<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 12, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
Registration Statement under the Securities Act of 1933
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ILLINOIS TOOL WORKS INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 3548 36-1258310
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
ILLINOIS TOOL WORKS INC.
3600 WEST LAKE AVENUE
GLENVIEW, ILLINOIS 60025
847-724-7500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
STEWART S. HUDNUT
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
3600 WEST LAKE AVENUE
GLENVIEW, ILLINOIS 60025
847-724-7500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copy to:
SCOTT J. DAVIS DANIEL A. NEFF
PHILIP J. NIEHOFF WACHTELL, LIPTON, ROSEN & KATZ
MAYER, BROWN & PLATT 51 WEST 52ND STREET
190 SOUTH LASALLE STREET NEW YORK, NEW YORK 10019
CHICAGO, ILLINOIS 60603-3441 212-403-1000
312-782-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED SHARE(2) PRICE(2) FEE(3)
- --------------------------------------------------------------------------------------------------------------------
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Common Stock, par value $0.01 62,792,997 Shares $55.24 $3,468,883,902 $964,350
per share..................
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</TABLE>
(1) This Registration Statement relates to the shares of common stock of
Illinois Tool Works Inc. to be issued in exchange for the outstanding shares
of common stock and options of Premark International, Inc. pursuant to the
merger described in the proxy statement/prospectus included herein.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f), based on the market value of the shares of Premark
common stock to be received in the exchange using the average of the low and
high sales prices of shares of Premark common stock as reported on the New
York Stock Exchange Composite Tape on October 6, 1999.
(3) Pursuant to Rule 457(b), $678,000 of the registration fee that was
previously paid pursuant to Section 14(g) of the Securities Exchange Act of
1934, as amended, in connection with the filing of preliminary proxy
materials on October 1, 1999, has been credited against the registration fee
payable in connection with this filing.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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[PREMARK LOGO] [ITW LOGO]
To Premark International, Inc. and Illinois Tool Works Inc. stockholders:
This proxy statement/prospectus relates to a merger agreement between
Illinois Tool Works Inc. and Premark International, Inc. calling for a merger of
a wholly owned subsidiary of Illinois Tool Works into Premark, with Premark
becoming a subsidiary of Illinois Tool Works.
In the merger, Premark's stockholders will receive a fraction of a share of
Illinois Tool Works common stock for each share of Premark common stock they
own. The fraction will be determined using a formula that is based on the
average closing market price of Illinois Tool Works common stock over a 20-day
trading period ending on the second business day before the merger. Please see
page 30 for detailed information concerning the formula. Under the formula,
Premark stockholders will receive Illinois Tool Works common stock with a market
value of $55 for each share of Premark common stock so long as the average
closing price of Illinois Tool Works common stock is greater than or equal to
$66.33 and less than or equal to $89.73 during the 20-day period.
Premark is furnishing this proxy statement/prospectus to its stockholders
in connection with the solicitation of proxies for use at a meeting of Premark's
stockholders to be held on November 23, 1999 to consider the merger agreement.
Premark's board of directors, by a unanimous vote of all directors present, has
approved and declared advisable the merger agreement, and recommends that
Premark's stockholders vote to adopt the merger agreement.
Only Premark stockholders of record at the close of business on October 11,
1999 are entitled to notice of and to vote at the Premark meeting or any
adjournments or postponements of the Premark meeting.
Illinois Tool Works is furnishing this proxy statement/prospectus to its
stockholders in connection with the solicitation of proxies for use at a meeting
of Illinois Tool Works' stockholders to be held on November 23, 1999 to consider
the issuance of Illinois Tool Works common stock in the merger, if approval of
the issuance is required by the New York Stock Exchange's listing requirements.
Illinois Tool Works' board of directors, by a unanimous vote of all directors
present, has approved and declared advisable the merger agreement, and
recommends that Illinois Tool Works stockholders vote to approve the issuance of
Illinois Tool Works common stock in the merger.
Only Illinois Tool Works stockholders of record at the close of business on
October 11, 1999 are entitled to notice of and to vote at the Illinois Tool
Works meeting or any adjournments or postponements of the Illinois Tool Works
meeting.
Whether or not you plan to attend your stockholder meeting, please take the
time to vote by signing, dating and mailing your enclosed proxy card, or vote by
telephone, fax or the Internet by following the instructions on the proxy card.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS VERY IMPORTANT. PLEASE
ACT TODAY.
WE ENCOURAGE YOU TO READ THIS DOCUMENT CAREFULLY.
Thank you for your continued interest and support.
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/s/ JAMES M. RINGLER /s/ W. JAMES FARRELL
James M. Ringler W. James Farrell
Chairman of the Board, Chief Executive Chairman and Chief Executive Officer
Officer and President Illinois Tool Works Inc.
Premark International, Inc.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF RISKS RELEVANT TO
THE MERGER.
Shares of Illinois Tool Works common stock are traded on the New York Stock
Exchange under the symbol "ITW," and shares of Premark common stock are traded
on the New York Stock Exchange under the symbol "PMI."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
Proxy statement/prospectus dated October 12, 1999 and
first mailed to stockholders on or about October 14, 1999.
<PAGE> 3
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this proxy statement/prospectus, which means that we
can disclose important information to you by referring you to another document
filed separately with the Securities and Exchange Commission. This proxy
statement/prospectus incorporates by reference important business and financial
information about both Premark and Illinois Tool Works which is deemed to be
part of this proxy statement/prospectus even though it is not included in or
delivered with this proxy statement/prospectus. See "Additional
Information -- Where You Can Find More Information."
You can obtain any of the documents incorporated by reference in this
document through Premark or Illinois Tool Works, as the case may be, or from the
Securities and Exchange Commission's web site at http://www.sec.gov. Documents
incorporated by reference are available from Premark and Illinois Tool Works
without charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference in this proxy statement/prospectus. You
can obtain these documents by requesting them in writing or by telephone from
the appropriate company as follows:
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PREMARK ILLINOIS TOOL WORKS
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John M. Costigan Stewart S. Hudnut
Secretary Secretary
Premark International, Inc. Illinois Tool Works Inc.
1717 Deerfield Road 3600 West Lake Avenue
Deerfield, Illinois 60015 Glenview, Illinois 60025
Telephone: (847) 405-6000 Telephone: (847) 724-7500
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY NOVEMBER 16, 1999,
TO RECEIVE THEM BEFORE THE MEETING. PLEASE BE SURE TO INCLUDE YOUR COMPLETE NAME
AND ADDRESS IN YOUR REQUEST. IF YOU REQUEST ANY DOCUMENTS INCORPORATED BY
REFERENCE, WE WILL MAIL THEM TO YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY
PROMPT MEANS, WITHIN ONE BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
<PAGE> 4
[PREMARK LOGO] [ITW LOGO]
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NOTICE OF SPECIAL MEETINGS
OF STOCKHOLDERS
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To Premark International, Inc. and Illinois Tool Works Inc. stockholders:
Premark and Illinois Tool Works have entered into a merger agreement. Under
the merger agreement, a subsidiary of Illinois Tool Works will merge with
Premark and Premark will become a subsidiary of Illinois Tool Works. As a result
of the merger, stockholders of Premark will receive shares of Illinois Tool
Works under the formula discussed in the attached proxy statement/prospectus.
Illinois Tool Works and Premark have scheduled stockholder meetings to vote on
matters necessary to complete the merger. The dates, times and places of the
meetings are as follows:
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FOR PREMARK STOCKHOLDERS: FOR ILLINOIS TOOL WORKS STOCKHOLDERS:
November 23, 1999 November 23, 1999
9:30 a.m., Central time 11:00 a.m., Central time
Premark International, Inc. Headquarters Harris Trust and Savings Bank
1717 Deerfield Road 111 West Monroe Street
Deerfield, Illinois 60015 Auditorium - 8th Floor West
Chicago, Illinois 60603
</TABLE>
The purpose of the Premark meeting is to consider the merger agreement and
such other business as may be properly brought before the meeting.
The purpose of the Illinois Tool Works meeting is to consider the issuance
of Illinois Tool Works common stock in the merger and such other business as may
be properly brought before the meeting.
These items of business are described in the attached proxy
statement/prospectus. YOUR VOTE IS IMPORTANT. You should complete, sign and mail
your proxy or vote by telephone, fax or the Internet as soon as possible to make
sure your shares are represented at the appropriate meeting. If you attend a
meeting and wish to vote in person, you may revoke your proxy and vote in
person. If you have instructed a broker to vote your shares, you must follow
directions received from the broker to change or revoke your proxy.
By Order of the Board of Directors of By Order of the Board of Directors of
Premark International, Inc. Illinois Tool Works Inc.
/s/ JOHN M. COSTIGAN /s/ STEWART S. HUDNUT
JOHN M. COSTIGAN STEWART S. HUDNUT
Secretary Secretary
Dated: October 12, 1999
WHETHER OR NOT YOU PLAN TO ATTEND A MEETING IN PERSON, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING SELF-ADDRESSED STAMPED
ENVELOPE OR VOTE BY TELEPHONE, FAX OR INTERNET AS SOON AS POSSIBLE.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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SUMMARY..................................................... 1
The Companies............................................. 1
What Premark Stockholders Will Receive in the Merger...... 1
Material Federal Income Tax Considerations................ 2
Market Prices of Illinois Tool Works Common Stock and
Premark Common Stock
on Important Dates..................................... 2
Premark's Reasons for the Merger.......................... 2
Illinois Tool Works' Reasons for the Merger............... 3
Exchange of Stock Certificates............................ 3
No Appraisal Rights....................................... 4
Comparative Rights of Illinois Tool Works Stockholders and
Premark Stockholders................................... 4
Comparative per Share Information......................... 4
The Meetings.............................................. 5
Vote Required............................................. 6
The Merger Agreement and the Merger....................... 6
The Stock Option Agreement................................ 8
Selected Historical Financial Information of Illinois Tool
Works.................................................. 9
Selected Historical Financial Information of Premark...... 10
Selected Unaudited Pro Forma Combined Financial
Information............................................ 11
RISK FACTORS................................................ 12
Premark stockholders may receive shares of Illinois Tool
Works common stock having a value of less than $55 per
Premark share.......................................... 12
Failure to qualify for "pooling-of-interests" accounting
treatment would negatively impact reported operating
results................................................ 12
The integration of Premark into Illinois Tool Works may be
difficult and expensive to achieve and may not result
in the benefits currently anticipated by Illinois Tool
Works.................................................. 12
Expenses resulting from the merger will be substantial and
may affect Illinois Tool Works' results of
operations............................................. 12
The price of Illinois Tool Works common stock may be
affected by factors different from those affecting the
price of Premark common stock.......................... 13
THE COMPANIES............................................... 13
Illinois Tool Works Inc. ................................. 13
Premark International, Inc. .............................. 14
THE STOCKHOLDER MEETINGS.................................... 15
Dates, Times and Places of the Meetings................... 15
Purpose of the Premark Meeting............................ 15
Purpose of the Illinois Tool Works Meeting................ 15
Voting Rights of Stockholders; Votes Required for
Approval............................................... 16
Giving and Revoking Your Proxy; Solicitation.............. 17
No Appraisal Rights....................................... 19
THE MERGER AGREEMENT AND THE MERGER......................... 19
Background of the Merger.................................. 19
Recommendation of Premark's Board of Directors and Reasons
for the Merger......................................... 20
Recommendation of Illinois Tool Works' Board of Directors
and Reasons for the Merger............................. 22
Opinion of Premark's Financial Advisor.................... 22
Structure of the Merger................................... 30
When the Merger Becomes Effective......................... 30
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PAGE
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Conversion of Stock, Stock Options and Other Awards....... 30
Fractional Shares......................................... 31
Exchange Procedures....................................... 31
Representations and Warranties............................ 32
Conduct of Business Covenants............................. 33
Non-Solicitation of Competing Proposals................... 34
Stockholders Meetings..................................... 35
Filings and Other Actions................................. 35
Employee Benefit Matters.................................. 36
Conditions to Completion of the Merger.................... 36
Indemnification and Insurance............................. 37
Termination of the Merger Agreement....................... 37
Expenses.................................................. 39
Modification or Amendment to the Merger Agreement......... 39
Regulatory Requirements................................... 39
Material Federal Income Tax Considerations................ 40
Anticipated Accounting Treatment.......................... 41
Resale Restrictions....................................... 42
Interests of Premark Directors and Officers in the Merger
that are Different from Premark Stockholders'
Interests.............................................. 42
The Stock Option Agreement................................ 43
MARKET PRICES AND DIVIDEND INFORMATION...................... 45
COMPARISON OF RIGHTS OF ILLINOIS TOOL WORKS STOCKHOLDERS AND
PREMARK STOCKHOLDERS...................................... 46
Authorized Capital........................................ 46
Stockholder Rights Agreement.............................. 46
Board of Directors........................................ 47
Number, Filling of Vacancies and Removal of Directors..... 47
Constituency Provision.................................... 48
Indemnification........................................... 48
Special Meetings of Stockholders.......................... 49
Advance Notice Provisions for Stockholder Proposals Other
than Election of Directors............................. 49
Advance Notice Provisions for Stockholder Nominations of
Directors at an Annual Meeting......................... 49
Advance Notice Provisions for Stockholder Nominations of
Directors at a Special Meeting......................... 50
Business Combination Transactions......................... 50
Amendments to Certificate of Incorporation and Bylaws..... 51
ADDITIONAL INFORMATION...................................... 52
Deadline for Premark Stockholder Proposals and Illinois
Tool Works Stockholder Proposals....................... 52
Legal Matters............................................. 53
Experts................................................... 53
Where You Can Find More Information....................... 53
Forward-Looking Statements................................ 55
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........... 57
ANNEXES:
A -- Agreement and Plan of Merger......................... A-1
B -- Opinion of Goldman, Sachs & Co....................... B-1
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SUMMARY
This summary highlights some of the information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger better and for a more complete
description of the legal terms of the merger, you should read this entire
document carefully, including the annexes and other documents to which we have
referred you. See "Additional Information -- Where You Can Find More
Information" for more details.
THE COMPANIES
Illinois Tool Works Inc.
3600 West Lake Avenue
Glenview, Illinois 60025-5811
Telephone: (847) 724-7500
website: http://www.itwinc.com
Illinois Tool Works is a multinational manufacturer of highly engineered
products and specialty systems with five business segments. Illinois Tool Works
serves primarily the automotive, construction and general industrial markets.
Premark International, Inc.
1717 Deerfield Road
Deerfield, Illinois 60015
Telephone: (847) 405-6000
website: http://www.premarkintl.com
Premark is a multinational company that conducts its business through three
business segments: the food equipment group, the decorative products group and
the consumer products group. Premark markets premium products in more than 100
countries under leading brand names such as Hobart, Wilsonart, West Bend,
Florida Tile and Precor.
In this proxy statement/prospectus, we refer to Illinois Tool Works,
Premark and their subsidiaries after the merger as the "combined company."
WHAT PREMARK STOCKHOLDERS WILL RECEIVE IN THE MERGER
Upon completion of the merger, each share of Premark common stock will be
converted into and become exchangeable for a fraction of a share of Illinois
Tool Works common stock based on the average closing price of Illinois Tool
Works common stock over the 20-day trading period ending on the second business
day before the effective time of the merger.
Premark stockholders will receive Illinois Tool Works common stock with a
market value of $55 for each share of Premark common stock so long as the
average closing price of Illinois Tool Works common stock is greater than or
equal to $66.33 and less than or equal to $89.73 during the 20-day period. The
$55 of implied market value represents over a 60% premium above the $34.25
closing price of Premark common stock on the day we announced the transaction.
If the average closing price of Illinois Tool Works common stock is less
than $66.33 or greater than $89.73 Premark stockholders will receive a fraction
of a share of Illinois Tool Works common stock having a market value less than
or greater than $55 per share of Premark common stock, respectively. Under the
merger agreement, the maximum fraction of a share of Illinois Tool Works common
stock into which each share of Premark may be converted is 0.9181, which would
apply if the average closing price of Illinois Tool Works common stock is less
than or equal to $54.62; the minimum fraction is 0.5776, which would apply if
the average closing price of Illinois Tool Works common stock is greater than or
equal to $101.44.
Please see page 30 for detailed information concerning the formula that
will be used to determine the fraction of a share of Illinois Tool Works common
stock Premark stockholders will receive for each of their shares.
The following table illustrates how the formula in the merger agreement
works. The table shows some hypothetical examples of the average closing price
for shares of Illinois Tool Works common stock, the corresponding exchange ratio
computed using the formula in the merger agreement and the implied market value
paid per share of Premark common stock. We determined the implied market value
paid per share of Premark common stock by multiplying each hypothetical average
closing price for shares of Illinois Tool Works common stock by the
corresponding ex-
<PAGE> 8
change ratio computed using the formula in the merger agreement.
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HYPOTHETICAL
ILLINOIS FRACTION OF IMPLIED MARKET
TOOL WORKS AN ILLINOIS VALUE PAID PER
AVERAGE TOOL WORKS SHARE OF PREMARK
CLOSING PRICE SHARE COMMON STOCK
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$ 45.00 0.9181 $41.31
50.00 0.9181 45.91
54.62 0.9181 50.15
55.00 0.9146 50.30
60.00 0.8729 52.37
65.00 0.8377 54.45
66.33 0.8292 55.00
70.00 0.7857 55.00
75.00 0.7333 55.00
78.03 0.7049 55.00
80.00 0.6875 55.00
85.00 0.6471 55.00
89.73 0.6129 55.00
90.00 0.6120 55.08
95.00 0.5960 56.62
100.00 0.5815 58.15
101.44 0.5776 58.59
105.00 0.5776 60.65
110.00 0.5776 63.54
</TABLE>
As noted, the pricing formula in the merger agreement values Illinois Tool
Works shares as an average of the closing prices over a 20-day period; the
market value of the shares received by Premark stockholders in the merger on the
date they are received may be higher or lower than the average price.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
Because the merger is expected to be treated as a "reorganization" for U.S.
federal income tax purposes, Premark stockholders are not expected to recognize
gain or loss for U.S. federal income tax purposes on the receipt of shares of
Illinois Tool Works common stock in the merger. However, Premark stockholders
will recognize gain or loss for U.S. federal income tax purposes with respect to
any cash received instead of fractional shares. See "The Merger Agreement and
the Merger -- Material Federal Income Tax Considerations."
Tax matters are very complicated. The tax consequences of the merger to
Premark stockholders will depend on the facts of their own situations. Premark
stockholders should consult their tax advisors for a full understanding of the
U.S. federal, state and local and foreign tax consequences of the merger.
MARKET PRICES OF ILLINOIS TOOL WORKS COMMON STOCK AND PREMARK COMMON STOCK ON
IMPORTANT DATES
The following table provides the closing per share prices of Illinois Tool
Works common stock and Premark common stock, as reported on the New York Stock
Exchange Composite Tape, on:
- - September 9, 1999 -- the last trading day before we announced the merger; and
- - October 11, 1999 -- the last trading day before the date of this proxy
statement/prospectus.
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ILLINOIS
TOOL WORKS PREMARK
COMMON COMMON
DATE STOCK STOCK
- ---- ---------- -------
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September 9, 1999....... $80.13 $34.25
October 11, 1999........ $79.56 $52.94
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PREMARK'S REASONS FOR THE MERGER
Premark's board of directors, in reaching its decision to approve and
declare advisable the merger agreement, consulted with its legal counsel and
financial advisor as well as with Premark's management and considered many
factors, including the following material factors (the order does not reflect
the relative significance):
- - Stockholder Value: the fact that the expected per share consideration to be
received by Premark stockholders represents a premium of approximately 60%
over the closing price per share of Premark common stock on September 9, 1999,
the last closing price prior to the announcement of the merger agreement;
- - Attractive Strategy: the attractiveness of the merger as compared to other
alternatives available to Premark;
- - Experienced Management; Acquisition Success: the track record of Illinois Tool
Works' management team generally in successfully operating diverse
manufacturing businesses and specifically in making frequent acquisitions,
applying its management techniques to acquired
2
<PAGE> 9
businesses and improving the operating performance of such businesses;
- - Fairness Opinion: the presentation by and fairness opinion of Goldman, Sachs &
Co. to the effect that as of September 9, 1999, the exchange ratio under the
merger agreement was fair, from a financial point of view, to Premark
stockholders. Goldman Sachs' fairness opinion is included as Annex B to this
proxy statement/ prospectus and we urge you to read it in its entirety;
- - Continuing Stake in the Combined Company: the opportunity for Premark
stockholders to continue as stockholders of the combined company, which has
greater financial strength, global diversification and scale than Premark
currently has;
- - Tax and Accounting Treatment: the expectation that the merger will qualify as
a "reorganization" under Section 368(a) of the Internal Revenue Code and as a
"pooling-of-interests" for financial accounting purposes; and
- - Terms of the Merger Agreement: the terms and conditions of the merger
agreement, which provide Premark with a reasonable expectation that the merger
will be completed.
Premark's board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger, including the
following material drawbacks and risks (the order does not reflect the relative
significance):
- - the risk that the benefits in the operating performance of Premark's
businesses which are sought to be achieved in connection with the merger will
not be achieved;
- - the risk that, should there be a large decrease in the market value of
Illinois Tool Works common stock, the value of the consideration to be
received by Premark stockholders in the merger could decline;
- - the risk that the merger will not be completed;
- - the risk that the termination fee provisions of the merger agreement and the
stock option agreement may have the effect of discouraging a superior proposal
by a third party for a business combination transaction with Premark.
ILLINOIS TOOL WORKS' REASONS FOR THE MERGER
Illinois Tool Works' board of directors, in reaching its decision to
approve the merger agreement, consulted with its legal counsel as well as
Illinois Tool Works' management and considered many factors, including the
following material factors (the order does not reflect the relative
significance):
- - Growth Through Diversifying Acquisitions: Growth through diversifying
acquisitions, both large and small, has been a key element of Illinois Tool
Works' business plan for many years. The merger with Premark would add to
Illinois Tool Works' already well-diversified portfolio of products.
- - Complementary Businesses: Premark is similar to and complementary with
Illinois Tool Works' other businesses. Some of the factors that make Premark a
"good strategic fit" include:
-- Premark is an innovative designer and established manufacturer of products
and systems that are targeted to commercial customers, the type of
customers for many of Illinois Tool Works' other products;
-- Premark has a long-standing reputation for products with well-known brand
names, strong market positions and well-defined distribution channels;
-- Premark products have a high degree of value-added engineering, like many
of Illinois Tool Works' existing products; and
-- Premark operates in a decentralized manner, and its businesses are
entrepreneurial.
- - Improvement of Operating Margins: Illinois Tool Works believes that it can
increase Premark's operating margins over the long term by introducing
Illinois Tool Works' proven engineering and manufacturing expertise at
Premark.
EXCHANGE OF STOCK CERTIFICATES
If you have a Premark stock certificate, then promptly after the merger
takes place, Harris Trust and Savings Bank, the exchange agent for this
transaction, will send you a letter of transmittal for you to use in exchanging
your Premark common stock certificates for certificates representing shares of
Illinois Tool Works common
3
<PAGE> 10
stock. You should not send in your Premark common stock certificates until you
receive the letter of transmittal. If you own Premark common stock through a
broker, Premark's employee benefit plans or other arrangement where you do not
hold a Premark certificate, then your stock certificates will be exchanged for
certificates representing Illinois Tool Works common stock without any action by
you.
NO APPRAISAL RIGHTS
Under Delaware corporate law, neither Illinois Tool Works stockholders nor
Premark stockholders are entitled to dissenters' or appraisal rights in
connection with the merger.
COMPARATIVE RIGHTS OF ILLINOIS TOOL WORKS STOCKHOLDERS AND PREMARK STOCKHOLDERS
Some of the rights of a stockholder of Illinois Tool Works are different
from the rights of a stockholder of Premark. One of the most important
differences is that Premark has a stockholder rights agreement that may
discourage unwelcome or hostile takeover attempts. Illinois Tool Works has no
such plan. Another difference is that Premark's board of directors is divided
into three classes, with only one class elected each year. In contrast, Illinois
Tool Works' entire board of directors stands for election every year.
COMPARATIVE PER SHARE INFORMATION
The following table summarizes certain (1) historical financial information
and (2) unaudited pro forma and equivalent pro forma financial information on a
per share basis.
The unaudited pro forma financial information assumes that the merger was
completed at the beginning of each of the periods presented for the statement of
income information and at the end of the period for the balance sheet
information and gives effect to the merger as a pooling-of-interests for
accounting purposes. The basic unaudited pro forma per share information for
Illinois Tool Works is based on the number of outstanding shares of Illinois
Tool Works common stock adjusted to include the number of shares of Illinois
Tool Works common stock that would be issued in the merger in exchange for the
outstanding Premark common stock at an assumed exchange ratio of 0.7049, which
was arrived at by dividing $55 by the average market value of Illinois Tool
Works common stock of $78.03 for the 20-day period ending September 9, 1999,
based on the number of shares of Premark common stock outstanding for the
periods reported. The diluted unaudited pro forma per share information for
Illinois Tool Works is based on the number of outstanding shares of Illinois
Tool Works common stock adjusted to include (1) the dilutive effect of
outstanding Illinois Tool Works employee stock options, (2) the number of shares
of Illinois Tool Works common stock that would be issued in the merger at the
assumed exchange ratio and (3) the dilutive effect of Premark employee stock
options.
The unaudited equivalent pro forma per share information for Premark is
based on the unaudited pro forma amounts per share for Illinois Tool Works
multiplied by an assumed exchange ratio of 0.7049, which was arrived at by
dividing $55 by the average market value of Illinois Tool Works common stock of
$78.03 for the 20-day period ending September 9, 1999.
The information set forth below is qualified in its entirety by reference
to, and should be read in conjunction with, the historical consolidated
financial information of Illinois Tool Works and Premark incorporated by
reference in this proxy statement/prospectus and the unaudited pro forma
combined financial statements included in this proxy statement/prospectus.
4
<PAGE> 11
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
1999 1998 1997 1996
---------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
ILLINOIS TOOL WORKS:
Income from continuing operations:
Basic:
Historical..................... $1.45 $2.69 $2.35 $1.96
Pro forma...................... 1.48 2.77 2.37 1.88
Diluted:
Historical..................... 1.44 2.67 2.33 1.95
Pro forma...................... 1.45 2.72 2.33 1.85
Book value per share:
Historical..................... 14.33 13.35
Pro forma...................... 15.27 14.38
Cash dividends declared per share:
Historical..................... 0.30 0.54 0.46 0.36
Pro forma(1)................... 0.30 0.54 0.46 0.46
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 26, ---------------------------------------------------------
1999 DECEMBER 26, 1998 DECEMBER 27, 1997 DECEMBER 28, 1996
---------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
PREMARK:
Income per share from continuing
operations:
Basic:
Historical..................... $1.10 $2.20 $1.67 $0.92
Equivalent pro forma........... 1.04 1.95 1.67 1.33
Diluted:
Historical..................... 1.06 2.11 1.59 0.89
Equivalent pro forma........... 1.02 1.92 1.64 1.30
Book value per share:
Historical..................... 16.51 16.23
Equivalent pro forma........... 10.76 10.14
Cash dividends declared per
share(2):
Historical..................... 0.21 0.39 0.35 0.73
Equivalent pro forma........... 0.21 0.38 0.32 0.32
</TABLE>
- ---------------
(1) Pro forma cash dividends per share have been computed by dividing the
aggregate historical dividends of Illinois Tool Works and Premark by the
combined weighted average number of shares of Illinois Tool Works common
stock and Premark common stock for all periods presented assuming Premark
stockholders receive 0.7049 of an Illinois Tool Works common share for each
share of Premark common stock held. These amounts are not necessarily
indicative of the future dividends to be paid by Illinois Tool Works.
(2) Premark's quarterly dividend was reduced in connection with its spin-off of
Tupperware Corporation on May 31, 1996.
THE MEETINGS
Premark
The meeting of Premark stockholders will take place on November 23, 1999,
at Premark's headquarters at 1717 Deerfield Road, Deerfield, Illinois 60015, at
9:30 a.m. Central time. At the Premark meeting, Premark stockholders will be
asked to adopt the merger agreement.
Illinois Tool Works
The meeting of Illinois Tool Works stockholders will take place on November
23, 1999 at Harris Trust and Savings Bank, 111 West Monroe Street, Auditorium --
8th Floor West, Chicago,
5
<PAGE> 12
Illinois 60603, at 11:00 a.m. Central time. At the
Illinois Tool Works meeting, Illinois Tool Works stockholders will be asked to
consider the issuance of Illinois Tool Works common stock in the merger.
VOTE REQUIRED
Premark
Each Premark stockholder on the record date is entitled to one vote on each
matter submitted to a vote at the meeting for each share of Premark common stock
then held. A majority of the shares of Premark common stock outstanding on the
record date constitutes a quorum at the meeting. If a quorum is present at the
meeting, the affirmative vote of at least a majority of the shares of Premark
common stock outstanding and entitled to vote is required to adopt the merger
agreement. Delaware corporate law requires that the Premark stockholders adopt
the merger agreement before we can complete the merger.
Illinois Tool Works
Each Illinois Tool Works stockholder on the record date is entitled to one
vote on each matter submitted to a vote at the meeting for each share of
Illinois Tool Works common stock then held. A majority of shares of Illinois
Tool Works common stock outstanding on the record date constitutes a quorum at
the meeting. If a quorum is present at the meeting, the affirmative vote of at
least a majority of the shares of common stock present and voting is required to
approve the issuance of Illinois Tool Works common stock in the merger.
If the number of Illinois Tool Works shares to be issued in the merger is
less than 20% of the number of Illinois Tool Works shares outstanding at the
time of the merger, then the New York Stock Exchange listing requirements will
not require any vote by the stockholders of Illinois Tool Works. Because the
exact number of shares of Illinois Tool Works common stock to be issued in the
merger will not be known until the second business day prior to the merger, we
do not yet know whether we will be required to obtain the approval for the
issuance. Illinois Tool Works reserves the right to cancel the Illinois Tool
Works meeting at any time if it determines that no vote of the Illinois Tool
Works stockholders is required under the New York Stock Exchange listing
requirements.
THE MERGER AGREEMENT AND THE MERGER
The merger agreement is attached as Annex A to this proxy
statement/prospectus. You should read the merger agreement because it, and not
this proxy statement/prospectus, is the legal document that governs the merger.
Recommendation to Illinois Tool Works Stockholders
Illinois Tool Works' board of directors has determined that the merger
agreement and the merger are in the best interests of Illinois Tool Works and
its stockholders. Accordingly, Illinois Tool Works' board of directors, by a
unanimous vote of all directors present, has approved the merger agreement, and
recommends that Illinois Tool Works stockholders vote to approve the issuance of
Illinois Tool Works common stock in connection with the merger. See "The Merger
Agreement and the Merger -- Background of the Merger" and "The Merger Agreement
and the Merger -- Recommendation of Illinois Tool Works' Board of Directors and
Reasons for the Merger."
Recommendation to Premark Stockholders
Premark's board of directors has determined that the merger agreement and
the merger are fair to and in the best interests of Premark and its
stockholders. Accordingly, Premark's board of directors, by a unanimous vote of
all directors present, has approved and declared advisable the merger agreement,
and recommends that Premark stockholders vote to adopt the merger agreement. See
"The Merger Agreement and the Merger -- Background of the Merger" and "The
Merger Agreement and the Merger -- Recommendation of Premark's Board of
Directors and Reasons for the Merger."
Interests of Premark Directors and Officers in the Merger that are Different
from Premark Stockholders' Interests
Some of the members of Premark's board of directors and some of Premark's
officers have interests in the merger that are different from Premark
stockholders' interests:
- - All outstanding options granted by Premark to purchase Premark common stock,
including those held by officers and directors of Premark, will vest upon
adoption of the merger by
6
<PAGE> 13
Premark stockholders and, if not exercised before the merger, will be converted
into vested options to purchase shares of Illinois Tool Works common stock.
- - Restrictions on restricted stock awards granted to employees of Premark will
lapse upon adoption of the merger agreement by Premark stockholders, and in
the merger those shares will be converted into unrestricted shares of Illinois
Tool Works common stock.
- - Premark's executive officers are each covered by individual employment
agreements with Premark and by Premark benefit plans containing change of
control provisions that become operative upon approval of the merger by
Premark stockholders. If, after the merger, such executive's employment is
terminated (1) without "cause" or by the affected executive for "good reason"
or (2) for any reason during a 30-day period commencing on the first
anniversary of the merger, the executive is entitled to certain severance
benefits.
- - W. James Farrell, chairman and chief executive officer of Illinois Tool Works,
is a director of Premark. Mr. Farrell did not take part in, and was not
present during, any of the deliberations of Premark's board of directors
concerning the merger or the merger agreement.
It is expected that James M. Ringler, Premark's chairman, chief executive
officer and president, will assume a senior management role with Illinois Tool
Works after the merger.
These interests are more fully described in "The Merger Agreement and the
Merger -- Interests of Premark Directors and Officers in the Merger that are
Different from Premark Stockholders' Interests."
Premark's board of directors was aware of these interests and considered
them, among other matters, when approving the merger agreement.
Illinois Tool Works intends to offer agreements to Mr. Ringler, William
Reeb, president of Wilsonart, a subsidiary of Premark, and possibly other
Premark executives who have not yet been designated in order to induce these
executives to stay with the combined company. The terms of these agreements have
not yet been determined. Illinois Tool Works may also make payments to some
Premark executives in exchange for a covenant not to compete.
Premark's directors and officers beneficially owned, as of September 30,
1999, approximately 4.41% of Premark common stock. As of September 30, 1999,
Illinois Tool Works' directors and officers beneficially owned 2,196 shares of
Premark common stock.
Opinion of Premark's Financial Advisor
Premark's financial advisor, Goldman Sachs, delivered its opinion to
Premark's board of directors as to the fairness, from a financial point of view,
of the exchange ratio provided for in the merger. The full text of Goldman
Sachs' written opinion dated as of September 9, 1999 is attached to this proxy
statement/prospectus as Annex B. We encourage Premark stockholders to read this
opinion carefully in its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the review undertaken.
GOLDMAN SACHS' OPINION IS DIRECTED TO PREMARK'S BOARD OF DIRECTORS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE
MERGER.
What We Need to Do to Complete the Merger
We will complete the merger only if the conditions set forth in the merger
agreement are satisfied or, if permissible, waived. These conditions include:
- - adoption of the merger agreement by Premark stockholders and, if required,
approval of Illinois Tool Works' share issuance by Illinois Tool Works
stockholders;
- - receipt of necessary antitrust approvals;
- - The absence of legal prohibitions to the merger, and of pending proceedings by
specified governments seeking such prohibitions;
- - the continued effectiveness of Illinois Tool Works' registration statement
relating to the merger filed with the Securities and Exchange Commission;
- - the approval for listing on the New York Stock Exchange of the Illinois Tool
Works common stock to be issued in the merger;
- - Illinois Tool Works and Premark each having received a letter from its
independent public
7
<PAGE> 14
accountants relating to qualification for "pooling-of-interests" accounting
treatment;
- - the continued accuracy of the representations and warranties of each party;
- - the performance by each party of its obligations under the merger agreement;
and
- - each party having received a legal opinion from its counsel to the effect that
the merger will be treated as a reorganization under the Internal Revenue Code
and that Illinois Tool Works, Premark and Merger Sub will each be a party to
that reorganization.
At any time before the merger, to the extent legally allowed, either
Illinois Tool Works or Premark may waive compliance with any of the conditions
contained in the merger agreement without the approval of their respective
stockholders. As of the date of this proxy statement/ prospectus, neither
Illinois Tool Works nor Premark expects that any condition will be waived.
Termination of the Merger Agreement
Illinois Tool Works and Premark can agree to terminate the merger agreement
at any time without completing the merger.
Also, either Illinois Tool Works or Premark can, without the consent of the
other, terminate the merger agreement if:
- - the merger is not completed by April 9, 2000, or, if extended by either party
under limited circumstances to obtain governmental approvals of the merger,
July 8, 2000, unless the party that wants to terminate the merger agreement
has violated the agreement;
- - the Premark meeting is held and Premark stockholders do not adopt the merger
agreement;
- - the Illinois Tool Works meeting is held and Illinois Tool Works stockholders
do not approve the issuance of the Illinois Tool Works shares in the merger;
- - any order permanently restraining, enjoining or otherwise prohibiting
completion of the merger becomes final and non-appealable; or
- - the other party materially breaches the merger agreement resulting in a
failure of a condition to close the merger and the breaching party cannot or
does not correct the breach before April 9, 2000, or, if extended under
certain limited circumstances, July 8, 2000.
In addition, Premark can terminate the merger agreement before the merger
if Premark receives an unsolicited proposal for a business combination
transaction with a third party that Premark's board of directors concludes is
superior to the merger with Illinois Tool Works, Premark gives Illinois Tool
Works at least four business days notice of its intention to enter into an
agreement for such superior proposal and, during that four-day period, Premark
considers any adjustment in the terms of the merger agreement that Illinois Tool
Works may propose.
Illinois Tool Works can terminate the merger agreement if Premark's board
of directors withdraws, materially modifies in a manner adverse to Illinois Tool
Works or changes in a manner adverse to Illinois Tool Works its approval or
recommendation of the merger or the merger agreement.
Termination Fee
Premark must pay Illinois Tool Works a fee of $75 million in cash if the
merger agreement is terminated under a number of circumstances described
elsewhere in this proxy statement/ prospectus. See "The Merger Agreement and the
Merger -- Termination of the Merger Agreement." The termination fee is in
addition to any profit Illinois Tool Works may receive under the stock option
agreement described below.
Non-Solicitation of Competing Proposals
The merger agreement generally restricts Premark's ability to initiate,
solicit, knowingly encourage or intentionally facilitate any competing merger or
acquisition inquiries, proposals or offers; however, Premark may respond to
unsolicited offers as provided in the merger agreement.
THE STOCK OPTION AGREEMENT
Premark has granted Illinois Tool Works an option to purchase up to
12,203,694 shares of Premark common stock, but not more than 19.9% of the number
of outstanding shares of Premark common stock, at a per share price in cash of
$34.06. Illinois Tool Works can exercise this option if it becomes entitled to
receive the
8
<PAGE> 15
termination fee under the merger agreement. The
stock option agreement limits to $30 million the total profit Illinois Tool
Works may receive from the option. The profit Illinois Tool Works may receive
under the stock option agreement is in addition to the termination fee Illinois
Tool Works may receive under the merger agreement.
SELECTED HISTORICAL FINANCIAL INFORMATION OF ILLINOIS TOOL WORKS
Illinois Tool Works is providing the following information to aid your
analysis of the financial aspects of the merger. Illinois Tool Works derived
this information from audited financial statements for the years 1994 through
1998 and unaudited financial statements for the six months ended June 30, 1998
and 1999. In the opinion of Illinois Tool Works' management, the unaudited
interim information reflects all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial condition for the six months ended June 30, 1998 and
1999.
Results for interim periods should not be considered indicative of results
for any other periods or for the year. This information is only a summary. You
should read it along with Illinois Tool Works' historical financial statements
and related notes and the section titled "Management's Discussion and Analysis"
contained in Illinois Tool Works' annual reports, quarterly reports and other
information on file with the Securities and Exchange Commission and incorporated
by reference in this proxy statement/ prospectus. See "Additional
Information -- Where You Can Find More Information."
<TABLE>
<CAPTION>
ILLINOIS TOOL WORKS
----------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED HISTORICAL CONSOLIDATED
STATEMENTS OF INCOME INFORMATION:
Operating revenues................... $3,098,004 $2,761,452 $5,647,889 $5,220,433 $4,996,681 $4,178,080 $3,461,315
Net income........................... 364,184 324,637 672,784 586,951 486,315 387,608 277,783
Net income per share -- basic........ 1.45 1.30 2.69 2.35 1.96 1.64 1.22
Net income per share -- diluted...... 1.44 1.29 2.67 2.33 1.95 1.63 1.22
Cash dividends declared per share.... 0.30 0.24 0.54 0.46 0.36 0.32 0.28
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED HISTORICAL CONSOLIDATED STATEMENT
OF FINANCIAL POSITION INFORMATION:
Total assets............................... $6,738,893 $6,118,162 $5,394,756 $4,806,162 $3,591,318 $2,580,498
Total long-term debt....................... 1,223,942 947,008 854,328 818,947 615,557 272,987
</TABLE>
9
<PAGE> 16
SELECTED HISTORICAL FINANCIAL INFORMATION OF PREMARK
Premark is providing the following information to aid your analysis of the
financial aspects of the merger. Premark derived this information from audited
financial statements for the years 1994 through 1998 and unaudited financial
statements for the six months ended June 27, 1998 and June 26, 1999. In the
opinion of Premark's management, the unaudited interim information reflects all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations and financial condition for the
six months ended June 27, 1998 and June 26, 1999. Results for interim periods
should not be considered indicative of results for any other periods or for the
year. This information is only a summary. You should read it along with
Premark's historical financial statements and related notes and the section
titled "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in Premark's annual reports, quarterly reports and
other information on file with the Securities and Exchange Commission and
incorporated by reference in this proxy statement/prospectus. See "Additional
Information -- Where You Can Find More Information."
<TABLE>
<CAPTION>
PREMARK
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
------------------- ------------------------------------------------------------------------
JUNE 26, JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------------ ------------ ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED HISTORICAL
CONSOLIDATED
STATEMENTS OF INCOME
INFORMATION:
Net sales............. $1,414.3 $1,291.7 $2,739.1 $2,406.8 $2,267.6 $2,213.4 $2,118.3
Income from continuing
operations.......... 67.5 56.2 136.1 103.8 56.7 78.9 70.8
Income from continuing
operations per
common share --
basic............... 1.10 0.91 2.20 1.67 0.92 1.29 1.11
Income from continuing
operations per
common share --
diluted............. 1.06 0.87 2.11 1.59 0.89 1.26 1.08
Cash dividends
declared per
share(1)............ 0.21 0.19 0.39 0.35 0.73 1.01 0.74
</TABLE>
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31,
1999 1998 1997 1996 1995 1994
-------- ------------ ------------ ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED HISTORICAL CONSOLIDATED
BALANCE SHEET INFORMATION:
Total assets.................... $2,040.9 $2,095.9 $1,765.8 $1,660.8 $1,546.1 $1,475.8
Total long-term debt............ 259.7 261.1 112.3 115.9 121.7 121.9
</TABLE>
- ---------------
(1) Premark's quarterly dividend was reduced in connection with its spin-off of
Tupperware Corporation on May 31, 1996.
10
<PAGE> 17
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following summarizes the pro forma effect of the merger on Illinois
Tool Works by combining (1) the unaudited statements of income information for
the six months ended June 30, 1999 and the statements of income information for
the years ended December 31, 1996, 1997 and 1998 and (2) the unaudited
statements of financial position information as of June 30, 1999 and the
statements of financial position information as of December 31, 1996, 1997 and
1998 of Illinois Tool Works with those of Premark for the corresponding periods.
The following information has been derived from the Unaudited Pro Forma
Combined Financial Statements included elsewhere in this proxy
statement/prospectus. The notes to the Unaudited Pro Forma Combined Financial
Statements set forth the estimates and assumptions upon which those financial
statements are based, including the fact that we used an estimated exchange
ratio of 0.7049 (see note (f)) and have not yet made adjustments to conform
Premark's depreciation method to that of Illinois Tool Works (see note (m)). The
amounts of the pro forma adjustments to conform depreciation methods are not
currently estimable, and may result in lower income from continuing operations
for each period presented. The pro forma statements are preliminary and have
been made solely for informational purposes, and therefore are not necessarily
indicative of the results of operations or financial position that might have
been achieved for the dates or periods indicated, nor are they necessarily
indicative of the results of operations or financial position that may occur in
the future.
Management of Illinois Tool Works and Premark expect that the merger will
qualify as a "pooling-of-interests" business combination for accounting
purposes. Under that method of accounting, the recorded historical cost basis of
the assets and liabilities of Illinois Tool Works and Premark will be carried
forward to the combined company. Results of operations of the combined company
will include income of Illinois Tool Works and Premark for the entire fiscal
period in which the combination occurs, and the historical results of operations
of the separate companies for fiscal years before the merger will be combined
and reported as the results of operations of the combined company.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SELECTED UNAUDITED PRO FORMA COMBINED
STATEMENTS OF INCOME INFORMATION:
Operating revenues........................... $4,512,304 $8,386,989 $7,627,233 $7,264,281
Income from continuing operations............ 433,912 813,341 695,208 547,472
Income from continuing operations per share:
Basic...................................... 1.48 2.77 2.37 1.88
Diluted.................................... 1.45 2.72 2.33 1.85
Cash Dividends Declared Per Share............ 0.30 0.54 0.46 0.46
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------
1999 1998 1997 1996
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
SELECTED UNAUDITED PRO FORMA COMBINED
STATEMENT OF FINANCIAL POSITION
INFORMATION:
Total assets................................. $8,818,413 $8,254,106 $7,203,450 $6,512,705
Total long-term debt......................... 1,483,642 1,208,108 966,628 934,847
</TABLE>
11
<PAGE> 18
RISK FACTORS
In addition to the other information included in this proxy
statement/prospectus, you should carefully consider the following risk factors.
These matters should be considered in addition to the other information included
or incorporated by reference in this proxy statement/prospectus.
PREMARK STOCKHOLDERS MAY RECEIVE SHARES OF ILLINOIS TOOL WORKS COMMON STOCK
HAVING A VALUE OF LESS THAN $55 PER PREMARK SHARE.
Premark stockholders will receive Illinois Tool Works common stock valued
under the merger agreement at $55 for each share of Premark common stock so long
as the average closing price of Illinois Tool Works common stock is greater than
or equal to $66.33 and less than or equal to $89.73 during the 20-day pricing
period under the merger agreement. However, if the average closing price of
Illinois Tool Works common stock is less than $66.33, Premark stockholders will
receive Illinois Tool Works common stock valued under the merger agreement at
less than $55 for each share of Premark common stock. As noted, the pricing
formula values Illinois Tool Works shares as an average of its closing prices
over a 20-day trading period; the market value of the shares received by Premark
stockholders in the merger on the date they are received may be higher or lower
than the average price.
FAILURE TO QUALIFY FOR "POOLING-OF-INTERESTS" ACCOUNTING TREATMENT WOULD
NEGATIVELY IMPACT REPORTED OPERATING RESULTS.
If, after completion of the merger, the merger fails to qualify for
"pooling-of-interests" accounting treatment, the purchase method of accounting
will apply. Under that method, the estimated fair value of the shares of
Illinois Tool Works common stock issued in the merger would be recorded as the
cost of acquiring Premark. That cost would be allocated to the individual
Premark assets acquired and liabilities according to their respective fair
values with the excess being recorded as goodwill. This goodwill would then be
amortized over its estimated useful life up to a maximum of 40 years.
Purchase accounting treatment would have a material adverse effect on the
reported operating results of Illinois Tool Works as compared to
"pooling-of-interests" accounting treatment. The purchase accounting method
requires charges to Illinois Tool Works' earnings for amortization of goodwill
and, in all likelihood, increased depreciation and amortization charges relating
to the excess of fair value of individual assets over their carrying values.
THE INTEGRATION OF PREMARK INTO ILLINOIS TOOL WORKS MAY BE DIFFICULT AND
EXPENSIVE TO ACHIEVE AND MAY NOT RESULT IN THE BENEFITS CURRENTLY ANTICIPATED BY
ILLINOIS TOOL WORKS.
The merger will present challenges to management, including the integration
of the operations, technologies and personnel of Illinois Tool Works and
Premark, and special risks, including possible unanticipated liabilities,
unanticipated costs, diversion of management attention and loss of personnel.
Illinois Tool Works may not be able to integrate successfully or manage
profitably Premark's businesses. Following the merger, Premark's businesses may
not achieve sales levels, profitability or cost savings that justify the
investment made by Illinois Tool Works. The acquisition, while expected to be
accretive to earnings in future periods, may fail to be accretive or earnings
accretion may occur later than planned.
EXPENSES RESULTING FROM THE MERGER WILL BE SUBSTANTIAL AND MAY AFFECT ILLINOIS
TOOL WORKS' RESULTS OF OPERATIONS.
We estimate that we will incur combined aggregate direct transaction costs
of approximately $20 million associated with the merger, consisting of
transaction fees for investment bankers, attorneys, accountants and other
related costs. These one-time transaction costs will be charged to expenses upon
completion of the merger. Following the merger, the combined company is expected
to incur additional one-time charges related to contractual termination payments
for Premark management of approximately
12
<PAGE> 19
$35.3 million, net of related tax benefits. We cannot assure you that the
combined company will not incur any other additional charges in connection with
the merger.
THE PRICE OF ILLINOIS TOOL WORKS COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE PRICE OF PREMARK COMMON STOCK.
Upon completion of the merger, holders of Premark common stock will become
holders of Illinois Tool Works common stock. Illinois Tool Works' businesses
differ from those of Premark. Illinois Tool Works' results of operations, as
well as the price of Illinois Tool Works common stock, may be affected by
factors different from those which affect Premark's results of operations and
the price of Premark common stock. See "Market Prices and Dividend Information."
For a discussion of Illinois Tool Works' and Premark's businesses and certain
factors to consider in connection with their businesses, see Illinois Tool
Works' Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
and Premark's Annual Report on Form 10-K for the fiscal year ended December 26,
1998, each of which is incorporated by reference in this proxy
statement/prospectus.
THE COMPANIES
ILLINOIS TOOL WORKS INC.
Illinois Tool Works manufactures and markets a variety of products and
systems that provide specific, problem-solving solutions for a diverse customer
base worldwide. Illinois Tool Works has more than 400 operations in 36 countries
and employs approximately 29,000 people. Illinois Tool Works' business units are
divided into five segments:
- engineered products-North America;
- engineered products-international;
- specialty systems-North America;
- specialty systems-international; and
- leasing and investments.
Businesses in the engineered products-North America segment are located in
North America and manufacture:
- short lead-time components and fasteners; and
- specialty products such as adhesives, resealable packaging and electronic
component packaging.
Businesses in the engineered products-international segment are located
outside North America and manufacture:
- short lead-time components and fasteners; and
- specialty products such as electronic component packaging and adhesives.
Businesses in the specialty systems-North America segment are located in
North America and manufacture:
- longer lead-time machinery and related consumables; and
- specialty equipment for applications such as industrial spray coating,
quality measurement and static control.
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Businesses in the specialty systems-international segment are located
outside North America and manufacture:
- longer lead-time machinery and related consumables; and
- specialty equipment for applications such as industrial spray coating, as
well as for other uses.
The leasing and investment segment makes opportunistic investments in
mortgage-related assets, leveraged and direct financing leases of equipment,
properties and property development, and affordable housing.
Additional information concerning Illinois Tool Works and its subsidiaries
is included in the Illinois Tool Works documents filed with the Securities and
Exchange Commission and incorporated in this proxy statement/prospectus by
reference. See "Additional Information -- Where You Can Find More Information."
PREMARK INTERNATIONAL, INC.
Premark is a multinational commercial and consumer products company that
conducts its business in three business segments:
- the food equipment group;
- the decorative products group; and
- the consumer products group.
The food equipment group is composed primarily of Hobart Corporation and
other subsidiaries of Premark engaged in the design, manufacture, distribution
and service of commercial equipment for:
- warewashing;
- refrigerating;
- cooking;
- baking;
- weighing and wrapping; and
- food preparation.
Wilsonart and Florida Tile make up the decorative products group. Wilsonart
designs, manufactures and distributes decorative surfacing products for
residential and commercial uses such as:
- high-pressure laminate;
- solid surfacing products; and
- laminate flooring.
Florida Tile manufactures glazed ceramic wall and floor tile products in a
wide variety of sizes, shapes, colors and finishes that are suitable for
residential and commercial uses.
The consumer products group consists of West Bend and Precor. West Bend
designs, manufactures and sells under the West Bend trademark small electric
appliances such as bread makers, electric skillets, griddles, slow cookers and
woks. West Bend also sells high quality cookware through direct sales channels
under various trademarks.
Precor manufactures aerobic and anaerobic physical fitness equipment, such
as treadmills, elliptical cross-trainers and weight training equipment, and
markets such equipment principally under the Precor trademark.
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Premark and its subsidiaries employ approximately 19,300 people who operate
approximately 55 manufacturing facilities in nine countries and sell products
worldwide.
Additional information concerning Premark and its subsidiaries is included
in the Premark documents filed with the Securities and Exchange Commission and
incorporated in this proxy statement/prospectus by reference. See "Additional
Information -- Where You Can Find More Information."
THE STOCKHOLDER MEETINGS
Premark's board of directors is using this proxy statement/prospectus to
solicit proxies from the holders of Premark common stock for use at the Premark
meeting. Illinois Tool Works' board of directors is using this proxy
statement/prospectus to solicit proxies from the holders of Illinois Tool Works
common stock for use at the Illinois Tool Works meeting.
DATES, TIMES AND PLACES OF THE MEETINGS
<TABLE>
<S> <C>
Date, Time and Place of the Date, Time and Place of the
Premark Meeting: Illinois Tool Works Meeting:
November 23, 1999 November 23, 1999
9:30 a.m., Central time 11:00 a.m., Central time
Premark International, Inc. Headquarters Harris Trust and Savings Bank
1717 Deerfield Road 111 West Monroe
Deerfield, Illinois 60015 Auditorium - 8th Floor West
Chicago, Illinois 60603
</TABLE>
PURPOSE OF THE PREMARK MEETING
At the Premark meeting, Premark stockholders will be asked to consider and
vote upon:
- a proposal to adopt the merger agreement; and
- such other business as may properly be brought before the Premark
meeting.
Premark's board of directors is not aware, as of the date of this proxy
statement/prospectus, of any other matters that may properly come before the
Premark meeting. If any such other matters properly come before the Premark
meeting, or at a subsequent meeting following any adjournment or postponement of
the Premark meeting, the persons named in Premark's proxy intend to vote proxies
in accordance with their discretion on any such matters unless other
instructions are given.
