplated by the Merger Agreement are not consummated, such confidence will
be maintained for a period of two years from the date thereof and, if requested
by or on behalf of the Company, the Parent and the Purchaser will, and will use
all reasonable efforts to cause their auditors and other agents to, return to
the Company or destroy all copies of written information furnished by the
Company to the Parent and the Purchaser or their agents, representatives or
advisors. It is understood that Parent and Purchaser shall be deemed to have
satisfied their obligation to hold such information confidential if they
exercise the same care as they take to preserve confidentiality for their own
similar information.
No Solicitation of Transactions. The Merger Agreement provides that the
Company, its affiliates and their respective officers, directors, employees,
representatives and agents will immediately cease any existing discussions or
negotiations, if any, with any parties conducted theretofore with respect to any
acquisition or exchange of all or any material portion of the assets of, or more
than 20% of the equity interest in, the Company or any business combination with
the Company. Except as set forth in the Merger Agreement, neither the Company or
any of its affiliates, nor any of its or their respective officers, directors,
employees, representatives or agents, will, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or provide
any information to, any corporation, partnership, person or other entity or
group (other than the Parent and the Purchaser, any affiliate or associate of
the Parent and the Purchaser or any designees of the Parent or the Purchaser)
concerning any merger, sale of any material portion or assets, sale of more than
20% of the shares of capital stock or similar transactions (including an
exchange of stock or assets) involving the Company or any subsidiary of the
Company. The Company may, directly or indirectly, furnish information and
access, in each case only in response to a request for such information or
access to any person made after the date of the Merger Agreement which was not
encouraged, solicited or initiated by the Company or any of its affiliates or
any of its or their respective officers, directors, employees, representatives
or agents after the date thereof, pursuant to appropriate confidentiality
agreements, and may participate in discussions and negotiate with such person
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction (including an exchange of stock or assets) involving the
Company or any subsidiary or division of the Company, if such person has
submitted a written proposal to the Board of Directors of the Company relating
to any such transaction and the Board determines in good faith, based upon the
advice of outside counsel to the Company, that failing to take such action would
constitute a breach of the Board's fiduciary duty under applicable law. The
Board will notify the Parent immediately if any such proposal is made and will
in such notice, indicate in reasonable detail the identity of the offeror and
the terms and conditions of any proposal and shall keep the Parent promptly
advised of all developments which could reasonably be expected to culminate in
the Board of Directors withdrawing, modifying or amending its recommendation of
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement. The Company has also agreed not to release any third party from, or
waive any provisions of, any confidentiality or standstill agreement to which
the Company is a party, unless the Board shall have determined in good faith,
based upon the advice of outside counsel, that failing to release such third
party or waive such provisions would constitute a breach of the fiduciary duties
of the Board of Directors under applicable law.
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<PAGE> 22
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that the By-Laws of the Surviving Corporation will contain
provisions no less favorable with respect to indemnification than are set forth
in Article 12 of the By-laws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers or employees
of the Company.
Pursuant to the Merger Agreement the Parent will use its reasonable best
efforts to cause to be maintained in effect for six years from the Effective
Time the current policies of the directors' and officers' liability insurance
maintained by the Company (provided that the Parent may substitute therefor
policies of at least the same coverage containing terms and conditions which are
not materially less advantageous) with respect to matters occurring prior to the
Effective Time to the extent available; provided, however, that in no event
shall the Parent or the Company be required to expend more than an amount per
year equal to 150% of current annual premiums paid by the Company (which the
Company represents and warrants to be not more than $250,000) to maintain or
procure insurance coverage pursuant to the Merger Agreement.
The Merger Agreement also provides that for six years after the Effective
Time, the Parent agrees that it will or will cause the Surviving Corporation to
indemnify and hold harmless each present and former director and officer of the
Company, determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, the "Costs") (but
only to the extent such Costs are not otherwise covered by insurance and paid)
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under applicable law (and the Parent will,
or will cause the Surviving Corporation to, also advance expenses as incurred to
the fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
Further Action; Reasonable Best Efforts. The Merger Agreement provides
that, upon the terms and subject to the conditions thereof, each of the parties
thereto shall use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Merger Agreement as soon as
practicable, including but not limited to (i) cooperation in the preparation and
filing of the Offer Documents (as defined in the Merger Agreement), the Schedule
14D-9, the Proxy Statement, any required filings under the HSR Act or other
foreign filings and any amendments to any thereof and (ii) using its reasonable
best efforts to promptly make all required regulatory filings and applications
including, without limitation, responding promptly to requests for further
information and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its subsidiaries as are necessary for
the consummation of the transactions contemplated by the Merger Agreement and to
fulfill the conditions to the Offer and the Merger. The Merger Agreement also
provides that the Company and the Parent each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated by
the Merger Agreement, including promptly furnishing the other with copies of
notices or other communications received by the Parent or the Company, as the
case may be, or any of their subsidiaries, from any Governmental Authority (as
defined in the Merger Agreement) with respect to the Offer or the Merger or any
of the other transactions contemplated by the Merger Agreement. The parties also
agree to consult and cooperate with one another, and consider in good faith the
views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party thereto in connection with proceedings
under or relating to the HSR Act or any other antitrust law.
Without limiting the generality of the foregoing undertakings, in the
Merger Agreement: (i) the Parent agrees to, if necessary to prevent any
Governmental Authority from taking steps to obtain, or from issuing, any order,
injunction, decree, judgment or ruling or the taking of any other action
restraining, enjoining or
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<PAGE> 23
otherwise prohibiting the Offer or the Merger, offer to accept an order to
divest (or enter into a consent decree or other agreement giving effect thereto)
such of the Company's or the Parent's assets and business as may be necessary to
forestall such order, decree, ruling or action and to hold separate such assets
and business pending such divestiture, but only if the amount of such assets and
businesses would not be material (measured in relation to the combined assets or
revenues of the Company and its subsidiaries and the Parent's fluid technology
business, taken as a whole); and (ii) the Company and the Parent each agree to
contest and resist any action seeking to have imposed any order, decree,
judgment, injunction, ruling or other order (whether temporary, preliminary or
permanent) (an "Order") that would delay, restrain, enjoin or otherwise prohibit
consummation of the Offer or the Merger and in the event that any such temporary
or preliminary Order is entered in any proceeding that would make consummation
of the Offer or the Merger in accordance with the terms of the Merger Agreement
unlawful or that would prevent or delay consummation of the Offer or the Merger
or the other transactions contemplated by the Merger Agreement, to use its
reasonable best efforts to take promptly any and all steps (including the appeal
thereof, the posting of a bond or the taking of the steps contemplated by clause
(i) of this paragraph) necessary to vacate, modify or suspend such Order so as
to permit such consummation as promptly as practicable after the date of the
Merger Agreement.
