<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
INSTRON CORPORATION
(Name of the Issuer)
ISN ACQUISITION CORPORATION
KIRTLAND CAPITAL PARTNERS III L.P.
<TABLE>
<S> <C>
GEORGE S. BURR JONATHAN L. BURR
HELEN L. BURR THE JONATHAN L. BURR TRUST -- 1965
THE HAROLD HINDMAN TRUST -- 1969 YAHYA GHARAGOZLOU
JAMES M. MCCONNELL ARTHUR D. HINDMAN
JOSEPH E. AMARAL WILLIAM J. MILLIKEN
KENNETH L. ANDERSEN LINTON A. MOULDING
JOHN R. BARRETT JANE ELIZABETH MOULDING
NORMAN L. SMITH
</TABLE>
INSTRON CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
0004577761
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C> <C>
Kirtland Capital Partners III L.P. Instron Corporation James M. McConnell
c/o Raymond A. Lancaster c/o James M. McConnell Joseph E. Amaral
2550 SOM Center Road 100 Royall Street Kenneth L. Andersen
Suite 105 Canton, MA 02021 John R. Barrett
Willoughby Hills, OH 44904 (781) 828-2500 Jonathan L. Burr
(440) 585-9010 The Jonathan L. Burr
Trust -- 1965
ISN Acquisition Corporation George S. Burr Yahya Gharagozlou
c/o Kirtland Capital Partners III L.P. Helen L. Burr Arthur D. Hindman
c/o Raymond A. Lancaster The Harold Hindman William J. Milliken
2550 SOM Center Road Trust -- 1969 Linton A. Moulding
Suite 105 c/o Instron Corporation Jane Elizabeth Moulding
Willoughby Hills, OH 44904 100 Royall Street Norman L. Smith
(440) 585-9010 Canton, MA 02021 c/o Instron Corporation
(781) 828-2500 100 Royall Street
Canton, MA 02021
(781) 828-2500
</TABLE>
WITH COPIES TO:
<TABLE>
<S> <C> <C> <C>
Stuart M. Cable, P.C. Charles W. Hardin, Jr. John R. Utzschneider Thomas J. Dougherty
Joseph L. Johnson III, P.C. Jones, Day, Reavis & Pogue Bingham Dana LLP Skadden, Arps, Slate,
Goodwin, Procter & Hoar LLP 901 Lakeside Avenue 150 Federal Street Meagher & Flom LLP
Exchange Place Cleveland, OH 44114 Boston, MA 02110 One Beacon Street
Boston, MA 02109 (216) 586-3939 (617) 951-8000 Boston, MA 02108
(617) 570-1000 (617) 573-4800
</TABLE>
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
TRANSACTION VALUE* AMOUNT OF FILING FEE
- -----------------------------------------------------------------------------------------------
<S> <C>
$151,662,752 $30,333
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
* For purposes of calculating the filing fee only. Calculated in accordance with
Rule 0-11(b)(2) under the Securities Exchange Act of 1934, as amended. Assumes
the purchase of 6,653,238 shares of Common Stock, par value $1.00 per share,
of Instron Corporation at $22.00 per share and the purchase of underlying
options to purchase Common Stock for an aggregate of $5,291,516.
[X] Check box if any of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid. Identify
the previous filing by registration statement number, or the form or schedule
and the date of its filing.
Amount previously paid: $30,333
Form or registration no.: Preliminary Proxy Statement on Schedule 14A (filed
concurrently with this Schedule 13E-3)
Filing party: Instron Corporation
Date filed: May 26, 1999
<PAGE> 2
This Rule 13e-3 Transaction Statement (this "Statement") is being filed
with the Securities and Exchange Commission (the "Commission") in connection
with the merger (the "Merger") of ISN Acquisition Corporation ("MergerCo") with
and into Instron Corporation ("Instron"), with Instron continuing as the
surviving corporation (the "Surviving Corporation"), pursuant to an Agreement
and Plan of Merger dated as of May 6, 1999 (the "Merger Agreement") by and among
Instron, MergerCo and Kirtland Capital Partners III L.P., the parent of MergerCo
("Kirtland"). Under the Merger Agreement, each share of common stock, par value
$1.00 per share, of Instron (the "Instron Common Stock") outstanding immediately
prior to the Merger, other than shares held by Instron, its subsidiaries,
MergerCo or dissenting Instron stockholders, will be canceled and converted
automatically into the right to receive $22.00 in cash without interest. In
addition, certain members of Instron's management and their affiliates (the
"Management Investors") and certain members of Instron's Board of Directors
and/or their affiliates (the "Other Investors") who or which are also
stockholders of Instron will exchange some of their shares of Instron Common
Stock for equity in the Surviving Corporation and will have certain of their
stock options assumed by the Surviving Corporation. Accordingly, upon
consummation of the Merger, the entire equity interest in Instron as the
Surviving Corporation will be owned by Kirtland and certain of its affiliates,
the Management Investors and the Other Investors. James M. McConnell, Joseph E.
Amaral, Kenneth L. Andersen, John R. Barrett, Jonathan L. Burr, The Jonathan L.
Burr Trust -- 1965, Yahya Gharagozlou, Arthur D. Hindman, William J. Milliken,
Linton A. Moulding, Jane Elizabeth Moulding and Norman L. Smith are the
Management Investors. George S. Burr, Helen L. Burr and The Harold Hindman
Trust -- 1969 are the Other Investors.
Concurrently with the filing of this Statement, Instron has filed with the
Commission a preliminary Proxy Statement on Schedule 14A (the "Proxy Statement")
in connection with a special meeting of the stockholders of Instron at which
such stockholders will be asked to approve the Merger Agreement and the
transactions contemplated thereby, including the Merger.
The following cross reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement of
the information required to be included in response to the items of this
Statement. The information in the Proxy Statement which is attached hereto as
Exhibit (d)(3), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN CAPTION OR LOCATION
SCHEDULE 13E-3 IN THE PROXY STATEMENT
-------------- ----------------------
<S> <C>
Item 1(a) Cover Page and "Summary -- The Companies"
Item 1(b) Cover Page, "Summary -- Record Date; Voting Power,"
"Historical Market Information" and "The Special
Meeting -- Record Date and Quorum Requirement"
Item 1(c)-(d) "Historical Market Information"
Item 1(e) *
Item 1(f) "Principal Stockholders and Stock Ownership of Management
and Others"
Item 2(a)-(d) and (g) "Summary -- The Companies" and "Certain Information
Concerning MergerCo and the Investor Group"
Item 2(e)-(f) *
Item 3(a)(1) "Special Factors -- Background of the Merger" and
"-- Conflicts of Interest"
Item 3(a)(2) "Special Factors -- Background of the Merger" and
"-- Conflicts of Interest"
Item 3(b) "Special Factors -- Background of the Merger" and
"-- Conflicts of Interest"
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Not applicable or answer is negative
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
ITEM IN CAPTION OR LOCATION
SCHEDULE 13E-3 IN THE PROXY STATEMENT
-------------- ----------------------
<S> <C>
Item 4(a) "Questions and Answers about the Merger," "Summary -- Terms
of the Merger Agreement," "-- Share Ownership of Instron
Following the Merger," "-- Conflicts of Interest,"
"-- Appraisal Rights," "Special Factors -- Certain Effects
of the Merger," "-- Financing of the Merger," "-- Conflicts
of Interest," "The Special Meeting -- Effective Time of the
Merger and Payment for Shares," "The Merger," "Appraisal
Rights" and Appendix A to the Proxy Statement
Item 4(b) "Questions and Answers about the Merger," "Summary -- Share
Ownership of Instron Following the Merger," "-- Conflicts of
Interest," "-- Appraisal Rights," "Special
Factors -- Purpose and Reasons of the Investor Group for the
Merger," "-- Conflicts of Interest," "-- Certain Effects of
the Merger," "The Merger" and "Appraisal Rights"
Item 5(a)-(b) *
Item 5(c) "Special Factors -- Conflicts of Interest" and "-- Conduct
of Instron's Business After the Merger"
Item 5(d) "Historical Market Information," "Special Factors -- Conduct
of Instron's Business After the Merger" and "The
Merger -- Terms of the Merger Agreement -- Covenants"
Item 5(e) "Special Factors -- Certain Effects of the Merger,"
"-- Financing of the Merger" and "-- Conduct of Instron's
Business After the Merger"
Item 5(f)-(g) "Special Factors -- Certain Effects of the Merger"
Item 6(a) "Special Factors -- Financing of the Merger"
Item 6(b) "The Merger -- Estimated Fees and Expenses of the Merger"
Item 6(c) "Special Factors -- Financing of the Merger"
Item 6(d) *
Item 7(a)-(c) "Questions and Answers about the Merger," "Summary,"
"Special Factors -- Background of the Merger," "-- The
Special Committee's and the Instron Board's Recommendation,"
"-- Opinion of Financial Advisor," "-- Purpose and Reasons
of the Investor Group for the Merger" and "-- Conflicts of
Interest"
Item 7(d) "Questions and Answers about the Merger," "Summary,"
"Special Factors -- Background of the Merger," "-- Purpose
and Reasons of the Investor Group for the Merger,"
"-- Conflicts of Interest," "-- Certain Effects of the
Merger," "--Financing of the Merger," "-- Conduct of
Instron's Business After the Merger," "Appraisal Rights,"
"Federal Income Tax Consequences" and "Principal
Stockholders and Stock Ownership of Management and Others"
Item 8(a)-(b) "Questions and Answers about the Merger,"
"Summary -- Recommendations," "-- Opinion of Financial
Advisor," "-- Conflicts of Interest," "-- Appraisal Rights,"
"Special Factors -- Background of the Merger," "-- The
Special Committee's and the Instron Board's Recommendation,"
"-- Opinion of Financial Advisor," "-- Position of the
Investor Group as to Fairness of the Merger," "-- Conflicts
of Interest" and "Appraisal Rights"
Item 8(c) "Questions and Answers about the Merger," "Summary -- Vote
Required," "The Special Meeting -- Voting Procedures" and
"The Merger -- Terms of the Merger Agreement -- Conditions."
</TABLE>
- ------------------------
* Not applicable or answer is negative.
3
<PAGE> 4
<TABLE>
Item 8(d) "Questions and Answers about the Merger," "Special Factors -- Background
of the Merger," "-- The Special Committee's and the Instron Board's
Recommendation" and "-- Opinion of Financial Advisor"
<S> <C>
Item 8(e) "Questions and Answers about the Merger," "Summary -- Recommendations,"
"Special Factors -- Background of the Merger" and
"-- The Special Committee's and the Instron Board's Recommendation"
Item 8(f) "Special Factors -- Background of the Merger"
Item 9(a)-(c) "Summary -- Recommendations," "-- Opinion of Financial Advisor," "Special
Factors -- Background of the Merger," "-- The Special Committee's and the
Instron Board's Recommendation," "-- Opinion of Financial Advisor,"
"-- Conflicts of Interest" and Appendix B to the Proxy Statement
Item 10(a) "Principal Stockholders and Stock Ownership of Management and Others"
Item 10(b) "Principal Stockholders and Stock Ownership of Management and Others"
Item 11 "Questions and Answers about the Merger," "Summary -- Terms of the Merger
Agreement," "Special Factors -- Background of the Merger,"
"-- Conflicts of Interest," "-- Financing of the Merger," "The Special
Meeting -- Voting Agreement," "The Merger" and Appendix A to the Proxy
Statement
Item 12(a)-(b) "Summary -- Recommendations," "-- Share Ownership of Instron Following the
Merger," "-- Conflicts of Interest," "Special Factors -- Background of the
Merger," "-- The Special Committee's and the Instron Board's
Recommendation," "-- Conflicts of Interest," "-- Purpose and Reasons of
the Investor Group for the Merger," "-- Financing of the Merger" and "The
Special Meeting -- Voting Agreement"
Item 13(a) "Summary -- Appraisal Rights," "The Special Meeting -- Voting Procedures,"
"Appraisal Rights" and Appendix C to the Proxy Statement
Item 13(b)-(c) *
Item 14(a) "Selected Historical Consolidated Financial Data" and "Unaudited Pro Forma
Condensed Consolidated Financial Data -- Ratio of Earnings to Fixed
Charges"
Item 14(b) "Unaudited Pro Forma Condensed Consolidated Financial Data"
Item 15(a)-(b) "Summary -- Effects of the Merger," "-- Financing of the Merger," "Special
Factors -- Conflicts of Interest," "-- Certain Effects of the Merger,"
"-- Financing of the Merger," "-- Conduct of Instron's Business After the
Merger," "The Special Meeting -- Proxy Solicitation" and "The Merger"
Item 16 Proxy Statement
Item 17(a)-(f) *
</TABLE>
- ---------------
* Not applicable or answer is negative.
4
<PAGE> 5
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth on the cover page to the Proxy Statement and
in the section entitled "Summary -- The Companies" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth on the cover page to the Proxy Statement and
in the sections entitled "Summary -- Record Date; Voting Power," "Historical
Market Information" and "The Special Meeting -- Record Date and Quorum
Requirement" of the Proxy Statement is incorporated herein by reference.
(c)-(d) The information set forth in the section entitled "Historical
Market Information" of the Proxy Statement is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the section entitled "Principal
Stockholders and Stock Ownership of Management and Others" of the Proxy
Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed jointly by Instron, MergerCo,
Kirtland, the Management Investors and the Other Investors. The information set
forth in the sections entitled "Summary -- The Companies" and "Certain
Information Concerning MergerCo and the Investor Group" of the Proxy Statement
is incorporated herein by reference.
(e), (f) None of the persons or entities with respect to whom information
is required by this item has during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the sections entitled "Special
Factors -- Background of the Merger" and "-- Conflicts of Interest" of the Proxy
Statement is incorporated herein by reference.
(a)(2) The information set forth in the sections entitled "Special
Factors -- Background of the Merger" and "-- Conflicts of Interest" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Special
Factors -- Background of the Merger" and "-- Conflicts of Interest" of the Proxy
Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary -- Terms of the Merger Agreement," "-- Share
Ownership of Instron Following the Merger," "-- Conflicts of Interest,"
"-- Appraisal Rights," "Special Factors -- Certain Effects of the Merger,"
"-- Financing of the Merger," "-- Conflicts of Interest," "The Special
Meeting -- Effective Time of the Merger and Payment for Shares," "The Merger"
and "Appraisal Rights" of the Proxy Statement and Appendix A to the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary -- Share Ownership of Instron Following the
Merger," "-- Conflicts of Interest," "-- Appraisal Rights," "Special
Factors -- Purpose and Reasons of the Investor Group for the Merger,"
"-- Conflicts of Interest," "-- Certain Effects of the Merger," "The Merger" and
"Appraisal Rights" of the Proxy Statement is incorporated herein by reference.
5
<PAGE> 6
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(b) Not applicable.
(c) The information set forth in the sections entitled "Special
Factors -- Conflicts of Interest" and "--Conduct of Instron's Business After the
Merger" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled "Historical Market
Information," "Special Factors -- Conduct of Instron's Business After the
Merger" and "The Merger -- Terms of the Merger Agreement -- Covenants" of the
Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled "Special
Factors -- Certain Effects of the Merger," "-- Financing of the Merger" and
"-- Conduct of Instron's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
(f)-(g) The information set forth in the section entitled "Special
Factors -- Certain Effects of the Merger" of the Proxy Statement is incorporated
herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the section entitled "Special
Factors -- Financing of the Merger" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in the section entitled "The
Merger -- Estimated Fees and Expenses of the Merger" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth in the section entitled "Special
Factors -- Financing of the Merger" of the Proxy Statement is incorporated
herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary," "Special Factors -- Background of the
Merger," "-- The Special Committee's and the Instron Board's Recommendation,"
"-- Opinion of Financial Advisor," "-- Purpose and Reasons of the Investor Group
for the Merger" and "-- Conflicts of Interest" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary," "Special Factors -- Background of the
Merger," "-- Purpose and Reasons of the Investor Group for the Merger,"
"-- Conflicts of Interest," "-- Certain Effects of the Merger," "-- Financing of
the Merger," "-- Conduct of Instron's Business After the Merger," "Appraisal
Rights," "Federal Income Tax Consequences" and "Principal Stockholders and Stock
Ownership of Management and Others" of the Proxy Statement is incorporated
herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary -- Recommendations," "-- Opinion of
Financial Advisor," "-- Conflicts of Interest," "-- Appraisal Rights," "Special
Factors -- Background of the Merger," "-- The Special Committee's and the
Instron Board's Recommendation," "-- Opinion of Financial Advisor," "-- Position
of the Investor Group as to Fairness of the Merger," "-- Conflicts of Interest"
and "Appraisal Rights" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary -- Vote Required," "The Special
Meeting -- Voting Procedures" and "The Merger -- Terms of the Merger
Agreement -- Conditions" of the Proxy Statement is incorporated herein by
reference.
6
<PAGE> 7
(d) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Special Factors -- Background of the Merger,"
"-- The Special Committee's and the Instron Board's Recommendation" and
"-- Opinion of Financial Advisor" of the Proxy Statement is incorporated herein
by reference.
(e) The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary -- Recommendations," "Special
Factors -- Background of the Merger" and "-- The Special Committee's and the
Instron Board's Recommendation" of the Proxy Statement is incorporated herein by
reference.