Premark's board of directors carefully reviewed and considered the terms
and conditions of the merger and concluded that the merger is in the best
interests of Premark and its stockholders. ACCORDINGLY, PREMARK'S BOARD OF
DIRECTORS, BY A UNANIMOUS VOTE OF ALL DIRECTORS OTHER THAN MR. FARRELL, WHO DID
NOT PARTICIPATE IN ANY DELIBERATIONS WITH RESPECT TO THE MERGER, APPROVED AND
DECLARED THE ADVISABILITY OF THE MERGER AGREEMENT AND RECOMMENDS THAT PREMARK
STOCKHOLDERS VOTE TO ADOPT THE MERGER AGREEMENT.
PURPOSE OF THE ILLINOIS TOOL WORKS MEETING
At the Illinois Tool Works meeting, Illinois Tool Works stockholders will
be asked to consider and vote upon:
- a proposal to issue Illinois Tool Works common stock in the merger; and
- such other business as may properly be brought before the Illinois Tool
Works meeting.
Based upon the number of shares of Premark common stock currently
outstanding, plus employee stock options to acquire Premark common stock, and
the formula in the merger agreement which determines the fraction of a share of
Illinois Tool Works common stock to be issued in exchange for each
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share of Premark common stock, Illinois Tool Works expects to issue between
approximately 39.5 million and 62.8 million shares of its common stock in the
merger.
Illinois Tool Works' board of directors is not aware, as of the date of
this proxy statement/prospectus, of any other matters that may properly come
before the Illinois Tool Works meeting. If any such other matters properly come
before the Illinois Tool Works meeting, or at a subsequent meeting following any
adjournment or postponement of the Illinois Tool Works meeting, the persons
named in Illinois Tool Works' proxy intend to vote proxies in accordance with
their discretion on any such matters unless other instructions are given.
Illinois Tool Works' board of directors carefully reviewed and considered
the terms and conditions of the merger and concluded that the merger is in the
best interests of Illinois Tool Works and its stockholders. ACCORDINGLY, THE
ILLINOIS TOOL WORKS BOARD OF DIRECTORS, BY A UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT AND VOTING AT A MEETING AT WHICH A QUORUM OF DIRECTORS WAS PRESENT,
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT ILLINOIS TOOL WORKS
STOCKHOLDERS VOTE TO APPROVE THE ISSUANCE OF ILLINOIS TOOL WORKS COMMON STOCK IN
THE MERGER.
The Illinois Tool Works meeting is being held solely to comply with the
listing requirements of the New York Stock Exchange. If the number of Illinois
Tool Works shares to be issued in the merger is less than 20% of the number of
Illinois Tool Works shares outstanding at the time of the merger, then the New
York Stock Exchange listing requirements will not require any vote by the
stockholders of Illinois Tool Works. Illinois Tool Works reserves the right to
cancel the Illinois Tool Works meeting at any time if it determines that no vote
of the Illinois Tool Works stockholders is required under the New York Stock
Exchange listing requirements.
VOTING RIGHTS OF STOCKHOLDERS; VOTES REQUIRED FOR APPROVAL
Voting Rights of Premark Stockholders
The record date to determine who is entitled to vote at the Premark meeting
is October 11, 1999. Only holders of record of Premark common stock at the close
of business on the record date are entitled to notice of, or to vote at, the
Premark meeting. If your Premark common stock is registered in the name of a
brokerage firm or trustee and you plan to attend the Premark meeting, you must
obtain from the firm or trustee a letter, account statement or other evidence of
your beneficial ownership of those shares of Premark common stock in order to be
admitted to the Premark meeting. You must bring that documentation to the
meeting to attend. As of the record date, 61,427,603 shares of Premark common
stock, and no shares of Premark capital stock other than common stock, were
outstanding and entitled to vote.
The Premark meeting may be adjourned or postponed to another date or place
for proper purposes, including for the purpose of soliciting additional proxies.
Unless revoked, proxies will remain valid following such adjournment or
postponement.
Each stockholder of record on the record date is entitled to one vote on
each matter submitted to a vote at the Premark meeting for each share of Premark
common stock held. A majority of the shares of Premark common stock outstanding
on the record date represented in person or by proxy will constitute a quorum
for consideration of such matters at the Premark meeting. Abstentions and broker
non-votes will be counted as present or represented for the purpose of
determining a quorum. If a quorum is present at the Premark meeting, under
Delaware corporate law the affirmative vote of a majority of the shares of
Premark common stock outstanding and entitled to vote is required to adopt the
merger agreement. Abstentions and broker non-votes will have the effect of votes
against the merger.
PREMARK'S BOARD OF DIRECTORS URGES PREMARK STOCKHOLDERS TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING SELF-ADDRESSED
STAMPED ENVELOPE OR VOTE BY TELEPHONE, FAX OR THE INTERNET AS SOON AS POSSIBLE.
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If you own stock or maintain multiple accounts under different names, for
example, with and without a middle initial, you may receive more than one set of
proxy statement/prospectus materials. To ensure that all of your shares of
Premark common stock are voted, you must sign and return by mail every proxy
card you receive.
Voting Rights of Illinois Tool Works Stockholders
The record date to determine who is entitled to vote at the Illinois Tool
Works meeting is October 11, 1999. Only holders of record of Illinois Tool Works
common stock at the close of business on the record date are entitled to notice
of, or to vote at, the Illinois Tool Works meeting. If your Illinois Tool Works
common stock is registered in the name of a brokerage firm or trustee and you
plan to attend the meeting, you must obtain from the firm or trustee a letter,
account statement or other evidence of your beneficial ownership of those shares
of Illinois Tool Works common stock in order to be admitted to the Illinois Tool
Works meeting. You must bring that documentation to the meeting to attend. As of
the record date, 250,674,938 shares of Illinois Tool Works common stock, and no
shares of Illinois Tool Works capital stock other than common stock, were
outstanding and entitled to vote.
The Illinois Tool Works meeting may be adjourned or postponed to another
date or place for proper purposes, including for the purpose of soliciting
additional proxies. Unless revoked, proxies will remain valid following such
adjournment or postponement.
Each stockholder of record on the record date is entitled to one vote on
each matter submitted to a vote at the Illinois Tool Works meeting for each
share of Illinois Tool Works common stock then held. A majority of the shares of
Illinois Tool Works common stock outstanding on the record date represented in
person, or by proxy, will constitute a quorum for consideration of such matters
at the Illinois Tool Works meeting. Abstentions and broker non-votes will be
counted as present or represented for the purpose of determining a quorum. If a
quorum is present at the Illinois Tool Works meeting, the affirmative vote of a
majority of the shares of Illinois Tool Works common stock present and voting is
required to approve the issuance of Illinois Tool Works common stock in
connection with the merger. Abstentions and broker non-votes will not be counted
in favor of the stock issuance proposal and will not be treated as votes cast on
such proposal. Because the stock issuance proposal requires the affirmative vote
of a majority of the votes cast by stockholders entitled to vote and voting at
the meeting, abstentions and broker non-votes will have no effect with respect
to the stock issuance proposal, provided that a quorum is present.
ILLINOIS TOOL WORKS' BOARD OF DIRECTORS URGES ILLINOIS TOOL WORKS
STOCKHOLDERS TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING SELF-ADDRESSED STAMPED ENVELOPE OR VOTE BY TELEPHONE, FAX OR THE
INTERNET AS SOON AS POSSIBLE.
If you own stock or maintain multiple accounts under different names, for
example, with and without a middle initial, you may receive more than one set of
proxy statement/prospectus materials. To ensure that all of your shares of
Illinois Tool Works common stock are voted, you must sign and return by mail
every proxy card you receive.
GIVING AND REVOKING YOUR PROXY; SOLICITATION
You may vote your shares either in person or by duly authorized proxy. By
granting a proxy, the proxyholders named on the proxy card will vote your shares
in accordance with your directions. If you grant a proxy without specifying how
your shares should be voted, the proxyholders will follow Illinois Tool Works'
board of directors' or Premark's board of directors' recommendation and vote
your shares, in the case of Premark stockholders, FOR the adoption of the merger
agreement and any amendments to the merger agreement, and, in the case of
Illinois Tool Works stockholders, FOR the Illinois Tool Works proposal to issue
Illinois Tool Works common stock in connection with the merger. By granting a
proxy to vote FOR the proposal, Premark stockholders will be authorizing the
voting of their shares in favor of the adoption of the merger agreement and any
amendments to the merger agreement and to transact any other business that may
come before the Premark meeting or any adjournments or postponements of the
meeting. By granting a proxy to vote FOR the proposal, Illinois Tool Works
stockholders will be
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authorizing the voting of their shares in favor of the approval of the issuance
of Illinois Tool Works shares pursuant to the merger agreement and any
amendments to the merger agreement and to transact any other business that may
come before the Illinois Tool Works meeting or any adjournments or postponements
of the meeting. If any other matters are properly presented for consideration at
the Illinois Tool Works or Premark meeting, or any adjournments or postponements
of the meeting, the proxyholders will have the discretion to vote in accordance
with their best judgment.
You may grant a proxy by:
- signing and mailing your proxy card;
- calling the toll-free number listed on your proxy card and following the
recorded instructions;
- faxing your proxy card to the telephone number listed on your proxy card;
or
- going to the Internet website listed on your proxy card and following the
instructions provided.
If your shares are not registered in your own name, the bank, broker or
other institution holding your shares of Premark or Illinois Tool Works common
stock may not offer telephone, fax or Internet proxy voting. If your proxy card
does not include telephone, fax or Internet voting instructions, please complete
and return your proxy card by mail. You may also cast your vote in person at the
meeting.
Mail
To grant your proxy by mail, please complete the proxy card and sign, date
and return it in the enclosed envelope. To be valid, a returned proxy card must
be signed and dated.
Telephone
You may use the toll-free number listed on your proxy card to grant your
proxy. You must have your proxy card ready. Call the toll-free number and:
- enter the control number listed on the proxy card; and
- follow the recorded instructions.
Fax
You may return your proxy card by fax. To do so, you must complete the
proxy card and sign, date and fax it to the telephone number listed on the proxy
card.
Internet
You may also use the Internet to grant your proxy. You must have your proxy
card ready and:
- go to the website listed on the proxy card and follow the instructions
provided; and
- enter the control number listed on the proxy card.
In Person
If you attend the Premark meeting or the Illinois Tool Works meeting in
person, you may vote your shares of Premark or Illinois Tool Works common stock
by completing a ballot at the meeting.
Revocation of Proxy
The giving of a proxy will not affect your right to vote your shares if you
attend the Premark meeting or the Illinois Tool Works meeting and desire to vote
in person. You may revoke a previously submitted proxy at any time before it is
voted by delivering written notice of revocation to your company's corporate
secretary, by executing a subsequently dated proxy that is received prior to the
Premark meeting or the
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Illinois Tool Works meeting or by voting in person at such meeting. Attendance
at the Premark meeting or the Illinois Tool Works meeting will not by itself
constitute revocation of a proxy. If you have instructed a broker to vote your
shares, you must follow directions received from the broker to change or revoke
your proxy.
Solicitation
In addition to soliciting proxies by mail, officers, directors and
employees of Premark or Illinois Tool Works, without receiving any additional
compensation, may solicit proxies by telephone, in person or by other means.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward proxy solicitation materials to the
beneficial owners of Premark and Illinois Tool Works common stock held of record
by those persons, and both companies will reimburse the brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection with the solicitation. Premark and Illinois Tool
Works have retained MacKenzie Partners, Inc. to assist in the solicitation of
proxies at an estimated cost of $20,000.
NO APPRAISAL RIGHTS
Under Delaware corporate law, neither the holders of Premark common stock
nor the holders of Illinois Tool Works common stock are entitled to dissenters'
or appraisal rights in connection with the merger.
THE MERGER AGREEMENT AND THE MERGER
BACKGROUND OF THE MERGER
In March 1999, W. James Farrell, Illinois Tool Works' chairman and chief
executive officer, and a director of Premark, approached James M. Ringler,
Premark's chairman, chief executive officer and president, about the possibility
of a combination between Premark and Illinois Tool Works. Messrs. Farrell and
Ringler engaged in occasional preliminary discussions about a possible
combination between March 1999 and July 1999. In the second half of July 1999,
Messrs. Farrell and Ringler first discussed possible terms of a stock-for-stock,
"pooling-of-interests" transaction along the lines of the merger which Premark
and Illinois Tool Works ultimately negotiated.
At Premark's regularly scheduled board of directors meeting on August 4,
1999, Mr. Ringler, with Mr. Farrell having excused himself from the meeting,
described the initial outlines of the transaction envisioned by Mr. Farrell.
After that meeting, Messrs. Farrell and Ringler continued their discussions
about a possible transaction. On August 6, 1999, Illinois Tool Works' board of
directors met and discussed a possible transaction between Illinois Tool Works
and Premark along the lines envisioned by Mr. Farrell.
On August 25, 1999, Premark and Illinois Tool Works entered into a
confidentiality agreement. On August 27, 1999, Premark's board of directors met
to consider the status of the discussions with Illinois Tool Works. Mr. Ringler
reviewed with Premark's board of directors his conversations with Mr. Farrell
and the strategic and financial rationale for a possible transaction. The board
also received a presentation from its financial advisor concerning Premark,
Illinois Tool Works and the financial aspects of a potential combination, as
well as a presentation from its legal advisors. Mr. Farrell, who had not been
present at the meeting, was invited into the meeting for the purpose of
describing Illinois Tool Works and its businesses and his view of Premark's fit
with Illinois Tool Works.
Beginning on August 30, 1999, and continuing until the merger agreement and
stock option agreement were signed, representatives of each of Premark and
Illinois Tool Works conducted a due diligence investigation of the other
company, including the exchange of information regarding the businesses and
operations of their respective companies.
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Mr. Ringler and Mr. Farrell met several times between August 31, 1999 and
September 7, 1999 to negotiate aspects of the proposed business combination, in
particular the consideration that would be received by Premark stockholders in
the merger, including the pricing and tax treatment.
Representatives of Illinois Tool Works and Premark negotiated the terms of
the definitive agreements between August 31, 1999 and September 9, 1999.
On September 9, 1999, Premark's board of directors met to consider the
proposed transaction and agreements. Mr. Farrell did not attend Premark's board
meeting. At Premark's board meeting, Mr. Ringler, representatives of Goldman
Sachs and Premark's special counsel addressed the board about the business,
financial, and legal implications, respectively, of a merger between Illinois
Tool Works and Premark and the terms of the proposed agreements. During the
meeting, representatives of Goldman Sachs informed the board that in the opinion
of Goldman Sachs, as of September 9, 1999, the exchange ratio under the proposed
merger agreement was fair, from a financial point of view, to Premark
stockholders. After discussion, Premark's board of directors voted to approve
and declare advisable the agreements and resolved to recommend that Premark
stockholders vote for the adoption of the merger agreement at a stockholders
meeting to be held for that purpose.
Illinois Tool Works' board of directors also met on September 9, 1999 to
consider the proposed transaction and agreements. At Illinois Tool Works' board
meeting, members of Illinois Tool Works' management discussed with the board
business, financial and legal aspects of the transaction and the agreements, and
legal counsel discussed with the board the legal aspects of the transaction and
the proposed agreements. After that discussion, Illinois Tool Works' board of
directors voted to approve and declare advisable the agreements and resolved to
recommend that Illinois Tool Works stockholders vote to approve the issuance of
the Illinois Tool Works shares to be issued in the merger should stockholder
approval of the issuance be required by New York Stock Exchange rules.
Following Premark's board of directors meeting and Illinois Tool Works'
board of directors meeting, the parties executed the merger agreement and the
stock option agreement.
RECOMMENDATION OF PREMARK'S BOARD OF DIRECTORS AND REASONS FOR THE MERGER
Premark's board of directors, in reaching its decision to approve the
merger agreement, consulted with its legal counsel and financial advisor as well
as with Premark's management and considered many factors, including the
following material factors (the order does not reflect the relative
significance):
- Stockholder Value: the fact that the expected per share consideration to
be received by Premark stockholders represents a premium of approximately
60% over the closing price per share of Premark common stock on September
9, 1999 ($34.25 per share), the last closing price prior to the
announcement of the merger agreement (assuming the average closing price
of Illinois Tool Works common stock under the merger agreement is between
$66.33 and $89.73). The provisions of the merger agreement that specify
the exchange ratio protect Premark stockholders from the effect of a
decline in the price of Illinois Tool Works common stock within a certain
range;
- Attractive Strategy: the attractiveness of the merger as compared to
other alternatives available to Premark, such as remaining an independent
company or attempting to enhance Premark's business through the
acquisition of, or merger with, other companies;
- Experienced Management; Acquisition Success: the track record of the
Illinois Tool Works management team generally in successfully operating
diverse manufacturing businesses, and specifically in making frequent
acquisitions, applying its management techniques to acquired businesses
and improving the operating performance of such businesses;
- Fairness Opinion: the presentation by and fairness opinion of Goldman
Sachs to the effect that as of September 9, 1999, the exchange ratio
under the merger agreement was fair, from a financial point of view, to
Premark stockholders. See "-- Opinion of Premark's Financial Advisor."
Goldman
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Sachs' fairness opinion is included as Annex B to this proxy
statement/prospectus and we urge Premark stockholders to read it in its
entirety;
- Continuing Stake in Combined Company: the opportunity for Premark
stockholders to continue as stockholders of a combined company with
greater financial strength, global diversification and scale than Premark
currently has;
- Tax and Accounting Treatment: the expectation that the merger will
qualify as a "reorganization" under Section 368(a) of the Internal
Revenue Code (see "-- Material Federal Income Tax Considerations") and as
a "pooling-of-interests" for financial accounting purposes (see
"-- Anticipated Accounting Treatment"); and
- Terms of the Merger Agreement: the terms and conditions of the merger
agreement which provide Premark with a reasonable expectation that the
merger will be completed, including the conditions to closing and the
representations and warranties of each of the parties to the merger
agreement, particularly the relatively high standard of materiality by
which each party's representations and warranties are generally
qualified.
Premark's board also considered a number of potentially negative factors in
its deliberations concerning the merger, including the following material
drawbacks and risks (the order does not reflect the relative significance):
- the risk that the benefits in the operating performance of Premark's
businesses that are sought to be achieved in connection with the merger
will not be achieved;
- the risk that, should there be a large decrease in the market value of
Illinois Tool Works common stock, the value of the consideration to be
received by Premark stockholders in the merger could decline; in this
regard, the merger agreement does not provide either party a right of
termination based on a decline, or an increase, in the market price of
Illinois Tool Works common stock;
- the risk that the merger will not be completed and the potential effects
the failure to complete the merger might have on the business, employees
and customers of Premark;
- the risk that although the merger agreement gives Premark the right to
terminate such agreement if a superior proposal for a business
combination with Premark is made, the termination fee provisions of the
merger agreement would have the effect of discouraging such a proposal.
In addition, Premark's board of directors considered the risk that the
stock option agreement would have the effect of precluding any
alternative business combination with Premark from being accounted for as
a "pooling-of-interests," which would be an impediment to alternative
business combination proposals. Premark's board of directors accepted
these provisions as a means to obtain other terms (principally the
exchange ratio) that are favorable to Premark, and did not believe that
such terms could be otherwise obtained in the negotiations with Illinois
Tool Works; and
- the matters described under "Risk Factors" in this proxy
statement/prospectus.
This summary is not meant to be an exhaustive description of the
information and factors considered by Premark's board of directors but is
believed to include all material factors that the board considered. In view of
the wide variety of factors considered by Premark's board of directors, it was
not possible to quantify or to give relative weights to the various factors,
particularly as each director may have assigned different weight to different
factors. Premark's board of directors considered all these factors as a whole,
and concluded that the merger overall was fair to, and in the best interests of,
Premark and its stockholders.
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RECOMMENDATION OF ILLINOIS TOOL WORKS' BOARD OF DIRECTORS AND REASONS FOR THE
MERGER
Illinois Tool Works' board of directors, in reaching its decision to
approve the merger agreement, consulted with its legal counsel as well as
Illinois Tool Works' management and considered many factors, including the
following material factors (the order does not reflect the relative
significance):
- Growth Through Diversifying Acquisitions: Growth through diversifying
acquisitions, both large and small, has been a key element of Illinois
Tool Works' business plan for many years. Prior to the proposed
transaction with Premark, Illinois Tool Works has implemented this
strategy through several major diversifying acquisitions including (1)
the acquisition of Signode in the field of industrial packaging, (2) the
acquisition of Ransburg in the field of industrial spray finishing, and
(3) the acquisition of Miller Electric in the field of welding equipment.
As with these three acquisitions, the merger with Premark would add to
Illinois Tool Works' already well-diversified portfolio of products.
Product diversification helps make Illinois Tool Works' revenue and
earnings growth more predictable, particularly during times of economic
recession.
- Complementary Businesses: Premark is similar to and complementary with
Illinois Tool Works' other businesses. The factors that make Premark a
"good strategic fit" include:
-- Premark is an innovative designer and established manufacturer of
products and systems that are targeted to commercial customers, the
type of customers for many of Illinois Tool Works' other products;
-- Premark has a long-standing reputation for developing products of
the type Illinois Tool Works produces with well-known brand names,
strong market positions and well-defined distribution channels;
-- Premark products have a high degree of value-added engineering,
like many of Illinois Tool Works' existing product lines; and
-- Premark operates in a decentralized manner, and its businesses are
entrepreneurial, which is similar to the way Illinois Tool Works is
organized.
- Improvement of Operating Margins: Illinois Tool Works believes that it
can increase Premark's operating margins over the long term by
introducing Illinois Tool Works' proven engineering and manufacturing
expertise to Premark's business.
OPINION OF PREMARK'S FINANCIAL ADVISOR
Premark retained Goldman Sachs pursuant to a letter agreement, dated August
2, 1999, to act as financial advisor in connection with a possible merger
transaction involving Illinois Tool Works. Goldman Sachs is a nationally
recognized investment banking firm and was selected by Premark based on the
firm's reputation and experience in investment banking in general and its
recognized expertise in the valuation of businesses, as well as its prior
investment banking relationship with Premark. On September 9, 1999, at the
meeting of Premark's board of directors, Goldman Sachs delivered to Premark's
board of directors its oral opinion (which was subsequently confirmed in a
written opinion dated as of September 9, 1999) that, as of such date and based
on and subject to the matters set forth therein, the exchange ratio was fair
from a financial point of view to the holders of Premark common stock.
You should consider the following when reading the discussion of Goldman
Sachs' opinion in this document:
- We urge you to read carefully the entire opinion of Goldman Sachs, which
is set forth in Annex B of this proxy statement/prospectus and is
incorporated herein by reference.
- Goldman Sachs' advisory services and opinion were provided to Premark's
board of directors for its information in its consideration of the merger
and the opinion was directed only to the fairness of
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the exchange ratio from a financial point of view to the holders of the
outstanding shares of Premark common stock.
- Goldman Sachs' opinion does not constitute a recommendation to any holder
of Premark common stock as to how to vote on the merger or any related
matter.
Although Goldman Sachs evaluated the fairness, from a financial point of
view, of the exchange ratio to the holders of Premark common stock, the exchange
ratio itself was determined by Premark and Illinois Tool Works through
arm's-length negotiations. Premark did not provide specific instructions to, or
place any limitations on, Goldman Sachs with respect to the procedures to be
followed or factors to be considered by Goldman Sachs in performing its analyses
or providing its opinion.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the following:
- the merger agreement;
- the Annual Reports to Stockholders and Annual Reports on Form 10-K of
Premark and Illinois Tool Works for each of the previous five years;
- certain interim reports to stockholders and Quarterly Reports on Form
10-Q of Premark and Illinois Tool Works;
- certain other communications from Premark and Illinois Tool Works to
their respective stockholders; and
- certain internal financial analyses and forecasts for Premark and
Illinois Tool Works prepared by their respective managements.
Goldman Sachs also held discussions with members of the senior management
of Premark and Illinois Tool Works regarding the past and current business
operations, financial condition and future prospects of each company. In
addition, Goldman Sachs reviewed the reported price and trading activity for
Premark common stock and Illinois Tool Works common stock, compared certain
financial and stock market information for Premark and Illinois Tool Works with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the food equipment industry specifically and in other industries
generally, and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In addition, because
Illinois Tool Works did not prepare internal forecasts beyond the current fiscal
year, Goldman Sachs' review of such information was limited to discussions with
senior managers of Illinois Tool Works regarding research analysts' estimates
for Illinois Tool Works.
In connection with Goldman Sachs' role as financial advisor to Premark,
Goldman Sachs was not requested to solicit, and did not solicit, interest from
other parties with respect to an acquisition or other business combination with
Premark.
Goldman Sachs did not make any independent evaluation or appraisal of the
assets and liabilities of Premark or Illinois Tool Works or any of their
respective subsidiaries and Goldman Sachs was not furnished with any such
evaluation or appraisal. Goldman Sachs assumed, with the consent of Premark's
board of directors, that the transaction contemplated by the merger agreement
will be accounted for as a "pooling-of-interests" under generally accepted
accounting principles.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Premark, having provided investment banking and financial advisory
services to Premark from time to time, including
23
<PAGE> 30
having acted as lead managing underwriter of a public offering of $150,000,000
aggregate principal amount of 6.875% Notes due November 15, 2008 of Premark in
November 1998 and having acted as its financial adviser in connection with, and
having participated in certain of the negotiations leading to, the merger
agreement. Goldman Sachs provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of Premark and Illinois Tool Works for its own account or the
accounts of customers.
The following is a summary of the material financial analyses used by
Goldman Sachs in reaching its opinion and does not purport to be a complete
description of the analyses performed by Goldman Sachs. The following
quantitative information, to the extent it is based on market data, is based on
market data as it existed at or about September 9, 1999 and is not necessarily
indicative of current market conditions. Readers should understand that the
order of analyses and the results derived from these analyses described below do
not represent relative importance or weight given to these analyses by Goldman
Sachs. The summary of the financial analyses includes information presented in
tabular format. IN ORDER TO UNDERSTAND FULLY THE FINANCIAL ANALYSES USED BY
GOLDMAN SACHS, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY.
THE TABLES ALONE DO NOT DESCRIBE COMPLETELY THE FINANCIAL ANALYSES.
Historical Stock Performance; Estimated Transaction Premiums. Goldman Sachs
reviewed the weekly indexed historical prices for shares of Premark common stock
and Illinois Tool Works common stock during the period from September 6, 1996 to
September 3, 1999, as compared to industry indices. Goldman Sachs also reviewed
the recent and historical prices and trading volume for shares of Premark common
stock and Illinois Tool Works common stock. Goldman Sachs reviewed estimated
premiums for the merger based on a price per share of Premark common stock of
$55.00. Such price represented a premium of approximately 60.9% to the price of
Premark common stock on the close of business on September 8, 1999, a premium of
approximately 101.8% to the lowest closing trading price of Premark common stock
during the 52-week period ending on September 8, 1999 and a premium of
approximately 41.9% to the highest closing trading price of Premark common stock
during the 52 weeks ending on September 8, 1999.
Analysis of Selected Publicly Traded Companies. Goldman Sachs reviewed
certain financial, market and operating information of Premark with
corresponding data for four groups of companies (collectively, the "Premark
Selected Companies"): a group of commercial food equipment companies, consisting
of Hussmann, Manitowoc, Maytag, Specialty Equipment and Whirlpool; a group of
building products companies, consisting of American Standard, Armstrong World
Industries, Congoleum, Dal-Tile, Masco, Stanley Works and TJ International; a
group of consumer products companies, consisting of Black & Decker, Nacco,
National Presto, Sunbeam and Windmere-Durable; and a group of fitness equipment
companies, consisting of Brunswick, Cybex International, Callaway Golf,
Cannondale, Delta Woodside, Huffy and K2. The following table sets forth the
values for Premark, and the ranges and medians for each group of Premark
Selected Companies, of:
(1) the closing price, on September 8, 1999, as a percentage of the 52-week
high;
(2) multiples of levered market capitalization (including preferred stock)
("Levered Market Capitalization") to each of the latest twelve months
("LTM") sales and the LTM earnings before interest expense, income
taxes and depreciation and amortization ("EBITDA");
(3) market price to earnings ("P/E") multiples for the calendar years 1999
and 2000, based on earnings estimates reported by the Institutional
Brokers Estimate System ("IBES") as of September 8, 1999;
(4) the LTM EBITDA margin (excluding extraordinary items, restructuring
costs, write-offs and other income not related to regular operations);
(5) the projected five-year earnings per share compound annual growth as
estimated by IBES (the "IBES Growth Rate");
(6) the ratio of 2000 P/E to the IBES Growth Rate; and
(7) the ratio of the 1999 P/E to the S&P 500 P/E multiple.
24
<PAGE> 31
<TABLE>
<CAPTION>
RANGE MEDIAN PREMARK
------------- ------ -------
<S> <C> <C> <C>
% OF 52 WEEK HIGH
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 70.3%-92.8% 83.9%
Building Products Comparables............................... 57.6%-98.5% 69.9%
Consumer Products Comparables............................... 54.3%-90.3% 66.7%
Fitness Equipment Comparables............................... 47.5%-87.7% 60.8%
Premark..................................................... 88.2%
MULTIPLES OF LEVERED MARKET CAPITALIZATION TO SALES
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 0.7x-1.5x 1.2x
Building Products Comparables............................... 0.4x-2.7x 1.0x
Consumer Products Comparables............................... 0.4x-1.4x 0.9x
Fitness Equipment Comparables............................... 0.2x-1.1x 0.6x
Premark..................................................... 0.8x
MULTIPLES OF LEVERED MARKET CAPITALIZATION TO EBITDA
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 6.5x- 8.9x 8.0x
Building Products Comparables............................... 3.8x-14.4x 7.4x
Consumer Products Comparables............................... 2.8x-10.2x 6.5x
Fitness Equipment Comparables............................... 4.2x-11.6x 5.5x
Premark..................................................... 6.5x
P/E MULTIPLES: 1999E
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 10.8x-15.6x 14.2x
Building Products Comparables............................... 7.4x-20.0x 12.1x
Consumer Products Comparables............................... 8.3x-16.6x 13.1x
Fitness Equipment Comparables............................... 4.6x-18.2x 9.6x
Premark..................................................... 13.7x
P/E MULTIPLES: 2000E
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 9.2x-13.9x 12.8x
Building Products Comparables............................... 5.7x-16.8x 10.9x
Consumer Products Comparables............................... 6.7x-54.5x 12.0x
Fitness Equipment Comparables............................... 8.3x-13.1x 9.3x
Premark..................................................... 12.2x
LTM EBITDA MARGINS
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 11.1%-17.1% 16.1%
Building Products Comparables............................... 11.1%-18.7% 15.0%
Consumer Products Comparables............................... 9.0%-19.8% 12.8%
Fitness Equipment Comparables............................... 4.9%-13.5% 9.3%
Premark..................................................... 12.0%
IBES 5 YR GROWTH RATE
- ------------------------------------------------------------
Commercial Food Equipment Comparables....................... 10.5%-15.0% 15.0%
Building Products Comparables............................... 8.0%-15.0% 12.0%
Consumer Products Comparables............................... 12.0%-15.0% 15.0%
Fitness Equipment Comparables............................... 12.0%-17.0% 15.0%
Premark..................................................... 13.0%
</TABLE>
25
<PAGE> 32
<TABLE>
<CAPTION>
RANGE MEDIAN PREMARK
------------- ------ -------
<S> <C> <C> <C>
RATIO OF 2000 P/E TO 5 YR GROWTH RATE
Commercial Food Equipment Comparables....................... 0.8x-1.1x 0.9x
Building Products Comparables............................... 0.6x-1.1x 1.0x
Consumer Products Comparables............................... 0.6x-4.5x 1.0x
Fitness Equipment Comparables............................... 0.5x-1.1x 0.7x
Premark..................................................... 0.9x
RATIO OF 1999 P/E TO S&P 500 P/E MULTIPLE
Commercial Food Equipment Comparables....................... 33.8%-49.0% 44.7%
Building Products Comparables............................... 23.4%-62.7% 38.1%
Consumer Products Comparables............................... 26.2%-52.2% 41.2%
Fitness Equipment Comparables............................... 14.5%-57.2% 28.6%
Premark..................................................... 43.0%
</TABLE>
Projected earnings per share and compound annual growth rate were based on
IBES estimates. LTM sales and EBITDA, and Levered Market Capitalization were
based on publicly available information.
Goldman Sachs also reviewed certain financial, market and operating
information of Illinois Tool Works with corresponding data for three groups of
companies (collectively, the "Illinois Tool Works Selected Companies"): a group
of premier industrial companies, consisting of General Electric, Emerson
Electric and Tyco; a group of multi-industry companies, consisting of Allied
Signal, Dover, Textron and United Technologies; and a group of diversified
industrial companies, consisting of American Standard, Black & Decker, Cooper
Industries, Crane, Dana, Danaher, Ingersoll Rand, Johnson Controls, Pentair,
Rockwell, U.S. Industries and York International. The following table sets forth
the values for Illinois Tool Works and the ranges and medians for each group of
Illinois Tool Works Selected Companies of:
(1) the closing price, on September 8, 1999, as a percentage of the 52-week
high;
(2) multiples of Levered Market Capitalization to each of the LTM sales and
the LTM EBITDA;
(3) P/E multiples for the calendar years 1999 and 2000, based on earnings
estimates reported by IBES as of September 8, 1999;
(4) the LTM EBITDA margin (excluding extraordinary items, restructuring
costs, write-offs and other income not related to regular operations);
(5) the IBES Growth Rate;
(6) the ratio of 2000 P/E to the IBES Growth Rate; and
(7) the ratio of the 1999 P/E to the S&P 500 P/E multiple.
<TABLE>
<CAPTION>
ILLINOIS TOOL
RANGE MEDIAN WORKS
------------ ------ -------------
<S> <C> <C> <C>
% OF 52 WEEK HIGH
Premier Industrial Comparables............................ 90.9%-99.9% 96.8%
Multi-Industry Comparables................................ 82.1%-95.5% 90.7%
Diversified Industrial Comparables........................ 73.1%-92.3% 85.5%
Illinois Tool Works....................................... 97.2%
MULTIPLES OF LEVERED MARKET CAPITALIZATION TO SALES
Premier Industrial Comparables............................ 2.2x-6.6x 6.3x
Multi-Industry Comparables................................ 1.2x-2.5x 1.7x
Diversified Industrial Comparables........................ 0.5x-2.8x 1.0x
Illinois Tool Works....................................... 3.6x
</TABLE>
26
<PAGE> 33
<TABLE>
<CAPTION>
ILLINOIS TOOL
RANGE MEDIAN WORKS
------------ ------ -------------
<S> <C> <C> <C>
MULTIPLES OF LEVERED MARKET CAPITALIZATION TO EBITDA
Premier Industrial Comparables............................ 11.3x-28.9x 17.1x
Multi-Industry Comparables................................ 9.8x-15.3x 11.4x
Diversified Industrial Comparables........................ 5.8x-16.3x 7.8x
Illinois Tool Works....................................... 15.6x
P/E MULTIPLES: 1999E
Premier Industrial Comparables............................ 21.2x-37.5x 30.9x
Multi-Industry Comparables................................ 20.0x-24.4x 23.2x
Diversified Industrial Comparables........................ 9.8x-31.9x 15.4x
Illinois Tool Works....................................... 26.6x
P/E MULTIPLES: 2000E
Premier Industrial Comparables............................ 19.6x-32.9x 24.2x
Multi-Industry Comparables................................ 17.5x-21.0x 20.0x
Diversified Industrial Comparables........................ 8.5x-27.9x 13.0x
Illinois Tool Works....................................... 23.8x
LTM EBITDA MARGINS
Premier Industrial Comparables............................ 19.8%-38.8% 21.9%
Multi-Industry Comparables................................ 12.3%-17.5% 14.5%
Diversified Industrial Comparables........................ 8.0%-20.1% 13.8%
Illinois Tool Works....................................... 23.0%
EPS 5 YR GROWTH RATE
Premier Industrial Comparables............................ 10.5%-20.0% 13.0%
Multi-Industry Comparables................................ 13.0%-15.0% 14.0%
Diversified Industrial Comparables........................ 10.0%-16.5% 12.0%
Illinois Tool Works....................................... 13.0%
RATIO OF 2000 P/E TO 5 YR GROWTH RATE
Premier Industrial Comparables............................ 1.2x-2.5x 1.9x
Multi-Industry Comparables................................ 1.3x-1.5x 1.4x
Diversified Industrial Comparables........................ 0.6x-1.7x 1.0x
Illinois Tool Works....................................... 1.8x
RATIO OF 1999 P/E TO S&P 500 P/E MULTIPLE
Premier Industrial Comparables............................ 66.5%-117.9% 97.2%
Multi-Industry Comparables................................ 62.8%- 76.6% 73.0%
Diversified Industrial Comparables........................ 30.7%-100.2% 49.5%
Illinois Tool Works....................................... 83.5%
</TABLE>
Projected earnings per share and compound annual growth rate were based on
IBES estimates. LTM sales and EBITDA, and Levered Market Capitalization were
based on publicly available information.
Analysis of Selected Transactions: Goldman Sachs reviewed the financial
terms, to the extent publicly available, of selected pending or completed
mergers and acquisitions transactions since December 1993 in the food equipment
industry (the "Food Equipment Industry Selected Transactions"). Goldman Sachs
based this analysis on publicly available information for each of the Food
Equipment Industry Selected Transactions. The transactions involved were:
Berisford/Scotsman; York International/Sabroe Refrigeration; Maytag/Jade Range;
Hussmann International/Koxka; TI Group/EIS Group; United Technologies/Tyler;
Sidel/Gebo Industries; Whirlpool/Brasmotor; Manitowoc/Servend International;
Maytag/Blodgett; Scotsman/Kysor; FMC/Frigoscandia Equipment; Manitowoc/Shannon
Group; Berisford/Welbilt; Welbilt/Lincoln Foodservice Products; and
Scotsman/Delfield/Whitlenge. Goldman Sachs calculated the multiple of levered
consideration (equity consideration plus net debt) ("Levered
27
<PAGE> 34
Consideration") to sales, EBITDA and earnings before interest expense and income
taxes ("EBIT") for the Food Equipment Industry Selected Transactions for which
the relevant information to make such calculations was publicly available. The
ranges, medians and means of such multiples for such transactions are set forth
in the following table:
<TABLE>
<CAPTION>
RANGE MEDIAN MEAN
---------- ------ -----
<S> <C> <C> <C>
Levered Consideration as a multiple of Sales................ 0.5x-4.1x 1.1x 1.3x
Levered Consideration as a multiple of EBITDA............... 5.9x-10.5x 8.6x 8.3x
Levered Consideration as a multiple of EBIT................. 7.5x-23.3x 11.6x 12.8x
</TABLE>
Goldman Sachs also reviewed the financial terms, to the extent publicly
available, of selected pending or completed mergers and acquisitions
transactions since October 1992 involving general industrial companies (the
"General Industrial Selected Transactions"). Goldman Sachs based this analysis
on publicly available information for each of the General Industrial Selected
Transactions. The transactions involved were: Allied Signal/Honeywell; B.F.
Goodrich/Coltec Industries; General Electric/Reltec; Eaton/ Aeroquip-Vickers;
Tyco International/AMP; United Technologies/Sundstrand; Siebe/BTR; ABB
Transportation/Elsag Bailey Process; SPX/General Signal; Framatome Connectors
International/Berg Electronics; Continental AG/ITT Industries -- Automotive
Brake and Chassis Division; Schlumberger Technology/Camco International; United
States Filter/Culligan Water Technologies; B.F. Goodrich/Rohr;
Ingersoll-Rand/Thermo King; KKR/Amphenol; Tyco International/Keystone
International; Ingersoll-Rand/Clark Equipment; Rockwell/Reliance Electric; and
Emerson Electric/Fisher Controls International. Goldman Sachs calculated the
multiples of Levered Consideration to sales, EBITDA and EBIT, as well as the
premiums (based on the premiums of the average 30-day trading price (prior to
announcement)) for such General Industrial Selected Transactions for which the
relevant information to make such calculations was publicly available. The
ranges, medians and means of such multiples and the premiums are set forth in
the following table:
<TABLE>
<CAPTION>
RANGE MEDIAN MEAN
------------ ------ -----
<S> <C> <C> <C>
Levered Consideration as a multiple of Sales................ 0.9x-2.9x 1.8x 1.7x
Levered Consideration as a multiple of EBITDA............... 7.4x-16.3x 10.1x 10.6x
Levered Consideration as a multiple of EBIT................. 6.6x-26.2x 15.1x 15.1x
Premium..................................................... 14.1%-90.4% 38.4% 43.3%
</TABLE>
Analysis of Implied Transaction Multiples. Goldman Sachs also reviewed
certain implied multiples for the merger, each based on a price per share of
Premark common stock of $55.00. Such implied transaction multiples included: (1)
Levered Consideration as a multiple of revenues, EBITDA and EBIT, and (2) equity
value as a multiple of net income. The following table presents the values of
such multiples:
<TABLE>
<S> <C> <C>
Levered Consideration as a multiple of:
1998 Revenues 1.4x
LTM Revenues 1.3x
1999E Revenues 1.3x
Levered Consideration as a multiple of:
1998 EBITDA 12.1x
LTM EBITDA 11.1x
1999E EBITDA 10.2x
Levered Consideration as a multiple of:
1998 EBIT 16.2x
LTM EBIT 14.9x
1999E EBIT 13.7x
</TABLE>
28
<PAGE> 35
<TABLE>
<S> <C> <C>
Equity Value as a multiple of:
1998 Net Income 26.9x
LTM Net Income 24.9x
1999E Net Income 22.7x
2000E Net Income 20.2x
</TABLE>
Estimates of revenues, EBITDA, EBIT and net income in the foregoing tables
are based on Premark management estimates. Equity values are calculated on a
fully-diluted basis, including options and share equivalents. Levered
Consideration includes net debt as of June 30, 1999.
Discounted Cash Flow Analysis. Based on internal estimates of the
management of Premark, Goldman Sachs performed a discounted cash flow analysis
of Premark on a stand-alone basis. The estimated future cash flows were based on
the financial projections for Premark for the years 1999 through 2002. The
terminal values of Premark were calculated based on projected EBITDA multiples
for 2002 of 6.0x to 10.0x and a range of discount rates of 10.0% to 14.0%. Based
on these parameters, Goldman Sachs calculated Premark's per share equity value
to range from $36.34 to $64.76.
Contribution Analysis. Goldman Sachs analyzed the relative contributions of
Premark and Illinois Tool Works to the pro forma income statement of the
combined company, based, in the case of Premark, on management projections and,
in the case of Illinois Tool Works, on various research reports. The analysis
showed that on a pro forma combined basis (excluding (1) the effect of any
synergies of the merger and (2) non-recurring expenses relating to the merger)
Premark and Illinois Tool Works would account for approximately the following
percentages of the combined company for the following:
<TABLE>
<CAPTION>
PREMARK ILLINOIS TOOL WORKS
------- -------------------
<S> <C> <C>
1998 Sales................................................. 32.7% 67.3%
1999E Sales................................................ 31.5% 68.5%
2000E Sales................................................ 31.8% 68.2%
1998 EBITDA................................................ 19.7% 80.3%
1999E EBITDA............................................... 20.4% 79.6%
2000E EBITDA............................................... 20.5% 79.5%
1998 EBIT.................................................. 17.9% 82.1%
1999E EBIT................................................. 18.7% 81.3%
2000E EBIT................................................. 18.7% 81.3%
1998 Net Income............................................ 16.8% 83.2%
1999E Net Income........................................... 17.6% 82.4%
2000E Net Income........................................... 17.6% 82.4%
</TABLE>
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, is not necessarily susceptible to partial analysis
or summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis as a whole, could create an
incomplete view of the processes underlying Goldman Sachs' opinion. In arriving
at its fairness determination, Goldman Sachs considered the results of all such
analyses and did not attribute any particular weight to any factor or analysis
considered by it; rather, Goldman Sachs made its determination as to fairness on
the basis of its experience and professional judgment after considering the
results of all such analyses. No company or transaction used in the above
analyses is directly comparable to Premark or the contemplated transaction. The
analyses were prepared solely for purposes of Goldman Sachs providing its
opinion to the Premark board of directors as to the fairness of the exchange
ratio and do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based on forecasts
of future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their respective
advisors, none of Premark, Goldman Sachs or any other
29
<PAGE> 36
person assumes responsibility if future results are materially different from
those forecast. As described above, the opinion of Goldman Sachs to the Premark
board of directors was among many factors taken into consideration by the
Premark board of directors in making its determination to approve the merger
agreement.
Pursuant to Goldman Sachs' engagement letter, Premark has agreed to pay
Goldman Sachs, as compensation for Goldman Sachs' services as financial advisor
to Premark in connection with the merger, a transaction fee equal to $14.0
million payable at the effective time of the merger. Premark has also agreed to
pay Goldman Sachs its reasonable out-of-pocket expenses, including the fees and
disbursements of its attorneys, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities arising under the federal securities
laws.
------------------------
Set forth below is a summary of the material terms of the merger agreement.
This summary is qualified in its entirety by reference to the merger agreement.
A copy of the merger agreement is attached as Annex A to this proxy
statement/prospectus and is incorporated in this proxy statement/prospectus by
reference. You should read the merger agreement because it, and not this proxy
statement/prospectus, is the legal document that governs the merger.
STRUCTURE OF THE MERGER
At the effective time of the merger, Merger Sub will merge with and into
Premark and the separate corporate existence of Merger Sub will end. Premark
will be the surviving corporation in the merger and will be a wholly owned
subsidiary of Illinois Tool Works.
WHEN THE MERGER BECOMES EFFECTIVE
On the second business day following the date the last of the closing
conditions to the merger is fulfilled or waived, or such other time and date as
Illinois Tool Works and Premark may agree, we will file a certificate of merger
with the Delaware Secretary of State. The merger will become effective at the
time and on the date on which we file the certificate of merger or such other
time upon which we agree and specify in the certificate of merger. That time is
the "effective time of the merger."
CONVERSION OF STOCK, STOCK OPTIONS AND OTHER AWARDS
At the effective time of the merger, each share of Premark common stock
issued and outstanding immediately prior to the effective time of the merger
(but not including shares of Premark common stock that are owned by Illinois
Tool Works, Merger Sub or any other direct or indirect subsidiary of Illinois
Tool Works or shares of Premark common stock that are owned by Premark or any
direct or indirect subsidiary of Premark) will be converted into and become
exchangeable for the fraction of a share of Illinois Tool Works common stock
equal to:
- if the Illinois Tool Works average price is equal to or greater than
$66.33 but less than or equal to $89.73, the result, calculated to four
decimal places, of $55.00 divided by the Illinois Tool Works average
price;
- if the Illinois Tool Works average price is greater than $89.73 but less
than $101.44, the result, calculated to four decimal places, of
[$55.00 + {.3065 (Illinois Tool Works average price - $89.73)}] /
Illinois Tool Works average price;
- if the Illinois Tool Works average price is less than $66.33 but greater
than $54.62, the result, calculated to four decimal places, of
[$55.00 - {.4146 ($66.33 - Illinois Tool Works average price)}] /
Illinois Tool Works average price;
- .5776 if the Illinois Tool Works average price is greater than or equal
to $101.44; or
- .9181 if the Illinois Tool Works average price is less than or equal to
$54.62.
30
<PAGE> 37
For purposes of these calculations, "the Illinois Tool Works average price"
means the average of the closing price per share of Illinois Tool Works common
stock on the New York Stock Exchange, as reported in The Wall Street Journal,
New York City edition, on the 20 New York Stock Exchange trading days ending on
the second business day before the effective time of the merger. The Illinois
Tool Works average price will be rounded to the nearest cent.
If, before the effective time of the merger, Illinois Tool Works or Premark
declares or effects a reclassification, stock split (including a reverse split),
or stock dividend or stock distribution with respect to its shares, or a stock
dividend or stock distribution, or any similar transaction occurs relating to
its shares, the exchange ratio will be equitably adjusted to reflect that event.
Each option to purchase Premark common stock granted under Premark's stock
plans that is outstanding and unexercised at the time the Premark stockholders
adopt the merger agreement will vest and, if not exercised prior to the
effective time of the merger, will be converted automatically at the effective
time of the merger into a vested option to purchase the same number of shares of
Illinois Tool Works common stock as the holder of the option would have been
entitled to receive in the merger had the holder exercised the option
immediately prior to the merger. After conversion, the exercise price per
Illinois Tool Works common share subject to each option will equal its
pre-conversion exercise price per share of Premark common stock, divided by the
number equal to the fraction of a share of Illinois Tool Works common stock to
be issued for each share of Premark common stock.
For a description of Illinois Tool Works common stock and a description of
the differences between the rights of holders of Illinois Tool Works common
stock and Premark common stock, see "Comparison of Rights of Illinois Tool Works
Stockholders and Premark Stockholders."
FRACTIONAL SHARES
No fractional shares of Illinois Tool Works common stock will be issued in
the merger. Instead of issuing fractional shares of Illinois Tool Works common
stock, Illinois Tool Works will pay cash, without interest, in an amount equal
to such fraction, rounded to the nearest one-hundredth of a share, multiplied by
the average closing price per share of Illinois Tool Works common stock as
reported in The Wall Street Journal, New York City edition, on the five trading
days immediately before the effective time of the merger.
EXCHANGE PROCEDURES
At or prior to the effective time of the merger, Illinois Tool Works will
deposit with the exchange agent, Harris Trust and Savings Bank, in trust for the
benefit of the holders of Premark shares, certificates representing shares of
Illinois Tool Works common stock issuable under the merger agreement and an
amount of cash sufficient to pay cash in lieu of fractional shares. Illinois
Tool Works will make sufficient funds available to the exchange agent from time
to time as needed to pay cash in respect of dividends or other distributions on
unexchanged shares.
If you have a Premark stock certificate, then promptly after the merger
takes place, but in no event later than three business days following the date
of the merger, Harris Trust and Savings Bank will send you a letter of
transmittal for you to use in exchanging your Premark common stock certificates
for certificates representing shares of Illinois Tool Works common stock. YOU
SHOULD NOT SEND IN YOUR PREMARK COMMON STOCK CERTIFICATES UNTIL YOU RECEIVE THE
LETTER OF TRANSMITTAL. If you own Premark common stock through a broker,
Premark's employee benefit plans or other arrangement where you do not hold a
Premark certificate, then your stock certificates will be exchanged for
certificates representing Illinois Tool Works common stock and cash in lieu of
fractional shares based on the exchange ratio without any action by you.
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If any certificates for shares of Illinois Tool Works common stock are to
be issued in a name other than that in which the Premark stock certificate
surrendered in exchange therefor is registered, the person requesting such
exchange must (1) pay any transfer or other taxes required by reason thereof or
(2) establish to the satisfaction of Illinois Tool Works or Harris Trust and
Savings Bank that such tax has been paid or is not applicable.
Harris Trust and Savings Bank will deduct and withhold from the
consideration otherwise payable pursuant to the merger agreement such amounts as
Harris Trust and Savings Bank is required to deduct and withhold under the
Internal Revenue Code, or any provision of state, local or foreign tax law, with
respect to the making of such payment. To the extent that amounts are withheld
by Harris Trust and Savings Bank, the withheld amounts shall be treated for
purposes of the merger agreement as having been paid to the person in respect of
whom the deduction and withholding was made by Harris Trust and Savings Bank.
If Illinois Tool Works declares a dividend or distribution with a record
date at or after the effective time of the merger, the declaration will include
dividends and distributions in respect of shares of Illinois Tool Works common
stock issued in the merger. If you have a Premark stock certificate, until you
surrender that certificate for exchange after the effective time of the merger,
you will not be paid dividends or other distributions declared with a record
date after the effective time of the merger, but with a payment date on or
before you surrender your certificate, with respect to shares of Illinois Tool
Works common stock into which your shares of Premark common stock have been
converted. When you surrender your certificates, any such unpaid dividends or
other distributions will be paid to you, subject to applicable abandoned
property, escheat or similar laws. No interest will be paid or accrued on cash
to be paid instead of fractional shares, unpaid dividends or distributions, if
any, payable to holders of Premark common stock certificates. Registered holders
of unsurrendered Premark common stock certificates, subject to applicable
abandoned property, escheat or similar laws, will be entitled to vote after the
effective time of the merger at any meeting of Illinois Tool Works stockholders
with a record date at or after the effective time of the merger the number of
whole shares of Illinois Tool Works common stock represented by such Premark
common stock certificates, regardless of whether such holders have exchanged
their Premark common stock certificates. None of Illinois Tool Works, Premark or
Harris Trust and Savings Bank, or any other person, will be liable to any former
holder of Premark common stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
After the effective time of the merger, there will be no transfers on the
Premark stock transfer books of shares of Premark common stock. If, after the
effective time, valid Premark stock certificates are presented to the surviving
corporation for any reason, they will be canceled and exchanged as described
above to the extent allowed by applicable law.
If a certificate for Premark common stock has been lost, stolen or
destroyed, Illinois Tool Works will issue the consideration properly payable in
accordance with the merger agreement upon receipt of an affidavit of the
claimant to the effect that the certificate has been lost, stolen or destroyed,
and (1) a reasonable undertaking to indemnify Illinois Tool Works or Premark, if
Illinois Tool Works believes that the person providing the indemnity is
sufficiently creditworthy, or (2) the posting by the claimant of an indemnity
bond customarily required by Illinois Tool Works, in each case in respect of the
certificate at issue.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of each of
Premark, Illinois Tool Works and Merger Sub as to, among other things:
- the corporate organization, existence, good standing and qualification to
do business of such company and its subsidiaries;
- its capitalization;
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- its corporate power and authority to execute, deliver and perform the
merger agreement and, in the case of Premark, the stock option agreement,
and to complete the merger;
- required governmental and third-party approvals;
- its financial statements and filings with the Securities and Exchange
Commission;
- changes in its business since the end of its prior fiscal year;
- litigation and liabilities;
- its compliance with applicable laws, including environmental laws;
- qualification of the merger for "pooling-of-interests" accounting
treatment and as a reorganization under the Internal Revenue Code; and
- tax returns and tax payment.