Conduct of Business Pending the Merger. Pursuant to the Merger Agreement,
the Company has covenanted and agreed that, during the period from the date of
the Merger Agreement to the Effective Time, unless the Parent shall otherwise
agree in writing, (1)the businesses of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice, (2) the Company and its subsidiaries shall each use its
reasonable best efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the services
of the present officers, employees and consultants of the Company and its
subsidiaries and to preserve the present relationships of the Company and its
subsidiaries with customers, suppliers and other persons with which the Company
or any of its subsidiaries has significant business relations and (3) neither
the Company nor any of its subsidiaries shall, between the date of the Merger
Agreement and the Effective Time, directly or indirectly do, or commit to do,
any of the following without the prior written consent of the Parent: (i) amend
or otherwise change its certificate of incorporation or by-laws or equivalent
organizational documents; (ii) issue, deliver, sell, pledge, dispose of or
encumber, or authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (A) 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 (including but not
limited to stock appreciation rights or phantom stock), of the Company or any of
its subsidiaries (except for the issuance of up to 1,749,829 shares of Company
Common Stock required to be issued pursuant to (x) the terms of Options
outstanding as of April 16, 1997, (y) the employment agreement effective July 1,
1996 between the Company and Thomas C. McDermott, and (z) the plan under which
non-employee directors are paid one-half of their annual retainer in shares of
Company Common Stock) or (B) any assets of the Company or any of its
subsidiaries, except for sales of products in the ordinary course of business
and in a manner consistent with past practice; (iii) declare, set aside, make or
pay any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock (other than (A) regular
quarterly dividends consistent with past practice, in an amount not to exceed
$.20 per share and (B) the distribution of Rights (as defined below) pursuant to
the Rights Plan (as defined below)); (iv) reclassify, combine, split, subdivide
or redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock; (v) (A) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof; (B) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or make any
loans, advances or capital contributions to, or investments in, any other person
(other than in the ordinary course of business consistent with past practice);
(C) enter into any contract or agreement other than in the ordinary course of
business consistent with past practice; or (D) authorize any single capital
expenditure which is in excess of $1,500,000 or capital expenditures (during any
three month period) which are, in the aggregate, in excess of $7,500,000 for the
Company and its subsidiaries taken as a whole; (vi) except to the extent
required under existing employee and director benefit plans, agreements or
arrangements as in effect on the date of the Merger Agreement, increase the
compensation or fringe benefits of any of its directors, officers or employees,
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except for increases in salary or wages of employees of the Company or its
subsidiaries who are not officers of the Company in the ordinary course of
business in accordance with past practice, or grant any severance or termination
pay not currently required to be paid under existing severance plans to or enter
into any employment, consulting or severance agreement or arrangement with any
present or former director, officer or other employee of the Company or any of
its subsidiaries, or establish, adopt, enter into or amend or terminate any
collective bargaining agreement or Company Plan (as defined in the Merger
Agreement), including, but not limited to, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers or
employees; (vii) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting practices
or principles used by it; (viii) make any material tax election or settle or
compromise any material federal, state, local or foreign tax liability; (ix)
settle or compromise any pending or threatened suit, action or claim which is
material or which relates to the transactions contemplated by the Merger
Agreement; (x) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries not constituting an inactive
subsidiary (other than the Merger); (xi) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction (A)
in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the financial statements of the
Company or incurred in the ordinary course of business and consistent with past
practice and (B) of liabilities required to be paid, discharged or satisfied
pursuant to the terms of any contract in existence on the date of the Merger
Agreement (including, without limitation, benefit plans relating to directors);
or (xii) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described here above or any action which would
make any of the representations or warranties of the Company contained in the
Merger Agreement untrue and incorrect as of the date when made if such action
had then been taken, or would result in any of the conditions set forth in Annex
A of the Merger Agreement not being satisfied.
Employee Benefits Matters. The Merger Agreement provides that on and after
the Effective Time, the Parent shall cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
earned through or prior to the Effective Time as provided pursuant to the terms
of any compensation arrangements, employment agreements and employee or director
benefit plans (including, without limitation, deferred compensation plans),
programs and policies in existence as of the date thereof for all employees (and
former employees) and directors (and former directors) of the Company and its
subsidiaries. The Parent and the Company have agreed that the Surviving
Corporation and its subsidiaries shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect as of the date thereof.
Pursuant to the Merger Agreement the Parent has agreed to cause the
Surviving Corporation, for the period commencing at the Effective Time and
ending on the first anniversary thereof, to provide employee benefits under
plans, programs and arrangements which, in the aggregate, will provide benefits
to the employees of the Surviving Corporation and its subsidiaries (other than
employees covered by a collective bargaining agreement) which are no less
favorable in the aggregate than those provided pursuant to the plans, programs
and arrangements (other than those related to the equity securities of the
Company) of the Company and its subsidiaries in effect on the date thereof and
employees covered by collective bargaining agreements shall be provided with
such benefits as shall be required under the terms of any applicable collective
bargaining agreement; provided, however, that nothing in the Merger Agreement
shall prevent the amendment or termination of any specific plan, program or
arrangement, require that the Surviving Corporation provide or permit investment
in the securities of the Parent, the Company or the Surviving Corporation or
interfere with the Surviving Corporation's right or obligation to make such
changes as are necessary to conform with applicable law. Employees of the
Surviving Corporation shall be given credit for all service with the Company and
its subsidiaries, to the same extent as such service was credited for such
purpose by the Company, under each employee benefit plan, program, or
arrangement of the Parent in which such employees are eligible to participate
for purposes of eligibility and vesting; provided, however, that in no
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event shall the employees be entitled to any credit to the extent that it would
result in a duplication of benefits with respect to the same period of service.
Disposition of Litigation. The Merger Agreement provides that the Company
agrees that it will not settle any litigation currently pending, or commenced
after the date thereof, against the Company or any of its directors by any
stockholder of the Company relating to the Offer or the Merger Agreement,
without the prior written consent of Parent (which shall not be unreasonably
withheld).
Rights. The Company also agreed in the Merger Agreement to promptly adopt
a Stockholder Rights Plan (the "Rights Plan") in the form delivered to the
Parent on or prior to the date of the Merger Agreement and that immediately
prior to the purchase of Shares pursuant to the Offer, the Board of Directors of
the Company will take all necessary action to terminate all of the outstanding
Rights (as defined in the Rights Plan), effective immediately prior thereto. The
Company has taken, or prior to the adoption of such Rights Plan, will take, all
necessary action so that none of the execution of the Merger Agreement, the
making of the Offer, the acquisition of Shares pursuant to the Offer or the
consummation of the Merger will (i) cause the Rights issued pursuant to such
Rights Plan to become exercisable, (ii) cause any person to become an Acquiring
Person (as defined in the Rights Plan) or (iii) give rise to a Separation Time
(as defined in the Rights Plan) or a Flip-In Date (as defined in the Rights
Plan). The Company has also agreed in the Merger Agreement that it will not
amend the Rights Plan.
Representation and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's capitalization, the absence of any required filings and consents, the
absence of conflicts with charter documents and contracts, SEC filings and
financial statements, absence of certain changes or events, business, compliance
with law, the absence of litigation, employee benefit plans, the filing and
compliance of reports with the requirements of the Commission, environmental
matters, brokers and taxes.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of the Parent, Purchaser and the Company to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions: (a) if required by the DGCL, the Merger Agreement shall
have been approved by the affirmative vote of the stockholders of the Company by
the requisite vote in accordance with the Company's Certificate of Incorporation
and the DGCL (which the Company has represented shall be solely the affirmative
vote of a majority of the outstanding Shares); (b) no statute, rule, regulation,
executive order, decree, ruling, injunction or other order (whether temporary,
preliminary or permanent) shall have been enacted, entered, promulgated or
enforced by any United States, foreign, federal or state court or governmental
authority which prohibits, restrains, enjoins or restricts the consummation of
the Merger; and (c) the Purchaser shall have purchased Shares pursuant to the
Offer.