(f) The information set forth in the section entitled "Special
Factors -- Background of the Merger" of the Proxy Statement is incorporated
herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the sections entitled
"Summary -- Recommendations," "-- Opinion of Financial Advisor," "Special
Factors -- Background of the Merger," "-- The Special Committee's and the
Instron Board's Recommendation," "-- Opinion of Financial Advisor" and
"-- Conflicts of Interest" of the Proxy Statement and in Appendix B to the Proxy
Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the section entitled "Principal
Stockholders and Stock Ownership of Management and Others" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the section entitled "Principal
Stockholders and Stock Ownership of Management and Others" of the Proxy
Statement is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the sections entitled "Questions and Answers
about the Merger," "Summary -- Terms of the Merger Agreement," "Special
Factors -- Background of the Merger," "-- Conflicts of Interest," "-- Financing
of the Merger," "The Special Meeting -- Voting Agreement" and "The Merger" of
the Proxy Statement and in Appendix A to the Proxy Statement is incorporated
herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a)-(b) The information set forth in the sections entitled
"Summary -- Recommendations," "-- Share Ownership of Instron Following the
Merger," "-- Conflicts of Interest," "Special Factors -- Background of the
Merger," "-- The Special Committee's and the Instron Board's Recommendation,"
"-- Purpose and Reasons of the Investor Group for the Merger," "-- Financing of
the Merger" and "The Special Meeting -- Voting Agreement" of the Proxy Statement
is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled
"Summary -- Appraisal Rights," "The Special Meeting -- Voting Procedures" and
"Appraisal Rights" of the Proxy Statement and in Appendix C to the Proxy
Statement is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The relevant financial information set forth in the sections entitled
"Selected Historical Consolidated Financial Data" and "Unaudited Pro Forma
Condensed Consolidated Financial Data -- Ratio of Earnings to Fixed Charges" of
the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the section entitled "Unaudited Pro Forma
Condensed Consolidated Financial Data" of the Proxy Statement is incorporated
herein by reference.
7
<PAGE> 8
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) The information set forth in the sections entitled
"Summary -- Effects of the Merger," "-- Financing of the Merger," "Special
Factors -- Conflicts of Interest," "-- Certain Effects of the Merger,"
"-- Financing of the Merger," "-- Conduct of Instron's Business After the
Merger," "The Special Meeting -- Proxy Solicitation" and "The Merger" of the
Proxy Statement is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Letter dated May 3, 1999 from National City Bank to Kirtland.
(b)(1) Opinion of The Beacon Group Capital Services, LLC dated May 6, 1999
(included as Appendix B to the Proxy Statement, which is filed herewith as
Exhibit (d)(3)).
(c)(1) Agreement and Plan of Merger dated as of May 6, 1999 by and among
Instron, MergerCo and Kirtland (included as Appendix A to the Proxy Statement,
which is filed herewith as Exhibit (d)(3)).
(c)(2) Letter Agreement dated as of May 6, 1999 by and among Kirtland and
the Management Investors.
(c)(3) Letter Agreement dated as of May 6, 1999 by and among Kirtland,
Instron and the Other Investors.
(c)(4) Voting Agreement dated as of May 6, 1999 by and among Kirtland,
MergerCo, the Management Investors and certain of their affiliates, and the
Other Investors and certain of their affiliates.
(c)(5) Form of Stockholders Agreement.
(c)(6) Form of Amendment to Restricted Stock Award Agreement.
(c)(7) Form of Instron Corporation 1999 Stock Option Plan.
(c)(8) Form of Incentive Stock Option Agreement.
(c)(9) Form of Nonqualified Stock Option Agreement.
(c)(10) Form of Amendment to Instron Corporation 1992 Stock Incentive Plan.
(c)(11) Form of Amendment to Nonqualified Stock Option Agreement.
(c)(12) Form of Amendment to Incentive Stock Option Agreement.
(d)(1) Letter to Stockholders (included in the Proxy Statement, which is
filed herewith as Exhibit (d)(3)).
(d)(2) Notice of Special Meeting of Stockholders (included in the Proxy
Statement, which is filed herewith as Exhibit (d)(3)).
(d)(3) Proxy Statement.
(d)(4) Form of Proxy.
(d)(5) Press Release issued by Instron and Kirtland dated as of May 7, 1999
(incorporated by reference to the Current Report on Form 8-K filed by Instron on
May 12, 1999).
(e) Text of Sections 85 to 98 of Chapter 156B of the General Laws of
Massachusetts (included as Appendix C to the Proxy Statement, which is filed
herewith as Exhibit (d)(3)).
(f) Not applicable.
8
<PAGE> 9
SIGNATURES
After due inquiry and to the best of our knowledge and belief, each of the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
<TABLE>
<S> <C>
INSTRON CORPORATION
Dated: May 26, 1999 By: /s/ LINTON A. MOULDING
--------------------------------------------
Name: Linton A. Moulding
Title: Chief Financial Officer
ISN ACQUISITION CORPORATION
Dated: May 26, 1999 By: /s/ THOMAS N. LITTMAN
--------------------------------------------
Name: Thomas N. Littman
Title: Treasurer
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd., its General
Partner
Dated: May 26, 1999 By: /s/ THOMAS N. LITTMAN
--------------------------------------------
Name: Thomas N. Littman
Title: Vice President
GEORGE S. BURR
Dated: May 26, 1999 /s/ GEORGE S. BURR
--------------------------------------------
HELEN L. BURR
Dated: May 26, 1999 /s/ HELEN L. BURR
--------------------------------------------
THE HAROLD HINDMAN TRUST -- 1969
Dated: May 26, 1999 By: /s/ HAROLD HINDMAN
--------------------------------------------
Name: Harold Hindman
Title: Trustee
Dated: May 26, 1999 By: /s/ ROBERT N. SHAPIRO
--------------------------------------------
Name: Robert N. Shapiro
Title: Trustee
JAMES M. MCCONNELL
Dated: May 26, 1999 /s/ JAMES M. MCCONNELL
--------------------------------------------
JOSEPH E. AMARAL
Dated: May 26, 1999 /s/ JOSEPH E. AMARAL
--------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
KENNETH L. ANDERSEN
Dated: May 26, 1999 /s/ KENNETH L. ANDERSEN
--------------------------------------------
JOHN R. BARRETT
Dated: May 26, 1999 /s/ JOHN R. BARRETT
--------------------------------------------
JONATHAN L. BURR
Dated: May 26, 1999 /s/ JONATHAN L. BURR
--------------------------------------------
THE JONATHAN L. BURR TRUST -- 1965
Dated: May 26, 1999 By: /s/ JONATHAN L. BURR
--------------------------------------------
Name: Jonathan L. Burr
Title: Beneficiary
YAHYA GHARAGOZLOU
Dated: May 26, 1999 /s/ YAHYA GHARAGOZLOU
--------------------------------------------
ARTHUR D. HINDMAN
Dated: May 26, 1999 /s/ ARTHUR D. HINDMAN
--------------------------------------------
WILLIAM J. MILLIKEN
Dated: May 26, 1999 /s/ WILLIAM J. MILLIKEN
--------------------------------------------
LINTON A. MOULDING
Dated: May 26, 1999 /s/ LINTON A. MOULDING
--------------------------------------------
JANE ELIZABETH MOULDING
Dated: May 26, 1999 /s/ JANE ELIZABETH MOULDING
--------------------------------------------
NORMAN L. SMITH
Dated: May 26, 1999 /s/ NORMAN L. SMITH
--------------------------------------------
</TABLE>
10
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<S> <C>
(a)(1) Letter dated May 3, 1999 from National City Bank to Kirtland
Capital Partners III L.P.
(b)(1) Opinion of The Beacon Group Capital Services, LLC dated May
6, 1999 (included as Appendix B to the Proxy Statement,
which is filed herewith as Exhibit (d)(3)).
(c)(1) Agreement and Plan of Merger dated as of May 6, 1999 by and
among Instron, MergerCo and Kirtland (included as Appendix A
to the Proxy Statement, which is filed herewith as Exhibit
(d)(3)).
(c)(2) Letter Agreement dated as of May 6, 1999 by and among
Kirtland and the Management Investors.
(c)(3) Letter Agreement dated as of May 6, 1999 by and among
Kirtland, Instron and the Other Investors.
(c)(4) Voting Agreement dated as of May 6, 1999 by and among
Kirtland, MergerCo, the Management Investors and certain of
their affiliates, and the Other Investors and certain of
their affiliates.
(c)(5) Form of Stockholders Agreement.
(c)(6) Form of Amendment to Restricted Stock Award Agreement.
(c)(7) Form of Instron Corporation 1999 Stock Option Plan.
(c)(8) Form of Incentive Stock Option Agreement.
(c)(9) Form of Nonqualified Stock Option Agreement.
(c)(10) Form of Amendment to Instron Corporation 1992 Stock
Incentive Plan.
(c)(11) Form of Amendment to Nonqualified Stock Option Agreement.
(c)(12) Form of Amendment to Incentive Stock Option Agreement.
(d)(1) Letter to Stockholders (included in the Proxy Statement,
which is filed herewith as Exhibit (d)(3)).
(d)(2) Notice of Special Meeting of Stockholders (included in the
Proxy Statement, which is filed herewith as Exhibit (d)(3)).
(d)(3) Proxy Statement.
(d)(4) Form of Proxy.
(d)(5) Press Release issued by Instron and Kirtland, dated as of
May 7, 1999 (incorporated by reference to the Current Report
on Form 8-K filed by Instron on May 12, 1999).
(e) Text of Sections 85 to 98 of Chapter 156B of the General
Laws of Massachusetts (included as Appendix C to the Proxy
Statement, which is filed herewith as Exhibit (d)(3)).
</TABLE>
11
<PAGE> 1
NATIONAL CITY LOGO EXHIBIT (a)(1)
NATIONAL CITY BANK
LOAN SYNDICATIONS
1900 East Ninth Street
Cleveland, OH 44114-3484
(216) 575-3061 Fax (216)
222-7079
E-Mail: [email protected]
DAVID A. BURNS
Managing Director
May 3, 1999
Mr. Thomas N. Littman
Kirtland Capital Partners III, L.P.
2550 SOM Center Road/Suite 105
Willoughby Hills, OH 44094
Dear Tom,
You have requested that National City Bank and its affiliates ("National
City" or the Agent") enter into certain financing arrangements with Instron
Corporation (the "Borrower" or the "Company") to provide the credit facility
(the "Credit Facility") described in the attached summary of terms and
conditions (the "Summary of Terms and Conditions") totaling $50,000,000, as
hereinafter set forth, for the Borrower, subject to the acquisition of a
controlling interest in the Borrower by Kirtland Capital Partners III, L.P.
("KCP").
We are pleased to advise you that, subject to the terms and conditions
hereinafter set forth, National City agrees to extend to the Borrower the entire
amount of the proposed Credit Facility and act as Administrative, Syndication
and Documentation Agent (National City in its capacity as the Administrative,
Syndication and Documentation Agent collectively, the "Agent") for the lenders
from time to time party thereto (collectively, the "Lenders").
National City's obligation hereunder is expressly conditioned upon the
execution and delivery by the Borrower and National City of a definitive Credit
Agreement (the "Credit Agreement"); the execution and delivery of all other
instruments and documents required by the Credit Agreement and such other
instruments, documents, certificates, opinions, and assurances as National City
may require; satisfaction of all of the terms as set forth in the Credit
Agreement; and completion of all proceedings in connection with the execution,
delivery, and performance of the credit documentation, all in form and substance
satisfactory to National City and its counsel.
The Credit Agreement shall include the terms and conditions set forth
herein and as referenced in the Summary of Terms and Conditions, which are not
intended to include all terms since final documentation will require further
discussions between National City and the Borrower. Without limitation, the
extension of the initial advance under the Credit Facility is conditioned upon
no material adverse change in the business, assets, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries taken as
a whole and upon the absence of any event or other circumstance which would,
individually or in the aggregate, reasonably be expected to result in any such
material adverse change.
By executing this letter, the Borrower and KCP agree to indemnify and hold
harmless National City and its respective officers, directors, employees,
affiliates, agents and controlling persons from and against any and all
liabilities, losses, claims, obligations, penalties, actions, judgments, suits,
damages, costs, expenses or disbursements of any kind or nature whatsoever which
any such person may become subject to arising out of or in connection with this
letter, the Summary of Terms and Conditions, the Credit Agreement or any claim,
litigation, investigation or proceeding relating to any one or more of the
foregoing, and to reimburse each of such indemnified parties from time to time
upon demand for any legal or other expense incurred in connection with
investigating or defending any of the foregoing; provided, however, that the
foregoing indemnity will not, as to any indemnified party, apply to losses,
claims, damages, liabilities or related expenses to the extent they arise from
the willful misconduct or gross negligence of such indemnified party.
Upon the initial funding of the Credit Agreement, the Borrower shall pay to
National City a non-refundable underwriting fee ("Underwriting Fee") equal to
1.0% of the total $50,000,000 Credit Facility. The Borrower shall also pay
National City a breakage fee ("Breakage Fee") of $50,000 in the event KCP or the
Borrower enters
1
<PAGE> 2
into an alternative credit agreement for which National City is not engaged to
function as the sole Agent for the purposes of funding the acquisition of the
Borrower by KCP. The Borrower shall also pay National City a ticking fee
("Ticking Fee") in the event the Credit Facility is not closed on, or prior to,
July 31, 1999. The Ticking Fee shall accrue at a rate of 3/8% per annum on the
$50,000,000 Credit Facility. The Ticking Fee shall begin accruing on August 1,
1999 and shall be payable at close. In addition, upon execution of the Credit
Agreement, the Borrower shall also pay, and continue to pay, National City an
Administrative Agent's fee of $25,000 per annum, payable quarterly in advance.
National City shall be reimbursed by the Borrower from time to time upon
request for all out-of-pocket expenses which it may incur in the negotiation,
preparation, due diligence, execution and delivery of this letter, the Credit
Agreement, and other documentation, and any assignment of its interests
hereunder or participation interest herein or while otherwise performing
services. These expenses include, but are not limited to, fees and expenses of
any of the Agent's legal counsel, title and survey companies, appraisers,
environmental consultants and other consultants (collectively, the "Agent's
Consultants") which will be passed through directly to the Borrower.
Reimbursement of the Agent's out-of-pocket expenses, including, without
limitation, the fees and expenses of the Agent's Consultants, shall not be
contingent upon closing under the Credit Agreement.
In connection with the syndications efforts of the Agent, the Borrower
agrees to provide the Agent, their legal counsel and consultants with such
information and access to the Borrower's officers, directors, employees,
accountants, and legal counsel as may be reasonably requested for the purposes
of preparing an Information Memorandum or like presentation package (the
"Memorandum") or as otherwise needed by the Agent for purposes of completing the
syndication as determined by the Agent in its sole discretion.
This commitment letter is solely for the benefit of the Borrower and KCP
and no other person shall obtain any rights hereunder or be entitled to rely or
claim reliance upon the terms and conditions hereof or in any documents
delivered pursuant hereto. This commitment letter may not be assigned by the
Borrower or KCP and no rights of the Borrower or KCP hereunder may be
transferred without prior written consent of the Agent. Subject to the attached
Summary of Terms and Conditions and the final definitive Credit Agreement, the
Agent may elect to (a) assign a portion of their respective rights and
obligations hereunder so that the permitted assignee or assignees thereof may
become parties to the Credit Agreement and (b) arrange for the sale or
assignment to other permitted banks of participation interests of their
commitments hereunder and/or loans made by them as contemplated hereby. In the
event of any assignment referred to in (a) above, the assignor shall be released
of all obligations assumed by the assignee.
This commitment letter shall not be binding unless it is accepted by the
KCP on or before May 7, 1999. If Kirtland Capital Partners III, L.P. accepts
this commitment on or before such date, an authorized officer should execute a
copy of this letter and return it to National City. Unless so accepted, this
letter will expire and will not be effective for any purpose. Subject to the
terms and conditions of this letter, the Agent shall be obligated hereunder only
if the Credit Agreement is executed on or before November 30, 1999.
Very truly yours,
NATIONAL CITY BANK
By: /s/ DAVID A. BURNS
------------------------------------
Name: David A. Burns
Title: Managing Director
Accepted and agreed this 6th day of
May, 1999
KIRTLAND CAPITAL PARTNERS III, L.P.
By: Kirtland Partners Ltd.
By: /s/ THOMAS N. LITTMAN
------------------------------------
Name: Thomas N. Littman
Title: Vice President
2
<PAGE> 3
INSTRON CORPORATION
SUMMARY OF TERMS AND CONDITIONS
BORROWER Instron Corporation, Instron Holdings, Ltd.,
Instron GmbH and other subsidiaries of Instron
Corporation as applicable (collectively, the
"Company" or the "Borrower").
GUARANTORS All material non-borrowing subsidiaries as
applicable [TBD].
AGENT National City Bank ("National City" or the
"Agent").
LENDERS A group of lenders selected by National City in
consultation with the Borrower (collectively,
together with the Agent in its capacity as a
lender, the "Lenders").
SYNDICATION MANAGEMENT The agent will, in consultation with the
Borrower, manage all aspects of the Syndication
including the amounts offered to potential
lenders and the acceptance of commitments.
ALLOCATIONS The Agent shall, in consultation with the
borrower, allocate the commitments received
form the Lenders
CREDIT FACILITY $50,000,000 Senior Secured Revolving Credit
Facility with a $[TBD] sublimit for the
issuance of Standby Letters of Credit and a
$[TBD] United States dollar denominated
sublimit for borrowings denominated in British
Pounds Sterling, German Deutsche Marks, Euros
or other liquid currency as approved by the
Agent.
(The "Credit Facility.")
PURPOSE Refinance existing debt, support working
capital needs, and general corporate purposes.
MATURITY Six years from the date of closing.
COLLATERAL First priority perfected lien on all personal
property, including, but not limited to,
receivables, inventory, equipment, furniture,
fixtures, improvements, real property and
intangibles. First priority perfected lien on
100% of the common stock of the borrowers
present and subsequently acquired domestic
subsidiaries and on 65% of the common stock of
the borrowers present and subsequently acquired
foreign subsidiaries. Perfection of real
property limited to filing of mortgages only.
REPAYMENT At maturity. Until maturity, the Company may
borrow, repay, and re-borrow an amount not to
exceed the maximum commitment.