The merger agreement also contains representations and warranties of
Premark as to, among other things:
- the approval by Premark's board of directors of the merger agreement, the
stock option agreement and the merger;
- the receipt by Premark's board of directors of the opinion of Goldman
Sachs to the effect that the fraction of a share of Illinois Tool Works
common stock issuable in respect of each share of Premark common stock in
the merger is fair to holders of Premark common stock from a financial
point of view;
- Premark's employee benefits plans;
- Premark's taking all appropriate and necessary actions to render
inapplicable to the merger Delaware's interested stockholder business
combination law, other state takeover statutes and the interested
stockholder business combination provisions of Premark's certificate of
incorporation;
- Premark's relationships with its employees;
- Premark's significant agreements;
- Premark's adoption of an amendment to its rights agreement as described
under "Comparison of Rights of Illinois Tool Works Stockholders and
Premark Stockholders -- Stockholder Rights Agreement";
- brokers and finders;
- its preparedness with respect to Year 2000 compliance; and
- Premark's intellectual property.
CONDUCT OF BUSINESS COVENANTS
The merger agreement provides that, subject to certain exceptions, Premark
will conduct its business only in the ordinary and usual course until the
effective time of the merger. The merger agreement also includes limitations,
prohibitions and other provisions relating to Premark's conduct of business
before the merger with respect to:
- charter and bylaw amendments;
- changes in capital stock and payment of dividends;
- actions that would affect the accounting or tax treatment of the merger;
- increases in compensation and amendments to employee benefit or
retirement plans;
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- incurrence or repayment of indebtedness;
- capital expenditure levels;
- issuance of Premark stock and convertible securities;
- acquisitions and dispositions;
- changes in accounting policies or procedures;
- settlement or release of claims in litigation; and
- tax elections.
The merger agreement also includes limitations, prohibitions and other
provisions relating to Illinois Tool Works' conduct of business during the
period between September 9, 1999 and the effective time of the merger with
respect to:
- charter and bylaw amendments;
- changes in capital stock and payment of dividends; and
- actions that would affect the accounting or tax treatment of the merger.
Illinois Tool Works and Premark have agreed that until the effective time
of the merger, they will each use the last day of Illinois Tool Works'
then-current fiscal quarter as the record date for determining the stockholders
entitled to receive any regular quarterly dividends they may pay for that
quarter.
NON-SOLICITATION OF COMPETING PROPOSALS
Premark has agreed to a number of restrictions concerning "acquisition
proposals," which the merger agreement defines generally as proposals to merge
or combine with Premark or to acquire 15% or more of Premark's stock or assets.
Specifically, Premark has agreed that neither it nor its agents will, directly
or indirectly,
- initiate, solicit, knowingly encourage or intentionally facilitate the
making of any acquisition proposal;
- provide any confidential information to a third party in connection with
an acquisition proposal; or
- engage in any negotiations concerning an acquisition proposal.
The merger agreement expressly allows Premark to comply with Securities and
Exchange Commission rules regarding the publication of a board of directors'
recommendations with respect to tender offers, and, subject to some limitations,
expressly allows Premark's board of directors
- to negotiate with, and provide information to, third parties when
Premark's board of directors determines in good faith, after consultation
with outside counsel, that it should do so to comply with its fiduciary
duties; and
- to recommend a "superior proposal" to Premark stockholders, a "superior
proposal" being defined generally as an acquisition proposal that
Premark's board of directors concludes in good faith, after consulting
its legal and financial advisors, is reasonably capable of being
completed, and, if completed, would be more favorable to Premark
stockholders than the merger with Illinois Tool Works.
Except as permitted by Illinois Tool Works, Premark has agreed to terminate
all existing discussions and negotiations with third parties concerning
acquisition proposals. Premark has agreed to notify Illinois Tool Works as soon
as reasonably practicable if it receives any acquisition proposal or if a third
party seeks
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information from it or seeks to engage it in discussions concerning an
acquisition proposal. Premark has also agreed to keep Illinois Tool Works
informed of any such proposals or inquiries on an ongoing basis.
STOCKHOLDERS MEETINGS
The merger agreement requires both companies to convene their respective
stockholder meetings as soon as reasonably practicable.
Premark has agreed that its board of directors will recommend that Premark
stockholders vote to adopt the merger agreement. Premark's board of directors
may withdraw or modify its recommendation if it determines in good faith, after
consultation with outside legal counsel, that failing to do so would be
reasonably likely to be inconsistent with its fiduciary duties.
Illinois Tool Works has agreed that its board of directors will recommend
that Illinois Tool Works stockholders vote to approve the issuance of stock
necessary to complete the merger. The merger agreement allows Illinois Tool
Works to cancel the meeting of its stockholders if, under the rules of the New
York Stock Exchange, the issuance can be completed without stockholder approval.
Two affiliates of Illinois Tool Works, Harold Smith and Robert McCormack, have
agreed to vote their shares of Illinois Tool Works stock in favor of the
issuance if a vote is required. Those affiliates have also agreed to use all
reasonable efforts, subject to their fiduciary duties as trustees, to cause the
trusts as to which they act as trustees to vote the shares of Illinois Tool
Works stock directly owned by such trusts in favor of the issuance if a vote
takes place.
FILINGS AND OTHER ACTIONS
Illinois Tool Works and Premark have agreed to cooperate with each other,
and to use their reasonable best efforts:
- to take all necessary, proper and advisable actions to complete the
merger, including obtaining comfort letters from their respective
independent public accountants and opinions from their respective
attorneys, preparing and filing promptly all documentation necessary to
complete the merger, and instituting any court action necessary to obtain
approval of the merger and defending any court action instituted to
prevent completion of the merger; and
- to obtain promptly all approvals necessary or advisable to complete the
merger.
The merger agreement provides that Premark will not commit to any
divestitures, licenses, hold separate arrangements or similar matters without
Illinois Tool Works' permission, and will, at Illinois Tool Works' request, use
its reasonable best efforts to effect any divestitures, licenses, hold separate
arrangements or similar matters, so long as they are contingent upon completion
of the merger. The merger agreement also provides that Illinois Tool Works will
not be required to agree to any divestitures, licenses, hold separate
arrangements or similar matters if doing so would reasonably be expected to have
a material adverse effect on either Illinois Tool Works or Premark.
Illinois Tool Works has agreed to limit its participation in business
combination transactions before the merger. Illinois Tool Works may participate
in such a transaction if:
- the fair market value of the consideration paid by Illinois Tool Works in
the transaction does not exceed $750 million;
- the aggregate fair market value of the consideration paid by Illinois
Tool Works in all such transactions does not exceed $1.5 billion; and
- Illinois Tool Works believes that the transaction is not reasonably
likely to prevent or delay satisfaction of any of the conditions to the
merger.
The $750 million and $1.5 billion limits may be exceeded with the consent
of Premark's chief executive officer.
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If Illinois Tool Works participates in a business combination transaction
other than with Premark, it must agree to any divestitures, licenses, hold
separate arrangements or similar matters necessary to obtain approval of the
Premark merger under applicable antitrust laws.
EMPLOYEE BENEFIT MATTERS
After the effective time of the merger, Illinois Tool Works will ensure
that the Premark compensation and benefit plans in effect immediately before the
effective time of the merger are maintained, but it may cause the amendment or
termination of any such plan to the extent permitted by its terms or applicable
law. The merger agreement further provides that, under circumstances described
in the merger agreement, Premark employees will receive credit under Illinois
Tool Works benefit plans in which they participate for their years of service
with Premark prior to the merger and Illinois Tool Works will cause all
"pre-existing conditions" exclusions and "actively-at-work" requirements under
its medical and other related plans to be waived.
CONDITIONS TO COMPLETION OF THE MERGER
We will complete the merger only if the conditions set forth in the merger
agreement are satisfied or waived. The conditions to each of Illinois Tool
Works' and Premark's obligation to complete the merger include:
- stockholder approval of
-- the merger agreement by Premark stockholders; and
-- if required by the rules of the New York Stock Exchange, the issuance
of stock necessary to complete the merger by Illinois Tool Works
stockholders;
- the approval for listing on the New York Stock Exchange of the Illinois
Tool Works stock to be issued in the merger;
- the receipt of specified governmental approvals of the merger;
- the absence of any law or order prohibiting completion of the merger, or
of any proceeding seeking prohibition of the completion of the merger
instituted by the United States, the European Union, or governmental
entities in other countries where Illinois Tool Works and Premark conduct
a significant amount of business on a combined basis;
- the absence of any stop order suspending the effectiveness of Illinois
Tool Works' registration statement relating to the merger with the
Securities and Exchange Commission or any instituted or threatened
proceeding seeking such an order; and
- the receipt of letters from Illinois Tool Works' and Premark's
independent public accountants regarding the accounting treatment of the
merger.
The conditions to Illinois Tool Works' obligation to complete the merger
include:
- the accuracy, as qualified for materiality, of Premark's representations
and warranties;
- Premark's performance in all material respects of all its pre-merger
obligations under the merger agreement; and
- Illinois Tool Works' receipt of a legal opinion to the effect that the
merger will be treated as a reorganization under the Internal Revenue
Code and that each of Illinois Tool Works, Premark and Merger Sub will be
a party to that reorganization under the Internal Revenue Code.
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The conditions to Premark's obligation to complete the merger include:
- the accuracy, as qualified for materiality, of Illinois Tool Works'
representations and warranties;
- Illinois Tool Works' performance in all material respects of all its
pre-merger obligations under the merger agreement; and
- Premark's receipt of a legal opinion to the effect that the merger will
be treated as a reorganization under the Internal Revenue Code and that
each of Illinois Tool Works, Premark and Merger Sub will be a party to
that reorganization under the Internal Revenue Code.
At any time before the effective time of the merger, Illinois Tool Works or
Premark may waive any of these conditions without the approval of their
respective stockholders. As of the date of this proxy statement/prospectus,
neither company expects to waive any condition.
INDEMNIFICATION AND INSURANCE
Illinois Tool Works has agreed that:
- it will, and will cause Premark to, indemnify each present and former
director or officer of Premark against any costs or expenses incurred in
connection with any proceeding or investigation pertaining to matters
occurring at or before the effective time of the merger relating to the
services the indemnified party performed for Premark;
- it will cause Premark to provide similar indemnification to each present
and former director or officer of any subsidiary or division of Premark
and to each person who served as a director, officer, trustee or
fiduciary of another entity at Premark's request;
- it will, or will cause Premark to, advance expenses to an indemnified
party;
- it will cause Premark to maintain, for at least six years, charter and
bylaw provisions regarding indemnification and exculpation that are at
least as favorable to the indemnified parties as those in place on
September 9, 1999; and
- it will cause Premark to maintain, for at least six years, a policy of
officers' and directors' liability insurance covering the indemnified
parties for acts and omissions on or before the effective time of the
merger at least as favorable to the indemnified parties as the Premark
policy in place on September 9, 1999, subject to a cap on the cost of the
policy of twice the cost of the last premium Premark paid under the
policy in place on September 9, 1999.
TERMINATION OF THE MERGER AGREEMENT
Illinois Tool Works and Premark can agree to terminate the merger agreement
at any time without completing the merger.
Also, either Illinois Tool Works or Premark can, without the consent of the
other, terminate the merger agreement:
- if the merger is not completed before the "termination date," which is
defined in the merger agreement as April 9, 2000, or July 8, 2000 if
extended by either party solely because such extension is necessary in
order to obtain governmental approvals of the merger under applicable
competition laws and if all other conditions to completion of the merger
are satisfied or are capable of being satisfied. The merger agreement may
not be terminated pursuant to this provision if the merger is not
completed because the party that wants to terminate the merger agreement
has materially breached the merger agreement;
- if the Premark meeting is held and Premark stockholders do not adopt the
merger agreement;
- if the listing requirements of the New York Stock Exchange require the
issuance of Illinois Tool Works shares in the merger to be approved, the
Illinois Tool Works meeting is held, and Illinois
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Tool Works' stockholders do not approve the issuance of the Illinois Tool
Works shares in the merger;
- if any order permanently restraining, enjoining or otherwise prohibiting
completion of the merger has become final and non-appealable; or
- if the other party materially breaches the merger agreement and cannot or
does not correct the breach before the termination date.
In addition, Premark can terminate the merger agreement before the
effective time of the merger if Premark receives an unsolicited proposal for a
business combination transaction with a third party that Premark's board of
directors concludes is a superior proposal and Premark gives Illinois Tool Works
at least four business days notice of its intention to enter into an agreement
for such superior proposal and, during that four business day period, Premark
considers any adjustment in the terms of the merger agreement that Illinois Tool
Works may propose.
Finally, Illinois Tool Works can terminate the merger agreement if
Premark's board of directors withdraws or materially modifies or changes in a
manner adverse to Illinois Tool Works its approval or recommendation of the
merger or the merger agreement.
Termination Fee
Premark must pay Illinois Tool Works a fee of $75 million in cash if the
merger agreement is terminated:
- by either Illinois Tool Works or Premark following completion of the
Premark stockholders meeting held to consider the merger agreement on the
basis that Premark stockholders have not adopted the merger agreement,
and:
-- a third party has made, and not withdrawn, an acquisition proposal to
Premark; and
-- Premark's board of directors has withdrawn or materially modified, in
a manner adverse to Illinois Tool Works, its approval or
recommendation of the merger;
- by Illinois Tool Works on the ground that Premark's board of directors
has withdrawn or modified its approval or recommendation of the merger in
a manner adverse to Illinois Tool Works to such an extent that it is no
longer approving or recommending the merger agreement or the merger;
- by either Illinois Tool Works or Premark following completion of the
Premark stockholders meeting held to consider the merger agreement on the
basis that Premark stockholders have not adopted the merger agreement,
and
-- a third party has made, and not withdrawn, an acquisition proposal to
Premark; and
-- within one year of the termination of the merger agreement, Premark
enters into a definitive agreement with respect to an acquisition
proposal, or an acquisition proposal has been completed; or
- by Premark, at any time before the adoption of the merger agreement by
Premark stockholders, because of a superior proposal.
For purposes of the termination fee provisions of the merger agreement, an
"acquisition proposal" includes any proposal or offer with respect to any
purchase or sale of the consolidated assets of Premark or any of its
subsidiaries, taken as a whole, having an aggregate value of 50% or more of
Premark's market capitalization, or any purchase or sale of, or tender offer
for, 50% or more of its equity securities.
The termination fee described above is in addition to any profit Illinois
Tool Works may receive under the stock option agreement.
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EXPENSES
Illinois Tool Works will pay the expenses in connection with the
registration fees paid to the Securities and Exchange Commission, printing and
mailing this proxy statement/prospectus and other filing fees. Illinois Tool
Works and Premark will pay their own expenses in connection with the merger and
the related transactions, except as described above.
MODIFICATION OR AMENDMENT TO THE MERGER AGREEMENT
At any time prior to the effective time, Illinois Tool Works and Premark
can modify or amend the merger agreement if they both agree to do so. Each can
waive its right to require the other to comply with the merger agreement where
the law allows.
REGULATORY REQUIREMENTS
Under the Hart-Scott-Rodino Act and the rules promulgated thereunder by the
Federal Trade Commission, the merger cannot be completed until notifications
have been given and certain information has been furnished to the Federal Trade
Commission and the Antitrust Division of the Department of Justice and specified
waiting period requirements have been satisfied. Illinois Tool Works and Premark
filed notification and report forms under the Hart-Scott-Rodino Act with the
Federal Trade Commission and the Antitrust Division on September 24, 1999. The
waiting period under the Hart-Scott-Rodino Act will expire at 11:59 p.m.,
Eastern Time, on October 24, 1999, unless a request for additional information
or documentary material by the Department of Justice or Federal Trade Commission
is made before that time or the waiting period is terminated earlier.
At any time before or after completion of the merger, the Antitrust
Division or the Federal Trade Commission or any state could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the completion of the merger, to rescind
the merger or to seek divestiture of particular assets of Illinois Tool Works or
Premark. Private parties also may seek to take legal action under the antitrust
laws under certain circumstances. In addition, non-United States governmental
and regulatory authorities may seek to take action under applicable antitrust
laws. A challenge to the merger on antitrust grounds may be made and, if such a
challenge is made, it is possible that Illinois Tool Works and Premark will not
prevail.
Premark and Illinois Tool Works each conducts business in member states of
the European Union. Council Regulation (ECC) 4064/89, as amended, requires
notification to and approval by the European Commission of mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding specific thresholds before these mergers or
acquisitions are implemented. Premark and Illinois Tool Works intend to file a
merger notification with the European Union antitrust authorities as soon as
practicable.
The European Commission must review the merger to determine whether or not
it is compatible with the common market and, accordingly, whether or not to
permit it to proceed. A merger or acquisition that does not create or strengthen
a dominant position that would significantly impede effective competition in the
common market or in a substantial part of it shall be declared compatible with
the common market and must be allowed to proceed. If, following a preliminary
one-month Phase I investigation, the European Commission determines that it
needs to examine the merger more closely because it raises serious doubts as to
its compatibility with the common market, it must initiate Phase II
investigation procedures. If it initiates a Phase II investigation, the European
Commission must issue a final decision as to whether or not the merger is
compatible with the common market no later than four months after the initiation
of the Phase II investigation.
Premark and Illinois Tool Works conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the merger. Premark and Illinois
Tool Works are currently reviewing whether filings or approvals may be required
or desirable in those jurisdictions that may be material to Premark and Illinois
Tool Works and
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their subsidiaries. It is possible that one or more of these filings may not be
made, or one or more of these approvals may not be obtained prior to the merger.
Regulatory agencies enforcing antitrust and similar laws could delay,
oppose or refuse to approve the merger or impose conditions that could have an
adverse effect on the combined company.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. federal income tax
considerations of the merger. This summary is based on the Internal Revenue
Code, applicable U.S. Treasury Regulations, judicial authority, and
administrative rulings and practice, all in effect on the date of this proxy
statement/prospectus, all of which are subject to change, possibly with
retroactive effect. This summary does not purport to be a complete discussion of
all U.S. federal income tax consequences of the merger. The discussion below
does not address any state, local or foreign tax consequences of the merger or
any federal tax consequences other than federal income tax consequences. In
addition, this discussion does not address all of the U.S. federal income tax
consequences that may be relevant to particular stockholders in light of their
individual circumstances and may not apply, in whole or in part, to particular
stockholders, such as individuals who hold options in respect of Premark common
stock or who have acquired Premark common stock under a compensatory or other
employment-related arrangement, insurance companies, tax-exempt organizations,
mutual funds, financial institutions or broker-dealers, non-United States
persons, traders in securities that elect to mark-to-market, and persons who
hold Premark common stock as part of a hedge, straddle, constructive sale or
conversion transaction. The following discussion assumes that Premark common
stock is held by the relevant stockholder as a capital asset at the effective
time of the merger.
PREMARK STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS, AND THE EFFECT OF POSSIBLE
CHANGES IN APPLICABLE TAX LAWS.
General
The obligations of Premark and Illinois Tool Works, respectively, to
complete the merger are conditioned upon the receipt by Premark of the opinion
of Wachtell, Lipton, Rosen & Katz and the receipt by Illinois Tool Works of the
opinion of Mayer, Brown & Platt, each dated the closing date of the merger, that
the merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and that each
of Illinois Tool Works, Merger Sub and Premark will be a party to that
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code. The tax opinions will be based upon certain facts, customary assumptions
and customary representations made by Illinois Tool Works, Merger Sub and
Premark, including representations in certificates to be delivered to counsel by
the management of each of Illinois Tool Works and Premark that, if incorrect in
material respects, would jeopardize the conclusions reached by counsel in their
respective opinions. Neither Illinois Tool Works nor Premark has requested nor
will request an advance ruling from the Internal Revenue Service as to the tax
consequences of the merger and there can be no assurance that the Internal
Revenue Service will agree with the conclusions set forth in this proxy
statement/prospectus or the opinions. The discussion below assumes that the
merger qualifies as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code.
Tax Treatment to Premark, Illinois Tool Works and Merger Sub
No gain or loss will be recognized by Premark, Illinois Tool Works or
Merger Sub as a result of the merger.
Tax Treatment to Holders of Premark Common Stock
Except with respect to any cash received instead of fractional shares, a
Premark stockholder will not recognize any gain or loss for federal income tax
purposes as a result of the exchange of Premark common
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stock solely for shares of Illinois Tool Works common stock pursuant to the
merger. A Premark stockholder's aggregate tax basis for the shares of Illinois
Tool Works common stock received pursuant to the merger, including any
fractional share interest for which cash is received, will equal such
stockholder's aggregate tax basis in shares of Premark common stock held
immediately before the merger. A Premark stockholder's holding period for the
shares of Illinois Tool Works common stock received pursuant to the merger,
including any fractional share interest for which cash is received, will include
the period during which the shares of Premark common stock were held.
A holder of Premark common stock that receives cash instead of a fractional
share of Illinois Tool Works common stock in the merger generally will recognize
a capital gain or loss in an amount equal to the difference between the amount
of cash received and such holder's adjusted tax basis allocable to such
fractional share. In the case of an individual stockholder, any such capital
gain or loss generally will be subject to a maximum United States federal income
tax rate of 20 percent if the individual has held his or her Premark common
stock for more than one year on the date of the merger. The deductibility of
capital losses is subject to limitations for both individuals and corporations.
Notwithstanding the foregoing, it is possible that, in the case of certain
holders of Premark common stock who after the merger own directly or
constructively more than a minimal amount of Illinois Tool Works common stock,
exercise control over Illinois Tool Works or, in addition to direct ownership,
own Illinois Tool Works stock under certain constructive ownership rules, the
cash received instead of a fractional share may be taxed as a dividend.
Tax Treatment to Holders of Illinois Tool Works Common Stock
Holders of Illinois Tool Works common stock will not recognize any gain or
loss for federal income tax purposes as a result of the merger.
ANTICIPATED ACCOUNTING TREATMENT
The merger is intended to qualify as a "pooling-of-interests" for
accounting purposes. Under that method of accounting, the recorded historical
cost basis of the assets and liabilities of Illinois Tool Works and Premark will
be carried forward to the combined company. Results of operations of the
combined company will include income of Illinois Tool Works and Premark for the
entire fiscal period in which the combination occurs, and the historical results
of operations of the separate companies for fiscal years before the merger will
be combined and reported as the results of operations of the combined company.
Completion of the merger is conditioned upon:
- Illinois Tool Works' receipt of a letter from its independent public
accountants to the effect that the merger should qualify for
"pooling-of-interests" accounting treatment; and
- Premark's receipt of a letter from its independent public accountants to
the effect that Premark is a poolable entity.
See "-- Conditions to Completion of the Merger." However, some of the
conditions to be met to qualify for "pooling-of-interests" accounting treatment
cannot be fully assessed until specific periods of time after the effective time
of the merger have passed, because some of the conditions for "pooling-of-
interests" accounting treatment address transactions occurring within those
specific periods of time. A number of events, including certain transactions
with respect to Illinois Tool Works common stock or Premark common stock by
affiliates of Illinois Tool Works and Premark, respectively, could prevent the
merger from qualifying as a "pooling-of-interests" for accounting purposes. For
information concerning restrictions to be imposed on the transferability of
Illinois Tool Works common stock to be received by affiliates in order, among
other things, to ensure the availability of "pooling-of-interests" accounting
treatment, see "-- Resale Restrictions."
If, after completion of the merger, events occur that cause the merger to
be deemed no longer to qualify for "pooling-of-interests" accounting treatment,
the purchase method of accounting would be applied. The purchase method of
accounting would have a material adverse effect on the reported
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operating results of Illinois Tool Works as compared to "pooling-of-interests"
accounting treatment. See "Risk Factors -- Failure to qualify for
"pooling-of-interests" accounting treatment would negatively impact reported
operating results."
RESALE RESTRICTIONS
Restrictions Imposed by Rule 145
All Illinois Tool Works common stock received by Premark stockholders in
the merger will be freely transferable, except that shares of Illinois Tool
Works common stock received by persons who are deemed to be "affiliates" (as
such term is defined under the Securities Act of 1933) of Premark may be resold
by them only in transactions permitted by the resale provisions of Rule 145 (or
Rule 144 in the case of such persons who become affiliates of Illinois Tool
Works) promulgated under the Securities Act of 1933 or as otherwise permitted
under the Securities Act of 1933. Persons who may be deemed to be affiliates of
Illinois Tool Works or Premark generally include individuals or entities that
control, are controlled by or are under common control with such party and may
include certain officers and directors of Illinois Tool Works or Premark, as
well as significant stockholders.
Restrictions Related to "Pooling-of-Interests" Accounting Treatment
Guidelines regarding qualification for the use of the
"pooling-of-interests" method of accounting also limit sales of capital stock by
affiliates of the acquiring and acquired companies in a business combination.
These guidelines indicate further that the "pooling-of-interests" method of
accounting generally will not be challenged on the basis of sales of capital
stock by affiliates of the acquiring or acquired company if they do not reduce
the risk of holding any of the shares they own or shares they receive in
connection with a merger during the period beginning 30 days before the merger
and ending when financial results covering at least 30 days of post-combination
results of operations have been published. See "-- Anticipated Accounting
Treatment."
Under the merger agreement, Premark is required to use all reasonable
efforts to cause each of its affiliates to execute a written agreement
restricting the disposition by such affiliate of the shares of Illinois Tool
Works common stock to be received by such affiliate in the merger. Premark has
agreed not to register the transfer of any certificate unless such transfer is
made in compliance with the foregoing. Also under the merger agreement, Illinois
Tool Works is required to use all reasonable efforts to cause each of its
affiliates to execute a written agreement restricting the disposition by such
affiliate of any shares of Illinois Tool Works common stock.
INTERESTS OF PREMARK DIRECTORS AND OFFICERS IN THE MERGER THAT ARE DIFFERENT
FROM PREMARK STOCKHOLDERS' INTERESTS
In considering the recommendation of Premark's board of directors with
respect to the merger, stockholders should be aware that some of the members of
Premark's board of directors and some of Premark's officers have interests in
the merger that are different from the interests of stockholders of Premark
generally.
- All outstanding options granted by Premark to purchase Premark common
stock, including those held by officers and directors of Premark, will
vest upon approval of the merger by Premark stockholders, and, if not
exercised by the effective time of the merger, will be converted into
vested options to purchase shares of Illinois Tool Works common stock,
which will be adjusted in accordance with the exchange ratio. Based upon
the options outstanding as of October 11, 1999, options held by Premark's
officers and directors relating to 1,069,750 shares of Premark common
stock will vest upon approval of the merger by Premark stockholders.
- Restrictions on restricted stock awards granted to employees of Premark
will lapse upon adoption of the merger agreement by Premark stockholders,
and, at the effective time of the merger, those shares will be converted
into unrestricted shares of Illinois Tool Works common stock in
accordance with the exchange ratio.
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- Premark's executive officers are each covered by individual employment
agreements with Premark and by Premark benefit plans containing change of
control provisions that become operative upon approval of the merger by
Premark stockholders. If, after the merger, such executive's employment
is terminated (1) without "cause" or by the affected executive for "good
reason" or (2) for any reason during a 30-day period commencing on the
first anniversary of the merger, the executive is entitled to the
following severance benefits:
-- three times the executives' annual base salary and annual and
long-term incentive awards;
-- specified annual and long-term awards;
-- lifetime medical benefits and continuation of other welfare benefits
for three years; and
-- an additional payment to the extent necessary to make the executive
whole for any excise tax imposed as a result of receiving "excess
parachute payments."
We estimate that if each executive officer were terminated without cause
immediately after the merger, the cash payments due, including with
respect to the excise tax, would be $50.7 million (assuming that the
merger occurred before December 31, 1999 and that the value of the
Premark common stock immediately before the merger was $55 per share).
- W. James Farrell, chairman and chief executive officer of Illinois Tool
Works, is a director of Premark. Mr. Farrell did not take part in, and
was not present during, any of the deliberations of Premark's board of
directors concerning the merger or the merger agreement.
- It is expected that James M. Ringler, Premark's chairman, chief executive
officer and president, will assume a senior management role with Illinois
Tool Works after the merger.
Premark's board of directors was aware of these interests and considered
them, among other matters, when approving the merger.
Illinois Tool Works intends to offer agreements to Mr. Ringler, William
Reeb, president of Wilsonart, a subsidiary of Premark, and possibly other
Premark executives who have not yet been designated in order to induce these
executives to stay with the combined company. The terms of these agreements have
not yet been determined. Illinois Tool Works may also make payments to some
Premark executives in exchange for a covenant not to compete to be entered into
at or near the completion of the merger.
Premark's directors and officers beneficially owned, as of September 30,
1999, approximately 4.41% of Premark's outstanding common stock, including
options. As of September 30, 1999, Illinois Tool Works' directors, officers and
their affiliates beneficially owned 2,196 shares of Premark common stock,
including options.
THE STOCK OPTION AGREEMENT
General Description of the Stock Option Agreement
At the same time the merger agreement was executed, Illinois Tool Works and
Premark entered into a stock option agreement under which Premark granted
Illinois Tool Works an option to purchase up to 12,203,694 shares of Premark
common stock, or such number of shares of Premark common stock as represents
19.9% of the then-outstanding shares of Premark common stock without giving
effect to the Premark common stock issued or issuable under the option, at a
price per share of $34.06. A copy of the form of the Stock Option Agreement is
included as Exhibit A to the merger agreement included in Annex A to this proxy
statement/prospectus.
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Exercise of the Option
Except as described below, the option is exercisable within 135 days
following any event entitling Illinois Tool Works to receive the termination fee
under the merger agreement. The right to exercise the option expires upon
either:
- the effective time of the merger; or
- the earlier of:
-- 135 days after the date that Illinois Tool Works becomes entitled
to receive the termination fee under the merger agreement; and
-- the date that Illinois Tool Works is no longer potentially entitled
to receive the termination fee under the merger agreement for a
reason other than that Illinois Tool Works has already received the
termination fee.
Adjustments to Number and Type of Shares
The total number of shares of Premark common stock purchasable upon the
exercise of the option, and the option price, are subject to adjustment from
time to time to reflect changes in the capitalization of Premark.
Cash Payment for the Option
If the option becomes exercisable, Illinois Tool Works may require Premark
to repurchase the option in whole or in part, for a price equal to the number of
shares of Premark common stock then purchasable upon exercise of the option
multiplied by the excess of the "market/offer price" over the option price. The
market/offer price is defined in the stock option agreement as the highest of:
- the price per share of Premark common stock at which a tender or exchange
offer for Premark common stock has been made during the term of the
option;
- the price per share of Premark common stock to be paid by any other
person pursuant to an agreement with Premark in connection with a
business combination; and
- the highest trading price for shares of Premark common stock on the New
York Stock Exchange within the six-month period immediately preceding the
delivery of the notice requesting cash payment for the option.
If the option has been exercised, Illinois Tool Works may require Premark
to repurchase any shares of Premark common stock issued upon exercise of the
option at a price equal to the number of shares designated for repurchase
multiplied by the market/offer price.
Repurchase at the Option of Premark
After the option has been exercised, Premark has the right, exercisable
during the 135-day period beginning 135 days after the option becomes
exercisable, to repurchase three-quarters, but not less than three-quarters, of
the shares of Premark common stock acquired by Illinois Tool Works at a purchase
price per share equal to the greater of the market/offer price or the exercise
price of the option.
First Refusal
At any time prior to the second anniversary of the first purchase of
Premark shares under the option, Premark would have a right of first refusal
over the shares issued under the option in the event the holder desires to sell
or transfer such shares.
Limitation on Profit
The stock option agreement provides that in no event will Illinois Tool
Works' total profit from the option exceed in the aggregate $30 million.
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Registration Rights and Listing
Premark will use its reasonable best efforts to (1) register any shares
purchased under the option under the securities laws for the sale or other
disposition by Illinois Tool Works of such shares and (2) cause the listing of
such shares on the New York Stock Exchange.
Assignability
The stock option agreement may not be assigned by Illinois Tool Works or
Premark without the prior written consent of the other.
Effect of Stock Option Agreement
The stock option agreement is expected to increase the likelihood that the
merger will be completed and to compensate Illinois Tool Works in certain
circumstances if the merger is not completed. Certain aspects of the stock
option agreement would have the effect of precluding any alternative business
combination from being accounted for as a "pooling-of-interests" and may
discourage persons who before the effective time of the merger might have been
interested in acquiring all of or a significant interest in Premark from
considering or proposing such an acquisition, even if such persons were prepared
to offer higher consideration per share for Premark common stock than that
offered by Illinois Tool Works.
MARKET PRICES AND DIVIDEND INFORMATION
Shares of Illinois Tool Works common stock are traded on the New York Stock
Exchange and the Chicago Stock Exchange under the symbol "ITW," and shares of
Premark common stock are listed on the New York Stock Exchange and Pacific
Exchange under the symbol "PMI" and the London Stock Exchange under the symbol
"PMK." The following table sets forth, for the periods indicated, the range of
high and low per share sales prices for Illinois Tool Works common stock and
Premark common stock as reported on the New York Stock Exchange, as well as
information concerning quarterly cash dividends declared on such shares.
<TABLE>
<CAPTION>
SHARES OF ILLINOIS TOOL WORKS SHARES OF PREMARK
COMMON STOCK COMMON STOCK
------------------------------ ---------------------------
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
------- ------- ---------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.......................... $45.69 $37.38 $0.095 $23.88 $20.88 $0.08
Second Quarter......................... 52.63 40.31 0.120 30.00 19.63 0.09
Third Quarter.......................... 55.31 45.56 0.120 32.94 26.75 0.09
Fourth Quarter......................... 60.13 46.88 0.120 33.13 25.19 0.09
1998
First Quarter.......................... $65.00 $52.56 $0.120 $33.81 $27.38 $0.09
Second Quarter......................... 73.19 62.13 0.120 35.13 30.94 0.10
Third Quarter.......................... 68.75 45.19 0.150 34.44 26.44 0.10
Fourth Quarter......................... 67.69 50.88 0.150 35.38 27.81 0.10
1999
First Quarter.......................... $72.63 $58.13 $0.150 $35.56 $31.38 $0.10
Second Quarter......................... 82.00 59.81 0.150 37.63 31.50 0.11
Third Quarter.......................... 81.81 69.25 0.180 51.13 32.50 0.11
Fourth Quarter (through October 11,
1999)................................ 80.25 71.75 -- 53.00 49.13 --
</TABLE>
After the merger, Illinois Tool Works expects to continue to pay a regular
quarterly cash dividend. The payment of dividends by Illinois Tool Works in the
future, however, will depend on business conditions, Illinois Tool Works'
financial condition and earnings, and other factors.
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COMPARISON OF RIGHTS OF ILLINOIS TOOL WORKS STOCKHOLDERS
AND PREMARK STOCKHOLDERS
The rights of Premark stockholders are currently governed by Delaware
corporate law and Premark's certificate of incorporation and bylaws. Upon
completion of the merger, Premark stockholders will become stockholders of
Illinois Tool Works and their rights as Illinois Tool Works stockholders will be
governed by Delaware corporate law and Illinois Tool Works' certificate of
incorporation and bylaws. There are a number of differences between the rights
of Illinois Tool Works stockholders and Premark stockholders. Set forth below is
a brief summary of the material differences between the rights of Illinois Tool
Works stockholders and the rights of Premark stockholders which is qualified in
its entirety by reference to the relevant provisions of Delaware corporate law,
Illinois Tool Works' certificate of incorporation and bylaws and Premark's
certificate of incorporation and bylaws. The charter documents are incorporated
by reference as exhibits to the registration statement of which this proxy
statement/prospectus is a part.
AUTHORIZED CAPITAL
Illinois Tool Works
Illinois Tool Works is authorized to issue 350,300,000 shares of all
classes of stock, 350,000,000 of which are shares of common stock and 300,000 of
which are shares of preferred stock. As of October 11, 1999, there were
250,674,938 shares of common stock issued and outstanding and no issued and
outstanding shares of preferred stock.
Premark
Premark is authorized to issue 250,000,000 shares of all classes of stock,
200,000,000 of which are shares of common stock and 50,000,000 of which are
shares of preferred stock. As of October 11, 1999, there were 61,427,603 shares
of common stock issued and outstanding and no issued and outstanding preferred
shares. As of October 11, 1999, 1,000,000 shares of preferred stock of Premark,
designated as Series A Junior Participating Preferred Stock, were reserved for
issuance pursuant to Premark's stockholder rights agreement described below.
STOCKHOLDER RIGHTS AGREEMENT
Illinois Tool Works
Illinois Tool Works does not have a stockholder rights agreement.
Premark
Premark has a stockholder rights agreement that could discourage unwanted
or hostile takeover attempts which are not approved by Premark's board of
directors. The rights agreement allows holders of Premark common stock to
purchase shares in either Premark or an acquiror at a discount to market value
in response to specified takeover events that are not approved in advance by
Premark's board of directors.
The Rights. On December 16, 1996, Premark's board of directors declared a
dividend of one preferred share purchase right, referred to as a "right," for
each Premark common share outstanding. The rights currently trade with, and are
inseparable from, the common stock.
Exercise Price. Each right allows its holder to purchase from Premark one
one-hundredth of a share of Premark Series A Junior Participating Preferred
Stock for $80. This portion of a preferred share will give the stockholder
approximately the same dividend, voting, and liquidation rights as would one
share of common stock.
Exercisability. The rights will not be exercisable until:
- 10 days after a public announcement that a person or group has obtained
beneficial ownership of 15% or more of Premark's outstanding common
stock; or
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- 10 business days after a person or group begins a tender or exchange
offer which, if completed, would result in that person or group becoming
the beneficial owner of 15% or more of Premark's outstanding common
stock.
The date when the rights become exercisable is referred to in the rights
agreement as the "distribution date." After that date, the rights will be
evidenced by rights certificates that Premark will mail to all eligible holders
of common stock. A person or member of a group that has obtained beneficial
ownership of 15% or more of Premark's outstanding common stock may not exercise
any rights even after the distribution date.
Consequences of a Person or Group Becoming an Acquiring Person.
A person or group who acquires beneficial ownership of 15% or more of
Premark's shares is called an "acquiring person."
- Flip In. If a person or group becomes an acquiring person, all holders of
rights except the acquiring person may purchase shares of Premark common
stock at half their market value.
- Flip Over. If, after a person or group becomes an acquiring person,
Premark merges or consolidates with another entity, or if 50% or more of
Premark's consolidated assets or earning power are sold, all holders of
rights except the acquiring person may purchase shares of the acquiring
company at half their market value.
The Amendment to the Rights Agreement.
Immediately before entering into the merger agreement, Premark amended the
rights agreement to provide that the rights will not become exercisable as a
result of the merger agreement, the stock option agreement or the merger. The
rights agreement amendment also provides that neither Illinois Tool Works nor
Merger Sub will become an acquiring person as a result of the merger agreement,
the stock option agreement or the merger.
BOARD OF DIRECTORS
Illinois Tool Works
Illinois Tool Works' bylaws provide that the entire board of directors is
elected each year. A quorum of directors consists of a majority of Illinois Tool
Works' board of directors.
Premark
Premark's certificate of incorporation divides Premark's board of directors
into three classes of directors serving staggered three-year terms. As a result,
approximately one-third of Premark's board of directors is elected each year. A
quorum of directors consists of one-third of Premark's whole board of directors,
the "whole board" being defined as the number of directors the board would have
if there were no vacancies.
NUMBER, FILLING OF VACANCIES AND REMOVAL OF DIRECTORS
Illinois Tool Works
Illinois Tool Works' certificate of incorporation provides that its board
of directors may not have less than three nor more than 20 members. The actual
number of directors is as fixed in Illinois Tool Works' bylaws. Currently,
Illinois Tool Works has ten members on its board of directors. Any director or
the entire board of directors of Illinois Tool Works may be removed, with or
without cause, by majority stockholder vote.
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Premark
Premark's certificate of incorporation and bylaws provide that its board of
directors may fix the number of directors by a vote of a majority of the whole
board. Currently, Premark's board of directors has nine members. Directors can
be removed only for cause by majority stockholder vote.
CONSTITUENCY PROVISION
Illinois Tool Works
Neither Illinois Tool Works' certificate of incorporation nor its bylaws
contains a provision authorizing the board of directors, in taking action, to
consider any interests other than the interests of stockholders.
Premark
Premark's certificate of incorporation provides that, in addition to any
other considerations Premark's board of directors may lawfully take into account
in determining whether to take or to refrain from taking corporate action on any
matter, the board of directors may consider the interests of creditors,
customers, employees and other constituencies of Premark and its subsidiaries,
as well as the effect that its decisions may have upon communities in which
Premark and its subsidiaries do business.
INDEMNIFICATION
Illinois Tool Works' bylaws and Premark's certificate of incorporation
contain similar, but not identical, indemnification provisions. The material
differences between the indemnification provisions are as follows:
Persons Covered
Illinois Tool Works' indemnification provisions cover all Illinois Tool
Works' directors, officers, employees and agents and all those who have served
at its request as a director, officer, employee or agent of another entity.
Premark's indemnification provisions cover all Premark's directors,
officers and employees, all those who have served at its request as a director,
officer, employee or agent of another entity, and the legal representatives of
all those persons.
Expenses Covered
The expenses expressly covered under Illinois Tool Works' indemnification
provisions include attorneys' fees, judgments, fines and amounts paid in
settlement.
The expenses expressly covered under Premark's indemnification provisions
include all those just mentioned plus ERISA excise taxes and penalties.
Role of Covered Party
Illinois Tool Works will indemnify a covered person who was or is a party,
or is threatened to be made a party to any threatened, pending or completed
action, suit or nonderivative proceeding.
Premark will indemnify a covered person in all the circumstances just
mentioned, and also when the covered person is involved in any action, suit or
proceeding, whether derivative or not derivative, as a party or as a non-party.
Limitations
In the case of a derivative action, Illinois Tool Works will not indemnify
a covered person who has been adjudged to be liable for negligence or misconduct
in the performance of his or her duties, unless a
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court determines that the covered person is entitled to indemnification
notwithstanding his or her negligence or misconduct. Premark's certificate of
incorporation contains no similar provision.
Advances
Illinois Tool Works may advance to a covered party expenses incurred in
defending a civil or criminal action, suit or proceeding if the covered party
undertakes to repay the amount advanced unless he or she is ultimately found
eligible for indemnification.
Premark will advance to a covered party any indemnifiable expense. If the
covered party is a director or officer, he or she must undertake to repay the
amount advanced if ultimately found ineligible for indemnification.
Suit for Indemnification
If Premark does not pay in full the indemnification amount due within 30
days of receiving notice of a claim for indemnification, the claimant may sue
Premark to recover the unpaid amount, as well as the expenses incurred in
prosecuting such claim. Illinois Tool Works' bylaws contain no similar
provision.
SPECIAL MEETINGS OF STOCKHOLDERS
Illinois Tool Works
Illinois Tool Works' certificate of incorporation provides that only the
chairman, the president or a majority of the board of directors may call a
special meeting of stockholders.
Premark
Premark's certificate of incorporation provides that only a majority of the
whole board of directors may call a special meeting of stockholders.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS OTHER THAN ELECTION OF
DIRECTORS
Illinois Tool Works
Neither Illinois Tool Works' certificate of incorporation nor its bylaws
contain provisions relating to stockholder proposals other than with respect to
the election of directors.
Premark
Premark's bylaws provide that a stockholder may propose that business be
brought before an annual stockholders' meeting if notice of such proposal is
delivered to and received at the principal executive office of Premark not more
than 120 days nor less than 90 days prior to the anniversary date of the prior
year's annual meeting. If the date of the meeting has changed more than 30 days
from the prior year, then the stockholder's notice must be received not later
than the 10th day following the date the meeting was publicly announced.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS AT AN ANNUAL
MEETING
Illinois Tool Works
Illinois Tool Works' bylaws provide that a stockholder may nominate a
person for election to the board of directors at an annual stockholders' meeting
if the stockholder gives notice not later than the last business day of December
prior to the annual meeting in April or May.
Premark
Premark's bylaws provide that a stockholder may nominate a person for
election to the board of directors at an annual meeting of the stockholders if
the nomination is received not more than 120 days
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nor less than 90 days prior to the anniversary date of the prior year's annual
meeting. If the date of the meeting has changed more than 30 days from the prior
year, then the nomination must be received not later than the close of business
on the 10th day following the date the meeting was publicly announced.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS AT A SPECIAL
MEETING
Illinois Tool Works
Illinois Tool Works' bylaws provide that a stockholder may nominate a
person for election to the board of directors at a special meeting of
stockholders at which directors are to be elected if the stockholder gives
Illinois Tool Works' corporate secretary notice of the nomination not later than
the close of business on the tenth day following the date on which notice of the
special meeting is first given to stockholders.
Premark
Premark's bylaws provide that the only business that may be conducted at
any special meeting is business which is brought before the meeting by or at the
direction of the board of directors.
BUSINESS COMBINATION TRANSACTIONS
Illinois Tool Works' certificate of incorporation contains a provision that
requires, in specified circumstances, supermajority stockholder approval of
business combination transactions with significant stockholders. Premark's
certificate of incorporation contains a similar provision. The material
differences between the provisions are as follows:
Definition of Significant Stockholder
Illinois Tool Works' certificate of incorporation applies generally to
those who beneficially own more than 10% of the outstanding Illinois Tool Works
common stock, excluding any stock acquired on or before March 2, 1984.
Premark's certificate of incorporation applies generally to those who
beneficially own 10% or more of the outstanding Premark common stock or those
who are affiliated or associated with Premark and who beneficially owned 10% or
more of the outstanding Premark common stock within the previous two years.
Business Combination Transactions Covered
Illinois Tool Works' certificate of incorporation contains a definition of
"business combination" that includes
- mergers or consolidations with a substantial stockholder;
- dispositions of more than one percent of the total gross assets of
Illinois Tool Works to a substantial stockholder;
- acquisitions of assets with a value of more than one percent of the total
gross assets of Illinois Tool Works from a substantial stockholder;
- issuances or transfers of Illinois Tool Works securities by Illinois Tool
Works to a substantial stockholder; and
- issuances or transfers of securities of a substantial stockholder by the
substantial stockholder to Illinois Tool Works.
The definition of "business combination" in Premark's certificate of
incorporation is similar to the Illinois Tool Works definition. However,
Premark's certificate of incorporation does not include within the definition an
acquisition of assets of a substantial stockholder by Premark, nor does it
include an issuance or transfer of securities of a substantial stockholder by
the substantial stockholder to Premark.
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Furthermore, under the Premark definition, dispositions of assets to substantial
stockholders and transfers of securities of Premark to substantial stockholders
are "business combinations" if the assets or securities transferred have an
aggregate fair market value of $10 million or more.
Vote Required
Illinois Tool Works' certificate of incorporation provides that any
business combination transaction must be approved by a two-thirds majority
stockholder vote and a majority vote of the stockholders other than the
substantial stockholder.
Premark's certificate of incorporation provides that any business
combination transaction must be approved by an 80% majority stockholder vote.
Exempted Transactions
Illinois Tool Works' certificate of incorporation exempts a transaction
from the supermajority vote requirement if it
- has been approved by at least two-thirds of Illinois Tool Works'
continuing directors;
- was approved by a majority of Illinois Tool Works' board of directors
before the substantial stockholder became a substantial stockholder;
- involves only Illinois Tool Works and a corporation of which Illinois
Tool Works owns more than 50% of the outstanding voting stock; or
- satisfies specified fair price criteria and procedural requirements.
Premark's certificate of incorporation exempts a transaction from the
supermajority vote requirement if it
- has been approved by a majority of Premark's continuing directors, and
there are at least five such directors; or
- satisfies fair price criteria and procedural requirements similar to
those specified in the Illinois Tool Works certificate of incorporation.
Premark's board of directors has taken all necessary actions to render the
business combination provisions of its certificate of incorporation inapplicable
to the merger, the merger agreement and the stock option agreement.
AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS
Illinois Tool Works
Illinois Tool Works' certificate of incorporation requires a two-thirds
majority stockholder vote to:
- repeal or amend the provisions of the certificate of incorporation
related to (1) the number of members of the board of directors and the
filling of vacancies thereof, (2) stockholders' meetings and the
prohibition of stockholder action by written consent, (3) the approval of
certain business combinations with substantial stockholders, and (4)
amendments to the certificate of incorporation and bylaws; or
- amend the certificate of incorporation to provide for cumulative voting.
If there is a substantial stockholder, any repeal, amendment or adoption of
the type discussed above must also be approved by a majority vote of
stockholders other than the substantial stockholder.
Illinois Tool Works' certificate of incorporation provides that new bylaws
may be adopted, or the bylaws may be amended or repealed, either by the vote of
a majority of the board of directors or by a
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majority stockholder vote, except that any bylaw fixing the number of directors
may be adopted, amended or repealed only by (1) the vote of a majority of the
directors, unless there exists a substantial stockholder in which case such
bylaw must also be adopted, amended or repealed by not less than two-thirds of
the continuing directors or (2) a two-thirds majority stockholder vote, unless
there exists a substantial stockholder in which case such bylaw must also be
adopted, amended or repealed by a majority vote of stockholders other than the
substantial stockholder.
Premark
Premark's certificate of incorporation requires an 80% majority stockholder
vote to alter, amend or repeal any provision of the certificate of incorporation
related to:
- the number, election and removal of the members of the board of directors
and the filling of vacancies on the board of directors;
- the approval of business combination transactions with substantial
stockholders;
- stockholders' meetings and the prohibition of stockholder action by
written consent; or
- amendments to the bylaws.
Premark's bylaws provide that the vote of a majority of directors, or an
80% majority stockholder vote is required to amend, add to, rescind or repeal
Premark's bylaws.
ADDITIONAL INFORMATION
DEADLINE FOR PREMARK STOCKHOLDER PROPOSALS AND ILLINOIS TOOL WORKS STOCKHOLDER
PROPOSALS
Premark's 2000 Annual Meeting
If the merger takes place, Premark expects that it will have no more annual
meetings. If the merger is not completed, Premark plans to hold an annual
meeting on May 3, 2000. Stockholder proposals for inclusion in Premark's 2000
annual meeting proxy statement must be received at Premark's principal executive
office no later than November 25, 1999.
Premark's bylaws require stockholders who intend to propose the nominations
of persons for election as directors or other business to be considered by
Premark stockholders at the annual meeting (other than stockholder proposals
included in the annual meeting proxy statement pursuant to Rule 14a-8) to give
written notice to Premark's secretary at least 90 days but no more than 120 days
before the anniversary date of Premark's previous year's annual meeting. Matters
to be raised by a stockholder at Premark's 2000 annual meeting must be submitted
on or after January 6, 2000, but no later than February 5, 2000. The written
notice must comply with the provisions set forth in Premark's bylaws.
Illinois Tool Works' 2000 Annual Meeting
Illinois Tool Works plans to hold its annual meeting on May 12, 2000. If
Illinois Tool Works stockholders wish to submit a proposal to be considered for
inclusion in the proxy material for Illinois Tool Works' 2000 annual meeting,
they must send it to the office of the corporate secretary, Illinois Tool Works,
3600 West Lake Avenue, Glenview, Illinois 60025. Under the rules of the
Securities and Exchange Commission, proposals must be received no later than
November 6, 1999, to be eligible for inclusion in Illinois Tool Works' 2000
annual meeting proxy statement.
Illinois Tool Works stockholders wishing to nominate a person for election
as an Illinois Tool Works director at Illinois Tool Works' 2000 annual meeting
must notify the corporate secretary of Illinois Tool Works at the address above
in writing by December 31, 1999. Such notices must comply with the provisions
set forth in Illinois Tool Works' bylaws. A copy of the relevant provisions of
Illinois Tool Works' bylaws will be sent without charge to any Illinois Tool
Works stockholder who requests it in
52
<PAGE> 59
writing. Such requests should be addressed to the office of the corporate
secretary at the address noted above.
LEGAL MATTERS
The validity of the securities to be issued in the merger will be passed
upon for Illinois Tool Works by Stewart S. Hudnut, senior vice president,
general counsel and secretary of Illinois Tool Works. As of September 30, 1999,
Mr. Hudnut owned 7,283 shares of Illinois Tool Works common stock and had
options to purchase 104,450 shares of Illinois Tool Works common stock, of which
options relating to 61,950 shares were vested. The opinions referred to in the
discussion set forth under "The Merger Agreement and the Merger -- Material
Federal Income Tax Considerations" in this proxy statement/prospectus will be
provided to Illinois Tool Works by Mayer, Brown & Platt, Chicago, Illinois and
to Premark by Wachtell, Lipton, Rosen & Katz, New York, New York.
EXPERTS
The Illinois Tool Works consolidated financial statements and schedule
incorporated by reference in this proxy statement/prospectus from Illinois Tool
Works' Annual Report on Form 10-K for the year ended December 31, 1998 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The consolidated financial statements of Premark appearing in Premark
International, Inc.'s Annual Report (Form 10-K) for the year ended December 26,
1998, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
Premark's consolidated financial statements and schedule for the year ended
December 28, 1996 incorporated by reference in this proxy statement/prospectus
by reference to the Annual Report on Form 10-K for the year ended December 26,
1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Illinois Tool Works has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 that registers the
distribution of the shares of Illinois Tool Works common stock to be issued to
Premark stockholders in connection with the merger. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about Illinois Tool Works and Illinois Tool Works common stock. The
rules and regulations of the Securities and Exchange Commission allow Illinois
Tool Works and Premark to omit certain information included in the registration
statement from this proxy statement/prospectus.
In addition, Illinois Tool Works and Premark file reports, proxy statements
and other information with the Securities and Exchange Commission under the
Securities Exchange Act of 1934. You may read and copy that information at the
following locations of the Securities and Exchange Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
1-800-SEC-0330 Chicago, Illinois 60661-2511
</TABLE>
53
<PAGE> 60
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet world
wide web site that contains reports, proxy statements and other information
about issuers, including Illinois Tool Works and Premark, that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Illinois Tool Works and Premark at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The Securities and Exchange Commission allows Illinois Tool Works and
Premark to "incorporate by reference" information into this proxy
statement/prospectus. This means that the companies can disclose important
information to you by referring you to another document filed separately with
the Securities and Exchange Commission. The information incorporated by
reference is considered to be a part of this proxy statement/prospectus, except
for any information that is superseded by information that is included directly
in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that Illinois Tool Works and Premark have previously filed with the
Securities and Exchange Commission. The documents contain important information
about Illinois Tool Works and Premark and their respective financial conditions.
<TABLE>
<CAPTION>
ILLINOIS TOOL WORKS' FILINGS WITH THE COMMISSION PERIOD
- ------------------------------------------------ ------
<S> <C>
Annual Report on Form 10-K.................................. Year ended December 31, 1998
Quarterly Reports on Form 10-Q.............................. Quarters ended:
- March 31, 1999
- June 30, 1999
Current Report on Form 8-K.................................. Filed on September 14, 1999
The description of Illinois Tool Works common stock set
forth in Exhibit 99 to Illinois Tool Works' Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997, including
any amendment or report filed with the Securities and
Exchange Commission for the purpose of updating that
description.