Termination; Fees and Expenses. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company as follows:
(a) by mutual written consent of the Parent, the Purchaser and the
Company;
(b) by the Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction
within the United States or any country or economic region in which either
the Company or the Parent, directly or indirectly, has material assets or
operations, shall have issued a final order, injunction, decree, judgment
or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, injunction,
decree, judgment, ruling or other action is or shall have become final and
nonappealable;
(c) by the Parent (only following the Outside Date (as defined below),
in the case of clause (ii) below) if due to an occurrence or circumstance
which resulted in a failure to satisfy any of the Offer Conditions, the
Purchaser shall have (i) terminated the Offer in accordance with the terms
of the Merger Agreement or (ii) failed to pay for Shares pursuant to the
Offer on or prior to the Outside Date;
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(d) by the Company (only following the Outside Date, in the case of
clause (ii)(B) below) if (i) there shall have been a material breach of any
covenant or agreement on the part of the Parent or the Purchaser contained
in the Merger Agreement which materially adversely affects the Parent's or
the Purchaser's ability to consummate (or materially delays commencement or
consummation of) the Offer, and which shall not have been cured prior to
the earlier of (A) 10 business days following notice of such breach and (B)
two business days prior to the date on which the Offer expires, (ii) the
Purchaser shall have (A) terminated the Offer or (B) failed to pay for
Shares pursuant to the Offer on or prior to the Outside Date (unless such
failure is caused by or results from the failure of any representation or
warranty of the Company to be true and correct in any material respect or
the failure of the Company to perform in any material respect any of its
covenants or agreements contained in the Merger Agreement) or (iii) prior
to the purchase of Shares pursuant to the Offer, any person shall have made
a bona fide offer to acquire the Company (A) that the Board of Directors of
the Company determines in its good faith judgment is more favorable to the
Company's stockholders than the Offer and the Merger and (B) as a result of
which the Board of Directors determines in good faith, based upon the
advice of outside counsel, that it is obligated by its fiduciary
obligations under applicable law to terminate the Merger Agreement,
provided that such termination under this clause (iii) shall not be
effective until the Company has made payment of the full fee and expense
reimbursement in accordance with the Merger Agreement as described below;
or
(e) by the Parent prior to the purchase of Shares pursuant to the
Offer if (i) there shall have been a breach of any covenant or agreement on
the part of the Company contained in the Merger Agreement which is
reasonably likely to have a Material Adverse Effect (as defined in the
Merger Agreement) on the Company or which materially adversely affects (or
materially delays) the consummation of the Offer, which shall not have been
cured prior to the earlier of (A) 10 business days following notice of such
breach and (B) two business days prior to the date on which the Offer
expires, (ii) the Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its
approval or recommendation of the Offer, Merger Agreement or the Merger or
shall have recommended another offer or transaction, or shall have resolved
to effect any of the foregoing, or (iii) the Minimum Condition shall not
have been satisfied by the expiration date of the Offer as it may have been
extended pursuant to the Merger Agreement and on or prior to such date (A)
any person (including the Company but not including the Parent or the
Purchaser) shall have made a public announcement with respect to a Third
Party Acquisition that contemplates a direct or indirect consideration (or
implicit valuation) for Shares (including the value of any stub equity) in
excess of the per Share Merger Consideration or (B) any person (including
the Company or any of its affiliates or subsidiaries), other than the
Parent or any of its affiliates shall have become (and remain at the time
of termination) the beneficial owner of 19.9% or more of the Shares (unless
such person shall have tendered and not withdrawn such person's Shares
pursuant to the Offer). As used in the Merger Agreement, the "Outside Date"
means the latest of (A) 70 days following the date thereof, (B) the date
that all conditions to the Offer set forth in paragraph (a) and (h) of the
Offer Conditions, the satisfaction of which involve compliance with or
otherwise relate to any United States antitrust or competition laws or
regulations (including any enforcement thereof), have been satisfied for a
period of 10 business days, or (C) 10 business days following the
conclusion of any ongoing proceedings before any foreign Governmental
Authority (as defined in the Merger Agreement) in connection with its
review of the transactions contemplated by the Merger Agreement pursuant to
any foreign antitrust or competition law or regulation; provided that in no
event shall the Outside Date be later than December 31, 1997.
The Merger Agreement provides that in the event of the termination of the
Merger Agreement pursuant to the above paragraph, the Merger Agreement shall
forthwith become void and there shall be no liability on the part of any party
thereto except as set forth in the Merger Agreement; provided, however, that
nothing therein shall relieve any party from liability for any wilful breach
thereof.
The Merger Agreement further provides that if:
(i) the Parent terminates the Merger Agreement pursuant to (e)(i) above, or
if the Company terminates the Merger Agreement pursuant to (d)(ii) above under
circumstances that would have permitted the Parent
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to terminate the Merger Agreement pursuant to (e)(i) above, and within 15 months
thereafter, the Company enters into an agreement with respect to a Third Party
Acquisition (as defined below), or a Third Party Acquisition occurs, involving
any party (or any affiliate or associate thereof) (x) with whom the Company (or
its agents) had any discussions with respect to a Third Party Acquisition, (y)
to whom the Company (or its agents) furnished information with respect to or
with a view to a Third Party Acquisition or (z) who had submitted a proposal or
expressed any interest publicly or to the Company in a Third Party Acquisition,
in the case of each of clauses (x), (y) and (z) prior to such termination; or
(ii) the Parent terminates the Merger Agreement pursuant to (e)(i) above,
or if the Company terminates the Merger Agreement pursuant to (d)(ii) above
under circumstances that would have permitted the Parent to terminate the Merger
Agreement pursuant to (e)(i) above and within 15 months thereafter the Company
enters into an agreement with respect to a Third Party Acquisition that
contemplates a direct or indirect consideration (or implicit valuation) for
Shares (including the value of any stub equity) in excess of the per Share
Merger Consideration; or
(iii) (1) the Company terminates the Merger Agreement pursuant to (d)(iii)
above or (2) the Company terminates the Merger Agreement pursuant to (d)(ii)(B)
above and at such time the Parent would have been permitted to terminate the
Merger Agreement according to (e)(ii) or (iii) above or (3) the Parent
terminates the Merger Agreement pursuant to (e)(ii) or (iii) above;
then the Company shall according to the Merger Agreement pay to the Parent and
the Purchaser, within one business day following the execution and delivery of
such agreement or such occurrence, as the case may be, or simultaneously with
any termination contemplated by the immediately preceding paragraph, a fee, in
cash, of $22 million (less any amounts previously paid pursuant to the next
paragraph), provided, however, that the Company in no event shall be obligated
to pay more than one such fee with respect to all such agreements and
occurrences and such termination.