MANDATORY REDUCTIONS 100% of the net proceeds of any additional
material indebtedness in excess of specified
baskets [TBD].
100% of the net proceeds of additional equity,
excluding equity issued in conjunction with
acquisitions or management incentive plans.
100% of the net proceeds of the sale of assets
outside the ordinary course of business.
100% of the proceeds of any material recovery
event.
VOLUNTARY REDUCTIONS Commitments under the Credit Facility may be
reduced or terminated, in whole or in part, at
the Company's option, subject to
3
<PAGE> 4
reimbursement of any costs associated with
prepayments of LIBOR/ Reference Rate advances
or any other provisions contained in the credit
agreement. Voluntary reductions of commitments
under the Credit Facility will be in minimum
amounts of $5,000,000.
INTEREST RATES, UNUSED FEES,
AND LETTER OF CREDIT FEES Outstanding amounts will accrue interest
according to the following pricing alternatives
plus an applicable borrowing margin (the
"Applicable Borrowing Margin"), as selected by
the Borrower:
Base Rate Option: The Alternate Base Rate
("ABR") is the higher of the Administrative
Agent's Prime Rate or the Federal Funds Rate
plus 1/2%. Interest on the ABR borrowings is
calculated on an actual/365 or 366 day basis
and is payable quarterly.
LIBOR/Reference Rate Option: Interest on
LIBOR/Reference Rate borrowings is calculated
on an actual/360 day basis and is payable the
earlier of quarterly or on the last day of each
interest rate period. LIBOR/Reference Rate
advances will be available for periods of one,
two, three, or six months. LIBOR/Reference Rate
pricing will be adjusted for any statutory
reserves.
Unused Fees shall be payable quarterly in
arrears based upon the average daily unused
amount of the Credit Facility.
The Company may have no more than [TBD]
borrowing tranches, including the ABR tranche,
at any one time.
The Company shall pay Standby Letter of Credit
fees equal to the then-applicable spread above
the LIBOR/Reference Rate on the aggregate face
amount of Standby Letters of Credit issued
under the Credit Facility. In addition, the
Company shall pay a Letter of Credit facing fee
of 1/8% to the fronting bank, payable quarterly
in arrears.
Subsequent to an Event of Default which
continues beyond any applicable cure period,
outstandings shall bear interest at 2% over the
rate of interest applicable under the ABR
pricing option and Letter of Credit fees shall
be 2% above the otherwise applicable Letter of
Credit fees.
PRICING The Applicable Borrowing Margin (as expressed
in basis points) for the Credit Facility will
be based upon a grid determined by the
Borrower's consolidated ratio of Total
Indebtedness to EBITDA, as measured on a
rolling four quarter basis, as attached in
Exhibit A.
INTEREST RATE PROTECTION At the Borrowers option. Any institution
providing such interest rate protection must be
reasonably acceptable to the Agent. Such
institution may be granted a security interest
in the Collateral which is pari passu with that
of the Lenders to the extent of such
institution's credit exposure. Such institution
shall calculate its credit exposure in a
reasonable and customary manner.
Documentation for interest rate protection
shall conform to ISDA standards and must be
acceptable to the Agent with respect to inter-
creditor issues.
YIELD PROTECTION The Company shall pay the Lenders such
additional amounts as will compensate the
Lenders in the event applicable law, or change
in
4
<PAGE> 5
law, subjects the Lenders to reserve
requirements, capital requirements, taxes
(except for taxes on the overall net income of
the Lenders), or other charges which increase
the cost or reduce the yield to the Lenders,
under customary yield protection provisions.
REPRESENTATIONS AND WARRANTIES a. Organization and qualification.
b. Capitalization and ownership.
c. Use of proceeds.
d. Subsidiaries.
e. Solvency.
f. Power and authority.
g. Validity, binding effect, and
enforceability.
h. No conflict.
i. Absence of litigation.
j. Title to properties.
k. Accuracy of financial statements.
l. No Material Adverse Change
m. Margin stock.
n. Full disclosure.
o. Payment of taxes.
p. Consents and approvals.
q. No Event of Default; compliance with
instruments.
r. Patents, trademarks, copyrights, and
licenses.
s. Security interests.
t. Mortgage liens.
u. Status of pledged collateral.
v. Insurance.
w. Compliance with laws.
x. Material contracts.
y. Investment Company Act.
z. Plans and benefit arrangement.
aa. Employment matters.
bb. Environmental matters.
cc. Senior Debt status.
dd. Year 2000
Other Representations and Warranties as
appropriate.
5
<PAGE> 6
CONDITIONS PRECEDENT TO
LENDING Receipt by the Agent of the following, in form
and substance satisfactory to the Agent and the
Lenders:
a. Closing certificate as to accuracy of
Representations and Warranties, compliance
with covenants, and absence of an Event of
Default or Potential Event of Default.
b. Certified resolutions, incumbency
certificate, and corporate documents.
c. All regulatory approvals and licenses,
absence of any legal or regulatory
prohibitions or restrictions.
d. Delivery of all definitive organizational
and financing documents and evidence of
filing of all collateral documents.
e. Delivery of satisfactory legal opinion(s)
of counsel.
f. No material adverse change.
g. No material litigation.
h. Evidence of required insurance.
i. Payment of all fees and expenses subject
to reimbursement.
j. Maximum amount drawn under the Credit
Facility at close of $30,000,000,
including outstanding Letters of Credit.
k. Delivery of a commitment for subordinated
indebtedness under terms and conditions
acceptable to the Agent which are not
materially different from those contained
in the Donaldson, Lufkin & Jenrette
("DLJ") Summary of Terms and Conditions
presented to the Agent for a maximum
amount of $100,000,000. In no event shall
the terms and conditions of any other loan
be more restrictive than those of the
Credit Facility.
l. Purchase of Instron Corporation by
Kirtland Capital Partners III L.P. for an
amount not to exceed a corporate value of
$173,000,000.
m. Solvency and fairness opinions in form and
substance satisfactory to the Agent.
Other Conditions Precedent to Lending as
appropriate.
REPORTING REQUIREMENTS a. Provide within 45 days after each of the
first three fiscal quarters consolidating
and consolidated balance sheets and
consolidating and consolidated statements
of income, retained earnings, and cash
flow, together with a Certificate of
Compliance from the Chief Executive
Officer, President, or Chief Financial
Officer of the Company.
b. Provide within 90 days after each fiscal
year end consolidating and consolidated
audited balance sheets and consolidating
and consolidated audited statements of
income, retained earnings, and cash flow,
together with (i) a report of an
independent certified public accountant
reasonably satisfactory to the Agents,
(ii) any management letters of such
accountants addressed to the Company, and
(iii) a Certificate of Compliance
6
<PAGE> 7
from the Chief Executive Officer, President, or Chief Financial Officer of the
Company.
c. Provide budgets and forecasts.
d. Notice of default.
e. Other information as reasonably requested.
Other Reporting Requirements as appropriate.
AFFIRMATIVE COVENANTS Usual and customary for facilities of this
nature including, but not limited to:
a. Maintenance of books, records and
inspections.
b. Maintenance of insurance.
c. Payment of taxes.
d. Preservation of corporate existence, rights
and authority.
e. Maintenance of properties and equipment.
f. Compliance with statutes including
environmental laws.
g. Any material subsidiary created or acquired
subsequent to the closing of the Credit
Facilities will be added as a guarantor and
appropriate stock pledges will be obtained.
Other Affirmative Covenants as appropriate.
NEGATIVE COVENANTS Usual and customary for transactions of this
nature, including, but not limited to, the
following: dividends, change of control,
capital expenditures, asset divestitures,
liens, acquisitions and business combinations,
transactions with affiliates, prepayment of
other indebtedness, and additional
indebtedness.
Financial covenants including, but not limited
to, the following:
Minimum ratio of Earnings Before Interest and
Taxes to Cash Interest Expense ("EBIT to
Interest"), as measured on a build-up to a
rolling four quarter basis at each applicable
fiscal quarter end following the close of the
transaction of:
09/30/99: 1.80x
12/31/99: 1.80x
12/31/00: 2.00x
12/31/01: 2.25x
12/31/02: 2.50x
12/31/03: 2.75x
12/31/04: 3.00x
Maximum ratio of Total Funded Debt to Earnings
Before Interest, Taxes, Depreciation, and
Amortization ("Total Funded Debt to
7
<PAGE> 8
EBITDA"), as measured on a rolling four quarter
basis at each applicable fiscal quarter end
following the close of the transaction of:
09/30/99: 6.00x
12/31/99: 5.50x
12/31/00: 5.00x
12/31/01: 4.75x
12/31/02: 4.50x
Thereafter: 4.50x
Maximum ratio of Total Senior Funded Debt to
Earnings Before Interest, Taxes, Depreciation,
and Amortization ("Total Senior Funded Debt to
EBITDA"), as measured on a rolling four quarter
basis at each applicable fiscal quarter end
following the close of the transaction of:
09/30/99: 2.75x
12/31/99: 2.50x
12/31/00: 2.50x
12/31/01: 2.25x
12/31/02: 2.00x
Minimum ratio of Earnings Before Interest,
Taxes, Depreciation, and Amortization to the
sum of Interest Expense, Current Portion of
Long Term Debt, Capital Expenditures, and Taxes
("Fixed Charge Coverage Ratio"), as measured on
a build-up to a rolling four quarter basis at
each fiscal quarter end following the close of
the transaction of:
12/31/99: 1.05x
12/31/00: 1.05x
12/31/01: 1.10x
Thereafter: 1.10x
Minimum Net Worth of 115% of actual closing Net
Worth plus 75% of Net Income going forward,
with no deduction for losses, as measured on a
quarterly basis.
Minimum level of Earnings Before Interest,
Taxes, Depreciation, and Amortization, as
measured on a rolling four quarter basis at
each applicable fiscal quarter end following
the close of the transaction of:
12/31/99: $22,500,000
12/31/00: $25,000,000
12/31/01: $26,000,000
12/31/02: $27,000,000
12/31/03: $28,000,000
12/31/04: $29,000,000
Maximum Capital Expenditures as measured at the
end of each fiscal year of: $8,000,000.
Management and Board of Director Fees limited
to $600,000 per annum.
Prohibition on dividends, excluding previously
outlined permitted Management Fees.
8
<PAGE> 9
Acquisitions limited to enterprises in the same
line of business which have a positive rolling
four quarter EBITDA, will be subject to pro-
forma covenant compliance at close and will be
restricted to total consideration of
$15,000,000 per individual transaction.
Other Negative Covenants as appropriate.
Quarterly covenant levels for all applicable
measures [TBD]. Note: All measures of EBITDA
will exclude one time charges associated with
transaction related expenses associated with
the initial acquisition of Instron Corporation
by Kirtland Capital Partners III, L.P..
EVENTS OF DEFAULT a. Payment default.
b. Breach of Representations and Warranties.
c. Violation of covenant(s).
d. Bankruptcy; insolvency.
e. Material adverse change in the financial
condition, operations or prospects of the
Borrower and its subsidiaries.
f. Cross default to other debt.
g. ERISA.
Other Events of Default as appropriate.
REQUIRED LENDERS For the purpose of making amendments or waivers
to the Credit Agreement, Required Lenders shall
be defined as Lenders whose commitments under
the Credit Facilities aggregate at least
66 2/3% of the total Credit Facilities.
However, unless agreed to by all Lenders, no
amendment or waiver shall change the principal
amount; reduce the rate of interest or fees;
postpone the scheduled payment of any
principal, interest, or fees; release any
collateral; or change the definition of
Required Lenders.
ASSIGNMENTS AND PARTICIPATIONS Lenders will be permitted to assign and
participate the Credit Facilities. Assignments
will be in minimum amounts of $5,000,000 and
assignees will be subject to the consent of the
Company and the Agent, with such consent not to
be unreasonably withheld. Voting rights to
participants will be limited to a change in
principal amount; reduction of the rate of
interest or fees; postponement of the scheduled
payment of any principal, interest, or fees; or
release of any collateral. Assignments will be
subject to the payment by the assigning Lender
of a $3,500 service fee to the Administrative
Agent.
GOVERNING LAW State of Ohio.
AGENT'S COUNSEL Calfee, Halter & Griswold LLP
THIS TERM SHEET IS DELIVERED TO YOU ON THE UNDERSTANDING THAT ANY OF THE TERMS
OF SUBSTANCE HEREUNDER SHALL NOT BE DISCLOSED, DIRECTLY OR INDIRECTLY, TO ANY
OTHER PERSON EXCEPT YOUR OFFICERS, AGENTS AND ADVISORS WHO ARE DIRECTLY INVOLVED
IN THE CONSIDERATION OF THIS MATTER UNLESS PRIOR WRITTEN CONSENT HAS BEEN GIVEN
BY NATIONAL CITY.
9
<PAGE> 10
EXHIBIT A
The Borrowers consolidated ratio of Total Funded Debt to EBITDA, as
measured on a rolling four quarter basis, outlined in the following Pricing Grid
shall determine the applicable Borrowing Margin on the Credit Facility:
PRICING GRID
(BASIS POINTS PER ANNUM)
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
COMMITMENT LIBOR ABR
TOTAL FUNDED DEBT/EBITDA FEE MARGIN MARGIN
------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Greater than 4.25x *...................................... 50.0 250.0 100.0
Greater than 3.50x & less than or equal to 4.25x.......... 45.0 225.0 75.0
Less than or equal to 3.50x............................... 37.5 200.0 50.0
</TABLE>
- ---------------
* Pricing at close. Pricing shall not be reduced below this level for a minimum
period of two quarters following closing.
10
<PAGE> 1
EXHIBIT (c)(2)
May 6, 1999
To the Persons Identified
on the Signature Page Hereto
c/o Instron Corporation
100 Royall Street
Canton, Massachusetts 02021
Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of May 6, 1999, among Kirtland Capital Partners III L.P.,
an Ohio limited partnership ("KCP"), ISN Acquisition Corporation, a
Massachusetts corporation ("MergerCo"), and Instron Corporation, a Massachusetts
corporation (the "Company"). Capitalized terms used and not defined herein shall
have the respective meanings ascribed to them in the Merger Agreement.
1. CONCERNING ROLLOVER. This letter agreement (this "Agreement")
memorializes our mutual understanding and agreement relating to the willingness
of certain members of management of the Company identified on the signature page
hereto and certain of their affiliates (collectively, the "Management
Stockholders") to maintain an equity ownership position in the Company following
the completion of the Merger. To this end, the Management Stockholders hereby
(i) agree that, from and after the date hereof and upon the request of the
Company or KCP, they will take such actions as may be reasonably necessary to
exchange the shares of Common Stock owned by them as reflected on Exhibit A
attached hereto for shares of Series B Stock as reflected on Exhibit A attached
hereto pursuant to customary documentation reasonably acceptable to KCP, the
Company and the Management Stockholders, (ii) consent to the conversion at the
Effective Time of all such shares of Series B Stock into a like number of shares
of Surviving Corporation Common Stock pursuant to customary documentation
reasonably acceptable to KCP, the Company and the Management Stockholders, and
(iii) consent to the conversion at the Effective Time of all Options identified
on Exhibit A attached hereto into the number of options identified on Exhibit A
attached hereto with the exercise price indicated thereon (such converted
options being hereinafter referred to as the "Rollover Options"). It is the
intention of the parties hereto that the rollover of stock and options described
above be structured on a tax-free basis, and the parties agree to use their
respective reasonable best efforts to attempt to give effect to such intentions.
Simultaneously with the execution and delivery hereof, KCP is entering into a
letter agreement with certain other stockholders (the "Other Stockholders") of
the Company providing for their continued participation in the equity ownership
of the Company as set forth therein (the "Other Stockholder Letter"). A fully
executed copy of the Other Stockholder Letter is being delivered to you
simultaneously herewith. KCP hereby agrees that, subject to the satisfaction of
the conditions set forth in the Merger Agreement and at the Effective Time: (i)
it will and will cause its affiliates to provide all of the equity capital
necessary to consummate the Transactions other than the equity capital (a) that
will be provided by the Management Stockholders as described above and (b) that
will be provided by the Other Stockholders pursuant to the Other Stockholder
Letter as in effect on the date hereof, (ii) it will and will cause its
affiliates to provide such equity capital by means of the issuance to KCP and
its affiliates of shares of Surviving Corporation Common Stock, and (iii) the
purchase price for each such share purchased by KCP and its affiliates shall be
$110 payable solely in cash.
2. CERTAIN AGREEMENTS. At the Effective Time, each of the Management
Stockholders and KCP will execute and deliver (and KCP will cause each of its
affiliates who are shareholders of the Company to execute and deliver) the
Stockholders Agreement in the form attached hereto as Exhibit B (the
"Stockholders Agreement"). At the Effective Time, each of the Management
Stockholders will execute and deliver a non-competition agreement in the form
attached hereto as Exhibit C. At the Effective Time, each of the Management
Stockholders (other than James M. McConnell) will execute and deliver and KCP
will cause the Company to execute and deliver an amendment to their respective
Executive Severance Agreements in the form attached hereto as Exhibit D. At the
Effective Time, Mr. McConnell will execute and deliver and KCP will cause the
Company to execute and deliver the Deferred Compensation Agreement in the form
attached hereto as Exhibit E.
1
<PAGE> 2
At the Effective Time, each of Messrs. McConnell, Andersen, Barrett, Burr,
Hindman and Gharagozlou will execute and deliver and KCP will cause the Company
to execute and deliver an amendment to their respective Restricted Stock Award
Agreements in the form attached hereto as Exhibit F. At the Effective Time each
of the Management Stockholders, the Other Stockholders and KCP will execute and
deliver (and KCP will cause (i) each of its affiliates who are shareholders of
the Company to execute and deliver and (ii) the Company to execute and deliver)
a registration rights agreement, in customary form, providing "piggyback"
registration rights for the Management Stockholders, subject to the approval of
the underwriters participating in any particular underwritten equity offering.