</TABLE>
<TABLE>
<CAPTION>
PREMARK'S FILINGS WITH THE COMMISSION PERIOD
- ------------------------------------- ------
<S> <C>
Annual Report on Form 10-K.................................. Year ended December 26, 1998
Quarterly Reports on Form 10-Q.............................. Quarters ended:
- March 27, 1999
- June 26, 1999
Current Reports on Form 8-K................................. Filed on September 13, 1999
(amended by Amended Current
Report on Form 8-K/A filed
on September 14, 1999)
The description of Premark common stock set forth on Form 10
dated September 8, 1986, as amended, and the description of
rights attaching to the common stock set forth on Form 8-K
dated December 21, 1996, including any amendment or report
filed with the Securities and Exchange Commission for the
purpose of updating that description.
</TABLE>
Illinois Tool Works and Premark incorporate by reference additional
documents that either company may file with the Securities and Exchange
Commission between the date of this proxy statement/
54
<PAGE> 61
prospectus and the date of the Premark and Illinois Tool Works stockholders
meetings. Those documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
Illinois Tool Works has supplied all information contained or incorporated
by reference in this proxy statement/prospectus relating to Illinois Tool Works,
and Premark has supplied all such information relating to Premark.
You can obtain any of the documents incorporated by reference in this
document through Illinois Tool Works or Premark, as the case may be, or from the
Securities and Exchange Commission's web site at the address described above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. You can obtain documents incorporated by reference in this
proxy statement/prospectus by requesting them in writing or by telephone from
the appropriate company at the following addresses:
<TABLE>
<CAPTION>
PREMARK ILLINOIS TOOL WORKS
------- -------------------
<S> <C>
John M. Costigan Stewart S. Hudnut
Secretary Secretary
Premark International, Inc. Illinois Tool Works Inc.
1717 Deerfield Road 3600 West Lake Avenue
Deerfield, Illinois 60015 Glenview, Illinois 60025
Telephone: (847) 405-6000 Telephone: (847) 724-7500
</TABLE>
If you would like to request documents, please do so by November 16, 1999
to receive them before the meeting. Please be sure to include your complete name
and address in your request. If you request any incorporated documents, we will
mail them to you by first class mail, or another equally prompt means, within
one business day after we receive your request.
Neither Illinois Tool Works nor Premark has authorized anyone to give any
information or make any representation about the merger, Illinois Tool Works or
Premark that is different from, or in addition to, that contained in this proxy
statement/prospectus or in any of the materials that we have incorporated into
this document. Therefore, if anyone does give you information of this sort, you
should not rely on it. If you are in a jurisdiction where offers to exchange or
sell, or solicitations of offers to exchange or purchase, the securities offered
by this document or the solicitation of proxies is unlawful, or if you are a
person to whom it is unlawful to direct these types of activities, then the
offer presented in this document does not extend to you. The information
contained in this document speaks only as of the date of this document unless
the information specifically indicates that another date applies.
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus, including information incorporated by
reference in this document, contains certain forward-looking statements with
respect to the financial condition, results of operations, plans, objectives,
future performance and business of each of Illinois Tool Works and Premark, as
well as certain information relating to the merger, including statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "estimates" or similar expressions. Those forward-looking
statements involve certain risks and uncertainties. For those statements,
Illinois Tool Works and Premark claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual results may differ materially from those contemplated by
such forward-looking statements due to, among others, the factors described
under "Risk Factors" in this proxy statement/prospectus and the following
factors:
- general economic, financial or business conditions, either
internationally, nationally or in the states in which Illinois Tool Works
or Premark is doing business that may be less favorable than expected;
55
<PAGE> 62
- supply/demand balance for the products of Illinois Tool Works and
Premark;
- legislative or regulatory changes that may adversely affect the
businesses in which Illinois Tool Works and Premark are engaged;
- technological changes, including "Year 2000" data systems compliance
issues, that may be more difficult or expensive than anticipated;
- changes that may occur in the securities markets;
- a downturn in the automotive, construction, general industrial or real
estate markets;
- an interruption in, or reduction in the introduction of new products
into, Illinois Tool Works' or Premark's product lines;
- an unfavorable environment for making acquisitions, domestic or foreign,
including adverse accounting or regulatory requirements, and adverse
market values of candidates;
- failure to achieve technology objectives or to complete projects on
schedule and on budget; and
- currency exchange risk.
56
<PAGE> 63
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements ("Pro Forma
Statements") give effect to the proposed merger of Illinois Tool Works and
Premark under the "pooling-of-interests" method of accounting. The Pro Forma
Statements are based on the historical financial statements of the respective
companies and should be read in conjunction with those historical financial
statements and related notes thereto, which are incorporated by reference in
this proxy statement/prospectus.
The Pro Forma Statements are presented as if the merger had been
consummated as of the beginning of each period presented for the unaudited pro
forma statements of income and as of June 30, 1999 for the unaudited pro forma
combined statement of financial position.
The Pro Forma Statements are based on the estimates and assumptions set
forth in the notes to such statements. The Pro Forma Statements are preliminary
and have been furnished solely for informational purposes, and therefore are not
necessarily indicative of the results of operations or financial position that
might have been achieved for the dates or periods indicated, nor are they
necessarily indicative of the results of operations or financial position that
may occur in the future.
57
<PAGE> 64
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ILLINOIS TOOL WORKS PREMARK PRO FORMA
FOR THE SIX FOR THE SIX COMBINED FOR THE
MONTHS ENDED MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 26, PRO FORMA JUNE 30,
1999 1999 ADJUSTMENTS 1999
------------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues................ $3,098,004 $1,414,300 $ -- $4,512,304
Cost of revenues................ 1,965,799 888,100 72,850(n) 2,926,749
Selling, administrative and
research and development
expenses..................... 511,665 408,800 (76,896)(n)(o) 843,569
Amortization of goodwill and
other intangible assets...... 30,805 -- 4,046(o) 34,851
Amortization of retiree
healthcare................... 3,653 -- (3,653)(p) --
---------- ---------- -------- ----------
Operating Income.................. 586,082 117,400 3,653 707,135
Interest expense................ (19,942) (12,100) -- (32,042)
Other income.................... 7,444 2,500 -- 9,944
---------- ---------- -------- ----------
Income from continuing
operations before income
taxes........................ 573,584 107,800 3,653 685,037
Income taxes.................... 209,400 40,300 1,425(q) 251,125
---------- ---------- -------- ----------
Income from continuing
operations................... $ 364,184 $ 67,500 $ 2,228 $ 433,912
========== ========== ======== ==========
Income from continuing
operations per share:
Basic........................ $ 1.45 $ 1.10 $ 1.48(r)
Diluted...................... $ 1.44 $ 1.06 $ 1.45(r)
Shares of common stock outstanding
during the period:
Average......................... 250,349 61,400 293,668
Average assuming dilution....... 253,035 63,900 298,646
</TABLE>
58
<PAGE> 65
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ILLINOIS TOOL WORKS PREMARK PRO FORMA
FOR THE SIX FOR THE SIX COMBINED FOR THE
MONTHS ENDED MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 27, PRO FORMA JUNE 30,
1998 1998 ADJUSTMENTS 1998
------------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues................ $2,761,452 $1,291,700 $ -- $4,053,152
Cost of revenues................ 1,784,846 817,300 67,275(n) 2,669,421
Selling, administrative and
research and development
expenses..................... 434,740 378,500 (70,767)(n)(o) 742,473
Amortization of goodwill and
other intangible assets...... 20,174 -- 3,492(o) 23,666
Amortization of retiree
healthcare................... 3,653 -- (3,653)(p) --
---------- ---------- -------- ----------
Operating Income.................. 518,039 95,900 3,653 617,592
Interest expense................ (5,239) (6,700) -- (11,939)
Other income.................... (1,563) 2,200 -- 637
---------- ---------- -------- ----------
Income from continuing
operations before income
taxes........................ 511,237 91,400 3,653 606,290
Income taxes.................... 186,600 35,200 1,425(q) 223,225
---------- ---------- -------- ----------
Income from continuing
operations................... $ 324,637 $ 56,200 $ 2,228 $ 383,065
========== ========== ======== ==========
Income from continuing
operations per share:
Basic........................ $ 1.30 $ 0.91 $ 1.31(r)
Diluted...................... $ 1.29 $ 0.87 $ 1.28(r)
Shares of common stock outstanding
during the period:
Average......................... 249,789 62,000 293,473
Average assuming dilution....... 252,526 64,800 298,811
</TABLE>
59
<PAGE> 66
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ILLINOIS TOOL WORKS PREMARK PRO FORMA
FOR THE FOR THE COMBINED FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 26, PRO FORMA DECEMBER 31,
1998 1998 ADJUSTMENTS 1998
------------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues................. $5,647,889 $2,739,100 $ -- $8,386,989
Cost of revenues................. 3,626,123 1,726,900 141,172(n) 5,494,195
Selling, administrative and
research and development
expenses...................... 890,581 776,700 (148,019)(n)(o) 1,519,262
Amortization of goodwill and
other intangible assets....... 44,593 -- 6,847(o) 51,440
Amortization of retiree
healthcare.................... 7,306 -- (7,306)(p) --
---------- ---------- ---------- ----------
Operating Income................... 1,079,286 235,500 7,306 1,322,092
Interest expense................. (14,230) (15,000) -- (29,230)
Other income..................... (5,472) (900) -- (6,372)
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes........... 1,059,584 219,600 7,306 1,286,490
Income taxes..................... 386,800 83,500 2,849(q) 473,149
---------- ---------- ---------- ----------
Income from continuing
operations.................... $ 672,784 $ 136,100 $ 4,457 $ 813,341
========== ========== ========== ==========
Income from continuing operations
per share:
Basic......................... $ 2.69 $ 2.20 $ 2.77(r)
Diluted....................... $ 2.67 $ 2.11 $ 2.72(r)
Shares of common stock outstanding
during the period:
Average.......................... 249,906 61,881 293,526
Average assuming dilution........ 252,443 64,593 298,618
</TABLE>
60
<PAGE> 67
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ILLINOIS TOOL WORKS PREMARK PRO FORMA
FOR THE FOR THE COMBINED FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 27, PRO FORMA DECEMBER 31,
1997 1997 ADJUSTMENTS 1997
------------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues................. $5,220,433 $2,406,800 $ -- $7,627,233
Cost of revenues................. 3,378,794 1,525,800 125,259(n) 5,029,853
Selling, administrative and
research and development
expenses...................... 870,268 704,300 (129,848)(n)(o) 1,444,720
Amortization of goodwill and
other intangible assets....... 36,842 -- 4,589(o) 41,431
Amortization of retiree
healthcare.................... 7,306 -- (7,306)(p) --
---------- ---------- ---------- ----------
Operating Income................... 927,223 176,700 7,306 1,111,229
Interest expense................. (19,383) (12,100) -- (31,483)
Other income..................... 16,511 10,100 -- 26,611
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes........... 924,351 174,700 7,306 1,106,357
Income taxes..................... 337,400 70,900 2,849(q) 411,149
---------- ---------- ---------- ----------
Income from continuing
operations.................... $ 586,951 $ 103,800 $ 4,457 $ 695,208
========== ========== ========== ==========
Income from continuing operations
per share:
Basic......................... $ 2.35 $ 1.67 $ 2.37(r)
Diluted....................... $ 2.33 $ 1.59 $ 2.33(r)
Shares of common stock outstanding
during the period:
Average.......................... 249,284 62,342 293,526
Average assuming dilution........ 251,760 65,326 298,581
</TABLE>
61
<PAGE> 68
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
ILLINOIS TOOL WORKS PREMARK PRO FORMA
FOR THE FOR THE COMBINED FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 28, PRO FORMA DECEMBER 31,
1996 1996 ADJUSTMENTS 1996
------------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues.................... $4,996,681 $2,267,600 $ -- $7,264,281
Cost of revenues.................... 3,281,530 1,443,800 115,992(n) 4,841,322
Selling, administrative and research
and development expenses......... 875,386 660,200 (120,631)(n)(o) 1,414,955
Amortization of goodwill and other
intangible assets................ 31,873 -- 4,639(o) 36,512
Amortization of retiree
healthcare....................... 7,306 -- (7,306)(p) --
---------- ---------- --------- ----------
Operating Income...................... 800,586 163,600 7,306 971,492
Interest expense.................... (27,834) (16,300) -- (44,134)
Other income........................ (2,437) (34,400) -- (36,837)
---------- ---------- --------- ----------
Income from continuing operations
before income taxes.............. 770,315 112,900 7,306 890,521
Income taxes........................ 284,000 56,200 2,849(q) 343,049
---------- ---------- --------- ----------
Income from continuing operations... $ 486,315 $ 56,700 $ 4,457 $ 547,472
========== ========== ========= ==========
Income from continuing operations
per share:
Basic............................ $ 1.96 $ 0.92 $ 1.88(r)
Diluted.......................... $ 1.95 $ 0.89 $ 1.85(r)
Shares of common stock outstanding
during the period:
Average............................... 247,556 62,059 291,301
Average assuming dilution............. 249,570 64,095 295,197
</TABLE>
62
<PAGE> 69
UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
(In Thousands)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA
ILLINOIS TOOL WORKS PREMARK PRO FORMA COMBINED
JUNE 30, 1999 JUNE 26, 1999 ADJUSTMENTS JUNE 30, 1999
------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents.......... $ 119,542 $ 126,600 $ -- $ 246,142
Trade receivables............. 1,087,783 457,200 -- 1,544,983
Inventories................... 613,678 449,900 -- 1,063,578
Deferred income taxes......... 110,811 75,400 -- 186,211
Prepaid expenses and other
current assets............. 100,469 45,200 -- 145,669
---------- ---------- --------- ----------
Total current
assets.............. 2,032,283 1,154,300 -- 3,186,583
---------- ---------- --------- ----------
Plant and Equipment, net........ 1,084,312 561,100 --(m) 1,645,412
Investments..................... 1,171,684 -- -- 1,171,684
Goodwill and Other Intangible
Assets........................ 1,542,921 241,900 172,405(a) 1,957,226
Deferred Income Taxes........... 413,424 -- 72,268(b)(l) 485,692
Other Assets.................... 494,269 83,600 (206,053)(a)(l) 371,816
---------- ---------- --------- ----------
$6,738,893 $2,040,900 $ 38,620 $8,818,413
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt............... $ 434,702 $ 24,900 $ -- $ 459,602
Accounts payable.............. 307,961 133,300 -- 441,261
Accrued expenses.............. 463,253 377,200 57,050(c)(d)(e) 897,503
Cash dividends payable........ 37,584 -- 6,746(c) 44,330
Income taxes payable.......... 88,406 -- (8,503)(e) 79,903
---------- ---------- --------- ----------
Total current
liabilities......... 1,331,906 535,400 55,293 1,922,599
---------- ---------- --------- ----------
Noncurrent Liabilities:
Long-term debt................ 1,223,942 259,700 -- 1,483,642
Other......................... 592,566 235,300 99,025(b) 926,891
---------- ---------- --------- ----------
Total noncurrent
liabilities......... 1,816,508 495,000 99,025 2,410,533
---------- ---------- --------- ----------
Stockholders' Equity:
Common stock.................. 2,508 69,000 (68,569)(f) 2,939
Additional paid-in-capital.... 308,421 364,900 (189,731)(h) 483,590
Income reinvested in the
business................... 3,419,270 873,700 (118,198)(k) 4,174,772
Common stock held in
treasury................... (1,783) (258,300) 258,300(g) (1,783)
Cumulative translation
adjustment................. (137,937) -- (36,300)(i) (174,237)
Unearned portion of restricted
stock...................... -- (2,500) 2,500(j) --
Accumulated other
comprehensive income....... -- (36,300) 36,300(i) --
---------- ---------- --------- ----------
Total stockholders'
equity.............. 3,590,479 1,010,500 (115,698) 4,485,281
---------- ---------- --------- ----------
$6,738,893 $2,040,900 $ 38,620 $8,818,413
========== ========== ========= ==========
</TABLE>
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<PAGE> 70
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma combined financial statements are presented for
informational purposes only, giving effect to the merger of Illinois Tool Works
Inc. ("Illinois Tool Works") and Premark International, Inc. ("Premark") as
accounted for by the "pooling-of-interests" method. In accordance with
Securities and Exchange Commission reporting rules, the pro forma combined
statements of income, and the historical statements from which they are derived,
present only income from continuing operations and therefore do not include
discontinued operations, extraordinary items or the cumulative effects of
accounting changes. The pro forma combined statements of income also do not
include the impact of nonrecurring items attributable to the transaction.
Because the transaction has not been completed, the costs of the merger
transaction can only be estimated at this time. The pro forma combined statement
of income for each period presented excludes: (1) the positive effects of
potential cost savings that may be achieved upon combining the resources of the
companies; (2) transaction costs including investment banking, legal, and
accounting fees; and (3) contractual termination benefits.
The unaudited pro forma combined statement of financial position as of June
30, 1999 includes, in accordance with the Securities and Exchange Commission
reporting rules, the impact of all transactions, whether of a recurring or
nonrecurring nature, that can be reasonably estimated and that would have been
reflected had the transaction been consummated as of that date.
2. PRO FORMA ADJUSTMENTS
As permitted in a pooling-of-interests business combination, the unaudited
pro forma financial statements reflect certain adjustments to conform the
accounting policies and financial statement classification of both companies.
The pro forma adjustments are as follows:
Statement of Financial Position
(a)Illinois Tool Works and Premark have classified other intangible assets
differently in their respective statements of financial position. Other
intangible assets of $172.4 million were classified in the Illinois Tool
Works historical financial statements as other assets, and were
reclassified in the pro forma statement of financial position to
goodwill and other intangible assets in order to conform the
presentation.
(b)Upon the original adoption of Statement of Financial Accounting
Standards No. 106 -- Employers' Accounting for Postretirement Benefits
other than Pensions ("SFAS 106") there were two options to recognize the
transition obligation. Illinois Tool Works chose to recognize the
transition obligation over a 20-year period. Premark chose the option of
immediate recognition. The combined entity will follow the immediate
recognition method. The pro forma combined statement of financial
position reflects an adjustment to other noncurrent liabilities of $99.0
million to record Illinois Tool Works' unamortized transition obligation
as of June 30, 1999. Noncurrent deferred taxes have been adjusted by
$38.6 million to account for the tax effect of the unamortized
transition obligation.
(c)Illinois Tool Works and Premark have classified dividends payable
differently in their respective statements of financial position.
Dividends payable of $6.7 million were classified in the Premark
historical financial statements as accrued expenses, and were
reclassified in the pro forma statement of financial position to cash
dividends payable in order to conform the presentation.
(d)A pro forma adjustment of $20 million was recorded to accrued expenses
and income reinvested in the business in order to reflect the estimated
transaction costs related to the merger.
64
<PAGE> 71
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(e)Accrued expenses and income reinvested in the business have been
adjusted to reflect $43.8 million in payments related to contractual
termination benefits that are expected to be paid subsequent to the
consummation of the merger transaction. Income taxes payable has been
adjusted by $8.5 million to reflect the tax effect relating to the
termination payments.
(f)Common stock ($.01 par value per share) was adjusted by $68.6 million to
reflect the merger accounted for as a "pooling-of-interests" through the
exchange of approximately 43.1 million shares of Illinois Tool Works
common stock for 61.2 million shares of Premark common stock using an
illustrative exchange ratio of 0.7049. The exchange ratio is based on a
market value of $55 worth of Illinois Tool Works' stock issued to
Premark stockholders upon consummation of the merger transaction, and an
average market value of Illinois Tool Works' stock of $78.03 for the
20-day period ending September 9, 1999. As described in this proxy
statement/prospectus, the actual exchange ratio will be based on the
average closing price of Illinois Tool Works common stock for the 20-day
trading period ending on the second business day before the effective
time of the merger.
(g)Treasury stock was adjusted by $258.3 million to reflect the retirement
of Premark's treasury stock.
(h)Additional paid-in-capital was adjusted by $189.7 million related to
adjustments (f) and (g) above.
(i)Illinois Tool Works and Premark have classified the cumulative
translation adjustment differently in their respective statements of
financial position. Translation adjustments were classified in the
Premark historical financial statements as accumulated other
comprehensive income, and were reclassified in the pro forma statement
of financial position as cumulative translation adjustment in order to
conform the presentation.
(j)Included in Premark's historical statement of financial position is the
unearned portion of restricted stock issued for future service, which
was adjusted by $2.5 million to reflect the vesting of the restricted
shares upon consummation of the merger transaction.
(k)Income reinvested in the business was adjusted by $118.2 million related
to adjustments (b), (d), (e) and (j) above, as follows (in thousands,
net of tax):
<TABLE>
<S> <C>
Unamortized SFAS 106 transition obligation................ $ 60,405
Transaction costs......................................... 20,000
Contractual termination payments.......................... 35,293
Unamortized restricted stock.............................. 2,500
--------
$118,198
========
</TABLE>
(l)Illinois Tool Works and Premark have classified long-term deferred tax
assets differently in their respective statements of financial position.
Long-term deferred tax assets of $33.6 million were classified in the
Premark historical financial statements as other noncurrent assets, and
were reclassified to deferred income taxes in the pro forma statement of
financial position in order to conform the presentation.
(m)Illinois Tool Works and Premark have used different methods for
depreciating fixed assets in their historical financial statements.
Illinois Tool Works has principally used accelerated depreciation
methods (primarily in its U.S. businesses), whereas Premark historically
has used the straight-line depreciation method. Because the merger
transaction has not been completed, the adjustment to conform Premark's
depreciation method to that of Illinois Tool Works is not currently
estimable. Upon consummation of the transaction, the depreciation method
for
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Premark's U.S. businesses is expected to be conformed to Illinois Tool
Works' accelerated methods in the financial statements for all periods.
Statements of Income
(n)Illinois Tool Works and Premark have classified distribution costs
differently in their respective statements of income. Distribution costs
were classified in the Premark historical financial statements as
selling and administrative expenses, and were reclassified in the pro
forma statements of income as cost of revenues in order to conform the
presentation.
(o)Illinois Tool Works and Premark have classified goodwill and other
intangible asset amortization differently in their respective statements
of income. Amortization was classified in the Premark historical
financial statements as a selling and administrative expense, and was
reclassified in the pro forma statements of income as amortization of
goodwill and intangible assets in order to conform the presentation.
(p)Upon the original adoption of SFAS 106, there were two options to
recognize the transition obligation. Illinois Tool Works chose to
recognize the transition obligation as of January 1, 1993 ratably over a
20-year period. Premark chose the option of immediate recognition. The
combined entity will follow the immediate recognition method. The pro
forma combined statements of income reflect the elimination of Illinois
Tool Works' amortization of retiree health care.
(q)The estimated income tax effect related to the pro forma adjustments
described in (p) above is based on an assumed combined federal and state
income tax rate of 39%.
(r)The pro forma combined per share amounts are based on the combined
weighted average number of Illinois Tool Works common shares and Premark
common stock outstanding for all periods presented assuming Premark
stockholders receive 0.7049 of an Illinois Tool Works common share for
each share of Premark common stock held.
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<PAGE> 73
ANNEX
A
AGREEMENT AND PLAN OF MERGER
AMONG
PREMARK INTERNATIONAL, INC.,
ILLINOIS TOOL WORKS INC.
AND
CS MERGER SUB INC.
DATED AS OF SEPTEMBER 9, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger.................................................. A-6
1.2. Closing..................................................... A-6
1.3. Effective Time.............................................. A-7
ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1. The Certificate of Incorporation............................ A-7
2.2. The Bylaws.................................................. A-7
ARTICLE III
OFFICERS, DIRECTORS AND MANAGEMENT
3.1. Directors of Surviving Corporation.......................... A-7
3.2. Officers of Surviving Corporation........................... A-7
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1. Effect on Capital Stock..................................... A-7
4.2. Exchange of Certificates for Shares......................... A-8
4.3. Dissenters' Rights.......................................... A-10
4.4. Adjustments to Prevent Dilution............................. A-10
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company............... A-10
5.2. Representations and Warranties of Parent and Merger Sub..... A-19
ARTICLE VI
COVENANTS
6.1. Interim Operations.......................................... A-23
6.2. Acquisition Proposals....................................... A-25
6.3. Information Supplied........................................ A-26
6.4. Stockholders Meetings....................................... A-27
6.5. Filings; Other Actions; Notification........................ A-27
6.6. Access; Consultation........................................ A-29
6.7. Affiliates.................................................. A-30
6.8. Stock Exchange Listing...................................... A-30
6.9. Publicity................................................... A-30
6.10. Benefits.................................................... A-30
6.11. Expenses.................................................... A-32
6.12. Indemnification; Directors' and Officers' Insurance......... A-32
6.13. Takeover Statute............................................ A-34
6.14. Confidentiality............................................. A-34
6.15 Tax-Free Reorganization..................................... A-34
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-35
7.2. Conditions to Obligations of Parent and Merger Sub.......... A-35
7.3. Conditions to Obligation of the Company..................... A-36
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent............................... A-36
8.2. Termination by Either Parent or the Company................. A-37
8.3. Termination by the Company.................................. A-37
8.4. Termination by Parent....................................... A-37
8.5. Effect of Termination and Abandonment....................... A-38
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Certain Definitions......................................... A-39
9.2. Survival.................................................... A-40
9.3. Modification or Amendment................................... A-40
9.4. Waiver of Conditions........................................ A-40
9.5. Counterparts................................................ A-41
9.6. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL............... A-41
9.7. Notices..................................................... A-42
9.8. Entire Agreement............................................ A-42
9.9. No Third Party Beneficiaries................................ A-43
9.10. Obligations of Parent and of the Company.................... A-43
9.11. Severability................................................ A-43
9.12. Interpretation.............................................. A-43
9.13. Assignment.................................................. A-43
EXHIBITS
Exhibit 1 -- Form of Stock Option Agreement......................... A-45
Exhibit 6.7(A) -- Form of Company Stockholder Agreement............ A-55
Exhibit 6.7(B) -- Form of Parent Stockholder Agreement............. A-59
Exhibit 6.7(C) -- Form of Parent Stockholder Agreement............. A-62
</TABLE>
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ---- -----------
<S> <C>
Acquisition Proposal........................................ 6.2(a)
Affiliates.................................................. 9.1
Agreement................................................... preamble
Audit Date.................................................. 5.1(f)
Bankruptcy and Equity Exception............................. 5.1(c)
Bylaws...................................................... 2.2
Certificate................................................. 4.1(a)
Certificate of Merger....................................... 1.3
Charter..................................................... 2.1
Closing..................................................... 1.2
Closing Date................................................ 1.2
Code........................................................ recitals
Company..................................................... preamble
Company Affiliate's Letter.................................. 6.7(a)
Company Disclosure Letter................................... 5.1
Company Employee............................................ 6.10(e)
Company IP Rights........................................... 5.1(q)(i)
Company Option.............................................. 6.10(a)(i)
Company Preferred Shares.................................... 5.1(b)
Company Representatives..................................... 6.1(a)
Company Requisite Vote...................................... 5.1(c)
Company Share............................................... 4.1(a)
Company Shares.............................................. 4.1(a)
Company Stock Plans......................................... 5.1(b)
Company Stockholders Meeting................................ 6.4(a)
Company's Reports........................................... 5.1(e)
Compensation and Benefit Plans.............................. 5.1(h)(i)
Competition Laws............................................ 9.1
Computer Systems............................................ 5.1(r)
Confidentiality Agreement................................... 6.14
Contracts................................................... 5.1(d)(ii)
Costs....................................................... 6.12(a)
Current Premium............................................. 6.12(c)
D&O Insurance............................................... 6.12(c)
Delaware Courts............................................. 9.6(a)
DGCL........................................................ 9.1
Effective Time.............................................. 1.3
Environmental Law........................................... 9.1
ERISA....................................................... 9.1
ERISA Affiliate............................................. 9.1
Exchange Act................................................ 9.1
Exchange Agent.............................................. 4.2(a)
Exchange Ratio.............................................. 4.1(a)
Excluded Company Shares..................................... 4.1(a)
GAAP........................................................ 9.1
Governmental Entity......................................... 5.1(d)(i)
Hazardous Substance......................................... 9.1
HSR Act..................................................... 9.1
Indemnified Parties......................................... 6.12(a)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- ---- -----------
<S> <C>
IRS......................................................... 9.1
Laws........................................................ 9.1
Material Adverse Effect..................................... 9.1
Merger...................................................... recitals
Merger Consideration........................................ 4.1(a)
Merger Sub.................................................. preamble
Multi-employer Plan......................................... 5.1(h)(vii)
NYSE........................................................ 4.1(a)
Order....................................................... 7.1(d)
Parent...................................................... preamble
Parent Affiliate's Letter................................... 6.7(a)
Parent Average Price........................................ 4.1(a)
Parent Common Stock......................................... 4.1(a)
Parent Companies............................................ 4.1(a)
Parent Disclosure Letter.................................... 5.2
Parent Preferred Shares..................................... 5.2(b)(i)
Parent Requisite Vote....................................... 5.2(d)(ii)
Parent Stock Plans.......................................... 5.2(b)(i)
Parent Stockholders Meeting................................. 6.4(b)
Parent's Reports............................................ 5.2(e)
PBGC........................................................ 9.1
Pension Plan................................................ 5.1(h)(ii)
Permits..................................................... 9.1
Person...................................................... 9.1
Pooling Affiliates.......................................... 6.7(a)
Pooling Requirements........................................ recitals
Products.................................................... 5.1(q)(iii)
Prospectus/Proxy Statement.................................. 6.3
Rights Agreement............................................ 5.1(b)
Rule 145 Affiliates......................................... 6.7(a)
S-4 Registration Statement.................................. 6.3
SEC......................................................... 9.1
Section 16.................................................. 6.10(c)
Securities Act.............................................. 9.1
Significant Agreements...................................... 9.1
Significant Investees....................................... 9.1
Significant Subsidiaries.................................... 9.1
Stock Option Agreement...................................... recitals
Subsequent Transaction...................................... 6.5(e)
Subsidiary.................................................. 9.1
Substitute Option........................................... 6.10(a)(i)
Superior Proposal........................................... 6.2(a)
Surviving Corporation....................................... 1.1
Takeover Statute............................................ 5.1(j)
Tax......................................................... 9.1
Tax Return.................................................. 9.1
Taxable..................................................... 9.1
Taxes....................................................... 9.1
Termination Date............................................ 8.2
Termination Fee............................................. 8.5(b)
Year 2000 Compliant......................................... 5.1(r)
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
9, 1999, is among PREMARK INTERNATIONAL, INC., a Delaware corporation (the
"Company"), ILLINOIS TOOL WORKS INC., a Delaware corporation ("Parent"), and CS
MERGER SUB INC., a Delaware corporation that is a wholly owned subsidiary of
Parent ("Merger Sub").
RECITALS
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub
and the Company have approved and declared advisable this Agreement and the
merger of Merger Sub with and into the Company (the "Merger") upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the parties intend, by executing and delivering this Agreement, to
adopt a plan of reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and to cause the Merger
to qualify as a "reorganization" as therein defined;
WHEREAS, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests" in accordance with the
requirements of Opinion No. 16 "Business Combinations" of the Accounting
Principles Board of the American Institute of Certified Public Accountants, as
amended and/or interpreted by the rules and regulations of the SEC and
applicable pronouncements by the Financial Accounting Standards Board, the
Emerging Issues Task Force and the American Institute of Certified Public
Accountants (collectively with the rules and regulations of the SEC, the
"Pooling Requirements");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, the Company is entering into a stock
option agreement with Parent, substantially in the form of Exhibit 1 (the "Stock
Option Agreement"), pursuant to which the Company has granted to Parent an
option to purchase shares of common stock of the Company under the terms and
conditions set forth in the Stock Option Agreement; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I.
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of the Company, with all its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger
except as set forth in Article III. The Merger shall have the effects specified
in the DGCL.
1.2. Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago,
Illinois, at 9:00 A.M., local time, on the second business day after the date on
which the last to be fulfilled or waived of the conditions set forth in Article
VII (other than those conditions that by their nature are to be satisfied at the
Closing (which may include the condition set forth in Section 7.1(a)), but
subject to the fulfillment or waiver of those conditions) shall be satisfied or
waived in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and Parent may agree in writing (the
"Closing Date").
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1.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger (the "Certificate of
Merger") to be executed, acknowledged and filed with the Secretary of State of
the State of Delaware as provided in Section 251 of the DGCL. The Merger shall
become effective at the time when the Certificate of Merger has been duly filed
with the Secretary of State of the State of Delaware or such other time as shall
be agreed upon by the parties and set forth in the Certificate of Merger in
accordance with the DGCL (the "Effective Time").
ARTICLE II.
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1. The Certificate of Incorporation. The certificate of incorporation of
Merger Sub as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"), until
duly amended as provided therein or by applicable law.
2.2. The Bylaws. The bylaws of Merger Sub in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation (the "Bylaws"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III.
OFFICERS, DIRECTORS AND MANAGEMENT
3.1. Directors of Surviving Corporation. The directors of Merger Sub at the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Charter and the Bylaws.
3.2. Officers of Surviving Corporation. The officers of the Company at the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Charter and the Bylaws.
ARTICLE IV.
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1. Effect on Capital Stock. At the Effective Time, the Merger shall have
the following effects on the capital stock of the Company and Merger Sub,
without any action on the part of the holder of any capital stock of the Company
or Merger Sub:
(a) Merger Consideration. Each share of common stock, $1.00 par value
per share, of the Company (each a "Company Share" and collectively the
"Company Shares") issued and outstanding immediately prior to the Effective
Time (but not including Company Shares that are owned by Parent, Merger Sub
or any other direct or indirect subsidiary of Parent (collectively, the
"Parent Companies") or Company Shares that are owned by the Company or any
direct or indirect subsidiary of the Company, and in each case not held on
behalf of third parties (collectively, "Excluded Company Shares")), shall
be converted into and become exchangeable for the fraction of a share (the
"Exchange Ratio" or the "Merger Consideration") of Common Stock, $0.01 par
value per share, of Parent ("Parent Common Stock"), equal to:
(i) if the Parent Average Price is equal to or greater than $66.33
but less than or equal to $89.73, the result, calculated to four decimal
places, of $55.00 divided by the Parent Average Price;
(ii) if the Parent Average Price is greater than $89.73 but less
than $101.44, the result, calculated to four decimal places, of
[$55.00 + {.3065 (Parent Average Price - $89.73)}] / Parent Average
Price;
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(iii) if the Parent Average Price is less than $66.33 but greater
than $54.62, the result, calculated to four decimal places, of
[$55.00 - {.4146 ($66.33 - Parent Average Price)}] / Parent Average
Price;
(iv) if the Parent Average Price is greater than or equal to
$101.44, .5776;
(v) if the Parent Average Price is less than or equal to $54.62,
.9181.
The "Parent Average Price" means the average of the closing price per share of
Parent Common Stock on the New York Stock Exchange (the "NYSE"), as reported in
The Wall Street Journal, New York City edition, on the twenty NYSE trading days
ending on the second business day prior to the Closing Date. The Parent Average
Price shall be rounded to the nearest cent.
At the Effective Time, all Company Shares shall no longer be outstanding,
shall be canceled and retired and shall cease to exist, and each certificate (a
"Certificate") formerly representing any of such Company Shares (other than
Excluded Company Shares) shall thereafter represent only the right to the Merger
Consideration in respect of each Company Share formerly represented by such
Certificate multiplied by the number of Company Shares formerly represented by
such Certificate and the right, if any, to receive pursuant to Section 4.2(d)
cash in lieu of the fractional shares into which such Company Shares have been
converted pursuant to this Section 4.1(a) and any distribution or dividend
pursuant to Section 4.2(b), in each case without interest.
(b) Cancellation of Excluded Company Shares. Each Excluded Company
Share issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, no longer be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of Common Stock, par
value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation, and the Surviving Corporation shall
thereby become a wholly owned subsidiary of Parent.
4.2. Exchange of Certificates for Shares.
(a) Exchange Procedures. At or prior to the Effective Time Parent
shall deposit with the Exchange Agent (as defined below), in trust for the
benefit of the holders of Company Shares, certificates representing shares
of Parent Common Stock issuable pursuant to Section 4.1(a), and an amount
of cash sufficient to pay cash in lieu of fractional shares in accordance
with Section 4.2(d). Parent shall make sufficient funds available to the
Exchange Agent from time to time as needed to pay cash in respect of
dividends or other distributions in accordance with Section 4.2(b).
Promptly after the Effective Time, but in no event later than three
business days following the Closing Date, the Surviving Corporation shall
cause an exchange agent (the "Exchange Agent"), selected by Parent with the
Company's prior approval, which shall not be unreasonably withheld, to mail
to each holder of record as of the Effective Time of a Certificate in
respect of Company Shares (other than holders of a Certificate in respect
of Excluded Company Shares) (i) a letter of transmittal specifying that
delivery of the Certificates shall be effected, and that risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates (or affidavits of loss and indemnity undertakings or indemnity
bonds, as the case may be, in lieu thereof) to the Exchange Agent, such
letter of transmittal to be in such form and have such other provisions as
Parent and the Company may reasonably agree, and (ii) instructions for
exchanging the Certificates for (A) certificates representing shares of
Parent Common Stock and (B) any cash in lieu of fractional shares
determined in accordance with Section 4.2(d) plus any cash dividends and
any other dividends or other distributions that such holder has the right
to receive pursuant to the provisions of this Article IV. Subject to
Section 4.2(g), upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of
Parent Common Stock that such holder is entitled to receive pursuant to
this Section 4.2, and (y) a check in the
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amount (after giving effect to any required tax withholdings) of (A) any
cash in lieu of fractional shares determined in accordance with Section
4.2(d) plus (B) any cash dividends and any other dividends or other
distributions that such holder has the right to receive pursuant to the
provisions of this Section 4.2. The Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on any amount
payable upon due surrender of any Certificate. In the event of a transfer
of ownership of Company Shares that occurred prior to the Effective Time,
but is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock, together
with a check for any cash in lieu of fractional shares to be paid upon due
surrender of the Certificate and any other dividends or distributions in
respect thereof, may be issued and/or paid to such a transferee if the
Certificate formerly representing such Company Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid. If any certificate for shares of Parent Common Stock
is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the Person requesting such exchange shall pay any
transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of Parent or the Exchange Agent that such tax has been paid or
is not applicable.
(b) Distributions with Respect to Unexchanged Shares; Voting.
(i) Whenever a dividend or other distribution is declared by Parent
in respect of Parent Common Stock, the record date for which is at or
after the Effective Time, that declaration shall include dividends or
other distributions in respect of all shares of Parent Common Stock
issuable pursuant to this Agreement. No dividends or other distributions
so declared in respect of such Parent Common Stock shall be paid to any
holder of any unsurrendered Certificate until such Certificate is
surrendered for exchange in accordance with this Section 4.2. Subject to
the effect of applicable laws, following surrender of any such
Certificate, there shall be issued or paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in
exchange for such Certificate, without interest, (A) at the time of such
surrender, the dividends or other distributions with a record date that
is at or after the Effective Time and a payment date on or prior to the
date of issuance of such whole shares of Parent Common Stock and not
previously paid and (B) at the appropriate payment date, the dividends
or other distributions payable with respect to such whole shares of
Parent Common Stock with a record date at or after the Effective Time
but with a payment date subsequent to surrender. For purposes of
dividends or other distributions in respect of shares of Parent Common
Stock, all shares of Parent Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time.
(ii) Registered holders of unsurrendered Certificates shall be
entitled to vote after the Effective Time at any meeting of Parent
stockholders with a record date at or after the Effective Time the
number of whole shares of Parent Common Stock represented by such
Certificates, regardless of whether such holders have exchanged their
Certificates.
(c) Transfers. After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the Company Shares that were
outstanding immediately prior to the Effective Time.
(d) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and
any holder of Company Shares entitled to receive a fractional share of
Parent Common Stock but for this Section 4.2(d) shall be entitled to
receive in lieu thereof an amount in cash (without interest) determined by
multiplying such fraction (rounded to the nearest one-hundredth of a share)
by the average closing price of a share of Parent Common Stock, as reported
in The Wall Street Journal, New York City edition, on the five (5) trading
days immediately prior to the Effective Time.
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(e) Termination of Exchange Period; Unclaimed Stock. Any shares of
Parent Common Stock and any portion of the cash, dividends or other
distributions with respect to the Parent Common Stock deposited by Parent
with the Exchange Agent (including the proceeds of any investments thereof)
that remain unclaimed by the stockholders of the Company 180 days after the
Effective Time shall be paid to Parent. Any stockholders of the Company who
have not theretofore complied with this Article IV shall thereafter be
entitled to look only to Parent for payment of their shares of Parent
Common Stock and any cash, dividends and other distributions in respect
thereof issuable and/or payable pursuant to Section 4.1, Section 4.2(b) and
Section 4.2(d) upon due surrender of their Certificates (or, in lieu of
such Certificates, affidavits of loss together with either a reasonable
undertaking to indemnify Parent or the Company, if Parent believes that the
person providing the indemnity is sufficiently creditworthy, or, if Parent
does not so believe, indemnity bonds), in each case, without any interest
thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of Company Shares for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or
similar laws.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Certificate to be
lost, stolen or destroyed and if Parent believes that the person providing
the indemnity is sufficiently creditworthy, the making of a reasonable
undertaking to indemnify Parent or the Company, or, if Parent does not so
believe, the posting by such Person of a bond in the form customarily
required by Parent to indemnify against any claim that may be made against
it with respect to such Certificate, Parent will issue the shares of Parent
Common Stock and the Exchange Agent will distribute such stock, any cash,
dividends and other distributions in respect thereof issuable or payable in
exchange for such lost, stolen or destroyed Certificate pursuant to Section
4.1, Section 4.2(b) and Section 4.2(d), in each case, without interest.
(g) Affiliates. Notwithstanding anything in this Agreement to the
contrary, Certificates surrendered for exchange by any Pooling Affiliate or
Rule 145 Affiliate (as determined pursuant to Section 6.7) of the Company
shall not be exchanged until Parent has received a written agreement from
such Person as provided in Section 6.7.
4.3. Dissenters' Rights. The parties hereto agree that, in accordance with
Section 262 of the DGCL, no appraisal rights will be available to holders of
Company Shares in connection with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that prior to the
Effective Time, there shall have been declared or effected a reclassification,
stock split (including a reverse split), or stock dividend or stock distribution
made with respect to the Company Shares or the Parent Common Stock, or a stock
dividend or stock distribution or any similar transaction relating to the
Company Shares or the Parent Common Stock, the Exchange Ratio shall be equitably
adjusted to reflect such event.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. Except as set forth in
the disclosure letter, dated the date of this Agreement, delivered by the
Company to Parent (the "Company Disclosure Letter") or in the Company's Reports
(as defined below) filed after December 31, 1996 but prior to the date of this
Agreement, the Company represents and warrants to Parent and Merger Sub that:
(a) Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority
to own and operate its properties and assets and to carry on its business
as presently conducted and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership
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or operation of its properties or conduct of its business requires such
qualification, except where the failure to have such power and authority or
to be so qualified or in good standing is not, when taken together with all
other such failures, reasonably likely to have a Material Adverse Effect
(as defined below) on it. The Company has made available to Parent a
complete and correct copy of its certificate of incorporation and bylaws,
each as amended to date. Such certificate of incorporation and bylaws are
in full force and effect.
(b) Capital Structure. The authorized capital stock of the Company
consists of 200,000,000 Company Shares, of which 61,325,093 Company Shares
were issued and outstanding and 7,678,747 Company Shares were held in
treasury as of the close of business on September 7, 1999, and 50,000,000
shares of Preferred Stock, $1.00 par value per share (the "Company
Preferred Shares"), none of which was outstanding as of the date hereof.
All of the outstanding Company Shares have been duly authorized and are
validly issued, fully paid and nonassessable. Other than the 1,000,000
Company Preferred Shares designated as Series A Junior Participating
Preferred Stock that are reserved for issuance pursuant to the Rights
Agreement, dated as of November 6, 1996, by and between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights Agreement"), and
Company Shares subject to issuance as set forth below or that are permitted
to become subject to issuance pursuant to Section 6.1(a)(iv) or (vii) of
this Agreement, the Company has no Company Shares, Company Preferred Shares
or other shares of capital stock reserved for or otherwise subject to
issuance. As of the date of this Agreement, the Company has outstanding
$150,000,000 aggregate principal amount of 6.875% notes due 2008,
$100,000,000 aggregate principal amount of 10.5% notes due 2000 and
$2,600,000 aggregate principal amount of 5.95% industrial revenue bonds due
2002. As of September 7, 1999, there were 7,069,414 Company Shares that the
Company was obligated to issue pursuant to the Company's stock plans at a
weighted average exercise price of $18.20 per Company Share, each of which
plans is listed in Section 5.1(b) of the Company Disclosure Letter
(collectively the "Company Stock Plans"). Each of the outstanding shares of
capital stock or other securities of each of the Company's Significant
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or a direct or indirect wholly owned
Subsidiary of the Company, free and clear of any lien, pledge, security
interest, claim or other encumbrance, except for such failures or
exceptions to the foregoing as are not reasonably likely to have a Material
Adverse Effect on the Company. Except as set forth above and except
pursuant to the Stock Option Agreement, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments granted by or enforceable against the Company
or any of its Significant Subsidiaries to issue or sell any shares of
capital stock, other securities of the Company or any of its Subsidiaries
or a material amount of assets of the Company or any of its Significant
Subsidiaries other than (in the case of assets) in the ordinary course of
business or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or
acquire, any shares of capital stock, other securities or material amount
of assets of the Company or any of its Significant Subsidiaries, and no
securities or obligations evidencing such rights are issued or outstanding.
Neither the Company nor any of its Subsidiaries has outstanding any bonds,
debentures, notes or other debt obligations the holders of which have the
right to vote with the stockholders of the Company on any matter or
convertible into or exercisable for securities having the right to vote
with the stockholders of the Company on any matter. The Company Shares
issuable pursuant to the Stock Option Agreement have been duly reserved for
issuance by the Company, and upon any issuance of such Company Shares in
accordance with the terms of the Stock Option Agreement, such Company
Shares will be duly and validly issued and fully paid and nonassessable. No
Company Shares are held by a Subsidiary of the Company.
(c) Corporate Authority; Approval and Fairness. The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under
this Agreement and the Stock Option Agreement and, subject only to adoption
of this Agreement by the holders of at least a majority of the outstanding
Company Shares (the "Company Requisite Vote") to consummate the Merger.
This Agreement has been duly
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executed and delivered by the Company and is a valid and binding agreement
of the Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles
(the "Bankruptcy and Equity Exception"). The Stock Option Agreement has
been duly executed and delivered by the Company and is a valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms, subject to the Bankruptcy and Equity Exception. The Board of
Directors of the Company (A) has approved and declared advisable this
Agreement, the Stock Option Agreement and the Merger and (B) has received
the opinion of its financial advisors, Goldman, Sachs & Co., to the effect
that the Merger Consideration to be received by the holders of the Company
Shares in the Merger is fair to such holders from a financial point of
view.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section
1.3, (B) under the HSR Act, the Exchange Act and the Securities Act, (C)
pursuant to the European Community Merger Control Regulation, (D) to
comply with state securities or "blue-sky" laws and (E) to comply with
any other relevant Competition Laws (as defined below), no notices,
reports or other filings are required to be made by the Company with,
nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any
governmental or regulatory authority, court, agency, commission, body or
other governmental entity ("Governmental Entity"), in connection with
the execution and delivery of this Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the
Merger and the other transactions contemplated by this Agreement and the
Stock Option Agreement, except those the failure to make or obtain,
individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on the Company and those that to the knowledge
of the Company's executive officers, as of the date hereof, would not be
reasonably likely to prevent, materially delay or materially impair the
Company's ability to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
(ii) The execution, delivery and performance of this Agreement and
the Stock Option Agreement by the Company do not, and the consummation
by the Company of the Merger and the other transactions contemplated by
this Agreement and the Stock Option Agreement will not, constitute or
result in (A) a breach or violation of, or a default under, the
Company's certificate of incorporation or bylaws or the comparable
governing instruments of any of the Company's Significant Investees or
(B) a breach or violation of, a default under, or give rise to a right
of termination under, the acceleration of any obligations or the
creation of a lien, pledge, security interest or other encumbrance on
its assets or the assets of any of the Company's Significant Investees
(with or without notice, lapse of time or both) pursuant to, any
agreement, license, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") binding upon the Company
or any of its Significant Investees or any Law (as defined in Section
5.1(i)) or governmental or non-governmental permit or license to which
the Company or any of its Significant Investees are subject or (C) any
change in the rights or obligations of any party under any Contracts to
which the Company or its Significant Investees are a party, except, in
the case of clauses (B) or (C) above, for any breach, violation,
default, right of termination, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect on the Company and that to the knowledge of the
Company's executive officers, as of the date hereof, would not be
reasonably likely to prevent, materially delay or materially impair the
Company's ability to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
(e) Reports; Financial Statements. The Company has filed with the SEC
all required forms, reports, registration statements and documents required
to be filed by it with the SEC since December 31, 1996. The Company has
made or will make available to Parent each registration statement, report,
proxy statement or information statement prepared by the Company since
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December 31, 1996, including the Company's Annual Report on Form 10-K for
the years ended December 28, 1996, December 27, 1997 and December 26, 1998
and the Company's Quarterly Report on Form 10-Q for the quarters ended
March 27, 1999 and June 26, 1999 in the form (including exhibits, annexes
and any amendments thereto) filed with the SEC (collectively, including any
such reports filed subsequent to the date of this Agreement, the "Company's
Reports"). As of their respective dates, the Company's Reports complied as
to form in all material respects with all applicable requirements under the
Securities Act, the Exchange Act and the rules and regulations thereunder
and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they
were made, not misleading. Each of the consolidated balance sheets included
in or incorporated by reference into the Company's Reports (including the
related notes and schedules) fairly presents the consolidated financial
position of the Company and its consolidated Subsidiaries as of its date
and each of the consolidated statements of income, stockholders' equity and
of cash flows included in or incorporated by reference into the Company's
Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as
the case may be, of the Company and its consolidated Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
the absence of notes (to the extent permitted by the rules applicable to
Form 10-Q) and to normal year-end audit adjustments that will not be
material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted
therein. Except as set forth in Section 5.1(e) of the Company Disclosure
Letter or except as may be reflected in any public filing made prior to the
date of this Agreement with the SEC under Section 13 of the Exchange Act
and the regulations promulgated thereunder, to the Company's knowledge, as
of the date of this Agreement, no Person or "group" "beneficially owns" 5%
or more of the Company's outstanding voting securities, with the terms
"beneficially owns" and "group" having the meanings ascribed to them under
Rule 13d-3 and Rule 13d-5 under the Exchange Act.
(f) Absence of Certain Changes. Except as disclosed in the Company's
Reports filed prior to the date of this Agreement or as expressly
contemplated by this Agreement, since December 26, 1998 (the "Audit Date"),
the Company and its Subsidiaries have conducted their respective businesses
only in the ordinary and usual course of such businesses and there has not
been: (i) any change in the financial condition, liabilities and assets
(taken together) or business of the Company and its Subsidiaries which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company; (ii) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or
otherwise used by the Company or any of its Subsidiaries, whether or not
covered by insurance, which damage, destruction or loss is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on the Company; (iii) any declaration, setting aside or payment of any
dividend or other distribution in respect of the Company's capital stock
other than regular quarterly cash dividends not in excess of $.11 per
Common Share; or (iv) any material change by the Company in financial
accounting principles, practices or methods, except as required by GAAP.
Since the Audit Date, except as provided for in this Agreement, in the
Company Disclosure Letter or as disclosed in the Company's Reports filed
prior to the date of this Agreement and except for increases and amendments
that are not material in the aggregate, there has not been any increase in
the salary, wage, bonus, grants, awards, benefits or other compensation
payable or that could become payable by the Company or any of its
Subsidiaries to directors, officers or key employees or any amendment of
any of the Company's Compensation and Benefit Plans (as defined in Section
5.1(h)(i)) other than increases or amendments in the normal and usual
course of the Company's business (which may include normal periodic
performance reviews and related compensation and benefit increases and the
provision of new individual compensation and benefits for promoted or newly
hired officers and employees on terms consistent with past practice).
(g) Litigation and Liabilities. Except as disclosed in the Company's
Reports filed prior to the date of this Agreement, there are no (i) civil,
criminal or administrative actions, suits, claims,
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hearings, investigations or proceedings pending or, to the actual knowledge
of the Company's executive officers, threatened against the Company or any
of its Affiliates or (ii) obligations or liabilities of the Company or any
of its Subsidiaries, whether or not accrued, contingent or otherwise and
whether or not required to be disclosed, including those relating to
matters involving any Environmental Law, in either such case, except for
those that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on the Company and that to the knowledge of
the Company's executive officers, as of the date hereof, would not be
reasonably likely to prevent, materially delay or materially impair the
Company's ability to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
(h) Employee Benefits.
(i) The term "Compensation and Benefit Plans" means any employee
benefit plan (within the meaning of Section 3(3) of ERISA), or any
bonus, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, incentive compensation, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment,
consulting, termination, severance, compensation, medical, health or
fringe benefit plan, program, agreement, policy or arrangement for any
agents, consultants, employees, directors, former employees or former
directors of the Company and/or any ERISA Affiliate which the Company or
any ERISA Affiliate maintains, is a party to, participates in or with
respect to which any of them has any liability or contingent liability.
The Company has delivered to Parent copies of certain plan documents and
summary plan descriptions for certain Compensation and Benefit Plans,
and such copies are, to the knowledge of the Company's executive
officers, true and complete in all material respects.