The Merger Agreement also provides that upon the termination of the Merger
Agreement (i) under circumstances in which the Parent shall have been entitled
to terminate the Merger Agreement pursuant to (e)(i) above (whether or not
expressly terminated on such basis) or (ii) if any of the representations and
warranties of the Company contained in the Merger Agreement were untrue or
incorrect in any material respect when made and at the time of termination
remained untrue or incorrect in any material respect and such misrepresentation
materially adversely affected the consummation (or materially delayed
commencement or consummation) of the Offer, then the Company shall reimburse the
Parent, the Purchaser and their affiliates (not later than one business day
after submission of statements therefor) for all actual documented out-of-pocket
fees and expenses actually incurred by any of them or on their behalf in
connection with the Offer and the Merger and the consummation of all
transactions contemplated by the Merger Agreement (including, without
limitation, fees and disbursements payable to financing sources, investment
bankers, counsel to the Purchaser or the Parent or any of the foregoing, and
accountants) up to a maximum amount of $2 million; provided, however, that in no
circumstances shall any payment be made under this paragraph after a payment has
been made in the immediately succeeding paragraph. Unless required to be paid
earlier pursuant to (d) as described above, the Company shall in any event pay
the amount requested within one business day of such request, subject to the
Company's right to demand a return of any portion as to which invoices are not
received in due course after request by the Company.
The Merger Agreement defines "Third Party Acquisition" as the occurrence of
any of the following events: (i) the acquisition of the Company by merger or
similar business combination by any person other than the Parent, the Purchaser
or any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third
Party of 20.0% or more of the assets of the Company and its subsidiaries, taken
as a whole; or (iii) the acquisition by a Third Party of 20.0% or more of the
outstanding Shares.
The Merger Agreement also provides that upon the termination of the Merger
Agreement (i) under circumstances in which the Company shall have been entitled
to terminate the Merger Agreement pursuant to (d)(i) above (whether or not
expressly terminated on such basis) or (ii) if any of the representations and
warranties of the Parent or the Purchaser contained in the Merger Agreement were
untrue or incorrect in any material respect when made and at the time of
termination remained untrue or incorrect in any material
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respect and such misrepresentation materially adversely affected the Parent's or
the Purchaser's ability to consummate (or materially delayed commencement or
consummation of) the Offer, then the Parent shall reimburse the Company and its
affiliates (not later than one business day after submission of statements
therefor) for all actual documented out-of-pocket fees and expenses actually
incurred by any of them or on their behalf in connection with the Offer and the
Merger and the consummation of all transactions contemplated by the Merger
Agreement (including, without limitation, fees and disbursements payable to
financing sources, investment bankers, counsel to the Company or any of the
foregoing, and accountants) up to a maximum amount of $2 million.
Except as otherwise specifically provided in the Merger Agreement, each
party shall bear its own expenses in connection with the Merger Agreement and
the transactions contemplated thereby.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. Purpose. The
purpose of the Offer is to acquire control of, and the entire equity interest
in, the Company. The Offer is being made pursuant to the Merger Agreement. As
promptly as practicable following consummation of the Offer and after
satisfaction or waiver of all conditions to the Merger set forth in the Merger
Agreement, the Purchaser intends to acquire the remaining equity interest in the
Company not acquired in the Offer by consummating the Merger.
Vote Required to Approve the Merger. The Board of Directors of the Company
has approved the Merger Agreement in accordance with the DGCL. If required for
approval of the Merger, the Company has agreed, subject to the satisfaction of
the conditions to the Merger set forth in the Merger Agreement, in accordance
with and subject to the DGCL, to duly convene a meeting of its stockholders as
soon as practicable following consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement. If stockholder approval
is required, the Merger Agreement must generally be approved by the vote of the
holders of a majority of the outstanding Shares. As a result, if the Minimum
Condition is satisfied, the Purchaser will have the power, to approve the Merger
Agreement without the affirmative vote of any other stockholder. In such case,
the Parent and the Purchaser have agreed to cause all Shares then owned by them
and their subsidiaries to be voted in favor of the approval of the Merger
Agreement and the Merger. If the Purchaser acquires at least 90% of the
outstanding Shares, the Purchaser intends to take, and the Company has agreed,
at the request of the Purchaser, to take all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's stockholders, in accordance
with the DGCL. In such event, the Merger would be accomplished without such a
meeting.
Appraisal Rights. Stockholders do not have appraisal rights as a result of
the Offer. However, if the Merger is consummated, stockholders of the Company at
the time of the Merger who do not vote in favor of the Merger and comply with
all statutory requirements will have the right under the DGCL to demand
appraisal of, and receive payment in cash of the fair value of, their Shares
outstanding immediately prior to the effective date of the Merger in accordance
with Section 262 of the DGCL.
Under the DGCL, stockholders who properly demand appraisal and otherwise
comply with the applicable statutory procedures will be entitled to receive a
judicial determination of the fair value of their Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Stockholders should recognize that the value so determined
could be equal to or higher or lower than the price per Share paid pursuant to
the Offer or the consideration per Share to be paid in the Merger.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court
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stated in Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of unfairness, including
fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS DOES NOT PURPORT TO BE
A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING
TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE PRESERVATION AND EXERCISE OF
APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
DELAWARE LAW.
The foregoing description of the DGCL is not necessarily complete and is
qualified in its entirely by reference to the DGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer in which the Purchaser seeks to acquire any
remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of the
Offer and the price paid in the Merger is not less than the per Share price paid
pursuant to the Offer. However, in the event that the Purchaser is deemed to
have acquired control of the Company pursuant to the Offer and if the Merger is
consummated more than one year after completion of the Offer or an alternative
acquisition transaction is effected whereby stockholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, the Purchaser
may be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
stockholders in the Merger or such alternative transaction, be filed with the
Commission and disclosed to stockholders prior to consummation of the Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 14. If such registration were terminated,
Rule 13e-3 would be inapplicable to any such future Merger or such alternative
transaction.
Plans for the Company. If the Purchaser obtains control of the Company
pursuant to the Offer, the Parent expects to conduct a detailed review of the
Company and its businesses, assets, corporate structure, capitalization,
operations, properties, policies, management and personnel and to consider what,
if any, changes would be desirable in light of the circumstances that then
exist. Such changes could include changes in the Company's businesses, corporate
structure, certificate of incorporation, by-laws, capitalization, board of
directors, management or dividend policy.
Except as described in this Offer to Purchase, none of the Purchaser, the
Parent nor, to the best knowledge of the Purchaser and the Parent, any of the
persons listed on Schedule I have any present plans or proposals that would
relate to or result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries
or a sale or other transfer of a material amount of assets of the Company or any
of its subsidiaries, any material change in the capitalization or dividend
policy of the Company or any other material change in the Company's corporate
structure or business or the composition of its Board of Directors or
management.
13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the
date of the Merger Agreement (except as contemplated thereby), split, combine or
otherwise change the Shares or its capitalization, or disclose that it has taken
any such action, then without prejudice to the Purchaser's rights under Section
15, the Purchaser may make such adjustments to the purchase price and other
terms of the Offer as it deems appropriate to reflect such split, combination or
other change.