Notwithstanding the foregoing provisions of this Section 2, the Jonathan Burr
Trust -- 1965 and Jane Elizabeth Moulding will only enter into the Stockholders
Agreement.
3. CONCERNING OPTIONS AND RESTRICTED STOCK. At the Effective Time, KCP
shall cause the Company to (i) adopt the Instron Corporation 1999 Stock Option
Plan in the form attached hereto as Exhibit G (the "Plan"), (ii) authorize up to
10% of the aggregate number of shares of Surviving Corporation Common Stock
outstanding on a fully diluted basis immediately following the Effective Time
(excluding any and all warrants issued to any Lender at the Effective Time but
including the Rollover Options and all options issued or issuable under the Plan
at the Effective Time) to be available for issuance thereunder in accordance
with the terms thereof, and (iii) issue options to purchase shares of Surviving
Corporation Common Stock (collectively, the "New Options") equal to 40% of the
number determined pursuant to clause (ii) hereof to the persons and in the
amounts specified on Exhibit H attached hereto, with each such New Option to
have an exercise price of $110 per share and to vest at the rate of 20% per year
or upon a Change of Control (as defined in the Plan). All New Options issued
under the Plan shall be issued in accordance with the terms of the Plan and the
terms of the Incentive Stock Option Agreement or Nonqualified Stock Option
Agreement attached hereto as Exhibit I-1 and I-2 respectively. All New Options
will be "incentive stock options" to the extent permitted by law. All Rollover
Options shall be governed by the terms of the Instron Corporation 1992 Stock
Incentive Plan as amended at the Effective Time as set forth on Exhibit J
attached hereto (such plan as amended being hereinafter referred to as the "1992
Plan") and the agreements governing such options except that, at the Effective
Time, all such agreements shall be amended as set forth on Exhibits K-1 and K-2
attached hereto. Shares of Common Stock that are subject to restrictions on
transfer as reflected on Exhibit A attached hereto shall, from and after the
Effective Time, be governed by the 1992 Plan and the Restricted Stock Award
Agreements, as amended in the manner contemplated hereby.
4. CERTAIN REPRESENTATIONS BY THE MANAGEMENT STOCKHOLDERS. Each Management
Stockholder hereby represents and warrants as follows, severally as to such
Management Stockholder only:
(a) Such Management Stockholder has the legal capacity, power and
authority to enter into and perform all of its respective obligations under
this Agreement. The execution, delivery and performance of this Agreement
by such Management Stockholder will not violate any other agreement to
which such Management Stockholder is a party. This Agreement has been duly
and validly executed and delivered by such Management Stockholder and
constitutes a valid and binding agreement of such Management Stockholder,
enforceable against such Management Stockholder in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws and principles of
equity affecting creditors rights and remedies generally. There is no
beneficiary or holder of a voting trust certificate or other interest in
any trust of which such Management Stockholder is a trustee whose consent
is required for the execution and delivery of this Agreement or the
consummation by such Management Stockholder of the transactions
contemplated hereby, other than where any such consent has been obtained.
(b)(i) Except for any filings under federal and state securities laws
and the filings referred to in Article VII of the Merger Agreement, no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by
such Management Stockholder and the consummation by such Management
Stockholder of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by such Management Stockholder,
the consummation by such Management Stockholder of the transactions
contemplated hereby or compliance by such Management Stockholder with any
of the provisions hereof (A) results in a violation or breach of, or
constitutes (with or without notice or lapse of time or both) a default (or
gives rise to any third party right of termination, cancellation, material
modification or acceleration) under, any of the terms, conditions or
2
<PAGE> 3
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Management Stockholder
is a party or by which such Management Stockholder or any of its respective
properties or assets may be bound, of (B) violates any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to
such Management Stockholder or any of its respective properties or assets.
(c) Such Management Stockholder understands and acknowledges that KCP
is entering into, and causing MergerCo to enter into, the Merger Agreement
in reliance upon the execution and delivery of this Agreement by such
Management Stockholder.
(d) Except for the Jonathan Burr Trust -- 1965, such Management
Stockholder is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act of 1933. KCP acknowledges that the
obligations of the Jonathan Burr Trust -- 1965 under Section 1 hereof shall
be subject to such trust's receipt, review and satisfaction with a private
placement memorandum or other documentation necessary to satisfy Regulation
D promulgated under the Securities Act of 1933.
5. CERTAIN REPRESENTATIONS BY KCP. KCP hereby represents and warrants to
the Management Stockholders as follows:
(a) KCP has the power and authority to enter into and perform all of
its obligations under this Agreement. The execution, delivery and
performance of this Agreement by KCP will not violate any other agreement
to which it is a party. This Agreement has been duly and validly executed
and delivered by KCP and constitutes a valid and binding agreement of KCP,
enforceable against KCP in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws and principles of equity affecting creditors rights
and remedies generally.
(b) (i) Except for any filings under federal and state securities laws
and the filings referred to in Article VII of the Merger Agreement, no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by KCP
and the consummation by KCP of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by KCP, the
consummation by KCP of the transactions contemplated hereby or compliance
by KCP with any of the provisions hereof (A) conflicts with or results in
any breach of any organizational documents applicable to KCP, (B) results
in a violation or breach of, or constitutes (with or without notice of
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which KCP is a party or by which KCP or any of its properties or assets may
be bound, or (C) violates any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to KCP or any of its properties or
assets.
(c) KCP understands and acknowledges that the Management Stockholders
are entering into this Agreement in reliance upon the execution and
delivery of the Merger Agreement by KCP.
6. FURTHER ASSURANCES. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be
reasonably necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
provided that the foregoing shall not require any party hereto to waive or amend
any of its rights under this Agreement or any of the exhibits hereto.
7. DEBT ARRANGEMENTS. KCP acknowledges that under the proposed terms of the
Stockholders Agreement the Company's ability to repurchase equity of the
Management Stockholders will depend on the terms of the Company's debt
arrangements. KCP agrees that it will negotiate in good faith to obtain
"baskets" under these debt arrangements in form and amounts customary for
leveraged acquisition financing agreements.
8. TERMINATION. This Agreement shall terminate upon the termination of the
Merger Agreement in accordance with its terms or upon the execution and delivery
of the Stockholders Agreement.
3
<PAGE> 4
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations hereunder shall
be binding upon the successors and, subject to Section 9(c) below, the assigns
of the parties hereto, including, without limitation, the heirs, guardians,
administrators or successors of the Management Stockholders.
(c) ASSIGNMENT. This Agreement shall not be assigned without the prior
written consent of the other parties.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(f) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
(g) REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(h) NO WAIVER. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof
at law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver of such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.
(i) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be for
the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto.
(j) CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to its rules
of conflict of laws. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts and of the United States District
Court for the District of Massachusetts (the "Massachusetts Courts") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement (and agrees not to commence any
litigation relating thereto except in such courts), waives any objection to the
laying of venue of any such litigation in the Massachusetts Courts and agrees
not to plead or claim in any Massachusetts Court that such litigation brought
therein has been brought in any inconvenient forum. Each of the parties hereto
agrees, (a) to the extent such party is not otherwise subject to service of
process in the Commonwealth of Massachusetts, to appoint and maintain an agent
in the Commonwealth of Massachusetts as such party's agent for acceptance of
legal process,
4
<PAGE> 5
and (b) that service of process may also be made on such party by prepaid
certified mail with a proof of mailing receipt validated by the United States
Postal Service constituting evidence of valid service. Service made pursuant to
(a) or (b) above shall have the same legal force and effect as if served upon
such party personally within the Commonwealth of Massachusetts. For purposes of
implementing the parties' agreement to appoint and maintain an agent for service
of process in the Commonwealth of Massachusetts, KCP does hereby appoint CT
Corporation, 2 Oliver Street, Boston, Massachusetts 02109, as such agent.
(k) DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(l) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
(m) NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall not
constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Chapter 110F of the
Massachusetts General Laws and any applicable provision of the Company's
articles of organization, the terms of this Agreement, and (ii) this Agreement
is executed by the parties hereto.
(n) ATTORNEY'S FEES. KCP acknowledges that the Company will be responsible
for the reasonable fees and expenses of the Management Stockholders' legal
counsel in connection with the preparation and negotiation of this Agreement and
the agreements contemplated hereby up to an aggregate of $85,000.
5
<PAGE> 6
If the foregoing accurately sets forth our mutual understanding and
agreement, kindly sign this Agreement in the space provided below.
Very truly yours,
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd., its
General Partner
By: /s/ THOMAS N. LITTMAN
------------------------------
Name: Thomas N. Littman
Title: Vice President
Accepted and Agreed this day of
May, 1999:
/s/ JAMES M. MCCONNELL
------------------------------
James M. McConnell
/s/ JOSEPH E. AMARAL
------------------------------
Joseph E. Amaral
/s/ KENNETH L. ANDERSEN
------------------------------
Kenneth L. Andersen
/s/ JOHN R. BARRETT
------------------------------
John R. Barrett
/s/ JONATHAN L. BURR
------------------------------
Jonathan L. Burr
THE JONATHAN L. BURR TRUST -- 1965
By: /s/ JONATHAN L. BURR
------------------------------
Name: Jonathan L. Burr
Title: Beneficiary
/s/ YAHYA GHARAGOZLOU
------------------------------
Yahya Gharagozlou
/s/ ARTHUR D. HINDMAN
------------------------------
Arthur D. Hindman
/s/ WILLIAM J. MILLIKEN
------------------------------
William J. Milliken
/s/ LINTON A. MOULDING
------------------------------
Linton A. Moulding
/s/ JANE ELIZABETH MOULDING
------------------------------
Jane Elizabeth Moulding
/s/ NORMAN L. SMITH
------------------------------
Norman L. Smith
6
<PAGE> 7
EXHIBIT A
<TABLE>
<CAPTION>
SURVIVING
COMMON STOCK CORPORATION OPTIONS
TO BE SERIES B COMMON TO BE ROLLOVER
MANAGEMENT STOCKHOLDER ROLLED OVER(1) STOCK STOCK ROLLED OVER OPTIONS(2)
---------------------- -------------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
J. McConnell............. 97,923 19,585 19,585 0 0
J. Amaral................ 0 0 0 15,000 3,000
K. Andersen.............. 1,335 267 267 16,500 3,300
J. Barrett............... 2,289 458 458 0 0
J. Burr.................. 1,645 329 329 40,000 8,000
The Jonathan L. Burr
Trust-1965............. 20,000 4,000 4,000 0 0
Y. Gharagozlou........... 5,310 1,062 1,062 0 0
A. Hindman............... 2,761 552 552 10,000 2,000
W. Milliken.............. 11,400 2,280 2,280 0 0
L. Moulding(3)........... 13,547 2,709 2,709 43,500 8,700
N. Smith................. 9,000 1,800 1,800 0 0
</TABLE>
- ---------------
(1) Includes an aggregate of 25,340 restricted shares (J. McConnell, 12,000; K.
Andersen, 1,335; J. Barrett, 2,289; J. Burr, 1,645; Y. Gharagozlou, 5,310;
and A. Hindman, 2,761.
(2) All Rollover Options will be exercisable at 5 times the exercise price under
the surrendered option.
(3) Common Stock held jointly with wife, Jane Elizabeth.
<PAGE> 1
EXHIBIT (c)(3)
May 6, 1999
George S. Burr
Helen L. Burr
The Harold Hindman Trust, dated 4/11/69
c/o Instron Corporation
100 Royall Street
Canton, Massachusetts 02021
Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of May 6, 1999, among Kirtland Capital Partners III L.P.,
an Ohio limited partnership ("KCP"), ISN Acquisition Corporation, a
Massachusetts corporation ("MergerCo"), and Instron Corporation, a Massachusetts
corporation (the "Company"). Capitalized terms used and not defined herein shall
have the respective meanings ascribed to them in the Merger Agreement.
1. CONCERNING ROLLOVER. This letter agreement (this "Agreement")
memorializes our mutual understanding and agreement relating to your willingness
to maintain an equity ownership position in the Company following the completion
of the Merger. To this end, you hereby (i) agree that, from and after the date
hereof and upon the request of the Company or KCP, you will take such actions as
may be reasonably necessary to exchange an aggregate of, subject to Section 2,
160,000 shares of Common Stock owned by you (comprised of 60,000 shares by Mr.
Burr, 20,000 shares by Mrs. Burr and 80,000 shares by The Harold Hindman Trust,
dated 4/11/69 (the "Hindman Trust")) for an aggregate of 32,000 shares of Series
B Stock (comprised of 12,000 shares by Mr. Burr, 4,000 by Mrs. Burr and 16,000
shares by the Hindman Trust) pursuant to customary documentation reasonably
acceptable to KCP, the Company and you, and (ii) consent to the conversion at
the Effective Time of all such shares of Series B Stock into a like number of
shares of Surviving Corporation Common Stock pursuant to customary documentation
reasonably acceptable to KCP, the Company and you. It is the intention of the
parties hereto that the rollover of stock described above be structured on a
tax-free basis, and the parties agree to use their respective reasonable best
efforts to attempt to give effect to such intentions. Simultaneously with the
execution and delivery hereof, KCP is entering into a letter agreement with
certain members of management of the Company (the "Management Stockholders")
providing for their continued participation in the equity ownership of the
Company as set forth in Exhibit A attached hereto. A fully executed copy of such
letter agreement is being delivered to you simultaneously herewith. KCP hereby
agrees that, subject to the satisfaction of the conditions set forth in the
Merger Agreement, at the Effective Time: (i) it will and will cause its
affiliates to provide all of the equity capital necessary to consummate the
Transactions other than the equity capital (a) that you will be providing as
described above and (b) that will be provided by the Management Stockholders as
set forth on Exhibit A attached hereto, (ii) it will and will cause its
affiliates to provide such equity capital by means of the issuance to KCP and
its affiliates of shares of Surviving Corporation Common Stock, and (iii) the
purchase price for each such share purchased by KCP and its affiliates shall be
$110 payable solely in cash. At the Effective Time, you agree to execute and
deliver the Stockholders Agreement substantially in the form attached hereto as
Exhibit B.
2. CERTAIN AGREEMENTS. At the Effective Time, each of you, the Company and
KCP will execute and deliver (and KCP will cause each of its affiliates who are
stockholders of the Company to execute and deliver) a registration rights
agreement, in customary form, providing "piggyback" registration rights to you,
subject to customary "cutbacks," as recommended by the underwriters
participating in any particular underwritten equity offering. Following the date
hereof, KCP and its independent accountants will consider alternative strategies
proposed by you and/or your representatives to reduce by up to an aggregate of
50,000 shares (18,750, 6,250 and 25,000 for each of you, respectively) the
number of shares of Common Stock to be exchanged by you as contemplated by
Section 1 hereof (it being understood that, in considering any such strategy,
KCP will use its reasonable best efforts to assist in the achievement of this
objective but that KCP need not agree to any such strategy unless KCP, its
independent accountants and the Company are able to attain at least the same
level of
1
<PAGE> 2
comfort that the Merger will receive recapitalization accounting treatment
utilizing any such strategy as has been determined by KCP and its independent
accountants based on the rollover of an aggregate of 160,000 shares (60,000,
20,000 and 80,000 from each of you, respectively) of Common Stock as
contemplated in Section 1 hereof). If KCP, its independent accountants and the
Company are able to attain at least the same level of comfort as set forth in
the previous sentence to the satisfaction of each of them, then KCP and the
Company will use their reasonable best efforts to implement such strategy and
reduce the number of shares to be exchanged by you as contemplated by Section 1
to the extent set forth in this Section 2. In the event that (i) you do not
propose any alternative strategies, (ii) your proposed alternative strategy or
strategies do not provide each of KCP, its independent accountants and the
Company with the same level of comfort as set forth above or (iii) KCP and the
Company cannot implement your proposed alternative strategy or strategies in
accordance with the previous sentence, you will participate in the exchange as
contemplated by Section 1 hereof to the full extent of the 160,000 shares
(60,000, 20,000 and 80,000 from each of you, respectively) set forth therein.
You should understand that, while KCP and its independent accountants will use
their reasonable best efforts as set forth above, no assurance can be given that
such a reduction can be achieved. Each of you hereby acknowledge that KCP is
entering into the Merger Agreement on the assumption that the Merger will
qualify as a recapitalization for accounting purposes and would not have entered
into the Merger Agreement if this objective could not have been achieved.
3. CERTAIN REPRESENTATIONS BY YOU. Each of you hereby represent and warrant
as follows:
(a) You have the legal capacity or (as applicable) power and authority
to enter into and perform all of your obligations under this Agreement. The
execution, delivery and performance of this Agreement by you will not
violate any other agreement to which you are a party. This Agreement has
been duly and validly executed and delivered by you and constitutes a valid
and binding agreement, enforceable against you in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws and principles of
equity affecting creditors' rights and remedies generally. There is no
beneficiary or holder of a voting trust certificate or other interest in
any trust of which you are a trustee whose consent is required for the
execution and delivery of this Agreement or the consummation by you of the
transactions contemplated hereby.
(b)(i) Except for any filings under federal and state securities laws
and the filings referred to in Article VII of the Merger Agreement, no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by you
and the consummation by you of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by you, the
consummation by you of the transactions contemplated hereby or compliance
by you with any of the provisions hereof (A) results in a violation or
breach of, or constitutes (with or without notice or lapse of time or both)
a default (or gives rise to any third-party right of termination,
cancellation, material modification or acceleration) under, any of the
terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which you are a party or by which you or any of your properties or assets
may be bound, or (B) violates any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to you or any of your
properties or assets.
(c) You understand and acknowledge that KCP is entering into, and
causing MergerCo to enter into, the Merger Agreement in reliance upon your
execution and delivery of this Agreement.
(d) You are an "accredited investor" within the meaning of Regulation
D promulgated under the Securities Act of 1933, as amended.