(ii) (A) All Compensation and Benefit Plans have been administered
in form and operation in substantial compliance with all requirements of
applicable law, and no event has occurred which will or could cause any
such Compensation and Benefit Plan to fail to comply with such
requirements and no notice has been issued by any governmental authority
questioning or challenging such compliance; (B) there have been no acts
or omissions by the Company or any ERISA Affiliate which have given rise
to or may give rise to material fines, penalties, taxes or related
charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the
Code for which the Company or ERISA Affiliate may be liable; (C) each of
the Compensation and Benefit Plans that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA, other than a
multiemployer plan (as defined in Section 3(37) of ERISA) (each a
"Pension Plan"), and that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from
the IRS or an application therefor filed within the applicable remedial
amendment period is pending which covers all changes in law for which
the remedial amendment period (within the meaning of Section 401(b) of
the Code and applicable regulations) has expired and none of the Company
nor any of its ERISA Affiliates is aware of any circumstances likely to
result in revocation of any such favorable determination letter; (D)
there is no pending or, to the knowledge of the Company's executive
officers, threatened material litigation relating to its Compensation
and Benefit Plans; and (E) neither the Company nor any of the ERISA
Affiliates has engaged in a transaction with respect to any of the
Compensation and Benefit Plans that would subject the Company or any of
the ERISA Affiliates to a material tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA.
(iii) All contributions required to be made under the terms of any
of the Compensation and Benefit Plans as of the date of this Agreement
have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the
Company's Reports prior to the date of this Agreement.
(iv) None of the Company nor any ERISA Affiliate has any obligation
for post-employment health and life benefits under any of the
Compensation and Benefit Plans, except as set forth in its Reports filed
prior to the date of this Agreement or as required by applicable law
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or as may be provided under individual employment or severance
agreements which in the aggregate do not require the Company to provide
benefits, the cost of which is material to the Company.
(v) The consummation of the Merger (or the approval of the Merger
by stockholders of the Company) and the other transactions contemplated
by this Agreement does not (x) entitle any employees or directors of the
Company or any employees of any of the Company's ERISA Affiliates to
severance pay, directly or indirectly, upon termination of employment or
otherwise, (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable
or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or (z) result in any breach or violation
of, or a default under, any of the Compensation and Benefit Plans.
(vi) In each summary plan description and plan document relating to
a Compensation and Benefits Plan that is not an individual agreement,
the Company has reserved the right unilaterally to amend or terminate
such plan, and to the knowledge of the Company's executive officers as
of the date hereof, the Company has not distributed any other documents
to participants generally or issued any general communication that
purports to promise that any such plan will be continued indefinitely or
otherwise obligates the Company to provide a specific level of benefits
in the future, except under the terms of a collective bargaining
agreement, a change-in-control provision that has been disclosed to
Parent prior to the date of this Agreement or an individual agreement
that has been disclosed to Parent prior to the date of this Agreement,
or except as may be required by a statutory provision requiring the
continuation of certain benefits or requiring that certain steps be
taken, such as notification to affected participants, before a plan
amendment or termination can be effective.
(vii) None of the Compensation and Benefit Plans is a
"multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA
that is subject to Title IV of ERISA (a "Multi-employer Plan"), none of
the Compensation and Benefit Plans is otherwise subject to Title IV of
ERISA and none of the Company or any of the ERISA Affiliates have
contributed or been obligated to contribute to a Multiemployer Plan or
any other plan which is subject to Title IV of ERISA.
(i) Compliance with Laws. Except as set forth in the Company's Reports
filed prior to the date of this Agreement, the businesses of each of the
Company and its Subsidiaries have not been, and are not being, conducted in
violation of any Laws except for violations or possible violations that,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on the Company or that to the knowledge of the Company's
executive officers, as of the date hereof, would be reasonably likely to
prevent, materially delay or materially impair the Company's ability to
consummate the transactions contemplated by this Agreement and the Stock
Option Agreement. Except as set forth in the Company's Reports filed prior
to the date of this Agreement, to the actual knowledge of the Company's
executive officers, no investigation or review by any Governmental Entity
with respect to the Company or any of its Subsidiaries is pending or
threatened, nor has any Governmental Entity indicated an intention to
conduct the same, which, individually or in the aggregate, are reasonably
likely to have a Material Adverse Effect on the Company or to the knowledge
of the Company's executive officers, as of the date hereof, would be
reasonably likely to prevent, materially delay or materially impair the
Company's ability to consummate the transactions contemplated by this
Agreement and the Stock Option Agreement. To the actual knowledge of the
Company's executive officers, no material change is required in the
Company's or any of its Subsidiaries' processes, properties or procedures
in order to comply with any such Laws, and the Company has not received any
written notice or written communication of any material noncompliance with
any such Laws that has not been cured as of the date of this Agreement,
except for changes and noncompliance that individually or in the aggregate,
are not reasonably likely to have a Material Adverse Effect on the Company
and that to the knowledge of the Company's executive
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officers, as of the date hereof, would not be reasonably likely to prevent,
materially delay or materially impair the Company's ability to consummate
the transactions contemplated by this Agreement and the Stock Option
Agreement. Each of the Company and its Subsidiaries has all Permits
necessary to conduct their business as presently conducted, except for
those the absence of which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on the Company and that
to the knowledge of the Company's executive officers, as of the date
hereof, would not be reasonably likely to prevent, materially delay or
materially impair the Company's ability to consummate the transactions
contemplated by this Agreement and the Stock Option Agreement.
(j) Takeover Statutes; Charter and Bylaw Provisions. The Board of
Directors of the Company has taken all appropriate and necessary actions to
render inapplicable to the Merger and the transactions contemplated by this
Agreement the provisions of Section 203 of the DGCL. No other "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation of any state in the United States (each a "Takeover
Statute") as in effect on the date of this Agreement is applicable to the
Company, the Company Shares, the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreement. Assuming that
Parent and its Affiliates were not, at or prior to the date of this
Agreement (without giving effect to the Stock Option Agreement),
"Interested Stockholders" within the meaning of Article EIGHTH, Section
B(2)(vii)(2) of the Company's certificate of incorporation, the Company's
Board of Directors has taken such action as is necessary to render Article
EIGHTH, Section A of the Company's certificate of incorporation
inapplicable to the Merger or the other transactions contemplated by this
Agreement or the Stock Option Agreement. Article NINTH of the Company's
certificate of incorporation has expired in accordance with its terms.
(k) Environmental Matters. Except as disclosed or reflected in the
Company's Reports filed prior to the date of this Agreement and except for
such matters that, alone or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on the Company: (i) each of the Company and
its Subsidiaries has complied with all applicable Environmental Laws; (ii)
neither the Company nor any of its Subsidiaries has received any notice,
demand, letter, claim or request for information alleging that the Company
or any of its Subsidiaries may be in violation of or liable under any
Environmental Law; (iii) neither the Company nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with
any third party relating to liability under any Environmental Law or
relating to Hazardous Substances; and (iv) there are no circumstances or
conditions involving the Company or any of its Subsidiaries that could
reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use, or transfer of any of the
Company's properties pursuant to any Environmental Law.
(l) Accounting and Tax Matters. Neither the Company nor any of its
Subsidiaries or Pooling Affiliates (as defined in Section 6.7) has taken or
agreed to take any action, nor do the Company's executive officers have any
actual knowledge of any fact or circumstance, that would prevent Parent
from accounting for the business combination to be effected by the Merger
as a "pooling-of-interests" in accordance with the Pooling Requirements or
prevent the Merger from qualifying as a "reorganization" within the meaning
of Section 368(a) of the Code.
(m) Taxes. Except to the extent of any inaccuracy or incompleteness of
any of the following which is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company, (i) the
Company and each of its Subsidiaries have prepared or will prepare in good
faith and duly and timely filed (taking into account any extension of time
within which to file), or will so file, all material Tax Returns required
to be filed by any of them at or before the Effective Time and all such
filed Tax Returns are or will be complete and accurate, (ii) the Company
and each of its Subsidiaries as of the Effective Time (x) will have paid
all Taxes that they are required to pay prior to the Effective Time, and
(y) will have withheld all federal, state and local income taxes, FICA,
FUTA and other Taxes, including, without limitation, similar foreign Taxes,
required to be withheld from amounts owing to any employee, creditor or
third party, (iii) as of the date of this
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Agreement, there are not pending or threatened in writing, any audits,
examinations, investigations or other proceedings in respect of Taxes or
Tax matters, (iv) there are not, to the actual knowledge of the Company's
executive officers, any unresolved questions, claims or outstanding
proposed or assessed deficiencies concerning the Company or any of its
Subsidiaries' Tax liability, (v) neither the Company nor any of its
Subsidiaries has any liability with respect to income, franchise or similar
Taxes in excess of the amounts accrued in respect of such Taxes that are
reflected in the financial statements included in the Company's Reports and
(vi) neither the Company nor any of its Subsidiaries has executed any
waiver of any statute of limitations on, or extended the period for the
assessment or collection of, any Tax. No payments to be made to any of the
officers and employees of the Company or its Subsidiaries will, as a result
of consummation of the Merger, be subject to the deduction limitations
under Sections 280G or 162(m) of the Code.
(n) Labor Matters. Neither the Company nor any of its Subsidiaries is
the subject of any material proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to
compel the Company to bargain with any labor union or labor organization
nor is there pending or, to the knowledge of the Company's executive
officers, threatened, any labor strike, dispute, walkout, work stoppage,
slow down or lockout involving the Company or any of its Subsidiaries,
except in each case as is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the Company.
(o) Brokers and Finders; Professional Expenses. Neither the Company
nor any of its officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the Merger or the other transactions
contemplated by this Agreement except that the Company has employed
Goldman, Sachs & Co. as the Company's financial advisor. The calculation of
the amount payable to Goldman, Sachs & Co. in connection with this
Agreement, including the Merger and the other transactions contemplated by
this Agreement, is disclosed in Section 5.1(o) of the Company Disclosure
Letter and true and complete copies of all engagement letters and other
Contracts relating to currently active assignments under which Goldman,
Sachs & Co. may be entitled to any engagement, assignment, fees, expense
reimbursement, indemnification or other payment from the Company or any of
its Subsidiaries are attached to the Company Disclosure Letter.
(p) Significant Agreements. Each of the Significant Agreements is in
full force and effect and enforceable in accordance with its terms, except
as would not reasonably be expected to have a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries has received
any notice (written or oral) of cancellation or termination of, or any
expression or indication of an intention or desire to cancel or terminate,
any of the Significant Agreements, except as would not reasonably be
expected to have a Material Adverse Effect on the Company. No Significant
Agreement is the subject of, or has been threatened to be made the subject
of, any arbitration, suit or other legal proceeding, except as would not
reasonably be expected to have a Material Adverse Effect on the Company.
With respect to any Significant Agreement which by its terms will terminate
as of a certain date unless renewed or unless an option to extend such
Significant Agreement is exercised, neither the Company nor any of its
Subsidiaries has received any notice (written or oral), or otherwise has
any knowledge, that any such Significant Agreement will not be, or is not
likely to be, so renewed or that any such extension option will not be
exercised, except as would not reasonably be expected to have a Material
Adverse Effect on the Company. There exists no event of default or
occurrence, condition or act on the part of the Company or any of its
Subsidiaries or, to the knowledge of the Company, on the part of the other
parties to the Significant Agreements which constitutes or would constitute
(with notice or lapse of time or both) a breach of or default under any of
the Significant Agreements, except as would not reasonably be expected to
have a Material Adverse Effect on the Company. Neither the Company nor any
of its Subsidiaries is a party to or otherwise bound by any Contract
purporting to limit the Company or any of its Affiliates from engaging in
any business or from competing with any Person in any business, except as
would not reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor
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any of its Subsidiaries is a party to or otherwise bound by any Contract
purporting to limit any direct or indirect shareholder or parent company of
the Company (or any Subsidiary of any direct or indirect shareholder or
parent company of the Company, other than the Company or any Subsidiary of
the Company) from engaging in any business or from competing with any
Person in any business except as would not have a Material Adverse Effect
on Parent.
(q) Intellectual Property Rights. Except as would not have a Material
Adverse Effect on the Company:
(i) The Company and its Subsidiaries own or have the right to use
all intellectual property material to the conduct of their respective
businesses (such intellectual property and such rights are collectively
referred to herein as the "Company IP Rights").
(ii) The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby will not (A) constitute a breach by the Company or
any of its Subsidiaries of any instrument or agreement governing any
Company IP Rights, (B) cause the modification of any terms of any
licenses or agreements relating to any Company IP Rights including but
not limited to the modification of the effective rate of any royalties
or other payments provided for in any such license or agreement, (C)
cause the forfeiture or termination of any Company IP Rights, (D) give
rise to a right of forfeiture or termination of any Company IP Rights or
(E) impair the right of the Company, its Subsidiaries, the Surviving
Corporation or Parent to use, sell or license any Company IP Rights or
portion thereof.
(iii) Neither the manufacture, marketing, license, sale or intended
use of any product or product under development (collectively,
"Products") by the Company and its Subsidiaries nor the current use by
the Company and its Subsidiaries of any Company IP Rights, (A) violates
any license or agreement between the Company or any of its Subsidiaries
and any third party or (B) infringes any patents or other intellectual
property rights of any other party; and there is no pending or
threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Company IP Rights, or
asserting that any Company IP Rights or the proposed use, sale, license
or disposition thereof, or the manufacture, use or sale of any Products,
conflicts or will conflict with the rights of any other party.
(r) Year 2000 Compliance. The Company has instituted processes and
controls to become Year 2000 Compliant, as that term is defined below, and
the foreseeable expenses or other liabilities associated with the process
of securing full Year 2000 Compliance would not be reasonably expected to
cause a Material Adverse Effect on the Company. Upon completion of such
instituted processes and controls the Company's Computer Systems will be
Year 2000 Compliant. "Year 2000 Compliant" means, except for any
noncompliance that, individually or in the aggregate would not be
reasonably likely to have a Material Adverse Effect on the Company, that
such hardware or software used, by the Company or any of its Subsidiaries
including, but not limited to, microcode, firmware, system and application
programs, files, databases, computer services, and microcontrollers,
including those embedded in computer and non-computer equipment (the
"Computer Systems") will not fail (because of a date change event resulting
from a transition to the Year 2000) to:
(i) process date data consistently from before and after January 1,
2000;
(ii) maintain functionality with respect to the introduction,
processing, or output of records containing dates falling on or after
January 1, 2000; and
(iii) be interoperable with other Year 2000 Compliant software or
hardware which may deliver records to, receive records from, or interact
with such Computer Systems in the course of conducting the business of
the Company, including processing data and manufacturing the products of
the Company.
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(s) Rights Agreement. The Company has adopted an amendment to the
Rights Agreement with the effect that neither Parent nor Merger Sub shall
be deemed to be an Acquiring Person (as defined in the Rights Agreement),
the Distribution Date (as defined in the Rights Agreement) shall not be
deemed to occur and the Rights (as defined in the Rights Agreement) will
not separate from the Company Shares, as a result of entering into this
Agreement or the Stock Option Agreement or consummating the Merger and/or
the other transactions contemplated by this Agreement or the Stock Option
Agreement.
5.2. Representations and Warranties of Parent and Merger Sub. Except as set
forth in the disclosure letter, dated the date of this Agreement, delivered by
Parent to the Company (the "Parent Disclosure Letter") or in Parent's Reports
filed after December 31, 1996 but prior to the date of this Agreement, Parent,
on behalf of itself and Merger Sub, represents and warrants to the Company that:
(a) Organization, Good Standing and Qualification. Each of Parent and
its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization
and has all requisite corporate or similar power and authority to own and
operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation
of its properties or conduct of its business requires such qualification,
except where the failure to have such power and authority or to be so
qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect on it.
Parent has made available to Company a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to date. Such
certificates of incorporation and bylaws are in full force and effect.
(b) Capital Structure.
(i) The authorized capital stock of Parent consists of 350,000,000
shares of Parent Common Stock, of which 250,637,386 shares were issued
and outstanding and 260,536 shares were held in treasury as of the close
of business on September 7, 1999, and 300,000 shares of Preferred Stock,
no par value (the "Parent Preferred Shares"), of which no shares were
outstanding as of the date hereof. All of the outstanding shares of
Parent Common Stock have been duly authorized and are validly issued,
fully paid and nonassessable. As of the date of this Agreement, other
than Parent Common Stock subject to issuance as set forth below, Parent
has no shares of Parent Common Stock or Parent Preferred Shares reserved
for or subject to issuance. As of September 7, 1999, there were not more
than 5,344,999 shares of Parent Common Stock that Parent was obligated
to issue pursuant to the Parent's stock plans, each of which plans is
listed in Section 5.2(b) of the Parent Disclosure Letter (collectively,
the "Parent Stock Plans"). Except as set forth above, as of the date of
this Agreement, there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or to sell any shares of capital stock or other
securities of Parent or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any securities of Parent, and no securities or
obligation evidencing such rights are authorized, issued or outstanding.
As of the date of this Agreement, Parent does not have outstanding any
bonds, debentures, notes or other debt obligations the holders of which
have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of Parent on
any matter.
(ii) The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, par value $0.01 per share, all of which are
validly issued and outstanding. All of the issued and outstanding
capital stock of Merger Sub is, and at the Effective Time will be, owned
by Parent, and there are (A) no other shares of capital stock or other
voting securities of Merger Sub, (B) no securities of Merger Sub
convertible into or exchangeable for shares of capital stock or other
voting securities of Merger Sub and (C) no options or other rights to
acquire from Merger
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Sub, and no obligations of Merger Sub to issue, any capital stock, other
voting securities or securities convertible into or exchangeable for
capital stock or other voting securities of Merger Sub. Merger Sub has
not conducted any business prior to the date of this Agreement and has
no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement.
(c) Corporate Authority; Approval. Parent and Merger Sub each has all
requisite corporate power and authority and each has taken all corporate
action necessary in order to execute, deliver and perform its obligations
under this Agreement and to consummate the Merger. This Agreement has been
duly executed and delivered by Parent and Merger Sub and is a valid and
binding agreement of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, subject to the
Bankruptcy and Equity Exception. The shares of Parent Common Stock, when
issued pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and no stockholder of Parent will have any preemptive right
of subscription or purchase in respect thereof.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section
1.3, (B) under the HSR Act, the Exchange Act and the Securities Act, (C)
pursuant to the European Community Merger Control Regulation, (D) to
comply with state securities or "blue-sky" laws and (E) to comply with
any other relevant Competition Laws, no notices, reports or other
filings are required to be made by Parent with, nor are any consents,
registrations, approvals, permits or authorizations required to be
obtained by Parent from, any Governmental Entity, in connection with the
execution and delivery of this Agreement and the Stock Option Agreement
by Parent and the consummation by Parent of the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement, except those that the failure to make or obtain, individually
or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on Parent and that to the knowledge of Parent's executive
officers, as of the date hereof, would not be reasonably likely to
prevent, materially delay or materially impair Parent's ability to
consummate the transactions contemplated by this Agreement or the Stock
Option Agreement.
(ii) The execution, delivery and performance of this Agreement and
the Stock Option Agreement by Parent do not, and the consummation by
Parent of the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement will not, constitute or result
in (A) a breach or violation of, or a default under, Parent's
certificate of incorporation or bylaws or the comparable governing
instruments of any of Parent or its Significant Subsidiaries or any
Significant Investees or (B) subject to the approval of the issuance of
the aggregate Merger Consideration by a majority of the stockholders of
Parent voting thereon at the Parent Stockholders Meeting (as defined in
Section 6.4(b) (the "Parent Requisite Vote"), if applicable, a breach or
violation of, a default under or give rise to a right of termination
under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on its assets or the
assets of any of Parent or its Significant Investees (with or without
notice, lapse of time or both) pursuant to, any Contracts binding upon
Parent or any of its Significant Investees or any Law or governmental or
non-governmental permit or license to which Parent or any of its
Significant Investees is subject or (C) any change in the rights or
obligations of any party under any Contracts to which Parent or its
Significant Investees are a party, except, in the case of clauses (B) or
(C) above, for any breach, violation, default, acceleration, creation or
change that, individually or in the aggregate, is not reasonably likely
to have a Material Adverse Effect on Parent and that to the knowledge of
Parent's executive officers, as of the date hereof, would not be
reasonably likely to prevent, materially delay or materially impair
Parent's ability to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
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(e) Reports; Financial Statements. Parent has made or will make
available to the Company each registration statement, report, proxy
statement or information statement prepared by Parent since December 31,
1996, including Parent's Annual Report on Form 10-K for the years ended
December 31, 1996, December 31, 1997 and December 31, 1998 and Parent's
Quarterly Report on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999 in the form (including exhibits, annexes and any amendments
thereto) filed with the SEC (collectively, including any such reports filed
subsequent to the date of this Agreement, "Parent's Reports"). As of their
respective dates, Parent's Reports complied as to form in all material
respects with all applicable requirements under the Securities Act, the
Exchange Act and the rules and regulations thereunder and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading. Each of the consolidated balance sheets included in or
incorporated by reference into Parent's Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
Parent and its consolidated Subsidiaries as of its date and each of the
consolidated statements of income, stockholders' equity and cash flows
included in or incorporated by reference into Parent's Reports (including
any related notes and schedules) fairly presents the consolidated results
of operations, statement of shareholders' investment and cash flows, as the
case may be, of Parent and its consolidated Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to the
absence of notes (to the extent permitted by the rules applicable to Form
10-Q) and to normal year-end audit adjustments that will not be material in
amount or effect), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein.
(f) Absence of Certain Changes. Except as disclosed in the Parent's
Reports filed prior to the date of this Agreement or as expressly
contemplated by this Agreement, since December 31, 1998, there has not
been: (i) any change in the financial condition, liabilities and assets
(taken together) or business of Parent and its Subsidiaries which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Parent; or (ii) any declaration, setting aside or payment
of any dividend or other distribution in respect of Parent's capital stock
other than regular quarterly cash dividends consistent with past practice
and other than any dividend that would be received by the holders of
Company Common Stock on an equivalent basis per share of Parent Common
Stock after the Effective Time.
(g) Accounting and Tax Matters. Neither Parent nor any of its
Subsidiaries or Pooling Affiliates (as defined in Section 6.7) has taken or
agreed to take any action, nor do Parent's executive officers have any
actual knowledge of any fact or circumstance, that would prevent Parent
from accounting for the business combination to be effected by the Merger
as a "pooling-of-interests" in accordance with the Pooling Requirements or
prevent the Merger from qualifying as a "reorganization" within the meaning
of Section 368(a) of the Code. Neither Parent nor any of its Subsidiaries
owns any shares of capital stock of the Company or any other securities
convertible into or otherwise exercisable to acquire capital stock of the
Company other than any securities that may be held pursuant to any pension
or benefit plan of Parent or any of its Subsidiaries.
(h) Compliance with Laws. Except as set forth in Parent's Reports
filed prior to the date of this Agreement, the businesses of each of Parent
and its Subsidiaries have not been, and are not being, conducted in
violation of any Laws except for violations or possible violations that,
individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on Parent and that to the knowledge of Parent's
executive officers, as of the date hereof, would not prevent, materially
delay or materially impair Parent's ability to consummate the transactions
contemplated by this Agreement and the Stock Option Agreement. Except as
set forth in Parent's Reports filed prior to the date of this Agreement, to
the actual knowledge of Parent's executive officers, no investigation or
review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or threatened, nor has any Governmental Entity
indicated an intention to conduct the same, which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on
Parent or that to the
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knowledge of Parent's executive officers, as of the date hereof, would be
reasonably likely to prevent, materially delay or materially impair
Parent's ability to consummate the transactions contemplated by this
Agreement and the Stock Option Agreement. To the actual knowledge of
Parent's executive officers, no material change is required in Parent's or
any of its Subsidiaries' processes, properties or procedures in order to
comply with any such Laws, and Parent has not received any written notice
or written communication of any material noncompliance with any such Laws
that has not been cured as of the date of this Agreement, except for
changes and noncompliance that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on Parent and that to
the knowledge of Parent's executive officers, as of the date hereof, would
not prevent, materially delay or materially impair Parent's ability to
consummate the transactions contemplated by this Agreement and the Stock
Option Agreement. Each of Parent and its Subsidiaries has all Permits
necessary to conduct their business as presently conducted, except for
those the absence of which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on Parent and that to
the knowledge of Parent's executive officers, as of the date hereof, would
not prevent, materially delay or materially impair Parent's ability to
consummate the transactions contemplated by this Agreement and the Stock
Option Agreement.
(i) Litigation and Liabilities. Except as disclosed in Parent's
Reports filed prior to the date of this Agreement, there are no (i) civil,
criminal or administrative actions, suits, claims, hearings, investigations
or proceedings pending or, to the actual knowledge of Parent's executive
officers, threatened against Parent or any of its Affiliates or (ii)
obligations or liabilities of Parent or any of its Subsidiaries, whether or
not accrued, contingent or otherwise and whether or not required to be
disclosed, including those relating to matters involving any Environmental
Law, in either such case, except for those that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on
Parent and that to the knowledge of Parent's executive officers, as of the
date hereof, would not prevent, materially delay or materially impair
Parent's ability to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
(j) Environmental Matters. Except as disclosed or reflected in
Parent's Reports filed prior to the date of this Agreement and except for
such matters that, alone or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on Parent: (i) each of Parent and its
Subsidiaries has complied with all applicable Environmental Laws; (ii)
neither Parent nor any of its Subsidiaries has received any notice, demand,
letter, claim or request for information alleging that Parent or any of its
Subsidiaries may be in violation of or liable under any Environmental Law;
(iii) neither Parent nor any of its Subsidiaries is subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
is subject to any indemnity or other agreement with any third party
relating to liability under any Environmental Law or relating to Hazardous
Substances; and (iv) there are no circumstances or conditions involving
Parent or any of its Subsidiaries that could reasonably be expected to
result in any claims, liability, investigations, costs or restrictions on
the ownership, use, or transfer of any of Parent's properties pursuant to
any Environmental Law.
(k) Taxes. Except to the extent of any inaccuracy or incompleteness of
any of the following which is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on Parent, (i) Parent
and each of its Subsidiaries have prepared or will prepare in good faith
and duly and timely filed (taking into account any extension of time within
which to file), or will so file, all material Tax Returns required to be
filed by any of them at or before the Effective Time and all such filed Tax
Returns are or will be complete and accurate, (ii) Parent and each of its
Subsidiaries as of the Effective Time (x) will have paid all Taxes that
they are required to pay prior to the Effective Time, and (y) will have
withheld all federal, state and local income taxes, FICA, FUTA and other
Taxes, including, without limitation, similar foreign Taxes, required to be
withheld from amounts owing to any employee, creditor or third party, (iii)
as of the date of this Agreement, there are not pending or threatened in
writing, any audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters, (iv) there are not, to the actual
knowledge of Parent's executive officers, any unresolved questions, claims
or outstanding proposed or assessed deficiencies concerning
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Parent or any of its Subsidiaries' Tax liability, (v) neither Parent nor
any of its Subsidiaries has any liability with respect to income, franchise
or similar Taxes in excess of the amounts accrued in respect of such Taxes
that are reflected in the financial statements included in Parent's Reports
and (vi) neither Parent nor any of its Subsidiaries has executed any waiver
of any statute of limitations on, or extended the period for the assessment
or collection of, any Tax.
ARTICLE VI.
COVENANTS
6.1. Interim Operations. Except as set forth in the corresponding sections
or subsections of the Company Disclosure Letter and the Parent Disclosure
Letter, as appropriate:
(a) The Company covenants and agrees as to itself and its Subsidiaries
that, after the date of this Agreement and prior to the Effective Time
(unless Parent shall otherwise approve in writing and except as otherwise
required by applicable Law, in which case, the Company shall provide Parent
with prior reasonable notice of such requirement, or unless expressly
contemplated by this Agreement or the Stock Option Agreement):
(i) Its business and that of its Subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use their commercially
reasonable efforts to preserve their business organizations intact and
maintain their existing relations and goodwill with customers,
suppliers, regulators, distributors, creditors, lessors, employees and
business associates; provided, however, that no action by the Company or
its Subsidiaries with respect to matters specifically addressed by any
other provision of this Section 6.1(a) shall be deemed a breach of this
Section 6.1(a)(i) unless such action would constitute a breach of one or
more such other provisions;
(ii) It shall not: (A) amend its certificate of incorporation or
bylaws; (B) split, combine, subdivide or reclassify its outstanding
shares of capital stock; (C) declare, set aside or pay any dividend on
the Common Shares or other capital stock of the Company payable in cash,
stock or property in respect of any such capital stock (other than
regular quarterly dividends on the Common Shares not to exceed $.11 per
common share per quarter); or (D) repurchase, redeem or otherwise
acquire, except in connection with existing commitments under the
Company Stock Plans but subject to the Company's obligations under
subparagraph (iii) below, or permit any of its Subsidiaries to purchase
or otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock;
(iii) Neither it nor any of its Subsidiaries shall take any action
that would prevent the Merger from qualifying for "pooling-of-interests"
accounting treatment in accordance with the Pooling Requirements or as a
"reorganization" within the meaning of Section 368(a) of the Code;
(iv) Neither it nor any of its ERISA Affiliates shall: (A)
accelerate, amend or change the period of exercisability of or
terminate, establish, adopt, enter into, make any new grants or awards
of stock-based compensation or other benefits under any Compensation and
Benefit Plans; (B) amend or otherwise modify any Compensation and
Benefit Plans; or (C) increase the salary, wage, bonus or other
compensation of any directors, officers or employees except, in the case
of (A), (B) and (C), (x) for grants or awards to employees with annual
salaries below $150,000 under existing Compensation and Benefit Plans in
such amounts and on such terms as are consistent with past practice, (y)
in the normal and usual course of its business (which may include normal
periodic performance reviews and related compensation and benefit
increases and the provision of individual Company Compensation and
Benefit Plans consistent with past practice for promoted or newly hired
employees below the level of Company Vice President on terms consistent
with past practice), or (z) for actions necessary to satisfy existing
contractual obligations under Compensation and Benefit Plans existing as
of the date of this Agreement,
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including pursuant to rights and obligations under such Compensation and
Benefit Plans that vest or mature automatically with the passage of time
or the satisfaction of other conditions; provided, that it shall not
take such action unless it shall provide Parent with prior reasonable
notice; or to comply with applicable law or regulations;
(v) Except for transactions between the Company and one or more of
its wholly-owned Subsidiaries or between wholly-owned Subsidiaries of
the Company, neither it nor any of its Subsidiaries shall incur, repay
or retire prior to maturity or refinance any indebtedness for borrowed
money or guarantee any such indebtedness or issue, sell, repurchase or
redeem prior to maturity any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others
in all such cases in excess of $10,000,000 in the aggregate or except
for the use of foreign bank lines of credit in the ordinary course;
(vi) Neither it nor any of its Subsidiaries shall (A) make any
capital expenditures prior to December 31, 1999 in an aggregate amount
in excess of $8,000,000, except as set forth in the Company's 1999
capital budget which has been made available to Parent or (B) make any
capital expenditures subsequent to December 31, 1999 in an amount in
excess of an average of $10,000,000 per month;
(vii) Neither it nor any of its Subsidiaries shall issue, deliver,
sell, pledge or encumber shares of any class of its capital stock or any
securities convertible or exchangeable into, any rights, warrants or
options to acquire, or any bonds, debentures, notes or other debt
obligations having the right to vote or convertible or exercisable for
any such shares except for transactions between the Company and one or
more of its wholly-owned Subsidiaries, or between wholly-owned
Subsidiaries of the Company and except for Company Shares issued
pursuant to options and other awards outstanding on the date of this
Agreement under the Company Stock Plans or otherwise permitted by
Section 6.1(a)(iv);
(viii) Except as permitted by Sections 6.2 and 8.3(b), neither it
nor any of its Subsidiaries shall authorize, propose or announce an
intention to authorize or propose or enter into an agreement with
respect to, any merger, consolidation or business combination (other
than the Merger), or any purchase, sale, lease, license or other
acquisition or disposition of any business or of a material amount of
assets or securities excluding sales of inventory or products in the
ordinary course of business;
(ix) It shall not make any material change in its financial
accounting policies or procedures, other than any such change that is
required by GAAP, or revalue any assets, including, without limitation,
writing down the value of material inventory or writing off notes or
accounts receivable in a material amount other than as required by GAAP;
(x) Except in the ordinary and usual course of business or as is
required by law, it shall not release, assign, settle or compromise any
material claims or litigation or make any material tax election or
settle or compromise any material United States federal, state, local or
foreign tax liability; and
(xi) Neither it nor any of its Subsidiaries shall authorize or
enter into any agreement to do any of the foregoing.
(b) Parent covenants and agrees as to itself and its Subsidiaries
that, after the date of this Agreement and prior to the Effective Time
(unless the Company shall otherwise approve in writing and except as
otherwise required by applicable Law, in which case, Parent shall provide
the Company with prior reasonable notice of such requirement, or unless
expressly contemplated by this Agreement or the Stock Option Agreement):
(i) It shall not: (A) amend its certificate of incorporation or
bylaws in any manner that would adversely affect the Merger or the other
transactions contemplated by this Agreement or the Stock Option
Agreement; (B) split, combine, subdivide or reclassify its outstanding
shares of
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capital stock; (C) declare, set aside or pay any dividend on the Parent
Common Stock or other capital stock of Parent payable in cash, stock or
property in respect of any such capital stock (other than regular
quarterly dividends on the Parent Common Stock consistent with past
practice and other than any dividend that would be received by the
holders of Company Common Stock on an equivalent basis per share of
Parent Common Stock after the Effective Time); or (D) repurchase, redeem
or otherwise acquire, except in connection with existing commitments
under Parent's employee benefit plans but subject to Parent's
obligations under subparagraph (iii) below, or permit any of its
Subsidiaries to purchase or otherwise acquire, any shares of its capital
stock or any securities convertible into or exchangeable or exercisable
for any shares of its capital stock;
(ii) Neither it nor any of its Subsidiaries shall take any action
that would prevent the Merger from qualifying for "pooling-of-interests"
accounting treatment in accordance with the Pooling Requirements or as a
"reorganization" within the meaning of Section 368(a) of the Code; and
(iii) Neither it nor any of its Subsidiaries shall authorize or
enter into any agreement to do any of the foregoing.
(c) Parent and the Company agree that any written approval obtained
under Section 6.1(a) must be signed by the Chief Executive Officer or
Senior Vice President, General Counsel and Secretary of Parent and any
written approval obtained under Section 6.1(b) must be signed by the Chief
Executive Officer or Senior Vice President, General Counsel and Secretary
of the Company.
(d) Parent and the Company agree that prior to the Closing, the record
date for determining shareholders of the Company or Parent entitled to
receive the regular quarterly dividends permitted hereunder that may be
declared by the board of directors of either Parent or the Company after
the date of this Agreement but prior to the Closing shall be the close of
business on the day on which Parent's then current fiscal quarter ends.
6.2. Acquisition Proposals.
(a) The Company agrees that it shall not nor shall it knowingly permit
any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to, and that it shall direct and use its reasonable best
efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) (the Company, its Subsidiaries
and their officers, directors, employees, agents and representatives being
referred to as the "Company Representatives") not to, directly or
indirectly, initiate, solicit, or knowingly encourage or otherwise
intentionally facilitate any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, or any purchase
or sale of the consolidated assets (including without limitation stock of
Subsidiaries) of the Company or any of its Subsidiaries, taken as a whole,
having an aggregate value equal to 15% or more of the Company's market
capitalization, or any purchase or sale of, or tender or exchange offer
for, 15% or more of its equity securities (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). The Company further
agrees that it shall not nor shall it knowingly permit any of its
Subsidiaries or any of the officers and directors of it or its Subsidiaries
to, and that it shall direct and use its reasonable best efforts to cause
the Company Representatives not to, directly or indirectly, have any
discussion in furtherance of or provide any confidential information or
data to any Person relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal, or otherwise intentionally
facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however ,that nothing contained in this Agreement shall
prevent either the Company or its Board of Directors from: (A) complying
with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard
to an Acquisition Proposal; (B) if the Board of Directors of the Company
determines in good faith after consultation with outside counsel, that in
order for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under applicable law
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it should take such action, engaging in any discussions or negotiations
with or providing any information or data to any Person (including its
Representatives) in response to an unsolicited written Acquisition Proposal
by any such Person; provided, that prior to providing any information or
data to any Person in connection with an Acquisition Proposal by any such
Person, the Board of Directors of the Company shall receive from such
Person an executed confidentiality agreement on terms substantially similar
to those contained in the confidentiality agreement previously entered into
between Parent and the Company in connection with their consideration of
the Merger; provided further, that such confidentiality agreement shall
contain terms that allow the Company to comply with its obligations under
this Section 6.2 or (C) recommending such an unsolicited written
Acquisition Proposal to the stockholders of the Company if, and only to the
extent that, with respect to the actions referred to in clause (C), (i) the
Board of Directors of the Company concludes in good faith (after
consultation with its outside legal counsel and its financial advisor) that
such Acquisition Proposal is reasonably capable of being completed, and
would, if consummated, result in a transaction more favorable to the
Company's stockholders than the Merger (a "Superior Proposal"), and (ii)
the Board of Directors of the Company determines in good faith after
consultation with outside legal counsel that the failure to take such
action would be reasonably likely to be inconsistent with its fiduciary
duty to the Company's stockholders under applicable Law.
(b) Except as disclosed in Section 6.1(a) of the Company Disclosure
Letter, the Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Company agrees that it will promptly inform its executive officers,
directors, attorneys and financial advisors of the obligations undertaken
in Section 6.2(a). The Company agrees that it will notify Parent as soon as
reasonably practicable, if any such proposals or offers are received by it,
any such information is requested from it or any such discussions or
negotiations are sought to be initiated with it, indicating, in connection
with such notice, the name of such Person making such inquiry, proposal,
offer or request and a description of the substance of any such inquiries,
proposals, offers or requests. The Company thereafter shall keep Parent
informed as soon as reasonably practicable, of the status and terms of any
such inquiries, proposals or offers.
6.3. Information Supplied. The Company and Parent each agrees, as to itself
and its Subsidiaries, that none of the information supplied or to be supplied by
it or its Subsidiaries for inclusion or incorporation by reference in (i) the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(including the joint proxy statement of Parent and the Company and prospectus of
Parent (the "Prospectus/Proxy Statement") constituting a part thereof) (the "S-4
Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, and (ii) the Prospectus/Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to stockholders and at the time of the meetings of stockholders of the Company
and Parent to be held in connection with the Merger, in any such case, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any information relating
to Parent or the Company, or any of their respective Affiliates, officers or
directors, is discovered by Parent or the Company which should be set forth in
an amendment or supplement to any of the S-4 Registration Statement or the
Prospectus/Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or would omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify the other parties
to this Agreement and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of the Company and Parent.
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6.4. Stockholders Meetings.
(a) The Company will take, in accordance with applicable Law and its
certificate of incorporation and bylaws, all action necessary to convene a
meeting of holders of Company Shares (the "Company Stockholders Meeting")
as promptly as reasonably practicable after the S-4 Registration Statement
is declared effective to consider and vote upon the adoption of this
Agreement. The Company's Board of Directors shall (i) recommend that the
stockholders of the Company adopt this Agreement and thereby approve the
transactions contemplated by this Agreement and (ii) solicit such adoption
(including soliciting proxies); provided, however, that the Company's Board
of Directors may, at any time prior to the Effective Time, withdraw, modify
or change any such recommendation to the extent that the Company's Board of
Directors determines in good faith, after consultation with outside legal
counsel, that the failure to take such action would be reasonably likely to
be inconsistent with its fiduciary duties to the Company's stockholders
under applicable Law.
(b) Parent will take, in accordance with applicable Law and its
certificate of incorporation and bylaws, all action necessary to convene a
meeting of its stockholders (the "Parent Stockholders Meeting") as promptly
as reasonably practicable after the S-4 Registration Statement is declared
effective to consider and vote upon the issuance of the aggregate Merger
Consideration pursuant to this Agreement. The Board of Directors of Parent
shall: (i) recommend that the stockholders approve the issuance of the
Merger Consideration pursuant to this Agreement; and (ii) solicit such
approval (including soliciting proxies). Notwithstanding the foregoing, at
any time following determination of the Exchange Ratio but prior to the
Parent Stockholders Meeting, Parent may cancel and not convene the Parent
Stockholders Meeting if the rules and listing policies of the NYSE do not
require the stockholders of Parent to approve the issuance of the Merger
Consideration in the Merger.
6.5. Filings; Other Actions; Notification.
(a) Parent and the Company shall promptly prepare and file with the
SEC the Prospectus/Proxy Statement, and Parent shall prepare and file with
the SEC the S-4 Registration Statement as promptly as practicable. Parent
and the Company each shall use its reasonable best efforts to have the S-4
Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the stockholders of the Company and to the
stockholders of Parent. Parent shall also use its reasonable best efforts
to obtain prior to the effective date of the S-4 Registration Statement all
necessary state securities law or "blue sky" permits and approvals required
in connection with the Merger and the other transactions contemplated by
this Agreement and will pay all expenses incident thereto.
(b) The Company and Parent each shall use its respective reasonable
best efforts to cause to be delivered to the other party and its directors
letters of its independent auditors, dated (i) the date on which the S-4
Registration Statement shall become effective and (ii) the Closing Date,
and addressed to the other party and its directors, in form customary for
"comfort" letters delivered by independent public accountants in connection
with registration statements similar to the S-4 Registration Statement.
(c) The Company and Parent shall cooperate with each other and,
subject to Sections 6.5(d) and (e), use (and shall cause their respective
Subsidiaries to use) their respective reasonable best efforts (i) to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on their part under this Agreement and the
Stock Option Agreement and applicable Laws to consummate and make effective
the Merger and the other transactions contemplated by this Agreement and
the Stock Option Agreement as soon as practicable, including (A) obtaining
comfort letters and opinions of their respective accountants and attorneys
referred to in Section 6.5(b) and Article VII of this Agreement, (B)
preparing and filing as promptly as practicable all documentation,
including all additional information requested by any Governmental Entity,
to effect all necessary applications, notices, petitions, filings and other
documents (including under the HSR Act (as defined below) and other
Competition Laws (as defined below)), and (C) instituting court actions and
other proceedings necessary to obtain the approval or clearance required
to, or have
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lifted any injunction or order which would not permit the parties hereto
to, consummate the Merger or the other transactions contemplated by this
Agreement and the Stock Option Agreement or defending or otherwise opposing
all court actions and other proceedings instituted by a Governmental Entity
or other Person under the Competition Laws or otherwise for purposes of
preventing the consummation of the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement and (ii) to
obtain as promptly as practicable all consents, clearances, registrations,
approvals, permits and authorizations and to achieve the termination or
expiration of all applicable waiting periods necessary or advisable to be
obtained from any Governmental Entity in order to consummate the Merger and
the other transactions contemplated by this Agreement and the Stock Option
Agreement. Subject to applicable Laws and existing obligations relating to
the exchange of information, Parent and the Company shall have the right to
review in advance, and to the extent practicable each will consult the
other on, all the information relating to Parent or the Company, as the
case may be, and any of their respective Subsidiaries, that appear in any
filing made with, or written materials submitted to, any third party and/or
any Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement.
In exercising the foregoing right, each of the Company and Parent shall act
reasonably and as promptly as practicable, including by (i) permitting the
other party to review and discuss in advance, and considering in good faith
the views of one another in connection with, any proposed written (or any
material proposed oral) communication with any Governmental Entity, (ii)
not participating in any meeting with any Governmental Entity unless it
consults with the other party in advance and to the extent permitted by
such Governmental Entity gives the other party the opportunity to attend
and participate thereat, and (iii) furnishing the other party with such
necessary information and reasonable assistance as such other party may
reasonably request in connection with its preparation of necessary filings
or submissions of information to any Governmental Entity; provided,
however, that subject to its obligations hereunder Parent shall have the
right to direct the strategy of the parties in a manner consistent with the
terms of this Agreement in any communications, meetings or proceedings with
any Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement.
The Company and Parent may, as each deems advisable and necessary,
reasonably designate any competitively sensitive material provided to the
other under this Section as "outside counsel only." Such materials and the
information contained therein shall be given only to the outside legal
counsel to the recipient and will not be disclosed by such outside counsel
to employees, officers, or directors of the recipient unless express
permission is obtained in advance from the source of the materials (the
Company or Parent, as the case may be) or its legal counsel.
(d) Notwithstanding anything to the contrary in this Agreement, (i)
the Company shall not, without Parent's prior written consent, commit to
any divestitures, licenses, hold separate arrangements or similar matters,
including covenants affecting business operating practices (or allow its
Subsidiaries to commit to any divestitures, licenses, hold separate
arrangements or similar matters), and the Company shall commit to, and
shall use reasonable best efforts to effect (and shall cause its
Subsidiaries to commit to and use reasonable best efforts to effect), any
such divestitures, licenses, hold separate arrangements or similar matters
as Parent shall request, but solely if such divestitures, licenses, hold
separate arrangements or similar matters are contingent on consummation of
the Merger and (ii) neither Parent nor any of its Subsidiaries shall be
required (pursuant to Section 6.5(c) or otherwise) to agree (with respect
to (x) Parent or its Subsidiaries or (y) the Company or its Subsidiaries)
to any divestitures, licenses, hold separate arrangements or similar
matters, including covenants affecting business operating practices, if
such divestitures, licenses, arrangements or similar matters, individually
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect on Parent or the Company.
(e) Except as provided below, nothing in this Section 6.5 or any other
part of this Agreement shall require Parent to refrain from entering into
any agreement with respect to, or issuing Parent Common Stock or other
consideration in connection with, a business combination with, or an
acquisition of, a third party after the date of this Agreement and prior to
the Effective Time
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(a "Subsequent Transaction"); provided, however, that (i) the aggregate
fair market value of the consideration paid or to be paid by Parent in all
such Subsequent Transactions shall not exceed $1.5 billion and the fair
market value of the consideration paid or to be paid by Parent in any
individual Subsequent Transaction shall not exceed $750 million (provided
that these amounts may be exceeded with the consent of the Company's Chief
Executive Officer) and (ii) Parent has a good faith belief at the time it
enters into the definitive agreement calling for any such Subsequent
Transaction that such Subsequent Transaction is not reasonably likely to
prevent or delay satisfaction of any of the conditions set forth in Article
VII. In the event of a Subsequent Transaction which would be permissible
under the preceding sentence, Parent shall agree to any divestitures,
licenses, hold separate arrangements or similar matters (including
covenants affecting business operating practices) necessary in order to
obtain approval of the transactions contemplated by this Agreement under
applicable Competition Laws that would not otherwise have been required in
order to obtain such approval but for the Subsequent Transaction.
(f) The Company and Parent each shall, upon request by the other and
subject to applicable laws and existing obligations relating to the
exchange of information, furnish the other with all information concerning
itself, its Subsidiaries, directors, officers and stockholders and such
other matters as may be reasonably necessary or advisable in connection
with the Prospectus/Proxy Statement, the S-4 Registration Statement or any
other statement, filing, notice or application made by or on behalf of
Parent, the Company or any of their respective Subsidiaries to any third
party and/or any Governmental Entity in connection with the Merger and the
transactions contemplated by this Agreement and the Stock Option Agreement.
(g) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
by this Agreement and the Stock Option Agreement, including promptly
furnishing the other with copies of notice or other communications received
by Parent or the Company, as the case may be, or any of its Subsidiaries,
from any Governmental Entity with respect to the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement.
6.6. Access; Consultation.
(a) Upon reasonable notice, and except as may be prohibited by
applicable Law, each of the Company and Parent shall (and shall cause its
respective Subsidiaries to) afford to the other employees, agents and
representatives (including any investment banker, attorney or accountant
retained by the other or any of its Subsidiaries) reasonable access, during
normal business hours throughout the period prior to the Effective Time, to
its properties, books, contracts and records and, during such period, it
shall (and shall cause its Subsidiaries to) furnish promptly to the other
all information concerning its business, properties and personnel as may
reasonably be requested; provided that no investigation pursuant to this
Section 6.6(a) shall affect or be deemed to modify any representation or
warranty made by the Company or Parent under this Agreement; and provided,
further, that the foregoing shall not require the Company to permit any
inspection, or to disclose any information, that in the reasonable judgment
of such party would result in the disclosure of any trade secrets of third
parties or the waiver of any privilege or violate any of such party's
obligations with respect to confidentiality if such party shall have used
all reasonable efforts to obtain the consent of such third party to such
inspection or disclosure or to preserve such privilege. All requests for
information made pursuant to this Section 6.6(a) shall be directed to an
executive officer of the Company or Parent, or such Person as may be
designated by any such executive officer, as the case may be.
(b) Subject to applicable Laws relating to the exchange of
information, from the date of this Agreement to the Effective Time, the
Company agrees to consult with Parent on a regular basis on a schedule to
be agreed with regard to the Company's operations.
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(c) Prior to the Closing, the Company will provide to Parent a
worldwide list of all patents, trade names, registered trademarks and
registered service marks, and applications for any of the foregoing, owned
or possessed by the Company or any of its Subsidiaries.
6.7. Affiliates.
(a) Each of the Company and Parent shall deliver to the other a letter
identifying all Persons whom such party believes to be, at the date of the
Company Stockholders Meeting, affiliates of such party for purposes of
applicable interpretations regarding use of the pooling-of-interests
accounting method ("Pooling Affiliates") and, in the case of the Company,
affiliates of the Company for purposes of Rule 145 under the Securities Act
("Rule 145 Affiliates"). Each of the Company and Parent shall use all
reasonable efforts to cause each Person who is identified as a Pooling
Affiliate or Rule 145 Affiliate in the letter referred to above to deliver
to Parent on or prior to the date of the Company Stockholders Meeting a
written agreement, in the form attached as Exhibit 6.7(A), in the case of a
Pooling Affiliate or Rule 145 Affiliate of the Company (the "Company
Affiliate's Letter"), and Exhibit 6.7(B) (or Exhibit 6.7(C) as applicable),
in the case of a Pooling Affiliate of Parent (the "Parent Affiliate's
Letter"). Prior to the Effective Time, each of the Company and Parent shall
use all reasonable efforts to cause each additional Person who is
identified by such party as its Pooling Affiliate or by the Company as a
Rule 145 Affiliate after the date of the Company Stockholders Meeting to
execute the applicable written agreement as set forth in this Section 6.7,
as soon as practicable after such Person is identified.
(b) Shares of Parent Common Stock issued to Pooling Affiliates of the
Company in exchange for Company Shares shall not be transferable until such
time as financial results covering at least 30 days of combined operations
of Parent and the Company shall have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such Pooling Affiliate has provided the written
agreement referred to in this Section, except to the extent permitted by,
and in accordance with, SEC Accounting Series Release 135 and SEC Staff
Accounting Bulletins 65 and 76. The Company shall not register the transfer
of any Certificate unless such transfer is made in compliance with the
foregoing.
6.8. Stock Exchange Listing. To the extent they are not already listed,
Parent shall use its reasonable best efforts to cause the shares of Parent
Common Stock to be issued in the Merger to be approved for listing on the NYSE
and on all other stock exchanges on which shares of Parent Common Stock are then
listed, subject to official notice of issuance, prior to the Closing Date.
6.9. Publicity. The initial press release with respect to the Merger shall
be a joint press release. Thereafter, unless otherwise required by applicable
law or pursuant to any listing agreement with or rules of a securities exchange,
the Company and Parent shall consult with each other prior to issuing any press
releases or otherwise making public announcements with respect to the Merger and
the other transactions contemplated by this Agreement and prior to making any
filings with any third party and/or any Governmental Entity (including any
securities exchange) with respect thereto.
6.10. Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option to purchase
Company Shares (a "Company Option") under the Company Stock Plans,
whether vested or unvested, shall be converted to an option to acquire
the same number of shares of Parent Common Stock as the holder of such
Company Option would have been entitled to receive pursuant to the
Merger had such holder exercised such Company Option in full immediately
prior to the Effective Time (rounded down to the nearest whole number)
(a "Substitute Option"), at an exercise price per share (rounded to the
nearest whole cent) equal to (y) the aggregate exercise price for the
Company Shares otherwise purchasable pursuant to such Company Option
divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Option in accordance with the
foregoing. To illustrate the foregoing, a Company Option
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outstanding immediately prior to the Effective Time that entitles the
holder to purchase 1,000 Company Shares for an aggregate exercise price
of $25,000 would be converted at the Effective Time into a Substitute
Option to purchase [1,000 * Exchange Ratio] shares of Parent Common
Stock for an exercise per share of Parent Common Stock of $[25,000 /
(1,000 * Exchange Ratio)].
(ii) As promptly as practicable after the Effective Time, the
Company shall deliver to the participants in the Company Stock Plans
appropriate notices setting forth such participants' rights pursuant to
the Substitute Options.
(b) Conversion and Registration. At or prior to the Effective Time,
the Company shall make all necessary arrangements with respect to the
Company Stock Plans to permit the conversion of the unexercised Company
Options into Substitute Options pursuant to this Section and register under
the Securities Act on Form S-8 or other appropriate form (and use its best
efforts to maintain the effectiveness thereof) shares of Parent Common
Stock issuable pursuant to all Substitute Options with respect to Parent
Common Stock not later than three business days after the Effective Time.
(c) Prior to the Effective Time, the Board of Directors of Parent, or
an appropriate committee of non-employee directors thereof, shall adopt a
resolution consistent with the interpretive guidance of the SEC so that the
acquisition by any officer or director of the Company who may become a
covered person of Parent for purposes of Section 16 of the Exchange Act and
the rules and regulations thereunder ("Section 16") of shares of Parent
Common Stock or options to acquire Parent Common Stock pursuant to this
Agreement and the Merger shall be an exempt transaction for purposes of
Section 16.
(d) From and after the Effective Time, Parent in its sole discretion
shall either itself assume or cause one of its Affiliates to assume, or
shall cause the Company to continue to maintain, the Compensation and
Benefit Plans in effect immediately before the Effective Time; provided
that nothing shall prevent Parent or its Affiliates or the Company or its
Affiliates from amending or terminating any Compensation or Benefit Plan to
the extent permitted by its terms or applicable law.
(e) For purposes of determining the eligibility of any individual
employed by the Company or any of its Subsidiaries immediately before the
Effective Time (a "Company Employee") to participate in and have vested
rights under the employee benefit plans of Parent and its Affiliates
providing benefits to Company Employees after the Effective Time, each
Company Employee shall be credited with his or her years of service with
the Company and its Affiliates before the Effective Time, to the same
extent as such Company Employee was entitled, before the Effective Time, to
credit for any such service under similar Compensation and Benefit Plans.