If on or after the date of the Merger Agreement (except as contemplated
thereby), the Company should declare or pay any cash or stock dividend or other
distribution on, or issue any right with respect to, the Shares that is payable
or distributable to stockholders of record on a date prior to the transfer to
the name of the
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Purchaser or the nominee or transferee of the Purchaser on the Company's stock
transfer records of such Shares that are purchased pursuant to the Offer, then
without prejudice to the Purchaser's rights under Section 15, (i) the purchase
price payable per Share by the Purchaser pursuant to the Offer will be reduced
to the extent any such dividend or distribution is payable in cash and (ii) any
non-cash dividend, distribution (including additional Shares) or right received
and held by a tendering stockholder shall be required to be promptly remitted
and transferred by the tendering stockholder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance or appropriate assurance thereof, the Purchaser will, subject to
applicable law, be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and will reduce
the number of holders of Shares. This could adversely affect the liquidity and
market value of the remaining Shares held by the public. Depending upon the
number of Shares purchased pursuant to the Offer, the Shares may no longer meet
the requirements of the National Association of Securities Dealers, Inc. (the
"NASD") for continued inclusion in the Nasdaq National Market, which require
that an issuer have at least 200,000 publicly held shares, held by at least 400
stockholders or 300 stockholders of round lots, with a market value of at least
$1,000,000 and have net tangible assets of at least $1,000,000, $2,000,000 or
$4,000,000, depending on profitability levels during the issuer's four most
recent fiscal years. If these standards are not met, the Shares might
nevertheless continue to be included in the NASD's Nasdaq Stock Market (the
"Nasdaq Stock Market") with quotations published in the Nasdaq "additional list"
or in one of the "local lists", but if the number of holders of the Shares were
to fall below 300, or if the number of publicly held Shares were to fall below
100,000 or there were not at least two registered and active market makers for
the Shares, the NASD's rules provide that the Shares would no longer be
"qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would
cease to provide any quotations. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10% of the Shares are not
considered as being publicly held for this purpose. According to the 1996 Annual
Report, as of February 28, 1997, there were approximately 4,726 holders of
record or through nominee or street name accounts with brokers of Shares and
there were 21,376,093 Shares outstanding. If as a result of the purchase of
Shares pursuant to the Offer or otherwise, the Shares no longer meet the
requirements of the NASD for continued inclusion in the Nasdaq National Market
or in any other tier of the Nasdaq Stock Market and the Shares are no longer
included in the Nasdaq National Market or in any other tier of the Nasdaq Stock
Market, as the case may be, the market for the Shares could be adversely
affected.
In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of the Nasdaq Stock Market, it is possible
that such Shares would continue to trade on other securities exchanges or in the
over-the-counter market and that price quotations would be reported by such
exchanges or through other sources. However, the extent of the public market for
the Shares and the availability of such quotations would depend upon such
factors as the number of stockholders and/or the aggregate market value of the
Shares remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of registration
under the Exchange Act as described below and other factors. The Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares.
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange and there are fewer than 300 record
holders. The termination of the registration of the Shares under the Exchange
Act would substantially reduce the information required to be furnished by the
Company to holders of the Shares and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. Furthermore, "affiliates"
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<PAGE> 31
of the Company and persons holding "restricted securities" of the Company may be
deprived of the ability to dispose of the securities pursuant to Rule 144 under
the Securities Act of 1933.
The Shares are currently "margin securities" under the rules of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), which
has the effect, among other things, of allowing brokers to extend credit on the
collateral of such Shares for the purpose of buying, carrying, or trading in
securities ("purpose loans"). Depending upon factors similar to those described
above with respect to listing and market quotations, it is possible that,
following the Offer, the Shares might no longer constitute "margin securities"
for the purposes of the Federal Reserve Board's margin regulations and therefore
could no longer be used as collateral for purpose loans made by brokers.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, but subject to the terms and conditions of the Merger Agreement,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for
any Shares tendered pursuant to the Offer, and may postpone the acceptance for
payment or, subject to the restriction referred to above, payment for any Shares
tendered pursuant to the Offer, and may amend or terminate the Offer (whether or
not any Shares have theretofore been purchased or paid for) to the extent
permitted by the Merger Agreement if, (i) at the expiration of the Offer, a
number of Shares which, together with any Shares owned by Parent or Purchaser,
constitutes more than 50% of the voting power (determined on a fully-diluted
basis), on the date of purchase, of all the securities of the Company entitled
to vote generally in the election of directors or in a merger shall not have
been validly tendered and not properly withdrawn prior to the expiration of the
Offer, the ("Minimum Condition") or (ii) at any time on or after the date of
this Agreement and prior to the acceptance for payment of Shares, any of the
following conditions occurs or has occurred:
(a) there shall have been entered any order, preliminary or permanent
injunction, decree, judgment or ruling in any action or proceeding before
any court or governmental, administrative or regulatory authority or
agency, or any statute, rule or regulation enacted, entered, enforced,
promulgated, amended or issued that is applicable to Parent, Purchaser, the
Company or any subsidiary or affiliate of Purchaser or the Company or the
Offer or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency that: (i)
makes illegal or otherwise directly or indirectly restrains or prohibits or
makes materially more costly the making of the Offer in accordance with the
terms of the Merger Agreement, the acceptance for payment of, or payment
for, some of or all the Shares by Purchaser or any of its affiliates or the
consummation of the Merger; (ii) prohibits the ownership or operation by
the Company or any of its subsidiaries, or Parent or any of its
subsidiaries, of all or any material portion of the business or assets of
the Company or any of its subsidiaries, taken as a whole, or Parent or its
subsidiaries, taken as a whole; or (iii) materially limits the ownership or
operation by the Company or any of its subsidiaries, or Parent or any of
its subsidiaries, of all or any material portion of the business or assets
of the Company or any of its subsidiaries, taken as a whole, or Parent or
its subsidiaries, taken as a whole (other than, in either case, assets or
businesses of the Company or its subsidiaries or Parent's fluid technology
business that are not material (measured in relation to the combined assets
or revenues of the Company and its subsidiaries and Parent's fluid
technology business, taken as a whole)) or compels Parent or any of its
subsidiaries to dispose of or hold separate all or any portion of the
businesses or assets of the Company or any of its subsidiaries or Parent or
any of its subsidiaries (other than, in either case, assets or businesses
of the Company or its subsidiaries or Parent's fluid technology business
that are not material (measured in relation to the combined assets or
revenues of the Company and its subsidiaries and Parent's fluid technology
business, taken as a whole)), as a result of the transactions contemplated
by the Offer or the Merger Agreement; (iv) imposes limitations on the
ability of Parent, Purchaser or any of Parent's affiliates effectively to
acquire or hold or to exercise full rights of ownership of Shares,
including without limitation the right to vote any Shares acquired or owned
by Parent or Purchaser or any of its affiliates on all matters properly
presented to the stockholders of the Company, including without limitation
the adoption and approval of the Merger Agreement and the
29
<PAGE> 32
Merger or the right to vote any shares of capital stock of any subsidiary
directly or indirectly owned by the Company; or (v) requires divestiture by
Parent or Purchaser or any of their affiliates of any Shares;
(b) there shall have occurred any event that is reasonably likely to
have a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices (other than suspensions or limitations
triggered on the New York Stock Exchange by price fluctuations on a trading
day) for, securities on any national securities exchange or in the
over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any material limitation (whether or not mandatory) by
any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on, the extension of credit by banks or other
lending institutions, (iv) a commencement of a war or armed hostilities or
other national calamity directly involving the United States or materially
adversely affecting (or material delaying) the consummation of the Offer or
(v) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof;
(d) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of more than 25.0% of the outstanding Shares has been acquired by any
corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than Parent or any of its
affiliates, or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