4. CERTAIN REPRESENTATIONS BY KCP. KCP hereby represents and warrants to
you as follows:
(a) KCP has the power and authority to enter into and perform all of
its obligations under this Agreement. The execution, delivery and
performance of this Agreement by KCP will not violate any other agreement
to which it is a party. This Agreement has been duly and validly executed
and delivered by KCP and constitutes a valid and binding agreement of KCP,
enforceable against KCP in accordance with its
2
<PAGE> 3
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws and principles of
equity affecting creditors' rights and remedies generally.
(b)(i) Except for any filings under federal and state securities laws
and the filings referred to in Article VII of the Merger Agreement, no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by KCP
and the consummation by KCP of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by KCP, the
consummation by KCP of the transactions contemplated hereby or compliance
by KCP with any of the provisions hereof (A) conflicts with or results in
any breach of any organizational documents applicable to KCP, (B) results
in a violation or breach of, or constitutes (with or without notice of
lapse of time or both) a default (or gives rise to any third-party right of
termination, cancellation, material modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which KCP is a party or by which KCP or any of its properties or assets may
be bound, or (C) violates any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to KCP or any of its properties or
assets.
(c) KCP understands and acknowledges that you are entering into this
Agreement in reliance upon the execution and delivery of the Merger
Agreement by KCP.
5. FURTHER ASSURANCES. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be
reasonably necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
PROVIDED that the foregoing shall not require any party hereto to waive or amend
any of its rights under this Agreement or any of the exhibits, together with the
Voting Agreement, hereto.
6. TERMINATION. This Agreement shall terminate upon the termination of the
Merger Agreement in accordance with its terms or execution and delivery of the
Stockholders Agreement.
7. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations hereunder shall
be binding upon the successors and, subject to Section 7(c) below, the assigns
of the parties hereto, including, without limitation, your heirs, guardians,
administrators or successors.
(c) ASSIGNMENT. This Agreement shall not be assigned without the prior
written consent of the other parties.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(f) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach, the
3
<PAGE> 4
aggrieved party shall be entitled to the remedy of specific performance of such
covenants and agreements and injunctive and other equitable relief in addition
to any other remedy to which it may be entitled, at law or in equity.
(g) REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(h) NO WAIVER. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof
at law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.
(i) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be for
the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto.
(j) CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement, shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to its rules
of conflict of laws. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts and of the United States District
Court for the District of Massachusetts (the "Massachusetts Courts") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement (and agrees not to commence any
litigation relating thereto except in such courts), waives any objection to the
laying of venue of any such litigation in the Massachusetts Courts and agrees
not to plead or claim in any Massachusetts Court that such litigation brought
therein has been brought in any inconvenient forum. Each of the parties hereto
agrees, (a) to the extent such party is not otherwise subject to service of
process in the Commonwealth of Massachusetts, to appoint and maintain an agent
in the Commonwealth of Massachusetts as such party's agent for acceptance of
legal process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the Commonwealth of Massachusetts. For
purposes of implementing the parties' agreement to appoint and maintain an agent
for service of process in the Commonwealth of Massachusetts, KCP does hereby
appoint CT Corporation, 2 Oliver Street, Boston, Massachusetts 02109, as such
agent.
(k) DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(l) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
(m) NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall not
constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Chapter 110F of the
Massachusetts General Laws and any applicable provision of the Company's
articles of organization, the terms of this Agreement, and (ii) this Agreement
is executed by the parties hereto.
(n) ATTORNEY'S FEES. KCP acknowledges that the Company will be responsible
for the reasonable fees and expenses of the Other Stockholders' legal counsel in
connection with the preparation and negotiation of this Agreement and the
agreements contemplated hereby up to an aggregate of $40,000.
4
<PAGE> 5
If the foregoing accurately sets forth our mutual understanding and
agreement, kindly sign this Agreement in the space provided below.
Very truly yours,
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd., its
General Partner
By: /s/ THOMAS N. LITTMAN
-------------------------
Name: Thomas N. Littman
Title: Vice President
Accepted and Agreed this day of
May, 1999:
/s/ GEORGE S. BURR
------------------------------
George S. Burr
/s/ HELEN L. BURR
------------------------------
Helen L. Burr
THE HAROLD HINDMAN TRUST -- 4/11/69
By: /s/ HAROLD HINDMAN
----------------------------
Trustee
By: /s/ ROBERT N. SHAPIRO
----------------------------
Trustee
INSTRON CORPORATION
By: /s/ JOHN R. BARRETT
----------------------------
Name: John R. Barrett
Title: Treasurer
5
<PAGE> 6
EXHIBIT A
<TABLE>
<CAPTION>
COMMON STOCK SURVIVING
OTHER TO BE SERIES B CORPORATION
STOCKHOLDER ROLLED OVER(1) STOCK(1) COMMON STOCK(1)
----------- -------------- -------- ---------------
<S> <C> <C> <C>
George S. Burr....................................... 60,000 12,000 12,000
Helen L. Burr........................................ 20,000 4,000 4,000
The Harold Hindman Trust............................. 80,000 16,000 16,000
</TABLE>
- ---------------
(1) Subject to Section 2.
<PAGE> 1
EXHIBIT (c)(4)
VOTING AGREEMENT
AGREEMENT (the "Agreement"), dated as of May 6, 1999, among Kirtland
Capital Partners III L.P., an Ohio limited partnership ("Parent"), ISN
Acquisition Corporation, a Massachusetts corporation and a wholly owned
subsidiary of Parent ("MergerCo"), and the stockholders of Instron Corporation,
a Massachusetts corporation (the "Company"), signatory hereto (collectively
referred to herein as the "Stockholders" and each, a "Stockholder"). Capitalized
terms used and not defined herein shall have the respective meanings ascribed to
them in the Merger Agreement (as hereinafter defined).
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, MergerCo and the Company have entered into an Agreement and Plan of
Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), providing for the merger of MergerCo and the Company (the
"Merger");
WHEREAS, as of the date hereof each Stockholder (i) is the owner of, and
has full rights to vote, that number of shares (the "Owned Shares") of the
Company's common stock, par value $1.00 per share (the "Common Stock"), and (ii)
is the beneficial owner of that number of shares of Common Stock (the "401(k)
Shares") held for the benefit of such Stockholder in the Instron Corporation
Savings and Security Plan (the "401(k) Plan"), set forth opposite such
Stockholder's name on Schedule I hereto (the Owned Shares, together with the
401(k) Shares, the "Existing Shares," and together with any shares acquired by
such Stockholder in any capacity after the date hereof and prior to the
termination of this Agreement whether upon the exercise of Options or by means
of purchase, dividend, distribution or otherwise (including any shares of Series
B Stock of the Company), the "Shares");
WHEREAS, Parent desires each Stockholder to agree, and each Stockholder is
willing to agree, not to transfer or otherwise dispose of any of such
Stockholder's Shares and to vote, or to direct the voting of, the Shares in a
manner so as to facilitate consummation of the Merger, as provided herein; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. TRANSFER OF SHARES.
(a) TRANSFER AND ENCUMBRANCE. Other than as provided herein or in the
Merger Agreement or those certain letter agreements of even date herewith
between the Stockholders signatory thereto and Parent (the "Rollover Letter
Agreements"), until the Expiration Date (as defined below), no Stockholder shall
hereafter (i) sell, tender, transfer, pledge, encumber, assign or otherwise
dispose of any of the Shares, (ii) deposit any Shares into a voting trust or
enter into a voting agreement or arrangement with respect to such Shares or
grant any proxy or power of attorney with respect thereto, (iii) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, transfer, pledge, encumbrance, assignment or other disposition
of any Shares, or (iv) take any action that would make any representation or
warranty of such Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling such Stockholder from performing such
Stockholder's obligations under this Agreement. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (A) the Effective Time; and
(B) such date and time as the Merger Agreement shall be terminated in accordance
with its terms.
(b) DISCLOSURE. The Stockholders hereby permit Parent and MergerCo to
publish and disclose in the Schedule 13E-3 and the Proxy Statement, if
applicable (including all documents and schedules filed with the SEC), their
identity and ownership of the Shares and the nature of their commitments,
arrangements and understandings under this Agreement.
1
<PAGE> 2
2. ADDITIONAL AGREEMENTS.
(a) VOTING AGREEMENT. Each Stockholder shall, at any meeting of the holders
of Common Stock, however called, or in connection with any written consent of
the holders of Common Stock, vote, or shall direct the trustee of the 401(k)
Plan, in accordance with and to the extent permitted under the terms of such
plan, to vote, as applicable, the Shares, (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other actions contemplated by the Merger
Agreement and this Agreement and any actions required in furtherance thereof and
hereof, and (ii) against any other Acquisition Proposal.
(b) NO INCONSISTENT ARRANGEMENTS. Each Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement, the Merger Agreement and
the Rollover Letter Agreements, it shall not (i) transfer (which term shall
include, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of such Stockholder's Shares, Options or
any interest therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Options
or any interest therein, (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to such Shares or Options, or (iv) deposit such
Shares or Options into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or Options.
(c) NO SOLICITATION. Each Stockholder hereby agrees that such Stockholder
will not, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent or
any of its affiliates or representatives) concerning any other Acquisition
Proposal, except to the extent that the Company shall be so permitted pursuant
to Section 7.5 of the Merger Agreement. Each Stockholder will immediately cease
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any other Acquisition Proposal.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SHARES. Such Stockholder's ownership of the Owned
Shares is set forth on Schedule I. Such Stockholder is the beneficial owner
of the 401(k) Shares, as set forth on Schedule I. On the date hereof, the
Owned Shares constitute all of the Shares owned by such Stockholder. On the
date hereof, the 401(k) Shares constitute all of the Shares beneficially
owned by such Stockholder pursuant to the 401(k) Plan. Except as noted in
Schedule I hereto, such Stockholder has sole voting power and sole power to
issue instructions with respect to the matters set forth in Sections 1 and
2 hereof, sole power of disposition, sole power of conversion and sole
power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Owned Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable
securities laws, the Rollover Letter Agreements, and the terms of this
Agreement and the Merger Agreement. Such Stockholder has the sole power to
issue instructions with respect to the matters set forth in Sections 1 and
2 hereof to the trustee of the 401(k) Plan.
(b) POWER; BINDING AGREEMENT. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party. This Agreement has been duly and
validly executed and delivered by such Stockholder and constitutes a valid
and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to applicable bankruptcy
or other similar laws relating to creditors' rights and general principles
of equity. There is no beneficiary or holder of a voting trust certificate
or other interest in any trust of which such Stockholder is a trustee whose
consent is required for the execution and delivery of this Agreement or the
consummation by such Stockholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder of
the transactions
2
<PAGE> 3
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by such Stockholder, the consummation by such Stockholder of the
transactions contemplated hereby or compliance by such Stockholder with any
of the provisions hereof (A) conflicts with or results in any breach of any
organizational documents applicable to the Stockholder, (B) results in a
violation or breach of, or constitutes (with or without notice or lapse of
time or both) a default (or gives rise to any third-party right of
termination, cancellation, material modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which such Stockholder is a party or by which such Stockholder or any of
its properties or assets may be bound, or (C) violates any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to
such Stockholder or any of its properties or assets.
(d) NO ENCUMBRANCES. Except as set forth in Schedule I hereto or
otherwise permitted by this Agreement, the Shares and the certificates
representing such Shares are now, and at all times during the term hereof
will be, held by such Stockholder, or by a nominee or custodian or, with
respect to the 401(k) Shares, the trustee to the 401(k) Plan, for the
benefit of such Stockholder, free and clear of all Encumbrances, proxies,
voting trusts or agreements, understandings or arrangements or any other
rights whatsoever, except for any such Encumbrances set forth in Schedule I
hereto or arising hereunder, under the Merger Agreement, under the Rollover
Letter Agreements and under the terms of the 401(k) Plan.
(e) NO FINDER'S FEES. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's
or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) RELIANCE BY PARENT. Each Stockholder understands and acknowledges
that Parent is entering into, and causing MergerCo to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO. Each of Parent
and MergerCo hereby represents and warrants to the Stockholders as follows:
(a) POWER; BINDING AGREEMENT. Each of Parent and MergerCo has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and MergerCo will not violate any other
agreement to which either of them is a party. This Agreement has been duly
and validly executed and delivered by each of Parent and MergerCo and
constitutes a valid and binding agreement of each of Parent and MergerCo,
enforceable against each of Parent and MergerCo in accordance with its
terms.
(b) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and MergerCo and the consummation by each of
Parent and MergerCo of the transactions contemplated hereby and (ii) none
of the execution and delivery of this Agreement by each of Parent and
MergerCo, the consummation by each of Parent and MergerCo of the
transactions contemplated hereby or compliance by each of Parent and
MergerCo with any of the provisions hereof (A) conflicts with or results in
any breach of any organizational documents applicable to either of Parent
or MergerCo, (B) results in a violation or breach of, or constitutes (with
or without notice or lapse of time or both) a default (or gives rise to any
third-party right of termination, cancellation, material modification or
acceleration) under, any of the terms, conditions or provisions of any
note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which either of Parent or MergerCo is a party or
by which either of Parent or MergerCo or any of their properties or assets
may be bound, or (C) violates any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to either of Parent or
MergerCo or any of their properties or assets.
5. WAIVER OF APPRAISAL RIGHTS. Each Stockholder hereby waives his rights
under the Appraisal Rights Provisions with respect to the Shares.
3
<PAGE> 4
6. FURTHER ASSURANCES. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
7. STOP TRANSFER. The Stockholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
8. TERMINATION. The covenants and agreements of the Stockholders contained
in this Agreement with respect to the Shares shall terminate upon the earlier of
(a) the Effective Time and (b) the termination of the Merger Agreement in
accordance with its terms.
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement, together with the Rollover Letter
Agreements, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of Shares,
the transferor shall remain liable for the performance of all obligations of the
transferor under this Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided that
Parent may assign, in its sole discretion, its rights and obligations hereunder
to any direct or indirect wholly owned Subsidiary of Parent, but no such
assignment shall relieve Parent of its obligations hereunder if such assignee
does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
<TABLE>
<S> <C>
If to a Stockholder: to such Stockholder's address set forth on Schedule
I hereto
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Stuart M. Cable, P.C.
Joseph L. Johnson III, P.C.
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, MA 02108
Attention: Thomas J. Dougherty, Esq.
Telephone No.: (617) 573-4820
Telecopy No.: (617) 573-4822
and
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: John R. Utzschneider, Esq.
Telephone No.: (617) 951-8852
Telecopy No.: (617) 951-8736
If to a Parent or MergerCo: Kirtland Capital Partners III L.P.
2550 SOM Center Road
Suite 105
Willoughby Hills, OH 44904
Attn: Raymond A. Lancaster
Telephone No.: (404) 585-9010
Telecopy No.: (404) 585-9699
With a copy to: Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Charles W. Hardin, Esq.
Telephone No.: (216) 586-7084
Telecopy No.: (216) 579-0212
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof
at law or in equity, or to insist upon compliance by any other
5
<PAGE> 6
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. Subject to the provisions of Section
9(c), this Agreement is not intended to be for the benefit of, and shall not be
enforceable by, any person or entity who or which is not a party hereto.
(k) CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to its rules
of conflict of laws. Each of Parent, MergerCo and the Stockholders hereby
irrevocably and unconditionally consents to submit to the sole and exclusive
jurisdiction of the courts of the Commonwealth of Massachusetts and of the
United States District Court for the District of Massachusetts (the
"Massachusetts Courts") for any litigation arising out of or relating to this
Agreement, or the negotiation, validity or performance of this Agreement (and
agrees not to commence any litigation relating thereto except in such courts),
waives any objection to the laying of venue of any such litigation in the
Massachusetts Courts and agrees not to plead or claim in any Massachusetts Court
that such litigation brought therein has been brought in any inconvenient forum.
Each of the parties hereto agrees, (a) to the extent such party is not otherwise
subject to service of process in the Commonwealth of Massachusetts, to appoint
and maintain an agent in the Commonwealth of Massachusetts as such party's agent
for acceptance of legal process, and (b) that service of process may also be
made on such party by prepaid certified mail with a proof of mailing receipt
validated by the United States Postal Service constituting evidence of valid
service. Service made pursuant to (a) or (b) above shall have the same legal
force and effect as if served upon such party personally within the Commonwealth
of Massachusetts. For purposes of implementing the parties' agreement to appoint
and maintain an agent for service of process in the Commonwealth of
Massachusetts, each such party does hereby appoint CT Corporation, 2 Oliver
Street, Boston, Massachusetts 02109, as such agent.
(l) DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
(n) NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall not
constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Chapter 110F of the
Massachusetts General Laws and any applicable provision of the Company's
articles of organization, the terms of this Agreement, including, without
limitation, the voting provisions set forth in Section 2(a) of this Agreement,
and (ii) this Agreement is executed by the parties hereto.
(o) CONCERNING SERIES B STOCK. The Stockholders hereby irrevocably waive
any and all rights to the payment of any dividends or distributions on the
Series B Stock.