"Eligibility" for purposes of this paragraph (e) shall mean (i) eligibility
to participate in any such employee benefit plan, (ii) eligibility for
post-retirement health and life benefits (to the extent such benefits are
conditioned on the satisfaction of specified age and service requirements)
and (iii) eligibility for early retirement under any employee pension
benefit plan of Parent and its Affiliates (to the extent that early
retirement is conditioned on the satisfaction of specified age and service
requirements). Years of service with the Company and its Affiliates prior
to the Effective Time shall also be recognized: (i) under any severance,
separation pay or vacation pay plan or policy of Parent and its Affiliates
extended to Company Employees after the Effective Time for purposes of
determining the amount of a Company Employee's benefit under such plan or
policy; (ii) under any savings, 401(k) or other defined contribution plan
in which any Company Employee participates after the Effective Time for
purposes of determining the amount of employer contributions to such
Company Employee's account thereunder (to the extent service is relevant
for that purpose); and (iii) under any plan providing welfare benefits in
which any Company Employee participates after the Effective Time for
purposes of determining the level of benefits and the amounts the Company
Employee is required to pay with respect thereto (including without
limitation premiums, co-payments, deductibles and the like), to the extent
service is relevant for those purposes, but only with respect to Company
Employees who are eligible for that category of welfare benefit (such as
post-retirement health care) under a
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Compensation and Benefit Plan on the date of this Agreement, or who would
be so eligible if they had met the requisite age and service requirements
for eligibility. For purposes of determining a Company Employee's benefits
under a pension benefit plan which is merged with or has its assets and
liabilities transferred to an employee benefit plan of Parent or its
Affiliates after the Effective Time, such benefit shall not be less than
the benefit to which any affected Company Employee would be entitled had
the Company employee benefit plan been frozen at the time of such merger or
transfer and the Parent or Affiliate employee benefit plan began accruing
benefits from and after the date of such merger or transfer. In addition,
and without limiting the generality of the foregoing, to the extent
permitted by applicable law, if a Company Employee participates,
immediately before the Effective Time, in a pension benefit plan under
which such Company Employee accrues a benefit based upon final average pay
(as opposed to career average pay), and such Company pension benefit plan
is merged into a pension benefit plan of Parent or one of its Affiliates
that continues to provide a benefit based upon final average pay, such
Company Employee's pay increases from the Company and its Affiliates after
the Effective Time shall be applied to his or her pre-Effective Time
service and benefit formula, except to the extent such application would
result in a duplication of benefits, so that such Company Employee's
combined pension benefit under the merged plan will reflect his or her
final average pay following the Effective Time as applied to all years of
service, both before and after the Effective Time, under whichever formula
is relevant to the different periods of service. Furthermore, and without
limiting the generality of the foregoing, for purposes of each employee
benefit plan sponsored by the Parent and its Affiliates which provides for
medical, dental, pharmaceutical and/or vision benefits to any Company
Employee, Parent shall cause all pre-existing condition exclusions and
actively-at-work requirements of such new employee benefit plan to be
waived for such Employee and his or her covered dependents and to have any
eligible expenses incurred by such Employee and his or her covered
dependents during the portion of the plan year of a prior plan ending on
the date such employee's participation in a replacement plan, begins to be
taken into account under such replacement plan for purposes of satisfying
all deductible, coinsurance and maximum out-of-pocket requirements
applicable to such employee and his or her covered dependents for the
applicable plan year as if such amounts had been paid in accordance with
such replacement plan. No provision in the foregoing shall be construed as
requiring Parent or any of its Affiliates to extend participation in any
employee benefit plan sponsored by Parent or any of its Affiliates to any
Company Employee. In addition, the foregoing provisions of this paragraph
(e) shall not apply to any benefits that are the subject of collective
bargaining, and nothing in this paragraph (e) shall limit or restrict the
right of Parent or any of its Affiliates to amend or terminate any of their
employee benefit plans at any time.
6.11. Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the S-4 Registration Statement, printing and mailing the Prospectus/Proxy
Statement, the S-4 Registration Statement and the filing fees under the HSR Act
and any other Competition Law filings shall be paid by Parent.
6.12. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, (i) Parent will, and will cause
the Surviving Corporation to, indemnify and hold harmless each present and
former director or officer of the Company and (ii) Parent will cause the
Surviving Corporation to indemnify and hold harmless each present or former
director or officer of any subsidiary or division of the Company and each
person who served at the request of the Company as a director, officer,
trustee or fiduciary of another corporation, partnership, joint venture,
trust, pension, or other employee benefit plan or enterprise (the Persons
indemnified under (i) and (ii) being the "Indemnified Parties"), in the
case of (i) and (ii), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
and amounts paid in settlement (provided that no such settlement is entered
into without the approval of Parent or the Surviving Corporation, which
approval shall not be unreasonably withheld) (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
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investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior
to the Effective Time relating to the Indemnified Party's service with or
at the request of the Company, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent permitted under Law (in the
case of (i)) and to the fullest extent the Company would have been
permitted to so indemnify under Delaware law (in the case of (ii)). In the
case of (i), Parent shall, and shall cause the Surviving Corporation to,
advance expenses to the fullest extent permitted under applicable Law,
provided that, if required under applicable Law, the Person to whom
expenses are advanced shall provide an undertaking to repay such advances
if it is ultimately determined that such Person is not entitled to
indemnification. In the case of (ii), Parent shall cause the Surviving
Corporation to advance expenses as incurred to the fullest extent permitted
under Delaware law, provided that the Person to whom expenses are advanced
shall provide an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification. The
indemnification rights hereunder shall be in addition to any other rights
such Indemnified Party may have under the Certificate of Incorporation and
Bylaws of the Surviving Corporation or any of its Subsidiaries, under the
DGCL or otherwise. The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall contain, and Parent shall cause the Surviving
Corporation to fulfill and honor, provisions with respect to
indemnification and exculpation that are at least as favorable to the
Indemnified Parties as those set forth in the certificate of incorporation
and bylaws of the Company as of the date of this Agreement, 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 any of the Indemnified Parties.
The parties agree that the provisions relating to exoneration of directors
and officers and the rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
in the certificate of incorporation and bylaws of Company and its
Subsidiaries with respect to matters occurring through the Effective Time,
shall survive the Merger and shall continue in full force and effect for a
period of six years from the Effective Time; provided, however, that all
rights to indemnification in respect of any action pending or asserted or
claim made within such period shall continue until the disposition of such
action or resolution of such claim.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.12 shall promptly notify Parent and the
Surviving Corporation, upon learning of any such claim, action, suit,
proceeding or investigation, but the failure to so notify shall not relieve
Parent and the Surviving Corporation of any liability they may have to such
Indemnified Party if such failure does not materially prejudice Parent and
the Surviving Corporation. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) Parent or the Surviving Corporation shall have the right to
assume the defense thereof (unless the Indemnified Parties (or any of them)
determine in good faith (after consultation with legal counsel) that there
are issues which raise conflicts of interest between an Indemnified Party,
on the one hand, and Parent and the Surviving Corporation on the other
hand), and Parent and the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof (except that if Parent and the Surviving
Corporation elect not to assume such defense or if there are issues which
raise conflicts of interest between Parent and the Surviving Corporation,
on the one hand, and one or more of the Indemnified Parties, on the other,
the Indemnified Parties may retain counsel satisfactory to them, and Parent
and the Surviving Corporation shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor
are received); provided, however, that Parent and the Surviving Corporation
shall be obligated pursuant to this paragraph (b) to pay for only one firm
of counsel (in addition to local counsel) for all Indemnified Parties in
any jurisdiction (unless there is such a conflict of interest), (ii) the
Indemnified Parties will cooperate in the defense of any such matter and
(iii) Parent and the Surviving Corporation shall not be liable for any
settlement effected without their prior written consent, which consent
shall not be unreasonably withheld.
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(c) Parent shall cause the Surviving Corporation to maintain a policy
of officers' and directors' liability insurance covering the Indemnified
Parties for acts and omissions occurring on or prior to the Effective Time
("D&O Insurance") with coverage in amount and scope at least as favorable
as the Company's existing directors' and officers' liability insurance
coverage for a period of six years after the Effective Time; provided,
however, if the existing D&O Insurance expires, is terminated or canceled,
or if the annual premium therefor is increased to an amount in excess of
200% of the last annual premium paid prior to the date of this Agreement
(the "Current Premium"), in each case during such six-year period, Parent
and the Surviving Corporation will use their best efforts to obtain D&O
Insurance in an amount and scope as great as can be obtained for the
remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium. The provisions of this Section
6.12(c) shall be deemed to have been satisfied if prepaid policies have
been obtained by the Company prior to the Closing, which policies provide
such directors and officers with coverage for an aggregate period of six
years with respect to claims arising from facts or events that occurred on
or before the Effective Time, including, without limitation, in respect of
the transactions contemplated by this Agreement and for a premium not in
excess of the aggregate of the premiums set forth in the preceding
sentence. If such prepaid policies have been obtained by the Company prior
to the Closing, Parent shall and shall cause the Surviving Corporation to
maintain such policies in full force and effect, and continue to honor the
Company's obligations thereunder.
(d) If Parent or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) shall transfer all or substantially
all of its properties and assets to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so that
the successors and assigns of Parent or the Surviving Corporation shall
assume all of the obligations set forth in this Section. Parent shall (in
the case of Section 6.12(a)(i)), and Parent shall cause the Surviving
Corporation (in the case of Section 6.12(a)(ii)), to pay all expenses,
including reasonable attorneys' fees, that may be incurred by the
Indemnified Parties in successfully enforcing the indemnity and other
rights in this Section 6.12.
(e) Parent shall cause the Surviving Corporation to perform its
obligations under this Section 6.12 and shall, in addition, guarantee, as
co-obligor with the Surviving Corporation, the performance of such
obligations by the Surviving Corporation subject to the limits imposed on
the Surviving Corporation under the DGCL.
(f) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
6.13. Takeover Statute. If any Takeover Statute is or may become applicable
to the Merger or the other transactions contemplated by this Agreement or the
Stock Option Agreement, each of Parent and the Company and its Board of
Directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement or by the Merger and otherwise act to
eliminate or minimize the effects of such statute or regulation on such
transactions.
6.14. Confidentiality. The Company and Parent each acknowledges and
confirms that it has entered into a Confidentiality Agreement, dated August 25,
1999 (the "Confidentiality Agreement"), and that the Confidentiality Agreement
shall remain in full force and effect in accordance with its terms.
6.15. Tax-Free Reorganization. Parent, Merger Sub, and the Company shall
each use all reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code and to obtain an
opinion of its respective counsel as contemplated by Sections 7.2(c) and 7.3(c),
respectively.
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ARTICLE VII.
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver, if applicable, at or prior to the Effective Time of each
of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly adopted
by the stockholders of the Company and, if required by the rules or listing
policies of the NYSE, the issuance of the aggregate Merger Consideration by
Parent shall have been approved by the stockholders of Parent;
(b) NYSE Listing. The shares of Parent Common Stock issuable to the
Company stockholders pursuant to this Agreement shall have been approved
for listing (either before or after the execution of this Agreement) on the
NYSE subject to official notice of issuance;
(c) Consents. (i) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and (ii)
any consents to the Merger required under (A) the European Community Merger
Control Regulation or (B) other applicable Competition Laws shall have been
obtained, except with respect to (B) for those consents the failure of
which to obtain would not reasonably be expected to have a Material Adverse
Effect on the Company or a Material Adverse Effect on Parent;
(d) Laws and Orders. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any Law
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or
prohibits consummation of the Merger under applicable Competition Laws
(collectively, an "Order") and neither the United States federal government
(or any agency, commission, department or similar entity of the United
States federal government), the European Community (or any agency,
commission, department or similar entity of the European Community) nor the
government (or any agency, commission, or department or similar entity of
such government) of any jurisdiction in which Parent and the Company had,
on a combined basis, revenues of $100 million or more in the twelve months
ending June 30, 1999 shall have instituted and be pursuing any proceeding
seeking any such Order;
(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the
S-4 Registration Statement shall have been issued, and no proceedings for
that purpose shall have been initiated or, through a senior official, be
threatened by the SEC; and
(f) Pooling. (i) Parent shall have received a letter from its
independent public accounting firm to the effect that the Merger should
qualify for "pooling-of-interests" accounting treatment and (ii) the
Company shall have received a letter from its independent public accounting
firm to the effect that the Company is a poolable entity.
7.2. Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by Parent at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company set forth in Section 5.1(b), 5.1(c) (other than
the third sentence), 5.1(j), 5.1(l) or 5.1(s) of this Agreement shall be
true and correct in all material respects, and (ii) the other
representations and warranties of the Company set forth in this Agreement
(x) to the extent qualified by Material Adverse Effect shall be true and
correct as so qualified and (y) to the extent not qualified by Material
Adverse Effect shall be true and correct (except that this clause (y) shall
be deemed satisfied so long as any failures of such representations and
warranties to be true and correct, taken together, would not reasonably be
expected to have a Material Adverse Effect on the Company), in the case of
each of
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(i) and (ii), as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by an executive
officer of the Company to such effect;
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect; and
(c) Tax Opinion. Parent shall have received the opinion of Mayer,
Brown & Platt, counsel to Parent, dated the Closing Date, to the effect
that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
each of Parent, Merger Sub and the Company will be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinions, such counsel may rely upon customary
representations and certificates of Parent, Merger Sub and the Company
reasonably satisfactory to such counsel.
7.3. Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) the representations and
warranties of Parent set forth in Sections 5.2(b), 5.2(c) and 5.2(g) of
this Agreement shall be true and correct in all material respects, and (ii)
the other representations and warranties of Parent and Merger Sub set forth
in this Agreement (x) to the extent qualified by Material Adverse Effect
and (y) to the extent not qualified by Material Adverse Effect shall be
true and correct (except that this clause (y) shall be deemed satisfied so
long as any failures of such representations and warranties to be true and
correct, taken together, would not reasonably be expected to have a
Material Adverse Effect on Parent), in the case of each of (i) and (ii), as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date), as of the
Closing Date as though made on and as of the Closing Date, and the Company
shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect;
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received a certificate
signed on behalf of Parent and Merger Sub by an executive officer of Parent
to such effect; and
(c) Tax Opinion. The Company shall have received the opinion of
Wachtell, Lipton, Rosen & Katz, counsel to the Company, dated the Closing
Date, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that each of Parent, Merger Sub and the Company will be a party
to that reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinions, such counsel may rely upon customary
representations and certificates of Parent, Merger Sub and the Company
reasonably satisfactory to such counsel.
ARTICLE VIII.
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 7.1(a), by mutual written consent of the Company and Parent, through
action of their respective Boards of Directors.
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8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (i)
the Merger shall not have been consummated prior to April 9, 2000 (the
"Termination Date"); provided, however, that either party shall have the option,
in its sole discretion, to extend the Termination Date for an additional period
of time not to exceed 90 days if all other conditions to consummation of the
Merger are satisfied or capable of then being satisfied and the sole reason that
the Merger has not been consummated by such date is that either (A) the
condition set forth in Section 7.1(c) has not been satisfied due to the failure
to obtain the necessary consents and approvals under applicable Competition Laws
and Parent or the Company are still attempting to obtain such necessary consents
and approvals under applicable Competition Laws or are contesting the refusal of
the relevant Governmental Entities to give such consents or approvals in court
or through other applicable proceedings, or (B) the condition set forth in
Section 7.1(d) has not been satisfied; (ii) the Company Stockholders Meeting
shall have been held and completed and the adoption of this Agreement by the
Company's stockholders referred to in Section 7.1(a) shall not have occurred;
(iii) the issuance of the aggregate Merger Consideration is required to be
approved by Parent's stockholders pursuant to the rules or listing policies of
the NYSE, the Parent Stockholders Meeting shall have been held and completed and
the approval of the issuance of the Merger Consideration pursuant to this
Agreement referred to in Section 7.1(a) shall not have occurred; or (iv) any
Order of a court of competent jurisdiction permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and non-
appealable (whether before or after the adoption or approval by the stockholders
of the Company or Parent); provided, that the right to terminate this Agreement
pursuant to clause (i) above shall not be available to any party that has
breached in any material respect its obligations under this Agreement in any
manner that shall have been the cause of, or resulted in, the failure of the
Merger to be consummated on or before the Termination Date.
8.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the adoption of this Agreement by the stockholders of the Company
referred to in Section 7.1(a), by action of the Board of Directors of the
Company:
(a) if there has been a material breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement
which (x) would result in a failure of a condition set forth in Section
7.3(a) or 7.3(b) and (y) cannot be or is not cured prior to the Termination
Date; or
(b) at any time prior to the adoption of this Agreement by the
Company's stockholders, by reason of a Superior Proposal; provided,
however, that the Company may not terminate this Agreement pursuant to this
Section 8.3(b) unless: (i) the Company shall have complied with Section
6.2; (ii) the Board of Directors of the Company shall have concluded in
good faith, prior to giving effect to all concessions which may be offered
the Company by Parent, that such proposal is a Superior Proposal; (iii) the
Company shall have (A) notified Parent in writing of its receipt of such
Superior Proposal, (B) further notified Parent in such writing that the
Company intends, not earlier than the fourth business day following such
notice, to enter into a binding agreement for such Superior Proposal and
(C) attached the most current written version of such Superior Proposal (or
a summary containing all material terms and conditions of such Superior
Proposal) to such notice; and (iv) during such four business day period,
the Company shall, and shall cause its respective financial and legal
advisors to, consider any adjustment in the terms and conditions of this
Agreement that Parent may propose; provided, further, that it shall be a
condition to termination pursuant to this Section 8.3(b) that the Company
shall have made the payment of the Termination Fee to Parent required by
Section 8.5(b).
8.4. Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the stockholders of the Company referred to in Section 7.1(a), by
action of the Board of Directors of Parent if:
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(a) the Board of Directors of the Company shall have withdrawn,
materially modified in a manner adverse to Parent or changed in a manner
adverse to Parent its approval or recommendation of this Agreement or the
Merger; or
(b) there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement
which (i) would result in a failure of a condition set forth in Section
7.2(a) or 7.2(b) and (ii) cannot be or is not cured prior to the
Termination Date.
8.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article VIII, this Agreement (other than as
set forth in Section 9.2) shall become void and of no effect with no
liability (other than as set forth in Section 8.5(b) or in the proviso at
the end of this sentence) on the part of any party to this Agreement or of
any of its directors, officers, employees, agents, legal or financial
advisors or other representatives; provided, however, that no such
termination shall relieve any party to this Agreement from any liability
resulting from any breach of this Agreement.
(b) In the event that (i) an Acquisition Proposal is publicly
announced and not withdrawn prior to the Company Stockholders Meeting, the
Board of Directors of the Company shall have withdrawn or materially
modified, in a manner adverse to Parent, its approval or recommendation of
this Agreement or the Merger and this Agreement is terminated by the
Company or Parent pursuant to Section 8.2(ii), (ii) this Agreement is
terminated by Parent pursuant to Section 8.4(a) (but with respect to
Section 8.4(a), only if the Board of Directors of the Company shall have
withdrawn its approval or recommendation of this Agreement or the Merger or
modified or changed that approval or recommendation to such an extent that
it is no longer approving or recommending this Agreement or the Merger),
(iii) an Acquisition Proposal is publicly announced and not withdrawn prior
to the Company Stockholders Meeting, this Agreement is terminated by the
Company or Parent pursuant to Section 8.2(ii) and within one year after
such termination the Company enters into a definitive agreement with
respect to an Acquisition Proposal or an Acquisition Proposal is
consummated, in either case with any Person or (iv) this Agreement is
terminated by the Company pursuant to Section 8.3(b), then the Company
shall pay Parent a fee equal to $75 million (the "Termination Fee"). In the
event of a termination by the Company described in clause (i) or (iv) of
the preceding sentence, the Termination Fee shall be payable by wire
transfer of same day funds as a condition precedent to such termination; in
the event the Termination Fee shall become payable pursuant to clause (iii)
of the preceding sentence, the Termination Fee shall be payable by wire
transfer of same day funds simultaneously with the execution of the
definitive agreement or the consummation of the Acquisition Proposal which
gives rise to the obligation to pay the Termination Fee; and in the event
of a termination by Parent described in clause (i) or (ii) of the preceding
sentence, the Termination Fee shall be payable by wire transfer of same day
funds promptly, but in no event later than two days after the date of such
termination of this Agreement. For purposes of this Section 8.5(b), the
definition of "Acquisition Proposal" shall be modified by changing all
references to "15%" to "50%." The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent
and Merger Sub would not enter into this Agreement. Accordingly, if the
Company fails to pay promptly the amount due pursuant to this Section
8.5(b), and, in order to obtain such payment, Parent or Merger Sub
commences a suit which results in a judgment against the Company for the
fee set forth in this paragraph (b), the Company shall pay to Parent or
Merger Sub its costs and expenses (including reasonable attorneys' fees) in
connection with such suit, together with interest on the amount of the fee
at the prime rate of Citibank N.A. in effect on the date such payment was
required to be made.
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ARTICLE IX.
MISCELLANEOUS AND GENERAL
9.1. Certain Definitions. Terms defined elsewhere in this Agreement shall
have the meanings set forth therein for all purposes of this Agreement, unless
otherwise specified to the contrary. The following terms shall have the
following meanings:
"Affiliates" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
"Competition Laws" includes the HSR Act, the European Community Merger
Control Regulation, and any other antitrust or competition Law of the United
States of America, the European Community or any other nation, province,
territory or jurisdiction which must be satisfied or complied with in order to
consummate and make effective the Merger.
"DGCL" means the Delaware General Corporation Law.
"Environmental Law" means any Law relating to: (A) the protection,
investigation or restoration of the environment or natural resources; (B) the
handling, use, presence, disposal, release or threatened release of any
Hazardous Substance; or (C) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property or notifications to
government agencies or the public in connection with any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or trade or business which,
together with the Company, is a member of a controlled group of Persons or a
group of trades or businesses under common control with the Company within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means U.S. generally accepted accounting principles.
"Hazardous Substance" means any substance that is listed, classified or
regulated pursuant to any Environmental Law, including any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, electromagnetic fields, microwave transmission,
radioactive materials or radon.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"IRS" means the Internal Revenue Service.
"Laws" means any law, statute, ordinance, regulation, judgment, order,
decree, injunction, license, authorization, opinion, agency requirement or
permit of any Governmental Entity or common law.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the financial condition, assets and liabilities (taken
together), or business of such Person and its Subsidiaries, taken as a whole,
provided, however, that none of the following shall be deemed to constitute and
shall not be taken into account in determining the occurrence of a Material
Adverse Effect with respect to a party: (i) any effect arising from or relating
to general business or economic conditions or financial market fluctuations or
conditions which do not affect such party in any materially disproportionate
manner, (ii) any effect relating to or affecting industries in which such
party's businesses operate generally; (iii) any effect arising from or relating
to changes in accounting rules or procedures announced by the Financial
Accounting Standards Board, or (iv) any effect arising from or relating to the
announcement of the Merger or a failure of a Person to achieve Year 2000
Compliance as a result of supplier, customer or third-party non-compliance.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals.
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"Person" means any individual, corporation (including not-for-profit),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, Governmental Entity (as defined in
Section 5.1(d)(i)) or other entity of any kind or nature.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Agreements" means (i) all Contracts required to be filed as
exhibits to the Company's Reports filed prior to the date hereof; (ii) all
Contracts reasonably expected to require the payment (whether by or to the
Company or any of its Subsidiaries) of $10,000,000 or more in the aggregate or
payments in any twelve-month period aggregating $2,000,000 or more; and (iii)
all Contracts between the Company and any of its Subsidiaries, on the one hand,
and any Affiliate of the Company, on the other hand excluding in each of clauses
(i), (ii) and (iii), Compensation and Benefit Plans.
"Significant Investees" means, with respect to any Person, Significant
Subsidiaries of such Person and any entity in which such Person has an equity
interest of 20% or more.
"Significant Subsidiaries" with respect to any Person has the meaning set
forth in Rule 1-02(w) of Regulation S-X promulgated pursuant to the Exchange
Act.
"Subsidiary" means, with respect to any Person, any entity, whether
incorporated or unincorporated, of which at least 50% of the stock, securities
or other ownership interests having by their terms ordinary voting power to
elect at least 50% of the Board of Directors or other persons performing similar
functions is directly or indirectly owned by such Person and "wholly-owned
subsidiary" shall include Subsidiaries which are wholly-owned except for
directors' qualifying shares.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions.
"Tax Return" means all federal, state, local and foreign returns and
reports (including elections, declarations, disclosures, schedules, estimates
and information returns) required to be supplied to a Tax authority relating to
Taxes.
9.2. Survival. Article II, Article III, Article IV and this Article IX and
the agreements of the Company, Parent and Merger Sub contained in Sections
6.7(b) (Affiliates), 6.10 (Benefits), 6.11 (Expenses), 6.12 (Indemnification;
Directors' and Officers' Insurance) and 6.15 (Tax-Free Reorganization) shall
survive the consummation of the Merger. This Article IX (other than Section 9.3
(Modification or Amendment), Section 9.4 (Waiver of Conditions) and Section 9.13
(Assignment)) and the agreements of the Company, Parent and Merger Sub contained
in Section 6.11 (Expenses), Section 6.13 (Takeover Statute), Section 6.14
(Confidentiality) and Section 8.5 (Effect of Termination and Abandonment) shall
survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.3. Modification or Amendment. Subject to the provisions of the applicable
law, at any time prior to the Effective Time, the parties to this Agreement may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.4. Waiver of Conditions.
(a) Any provision of this Agreement may be waived prior to the
Effective Time if, and only if, such waiver is in writing and signed by an
authorized representative or the party against whom the waiver is to be
effective.
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(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
Except as otherwise provided in this Agreement, the rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law. The payments required to be made to Parent
pursuant to Section 8.5(b) shall not prevent Parent from pursuing remedies
for breach of this Agreement or in tort if, prior to instituting any
proceeding in any court seeking such remedies, Parent shall reject such
payments and refund such payments to the Company in full, it being agreed
that a termination of this Agreement by the Company in accordance with
Section 8.3(b) and the taking of actions in accordance with Section 6.2
shall not constitute a breach of this Agreement.
9.5. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.6. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE
LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of the State
of Delaware and of the United States of America located in Wilmington,
Delaware (the "Delaware Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated by this
Agreement (and agree not to commence any litigation relating thereto except
in such Delaware Courts), waive any objection to the laying of venue of any
such litigation in the Delaware Courts and agree not to plead or claim in
any Delaware Court that such litigation brought therein has been brought in
an inconvenient forum.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.6.
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9.7. Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
when received if sent by facsimile, (ii) when delivered, if delivered personally
to the intended recipient, and (iii) one business day later, if sent by
overnight delivery via a national courier service, and in each case, addressed
to a party at the following address for such party:
If to Parent or Merger Sub:
Illinois Tool Works Inc.
3600 West Lake Avenue
Glenview, IL 60025-5811
Attention: Chief Executive Officer
Fax: (847) 657-4392
and
Illinois Tool Works Inc.
3600 West Lake Avenue
Glenview, IL 60025-5811
Attention: General Counsel
Fax: (847) 657-4392
with a copy to:
Scott J. Davis and James T. Lidbury
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Fax: (312) 701-7711
and if to the Company:
Premark International, Inc.
1717 Deerfield Road
Deerfield, IL 60015
Attention: Chief Executive Officer
Fax: (847) 405-6333
and
Premark International, Inc.
1717 Deerfield Road
Deerfield, IL 60015
Attention: General Counsel
Fax: (847) 405-6333
with a copy to:
Daniel A. Neff
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Fax: (212) 403-2000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.8. Entire Agreement. This Agreement (including any exhibits to this
Agreement), the Stock Option Agreement, the Confidentiality Agreement, the
Company Disclosure Letter and the Parent
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Disclosure Letter constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties with respect to the subject matter of this Agreement.
EACH PARTY TO THIS AGREEMENT AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT AND MERGER SUB NOR THE
COMPANY MAKES ANY REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY
OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR
OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.9. No Third Party Beneficiaries. Except as provided in Section 6.10(a),
Section 6.10(c) and Section 6.12, this Agreement is not intended to confer upon
any Person other than the parties to this Agreement any rights or remedies under
this Agreement.
9.10. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent (including, after the Effective Time, the
Surviving Corporation) to take any action, such requirement shall be deemed to
include an undertaking on the part of Parent to cause such Subsidiary to take
such action. Whenever this Agreement requires a Subsidiary of the Company to
take any action, such requirement shall be deemed to include an undertaking on
the part of the Company to cause such Subsidiary to take such action and, after
the Effective Time, on the part of the Surviving Corporation to cause such
Subsidiary to take such action.
9.11. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions of this Agreement.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.12. Interpretation. The table of contents and headings in this Agreement
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions of
this Agreement. Where a reference in this Agreement is made to a Section or
Exhibit, such reference shall be to a Section of or Exhibit to this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The definitions in this Agreement are applicable
to the singular as well as the plural forms of such terms.
9.13. Assignment. This Agreement shall not be assignable; provided,
however, that Parent may designate prior to the Effective Time, by written
notice to the Company, another wholly owned direct or indirect Subsidiary to be
a party to the Merger in lieu of Merger Sub, in which event all references in
this Agreement to Merger Sub shall be deemed references to such other Subsidiary
(except with respect to representations and warranties made in this Agreement,
with respect to Merger Sub as of the date of this Agreement) and all
representations and warranties made herein with respect to Merger Sub as of the
date of this Agreement shall also be made with respect to such other subsidiary
as of the date of such designation. Any assignment in contravention of the
preceding sentence shall be null and void.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties to this Agreement as of the date
first written above.
PREMARK INTERNATIONAL, INC.
By: /s/ JAMES M. RINGLER
----------------------------------
Name: James M. Ringler
Title:Chairman of the Board,
Chief
Executive Officer and
President
ILLINOIS TOOL WORKS INC.
By: /s/ W. JAMES FARRELL
----------------------------------
Name: W. James Farrell
Title:Chairman and Chief
Executive
Officer
CS MERGER SUB INC.
By: /s/ FRANK S. PTAK
----------------------------------
Name: Frank S. Ptak
Title: President
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EXHIBIT 1
FORM OF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of September 9, 1999 (this
"Agreement"), is between PREMARK INTERNATIONAL, INC., a Delaware corporation
("Issuer"), and ILLINOIS TOOLWORKS INC., a Delaware corporation ("Grantee").
RECITALS
A. The Merger Agreement. Prior to the entry into this Agreement and prior
to the grant of the Option (as defined in Section 1(a)), Issuer, Grantee, and CS
Merger Sub Inc., a wholly owned subsidiary of Grantee ("Merger Sub") have
entered into an Agreement and Plan of Merger, dated as of the date of this
Agreement (the "Merger Agreement"), pursuant to which Grantee and Issuer intend
to effect a merger of Merger Sub with and into Issuer (the "Merger").
B. The Stock Option Agreement. As an inducement and condition to Grantee's
and Merger Sub's willingness to enter into the Merger Agreement, and in
consideration thereof, the board of directors of Issuer has approved the grant
to Grantee of the Option pursuant to this Agreement and the acquisition of
Common Stock (as defined below) by Grantee pursuant to this Agreement; provided,
that such grant was expressly conditioned upon, and made of no effect until
after, execution and delivery by Issuer, Grantee and Merger Sub of the Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this Agreement and in the Merger Agreement, the
parties agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an irrevocable option
(the "Option") to purchase, subject to the terms and conditions of this
Agreement, up to 12,203,694 fully paid and nonassessable shares of common stock,
$1.00 par value per share ("Common Stock"), of Issuer at a price per share in
cash equal to $34.06 (the "Option Price"); provided, however, that in no event
shall the number of shares for which the Option is exercisable exceed 19.9% of
the shares of Common Stock issued and outstanding at the time of exercise
(without giving effect to the shares of Common Stock issued or issuable under
the Option) (the "Maximum Applicable Percentage"). The number of shares of
Common Stock purchasable upon exercise of the Option and the Option Price are
subject to adjustment as set forth in this Agreement.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the aggregate number of shares of Common Stock
purchasable upon exercise of the Option (inclusive of shares, if any, previously
purchased upon exercise of the Option) shall automatically be increased (without
any further action on the part of Issuer or Grantee being necessary) so that,
after such issuance, it equals the Maximum Applicable Percentage. Any such
increase shall not affect the Option Price.
2. Exercise; Closing. (a) Conditions to Exercise; Termination. Grantee
(sometimes referred to as the "Holder") may exercise the Option, in whole or in
part, by delivering a written notice thereof as provided in Section 2(d) within
135 days following the occurrence of a Triggering Event (as defined in Section
2(b)) unless prior to such Triggering Event the Effective Time (as defined in
the Merger Agreement) shall have occurred or the Option shall have terminated in
accordance with the following sentence. If no notice pursuant to the preceding
sentence has been delivered prior thereto, the Option shall terminate upon
either (i) the occurrence of the Effective Time or (ii) the close of business on
the earlier of (x) the day 135 days after the date that Grantee becomes entitled
to receive the Termination Fee (as defined in the Merger Agreement) under
Section 8.5(b) of the Merger Agreement and (y) the date that
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Grantee is no longer potentially entitled to receive the Termination Fee under
Section 8.5(b) of the Merger Agreement for a reason other than that Grantee has
already received the Termination Fee.
(b) Triggering Event. A "Triggering Event" shall have occurred if the
Merger Agreement is terminated and Grantee shall have become entitled to receive
the Termination Fee pursuant to Section 8.5(b) of the Merger Agreement.
(c) Notice of Triggering Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If the Holder shall be entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which is referred to in this Agreement as the "Notice Date") specifying
(i) the total number of shares that the Holder will purchase pursuant to such
exercise and (ii) a place and date (a "Closing Date") not earlier than three
business days nor later than 20 business days from the Notice Date for the
closing of such purchase (a "Closing"); provided, that if the Closing cannot be
effected by reason of the application of any laws, (x) the Holder or Issuer, as
required, promptly after the giving of such notice shall file the required
notice, report, filing or application for approval and shall expeditiously
process the same and (y) the Closing Date shall be extended to not later than
the tenth business day following the expiration or termination of the
restriction imposed by such law. Each of the Holder and the Issuer agrees to use
its reasonable best efforts to cooperate with and provide information to Issuer
or Holder, as the case may be, for the purpose of any required notice, report,
filing or application for approval.
(e) Payment of Purchase Price. At each Closing, the Holder shall pay to
Issuer the aggregate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Issuer; provided, that failure or
refusal of Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously with the
payment of the purchase price by the Holder, Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option shall be exercised in part only, a
new Option evidencing the rights of the Holder to purchase the balance (as
adjusted pursuant to Section 1(b)) of the shares of Common Stock then
purchasable under this Agreement and the Holder shall deliver to the Company its
written agreement that the Holder will not offer to sell or otherwise dispose of
such shares of Common Stock in violation of law or this Agreement.
(g) Restrictive Legend. Certificates for Common Stock delivered at a
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and pursuant to the terms of a Stock Option Agreement dated as of
September 9, 1999. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by the Company of a written request
therefor."
It is understood and agreed that the above legend shall be removed, insofar as
it refers to the Securities Act of 1933, by delivery of substitute
certificate(s) without such reference to the Securities Act of 1933 if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such reference
is not required for purposes of the Securities Act of 1933, as amended (the
"Securities Act"). In addition, such certificates shall bear any other legend as
may be required by applicable law.
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3. Covenants of Issuer. In addition to its other agreements and covenants
in this Agreement, Issuer agrees:
(a) Shares Reserved for Issuance. It will maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock to issue the appropriate number of shares of Common Stock
pursuant to the terms of this Agreement so that the Option may be fully
exercised without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other
rights of third parties to purchase shares of Common Stock from Issuer.
(b) No Avoidance. It will not avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger,
issuance of rights, dissolution or sale of assets, or by any other
voluntary act) the observance or performance of any of the covenants,
agreements or conditions to be observed or performed under this Agreement
by Issuer.
(c) Further Assurances. After the date of this Agreement, it will
promptly take all actions as may from time to time be required (including
(i) complying with all applicable premerger notification, reporting and
waiting period requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended and (ii) in the event that prior
notice, report, filing or approval with respect to any Governmental Entity
is necessary under any applicable foreign or United States federal, state
or local law before the Option may be exercised, cooperating fully with the
Holder in preparing and processing the required applications or notices) in
order to permit each Holder to exercise the Option and purchase shares of
Common Stock pursuant to such exercise subject to the terms and conditions
hereof.
(d) Stock Exchange Listing. It will use its reasonable best efforts to
cause the shares of Common Stock to be issued pursuant to the Option to be
approved for listing (to the extent they are not already listed) on the New
York Stock Exchange ("NYSE"), if the Common Stock is then listed on the
NYSE, and on all other stock exchanges on which shares of Common Stock of
the Issuer are then listed, subject to official notice of issuance.
4. Representations and Warranties of Issuer. Issuer represents and warrants
to Grantee as follows:
(a) Merger Agreement. Issuer hereby makes each of the representations
and warranties contained in Section 5.1(a), (b), (c), (d), (j) and (s) of
the Merger Agreement to the extent they relate to Issuer and this
Agreement, as if such representations were set forth in this Agreement.
(b) Shares Reserved for Issuance; Capital Stock. Issuer has taken all
necessary corporate action to authorize and reserve, free from preemptive
rights, and permit it to issue, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be fully exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Common Stock from Issuer, and all such
shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free
and clear of all claims, liens, encumbrances, and security interests (other
than those created by this Agreement) and not subject to any preemptive
rights.
5. Representations and Warranties of Grantee. Grantee hereby makes each of
the representations and warranties contained in Section 5.2(a), (c) and (d) of
the Merger Agreement to the extent they relate to the Grantee and this
Agreement, as if such representations were set forth in this Agreement.
6. Exchange; Replacement. This Agreement and the Option granted by this
Agreement are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable at such time under this Agreement, subject to
corresponding adjustments in the number of shares of Common Stock purchasable
upon exercise so that the aggregate number of such shares under all stock option
agreements issued in respect of this Agreement shall not exceed the
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Maximum Applicable Percentage. Unless the context shall require otherwise, the
terms "Agreement" and "Option" as used in this Agreement include any stock
option agreements and related Options for which this Agreement (and the Option
granted by this Agreement) may be exchanged. Upon (i) receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction of this
Agreement, or mutilation of this Agreement, (ii) receipt by Issuer of reasonably
satisfactory indemnification in the case of loss, theft or destruction of this
Agreement and (iii) surrender and cancellation of this Agreement in the case of
mutilation, Issuer will execute and deliver a new Agreement of like tenor and
date.
7. Adjustments. In addition to the adjustment to the total number of shares
of Common Stock purchasable upon exercise of the Option pursuant to Section
1(b), the total number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as follows:
In the event of any change in the outstanding shares of Common Stock
by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like,
the type and number of shares of Common Stock purchasable upon exercise of
the Option, and the Option Price therefor, shall be appropriately adjusted,
and proper provision shall be made in the agreements governing any such
transaction, so that (i) any Holder shall receive upon exercise of the
Option the number and class of shares, other securities, property or cash
that such Holder would have received in respect of the shares of Common
Stock purchasable upon exercise of the Option if the Option had been
exercised and such shares of Common Stock had been issued to such Holder
immediately prior to such event or the record date therefor, as applicable,
and (ii) in the event any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares of
Common Stock purchasable upon exercise of the Option shall be increased so
that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on
account of any of the foregoing changes in the Common Stock), the number of
shares so purchasable equals the Maximum Applicable Percentage of the
number of shares of Common Stock issued and outstanding immediately after
the consummation of such change.
8. Registration. (a) Upon the occurrence of a Triggering Event, Issuer
shall, at the request of Grantee delivered in the written notice of exercise of
the Option provided for in Section 2(d), as promptly as practicable prepare,
file and keep current a shelf registration statement under the Securities Act
covering any or all shares issued and issuable pursuant to the Option and shall
use its reasonable best efforts to cause such registration statement to become
and remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
permit the sale or other disposition of any shares of Common Stock issued upon
total or partial exercise of the Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee; provided, however, that Issuer may
suspend filing of or maintaining the effectiveness of a registration statement
relating to a registration request by Grantee under this Section 8 for a period
of time (not in excess of 60 days in the aggregate) if in its judgment such
filing of such registration statement or the maintenance of its effectiveness
would require the disclosure of nonpublic information that Issuer has a good
faith business purpose for preserving as confidential. Subject to the foregoing,
Issuer will use its reasonable best efforts to cause such registration statement
to become effective as soon as practicable. In connection with any such
registration, Issuer and Grantee shall provide each other with representations,
warranties, indemnities and other agreements customarily given in connection
with such registrations. If requested by Grantee in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating Issuer in
respect of representations, warranties, indemnities, contribution and other
agreements customarily made by issuers in such underwriting agreements.
(b) To the extent consistent with the other provisions hereof, in the event
that Grantee so requests, the closing of the sale or other disposition of the
Common Stock or other securities pursuant to a registration statement filed
pursuant to Section 8(a) shall occur substantially simultaneously with the
exercise of the Option.
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(c) Notwithstanding any other provision hereof, any request for
registration shall permit the Issuer, upon written notice given within 30 days
of the request for registration, to repurchase from the Grantee any shares as to
which the Grantee requests registration at a price per share equal to the
average of the closing price per share of Common Stock on the NYSE as reported
in the Wall Street Journal, New York City edition, on the twenty NYSE trading
days ending on the second business day prior to the date Issuer notifies the
Grantee of its decision to so repurchase.
9. Repurchase of Option and/or Shares. (a) Repurchase; Repurchase
Price. Upon the occurrence of a Triggering Event, (i) at the request of a
Holder, delivered in writing within 135 days of such occurrence (or such later
period as provided in Section 2(d) with respect to any required notice or
application or in Section 12), Issuer shall repurchase the Option from the
Holder, in whole or in part, at a price (the "Option Repurchase Price") equal to
the number of shares of Common Stock then purchasable upon exercise of the
Option (or such lesser number of shares as may be designated in the repurchase
notice) multiplied by the amount by which the market/offer price (as defined
below) exceeds the Option Price and (ii) at the request of a Holder, delivered
in writing within 135 days of such occurrence (or such later period as provided
in Section 2(d) with respect to any required notice or application or in Section
12), Issuer shall repurchase such number of Option Shares from such Holder as
the Holder shall designate in the Repurchase Notice at a price (the "Option
Share Repurchase Price") equal to the number of shares designated multiplied by
the market/offer price. The term "market/offer price" shall mean the highest of
(x) the price per share of Common Stock at which a tender or exchange offer for
Common Stock has been made during the term of the Option, (y) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer with respect to a Business Combination Transaction (defined below)
and (z) the highest trading price for shares of Common Stock on the NYSE (or, if
the Common Stock is not then listed on the NYSE, any other national securities
exchange or automated quotation system on which the Common Stock is then listed
or quoted) within the six-month period immediately preceding the delivery of the
repurchase notice. In the event that a tender or exchange offer is made for the
Common Stock or an agreement is entered into for a merger, share exchange,
consolidation or reorganization involving consideration other than cash, the
value of the securities or other property issuable or deliverable in exchange
for the Common Stock shall (I) if such consideration is in securities and such
securities are listed on a national securities exchange, be determined to be the
highest trading price for such securities on such national securities exchange
within the six month period immediately preceding the delivery of the repurchase
notice or (II) if such consideration is not securities, or if in securities and
such securities are not traded on a national securities exchange, be determined
in good faith by a nationally recognized investment banking firm selected by an
investment banking firm designated by Grantee and an investment banking firm
designated by Issuer. "Business Combination Transaction" shall mean (i) a
consolidation, exchange of shares or merger of Issuer with any Person, other
than the Grantee or one of its subsidiaries, and, in the case of a merger, in
which Issuer shall not be the continuing or surviving corporation, (ii) a merger
of Issuer with a Person, other than the Grantee or one of its Subsidiaries, in
which Issuer shall be the continuing or surviving corporation but the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of Issuer or any other Person or cash or any other property
or the shares of Common Stock outstanding immediately before such merger shall
after such merger represent less than 50% of the common shares and common share
equivalents of Issuer outstanding immediately after the merger or (iii) a sale,
lease or other transfer of all or substantially all the assets of Issuer to any
Person, other than the Grantee or one of its Subsidiaries.
(b) Method of Repurchase. A Holder may exercise its right to require Issuer
to repurchase the Option, in whole or in part, and/or any Option Shares then
owned by such Holder pursuant to this Section 9 by surrendering for such purpose
to Issuer, at its principal office, this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating that
the Holder elects to require Issuer to repurchase the Option and/or such Option
Shares in accordance with the provisions of this Section 9. As promptly as
practicable, and in any event within three business days after the surrender of
the Option and/or certificates representing Option Shares and the receipt of the
repurchase notice relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the applicable Option
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Repurchase Price and/or the Option Share Repurchase Price subject to receipt by
Issuer of a certificate executed by the Holder containing representations and
warranties that, immediately prior to the repurchase thereof pursuant to this
Section 9, the Holder had sole record and beneficial ownership of the Option or
the Option Shares, or both, as the case may be, and that, other than pursuant to
this Agreement, the Option or the Option Shares, or both, as the case may be,
were held free and clear of all material liens. Any Holder shall have the right
to require that the repurchase of Option Shares shall occur immediately after
the exercise of all or part of the Option. In the event that the repurchase
notice shall request the repurchase of the Option in part, Issuer shall deliver
with the Option Repurchase Price a new Stock Option Agreement evidencing the
right of the Holder to purchase that number of shares of Common Stock
purchasable pursuant to the Option at the time of delivery of the repurchase
notice minus the number of shares of Common Stock represented by that portion of
the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase. To the
extent that, upon or following the delivery of a repurchase notice, Issuer is
prohibited under applicable law or regulation from repurchasing the Option (or
portion thereof) and/or any Option Shares subject to such repurchase notice (and
Issuer will undertake to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), Issuer shall immediately so
notify the Holder in writing and thereafter deliver or cause to be delivered,
from time to time, to the Holder the portion of the Option Repurchase Price and
the Option Share Repurchase Price that Issuer is no longer prohibited from
delivering, within two business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Issuer in writing of
such prohibition, the Holder may, within five days of receipt of such
notification from Issuer, revoke in writing its repurchase notice, whether in
whole or to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder that portion of the Option Repurchase
Price and/or the Option Share Repurchase Price that Issuer is not prohibited
from delivering; and (ii) deliver to the Holder, as appropriate, (A) with
respect to the Option, a new Stock Option Agreement evidencing the right of the
Holder to purchase that number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of delivery of
the Repurchase Notice less the number of shares as to which the Option
Repurchase Price has theretofore been delivered to the Holder, and/or (B) with
respect to Option Shares, a certificate for the Option Shares as to which the
Option Share Repurchase Price has not theretofore been delivered to the Holder.
Notwithstanding anything to the contrary in this Agreement, including, without
limitation, the time limitations on the exercise of the Option, the Holder may
give notice of exercise of the Option for 135 days after a notice of revocation
has been issued pursuant to this Section 9(c) and thereafter exercise the Option
in accordance with the applicable provisions of this Agreement.
(d) Acquisition Transactions. In addition to any other restrictions or
covenants, Issuer agrees that, in the event that a Holder delivers a repurchase
notice, Issuer shall not enter or agree to enter into an agreement or series of
agreements relating to a merger with or into or the consolidation with any other
person or entity, the sale of all or substantially all of the assets of Issuer
or any similar disposition unless the other party or parties to such agreement
or agreements agree to assume in writing Issuer's obligations under Section 9(a)
and, notwithstanding any notice of revocation delivered pursuant to the proviso
to Section 9(c), a Holder may require such other party or parties to perform
Issuer's obligations under Section 9(a) unless such party or parties are
prohibited by law or regulation from such performance, in which case such party
or parties shall be subject to the obligations of the Issuer under Section 9(c).
10. Repurchase at the Option of the Company.
(a) To the extent the Grantee shall not have previously exercised its
rights under Section 9, at the written request of Issuer made at any time
during the 135-day period commencing at the expiration of the 135-day
periods for exercise of rights under Section 9 (the "Call Period"), Issuer
may repurchase from the Holder, and the Holder shall sell, or cause to be
sold to Issuer, three-quarters (but not less than three-quarters) of the
shares of Common Stock acquired by the Holder pursuant hereto and with
respect to which the Holder has ownership at the time of such repurchase at
a price per share equal to the greater of (A) the market/offer price (as
defined in Section 9, except
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all references to any repurchase notice shall instead be to the written
request made by Issuer pursuant to this Section 10(a)) and (B) the Option
Price per share in respect of the shares so acquired (the higher of such
per share prices in (A) and (B) multiplied by the number of shares of
Common Stock to be repurchased pursuant to this Section 10 being herein
called the "Call Consideration"). The date on which the Company exercises
its rights under this Section 10 is referred to as the "Call Date."
(b) If the Company exercises its rights under this Section 10, Issuer
shall, within three business days pay the Call Consideration in immediately
available funds and the Holder shall surrender to Issuer certificates
evidencing the shares of Common Stock purchased hereunder, and the Holder
shall warrant to Issuer that, immediately prior to the repurchase thereof
pursuant to this Section 10, the Holder had sole record and beneficial
ownership of such shares and that such shares were then held free and clear
of all material liens.
(c) To the extent that the Holder shall exercise the Option, the
Holder shall, unless the Holder shall exercise its rights under Section 9
to cause the repurchase of the Option Shares, or Issuer shall exercise its
rights to repurchase the Option Shares under this Section 10, retain sole
ownership of the Option Shares acquired through the end of the Call Period.
11. First Refusal. Subject to the provisions of Sections 9 and 10 herein,
at any time after the first occurrence of a Triggering Event and prior to the
second anniversary of the first purchase of shares of Common Stock pursuant to
the Option, if the Holder shall desire to sell, assign, transfer or otherwise
dispose of all or any of the Option Shares or other securities acquired by it
pursuant to the Option, it shall give Issuer written notice of the proposed
transaction (an "Offeror's Notice"), identifying the proposed transferee,
accompanied by a copy of a binding offer to purchase such shares or other
securities signed by such transferee and setting forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer by the Holder to
Issuer, which may be accepted, in whole but not in part, within 20 business days
of the receipt of such Offeror's Notice, on the same terms and conditions and at
the same price at which Issuer is proposing to transfer such shares or other
securities to such transferee. The purchase of any such shares or other
securities by Issuer shall be settled within 20 business days of the date of the
acceptance of the offer and the purchase price shall be paid to the Holder in
immediately available funds. If Issuer shall fail or refuse to purchase all the
shares or other securities covered by an Offeror's Notice, the Holder may,
within 60 days from the date of the Offeror's Notice, sell all, but not less
than all, of such shares or other securities to the proposed transferee at no
less than the price specified and on terms no more favorable than those set
forth in the Offeror's Notice; provided, however, that the provisions of this
sentence shall not limit the rights the Holder may otherwise have if Issuer has
accepted the offer contained in the Offeror's Notice and wrongfully refuses to
purchase the shares or other securities subject thereto. The requirements of
this Section 11 shall not apply to (a) any disposition as a result of which the
proposed transferee would own beneficially not more than 2% of the outstanding
voting power of Issuer, (b) any disposition of Common Stock or other securities
by a Person to whom the Holder has assigned its rights under the Option with the
consent of Issuer, (c) any sale by means of a public offering registered under
the Securities Act or (d) any transfer to a wholly owned subsidiary of the
Holder which agrees in writing to be bound by the terms hereof.
12. Extension of Exercise Periods. The 135-day periods for exercise of
certain rights under Sections 2 and 9 shall be extended in each such case at the
request of the Holder to the extent necessary to avoid liability by the Holder
under Section 16(b) of the Securities Exchange Act of 1934, as amended ("Section
16(b)"), by reason of such exercise. Furthermore, in the event the Company
exercises its rights under Section 10, the Holder may defer the Call Date to the
extent necessary to avoid liability by the Holder under Section 16(b).
13. Assignment. Neither party may assign any of its rights or obligations
under this Agreement or the Option to any other person without the express
written consent of the other party. Any attempted assignment in contravention of
the preceding sentence shall be null and void.
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14. Filings; Other Actions. The parties hereto will use their reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary for the consummation of the
transactions contemplated by this Agreement.
15. Specific Performance. The parties acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be specifically enforceable through injunctive
or other equitable relief.
16. Severability. If any term, provision, covenant, or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants, and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Sections 9, 10 or 11 the full number of
shares of Common Stock provided in Section 1(a) of this Agreement (as adjusted
pursuant to Sections 1(b) and 7 of this Agreement), it is the express intention
of Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification of this Agreement.
17. Notices. Notices, requests, instructions or other documents to be given
under this Agreement shall be in writing and shall be deemed given, (i) when
received, if sent by facsimile, (ii) when delivered, if delivered personally to
the intended recipient, and (iii) one business day later, if sent by overnight
delivery via a national courier service, in each case at the respective
addresses of the parties set forth in the Merger Agreement.
18. Expenses. Except as otherwise expressly provided in this Agreement or
in the Merger Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expense, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
19. Entire Agreement. This Agreement, the Confidentiality Agreement (as
defined in the Merger Agreement) and the Merger Agreement constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties, with
respect to the subject matter of this Agreement. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns. Nothing in this Agreement is
intended to confer upon any person or entity, other than the parties to this
Agreement, and their respective successors and permitted assigns, any rights or
remedies under this Agreement.
20. Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects
shall be interpreted, construed and governed by and in accordance with
Delaware law without regard to the conflict of law principles thereof. The
parties irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts")
for any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware
Courts and agree not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS
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CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 20.
21. Captions. The Section and paragraph captions in this Agreement are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions of this
Agreement.
22. Limitation on Profit. (a) Notwithstanding any other provisions of this
Agreement including, without limitation, Sections 8, 9, 10 and 11 hereof, in no
event shall the Grantee's Total Profit (as defined herein) exceed in the
aggregate $30 million (the "Maximum Amount") and, if it otherwise would exceed
such amount, the Grantee, at its sole election, shall either: (i) reduce the
number of shares of Common Stock subject to this Option; (ii) deliver to the
Issuer for cancellation Option Shares previously purchased by Grantee; (iii) pay
cash to the Issuer; or (iv) any combination thereof, so that Grantee's Total
Profit shall not exceed the Maximum Amount taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) which would exceed the
Maximum Amount; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date if such exercise
would not then be restricted by this Section 22(b).