Parent or Purchaser the approval or recommendation of the Offer, the Merger
or the Merger Agreement, or approved or recommended any takeover proposal
or any other acquisition of more than 5% of the outstanding Shares other
than the Offer and the Merger, (B) any such corporation, partnership,
person or other entity or group shall have entered into a definitive
agreement or an agreement in principle with the Company with respect to a
tender offer or exchange offer for any Shares or a merger, consolidation or
other business combination with or involving the Company or any of its
subsidiaries, or (C) the Board of Directors of the Company or any committee
thereof shall have resolved to do any of the foregoing;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified by reference to a Material
Adverse Effect shall not be true and correct, or any such representations
and warranties that are not so qualified shall not be true and correct in
any respect that is reasonably likely to have a Material Adverse Effect, in
each case as if such representations and warranties were made at the time
of such determination;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company; or
(h) any waiting periods under the HSR Act applicable to the purchase
of Shares pursuant to the Offer or the Merger, and any applicable waiting
periods under any foreign statutes or regulations, shall not have expired
or been terminated;
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (except for any
action or inaction by Purchaser or any of its affiliates constituting a breach
of the Merger Agreement) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with such acceptance for payment of or payment for
Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or (other than the
Minimum
30
<PAGE> 33
Condition) may be waived by Purchaser in whole or in part at any time and from
time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. General. Except as
set forth below, based upon its examination of publicly available filings by the
Company with the Commission and other publicly available information concerning
the Company, neither the Purchaser nor the Parent is aware of any licenses or
other regulatory permits that appear to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by the Purchaser's acquisition of Shares (and the indirect acquisition of the
stock of the Company's subsidiaries) as contemplated herein, or of any filings,
approvals or other actions by or with any domestic (federal or state), foreign
or supranational governmental authority or administrative or regulatory agency
that would be required prior to the acquisition of Shares (or the indirect
acquisition of the stock of the Company's subsidiaries) by the Purchaser
pursuant to the Offer as contemplated herein. Should any such approval or other
action be required, it is the Purchaser's present intention to seek such
approval or action. There can be no assurance that any such approval or other
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company, the Parent
or the Purchaser or that certain parts of the businesses of the Company, the
Parent or the Purchaser might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
other action or in the event that such approval was not obtained or such other
action was not taken, any of which could cause the Purchaser to elect (subject
to the terms of the Merger Agreement) to terminate the Offer without the
purchase of the Shares thereunder. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 15.
State Takeover Laws. A number of states have adopted takeover laws and
regulations which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in such states or
which have or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, principal
executive offices or principal places of business therein. To the extent that
certain provisions of certain of these state takeover statutes purport to apply
to the Offer, the Purchaser believes that such laws conflict with federal law
and constitute an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of
state securities law made takeovers of corporations meeting certain requirements
more difficult, and the reasoning in such decision is likely to apply to certain
other state takeover statutes. However, in 1987, in CTS Corp. v. Dynamics Corp.
of America, the Supreme Court of the United States held that the State of
Indiana could, as a matter of corporate law and in particular those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the remaining stockholders, provided that such laws were
applicable only under certain conditions. Subsequently, in TLX Acquisition Corp.
v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma
statutes were unconstitutional insofar as they applied to corporations
incorporated outside Oklahoma in that they would subject such corporations to
inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a
federal district court in Tennessee ruled that four Tennessee takeover statutes
were unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser reserves
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in
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<PAGE> 34
connection herewith is intended as a waiver of that right. In the event that any
state takeover statute is found applicable to the Offer, the Purchaser might be
unable to accept for payment or purchase Shares tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for purchase or pay for, any Shares
tendered. See Section 15.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer is subject to such
requirements. See Section 2.
The Parent intends, as soon as reasonably practicable following the date
hereof, to file with the FTC and the Antitrust Division a Premerger Notification
and Report Form in connection with the purchase of Shares pursuant to the Offer.
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by the Parent, unless both
the Antitrust Division and the FTC terminate the waiting period prior thereto.
If, within such 15-calendar day waiting period, either the Antitrust Division or
the FTC requests additional information or documentary material from the Parent,
the waiting period would be extended for an additional 10 calendar days
following substantial compliance by the Parent with such request. Thereafter,
the waiting period could be extended only by court order. If the acquisition of
Shares is delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Offer may, but need not (other than as may be requested by the Company pursuant
to the Merger Agreement), be extended and in any event the purchase of and
payment for Shares will be deferred until 10 days after the request is
substantially complied with, unless the waiting period is sooner terminated by
the FTC and the Antitrust Division. See Section 2. Only one extension of such
waiting period pursuant to a request for additional information is authorized by
the HSR Act and the rules promulgated thereunder, except by court order. Any
such extension of the waiting period will not give rise to any withdrawal rights
not otherwise provided for by applicable law. See Section 4.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase by
the Purchaser of Shares pursuant to the Offer, either of the FTC and the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of Shares pursuant to the Offer or seeking the divestiture of Shares
purchased by the Purchaser or the divestiture of substantial assets of the
Parent, its subsidiaries or the Company. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company and its subsidiaries are engaged, the Purchaser
has determined that the Company and the Parent both produce and distribute
similar product lines in certain geographic areas. Although the Purchaser
believes that the acquisition of Shares pursuant to the Offer would not violate
the antitrust laws, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such challenge is made, what the
outcome will be. See Section 15 for certain conditions to the Offer, including
conditions with respect to litigation and certain government actions.
Certain Foreign Approvals. The Company has informed the Purchaser that the
Company has interests in certain businesses and assets in Italy and Canada with
respect to which certain filings may be acquired.
Under Italian antitrust law, the Purchaser may have to provide notice of
the consummation of the Offer to the Italian antitrust authorities in advance
thereof. Upon such filing, such authorities will have 30 days to either (i)
approve the indirect transfer of Italian assets that would result from
consummation of the Offer or (ii) institute a full investigation of the effect
of the transactions pursuant to the Merger Agreement on competition in the
Italian pump market. Within 45 days of commencing such investigation, such
authorities will either (a) approve such consummation, (b) prohibit the indirect
transfer of Italian assets, (c) condition
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<PAGE> 35
such transfer on divestiture of some portion of such assets or (d) extend the
investigation for an additional 30 days.
Certain provisions of Canada's Competition Act require pre-notification to
the Director of Investigation and Research (the "Director") of a significant
acquisition of assets in Canada of an operating business or, subject to certain
share thresholds, voting shares of a corporation that directly or through
subsidiaries conducts an operating business in Canada (a "Notifiable
Transaction"). If a transaction is a Notifiable Transaction it may not be
completed prior to the expiration or earlier termination of the applicable
waiting period after notice of such transaction has been delivered to the
Director. The waiting periods may be seven or 21 days from the time information
provided to the Director is certified to be completed, depending upon the type
of information provided to the Director. The Director may waive or abridge the
waiting period. If the Director determines that the Notifiable Transaction
would, or is likely to, have the effect of lessening or preventing competition
substantially in a definable market, the Director may apply to the Competition
Tribunal (a special purpose Canadian tribunal) for an order to require, among
other things, the disposition of the Canadian assets or shares acquired in such
Notifiable Transaction in the case of a completed merger, or to prevent the
acquisition of Canadian assets or shares in the case of a proposed merger.