6
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd.,
its General Partner
By: /s/ RAYMOND A. LANCASTER
------------------------------------
Name: Raymond A. Lancaster
Title: Managing Member
ISN ACQUISITION CORPORATION
By: /s/ RAYMOND A. LANCASTER
------------------------------------
Name: Raymond A. Lancaster
Title: President
STOCKHOLDERS:
/s/ GEORGE S. BURR
--------------------------------------
George S. Burr
/s/ HAROLD HINDMAN
--------------------------------------
Harold Hindman
HAROLD HINDMAN TRUST
By: /s/ ROBERT SHAPIRO
------------------------------------
Name: Robert Shapiro, as Trustee
-and-
By: /s/ HAROLD HINDMAN
------------------------------------
Name: Harold Hindman, as Trustee
/s/ JOSEPH E. AMARAL
--------------------------------------
Joseph E. Amaral
/s/ KENNETH L. ANDERSEN
--------------------------------------
Kenneth L. Andersen
/s/ JOHN R. BARRETT
--------------------------------------
John R. Barrett
/s/ JONATHAN L. BURR
--------------------------------------
Jonathan L. Burr
7
<PAGE> 8
THE JONATHAN L. BURR TRUST -- 1965
By: /s/ PRESTON SAUNDERS
------------------------------------
Name: Preston Saunders, as Trustee
/s/ YAHYA GHARAGOZLOU
--------------------------------------
Yahya Gharagozlou
/s/ ARTHUR D. HINDMAN
--------------------------------------
Arthur D. Hindman
ARTHUR D. HINDMAN TRUST
By: /s/ ROBERT SHAPIRO
------------------------------------
Name: Robert Shapiro, as Trustee
/s/ NANCY HINDMAN
--------------------------------------
Nancy Hindman
BENJAMIN HINDMAN
By: /s/ ARTHUR D. HINDMAN
------------------------------------
Name: Arthur D. Hindman, as Custodian
SARAH HINDMAN
By: /s/ ARTHUR D. HINDMAN
------------------------------------
Name: Arthur D. Hindman, as Custodian
NATHANIEL HINDMAN
By: /s/ ARTHUR D. HINDMAN
------------------------------------
Name: Arthur D. Hindman, as Custodian
/s/ JAMES M. MCCONNELL
--------------------------------------
James M. McConnell
/s/ WILLIAM J. MILLIKEN
--------------------------------------
William J. Milliken
/s/ LINTON A. MOULDING
--------------------------------------
Linton A. Moulding
8
<PAGE> 9
LINTON A. & JANE E. MOULDING,
AS JOINT TENANTS
By: /s/ LINTON A. MOULDING
------------------------------------
Name: Linton A. Moulding, as Joint
Tenant
-and-
By: /s/ JANE E. MOULDING
------------------------------------
Name: Jane E. Moulding, as Joint
Tenant
/s/ NORMAN L. SMITH
--------------------------------------
Norman L. Smith
/s/ CAROLYN SMITH
--------------------------------------
Carolyn Smith
/s/ HELEN L. BURR
--------------------------------------
Helen L. Burr
9
<PAGE> 10
SCHEDULE I
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDERS NUMBER OF OWNED SHARES NUMBER OF 401(k) SHARES
-------------------------------- ---------------------- -----------------------
<S> <C> <C>
George S. Burr.................................... 259,206* 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Harold Hindman.................................... 37,005** 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Harold Hindman Trust.............................. 492,814*** 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Joseph E. Amaral.................................. 29,000 4,215
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Kenneth L. Andersen............................... 25,328 11,273
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
John R. Barrett................................... 25,000 2,553
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Jonathan L. Burr.................................. 82,014 3,437
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
The Jonathan L. Burr Trust -- 1965................ 60,750 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Yahya Gharagozlou................................. 25,000 1,892
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Arthur D. Hindman................................. 34,775 8,100
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Arthur D. Hindman Trust........................... 15,186 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Nancy Hindman..................................... 1,000 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Benjamin Hindman.................................. 17,575 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDERS NUMBER OF OWNED SHARES NUMBER OF 401(k) SHARES
-------------------------------- ---------------------- -----------------------
<S> <C> <C>
Sarah Hindman..................................... 10,800 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Nathaniel Hindman................................. 11,825 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
James M. McConnell................................ 211,112 4,413
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
William J. Milliken............................... 20,500 49
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Linton A. Moulding................................ 25,000 6,476
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Linton A. & Jane E. Moulding,..................... 13,547 0
as Joint Tenants
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Norman L. Smith................................... 26,720 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Carolyn Smith..................................... 2,000 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
Helen L. Burr..................................... 91,550 0
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
</TABLE>
- ---------------
* 4,200 of these shares are held in street name in a cash account at Tucker
Anthony.
** 23,775 of these shares are held in a margin account at PaineWebber
Incorporated and 13,020 of these shares are held in street name in a margin
account at Tucker Anthony.
*** Harold Hindman and Robert Shapiro, as Trustees, have shared voting and
dispositive power with respect to these shares. 255,797 of these shares are
held in street name a margin account at BT Alex. Brown Incorporated.
11
<PAGE> 1
EXHIBIT (c)(5)
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") dated as of
, 1999, is entered into by and among Instron
Corporation, a Massachusetts corporation (the "Company"), and all of the
stockholders of the Company (the "Stockholders").
RECITALS
1. Certain terms are defined in Section 1 of this Agreement and will
have the meanings specified in Section 1.
2. The Stockholders own all of the issued and outstanding shares of
the common stock, $1.00 par value, of the Company (the "Common Stock").
3. The Stockholders and the Company desire to agree upon certain terms
and conditions which shall govern the ownership and transfer of the Shares.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and provisions set forth in this Agreement, the parties agree as
follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
"Acceptance Period" means the fifteen (15) business days from and
after the date of receipt by the Company of a Notice of Intention to Sell.
"Affiliate" means with respect to any Person, any other Person (other
than the Company or any Subsidiary of the Company) that directly or
indirectly controls, is controlled by or is under common control with such
Person.
"Board of Directors" means the Board of Directors of the Company.
"Cause" means (i) the continued failure of the Management Employee to
perform substantially the Management Employee's duties with the Company or
one of its Subsidiaries (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Management Employee by the
Board of Directors which specifically identifies the manner in which the
Board of Directors believes that the Management Employee has not
substantially performed the Management Employee's duties, (ii) the engaging
by the Management Employee in illegal conduct or willful misconduct, in
each case which is materially injurious to the Company, (iii) the
Management Employee's intentional violation of the Management Employee's
confidentiality obligations with respect to the Company's confidential
information, knowledge or data or the Management Employee's violation of
his agreement to not engage in competition with the Company, or (iv) the
Management Employee's conviction of, or plea of guilty or nolo contendere
to, a felony involving moral turpitude. For purposes of this definition, no
act or failure to act, on the part of the Management Employee, shall be
considered "willful" or "intentional" unless it is done, or omitted to be
done, by the Management Employee in bad faith or without reasonable belief
that the Management Employee's action or omission was in the best interests
of the Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board of Directors or based
upon the advice of counsel for the Company shall be conclusively presumed
to be done, or omitted to be done, by the Management Employee in good faith
and in the best interests of the Company. The cessation of employment of
the Management Employee shall not be deemed to be for Cause unless and
until there shall have been delivered to the
1
<PAGE> 2
Management Employee a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose (after reasonable notice is provided to the Management Employee and
the Management Employee is given a reasonable opportunity, together with
counsel, to be heard before the Board of Directors), finding that, in the
good faith opinion of the Board of Directors, the Management Employee is
guilty of the conduct described in clause (i), (ii), (iii) or (iv) above,
and specifying the particulars thereof in detail.
"Credit Agreements" means the Indenture or any other agreement or
instrument under which the Company or any Subsidiary has any Debt
outstanding at the applicable time, including, without limitation, the
[NATIONAL CITY CREDIT AGREEMENT].
"Debt" of any Person means: either (a) any liability of any Person (i)
for borrowed money (including the current portion thereof), or (ii) under
any reimbursement obligation relating to a letter of credit, bankers'
acceptance or note purchase facility, or (iii) evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation), or
(iv) for all or any part of the deferred purchase price of property or
services (other than trade payables), or (b) any liability of others
described in the preceding clause (a) that such Person has Guaranteed, that
is recourse to such Person or any of its assets or that is otherwise its
legal liability or that is secured in whole or in part by the assets of
such Person.
"Disability" means the Management Employee's incapacity due to
physical or mental illness which has caused the Management Employee to be
absent from the full-time performance of his or her duties with the Company
for a period of six (6) consecutive months if the Company shall have given
the Management Employee written notice of termination and, within thirty
(30) days after such notice is given, the Management Employee shall not
have returned to the full-time performance of his or her duties.
"EBITDA" means methodology to achieve LTM EBITDA of $25.617 million at
3/31/99 as reflected in "Fair Value" definition; [INSERT METHODOLOGY WILL
ALSO PROVIDE FOR PRO FORMA ADJUSTMENTS TO EXCLUDE ACQUISITIONS AND
DIVESTITURES MADE DURING MOST RECENT FOUR QUARTER PERIOD AND RELATED DEBT
CHANGES].
"Eligible Stockholder" Means (i) the Kirtland Entities, (ii) each
Other Stockholder, and (iii) each Management Stockholder who is an employee
of the Company or any Subsidiary of the Company upon the giving of the
Notice required by Section 3.3.
"Existing Option Plan" means the Instron Corporation 1992 Stock
Incentive Plan.
"Fair Value" means the product achieved by multiplying (i) EBITDA for
the four (4) full fiscal quarters immediately preceding the Management
Stockholder Repurchase Event in question, determined on a pro forma basis
consistent with the methodologies set forth in the "EBITDA" definition and
(ii) [MULTIPLE AS OF THE CLOSING USING METHODOLOGY DESCRIBED BELOW](1) and
subtracting all Debt of the Company and its Subsidiaries on a consolidated
basis then outstanding on the last day of such four fiscal quarter period
and (iii) adding all cash and cash equivalents of the Company and its
Subsidiaries on a consolidated basis on such date, with the result then
being divided by the aggregate number of Shares then outstanding on a fully
diluted basis, including, without limitation, all Options and warrants, if
any, then outstanding.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing or otherwise
supporting in whole or in part the payment of any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such Person
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such other Person (whether
arising by virtue of partnership arrangements, by agreement to keep-well,
to purchase assets, goods, securities or services, to
- ---------------
1 At present, such multiple is 6.75 based on the assumption that (i) net Debt is
$13 million, (ii) LTM EBITDA at 3/31/99 is $25.617 million and (iii) enterprise
value is $172 million. These assumptions will be updated at the closing using
LTM EBITDA at the most recent quarter end.
2
<PAGE> 3
take-or-pay, or to maintain financial statement conditions or otherwise) or
(b) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligations of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part).
"Immediate Family" has the meaning ascribed thereto in Rule 16a-1(e)
under the Securities Exchange Act of 1934, as amended (or any successor
rule to the same effect), as in effect from time to time.
"Indenture" means the Indenture, dated as of , 1999,
between the Company and , as Trustee.
"Kirtland" means Kirtland Capital Partners III L.P., together with its
successors and transferees.
"Kirtland Entities" means Kirtland, Kirtland Capital Company III LLC
and ISN Investments Ltd., together with their successors and transferees.
"Kirtland Shares" means any and all Shares held by the Kirtland
Entities.
"Management Employee" means an individual who is employed by the
Company or any Subsidiary of the Company at the time he or she executes and
delivers this Agreement.(2)
"Management Stockholder" means collectively a Management Employee and
each and every Management Transferee of such Person.
"Management Stockholder Repurchase Event" means the death or
Disability of or the termination of employment of a Management Employee
with the Company or any Subsidiary of the Company for any reason
whatsoever.
"Management Transferee" means each and every direct or indirect
transferee of any Management Employee.
"Notice of Intention to Sell" means the written notice specified in
Section 3.1.
"Options" means any and all options to purchase Shares issued pursuant
to the Instron Corporation 1999 Stock Option Plan or the Existing Option
Plan.
"Other Stockholder" means George S. Burr , Helen L. Burr, Harold
Hindman of the Harold Hindman Trust -- 4/11/69, together with their
respective heirs, administrators, executors, successors and assigns, as
applicable, and any direct or indirect transferee of George S. Burr, Helen
L. Burr, Harold Hindman, or the Harold Hindman Trust -- 4/11/69, together
with each of such transferee's heirs, administrators, executors, successors
and assigns, as applicable.
"Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated association or other entity.
"Prime Rate" means the "Prime Rate" as reported by The Wall Street
Journal in its column entitled "Money Rates," such rate being the base rate
on corporate loans posted by at least 75% of the nation's 30 largest banks;
PROVIDED, HOWEVER, that if The Wall Street Journal no longer publishes such
rate or changes the definition of such rate, the Company shall substitute
another reference to be used to define the Prime Rate which closely
approximates the original definition used herein.
"Qualified Note" means an unsecured promissory note of the Company (i)
maturing in five years, with principal due in five equal annual
installments, (ii) bearing interest at an annual rate equal to the Prime
Rate, with interest paid annually in arrears, and (iii) becoming payable on
a Substantial Sale; PROVIDED, HOWEVER, that the terms of such note shall
expressly be subordinated and subject to the Company's Credit Agreements as
required by the lenders thereunder and any failure by the Company to make
any principal or interest payment on such note shall not be a default under
such note if such payment is at the time of payment prohibited under the
terms of any of the subordination provisions of the Credit Agreements.
- ---------------
2 This definition may be revised at the closing depending upon how Shares
will be owned at closing (i.e., to reflect issuances to spouses, trusts, etc.).
The intent of such revision would be to ensure that all such persons are bound
by the Stockholders Agreement.
3
<PAGE> 4
"Restricted Shares" means Shares subject to transfer and vesting
restrictions pursuant to the Restricted Stock Award Agreements so long as
such Shares remain subject to such restrictions.
"Restricted Stock Award Agreements" means the Restricted Stock Award
Agreements, as amended on the date of this Agreement, between the Company
and certain Management Employees.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Shares" means the Common Stock of the Company (including the
Restricted Shares) now or hereafter outstanding and any securities into
which any such Common Stock may have been changed, converted or exchanged.
"Stockholder" means each of the signatories to this Agreement (other
than the Company) and each other Person who hereafter becomes the owner of
any Shares.
"Subsidiary" means any Person of which at least a majority of the
voting stock or voting interests of such Person are owned, directly or
indirectly, by any other Person.
"Substantial Sale" means the sale of the Company or its business to
any Person whether by merger, consolidation, sale of all or substantially
all of the assets or capital stock of the Company or otherwise, which has
been approved by the Board of Directors but shall not include a public
offering of equity securities by the Company or any Subsidiary of the
Company.
"Transfer" means sale, transfer, assignment, gift, pledge,
hypothecation, encumber, or other disposition, whether voluntary or
involuntary.
"Vested Options" means any Options that at the time of determination
are then exercisable.
SECTION 2. RESTRICTIONS ON TRANSFER
2.1 RESTRICTION ON TRANSFER. At no time during the term of this Agreement
may a Stockholder Transfer any Shares or any interest in Shares except:
(a) in the case of a Management Stockholder, to the extent permitted
and under the conditions set forth in Sections 3, 4 or 5 (it being
understood that, notwithstanding any other provision of this Agreement to
the contrary, Restricted Shares may not be Transferred pursuant to such
Section 3, 4 (other than in circumstances constituting a Change in Control
of the Company (as defined in the Restricted Stock Award Agreement) or 5);
(b) in the case of an Other Stockholder, to the extent permitted and
under the conditions set forth in Sections 3 or 4;
(c) that any Kirtland Entity may Transfer any of its Shares to (i) any
Affiliate of any Kirtland Entity, (ii) any other Kirtland Entity, (iii) any
Person so long as all Transfers to any Persons on a cumulative basis
pursuant to this clause (iii) do not, in the aggregate, exceed 90,909
Shares or (iv) the partners, members or stockholders, as the case may be,
of any Kirtland Entity, on a pro rata basis as part of a partnership
distribution;
(d) that any Kirtland Entity may Transfer any of its Shares to any
Person provided that such Kirtland Entity complies with the provisions of
Section 4, if applicable;
(e) any Management Stockholder or any Other Stockholder may Transfer
Shares (other than Restricted Shares) to any one or more members of such
Stockholder's Immediate Family (or to one or more trusts established solely
for the benefit of such Stockholder and/or one or more members of such
Stockholder's Immediate Family or to one or more partnerships in which the
only partners are such Stockholder and/or members of such Stockholder's
Immediate Family); and
(f) any Stockholder may Transfer Shares pursuant to an initial public
offering of the equity securities of the Company subject to the provisions
of the Registration Rights Agreement, dated the date hereof, by and among
the Company and the Stockholders.
4
<PAGE> 5
The Company will not recognize any Transfer of any Shares unless such Transfer
is made in full compliance with all provisions of this Agreement. Any transferee
of any Shares must agree in writing to become a party to, and to be bound by the
provisions of, this Agreement.
2.2 SECURITIES LAW RESTRICTIONS. Notwithstanding any other provision in
this Agreement, but subject to the express written waiver by the Company in the
exercise of its good faith and reasonable judgment, no Stockholder may Transfer
any Shares without the registration of the Transfer of such Shares under the
Securities Act or until the Company has received such legal opinions or other
evidence that such Transfer is exempt from the registration requirements under
the Securities Act and applicable state securities laws as the Company deems
appropriate in light of the facts and circumstances relating to such proposed
Transfer, together with such representations, warranties and indemnifications
from the transferor and the transferee as the Company deems appropriate to
confirm the accuracy of the facts and circumstances that are the basis for any
such opinion or other assurances and to protect the Company and the other
Stockholders from any liability resulting from any such Transfer.
SECTION 3. RIGHT OF FIRST REFUSAL
3.1 INTENTION TO SELL. If a Management Stockholder or an Other Stockholder
wishes to sell all or any portion of the Shares owned by such Stockholder to a
bona fide third party for cash (other than a Transfer pursuant to Section
2.1(e), 4 or 5), such Management Stockholder or Other Stockholder promptly shall
deliver to the Company a Notice of Intention to Sell setting forth the number of
Shares to be sold (the "Offered Shares"), the proposed purchase price per
Offered Share, the proposed purchaser (including any information concerning such
purchaser and its Affiliates as the Company may reasonably request) and the
other terms of sale.