(c) As used in this Agreement, the "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i)(x) the amount received by Grantee or
concurrently being paid to Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) or any Option Shares pursuant to Sections 9, 10 or 11
less, in the case of any repurchase of Option Shares, (y) the Grantee's purchase
price for such Option Shares, as the case may be and (ii)(x) the amounts
received by Grantee or concurrently being paid to Grantee pursuant to the sale
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to the Issuer or any other Person (as defined in the
Merger Agreement) including sales made pursuant to a registration statement or
an exemption therefrom, less (y) the Grantee's purchase price for such Option
Shares.
(d) As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposal
assuming that the Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions) and including all amounts
theretofore received or concurrently being paid to Grantee pursuant to clauses
(i) and (ii) of the definition of Total Profit.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties as of the day and year first written
above.
PREMARK INTERNATIONAL, INC.
By:
----------------------------------
Name: James M. Ringler
Title: Chairman of the Board, Chief
Executive Officer and
President
ILLINOIS TOOL WORKS INC.
By:
----------------------------------
Name: W. James Farrell
Title: Chairman and Chief Executive
Officer
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<PAGE> 127
EXHIBIT 6.7(A)
FORM OF COMPANY STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of , 1999 (this
"Agreement") is between Illinois Tool Works Inc., a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of Premark
International, Inc., a Delaware corporation (the "Company"). Capitalized terms
not otherwise defined in this Agreement have the meanings ascribed to them in
the Merger Agreement (as defined below).
RECITALS
A. Parent and the Company have entered into an Agreement and Plan of
Merger, dated as of September 9, 1999 (the "Merger Agreement"), pursuant to
which CS Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary
of Parent ("Merger Sub"), will merge with and into the Company (the "Merger"),
with the Company surviving the Merger and becoming a wholly owned subsidiary of
Parent;
B. Pursuant to the Merger Agreement, at the Effective Time, outstanding
shares of Company Common Stock, including any Company Common Stock owned by
Stockholder, will be converted into the right to receive shares of Parent Common
Stock;
C. It is a condition to each party's obligation to effect the Merger that
(i) legal counsel to the Company and Parent shall have delivered their
respective opinions to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and Parent, Merger Sub and the Company each
will be a party to the reorganization within the meaning of Section 368(b) of
the Code, (ii) Parent shall have received a letter from its independent public
accounting firm to the effect that the Merger should qualify for "pooling-of-
interests" accounting treatment and (iii) the Company shall have received a
letter from its independent public accounting firm to the effect that the
Company is a poolable entity;
D. The execution and delivery of this Agreement by Stockholder is a
material inducement to Parent and the Company to enter into the Merger
Agreement; and
E. Stockholder has been advised that Stockholder may be deemed to be an
"affiliate" of the Company, as such term is used (i) for purposes of paragraphs
(c) and (d) of Rule 145 of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), or (ii)
in the Commission's Accounting Series Releases 130 and 135, as amended, although
nothing contained herein shall be construed as an admission by Stockholder that
Stockholder is in fact an affiliate of the Company.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Acknowledgments by Stockholder. Stockholder acknowledges and understands
that the representations, warranties and covenants made by Stockholder set forth
in this Agreement will be relied upon by Parent, the Company and their
respective affiliates, counsel and accounting firms, and that substantial losses
and damages may be incurred by such persons if Stockholder's representations,
warranties or covenants are breached. Stockholder has carefully read this
Agreement and the Merger Agreement and has consulted with such legal counsel and
financial advisers as Stockholder has deemed appropriate in connection with the
execution of this Agreement.
2. Compliance with Rule 145 and the Act.
(a) Stockholder has been advised that (i) the issuance of shares of
Parent Common Stock in connection with the Merger is expected to be
effected pursuant to a Registration Statement filed by Parent on Form S-4,
and the resale of such shares will be subject to the restrictions set forth
in Rule 145 under the Act unless such shares are otherwise transferred
pursuant to an effective registration statement under the Act or an
appropriate exemption from registration, and
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(ii) Stockholder may be deemed to be an affiliate of the Company, although
nothing contained herein shall be construed as an admission by Stockholder
that Stockholder is an affiliate of the Company. Stockholder agrees not to
sell, pledge, transfer or otherwise dispose of any shares of Parent Common
Stock issued to Stockholder in the Merger unless (i) such sale, pledge,
transfer or other disposition is made in conformity with the requirements
of Rule 145 under the Act, (ii) such sale, pledge, transfer or other
disposition is made pursuant to an effective registration statement under
the Act, or (iii) Stockholder delivers to Parent a written opinion of
counsel, in form and substance reasonably acceptable to Parent, or a
"no-action" letter obtained from the staff of the Commission, to the effect
that such sale, pledge, transfer or other disposition is otherwise exempt
from registration under the Act.
(b) Parent will give stop transfer instructions to its transfer agent
with respect to any Parent Common Stock received by Stockholder pursuant to
the Merger, and there will be placed on the certificates representing such
Parent Common Stock, or any substitutions therefor, legends stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO
A BUSINESS COMBINATION WHICH IS BEING ACCOUNTED FOR AS A POOLING OF
INTERESTS, IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES, AND MAY ONLY BE TRANSFERRED IN
CONFORMITY WITH RULE 145, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL,
REASONABLY ACCEPTABLE TO THE ISSUER, IN FORM AND SUBSTANCE TO THE EFFECT
THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933. SUCH SHARES MAY NOT BE TRANSFERRED UNTIL SUCH TIME AS PARENT
SHALL HAVE PUBLISHED FINANCIAL RESULTS COVERING AT LEAST 30 DAYS OF
COMBINED OPERATIONS FOLLOWING THE MERGER WITH THE COMPANY."
and
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED,
SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH THE REQUIREMENTS OF THE CONDITIONS SPECIFIED IN THE STOCKHOLDER
AGREEMENT DATED AS OF , 1999 BETWEEN THE HOLDER OF THIS
CERTIFICATE AND PARENT, A COPY OF WHICH AGREEMENT MAY BE INSPECTED BY
THE HOLDER OF THIS CERTIFICATE AT THE PRINCIPAL OFFICES OF PARENT OR
FURNISHED BY PARENT TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN
REQUEST AND WITHOUT CHARGE."
The legends set forth above shall be removed (by delivery of a substitute
certificate without such legends), and Parent shall promptly so instruct its
transfer agent, if a registration statement respecting the sale of the shares
has been declared effective under the Act or if Parent is provided (i)
satisfactory written evidence that the shares have been sold in compliance with
Rule 145 (in which case, the substitute certificate will be issued in the name
of the transferee), (ii) an opinion of counsel, in form and substance reasonably
acceptable to Parent, or (iii) a "no-action" letter obtained from the staff of
the Commission to the effect that sale of the shares by the holder thereof is no
longer subject to Rule 145 or Stockholder was not at the time of the Merger an
affiliate of the Company.
3. Covenants Related to Pooling of Interests.
(a) During the period beginning on the date 30 days prior to the
Closing Date (as defined in the Merger Agreement) and ending on the day
after Parent has published (within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies) financial
results covering at least 30 days of combined operations following the
Merger of Parent and the Company
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(the "Restricted Period"), Stockholder will not sell, exchange, transfer,
pledge, distribute or otherwise dispose of or grant any option, establish
any "short" or "put"-equivalent position with respect to or enter into any
similar transaction (through derivatives or otherwise) intended to have or
having the effect, directly or indirectly, or reducing its risk relative to
(i) any shares of Company Common Stock owned by Stockholder or (ii) any
shares of Parent Common Stock received by Stockholder in connection with
the Merger. The parties acknowledge that sales of Parent Common Stock
issuable on exercise of stock options solely to provide for payment of the
exercise price of such stock options simultaneously with the exercise of
such stock options shall not constitute such reduction of relative risk.
The foregoing does not cover withholding taxes, which would constitute a
reduction of risk.
(b) Notwithstanding anything to the contrary contained in Section
3(a), Stockholder will be permitted, during the Restricted Period, (ii) to
sell, exchange, transfer, pledge, distribute or otherwise dispose of or
grant any option, establish any "short" or "put"-equivalent position with
respect to or enter into any similar transaction (through derivatives or
otherwise) intended to have or having the effect, directly or indirectly,
of reducing its risk relative to any shares of Company Common Stock or
Parent Common Stock received by Stockholder in connection with the Merger
(a "Transfer") equal to the lesser of (A) 10% of the Company Common Stock,
or equivalent post-Merger Parent Common Stock, owned by Stockholder and (B)
Stockholder's pro rata portion of 1% of the total number of outstanding
shares of Company Common Stock, or equivalent post-Merger Parent Common
Stock, owned by Stockholder and all other stockholders of the Company (in
each of clause (A) and clause (B) above as measured as of the date of such
Transfer and subject to confirmation of such calculation by Parent), and
(ii) to make bona fide charitable contributions or gifts of such
securities; provided, however, that the transferee(s) of such charitable
contributions or gifts agree(s) in writing to hold such securities for the
period specified in Section 3(a).
4. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties and their respective successors
and assigns. As used in this Agreement, the term "successors and assigns"
means, where the context so permits, heirs, executors, administrators,
trustees and successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects
shall be interpreted, construed and governed by and in accordance with
Delaware law without regard to the conflict of law principles thereof. The
parties irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts")
for any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware
Courts and agree not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void, or unenforceable, the remainder
of the terms, provisions, covenants, and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated.
(e) Counsel to and accountants for the parties to the Merger Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
waived or any obligations excused, except by a written agreement signed by
both parties.
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(g) Notwithstanding any other provision contained in this Agreement,
this Agreement and all obligations under this Agreement shall terminate
upon the termination of the Merger Agreement in accordance with its terms.
(h) From and after the Effective Time of the Merger and as long as is
necessary in order to permit Stockholder to sell Parent Common Stock held
by Stockholder pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Parent will file on a timely basis all reports required to
be filed by it pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as the same shall be in effect at
the time, and shall otherwise make available adequate public information
regarding Parent in such manner as may be required to satisfy the
requirements of paragraph (c) of Rule 144 under the Act.
IN WITNESS WHEREOF, this Agreement is executed as of the date first stated
above.
ILLINOIS TOOL WORKS INC.
a Delaware corporation
By:
----------------------------------
Name:
Title:
STOCKHOLDER
By:
----------------------------------
Name:
Name of Signatory
(if different from name of
Stockholder):
------------------------------------
Title of Signatory
(if applicable): ________
Number of Shares Owned: ________
Number of Shares Issuable upon
Exercise of Stock Options: ________
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<PAGE> 131
EXHIBIT 6.7(B)
FORM OF PARENT STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of , 1999 (this
"Agreement"), is by and between Illinois Tool Works Inc., a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of Parent.
Capitalized terms not otherwise defined in this Agreement have the meanings
ascribed to them in the Merger Agreement (as defined below).
RECITALS
A. Parent and Premark International, Inc., a Delaware corporation (the
"Company"), have entered into an Agreement and Plan of Merger, dated as of
September 9, 1999 (the "Merger Agreement"), pursuant to which CS Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), will merge with and into the Company (the "Merger"), with the Company
surviving the Merger and becoming a wholly owned subsidiary of Parent;
B. It is a condition to the effectiveness of the Merger that (i) legal
counsel to Parent and the Company shall have delivered their respective opinions
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and Parent, Merger Sub and the Company each will be a party to the
reorganization within the meaning of Section 368(b) of the Code, (ii) Parent
shall have received a letter from its independent public accounting firm to the
effect that the Merger should qualify for "pooling-of-interests" accounting
treatment and (iii) the Company shall have received a letter from its
independent public accounting firm to the effect that the Company is a poolable
entity;
C. The execution and delivery of this Agreement by Stockholder is a
material inducement to Parent and the Company to enter into the Merger
Agreement; and
D. Stockholder has been advised that Stockholder may be deemed to be an
"affiliate" of Parent, as such term is used in the Commission's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein shall
be construed as an admission by Stockholder that Stockholder is in fact an
affiliate of Parent.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Acknowledgments by Stockholder. Stockholder acknowledges and understands
that the representations, warranties and covenants made by Stockholder set forth
in this Agreement will be relied upon by the Company, Parent and their
respective affiliates, counsel and accounting firms, and that substantial losses
and damages may be incurred by such persons if Stockholder's representations,
warranties or covenants are breached. Stockholder has carefully read this
Agreement and the Merger Agreement and has consulted with such legal counsel and
financial advisers as Stockholder has deemed appropriate in connection with the
execution of this Agreement.
2. Covenants Related to Pooling of Interests.
(a) During the period beginning on the date 30 days prior to the
Closing Date (as defined in the Merger Agreement) and ending on the day
after Parent has published (within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies) financial
results covering at least 30 days of combined operations following the
Merger of the Company and Parent (the "Restricted Period"), Stockholder
will not sell, exchange, transfer, pledge, distribute or otherwise dispose
of or grant any option, establish any "short" or "put"-equivalent position
with respect to or enter into any similar transaction (through derivatives
or otherwise) intended to have or having the effect, directly or
indirectly, of reducing its risk relative to any shares of Parent Common
Stock owned by Stockholder. The parties acknowledge that sales of Parent
Common Stock issuable on exercise of stock options solely to provide for
payment of the exercise price of such stock options simultaneously with the
exercise of such stock options shall not constitute such reduction of
relative risk.
A-59
<PAGE> 132
(b) Notwithstanding anything to the contrary contained in Section
2(a), Stockholder will be permitted, during the Restricted Period, (i) to
sell, exchange, transfer, pledge, distribute or otherwise dispose of or
grant any option, establish any "short" or "put"-equivalent position with
respect to or enter into any similar transaction (through derivatives or
otherwise) intended to have or having the effect, directly or indirectly,
of reducing its risk relative to any shares of Parent Common Stock owned by
Stockholder (a "Transfer") equal to the lesser of (A) 10% of the Parent
Common Stock owned by Stockholder and (B) Stockholder's pro rata portion of
1% of the total number of outstanding shares of Parent Common Stock owned
by Stockholder and all other stockholders of Parent (in each of clause (A)
and clause (B) above as measured as of the date of such Transfer and
subject to confirmation of such calculation by Parent), and (ii) to make
bona fide charitable contributions or gifts of such securities; provided,
however, that the transferee(s) of such charitable contributions or gifts
agree(s) in writing to hold such securities for the period specified in
Section 2(a). The foregoing does not cover withholding taxes, which would
constitute a reduction of risk.
3. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties and their respective successors
and assigns. As used in this Agreement, the term "successors and assigns"
means, where the context so permits, heirs, executors, administrators,
trustees and successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects
shall be interpreted, construed and governed by and in accordance with
Delaware law without regard to the conflict of law principles thereof. The
parties irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts")
for any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware
Courts and agree not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void, or unenforceable, the remainder
of the terms, provisions, covenants, and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated.
(e) Counsel to and accountants for the parties to the Merger Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
waived or any obligation excused, except by a written agreement signed by
both parties.
(g) Notwithstanding any other provision contained in this Agreement,
this Agreement and all obligations under this Agreement shall terminate
upon the termination of the Merger Agreement in accordance with its terms.
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<PAGE> 133
IN WITNESS WHEREOF, this Agreement is executed as of the date first stated
above.
ILLINOIS TOOL WORKS INC.,
a Delaware corporation
By:
----------------------------------
Name:
Title:
Stockholder
By:
----------------------------------
Name:
Name of Signatory
(if different from name of
Stockholder):
------------------------------------
Title of Signatory
(if applicable): ________
Number of Shares Owned: ________
Number of Shares Issuable upon
Exercise of Stock Options: ________
A-61
<PAGE> 134
EXHIBIT 6.7(C)
FORM OF PARENT STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of , 1999 (this
"Agreement"), is by and between Illinois Tool Works Inc. , a Delaware
corporation ("Parent"), and the undersigned stockholder ("Stockholder") of
Parent. Capitalized terms not otherwise defined in this Agreement have the
meanings ascribed to them in the Merger Agreement (as defined below).
RECITALS
A. Parent and Premark International, Inc., a Delaware corporation (the
"Company"), have entered into an Agreement and Plan of Merger, dated as of
September 9, 1999 (the "Merger Agreement"), pursuant to which CS Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), will merge with and into the Company (the "Merger"), with the Company
surviving the Merger and becoming a wholly owned subsidiary of Parent;
B. It is a condition to the effectiveness of the Merger that (i) legal
counsel to Parent and the Company shall have delivered their respective opinions
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and Parent, Merger Sub and the Company each will be a party to the
reorganization within the meaning of Section 368(b) of the Code, (ii) Parent
shall have received a letter from its independent public accounting firm to the
effect that the Merger should qualify for "pooling-of-interests" accounting
treatment and (iii) the Company shall have received a letter from its
independent public accounting firm to the effect that the Company is a poolable
entity;
C. The execution and delivery of this Agreement by Stockholder is a
material inducement to Parent and the Company to enter into the Merger
Agreement; and
D. Stockholder has been advised that Stockholder may be deemed to be an
"affiliate" of Parent, as such term is used in the Commission's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein shall
be construed as an admission by Stockholder that Stockholder is in fact an
affiliate of Parent.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Acknowledgments by Stockholder. Stockholder acknowledges and understands
that the representations, warranties and covenants made by Stockholder set forth
in this Agreement will be relied upon by the Company, Parent and their
respective affiliates, counsel and accounting firms, and that substantial losses
and damages may be incurred by such persons if Stockholder's representations,
warranties or covenants are breached. Stockholder has carefully read this
Agreement and the Merger Agreement and has consulted with such legal counsel and
financial advisers as Stockholder has deemed appropriate in connection with the
execution of this Agreement.
2. Covenants Related to Pooling of Interests.
(a) During the period beginning on the date 30 days prior to the
Closing Date (as defined in the Merger Agreement) and ending on the day
after Parent has published (within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies) financial
results covering at least 30 days of combined operations following the
Merger of the Company and Parent (the "Restricted Period"), Stockholder
will not sell, exchange, transfer, pledge, distribute or otherwise dispose
of or grant any option, establish any "short" or "put"-equivalent position
with respect to or enter into any similar transaction (through derivatives
or otherwise) intended to have or having the effect, directly or
indirectly, of reducing its risk relative to any shares of Parent Common
Stock owned by Stockholder. The parties acknowledge that sales of Parent
Common Stock issuable on exercise of stock options solely to provide for
payment of the exercise price of such stock options simultaneously with the
exercise of such stock options shall not constitute such reduction of
relative risk.
A-62
<PAGE> 135
(b) Notwithstanding anything to the contrary contained in Section
2(a), Stockholder will be permitted, during the Restricted Period, (i) to
sell, exchange, transfer, pledge, distribute or otherwise dispose of or
grant any option, establish any "short" or "put"-equivalent position with
respect to or enter into any similar transaction (through derivatives or
otherwise) intended to have or having the effect, directly or indirectly,
of reducing its risk relative to any shares of Parent Common Stock owned by
Stockholder (a "Transfer") equal to the lesser of (A) 10% of the Parent
Common Stock owned by Stockholder and (B) Stockholder's pro rata portion of
1% of the total number of outstanding shares of Parent Common Stock owned
by Stockholder and all other stockholders of Parent (in each of clause (A)
and clause (B) above as measured as of the date of such Transfer and
subject to confirmation of such calculation by Parent), and (ii) to make
bona fide charitable contributions or gifts of such securities; provided,
however, that the transferee(s) of such charitable contributions or gifts
agree(s) in writing to hold such securities for the period specified in
Section 2(a). The foregoing does not cover withholding taxes, which would
constitute a reduction of risk.
(c) Covenants Related to Voting. The Stockholder agrees that all of
the shares of Parent Common Stock directly owned by the Stockholder at the
record date for any meeting of stockholders of Parent called to consider
and vote to approve the issuance (the "Issuance") of Parent Common Stock in
the Merger and/or the transactions relating thereto will be voted by the
Stockholder in favor of the Issuance. In addition, the Stockholder agrees
to use all reasonable efforts, subject to his fiduciary duties as trustee,
to cause the trusts as to which he is a trustee to vote the shares of
Parent Common Stock directly owned by such trusts in favor of the Issuance.
4. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties and their respective successors
and assigns. As used in this Agreement, the term "successors and assigns"
means, where the context so permits, heirs, executors, administrators,
trustees and successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects
shall be interpreted, construed and governed by and in accordance with
Delaware law without regard to the conflict of law principles thereof. The
parties irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts")
for any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware
Courts and agree not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void, or unenforceable, the remainder
of the terms, provisions, covenants, and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated.
(e) Counsel to and accountants for the parties to the Merger Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
waived or any obligation excused, except by a written agreement signed by
both parties.
(g) Notwithstanding any other provision contained in this Agreement,
this Agreement and all obligations under this Agreement shall terminate
upon the termination of the Merger Agreement in accordance with its terms.
A-63
<PAGE> 136
IN WITNESS WHEREOF, this Agreement is executed as of the date first stated
above.
ILLINOIS TOOL WORKS INC.,
a Delaware corporation
By:
----------------------------------
Name:
Title:
Stockholder
By:
----------------------------------
Name:
Name of Signatory
(if different from name of
Stockholder):
------------------------------------
Title of Signatory
(if applicable): ________
Number of Shares Owned: ________
Number of Shares Issuable upon
Exercise of Stock Options: ________
A-64
<PAGE> 137
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
September 9, 1999
Board of Directors
Premark International, Inc.
1717 Deerfield Road
Deerfield, IL 60015
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Common Stock, par value $1.00 per
share (the "Company Shares"), of Premark International, Inc. (the "Company") of
the Exchange Ratio (as defined below) pursuant to the Agreement and Plan of
Merger, dated as of September 9, 1999, among Illinois Tool Works Inc. ("ITW"),
CS Merger Sub Inc., a wholly owned subsidiary of ITW ("Merger Sub"), and the
Company (the "Agreement"). Pursuant to the Agreement, Merger Sub will be merged
with and into the Company and each outstanding Company Share will be converted
into the right to receive a certain number (the "Exchange Ratio") of shares of
Common Stock, par value 0.01 per share ("ITW Common Stock"), of ITW. The
Exchange Ratio shall be equal to (i) if the Parent Average Price (as defined in
the Agreement) is equal to or greater than $66.33 but less than or equal to
$89.73, the result, calculated to four decimal places, of $55.00 divided by the
Parent Average Price; (ii) if the Parent Average Price is greater than $89.73
but less than $101.44, the result, calculated to four decimal places, of [$55.00
+ (0.3065*(Parent Average Price - $89.73))]/Parent Average Price, (iii) if the
Parent Average Price is less than $66.33 but greater than $54.62, the result,
calculated to four decimal places, of [$55.00 - (0.4146*($66.33 - Parent Average
Price))]/Parent Average Price, (iv) if the Parent Average Price is greater than
or equal to $101.44, 0.5776, (v) if the Parent Average Price is less than or
equal to $54.62, 0.9181.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company, having provided certain investment banking services to the Company
from time to time, including having acted as lead managing underwriter of a
public offering of $150 million aggregate principal amount of 6.875% Notes due
November 15, 2008 of the Company in November 1998 and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or ITW for its own
account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things: the
Agreement, Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and ITW for the five years ended December 1998; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company and ITW;
certain other communications from the Company and ITW to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company and ITW prepared by
B-1
<PAGE> 138
Premark International, Inc.
September 9, 1999
Page 2
their respective managements. We also have held discussions with members of the
senior management of the Company and ITW regarding the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Company Shares and the ITW Common Stock, compared certain financial and
stock market information for the Company and ITW with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the food
equipment industry specifically and in other industries generally and performed
such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. As you are aware, ITW has informed us
that ITW has not prepared internal forecasts beyond the current fiscal year.
Accordingly, our review of such information was limited to discussions with
senior managers of ITW regarding the estimates of research analysts for the
company. In addition, we have not made any independent evaluation or appraisal
of the assets and liabilities of ITW or the Company or any of their respective
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have assumed with your consent that the transaction contemplated
by the Agreement will be accounted for as a pooling-of-interests under generally
accepted accounting principles. We were not requested to solicit, and did not
solicit, interest from other parties with respect to an acquisition of or other
business combination with the Company. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Company Shares should vote with respect
to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of Company Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
(GOLDMAN, SACHS & CO.)
B-2
<PAGE> 139
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("DGCL") permits a
Delaware corporation to indemnify directors and officers under certain
circumstances. Illinois Tool Works' restated certificate of incorporation and
by-laws provide that Illinois Tool Works shall, subject to certain limitations,
indemnify its directors and officers against expenses (including attorneys'
fees, judgments, fines and certain settlements) actually and reasonably incurred
by them in connection with any suit or proceeding to which they are a party so
long as they acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to a
criminal action or proceeding, so long as they had no reasonable cause to
believe their conduct to have been unlawful.
Section 102 of the DGCL permits a Delaware corporation to include in its
certificate of incorporation a provision eliminating or limiting a director's
liability to a corporation or its stockholders for monetary damages for breaches
of fiduciary duty. DGCL Section 102 provides, however, that liability for
breaches of the duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct, or knowing violation of the law, and the
unlawful purchase or redemption of stock or payment of unlawful dividends or the
receipt of improper personal benefits cannot be eliminated or limited in this
manner. Illinois Tool Works' restated certificate of incorporation includes a
provision that eliminates, to the fullest extent permitted, director liability
for monetary damages for breaches of fiduciary duty.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
See Index to Exhibits which is incorporated by reference in this item.
(b) Financial Statement Schedules:
Not Applicable
ITEM 22. UNDERTAKINGS.
The undersigned Registrant undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment of the Registration Statement) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
II-1
<PAGE> 140
provided, however, that paragraphs q(1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement,
shall be deemed to be a new registration statement relating to the
securities offered in the Registration Statement and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering of such securities;
(5) That, prior to any public reoffering of the securities registered
under this Registration Statement through use of a prospectus which is a
part of this Registration Statement, by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form;
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered in the Registration Statement, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering of such securities;
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved in a
transaction that was not the subject of and included in the registration
statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in Glenview, Illinois on this 12th day of
October, 1999.
ILLINOIS TOOL WORKS INC.
By: /s/ W. JAMES FARRELL
----------------------------------
W. James Farrell
Director, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints W. James
Farrell or Stewart S. Hudnut, acting severally, as his or her attorney-in-fact
and agent, to sign any or all amendments (including post-effective amendments)
to this Registration Statement and any registration statement filed pursuant to
Rule 462 under the Securities Act of 1933 relating to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
to said attorney-in-fact and agent full power and authority to perform any act
in connection with any of the foregoing as fully to all intents and purposes as
he or she might do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Each attorney-in-fact and agent is hereby granted full power of substitution and
revocation with respect hereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
registrant and in the capacities indicated on this 12th day of October, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ JON C. KINNEY Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Accounting and Financial
Jon C. Kinney Officer)
/s/ WILLIAM F. ALDINGER Director
- -----------------------------------------------------
William F. Aldinger
/s/ MICHAEL J. BIRCK Director
- -----------------------------------------------------
Michael J. Birck
/s/ MARVIN D. BRAILSFORD Director
- -----------------------------------------------------
Marvin D. Brailsford
/s/ SUSAN CROWN Director
- -----------------------------------------------------
Susan Crown
/s/ H. RICHARD CROWTHER Director
- -----------------------------------------------------
H. Richard Crowther
/s/ W. JAMES FARRELL Director, Chairman and Chief Executive Officer
- ----------------------------------------------------- (Principal Executive Officer)
W. James Farrell
/s/ ROBERT C. MCCORMACK Director
- -----------------------------------------------------
Robert C. McCormack
/s/ PHILLIP B. ROONEY Director
- -----------------------------------------------------
Phillip B. Rooney
/s/ HAROLD B. SMITH Director
- -----------------------------------------------------
Harold B. Smith
/s/ ORMAND J. WADE Director
- -----------------------------------------------------
Ormand J. Wade
</TABLE>
II-3
<PAGE> 142
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DOCUMENT DESCRIPTION
-------------- --------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of September 9, 1999
among Premark International, Inc., Illinois Tool Works Inc.
and CS Merger Sub Inc. (Included as Annex A to the proxy
statement/prospectus included herein.)
2.2 Stock Option Agreement dated as of September 9, 1999 between
Premark International, Inc. and Illinois Tool Works Inc.
(Filed as Exhibit 99.1 to Premark's Current Report on Form
8-K dated September 13, 1999 (File No. 1-9256), and
incorporated by reference herein.)
3.1 Restated Certificate of Incorporation of Illinois Tool Works
Inc., as amended. (Filed as Exhibit 3(a) to Illinois Tool
Works' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 (File No. 1-4797), and incorporated by
reference herein.)
3.2 By-laws of Illinois Tool Works Inc., as amended. (Filed as
Exhibit 3(b) to Illinois Tool Works' Annual Report on Form
10-K for the fiscal year ended December 31, 1998 (File No.
1-4797), and incorporated by reference herein.)
3.3 Restated Certificate of Incorporation of Premark
International, Inc., as restated effective October 31, 1986.
(Filed as Exhibit 3.1 to Premark's Annual Report on Form
10-K for the fiscal year ended December 27, 1997 (File No.
1-9256), and incorporated by reference herein.)
3.4 Amended By-Laws of Premark International, Inc. (Filed as
Exhibit 3 to Premark's Quarterly Report on Form 10-Q for the
quarter ended September 26, 1998 (File No. 1-9256), and
incorporated by reference herein.)
4.1 Indenture, dated as of November 1, 1986, between Illinois
Tool Works and The First National Bank of Chicago, as
Trustee. (Filed as Exhibit 4 to Illinois Tool Works'
Registration Statement on Form S-3 (File No. 33-5780), and
incorporated by reference herein.)
4.2 First Supplemental Indenture, dated as of May 1, 1990
between Illinois Tool Works and Harris Trust and Savings
Bank, as Trustee. (Filed as Exhibit 4.3 to Illinois Tool
Works' Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (File No. 33-5780), and incorporated
by reference herein.)
4.3 Form of Illinois Tool Works 5 7/8% Notes due March 1, 2000.
(Filed as Exhibit 4(f) to Illinois Tool Works' Annual Report
on Form 10-K for the year ended December 31, 1992. (File No.
1-4797), and incorporated by reference herein.)
4.4 Form of Illinois Tool Works 5 3/4% Notes due March 1, 2009.
(Filed as Exhibit 4 to Illinois Tool Works' Current Report
on Form 8-K dated February 24, 1999 (File No. 1-4797), and
incorporated by reference herein.)
4.5 Premark's Rights Agreement and Exhibits dated November 6,
1996. (Filed as Exhibit 1 to Premark's Current Report on
Form 8-K dated November 22, 1996 (File No. 1-9256), and
incorporated by reference herein.)
5.1 Opinion of Stewart S. Hudnut, Senior Vice President, General
Counsel and Secretary of Illinois Tool Works Inc.
8.1 Opinion of Mayer, Brown & Platt regarding certain United
States federal income tax matters.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz regarding certain
United States federal income tax matters.
</TABLE>
<PAGE> 143
<TABLE>
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10.1 Illinois Tool Works Inc. 1996 Stock Incentive Plan dated
February 16, 1996, as amended on December 12, 1997. (Filed
as Exhibit 10(a) to Illinois Tool Works' Annual Report on
Form 10-K for the year ended December 31, 1997 (File No.
1-4797), and incorporated by reference herein.)
10.2 Illinois Tool Works Inc. 1982 Executive Contributory
Retirement Income Plan adopted December 13, 1982. (Filed as
Exhibit 10(c) to Illinois Tool Works' Annual Report on Form
10-K for the fiscal year ended December 13, 1982, filed as
Exhibit 10(c) to Illinois Tool Works' Annual Report on Form
10-K for the fiscal year ended December 31, 1990 (File No.
1-4797), and incorporated by reference herein.)
10.3 Illinois Tool Works Inc. 1985 Executive Contributory
Retirement Income Plan adopted December 1985. (Filed as
Exhibit 10(d) to Illinois Tool Works' Annual Report on Form
10-K for the year ended December 31, 1990 (File No. 1-4797),
and incorporated by reference herein.)
10.4 Amendment to the Illinois Tool Works Inc. 1985 Executive
Contributory Retirement Income Plan dated May 1, 1996.
(Filed as Exhibit 10(c) to Illinois Tool Works' Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996
(File No. 1-4797), and incorporated by reference herein.)
10.5 Illinois Tool Works Inc. Executive Incentive Plan adopted
February 16, 1996. (Filed as Exhibit 10(a) to Illinois Tool
Works' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (File No. 1-4797), and incorporated by
reference herein.)
10.6 Supplemental Plan for Employees of Illinois Tool Works Inc.,
effective January 1, 1989. (Filed as Exhibit 10(d) to
Illinois Tool Works' Annual Report on Form 10-K for the year
ended December 31, 1989 (File No. 1-4797), and incorporated
by reference herein.)
10.7 Non-officer directors' restricted stock program, and
non-officer directors' phantom stock plan, descriptions of
which are under the caption "Directors' Compensation" in
Illinois Tool Works' Proxy Statement for the 1999 Annual
Meeting of Stockholders (File No. 1-4797), and incorporated
by reference herein.
10.8 Illinois Tool Works Inc. Outside Directors' Deferred Fee
Plan dated December 12, 1980. (Filed as Exhibit 10(h) to
Illinois Tool Works' Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 1-4797), and incorporated
by reference herein.)
10.9 Illinois Tool Works Inc. Outside Directors' Deferred Fee
Plan dated December 12, 1980. (Filed as Exhibit 10(h) to
Illinois Tool Works' Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 1-4797), and incorporated
by reference herein.)
10.10 Underwriting Agreement dated February 23, 1993, related to
the 5 7/8% Notes due March 1, 2000. (Filed as Exhibit 10(j)
to Illinois Tool Works' Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 1-4797), and
incorporated by reference herein.)
10.11 Underwriting Agreement dated February 19, 1999, related to
Illinois Tool Works' 5 3/4% Notes due March 1, 2009. (Filed
as Exhibit 1 to Illinois Tool Works' Current Report on Form
8-K dated February 24, 1999 (File No. 1-4797), and
incorporated by reference herein.)
10.12 Illinois Tool Works Inc. Non-officer Directors' Fee
Conversion Plan adopted February 19, 1999. (Filed as Exhibit
10(m) to Illinois Tool Works' Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (File No. 1-4797),
and incorporated by reference herein.)
</TABLE>
<PAGE> 144
<TABLE>
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EXHIBIT NUMBER DOCUMENT DESCRIPTION
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<C> <S>
10.13 $250,000,000 Credit Agreement amended as of October 3, 1997.
(Filed as Exhibit 10.1 to Premark's Annual Report on Form
10-K for the fiscal year ended December 27, 1997 (File No.
1-9256), and incorporated by reference herein.)
10.14 Premark International, Inc. 1994 Incentive Plan as amended
and restated effective May 5, 1999.
10.15 Premark International, Inc. Supplemental Plan, as amended
and restated effective January 1, 1999.
10.16 Premark International, Inc. Change of Control Policy, as
amended in 1996. (Filed as Exhibit 10.7 to Premark's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996 (File No. 1-9256), and incorporated by reference
herein.)
10.17 Form of Employment Agreement entered into between Premark
and certain executive officers. (Filed as Exhibit 5 to
Premark's Current Report on Form 8-K dated November 22, 1996
(File No. 1-9256), and incorporated by reference herein.)
10.18 Premark International, Inc. Director Stock Plan, as amended.
(Filed as Exhibit 10.6 to Premark's Annual Report on Form
10-K for the fiscal year ended December 26, 1998 (File No.
1-9256), and incorporated by reference herein.)
23.1 Consent of Arthur Andersen LLP, independent auditors of
Illinois Tool Works Inc.
23.2 Consent of PricewaterhouseCoopers LLP (as successor to Price
Waterhouse), independent auditors of Premark International,
Inc.
23.3 Consent of Ernst & Young LLP, independent auditors of
Premark International, Inc.
23.4 Consent of Stewart S. Hudnut. (Included in Exhibit 5.1
hereto.)
23.5 Consent of Mayer Brown & Platt. (Included in Exhibit 8.1
hereto.)
23.6 Consent of Wachtell, Lipton, Rosen & Katz. (Included in
Exhibit 8.2 hereto.)
24.1 Power of Attorney of certain officers and directors of
Illinois Tool Works Inc. (Included in Signature Page
hereto.)
99.1 Form of Proxy Card for Illinois Tool Works Inc.
99.2 Form of Proxy Card for Premark International, Inc.
99.3 Form of Voting Instruction for Premark International, Inc.
sponsored benefit plans.
99.4 Consent of Goldman, Sachs & Co.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
October 12, 1999
Illinois Tool Works Inc.
3600 West Lake Avenue
Glenview, Illinois 60025
Re: Merger of CS Merger Sub Inc., a wholly owned subsidiary
of Illinois Tool Works Inc., with and into Premark International,
Inc.
Ladies and Gentlemen:
As General Counsel of Illinois Tool Works Inc., a Delaware corporation
(the "Company"), I have participated in the corporate and other proceedings
taken by the Company relating to the merger of CS Merger Sub Inc., a wholly
owned subsidiary of the Company, with and into Premark International, Inc.
("Premark"), with Premark being the surviving corporation (the "Merger"), and
the conversion of each share of Premark common stock, par value $1.00 per share,
issued and outstanding at the effective time of the Merger into common stock,
par value $0.01 per share, of the Company ("ITW Common Stock"). I participated
in the preparation and filing with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, of a registration statement on Form S-4
(the "Registration Statement") relating to the Merger and have examined such
other documents and such legal authorities as I have deemed necessary for
purposes of this opinion.
Based upon the foregoing, I am of the opinion that the ITW Common Stock
has been duly and validly authorized by all necessary action on the part of the
Company and when issued pursuant to the terms of the Agreement and Plan of
Merger, dated as of September 9, 1999, will be validly issued, fully paid and
non-assessable by the Company.
I consent to the use of my name in the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Stewart S. Hudnut
Stewart S. Hudnut
Senior Vice President, General Counsel
and Secretary
Illinois Tool Works Inc.
<PAGE> 1
EXHIBIT 8.1
October 12, 1999
Illinois Tool Works Inc.
3600 West Lake Avenue
Glenview, Illinois 60025-5811
Re: Material Federal Income Tax Consequences of the Merger
Dear Ladies and Gentlemen:
We have acted as counsel to Illinois Tool Works Inc. ("ITW") in
connection with the intended merger (the "Merger") of CS Merger Subsidiary
("Merger Sub"), a wholly owned subsidiary of ITW, with and into Premark
International, Inc. ("Premark") pursuant to the Agreement and Plan of Merger
dated as of September 9, 1999 among ITW, Merger Sub and Premark (the "Merger
Agreement"). You have requested that we provide an opinion regarding the
accuracy of the tax disclosures in the joint proxy statement/ prospectus
included as part of the registration statement on Form S-4 filed with the
Securities and Exchange Commission on this date (the "Proxy Statement /
Prospectus").
In providing this opinion, we have relied on, and assumed the accuracy
of, (i) the description of the transaction as set forth in the Merger Agreement
and the exhibits thereto, including the representations and covenants of ITW and
Premark contained therein and (ii) the description of the transaction as set
forth in the Proxy Statement/Prospectus and the exhibits thereto.
Based upon and subject to the foregoing, it is our opinion that the
summaries of federal income tax consequences set forth in the Proxy
Statement/Prospectus under the headings "Summary -- Material Federal Income Tax
Considerations" and "The Merger Agreement and the Merger -- Material Federal
Income Tax Considerations" are accurate in all material respects as to matters
of law and legal conclusions.
<PAGE> 2
This opinion is based on current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury regulations promulgated
thereunder, and the interpretation of the Code and such regulations by the
courts and the Internal Revenue Service, as they are in effect and exist at the
date of this opinion. It should be noted that statutes, regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A material change that is
made after the date hereof in any of the foregoing bases for our opinion could
adversely affect our conclusion.
We hereby consent to the filing of this opinion as an exhibit to the
Proxy Statement/Prospectus and to all references to this firm under the heading
"The Merger Agreement and the Merger -- Material Federal Income Tax
Considerations" in the Proxy Statement/Prospectus.
Sincerely,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE> 1
EXHIBIT 8.2
October 12, 1999
Premark International, Inc.
1717 Deerfield Road
Deerfield, Illinois 60015
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4
(the "Registration Statement") of Illinois Tool Works Inc., a Delaware
corporation ("Illinois Tool Works"), relating to the merger (the "Merger") of CS
Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of
Illinois Tool Works, with and into Premark International, Inc., a Delaware
corporation.
We have participated in the preparation of the discussion set
forth in the section entitled "THE MERGER AGREEMENT AND THE MERGER--Material
Federal Income Tax Considerations" in the Registration Statement. In our
opinion, such discussion, insofar as it relates to the United States federal
income tax consequences of the Merger, is accurate in all material respects.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement,
and to the references therein to us. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
Exhibit 10.14
PREMARK INTERNATIONAL, INC.
1994 INCENTIVE PLAN
(As amended through May 5, 1999)
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Premark International, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "Premark International, Inc. 1994
Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, SARs, Restricted Stock, and Performance Awards. Subject to
ratification by the Company's shareholders, the Plan shall become effective as
of May 4, 1994 (the "Effective Date"), and shall remain in effect as provided in
Section 1.3 herein.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the personal interests
of Participants to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of Participants upon whose judgment, interest,
and special efforts the successful conduct of its operations largely is
dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board of Directors to terminate, amend or modify the Plan at
any time pursuant to Article 15 herein, until all Shares subject to it shall
have been purchased or acquired according to the Plan's provisions. However, in
no event may an Award be granted under the Plan on or after May 4, 2004.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
(a) "Award" means, individually or collectively, a grant under
this Plan of Nonqualified Stock Options, Incentive Stock
Options, SARs, Restricted Stock, or Performance Awards.
(b) "Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and
provisions applicable to Awards granted to Participants under
this Plan.
(c) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
(d) "Beneficiary" means a person who may be designated by a
Participant pursuant to Article 10 and to whom any benefit
under the Plan is to be paid in case of the Participant's
death or physical or mental incapacity, as determined by the
Committee, before he or she receives any or all of such
benefit.
(e) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(f) "Change in Control" of the Company means:
(i) An acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then
outstanding Shares (the "Outstanding Company Common
Stock") or (2) the combined
<PAGE> 2
voting power of the then outstanding Shares entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); excluding, however, the
following: (1) any acquisition directly from the Company,
other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted
was itself acquired from the Company, (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company or (4) any
acquisition by any Person pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) of
this definition; or
(ii) A change in the composition of the Board such that the
individuals who, as of the effective date of the Plan,
constitute the Board (such Board shall be hereinafter referred
to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, for purposes of this definition, that any individual
who becomes a member of the Board subsequent to such effective
date, whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and
who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but,
provided further, that any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or
consents by or on behalf of a person or legal entity other
than the Board shall not be so considered as a member of the
Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company ("Corporate Transaction"); excluding, however, such a
Corporate Transaction pursuant to which (1) all or
substantially all of the individuals and entities who are the
Beneficial Owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding Shares, and the combined voting
power of the then outstanding Shares entitled to vote
generally in the election of directors, as the case may be, of
the company resulting from such Corporate Transaction
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be,
(2) no Person (other than the Company, any employee benefit
plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or such
corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of
such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed
with respect to the Company prior to the Corporate Transaction
and (3) individuals who were members of the Incumbent Board
will constitute at least a majority of the board of directors
of the corporation resulting from such Corporate Transaction;
or
(iv) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
2
<PAGE> 3
(g) "Change in Control Price" shall mean the higher of (a) the
Fair Market Value of a Share on the day of cancellation of an
Award, and (b) the highest cash purchase price per Share paid
in a Corporate Transaction.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "Committee" means the committee, as specified in Article 3,
appointed by the Board to administer the Plan with respect to
grants of Awards, or (unless otherwise stated) its designee
pursuant to a delegation by the Committee as contemplated by
Section 3.2.
(j) "Company" means Premark International, Inc., a Delaware
corporation, or any successor thereto as provided in Article
17 herein.
(k) "Director" means any individual who is a member of the Board
of Directors of the Company.
(l) "Employee" means any full-time, nonunion employee of the
Company or of the Company's Subsidiaries. Directors who are
not otherwise employed by the Company shall not be considered
Employees under this Plan.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(n) "Fair Market Value" shall mean the average of the highest and
lowest quoted selling prices for Shares on the relevant date,
or (if there were no sales on such date) the average of the
highest and lowest quoted selling prices on the nearest day
before and/or the nearest day after the relevant date, as
determined by the Committee.
(o) "Freestanding SAR" means a SAR that is granted independently
of any Options pursuant to Section 7.1 herein.
(p) "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 herein, which is designated as
an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code.
(q) "Insider" shall mean an Employee who is, on the relevant date,
an officer, director, or ten percent (10%) beneficial owner of
the Company, as defined under Section 16 of the Exchange Act.
(r) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares, granted under Article 6 herein, which is not
intended to be an Incentive Stock Option.
(s) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
(t) "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as
determined by the Committee.
(u) "Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
3
<PAGE> 4
(v) "Performance Award" means an Award granted to an Employee, as
described in Article 9 herein, including Performance Units and
Performance Shares.
(w) "Performance Period" means a time period during which
performance goals established in connection with Performance
Awards must be met.
(x) "Performance Unit" means an Award granted to an Employee, as
described in Article 9 herein.
(y) "Performance Share" means an Award granted to an Employee, as
described in Article 9 herein.
(z) "Period of Restriction" or "Period" means the period or
periods during which the transfer of Shares of Restricted
Stock is limited based on the passage of time, and the Shares
are subject to a substantial risk of forfeiture, as provided
in Article 8 herein.
(aa) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined in Section
13(d).
(ab) "Prior Plans" means, collectively, the Premark
International, Inc. Stock Option Plan, the Premark
International, Inc. Restricted Stock Plan, the Premark
International, Inc. Performance Unit Plan, the Premark
International, Inc. Annual Incentive Plan, and the
Premark International, Inc. Phantom Stock Unit Appreciation
Plan.
(ac) "Restricted Stock" means an Award granted to a Participant
pursuant to Article 8 herein, the receipt of which shall be
subject solely to the Period of Restriction.
(ad) "Share" means a share of common stock of the Company.
(ae) "Subsidiary" or "Subsidiaries" means any corporation or
corporations in which the Company owns directly, or indirectly
through subsidiaries, at least fifty percent (50%) of the
total combined voting power of all classes of stock, or any
other entity (including, but not limited to, partnerships and
joint ventures) in which the Company owns at least fifty
percent (50%) of the combined equity thereof.
(af) "Stock Appreciation Right" or "SAR" means an Award, granted
alone (Freestanding SAR) or in connection with a related
Option (Tandem SAR), designated as a SAR, pursuant to the
terms of Article 7 herein.
(ag) "Tandem SAR" means an SAR that is granted in connection with a
related Option pursuant to Section 7.1 herein, the exercise of
which shall require forfeiture of the right to purchase a
Share under the related Option (and when a Share is purchased
under the Option, the Tandem SAR shall similarly be
cancelled).
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
and Directors Committee of the Board, or by any other Committee appointed by the
Board consisting of not less than two (2) Directors who are not Employees. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
4
<PAGE> 5
The Committee shall be composed solely of Directors who are eligible to
administer the Plan pursuant to Rule 16b-3 under the Exchange Act. However, if
for any reason the Committee does not qualify to administer the Plan, as
contemplated by Rule 16b-3 of the Exchange Act, the Board of Directors may
appoint a new Committee so as to comply with Rule 16b-3.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power
except as limited by law or by the Company's Restated Certificate of
Incorporation or Bylaws, and subject to the provisions herein, to determine the
size and types of Awards; to determine the terms and conditions of such Awards
in a manner consistent with the Plan; to construe and interpret the Plan and any
agreement or instrument entered into under the Plan; to establish, amend, or
waive rules and regulations for the Plan's administration; and (subject to the
provisions of Article 15 herein) to amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. The Committee may delegate its duties under the Plan
in whole or in part, on such terms and conditions as it shall determine, to the
Chief Executive Officer of the Company and to other senior officers of the
Company and its Subsidiaries, except that (i) only the Committee may select and
make other decisions as to Awards to Participants who are subject to Section 16
of the Exchange Act, and (ii) no delegation shall be made if the consequence of
such delegation would adversely affect the compliance of the Plan with the
conditions established by Rule 16b-3 for exemption from Section 16 of the
Exchange Act (or any successor provisions) or adversely affect the compliance of
the Plan with Section 162(m) of the Code (or any successor provisions) and any
regulations promulgated thereunder.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its stockholders, Employees, Participants,
and their estates and Beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan may not
exceed two million three hundred thousand (2,300,000) plus the number of Shares
reserved for Stock Option use under the Prior Plans and transferred to this Plan
pursuant to Article 19; provided, however, that if during the term of the Plan
the Company repurchases Shares, additional Options may be granted equal to the
number of Shares so repurchased, except that no more than three million
(3,000,000) additional Shares shall be authorized for Options under this
proviso; and provided further that the total number of such available Shares
that may be used for Restricted Stock Awards under the Plan shall be limited to
three hundred thousand (300,000) plus the number of Shares reserved for
Restricted Stock use under the Prior Plans and transferred to this Plan pursuant
to Article 19. These Shares may be either authorized but unissued or reacquired
Shares.
The following rules will apply for purposes of the determination of the
number of Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(b) The grant of an Option or Restricted Stock shall reduce the
Shares available for grant under the Plan by the number of
Shares subject to such Award.
5
<PAGE> 6
(c) The grant of a Tandem SAR shall not reduce the number of
Shares available for grant by the number of Shares subject to
the related Option (i.e., there is no double counting of
Options and their related Tandem SARs).
(d) The grant of a Freestanding SAR shall reduce the number of
Shares available for grant by the number of Freestanding SARs
granted.
(e) The Committee shall reduce the appropriate number of Shares
from the authorized pool where a Performance Award is payable
in Shares.
6
<PAGE> 7
(f) The Shares subject to outstanding Awards under Prior Plans
which are transferred to this Plan in accordance with Article
19 shall not reduce the number of Shares available for grant
hereunder. The number of Shares reserved for use under the
Prior Plans, upon transfer to this Plan in accordance with
Article 19, shall be in addition to the total amount of Shares
available for grant under this Plan as set forth in the first
sentence of this Section 4.1.
4.2 LAPSED AWARDS. If any Award granted under this Plan is cancelled,
forfeited, terminates, expires, or lapses for any reason (with the exception of
the termination of a Tandem SAR upon exercise of the related Option or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan. However, in the event that prior to the Award's
cancellation, forfeiture, termination, expiration, or lapse, the holder of the
Award at any time received one or more "benefits of ownership" pursuant to such
Award (as defined by the Securities and Exchange Commission, pursuant to any
rule or interpretation promulgated under Section 16 or any successor rule of the
Exchange Act), the Shares subject to such Award shall not be made available for
regrant under the Plan to Insiders, but shall be available for regrants under
the Plan to Participants who are not Insiders.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES AND PRICES. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, spin-off, Share combination, or other
change in the corporate structure of the Company affecting the Shares, such
adjustment shall be made in the number and class of Shares which may be
delivered under the Plan, and in the number, class and/or price of Shares
subject to outstanding Awards granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; and provided that the number of Shares
subject to any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include
all Employees of the Company and its Subsidiaries, as determined by the
Committee, including Employees who are members of the Board, but excluding
Directors who are not Employees.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each Participant.
The Committee may grant ISOs, NQSOs, or a combination thereof. The maximum
number of Options which are available under the Plan for award to any individual
Participant over the duration of the Plan shall not exceed twenty percent (20%)
of the amount of shares available under the Plan for issuance in the form of
Options, as may be adjusted pursuant to the Plan.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Option Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Section 422 of the Code,
or a NQSO whose grant is intended not to fall under Section 422 of the Code.
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6.3 OPTION PRICE. The Option Price for each grant of an Option shall be
determined by the Committee; provided that the Option Price shall not be less
than the Fair Market Value of a Share on the date the Option is granted, subject
to adjustment pursuant to Section 4.3 herein. Options may not be repriced
without shareholder approval.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 PAYMENT. (a) Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied by full payment
for the Shares.
(b) The Option Price upon exercise of any Option shall be payable to
the Company in full either: (i) in cash or its equivalent, or (ii) by tendering
to the Company, or certifying ownership by the Participant to the satisfaction
of the Company of, previously acquired Shares having an aggregate Fair Market
Value at the time of exercise equal to the total Option Price (provided that the
Shares which are tendered or certified must have been held by the Participant
for at least six (6) months prior to their tender or certification), or (iii) by
a combination of (i) and (ii).
(c) The Committee also may allow cashless exercise as permitted under
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
(d) As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under applicable Federal securities laws, under the requirements of
any stock exchange or market upon which such Shares are then listed and/or
traded, and under any blue sky or state securities laws applicable to such
Shares.
6.8 NONTRANSFERABILITY OF OPTIONS. No Options granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, all Options granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant. Notwithstanding
the foregoing, at the discretion of the Committee, an Award Agreement may permit
the transferability of an Option by a Participant solely to members of the
Participant's immediate family or trusts or partnerships for the benefit of such
persons.
ARTICLE 7. STOCK APPRECIATION RIGHTS
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7.1 GRANT OF SARs. Subject to the terms and conditions of the Plan, a
SAR may be granted to an Employee at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR. The maximum number of SARs which
are available under the Plan for award to any individual Participant over the
duration of the Plan shall not exceed ten percent (10%) of the amount of shares
available under the Plan for issuance in the form of SARs, as may be adjusted
pursuant to the Plan.
The Committee shall have complete discretion in determining the number
of SARs granted to each Participant (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs. However, the grant price of a Freestanding
SAR shall be at least equal to the Fair Market Value of a Share on the date of
grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of
the related Option. In no event shall any SAR granted hereunder become
exercisable within the first six (6) months of its grant. SARs may not be
repriced without shareholder approval.
7.2 EXERCISE OF TANDEM SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
7.3 EXERCISE OF FREESTANDING SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, at its sole discretion,
imposes upon them.
7.4 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5 TERM OF SARs. The term of a SAR granted under the Plan shall be
determined by the Committee, at its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6 PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The excess of the Fair Market Value of a Share on the date of
exercise over the grant price of the SAR; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof.
7.7 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of a SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of any rule or
interpretation promulgated under Section 16 (or any successor rule) of the
Exchange Act.