The Purchaser intends to file any required notices or applications with
respect to the Merger with the appropriate Italian and Canadian authorities and,
to the extent necessary, observe the applicable waiting periods and to seek any
requisite approvals from such authorities.
Other Foreign Approvals. Based on publicly available information, it
appears that the Company also owns property or conducts business in other
foreign countries and jurisdictions. In connection with the acquisition of the
Shares pursuant to the Offer, the laws of certain of those foreign countries and
jurisdictions may require the filing of information with, or the obtaining of
the approval of, governmental authorities in such countries and jurisdictions.
The governments in such countries and jurisdictions might attempt to impose
additional conditions on the Company's operations conducted in such countries
and jurisdictions as a result of the acquisition of the Shares pursuant to the
Offer. There can be no assurance that the Purchaser will be able to cause the
Company or its subsidiaries to satisfy or comply with such laws or that
compliance or non-compliance will not have adverse consequences for the Company
or any subsidiary after purchase of the Shares pursuant to the Offer.
Margin Credit Regulations. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. Morgan Stanley is acting as Dealer Manager in
connection with the Offer and serving as financial advisor to the Parent and the
Purchaser in connection with the acquisition of the Company. The Parent has
agreed, pursuant to an engagement letter, to pay to Morgan Stanley an advisory
fee, in the event a transaction is not consummated, estimated to be between
$200,000 and $300,000. The Parent has agreed to pay Morgan Stanley a fee of $4.3
million upon the consummation of the Offer or a merger or other business
combination with, or acquisition of 50% or more of the Shares or of all or
substantially all of the assets of, the Company. The Parent and the Purchaser
will also reimburse Morgan Stanley for reasonable out-of-pocket expenses,
including reasonable attorneys' fees, and have also agreed to indemnify Morgan
Stanley against certain liabilities and expenses in connection with the Offer,
including certain liabilities under the federal securities laws.
The Purchaser has retained Georgeson & Company Inc. to act as the
Information Agent and The Bank of New York to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward the Offer materials
to beneficial owners. The Information Agent and
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<PAGE> 36
the Depositary will receive reasonable and customary compensation for services
relating to the Offer and will be reimbursed for certain out-of-pocket expenses.
The Purchaser and the Parent have also agreed to indemnify the Information Agent
and the Depositary against certain liabilities and expenses in connection with
the Offer, including certain liabilities under the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Shares pursuant to the Offer
(other than to the Dealer Manager, the Information Agent and the Depositary).
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by the Purchaser for customary mailing and handling expenses incurred
by them in forwarding offering materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Shares. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be accepted from or on
behalf of the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission a Schedule
14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the Commission (except that they will
not be available at the regional offices of the Commission) in the manner set
forth in Section 8 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
GEORGE ACQUISITION, INC.
APRIL 25, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER AND THE PARENT
1. Directors and Executive Officers of the Purchaser. The name and
position with the Purchaser of each director and executive officer of the
Purchaser are set forth below. The other required information with respect to
each such person, with the exception of Lawrence J. Swire, for whom such
information is provided below, is set forth under "Directors and Executive
Officers of the Parent". All directors and executive officers listed below are
citizens of the United States, except that Mr. Kamber is a citizen of Austria.
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------- ----------------------------------------------------------
<S> <C>
Martin Kamber.................... President and Director.
Vincent A. Maffeo................ Vice President, Treasurer and Director.
Lawrence J. Swire................ Vice President, Secretary and Director. He has been
Associate General Counsel of the Parent since December
1995. Prior thereto, he was Assistant General Counsel of
ITT Corporation, the corporate predecessor of the
Parent.
</TABLE>
2. Directors and Executive Officers of the Parent. The name, business
address, present principal occupation or employment and material occupations,
positions, offices or employments during the last five years of each director
and executive officer of the Parent and certain other information are set forth
below. Unless otherwise indicated, the business address of each such director
and executive officer is Four West Red Oak Lane, White Plains, NY 10604. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with the Parent. All directors and executive officers
listed below are citizens of the United States, except that Mr. David-Weill is a
citizen of France and Mr. Kamber is a citizen of Austria.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
Travis Engen..................... Director since 1995; Chairman, President and Chief
Executive of ITT Industries since December 1995. From
January 1991 through December 19, 1995, he was an
Executive Vice President of ITT Corporation, the
corporate predecessor of ITT Industries. Mr. Engen is a
director of Lyondell Petrochemical Company and of Alcan
Aluminium Limited. He is a member of the Business
Roundtable and the Manufacturers Alliance Board of
Trustees. He also is a director of Fundacion Chile, a
non-profit research organization in Chile.
Rand V. Araskog.................. Director since 1995, Chairman and Chief Executive of ITT
Corporation since December 1995. Previously he had
served as the Chief Executive of the corporate
predecessor of ITT Industries since 1979 and as Chairman
since 1980. He is a director of ITT Corporation, ITT
Hartford Group, Inc., ITT Educational Services, Inc.,
Alcatel Alsthom of France, Dow Jones & Company, Inc.,
Rayonier Inc., and Shell Oil Company. Mr. Araskog is a
member of The Business Council, The Business Roundtable,
and a trustee of the New York Zoological Society and of
the Salk Institute.
</TABLE>
I-1
<PAGE> 38
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
Robert A. Burnett................ Director since 1995, former Chairman of Meredith
Corporation (1988-1992). He is a director of ITT
Corporation, ITT Hartford Group, Inc., Meredith
Corporation, Whirlpool Corporation, and Mid American
Energy. He is a member of the Board of Trustees of
Grinnell College, Grinnell, Iowa.
Curtis J. Crawford............... Director since 1996; President of Microelectronics Group
of Lucent Technologies, Inc. since 1996. He served in a
similar capacity with AT&T from 1993 to 1996. From 1991
to 1993, he was Vice President and Co-Chief Executive
Officer of Microelectronics, formerly a division of
AT&T. He is a director of Lyondell Petrochemical Company
and chairman of the board of i-STAT Corporation. He also
is a director of the Semiconductor Industry Association.
Michel David-Weill............... Director since 1995; Chairman of Lazard Freres & Co. LLC
since May 1, 1995 when Lazard Freres & Co., of which he
had been Senior Partner since 1977, was restructured and
its name changed. Mr. David-Weill is a director of a
number of corporations, including Groupe Danone and
Publicis S.A. in France, Instituto Finanziario
Industriale S.p.A. in Italy, Pearson plc in England, The
Dannon Company, Inc. and the New York Stock Exchange,
Inc. in the United States, as well as other companies of
which Lazard Freres & Cie., Paris, or one of its
affiliates, is the principal stockholder.
S. Parker Gilbert................ Director since 1995; Chairman, Morgan Stanley Advisory
Board; retired in 1990 from Morgan Stanley Group Inc.,
where he served as Chairman from 1984. Mr. Gilbert is a
director of Morgan Stanley Group Inc., Burlington
Resources Inc., and Taubman Centers, Inc. He is
President, Board of Trustees of the Pierpont Morgan
Library, and a member of the Board of Trustees of the
Metropolitan Museum of Art and the Alfred P. Sloan
Foundation.