3.2 ACCEPTANCE PERIOD. Upon receipt of a Notice of Intention to Sell and
for the duration of the Acceptance Period, the Company or its designee (which
shall not include any Kirtland Entity or any Affiliate thereof) will have the
right and option to elect to purchase all or any portion of such Offered Shares
at the purchase price and on the terms stated in the Notice of Intention to
Sell. On or before the expiration of the Acceptance Period, the Company may give
the Management Stockholder or Other Stockholder written notice of the Company's
intention to exercise its rights to purchase, or cause such designee to
purchase, the Offered Shares.
3.3 NOTICE OF ELECTION TO PURCHASE; FAILURE OF COMPANY TO EXERCISE ITS
OPTION TO PURCHASE. If the Company or such designee fails to elect to purchase
all of the Offered Shares in accordance with the provisions of Sections 3.1 and
3.2, then, prior to the expiration of the Acceptance Period, the Company shall
give written notice to each Eligible Stockholder (the "Notice") setting forth
the number of Offered Shares remaining available for purchase pursuant to the
Notice of Intention to Sell, and each Eligible Stockholder will then have the
right and option to, within ten (10) business days after receiving the Notice
from the Company, elect to purchase (i) all of such Offered Shares so remaining
available (if there is only one Eligible Stockholder electing to purchase such
Shares) or (ii) up to its pro rata share of such Offered Shares so remaining
available (if there is more than one Eligible Stockholder electing to purchase
such Shares), or (iii) such Offered Shares so remaining available in such other
proportions as the Eligible Stockholders may mutually agree, at the purchase
price and on the terms stated in the Notice of Intention to Sell, such election
to be made by giving written notice to the Company within ten (10) business days
after the receipt of the Notice.
3.4 SELLING STOCKHOLDER'S RIGHTS UPON FAILURE TO EXERCISE RIGHT TO PURCHASE
ALL OFFERED SHARES. If the Company and the Eligible Stockholders fail to elect
to purchase all of the Offered Shares under Sections 3.1, 3.2 and 3.3, then the
Management Stockholder or the Other Stockholder who or which delivered the
Notice of Intention to Sell may sell all (but not less than all) of the Offered
Shares to the purchaser specified in the Notice of Intention to Sell at the
price and upon the same terms set forth in the Notice of Intention to Sell, at
any time within twenty (20) business days after the last date on which any
Eligible Stockholder will be entitled to make any election pursuant to the
provisions of Section 3.3. The purchaser specified in the Notice of Intention to
Sell must, prior to purchasing the Offered Shares, agree in writing to become a
party to, and to be bound by the provisions of, this Agreement, and the Company
will not recognize any Transfer to such purchaser of Offered Shares until such
agreement has been executed and delivered to the Company. If the Offered Shares
are not sold by the Management Stockholder or the Other Stockholder during such
twenty (20) business-day period, the right
5
<PAGE> 6
of the Management Stockholder or the Other Stockholder to sell such Offered
Shares will expire and such remaining Offered Shares again will be subject to
the restrictions contained in this Agreement and will not thereafter be
Transferred except in compliance with this Agreement.
3.5 PAYMENT FOR OFFERED SHARES. Payment by the Company or the Eligible
Stockholders for the Management Stockholder's or the Other Stockholder's Offered
Shares will be made by certified or official bank check, payable to the order of
such Management Stockholder or Other Stockholder, as the case may be, against
delivery by such Management Stockholder or Other Stockholder to the party
purchasing such Offered Shares of (a) a certificate or certificates representing
the Offered Shares so sold, duly endorsed for transfer to the purchasing party
or accompanied by a stock transfer power duly endorsed for transfer, with all
requisite stock transfer taxes paid and stamps affixed and (b) written
representations and warranties of such Management Stockholder or Other
Stockholder to the effect that: (i) such Management Stockholder or Other
Stockholder is the record and beneficial owner of the Shares being purchased and
sold, has good and valid title to the Shares and the absolute right to transfer
the same to the purchaser, and the same, upon transfer to the purchaser, will be
free and clear of all claims, liens, pledges, restrictions (other than
restrictions imposed by this Agreement and restrictions under federal and state
securities laws) or encumbrances of any nature whatsoever; (ii) such Management
Stockholder or Other Stockholder has full power, authority or capacity, as
applicable, to perform the terms of this Agreement relating to such purchase and
sale; and (iii) any consent or approval of any governmental authority, court or
third person required to be obtained by such Management Stockholder or Other
Stockholder to permit the Transfer of the Shares has been obtained.
3.6 CLOSING DATE. The closing of the sale and delivery of Offered Shares
being purchased and sold pursuant to this Section 3 to the Company (or its
designee) or an Eligible Stockholder, and payment for such Offered Shares, will
be held at a time and place designated by the Company as follows:
(a) If the Company has elected to purchase, or cause its designee to
purchase, all of the Offered Shares, any date on or prior to the twentieth
(20th) business day after the date on which the Management Stockholder or
the Other Stockholder receives notification of the Company's intention to
so purchase; or
(b) In all other cases, any date on or prior to the twentieth (20th)
business day after the last day upon which any Eligible Stockholder can
elect to purchase Offered Shares pursuant to this Section 3.
3.7 RESTRICTIONS. Notwithstanding the foregoing provisions of this Section
3 to the contrary, no Management Stockholder or Other Stockholder shall (a)
deliver any Notice of Intention to Sell if such Management Stockholder or Other
Stockholder did not at the time of giving such Notice of Intention to Sell have
a good faith belief that such purchaser would purchase all of the Offered Shares
at the price and on the terms contained in the Notice of Intention to Sell or
(b) Transfer any Shares to any competitor of the Company or any employee,
shareholder, officer, director or other Affiliate of any such competitor of the
Company, as determined in good faith by the Board of Directors, without the
prior written consent of the Company. In the event that the Company does not
provide written notice during the Acceptance Period that the Board of Directors
has determined that such Transfer may not be made for competitive reasons as
provided above, the Management Stockholder or Other Stockholder will be deemed
to have met its obligations under clause (b) of the previous sentence.
3.8 DISCRETION OF BOARD OF DIRECTORS. Notwithstanding the foregoing
provisions of this Section 3 to the contrary, the Board of Directors may, in its
sole and absolute discretion, authorize the Transfer of any Shares by any
Management Stockholder or Other Stockholder without compliance with this Section
3.
SECTION 4. TAG-ALONG/CO-SALE RIGHTS
4.1 TAG-ALONG RIGHTS.
(a) If the Kirtland Entities desire to Transfer any Shares (other than a
Transfer pursuant to Section 2.1(c) of this Agreement) whether by sale, merger
or otherwise (a "Sale") and Kirtland does not elect to exercise its rights under
Section 4.2, then at least fifteen (15) days prior to the closing of such Sale,
Kirtland shall make an offer (the "Participation Offer") to the Management
Stockholders and the Other Stockholders to include in the proposed Sale a
portion of each Management Stockholder's or Other Stockholder's Shares (other
than Restricted
6
<PAGE> 7
Shares) that represents the same percentage of such Shares (other than
Restricted Shares) as the Shares being Transferred by the Kirtland Entities
represent to all Shares held by the Kirtland Entities.
(b) The Participation Offer must describe the terms (including purchase
price) and conditions of the proposed Sale and the number of Shares (other than
Restricted Shares) that a Management Stockholder or Other Stockholder may
Transfer in the proposed Sale and must be conditioned upon (i) the consummation
of the transactions contemplated in the Participation Offer, and (ii) each
Management Stockholder's or Other Stockholder's execution and delivery of all
agreements and other documents as may be reasonably required by the acquiror in
connection with such Sale. If any Management Stockholder or Other Stockholder
accepts the Participation Offer, the Kirtland Entities will reduce, to the
extent necessary, the number of Shares they otherwise would have Transferred in
the proposed Sale so as to permit those Management Stockholders and/or Other
Stockholders who have accepted the Participation Offer to Transfer the number of
Shares (other than Restricted Shares) that they are entitled to Transfer under
this Section 4, and such Management Stockholders and/or Other Stockholders shall
Transfer the number of Shares (other than Restricted Shares) specified in the
Participation Offer to the proposed transferee in accordance with the terms set
forth in the Participation Offer.
(c) Any Management Stockholder or Other Stockholder that desires to
exercise its right to Transfer Shares (other than Restricted Shares) in the
Participation Offer shall deliver notice to Kirtland within ten (10) days after
its receipt of the Participation Offer, specifying the number of Shares (other
than Restricted Shares) (up to the number of such Shares specified in the
Participation Offer) that such Management Stockholder or Other Stockholder
desires to Transfer Shares (other than Restricted Shares) in the Participation
Offer, whereupon such Management Stockholder or Other Stockholder shall be
obligated to Transfer such Shares (other than Restricted Shares) at the closing
of such Sale, if and when it occurs.
(d) Notwithstanding anything contained in this Agreement to the contrary
and subject to the terms and conditions of that certain Registration Rights
Agreement of even date herewith by and among the Management Stockholders, the
Other Stockholders and the Company, the tag-along rights set forth in this
Section 4.1 shall not apply in connection with any Sale by any Kirtland Entity
of Shares to the public pursuant to a public offering of equity securities of
the Company or any Subsidiary of the Company.
4.2 CO-SALE RIGHTS.
(a) In connection with any Sale, Kirtland has the right to require each
Management Stockholder and Other Stockholder to Transfer a portion of such
Management Stockholder's or Other Stockholder's Shares (and, in the case of the
Management Stockholders and to the extent permitted under the terms of the
applicable option plan, a portion of such Management Stockholder's Vested
Options) that represents the same percentage of such Management Stockholder's or
Other Stockholder's Shares and Options, as applicable, as the Shares being
Transferred by the Kirtland Entities represent of the Kirtland Shares. All
Shares Transferred by Management Stockholders and the Other Stockholders
pursuant to this Section 4.2 must be Transferred at the same price and terms
(including form of consideration) as the Shares being Transferred by the
Kirtland Entities. All Options Transferred by Management Stockholders pursuant
to this Section 4.2 must be Transferred at the same price (less the applicable
exercise price in respect of each such Option) and terms (including form of
consideration) as the Shares being Transferred by the Kirtland Entities.
(b) Kirtland shall give the Company, the Management Stockholders and the
Other Stockholders at least fifteen (15) days' prior written notice of any Sale
as to which Kirtland intends to exercise its rights under Section 4.2(a).
4.3 SALE REQUIREMENTS. All Management Stockholders and Other Stockholders,
if Kirtland elects to exercise its rights under Section 4.2(a), or the electing
Management Stockholders and/or Other Stockholders if such Management
Stockholders and/or Other Stockholders elect to exercise their rights under
Section 4.1(a), shall (i) take such actions as may be reasonably requested by
Kirtland in connection with consummating the Sale, (ii) vote in favor of,
consent to, and raise no objections against, the Sale or the process pursuant to
which the Sale was arranged, (iii) waive any dissenter's rights and other
similar rights, (iv) if the Sale is structured as a sale of Shares, agree to
sell its Shares and Options, as applicable, on the terms and conditions of the
Sale and (v) execute and deliver such documents as may be reasonably requested
by Kirtland in connection with any Sale, including,
7
<PAGE> 8
without limitation, written consents of stockholders, proxies, letters of
transmittal, purchase agreements and stock powers, in each case so long as the
Kirtland Entities also have executed such documents on no more favorable a basis
than the Management Stockholders and the Other Stockholders. At the closing of
such Sale, the participating Management Stockholders and Other Stockholders
shall deliver certificates for all Shares (or, in the case of the Options, such
reasonable and customary transfer documentation as may be specified by Kirtland)
to be Transferred by Management Stockholders or Other Stockholders, duly
endorsed for transfer, to the purchaser against delivery of the appropriate
purchase price.
4.4 COST OF SALE. In connection with any Sale, Kirtland may, or may cause
the Company or the Company's Subsidiaries to, hire legal counsel and other
professional advisors as it deems necessary or desirable to effectuate the
contemplated transaction on behalf of all of the participating Stockholders. All
Stockholders participating in such Sale agree to bear their pro rata share
(based upon the number of Shares and Options, as applicable, sold or to be sold)
of the reasonable costs of such Sale to the extent such costs are not otherwise
paid by the Company or the acquiring Person whether or not such Sale closes.
Costs incurred by any Stockholder on its own behalf (other than the costs of the
professional advisors hired by Kirtland) will not be considered costs of a Sale
and must be paid solely by such Stockholder.
4.5 ASSET SALE. In the event that Kirtland determines to pursue a sale of
all or substantially all of the assets of the Company, the Management
Stockholders and the Other Stockholders shall participate therein and take the
action contemplated in this Section 4.0 to the extent applicable so long as the
Management Stockholders and the Other Stockholders are treated no less favorably
than the Kirtland Entities (including form of consideration) in any such
transaction.
4.6 PRICE. For the purposes of this Section 4, unless the context otherwise
requires, the term "price" shall mean all consideration received by the Kirtland
Entities and their Affiliates in connection with a Sale other than compensation
for bona fide services provided by the Kirtland Entities and their Affiliates as
determined by the Board of Directors.
SECTION 5. REPURCHASE OF MANAGEMENT SHARES
Shares held by a Management Stockholder are subject to repurchase upon the
occurrence of a Management Stockholder Repurchase Event as follows:
5.1 PUT OPTION.
(a) Upon the death or Disability of a Management Employee or the
termination of employment of a Management Employee by the Company or a
Subsidiary of the Company without Cause, such Management Employee (or the estate
or legal representative of such Person) will have the option (the "Put Option")
to require the Company, subject to Section 8 of this Agreement, to purchase all
but not less than all of (i) the Shares held by such Person at a price per Share
equal to the Fair Value of such Shares and (ii) the Vested Options held by such
Person at a price per Option equal to the Fair Value per share subject thereto
less the exercise price of the applicable Vested Option. Such Put Option must be
exercised by written notice to the Company no later than six (6) months from the
date of death or Disability or termination by the Company without Cause
specifying the name of the Management Employee and the number of Shares
(including Shares subject to Vested Options) owned by such Management Employee
(the "Put Option Shares").
(b) Subject to the limitations set forth in Section 8, upon the giving of
notice of exercise of the Put Option pursuant to Section 5.1(a), a purchase and
sale agreement will be deemed to have been created between the Company, as
purchaser, and the owners of Put Option Shares, as sellers, providing for the
purchase and sale of the Put Option Shares upon the terms determined under
Section 5.1(a). Subject to the provisions of Section 8, such purchase and sale
will be consummated on a date determined by the Company not later than the 45th
day following the giving of notice of exercise of the Put Option pursuant to
Section 5.1(a).
5.2 CALL OPTION. Subject to the limitations set forth in Section 8, upon
the termination of a Management Employee for any reason, the Company will have
the option (the "Call Option") exercisable at any time within six (6) months
from the date of such termination, by delivering written notice to the subject
Management Employee and his or her respective Management Transferees (or the
estate or legal representative of such
8
<PAGE> 9
Persons) to require such Persons to sell all of (i) the Shares owned by such
Persons (the "Call Option Shares") at a price per share equal to the Fair Value
of such Shares and (ii) the Vested Options held by such Persons at a price per
Option equal to the Fair Value per share less the exercise price of the
applicable Vested Option.
5.3 CONSUMMATION OF PURCHASE PURSUANT TO CALL OPTION. Subject to the
limitations set forth in Section 8, upon the giving of notice of exercise of the
Call Option pursuant to Section 5.2, a purchase and sale agreement will be
deemed to have been created between the Company, as purchaser, and the owners of
the Call Option Shares, as sellers, providing for the purchase and sale of the
Call Option Shares upon the terms determined under Section 5.2. Subject to the
provisions of Section 8, such purchase and sale will be consummated on a date
determined by the Company not later than the 45th day following the giving of
notice of exercise of the Call Option pursuant to Section 5.2.
5.4 TRANSFER TERMS. Any Management Stockholder transferring any Shares to
the Company pursuant to Section 5 shall do so by delivering to the Company (i)
the certificate representing the Shares to be Transferred duly endorsed (or
accompanied by an irrevocable stock power duly endorsed) and in proper form for
transfer and customary transfer documentation for any Vested Options and (ii) a
written representation and warranty in accordance with the provisions of Section
5.5. In the case of the exercise of the Call Option by the Company, the Call
Option will be effective notwithstanding the failure of any Management
Stockholder to make the deliveries specified in this Section 5.4. In the event
of such failure, such Management Stockholder shall be deemed to have appointed
any officer of the Company to execute and deliver stock powers and any other
documents deemed reasonably necessary or appropriate by the Company to complete
the Transfer of Shares by such Management Stockholder. In the event of a
Transfer of Shares pursuant to Section 5.1 or Section 5.2, subject to Section 8,
the purchase price must be paid in cash at closing in immediately available
funds.
5.5 ABSENCE OF ADVERSE CLAIMS. Each Management Stockholder Transferring
Shares pursuant to Section 5.1 or 5.2 shall represent and warrant to the Company
that:
(a) the seller is the sole owner of record and beneficially of the
Shares being purchased and sold, has good and valid title to such shares
and the absolute right to Transfer the applicable Shares and Vested Options
to the Company; and, upon Transfer to the Company, the same will be free
and clear of all claims, liens, pledges, restrictions (other than any
restrictions imposed by this Agreement and restrictions under federal and
state securities laws) or encumbrances of any nature whatsoever;
(b) the seller has full power and capacity to perform the terms of
this Section 5 relating to such purchase and sale;
(c) the Transfer of the Shares and Vested Options by the seller as
contemplated by this Section 5 is not subject to the consent or approval of
any governmental authority, court or Person required to be obtained by the
seller (except for such consents or approvals as have been obtained); and
(d) the compliance with and performance of the terms and provisions of
this Section 5 relating to such purchase and sale by or on the part of the
seller will not conflict with or result in the breach of any of the terms,
conditions or provisions of any agreement or instrument to which the seller
is a party or by which the seller may be bound, or give rise to a right of
termination or accelerate the performance of any obligation thereunder, or
constitute a default thereunder or result in the creation or imposition of
any claim, liens, pledges, restrictions or encumbrances of any nature
whatsoever against the Shares being purchased and sold.