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<PAGE> 10
7.8 NONTRANSFERABILITY OF SARs. No SAR granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all SARs
granted to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant. Notwithstanding the foregoing, at the
discretion of the Committee, an Award Agreement may permit the transferability
of a SAR by a Participant solely to members of the Participant's immediate
family or trusts for the benefit of such persons.
ARTICLE 8. RESTRICTED STOCK
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to eligible Employees in such amounts as the Committee shall
determine.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, or Periods, the number of Restricted Stock Shares granted, and such
other provisions as the Committee shall determine.
8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction established by the Committee and specified in the
Restricted Stock Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Agreement. However, in no event may any Restricted Stock
granted under the Plan become vested in a Participant prior to six (6) months
following the date of its grant. All rights with respect to the Restricted Stock
granted to a Participant under the Plan shall be available during his or her
lifetime only to such Participant. Notwithstanding the foregoing, at the
discretion of the Committee, an Award Agreement may permit the transferability
of a Restricted Stock Award by a Participant solely to members of the
Participant's immediate family or trusts or partnerships for the benefit of such
persons, subject to any Period of Restriction.
8.4 CERTIFICATE LEGEND. Each certificate representing Shares
of Restricted Stock granted pursuant to the Plan may bear the following legend:
"The sale or other transfer of the Shares of stock represented
by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on
transfer as set forth in the Premark International, Inc. 1994
Incentive Plan, and in a Restricted Stock Agreement. A copy of
the Plan and such Restricted Stock Agreement may be obtained
from Premark International, Inc."
The Company shall have the right to retain the certificates
representing Shares of Restricted Stock in the Company's possession until such
time as all conditions and/or restrictions applicable to such Shares have been
satisfied.
8.5 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Article 8, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the Shares are released from the
restrictions, the Participant shall be entitled to have the legend required by
Section 8.4 removed from his or her Share certificate.
8.6 VOTING RIGHTS. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
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8.7 DIVIDENDS AND OTHER DISTRIBUTIONS. The Committee shall have the
discretion to determine whether Participants who have been granted Restricted
Stock will be entitled to dividends and other distributions paid on Shares
during the Period of Restriction, and if so, the date of receipt. If any such
dividends or distributions are paid in Shares, the Shares shall be subject to
the same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid. In the event that any
dividend constitutes a "derivative security" or an "equity security" pursuant to
Rule 16(a) under the Exchange Act, such dividend shall be subject to a vesting
period equal to the longer of: (i) the remaining vesting period of the Shares of
Restricted Stock with respect to which the dividend is paid; or (ii) six months.
The Committee shall establish procedures for the application of this provision.
8.8 PERIOD OF RESTRICTION. Any Restricted Stock Award granted hereunder
shall have a Period of Restriction of not less than three years, except in the
following circumstances:
(a) Any Restricted Stock Award which includes a performance-based
condition may have a Period of Restriction as short as one
year; and
(b) An aggregate amount of Restricted Stock Awards not exceeding
three percent (3%) of the Shares available pursuant to Section
4.1 of the Plan, excluding Shares transferred to this Plan
from Prior Plans pursuant to Article 19, may be issued without
a minimum Period of Restriction.
ARTICLE 9. PERFORMANCE AWARDS
9.1 GRANT OF PERFORMANCE AWARDS. Subject to the terms of the Plan,
Performance Awards may be granted to eligible Employees at any time and from
time to time, as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number, amount and timing of Awards
granted to each Participant. Such Performance Awards may take the form
determined by the Committee, including without limitation, cash, Shares,
Performance Units and Performance Shares, or any combination thereof.
Performance Awards may be awarded as short-term or long-term incentives.
9.2 PERFORMANCE GOALS. (a) The Committee shall set performance goals at
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Awards that will be paid out to
the Participants, and may attach to such Performance Awards one or more
restrictions, including, without limitation, a requirement that Participants pay
a stipulated purchase price for each Performance Share, or restrictions which
are necessary or desirable as a result of applicable laws or regulations.
Performance goals may be based upon, without limitation, Company-wide,
divisional, project team, and/or individual performance.
(b) The Committee shall have the authority at any time to make
adjustments to performance goals for any outstanding Performance Awards which
the Committee deems necessary or desirable unless at the time of establishment
of goals the Committee shall have precluded its authority to make such
adjustments.
(c) Performance Periods shall, in all cases, exceed six (6) months in
length.
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9.3 VALUE OF PERFORMANCE UNITS/SHARES. (a) Each Performance Unit shall
have an initial value that is established by the Committee at the time of grant.
(b) Each Performance Share shall have an initial value equal to the
Fair Market Value of a Share on the date of grant.
9.4 EARNING OF PERFORMANCE AWARDS. After the applicable Performance
Period has ended, the holder of Performance Awards shall be entitled to receive
the payout earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance
goals have been achieved, except as adjusted pursuant to Section 9.2(b) or as
deferred pursuant to Article 11.
9.5 TIMING OF PAYMENT OF PERFORMANCE AWARDS. Payment of earned
Performance Awards shall be made in accordance with terms and conditions
prescribed or authorized by the Committee. Participants may elect to defer, or
the Committee may require the deferral of, the receipt of Performance Awards
upon such terms as the Committee deems appropriate.
9.6 NONTRANSFERABILITY. Performance Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, a
Participant's rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's Beneficiary.
Notwithstanding the foregoing, at the discretion of the Committee, an Award
Agreement may permit the transferability of a Performance Award by a Participant
solely to members of the Participant's immediate family or trusts or
partnerships for the benefit of such persons.
ARTICLE 10. BENEFICIARY
10.1 DESIGNATION. Each Participant under the Plan may, from time to
time, name any Beneficiary or Beneficiaries (who may be named contingently or
successively). Each such designation shall revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company, and shall be
effective only when filed by the Participant in writing with the Company during
the Participant's lifetime. Any such designation shall control over any
inconsistent testamentary or intervivos transfer by a Participant, and any
benefit of a Participant under the Plan shall pass automatically to a
Participant's Beneficiary pursuant to a proper designation pursuant to this
Section 10.1 without administration under any statute or rule of law governing
the transfer of property by will, trust, gift or intestacy.
10.2 ABSENCE OF DESIGNATION. In the absence of any such designation
contemplated by Section 10.1, benefits remaining unpaid at the Participant's
death shall be paid pursuant to the Participant's will or pursuant to the laws
of descent and distribution.
ARTICLE 11. DEFERRALS
The Committee may permit a Participant to elect, or the Committee may
require at its sole discretion subject to the proviso set forth below, any one
or more of the following: (i) the deferral of the Participant's receipt of cash,
(ii) a delay in the exercise of an Option or SAR, (iii) a delay in the lapse or
waiver of restrictions with respect to Restricted Stock, or (iv) a delay of the
satisfaction of any requirements or goals with respect to Performance Awards;
provided, however, the Committee's authority to take such actions hereunder
shall exist only to the extent necessary to reduce or eliminate a limitation on
the deductibility of compensation paid to the Participant pursuant to (and so
long as such action in and of itself does not constitute the exercise of
impermissible discretion under) Section 162(m) of the Code, or any successor
provision thereunder. If any such deferral is required or permitted, the
Committee shall establish rules and procedures for such deferrals, including
provisions relating to periods of deferral, the terms of payment following the
expiration of the deferral periods, and the rate of earnings, if any, to be
credited to any amounts
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deferred thereunder.
ARTICLE 12. RIGHTS OF EMPLOYEES
12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ of
the Company. For purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Subsidiaries (or between Subsidiaries)
shall not be deemed a termination of employment.
12.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 13. CHANGE IN CONTROL
13.1 ACCELERATION OF VESTING. Notwithstanding any other provision of
the Plan to the contrary, in the event of a Change in Control, any Awards
outstanding and not then exercisable and vested as of the date such Change in
Control is determined to have occurred, shall become fully exercisable and
vested to the full extent of the original grant. Upon termination of employment
occurring as a consequence of a Change in Control, as determined by the
Committee, an Option shall remain exercisable for seven months following such
termination or until the expiration of the stated term of such Option, whichever
period is shorter.
13.2 SURRENDER IN LIEU OF ACCELERATION. During the 60-day period from
and after a Change in Control (the "Exercise Period"), a Participant who holds
an Option shall have the right, in lieu of the payment of the exercise price for
the Shares being purchased under the Option and by giving notice to the Company,
to elect (within the Exercise Period) to surrender all or part of an Option to
the Company and to receive cash, within 30 days of such notice, in an amount
equal to the amount by which the Change in Control Price per Share on the date
of such election shall exceed the exercise price per Share under the Option (the
"Spread") multiplied by the number of Shares granted under the Option as to
which the right granted under this Section shall have been exercised.
Notwithstanding the foregoing, if any right granted pursuant to this Section
13.2 would make a Change in Control transaction ineligible for pooling of
interests accounting under the provisions of the Accounting Principles Board's
Opinion No. 16 that but for this Section 13.2 would otherwise be eligible for
such accounting treatment, the Committee shall have the ability to substitute
the cash payable pursuant to this Section 13.2 with shares of common stock
having a Fair Market Value equal to the cash that would otherwise be payable
hereunder and which will not render the Change in Control transaction ineligible
for pooling of interests accounting.
ARTICLE 14. DEATH AND TERMINATION
The Committee shall have the authority to establish provisions from
time to time governing the exercisability, vesting, forfeiture, payout or amount
of Awards in respect of a Participant's death or disability, or termination of
employment, whether as a consequence of retirement, resignation, involuntary
termination or otherwise.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from
time to time, the Board may terminate, amend, or modify the Plan. However,
without the approval of the stockholders of the Company (as may be required by
the Code, by the short-swing profit rules of Section 16 of the Exchange Act, by
any national securities exchange or system on which the Shares are then listed
or reported, or by a regulatory body having jurisdiction with respect hereto),
no such amendment or modification may:
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(a) Increase the total number of Shares which may be issued under
this Plan, except as provided in Article 4 hereof; or
(b) Modify the eligibility requirements; or
(c) Materially increase the benefits accruing under the Plan.
15.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award. The Committee shall have the right to replace
any previously-granted Award under the Plan with an Award equal to the value of
the replaced Award at the time of replacement, without obtaining the consent of
the Participant holding such Award.
ARTICLE 16. WITHHOLDING
16.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising under or as a result of this
Plan.
16.2 SHARE WITHHOLDING. With respect to withholding required and/or
permitted upon the exercise of Options or SARs, upon the lapse of restrictions
on Restricted Stock, or upon any other taxable event hereunder, Participants may
elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares (or by
surrendering Shares previously owned which have been held for longer than six
months) having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All elections shall be irrevocable, made in writing, signed by the Participant,
and elections by Insiders shall additionally comply with the requirements
established by the Committee.
ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, spin-off, or otherwise, of all or substantially all of
the business and/or assets of the Company.
ARTICLE 18. LEGAL CONSTRUCTION
18.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
18.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
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18.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to comply with Section 18.3, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
Notwithstanding any other provision set forth in the Plan, if required
by any rule or interpretation promulgated under Section 16 of the Exchange Act,
any "derivative security" or "equity security" offered pursuant to the Plan to
any Insider may not be sold or transferred for at least six (6) months after the
date of grant of such Award. The terms "equity security" and "derivative
security" shall have the meanings ascribed to them in the then-current Rule
16(a) under the Exchange Act.
18.4 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Illinois.
ARTICLE 19. PRIOR PLANS
Upon the approval by the Company's shareholders of this Plan, all
outstanding grants and awards under the Prior Plans, as well as any Shares
then-reserved for use under the Prior Plans, shall be deemed transferred to this
Plan. The terms and conditions of any agreements issued pursuant to any of the
Prior Plans shall remain unchanged and in full force and effect.
15
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EXHIBIT 10.15
PREMARK INTERNATIONAL, INC.
SUPPLEMENTAL PLAN
(As Amended and Restated Effective January 1, 1999)
<PAGE> 2
PREMARK INTERNATIONAL, INC. SUPPLEMENTAL PLAN
(As Amended and Restated Effective January 1, 1999)
CONTENTS
- --------
Article I. Establishment and Construction.................................. 1
1.1 Establishment and Amendment........................................... 1
1.2 Purpose............................................................... 1
Article II. Definitions, Construction, and Interpretation................. 2
2.1 Definitions........................................................... 2
2.2 Gender and Number..................................................... 5
2.3 Employment Rights..................................................... 6
2.4 Severability.......................................................... 6
2.5 Applicable Law........................................................ 6
Article III. Benefit Limitations Relating to Defined Contribution Plans... 7
3.1 Participation......................................................... 7
3.2 Benefit Amount........................................................ 8
3.4 Establishment of Accounts.............................................10
3.5 Benefit Payment or Commencement.......................................10
3.6 Form of Distribution..................................................11
Article IV. Benefit Limitations Relating to Defined Benefit Plans.........12
4.1 Participation.........................................................12
4.2 Benefit Amount........................................................12
4.3 Establishment of Accounts.............................................12
4.4 Benefit Payment or Commencement.......................................13
4.5 Form of Distribution..................................................13
Article V. Change of Control...............................................14
5.1 Participation.........................................................14
5.2 Benefit Amount........................................................14
5.3 Establishment of Accounts.............................................14
5.4 Benefit Payment.......................................................14
5.5 Form of Distribution..................................................14
Article VI. General Provisions............................................16
6.1 Funding...............................................................16
6.2 Vesting...............................................................16
6.3 Form of Distribution..................................................16
6.4 Death Benefits........................................................17
6.5 Administration........................................................17
<PAGE> 3
6.6 Claims and Appeals.............................................17
6.7 Expenses.......................................................19
6.8 Indemnification and Exculpation................................19
6.9 Interests Not Transferable.....................................19
6.10 Action by the Corporation or Affiliates.......................19
6.11 Effect on Other Benefit Plans.................................19
6.12 Tax Liability.................................................19
Article VII. Amendment and Termination.............................21
7.1 Amendment and Termination......................................21
ii
<PAGE> 4
ARTICLE I. ESTABLISHMENT AND CONSTRUCTION
1.1 ESTABLISHMENT AND AMENDMENT
Premark International, Inc. (the "Corporation") presently maintains an unfunded
deferred compensation plan, known as "The Premark International, Inc.
Supplemental Plan", which provides benefits to certain eligible employees of the
Corporation and its Affiliates. This plan was established effective as of
September 28, 1986, and was last amended and restated effective as of April 1,
1997. Said plan is hereby further amended and restated as set forth herein
effective as of January 1, 1999.
1.2 PURPOSE
The Corporation and its Affiliates sponsor several defined benefit plans and
defined contribution plans for the benefit of their U.S. employees and their
beneficiaries. These plans cover a variety of employee groups and are intended
to operate as "qualified plans" as that term is defined under the Code.
These qualified plans are subject to limitations under section 415 of the Code
that sometimes result in the diminution of allocations and benefits payable on
behalf of certain employees. This Plan is established to offset this diminution
for eligible employees. These benefits are intended to constitute an "unfunded
excess benefit plan" under Section 3(36) of ERISA.
These qualified plans also contain certain other restrictions, including
restrictions under Code sections 401 (a)(17), 401(k), and 402(g), that sometimes
result in a diminution of benefits available to certain highly compensated
employees. Also, these qualified plans exclude from the definition of
"compensation" amounts deferred by such employees to this Plan thereby resulting
in a diminution of benefits with respect to such deferrals. This Plan is
established to offset these diminutions, in part and to the extent provided
herein, for eligible employees. These benefits are intended as constituting an
unfunded deferred compensation plan for a select group of highly compensated
employees, as described in Sections 201(2), 301(a)(3), and 401 (a)(1) of ERISA.
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ARTICLE II. DEFINITIONS, CONSTRUCTION, AND INTERPRETATION
2.1 DEFINITIONS
The following terms shall have the meaning stated below unless the context
clearly indicates otherwise.
(a) "ADMINISTRATOR(S)" means a committee of the Board, such Employee,
Employees, or committee of Employees as may from time to time be
designated by the Board or a committee of the Board to have the
authority and control over some specified portion of the administration
and management of the Plan.
(b) "AFFILIATE" means-
(1) any corporation other than an Employer, i.e., either a
subsidiary corporation or an affiliated or associated
corporation of an Employer, which together with an Employer is
a member of a "controlled group" of corporations (as defined
in section 414(b) of the Code);
(2) any organization which together with an Employer is under
"common control" (as defined in section 414(c) of the Code);
(3) any organization which together with an Employer is an
"affiliated service group" (as defined in section 414(m) of
the Code); or
(4) any other entity required to be aggregated with an Employer
pursuant to regulations under section 414(o) of the Code.
(c) "BOARD" means the Board of Directors of the Corporation.
(d) "CHANGE OF CONTROL" effective November 6, 1996, means the following events:
(1) the acquisition, other than from the Corporation, by any
individual, entity, or group (within the meaning of Section 13
(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of securities representing twenty (20) percent or more of the
combined voting power of the Corporation's securities entitled
to vote in the election of directors; provided, however, that
any acquisition by the Corporation or any of its subsidiaries,
or by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any of its subsidiaries,
or any merger or acquisition following which more than sixty
(60) percent of the combined voting power of the securities of the
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resulting parent corporation is held by the holders of the
combined voting power of the Corporation's securities in
substantially the same proportion as their ownership
immediately prior to such transaction and the Incumbent Board
still constitutes at least a majority of the Board, shall not
constitute a Change of Control; or
(2) individuals who, as of November 6, 1996, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual
becoming a director subsequent to November 6, 1996, whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection
with an actual or threatened election contest (as such terms
are used in Rule 14a-11 of regulation 14A promulgated under
the Exchange Act) or other actual or threatened solicitation
of proxies or consents; or
(3) approval by the shareholders of the Corporation of-
(A) a complete liquidation or dissolution of the
Corporation, or
(B) the sale or other disposition of all or substantially
all of the assets of the Corporation, or
(C) a reorganization, merger, or consolidation of the
Corporation, provided that such transaction shall not
constitute a Change of Control if, following such
transaction, the holders of the combined voting power
of the Corporation's securities own more than sixty
(60) percent of the combined voting power of the
securities of the Corporation which acquires the
assets in (B) above or the parent Corporation which
results from the reorganization, merger or
consolidation in (C) above and the Incumbent Board
still constitutes at least a majority of such
entities; or
(D) the sale or other disposition, in response to a
pending or threatened Change of Control, of a
majority of the voting stock or all or substantially
all of the assets of the Corporation comprising the
decorative laminate business or the food equipment
business, if the sales or operating income of
such business constituted at least twenty (20)
percent of the Corporation's consolidated sales or
operating income during the most recently completed
fiscal year. The Board shall
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determine, in its sole discretion, whether the sale or other
disposition of such businesses is in response to a pending or
threatened Change of Control. If the Board determines that such
transaction is not in response to a pending or threatened Change of
Control, the Participant shall have no right to the benefits
resulting from a Change of Control; provided, however, that the Board
shall review the circumstances of such transaction, including
management's role in initiating the transaction, its effect on
shareholder value, and its effect on the Participant's
responsibilities and terms of employment, and shall determine, in its
sole discretion, whether all or any part of the benefits resulting
from a Change of Control shall be awarded to the Participant.
(e) "CODE" means the Internal Revenue Code of 1986, as it may be amended from
time to time.
(f) "COMPENSATION" means:
(1) for purposes of Article III, a Participant's "Compensation" as
defined in the Defined Contribution Plan, for a calendar year
(disregarding any provision having the effect of excluding the
Participant's deferrals to this Plan); and
(2) for purposes of Article IV, a Participant's "Compensation" as
defined in the Defined Benefit Plan, for a calendar year
(disregarding any provision having the effect of excluding the
Participant's deferrals to this Plan).
Notwithstanding the above, the definition of "Compensation" in the
Defined Compensation Plan and the Defined Benefits Plan shall not
include the compensation limit of Code section 401(a)(17).
(g) "DEFINED BENEFIT PLAN" means the Premark International, Inc. Base
Retirement Plan on account of which a Participant becomes eligible
under this Plan.
(h) "DEFINED CONTRIBUTION PLAN" means the Premark International, Inc.
Retirement Savings Plan.
(i) "EMPLOYER" means the Corporation and its Affiliates the employees of
which participate in any Defined Benefit Plan or Defined Contribution
Plan.
(j) "EMPLOYER PROVIDED BENEFIT" are amounts provided under this Plan on
behalf of a Participant by the Employer under Section 3.2(a).
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(k) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
(l) "HIGHLY COMPENSATED EMPLOYEE" means with respect to a calendar year an
employee of the Employer whom the Administrator(s) determines to be a
highly compensated employee within the meaning of Code section 414(q).
(m) "MAXIMUM RATE" means a limitation on the rate of contribution, as a
percentage of Compensation, of elective deferals placed on Highly
Compensated Employees by the Administrator under the Defined
Contribution Plan for the calendar year in order to pass the actual
deferral percentage or actual compensation percentage discrimination
tests of Codes sections 401(k) and 401(m), respectively.
(n) "PARTICIPANT" means a Highly Compensated Employee or former Highly
Compensated Employee or Level I Employee, who meets the participation
requirements set forth in Section 3.1, 4. 1, or 5.1 (whichever is
applicable) of this Plan.
(o) "PREMARK INCENTIVE PLAN" means the Premark International, Inc.
1994 Incentive Plan.
(p) "RETIREMENT" means a Participant's termination of employment with the
Corporation and Affiliates on or after the date the Participant either-
(1) has become eligible to receive an immediate retirement benefit
under the Defined Benefit Plan or, in the event the
Participant is not covered by the Defined Benefit Plan, the
Participant either has attained (A) age fifty-five (55) with
ten (10) years of service or (B) age sixty-five (65), or
(2) has immediate coverage under a retiree medical plan maintained by
the Employer.
Salary Reduction Contributions are before-tax contributions made to this Plan
under Section 3.2(b).
Unless the context clearly indicates otherwise, terms not defined in this
Section shall have the meaning specified in the applicable Defined Benefit Plan
or Defined Contribution Plan (if defined therein). Where the defined meaning is
intended, the term is capitalized.
2.2 GENDER AND NUMBER
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Unless the context clearly requires otherwise, masculine pronouns whenever used
shall include the feminine and neuter pronouns, and the singular shall include
the plural.
2.3 EMPLOYMENT RIGHTS
Establishment of the Plan shall not be construed to give any Participant the
right to be retained by the Employer or to receive any benefits not specifically
provided by the Plan.
2.4 SEVERABILITY
If a provision of this Plan shall be held illegal or invalid, the illegality or
invalidity shall not affect the remaining parts of the Plan and the Plan shall
be construed and enforced as if the illegal or invalid provision had not been
included in this Plan. The Corporation shall have the privilege and opportunity
to correct and remedy such question of illegality or invalidity by amendment as
provided in the Plan.
2.5 APPLICABLE LAW
(a) This Plan, to the extent considered an "unfunded supplemental executive
retirement plan", is fully exempt from Titles II, III, and IV of ERISA.
The Plan shall be governed and construed in accordance with Title I of
ERISA.
(b) In addition, this Plan, to the extent considered an "unfunded excess
benefit plan", is fully exempt from the provisions of ERISA pursuant to
Section 4(B)(5) thereof.
(c) To the extent not governed by ERISA, the Plan shall be governed by and
construed according to the laws of the State of Illinois.
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ARTICLE III. BENEFIT LIMITATIONS RELATING TO DEFINED CONTRIBUTION PLANS
3.1 PARTICIPATION
(a) A person who is a participant in a Defined Contribution Plan shall be
an eligible Participant under this Article for a calendar year if such
person satisfies any of the following:
(1) the person is a Level I Employee as designated by the Employer
for that calendar year;
(2) the person's Compensation for the prior calendar year was
equal to or greater than $125,000;
(3) the person's Compensation for the prior calendar year was
equal to or greater than $100,000, the person received a stock
option award under the Premark Incentive Plan during the prior
calendar year and the person participated in a performance
award under the Premark Incentive Plan with respect to
services performed during the prior calendar year; or
(4) the Administrator(s) designates the individual to be a
Participant for that calendar year because the
Administrator(s) reasonably believes that the individual will
satisfy the requirements of either (a)(2) or (a)(3) of this
Section 3.1.
(b) Participation in this Plan for a calendar year commences, with respect
to the Employer Provided Benefit, on the first payroll period upon
which occurs (i) the employee contributions, employer contributions,
forfeitures, compensation, or allocations under the applicable Defined
Contribution Plan are restricted for that calendar year as a result of
the provisions of Code sections 415, 401(a)(17), and/or 402(g), or any
successor provisions thereto; or (ii) a Participant's Salary Reduction
Contributions are made to this Plan.
(c) Participation in this Plan for a calendar year commences with respect to
Salary Reduction Contributions, on the earliest of (i) the first payroll
period of the calendar year from which amounts are withheld as a
contribution to the Defined Contribution Plan when the Participant has
irrevocably elected to make contributions to the Defined Contribution
Plan and to this Plan at a rate in excess of the Maximum Rate; (ii) the
first payroll period of the calendar year where the aggregate amount of
(A) deferrals to the Defined Contribution Plan subject to Code section
402(g), or any successor thereto; plus (B) Salary Reduction Contributions
to this Plan, equal the Code section 402(g) limit, or
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any successor thereto; or (iii) the first payroll period of the calendar
year where the Participant's Compensation exceeds the amount allowed by
Code section 401(a)(17), or any successor provision thereto.
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3.2 BENEFIT AMOUNT
For each calendar year of the Defined Contribution Plan, a Participant shall be
credited with a benefit equal to the sum of the amounts in (a) and (b) below-
(a) EMPLOYER-PROVIDED BENEFITS. The amount of Employer-Provided Benefits
shall equal to the sum of:
(1) the excess of (A) the amount which would have been allocated
for the calendar year, but for the limitations described in
Section 3.1(b) and based on Compensation as defined in this
Plan, over (B) the amount allocated for the calendar year, to
the Participant's Defined Contribution Plan account balance,
without regard to the rate of contribution elected by the
Participant under the Defined Contribution Plan; and,
(2) provided that the Participant has made a timely submission to
the Administrator of an election to make before-tax deferrals
for the calendar year to this Plan and the Defined
Contribution Plan, the excess of (A) the amount which would
have been allocated for the calendar year, but for the
limitations described in Section 3.1(b) and based on
Compensation as defined in this Plan, over (B) the amount
allocated for the calendar year, to the Participant's Defined
Contribution Plan account, where both (A) and (B) are based on
the rate of contribution specified in a timely election by the
Participant under this Plan and the Defined Contribution Plan,
as in effect on January 1 of such calendar year (or such later
date as of which an individual is first eligible to
participate as described in Section 3.2(c)), and (B) is
subject to the Maximum Rate.
For purposes of this subsection, contributions made pursuant to a
salary reduction agreement shall be deemed a Participant contribution
and not an Employer-provided benefit.
(b) SALARY REDUCTION CONTRIBUTIONS. Upon timely submission to the
Administrator(s) of an election to participate, a Participant shall be
eligible to make before-tax deferrals to this Plan equal to the amount
of contributions that would have been made to the Defined Contribution
Plan pursuant to a salary reduction agreement but for the Imitations
described in Section 3.1(b) and based on Compensation as defined in
this Plan. Such amount shall be based on the rate of Salary Reduction
Contributions elected by the Participant under this Plan, without
regard to the Maximum Rate, and the rate of contributions elected to be
made to the Defined Contribution Plan by salary reduction, without
regard to the Maximum Rate, as in effect on January 1 of each calendar
year (or such later date as of which an individual
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is first eligible to participate as described in Section 3.2(c)) for
which such elections are effective.
(c) ELECTION TO PARTICIPATE. To be effective for a calendar year, an
election to participate must be communicated in writing to the
Administrator(s) prior to January 1st of such year. Once an election is
made, it shall continue in effect unless and until the Participant
notifies the Administrator(s) in writing of his intention to change or
cancel his election, which cancellation or change shall not be
effective for purposes of this Plan until the first day of the calendar
year following the year in which the Administrator(s) receives such
notification.
(1) For a person first becoming an eligible Participant under this
Article 3.2(c), such election to participate must be
communicated in writing to the Administrator(s) no later than
thirty (30) days after the date he is notified of his
eligibility to make such deferrals, in which event-
(A) the election shall be effective for the first payroll
period occurring after the Administrator(s) receives
such written election, and
(B) deferrals pursuant to such election shall be
determined with reference to contributions to the
Defined Contribution Plan beginning with said payroll
period.
(2) If an election to participate is not timely filed, the
eligible Participant may elect to participate at the beginning
of any subsequent calendar year by submitting an election to
the Administrator(s) prior to the beginning of any subsequent
calendar year.
(d) CONTRIBUTION RATE CHANGES. An election to participate and the rate of
Salary Reduction Contributions elected by the Participant to this Plan
and the rate of contributions elected to be made to the Defined
Contribution Plan by salary reduction, without regard to the Maximum
Rate, will be irrevocable and shall continue for the balance of the
calendar year at the rate in effect at the beginning of the calendar
year (or such later date as of which an individual is first eligible to
participate as described in Section 3.2(c)).
3.3 EARNINGS
The benefit amount for each Participant pursuant to Section 3.2 shall be
adjusted and credited to each Participant's account at the end of each business
day to reflect an assumed rate of earnings, as follows:
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(a) Interest shall accrue on each day within a calendar quarter at an
annual rate equal to the prime rate published in the Wall Street
Journal at the beginning (January 1, April 1, July 1, October 1) of
each calendar quarter plus one percent (the "Quarterly Rate"). The
amount of earnings credited to each Participant shall be calculated
based on the balance in the Participant's account at the end of each
day, times the Quarterly Rate divided by 365 (or 366 during a leap
year).
(b) (1) In the event of a distribution (whether in a lump sum or
installments and whether or not deferred), earnings shall be
credited to the Participant's account in the manner and amount
specified in Section 3.3 (a) through the day prior to the day
in which the distribution is made or installment payments begin.
(2) In the event the Participant elects to receive the distribution in
installments pursuant to Section 6.3(b), the benefit amount shall
be further credited with a rate of earnings for each day of the
installment payment period in the manner and amount specified
in Section 3.3(a).
3.4 ESTABLISHMENT OF ACCOUNTS
An account shall be established on the Corporation's financial ledgers for
Participants entitled to a benefit under Section 3.2. The amounts credited to
the account shall be equal to the amounts of the Participant's benefit under
Section 3.2 and Section 3.3. Amounts shall be credited to the Participant's
account at the same time a similar amount is (or would have been) credited to
the Participant's Defined Contribution Plan account.
3.5 BENEFIT PAYMENT OR COMMENCEMENT
(a) Subject to Article V, in the event the Participant is to receive a lump
sum distribution under Section 6.3(a) or elects to receive an immediate
lump sum distribution under Section 6.3(b), the Participant's account
established under Section 3.4 shall be payable as soon as practicable
following the Participant's termination of employment with the
Corporation and Affiliates.
(b) Subject to Article V, each Participant who satisfies the requirements
of Section 6.3(b) may elect to defer the lump sum payment or
commencement of installment payments. In such event, the payment or
commencement of installments shall be made as soon as practicable
following the first anniversary of termination of employment with the
Corporation and Affiliates. The Participant shall be permitted to
revoke such election or to change the election in a manner consistent
with Section 6.3(b), provided that such a relocation or change shall
not be effective unless the Participant's new written election has been
on file with the Administrator(s)
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for at least twelve (12) months prior to the date of Participant's
termination of employment with the Employer.
(c) To the extent the payment or commencement of a benefit is deferred
under this Section, the amount so deferred shall continue to accrue an
assumed rate of earnings, as described in Section 3.3.
3.6 FORM OF DISTRIBUTION
The account established for a Participant under Section 3.4, in conjunction with
the account(s) established under Section 4.3 shall be payable in the same manner
described under Section 6.3; or if applicable, Section 5.4.
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ARTICLE IV. BENEFIT LIMITATIONS RELATING TO DEFINED BENEFIT PLANS
4.1 PARTICIPATION
(a) An employee who is a Highly Compensated Employee or who on or after
January 1, 1998, is a Level I Employee (who is designated as such by
the Administrator(s)) and who is a participant in a Defined Benefit
Plan shall become a Participant under this Article on the first date
upon which his Compensation and/or benefits under the applicable
Defined Benefit Plan are restricted as a result of the provisions of
Code sections 415 and/or 401(a)(17), or any successor provisions
thereto.
(b) A person who is a Participant described in Section 3.1(c) shall become
a Participant under this Article on the same day as of which the person
becomes a Participant under Section 3.1(c).
4.2 BENEFIT AMOUNT
A Participant shall receive a benefit equal to the actuarial equivalent of the
benefit under the Defined Benefit Plan that he is prevented from receiving as a
result of the restrictions described in Section 4.1. This amount is equal to the
excess of (a) over (b) below:
(a) the amount of benefit which the Participant would have received under
the Defined Benefit Plan if his benefits under any of such Defined
Benefit Plan had been based on Compensation as defined in this Plan and
had not been reduced by the restrictions described in Section 4.1(a);
and
(b) the amount of benefit the Participant actually receives under the Defined
Benefit Plan.
For purposes of this Section, "actuarial equivalent" shall be determined on the
same basis as single sum distributions payable from the Defined Benefit Plan and
subject to the same actuarial factors and adjustments.
4.3 ESTABLISHMENT OF ACCOUNTS
An account shall be established on the Corporation's financial ledgers for
Participants entitled to a benefit under Section 4.2. The amount credited shall
be equal to the amount of the Participant's benefit under Section 4.2, and, if
applicable, adjusted for earnings pursuant to Section 4.4(c).
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4.4 BENEFIT PAYMENT OR COMMENCEMENT
(a) Subject to Article V and except as otherwise specified in Section
6.3(b), the benefit payable under Section 4.2 shall be payable to the
Participant as soon as practicable following the Participant's
termination of employment with the Corporation and Affiliates.
(b) Subject to Article V, each Participant who satisfies the requirements
of Section 6.3(b) may elect to defer the lump sum payment or
commencement of installment payments. In such event the payment or
commencement of installments shall be made as soon as practicable
following the first anniversary of termination of employment with the
Corporation and Affiliates. The Participant shall be permitted to
revoke such election or to change the election in a manner consistent
with Section 6.3(b), provided that such a revocation or change shall
not be effective unless the Participant's new written election has been
on file with the Administrator(s) for at least twelve (12) months prior
to the date of Participant's termination of employment with the
Employer.
(c) To the extent the payment or commencement of a benefit is deferred
under this Section, the amount so deferred shall accrue an assumed rate
of earnings in the manner and amount described in Article III
commencing on the date as of which payment would have commenced.
4.5 FORM OF DISTRIBUTION
The account established for a Participant under Section 4.3, in conjunction with
the account(s) established under Section 3.4 shall be payable in the manner
described under Section 6.3; or if applicable, Section 5.4.
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ARTICLE V. CHANGE OF CONTROL
5.1 PARTICIPATION
A Participant shall become entitled to a benefit under this Article only if
covered by the Corporation's change of control policy or an employment agreement
with the Corporation and Affiliates which becomes effective upon a Change of
Control.
5.2 BENEFIT AMOUNT
A Participant shall receive a benefit only if there is a Change of Control of
the Corporation and the Participant terminates employment with the Corporation
and Affiliates as a result of the Change of Control pursuant to an employment
agreement or the Corporation's change of control policy. The benefit amount
payable will equal the excess of (a) over (b) below:
(a) the amount of benefit which the Participant would have received under
this Plan and all of his Employer-sponsored qualified retirement plans
had the Participant been fully vested in such plans at his termination
of employment with the Corporation and its Affiliates; and
(b) the amount of benefit in which the Participant has a vested interest
under this Plan and all of his Employer-sponsored qualified retirement
plans at his termination of employment with the Corporation and
Affiliates.
5.3 ESTABLISHMENT OF ACCOUNTS
An account shall be established on the Corporation's financial ledgers for
Participants entitled to a benefit under this Article V. The amount credited
shall be equal to the amount of the Participants' benefit under Section 5.2.
5.4 BENEFIT PAYMENT
Notwithstanding any other term or provision of this Plan and in lieu of any
other benefit payable under this Plan, payment of benefits under this Article V,
if any, and the benefit amount payable under Articles III and IV shall be made
within thirty (30) days following the Participant's termination of employment
with the Corporation and Affiliates.
5.5 FORM OF DISTRIBUTION
Such benefits described in Section 5.4 shall be paid in a single sum payment. In
determining the single sum value of a benefit payable as a result of
participation in a Defined Benefit Plan, the single sum shall be determined on
the same basis as single sum distributions payable from the Defined Benefit Plan
and subject to the same actuarial factors and adjustments.
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ARTICLE VI. GENERAL PROVISIONS
6.1 FUNDING
All amounts paid under this Plan shall be paid in cash from the general assets
of the Employer. Such amounts shall be reflected on the accounting records of
the Corporation but shall not be construed to create or require the creation of
a trust, custodial account, or escrow account. No Participant shall have any
right, title, or interest whatever in or to any investment reserves, accounts or
funds that the Corporation and Affiliates may purchase, establish, or accumulate
to aid in providing benefits under this Plan. Nothing contained in this Plan,
and no action taken pursuant to its provisions, shall create a trust or
fiduciary relationship of any kind between the Corporation and Affiliates and an
employee or any other person. Neither a Participant nor beneficiary of a
Participant shall acquire any interest greater than that of an unsecured
creditor.
6.2 VESTING
Benefits under this Plan shall become nonforfeitable when and to the extent they
would have become nonforfeitable had they been attributable to the applicable
qualified plan, except as otherwise provided in Section 5.2. Notwithstanding the
preceding sentence, a Participant or his beneficiary shall have no right to
benefits under this Plan if the Administrator(s) determines that he engaged in a
willful, deliberate, or gross act of commission or omission which is
substantially injurious to the finances or reputation of the Employer.
6.3 FORM OF DISTRIBUTION
Subject to Article V,
(a) if the total value of the account(s) established for a Participant
under Section 3.4 and/or Section 4.3 is equal to or less than $100,000,
the total Plan benefit shall be payable in a single-sum distribution on
the date determined pursuant to Sections 3.5(a) and 4.4(a). No other
form of distribution will be available to the Participant.
(b) if the total value of the account(s) established for a Participant
under Section 3.4 and/or Section 4.3 exceeds $100,000, the total Plan
benefit shall be payable in a single sum distribution on the date
determined pursuant to Sections 3.5 (a) and/or 4.4(a). However, each
Participant may elect that payment be made in either a single sum
distribution or equal annual installments over a period of ten (10)
years beginning with the date determined pursuant to Sections 3.5(b)
and/or 4.4(b) provided that such election shall not be effective
unless-
(1) the Participant's termination is on account of his Retirement, and
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(2) the Participant's written election of such alternative
distribution has been on file with the Administrator(s) for at
least twelve (12) months prior to the date of Participant's
termination of employment with the Employer.
6.4 DEATH BENEFITS
(a) Each Participant shall have the right to designate a beneficiary to
receive death benefits under this Plan upon the death of the
Participant. In the absence of a valid beneficiary designation, the
Participants spouse or, if the Participant is unmarried, the
Participant`s Beneficiary under the Defined Contribution Plan shall be
the beneficiary of the Participant's benefits under this Plan.
(b) In the event of a Participant's death prior to the commencement of
benefits, his beneficiary will receive such benefits in a single-sum
distribution as soon as practicable after the Participant's death.
Benefits attributable to Defined Benefit Plans shall be calculated and
subject to the same actuarial factors and adjustments used in
determining the death benefits under the applicable Defined Benefit
Plan.
(c) If the Participant dies after the commencement of benefits and before
all benefits have been distributed, the beneficiary shall receive all
unpaid benefit amounts, if any, in the same manner and form of
distribution as the Participant.
6.5 ADMINISTRATION
This Plan shall be administered by the Administrator(s). The Administrator(s)
shall have, to the extent appropriate, the same powers, rights, duties, and
obligations with respect to this Plan as they do for the applicable qualified
plans; provided, however, that the Administrator(s) determination of the
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons.
6.6 CLAIMS AND APPEALS
If any part of an application for benefits under the Plan is denied, the
following claim procedure applies:
(a) The Administrator(s) shall act upon each application for benefits
within ninety (90) days after receipt of the application. If special
circumstances require an extension of time, such Administrator(s) shall
notify the applicant of the delay and shall act within one hundred
eighty (180) days after receipt of the application. The
Administrator(s) shall also explain the reason for the delay and
indicate the date on which a decision may be expected. If the
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Administrator(s) does not act on an application for benefits within
ninety (90) days (or one hundred eighty (180) days, if applicable), the
application will be deemed to have been denied.
(b) If a claim is denied in whole or in part, the applicant shall be
notified in writing of the following information:
(1) the specific reasons for such denial;
(2) specific reference to pertinent Plan provisions on which the denial
is based;
(3) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(4) an explanation of the Plan's claim review procedure.
(c) The applicant may appeal by delivering a written notice to the
Administrator(s) within sixty (60) days after receiving notice of
denial from the Administrator(s) or, if no notice of denial was
received, within one hundred fifty (150) days (or two hundred forty
(240) days, if applicable) after the claim was filed. The applicant's
notice of appeal should:
(1) request a review of his application for benefits by the
Administrator(s);
(2) set forth all of the grounds upon which his request for review
is based and any facts in
support; and
(3) set forth any issues or comments which the applicant deems
pertinent to his application.
If he appeals, the applicant may review pertinent documents at any reasonable
time and place specified by the Administrator(s) and may submit any additional
written materials pertinent to the appeal not set forth in the notice of appeal.
(d) Any appeal will be reviewed by the Administrator(s). The applicant, who
may be represented by any person, will be entitled to appear before the
Administrator(s) to present his claim. The Administrator(s) will decide
the appeal not later than sixty (60) days after receiving the notice of
appeal. If special circumstances require an extension of time, a
decision will be made as soon as possible, but not later than one
hundred twenty (120) days after receipt of the notice of appeal. The
Administrator(s) shall also explain the reason for the delay and
indicate the date on which a decision may be expected. The decision of
the Administrator(s) will be in writing and will
18
<PAGE> 22
state clearly the reasons for the decision including specific reference
to the provisions of the Plan supporting the decision. The decision of
the Administrator(s) on any and all appeals shall be final and
conclusive upon all applicants.
6.7 EXPENSES
The expenses of administering the Plan shall be borne by the Employer.
19
<PAGE> 23
6.8 INDEMNIFICATION AND EXCULPATION
The Administrator(s), its agents, and officers, directors, and employees of the
Corporation and its Affiliates shall be indemnified and held harmless by the
Corporation against and from any and all loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by them in connection with or
resulting from any claim, action, suit, or proceeding to which they may be a
party or in which they may be involved by reason of any action taken or failure
to act under this Plan and against and from any and all amounts paid by them in
settlement (with the Corporation's written approval) or paid by them in
satisfaction of a judgement in any such action, suit, or proceeding. The
foregoing provision shall not be applicable to any person if the loss, cost,
liability, or expense is due to such person's gross negligence or willful
misconduct.
6.9 INTERESTS NOT TRANSFERABLE
The interests of the Participants and their beneficiaries under the Plan are not
subject to the claims of their creditors and may not be voluntarily or
involuntarily transferred, assigned, alienated, or encumbered.
6.10 ACTION BY THE CORPORATION OR AFFILIATES
Any action required of or permitted by the Corporation or an Affiliate under
this Plan shall be by approval of the Administrator(s) or any person or persons
authorized by the Administrator(s).
6.11 EFFECT ON OTHER BENEFIT PLANS
Amounts credited or paid under this Plan shall not be considered to be
compensation for the purposes of a qualified pension plan maintained by the
Corporation and Affiliates. The treatment of such amounts under other employee
benefit plans shall be determined pursuant to the provisions of such plans.
6.12 TAX LIABILITY
The Employer may withhold from any payment of benefits hereunder any taxes
required to be withheld and such sum as the Employer may reasonably estimate to
be necessary to cover any taxes for which the Employer may be liable and which
may be assessed with regard, to such payment.
20
<PAGE> 24
ARTICLE VII. AMENDMENT AND TERMINATION
7.1 AMENDMENT AND TERMINATION
The Corporation, by written action of the Administrator(s) reserves the right to
amend this Plan from time to time or to terminate the Plan at any time;
provided, however, the Corporation will not be entitled to amend the provisions
of Article V following a Change of Control.
21
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 27,
1999 included or incorporated by reference in Illinois Tool Works Inc.'s Form
10-K for the year ended December 31, 1998 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 8, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Illinois Tools Works Inc. of our report dated February
14, 1997 relating to the financial statements and financial statement schedule
for the year ended December 28, 1996 appearing in Premark International, Inc.'s
Annual Report on Form 10-K for the year ended December 26, 1998. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
Chicago, Illinois
October 12, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Illinois Tool Works
Inc. for the registration of its common stock and to the incorporation by
reference therein of our report dated February 5, 1999, with respect to the
consolidated financial statements and schedule of Premark International, Inc.
included in its Annual Report (Form 10-K) for the year ended December 26, 1998,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
October 12, 1999
<PAGE> 1
EXHIBIT 99.1
PROXY PROXY
ILLINOIS TOOL WORKS INC.
3600 WEST LAKE AVENUE, GLENVIEW, ILLINOIS 60025
SPECIAL MEETING OF STOCKHOLDERS NOVEMBER 23, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
I or we authorize W. James Farrell, Frank S. Ptak and Stewart S. Hudnut and any
one of them as proxies, with full power of substitution, to vote all stock of
Illinois Tool Works Inc., registered in the name of the undersigned on any
matters that come before the Special Meeting or any adjournments or
postponements of the meeting. The proxies will vote (1) as specified on this
card, (2) as the Board of Directors recommends where no choice is specified, and
(3) as the proxies decide on any other matter.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
- --------------------------------------------------------------------------------
[ITW LOGO}
ILLINOIS TOOL WORKS INC.
SPECIAL MEETING OF STOCKHOLDERS
TUESDAY, NOVEMBER 23, 1999
11:00 CENTRAL TIME
HARRIS TRUST AND SAVINGS BANK
11 WEST MONROE STREET
AUDITORIUM - 8TH FLOOR WEST
CHICAGO, ILLINOIS
<PAGE> 2
<TABLE>
<CAPTION>
<S><C>
ILLINOIS TOOL WORKS INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [ ]
The Board of Directors Recommends a Vote FOR the Proposal.
To approve the issuance of Illinois Tool Works Inc. common stock in connection For Against Abstain
with the Agreement and the Plan of Merger among Premark International, Inc., [ ] [ ] [ ]
Illinois Tool Works Inc., and CS Merger Sub Inc. dated as of September 9,
1999, as the same may be amended from to time.
THIS SPACE RESERVED FOR ADDRESSING
----------------------------
(key lines do not print) Signature
----------------------------
Signature
----------------------------
Date
- -------------------------------------------------------------------------------
CONTROL NUMBER / \ DETACH PROXY CARD HERE / \
VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
Vote by Telephone Have this proxy card available when you call the
toll-free number 800-215-9653 using a touch-tone
phone. Enter your Control Number when asked and
follow the simple prompts. Your Control Number is
located above, to the left of this box.
Vote by Fax Please mark, sign and date this proxy and fax it
to 312-293-5999.
Vote by the Internet Have this proxy card available when you access
the website: www.harrisbank.com/wproxy Enter
our Control Number where indicated and follow the
simple prompts.
Vote by Mail Please mark, sign and date this proxy card and
return it to Harris Bank in the enclosed postage-
paid envelope.
</TABLE>
<PAGE> 1
EXHIBIT 99.2
PREMARK
INTERNATIONAL
- --------------------------------------------------------------------------------
PREMARK PREMARK INTERNATIONAL, INC.
INTERNATIONAL 1717 DEERFIELD ROAD, DEERFIELD, IL 60015 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE SPECIAL MEETING
OF STOCKHOLDERS ON NOVEMBER 23, 1999.
I or we authorize James M. Ringler and John M. Costigan, and any one or both of
them as proxies, with full power of substitution, to vote all stock of Premark
International, Inc. registered in my name or our names or held for me or for us
on any matters that come before the Special Meeting or any adjournments or
postponements of the meeting. The proxies will vote (1) as specified on the
card; (2) as the Board of Directors recommends where no choice is specified; and
(3) as the proxies decide on any other matter.
Your vote is important. Please indicate your vote, sign, date and return the
card promptly in the enclosed postage-paid envelope or vote by phone, internet
or fax.
See reverse for voting instructions
<PAGE> 2
COMPANY #
CONTROL #
THERE ARE FOUR WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE, INTERNET OR FAX VOTE AUTHORIZES THE PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD
BY MAIL.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
- -- Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- -- You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- -- Follow the simple instructions the voice provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/PMI -- QUICK *** EASY *** IMMEDIATE
- -- Use the internet to vote your proxy 24 hours a day, 7 days a week.
- -- You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY FAX
Mark, sign, and date your proxy card and fax it to 1-651-450-4026, Attention:
Proxy Department.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Premark International, Inc., c/o Shareowner
Services, P.O. Box 64873, St.Paul, MN 55164-0673.
IF YOU VOTE BY PHONE, INTERNET OR FAX, PLEASE DO NOT MAIL YOUR PROXY CARD
\/ Please detach here \/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
<TABLE>
<CAPTION>
<S><C>
1. TO ADOPT THE AGREEMENT AND PLAN OF MERGER
AMONG PREMARK INTERNATIONAL, INC., ILLINOIS
TOOL WORKS INC. AND CS MERGER SUB INC. DATED
AS OF SEPTEMBER 9, 1999, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME. [ ] For [ ] Against [ ] Abstain
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR THE PROPOSAL.
[ ] I plan to attend the meeting.
Address Change? Mark Box [ ] Indicate changes below: Date
---------------
---------------------------
---------------------------
Signature(s) in Box
Please sign exactly as
your name(s) appear on
Proxy. If held in joint
tenancy, all persons must
sign. Trustees,
administrators, etc.,
should include title and
authority. Corporations
should provide full name of
corporation and title of
authorized officer signing
the proxy.
<PAGE> 1
EXHIBIT 99.3
[PREMARK INTERNATIONAL LOGO]
- --------------------------------------------------------------------------------
[PREMARK INTERNATIONAL LETTERHEAD] VOTING INSTRUCTION
- --------------------------------------------------------------------------------
THIS VOTING INSTRUCTION CARD IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT
THE SPECIAL MEETING OF STOCKHOLDERS ON NOVEMBER 23, 1999.
As a participant in a benefit plan sponsored by Premark International, Inc.,
you have the right to give written instructions to the trustee of the plan as
to the voting of the shares of the Corporation's common stock held for your
benefit by the plan.
This Voting Instruction Card when properly signed will be voted in the manner
you direct. IF NO DIRECTION IS MADE, THIS VOTING INSTRUCTION CARD WILL BE TAKEN
AS AUTHORITY TO VOTE "FOR" ITEM 1, AND TO VOTE UPON ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT THEREOF. If this card is
not returned or is returned unsigned, the trustee will vote the shares in
accordance with the terms of the Master Defined Contribution Trust.
Your vote is important. Please indicate your vote, sign, date and return the
card promptly in the enclosed postage-paid envelope or vote by phone, internet
or fax.
See reverse for voting instructions.
<PAGE> 2
COMPANY #
CONTROL #
THERE ARE FOUR WAYS TO VOTE YOUR SHARES
YOUR TELEPHONE, INTERNET OR FAX VOTE AUTHORIZES THE TRUSTEE TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR VOTING
INSTRUCTION CARD BY MAIL.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
- - Use any touch-tone telephone to vote your shares 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- - Follow the simple instructions the voice provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/PMI -- QUICK *** EASY *** IMMEDIATE
- - Use the Internet to vote your shares 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY FAX
Mark, sign and date your Voting Instruction Card and fax it to 1-651-450-4026,
Attention: Proxy Department.
VOTE BY MAIL
Mark, sign and date your Voting Instruction Card and return it in the
postage-paid envelop we've provided or return it to Premark International,
Inc., c/o Shareowner Services (TM), P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE, INTERNET OR FAX, PLEASE DO NOT MAIL YOUR VOTING
INSTRUCTION CARD
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
1. TO ADOPT THE AGREEMENT AND PLAN OF MERGER AMONG PREMARK
INTERNATIONAL, INC., ILLINOIS TOOL WORKS INC. AND CS MERGER
SUB INC. DATED AS OF SEPTEMBER 9, 1999, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME.
[ ] For [ ] Against [ ] Abstain
[ ] I plan to attend the meeting
Address Change? Mark Box [ ] Indicate changes below Date
--------------
---------------------
---------------------
Signature(s) in Box
Please sign exactly
as your name(s)
appear on this Voting
Instruction Card. If
held in joint tenancy,
all persons must sign.
Trustees,
administrators, etc.
should include title
and authority.
Corporations should
provide full name of
corporation and title
of authorized officer
signing the Voting
Instruction Card.
<PAGE> 1
EXHIBIT 99.4
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
October 12, 1999
Board of Directors
Premark International, Inc.
1717 Deerfield Road
Deerfield, IL 60015
Re: Registration Statement on Form S-4 of Illinois Tool Works Inc. relating to
the shares of common stock, par value $0.01 per share, of Illinois Tool
Works Inc. being registered in connection with the proposed merger of a
wholly-owned subsidiary of Illinois Tool Works Inc. with and into Premark
International, Inc.
Ladies and Gentlemen:
Attached is our opinion letter dated September 9, 1999 with respect to the
fairness from a financial point of view to the holders of the outstanding shares
of Common Stock, par value $1.00 per share, of Premark International, Inc. (the
"Company") of the Exchange Ratio (as defined therein) pursuant to the Agreement
and Plan of Merger, dated as of September 9, 1999, among Illinois Tool Works
Inc. ("ITW"), CS Merger Sub Inc., a wholly owned subsidiary of ITW, and the
Company.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary - Premark's Reasons for the Merger", "Summary - The
Merger Agreement and the Merger", "The Merger Agreement and the Merger -
Background of the Merger", "The Merger Agreement and the Merger - Recommendation
of Premark's Board of Directors and Reasons for the Merger" and "The Merger
Agreement and the Merger - Opinion of Premark's Financial Advisor" and to the
inclusion of the foregoing opinion in the Joint Proxy Statement/Prospectus
included in the above-mentioned Registration Statement. In giving such consent,
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
- --------------------------------
(GOLDMAN, SACHS & CO.)