Edward C. Meyer.................. Director since 1995; Chairman of Mitretek Systems retired
in 1983 as chief of staff of the United States Army. He is
a director of ITT Corporation, FMC Corporation and its
joint venture company in Turkey, the Brown Group, Aegon
U.S.A., and GRC International. He is a managing partner
of Cilluffo Associates Limited Partnership, a trustee of
the George C. Marshall Foundation, and a board member of
the Smith Richardson Foundation. He is President of the
Army Emergency Relief Association and a member of the
Board of Overseers of the Hoover Institution and the
Board of Advisors of the Center for Strategic and
International Studies.
</TABLE>
I-2
<PAGE> 39
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
Sidney Taurel.................... Director since 1996; President and Chief Operating Officer
of Eli Lilly and Company since February 1996. In 1986, he
was named President of Eli Lilly International
Corporation and became executive Vice President of the
pharmaceutical division in 1991. In 1993, he became
executive Vice President of Eli Lilly and Company and
President of its pharmaceutical division. Mr. Taurel is
a director of Eli Lilly and Company and The McGraw Hill
Companies, Inc. He also is Chairman of the Board of
Directors of the Pharmaceutical Research and
Manufacturers of America and a member of the Board of
Overseers of the Columbia University Business School and
the Board of the RCA Tennis Championships.
Ralph D. Allen................... Vice President, Director of Investor Relations since
December 1995 and prior thereto, Mr. Allen served in a
similar capacity with the corporate predecessor of the
Parent since 1981.
Donald E. Foley.................. Vice President and Treasurer since May 1996. Prior
thereto, Mr. Foley was Assistant Treasurer of the
International Paper Company.
Louis J. Giuliano................ Senior Vice President since December 1995 and, prior
thereto, Mr. Giuliano served in a similar capacity with
the corporate predecessor of the Parent since 1988.
Martin Kamber.................... Senior Vice President, Director of Corporate Development
since December 1995. From 1993 until December 1995, Mr.
Kamber was Vice President, Corporate Development of ITT
Automotive, Inc. and Executive Assistant to the
President, Chief Operating Officer and Executive Vice
President of the corporate predecessor of the Parent.
Heidi Kunz....................... Senior Vice President and Chief Financial Officer since
December 1995. Prior thereto, Ms. Kunz was Vice President
since 1994 and Treasurer since 1993 of the General
Motors Corporation. Prior thereto, she was Assistant
Treasurer of the General Motors Corporation.
Richard J. Labrecque............. Senior Vice President since March 1996. Prior thereto, Mr.
Labrecque was Vice President of the corporate
predecessor of the Parent since 1985.
Vincent A. Maffeo................ Senior Vice President and General Counsel since December
1995. Prior thereto, Mr. Maffeo was Vice President and
General Counsel to ITT Automotive, Inc. since 1992 and
prior thereto, Vice President and General Counsel of ITT
Defense, Inc.
Thomas R. Martin................. Vice President, Director of Corporate Relations since
September 1996. Mr. Martin was Vice President of Corporate
Communications since 1995 and prior thereto, Managing
Director of Public Relations of Federal Express Corp.
Richard W. Powers................ Vice President, Director of Taxes since December 1995.
Prior thereto, Mr. Powers was Vice President of the
corporate predecessor of the Parent since 1991.
</TABLE>
I-3
<PAGE> 40
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
James P. Smith, Jr. ............. Senior Vice President, Director of Human Resources since
December 1995. Prior thereto, Mr. Smith was Executive Vice
President of ITT Sheraton Corporation since 1993 and
Senior Vice President of ITT Sheraton Corporation.
Richard J. Townsend.............. Vice President and Controller since March 1997. Prior
thereto, Mr. Townsend was Assistant Corporate Controller
of IBM Corporation since 1995 and, prior to that, held
various management positions in the IBM organization.
</TABLE>
I-4
<PAGE> 41
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight
Delivery:
Tender & Exchange Department (for Eligible Institutions only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, NY 10286-1248 For Information Telephone: New York, NY 10286
(800) 507-9357
</TABLE>
Any questions and requests for assistance may be directed to the
Information Agent or the Dealer Manager at their respective telephone numbers
and addresses listed below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained
from the Information Agent. You may also contact your broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
(GEORGESON & COMPANY LOGO)
Wall Street Plaza
New York, New York 10005
BANKS AND BROKERS CALL COLLECT:
(212) 440-9800
ALL OTHERS CALL TOLL FREE:
1-800-223-2064
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1585 Broadway
New York, New York 10036
(212) 761-4341
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
GOULDS PUMPS, INCORPORATED
AT
$37.00 NET PER SHARE
BY
GEORGE ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY OF
ITT INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON THURSDAY, MAY 22, 1997 UNLESS THE OFFER IS EXTENDED.
April 25, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by George Acquisition, Inc., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of ITT Industries, Inc., an
Indiana corporation (the "Parent"), to act as Dealer Manager in connection with
the Purchaser's offer to purchase for cash all the outstanding shares of Common
Stock, par value $1.00 per share (the "Shares"), of Goulds Pumps, Incorporated,
a Delaware corporation (the "Company") at a purchase price of $37.00 per Share,
net to the seller in cash without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated April 25, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") enclosed herewith.
Holders of Shares whose certificates for such Shares (the "Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other required documents to the Depositary (as defined below) prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated April 25, 1997.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if Share Certificates are not immediately available or if such
certificates and all other required documents cannot be delivered to The
Bank of New York (the "Depositary") by the Expiration Date or if the
procedure for book-entry transfer cannot be completed by the Expiration
Date.
4. The Letter to Stockholders of the Company from the Chairman,
President and Chief Executive Officer of the Company, accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9.
<PAGE> 2
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. A return envelope addressed to The Bank of New York, the
Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 22, 1997, UNLESS THE OFFER
IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
number of Shares which, together with any Shares owned by the Parent or the
Purchaser, constitutes more than 50% of the voting power (determined on a
fully-diluted basis), of all the securities of the Company entitled to vote
generally in the election of directors or in a merger and (ii) the expiration or
termination of all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
The Board of Directors of the Company (the "Board of Directors") has
unanimously approved the Merger Agreement (as defined below) and the
transactions contemplated thereby, and determined that the Offer and the Merger
(as defined below) are fair to, and in the best interests of, the holders of the
Shares and recommends that the stockholders of the Company accept the Offer and
tender their Shares to the Purchaser.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 20, 1997 (the "Merger Agreement"), among the Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement and the Delaware General Corporation Law, the Purchaser will be
merged with and into the Company (the "Merger"). Following the Merger, the
Company will continue as the surviving corporation and become a wholly owned
subsidiary of the Parent, and the separate corporate existence of the Purchaser
will cease.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares, and other required documents should be sent to
the Depositary, and (ii) either Share Certificates, representing the tendered
Shares should be delivered to the Depositary, or such Shares should be tendered
by book-entry transfer into the Depositary's account maintained at one of the
Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and Georgeson &
Company Inc. (the "Information Agent") (as described in the Offer to Purchase))
for soliciting tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary clerical and mailing expenses
incurred by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent or the undersigned, at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the Information
Agent.
Very truly yours,
MORGAN STANLEY & CO.
Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGER,
THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