SECTION 6. LEGEND ON SHARE CERTIFICATES
All certificates representing Shares now or hereafter held by a Stockholder
will be endorsed with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS EITHER (A) THEY ARE REGISTERED UNDER THE ACT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR (B) THE COMPANY HAS RECEIVED
EVIDENCE SATISFACTORY TO
9
<PAGE> 10
IT (WHICH MAY INCLUDE AN OPINION OF COUNSEL) THAT SUCH PROPOSED DISPOSITION
IS EXEMPT FROM SUCH REGISTRATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF , 1999
TO WHICH THE COMPANY IS A PARTY. A COPY OF SUCH AGREEMENT MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE CORPORATE SECRETARY OF THE COMPANY."
SECTION 7. DURATION OF AGREEMENT
This Agreement will terminate and be of no further force and effect upon
the first to occur of (a) the date that the Kirtland Entities shall cease to own
any Shares, (b) the date of the consummation of a public offering of any equity
securities of the Company or any Subsidiary of the Company and (c) the date upon
which Kirtland, the holders of at least fifty percent (50%) of the Shares then
held by Management Stockholders and the holders of at least fifty percent (50%)
of the Shares then held by Other Stockholders agree in writing to terminate this
Agreement.
SECTION 8. COMPANY'S INABILITY TO SATISFY OBLIGATIONS
(a) The Company shall not be required to repurchase any Shares or Vested
Options under Section 5 if, in the reasonable good faith judgment of the Board
of Directors such performance would violate (i) the provisions of the Company's
Articles of Organization, the Company's By-Laws, any Credit Agreement or (ii)
any statute, common law doctrine, rule, regulation, decree or order ("Legal
Restrictions") to which the Company is subject or if the Company is unable to
lawfully obtain through receipt of a dividend from any Subsidiary funds
sufficient to effect such a repurchase. In the event the Company's repurchase is
subject to a Legal Restriction or any restriction imposed by the Articles of
Organization or the By-laws of the Company, the Company will use commercially
reasonable efforts so as to address any such restriction so the Company is then
permitted to make any outstanding repurchases. If the provisions of this Section
8(a) limit the Company's purchase of the Shares and Vested Options, if any, of
more than one Management Stockholder, then, with respect to any Shares or Vested
Options which the Company becomes obligated to purchase simultaneously, the
Company shall purchase such Shares and Vested Options, if any, when permitted,
on a pro rata basis from each such Management Stockholder.
(b) In the event that the Company is not required, pursuant to Section
8(a), to consummate a repurchase of Put Option Shares in the time period set
forth in Section 5.1(b), the Company shall deliver a notice (the "Deferral
Notice") to the applicable Management Stockholder, and at such Management
Stockholder's request, representatives of the Company will meet to discuss the
basis for such deferral pursuant to Section 8(a). Such purchase and sale of the
Put Option Shares shall be at the price effective as of the last day of the
calendar quarter immediately preceding the date on which such purchase and sale
may be consummated pursuant to Section 8(a). Subject to the provisions of
Section 8(a), such purchase and sale will be consummated on a date determined by
the Company not later than the 45th day following the date on which such
purchase and sale may be consummated pursuant to Section 8(a).
(c) In the event that the Company is not required, pursuant to Section
8(a), to consummate such repurchase of Call Option Shares in the time period set
forth in Section 5.3, the Company shall deliver a Deferral Notice to the
applicable Management Stockholder, and at such Management Stockholder's request,
representatives of the Company will meet to discuss the basis for such deferral
pursuant to Section 8(a). In such event, the applicable Management Stockholder
shall have the right to elect (i) to receive the repurchase price in the form of
a Qualified Note subject to the provisions of Section 8(a) or (ii) to cause the
Company to repurchase the Call Option Shares in the same manner and using the
same pricing methodology as set forth in Section 8(b) above. Any such election
must be made by a Management Employee within fifteen (15) days after receipt of
the Deferral Notice. If the Management Employee elects to receive a Qualified
Note, and the Company is then permitted under the terms of its Credit Agreements
to issue a Qualified Note, the Company will promptly pay the repurchase price by
issuing a
10
<PAGE> 11
Qualified Note in the applicable amount. If the Company is not thus permitted to
issue a Qualified Note, the Company will defer the repurchase as contemplated by
clause (ii) above.
SECTION 9. PREEMPTIVE RIGHTS
(a) Subject to the provisions of this Section 9, in the event that any
Kirtland Entity or any Affiliate of any Kirtland Entity purchases Shares from
the Company subsequent to the date of this Agreement, each Management
Stockholder (other than a Management Employee who ceases to be an employee of
the Company or any Subsidiary of the Company for any reason and his or her
respective Management Transferees) and each Other Stockholder will have the
right to purchase from the Company, during a reasonable time to be fixed by the
Board of Directors (which will not be less than ten (10) days), such number of
Shares equal to (i) that number of such Shares proposed to be issued by the
Company multiplied by (ii) a fraction, the numerator of which equals the
aggregate number of Shares (other than Restricted Shares, as applicable) owned
by such Stockholder and the denominator of which equals the aggregate number of
Shares (other than Restricted Shares) issued and outstanding at such time, at a
price or prices and on other terms not less favorable to such Stockholder than
the price or prices and other terms at which such Shares are proposed to be
offered for sale to any Kirtland Entity or any Affiliate of any Kirtland Entity.
(b) The Company will provide written notice to each Stockholder entitled to
purchase Shares in accordance with this Section 9 setting forth the time within,
and the price and other terms and conditions upon which, such Stockholder may
purchase such Shares. Any Shares which the Company proposes to issue or sell
which are not purchased by Stockholders pursuant to this Section 9 may be issued
or sold by the Company to any Kirtland Entity or any Affiliate of any Kirtland
Entity within ninety (90) days after the expiration of the period during which
such Stockholders shall have the preemptive right to purchase, but the Company
shall not sell or issue any such Shares after such ninety day (90-day) period
without renewed compliance with this Section 9.
SECTION 10. REPORTS
The Company shall provide to (i) each Other Stockholder quarterly and
annual financial reports (without exhibits), as soon as practicable after the
completion of such reports, and (ii) in the event that the Company files
quarterly and annual reports with the Securities and Exchange Commission, each
Other Stockholder and to each Management Stockholder following the termination
of his employment with the Company so long as such Person continues to be a
Stockholder, copies of such reports (without exhibits) to such Stockholders as
soon as practicable after the date of such filing.
SECTION 11. BOARD OF DIRECTORS.
The Kirtland Entities shall vote their Shares in such a way so as to elect
the Chief Executive Officer of the Company and one other person designated by
the Chief Executive Officer of the Company to the Board of Directors in addition
to such other directors that the Kirtland Entities may elect, in their sole
discretion, from time to time.
SECTION 12. CONFIDENTIALITY
Each of the Kirtland Entities, each Management Stockholder and each Other
Stockholder agrees that all trade secrets, customer lists and other confidential
business information are the exclusive property of the Company, and each of the
Kirtland Entities, each Management Stockholder and each Other Stockholder shall
not at any time directly or indirectly reveal or cause to be revealed to any
Person such trade secrets, customer lists and other confidential business
information obtained as a result of its or his or her employment or relationship
with the Company; provided that the foregoing shall not (i) prevent any
Management Stockholder or Other Stockholder from disclosing any of the foregoing
during his or her employment with the Company or any of its Subsidiaries as part
of his or her work on behalf of the Company, (ii) apply to any of the foregoing
once it is publicly available through no fault of the applicable Kirtland
Entity, Management Stockholder or any Other Stockholder, (iii) prevent any of
the Kirtland Entities, any Management Stockholder or any Other Stockholder from
engaging in any legally required or compelled disclosure, provided such Kirtland
Entity, Management
11
<PAGE> 12
Stockholder or Other Stockholder gives the Company prior notice and a reasonable
opportunity to minimize or contest the applicability of such required or
compelled disclosure or (iv) prevent any of the Kirtland Entities, any
Management Stockholder or Other Stockholder from disclosing any of the foregoing
as is appropriate and customary in the ordinary course of, and in furtherance
of, the business of the Company or its Subsidiaries. Upon termination of his or
her employment, each Management Stockholder agrees to return to the
Company and the Subsidiaries of the Company any and all materials and
information in tangible or electronic form concerning the business and affairs
of the Company or any of its Subsidiaries except that any such Management
Stockholder may, so long as such Person remains a Stockholder, retain financial
information pertaining to the Company solely for his or her personal use and
shall return all such information promptly following the date that such Person
ceases to be a Stockholder.
SECTION 13. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder severally represents and warrants to the Company and to
each other Stockholder as follows as may be applicable to such Stockholder:
(a) If a corporation, the Stockholder is a corporation duly organized,
validly existing, and in good standing under the laws of the state of its
incorporation and has requisite corporate power and authority to enter into
this Agreement and to undertake the transactions contemplated in this
Agreement;
(b) If a partnership, the Stockholder is a partnership duly organized,
validly existing, and in good standing under the laws of the state of its
formation and has requisite partnership power and authority to enter into
this Agreement and to undertake the transactions contemplated in this
Agreement;
(c) If a limited liability company, the Stockholder is a limited
liability company duly organized, validly existing, and in good standing
under the laws of the state of its formation and has the requisite limited
liability company power and authority to enter into this Agreement and to
undertake the transactions contemplated in this Agreement;
(d) If an individual, the Stockholder is legally competent to enter
into this Agreement and to undertake the transactions contemplated in this
Agreement;
(e) The address of the Stockholder set forth on the signature page is
true, correct and complete; and
(f) This Agreement has been duly and validly authorized, executed, and
delivered by the Stockholder and constitutes the legal, valid, and binding
obligation of the Stockholder, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, fraudulent conveyance and other similar laws and principles of
equity affecting creditors' rights and remedies generally.
SECTION 14. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Stockholder as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Massachusetts and
has the requisite corporate power and authority to enter into this
Agreement and to undertake the transactions contemplated in this Agreement;
and
(b) This Agreement has been duly and validly authorized, as
applicable, executed, and delivered by the Company and constitutes the
legal, valid, and binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, fraudulent conveyance and other
similar laws and principles of equity affecting creditors' rights and
remedies generally.
SECTION 15. GOVERNING LAW; CONSTRUCTION
This Agreement is governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its conflict of law rules.
The headings or titles to Sections in this Agreement are
12
<PAGE> 13
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the heading or title of any Section. Unless otherwise
specifically stated, references in this Agreement to Sections or Schedules refer
to Sections and Schedules of this Agreement.
SECTION 16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS
Each Stockholder irrevocably consents to the non-exclusive jurisdiction of
the state and federal courts located in the Commonwealth of Massachusetts,
agrees that any action, suit or proceeding by or among the Stockholders (or any
of them) or the Company and any Stockholder may be brought in any court in the
Commonwealth of Massachusetts, and waives any objection which the Stockholder
may now or hereafter have to the choice of forum whether personal jurisdiction,
venue, FORUM NON CONVENIENS or on any other ground. Each Stockholder hereby
irrevocably designates, appoints and empowers the Secretary of the Commonwealth
of Massachusetts to receive for and on behalf of such Stockholder service of
process in the Commonwealth of Massachusetts, and each Stockholder irrevocably
consents to the service of process outside of the territorial jurisdiction of
said courts by mailing copies thereof by registered or certified United States
mail, postage prepaid, to such Stockholder's last known address as shown in the
records of the Company with the same effect as if the Stockholder were a
resident of the Commonwealth of Massachusetts and had been lawfully served in
such Commonwealth. Nothing in this Agreement will affect the right to service of
process in any other manner permitted by law. Each Stockholder further agrees
that final judgment against it or him in any such action or proceeding will be
conclusive and may be enforced in any other jurisdiction within or outside the
Commonwealth of Massachusetts by suit on the judgment, a certified or
exemplified copy of which will be conclusive evidence of the fact and the amount
of such judgment.
SECTION 17. BENEFITS OF AGREEMENT; ASSIGNMENT
This Agreement is binding upon and inures to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors,
administrators, and legal representatives. Except as otherwise provided in this
Agreement, neither the Company nor any Stockholder may assign or delegate any of
its rights or obligations under this Agreement without the prior written consent
of the Company.
13
<PAGE> 14
SECTION 18. NOTICES
All notices, requests, consents, and other communications must be in
writing, delivered in person or duly sent by recognized overnight courier or
sent by facsimile or by first-class registered or certified mail, postage
prepaid, addressed as follows:
<TABLE>
<S> <C>
(a) If to the Company: Instron Corporation
100 Royall Street
Canton, Massachusetts 02021
Facsimile:
Attn: Chief Executive Officer
and
Kirtland Capital Partners III L.P.
2550 SOM Center Road, Suite 105
Willoughby Hills, Ohio 44094
Facsimile: 440/585-9699
Attn: Thomas N. Littman
with copies to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Facsimile: 216/579-0212
Attn: Charles W. Hardin, Jr.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Facsimile: 617/951-8736
Attn: John R. Utzschneider
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, Massachusetts 02108
Facsimile: 617/573-4822
Attn: Thomas J. Dougherty
</TABLE>
(a) If to the Stockholders, at the addresses shown below their names
on the signature page attached to this Agreement, or to such other address
which has been designated by notice in writing by such party to the others
in accordance with the provisions of this Section 18.
Each party will at all times have an address to which any communications may be
sent. All such notices, requests, consents and other communications will be
deemed to have been received (i) in the case of personal delivery or facsimile,
on the date of such delivery, (ii) in the case of delivery by recognized
overnight courier service, on the first business day following delivery of such
notice to the overnight courier, and (iii) in the case of mailing, on the third
(3rd) business day following such mailing.
SECTION 19. MODIFICATION AND WAIVER
Except as otherwise provided in this Agreement, neither this Agreement, nor
any provision of this Agreement, may be modified, changed, waived, discharged or
terminated except by an instrument in writing signed by the Company, Kirtland,
the holders of at least fifty percent (50%) of the Shares held by Management
Stockholders and the holders of at least fifty percent (50%) of the Shares held
by the Other Stockholders.
14
<PAGE> 15
SECTION 20. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties with
respect to matters or understandings involving the ownership, control or
disposition of the Shares, and supersedes in its entirety any and all prior
agreements or understandings, oral or written, among any or all of the
undersigned relating to such ownership, control or disposition.
SECTION 21. SEVERABILITY
If any provision of this Agreement, or the application of such provision to
any Person or circumstance, is adjudged or ruled to be invalid or unenforceable,
the remaining provisions of this Agreement and the application of such
provisions to other Persons or circumstances will not be affected by such
invalidity or unenforceability.
SECTION 22. REMEDIES
The parties recognize and agree that if the Company or any of the
Stockholders breaches its or his obligations under this Agreement, the other
parties may not have an adequate remedy at law. Such breach will cause such
other parties irreparable harm for which there may be no adequate remedy at law.
If any party institutes an action or proceeding to enforce the provisions of
this Agreement, such party will be entitled to the remedies of specific
performance and injunctive relief, and any such Person against whom such action
or proceeding is brought hereby waives any claim or defense that there is an
adequate remedy at law. The right to obtain an injunction hereunder will not be
considered a waiver of any right on the part of the non-breaching parties to
recover damages and to assert any other claims for remedies which such parties
may have at law or in equity. The non-prevailing party in any such action agrees
to bear any expenses incurred by the prevailing party, including reasonable
attorneys' fees, in enforcing its rights under this Agreement.
SECTION 23 GENDER
Whenever the context requires, pronouns of any gender will be deemed to
include and designate the feminine, masculine or neuter gender.
SECTION 24. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
will be deemed to be an original, but all of which taken together will
constitute one and the same instrument.
15
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
INSTRON CORPORATION
By:
--------------------------------------
Name:
Title:
Address:
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd., its
general partner
By:
--------------------------------------
Name:
Title:
Address:
2550 SOM Center Road
Suite 105
Willoughby Hills, Ohio 44094
KIRTLAND CAPITAL COMPANY III LLC
By:
--------------------------------------
Name:
Title:
Address:
2550 SOM Center Road
Suite 105
Willoughby Hills, Ohio 44094
[OTHER KIRTLAND ENTITIES]
--------------------------------------
James M. McConnell
Address:
[INSERT ADDRESS]
--------------------------------------
Joseph E. Amaral
Address:
[INSERT ADDRESS]
16
<PAGE> 17
--------------------------------------
Kenneth L. Andersen
Address:
[INSERT ADDRESS]
--------------------------------------
John R. Barrett
Address:
[INSERT ADDRESS]
--------------------------------------
Jonathan L. Burr
Address:
[INSERT ADDRESS]
--------------------------------------
Yahya Gharagozlou
Address:
[INSERT ADDRESS]
--------------------------------------
Arthur D. Hindman
Address:
[INSERT ADDRESS]
--------------------------------------
William Milliken
Address:
[INSERT ADDRESS]
--------------------------------------
Linton A. Moulding
Address:
[INSERT ADDRESS]
--------------------------------------
Norman Smith
Address:
[INSERT ADDRESS]
--------------------------------------
George S. Burr
Address:
[INSERT ADDRESS]
17
<PAGE> 18
--------------------------------------
Helen L. Burr
Address:
[INSERT ADDRESS]
--------------------------------------
Harold Hindman
Address:
[INSERT ADDRESS]
THE HAROLD HINDMAN TRUST -- 4/11/69
By:
--------------------------------------
Title:
By:
--------------------------------------
Title:
[INSERT ADDRESS]
18
<PAGE> 1
EXHIBIT (c)(6)
AMENDMENT TO RESTRICTED STOCK
AWARD AGREEMENT UNDER THE
INSTRON CORPORATION 1992 STOCK INCENTIVE PLAN
<TABLE>
<S> <C>
Name of Grantee:
Number of Shares of Restricted Stock:
Purchase Price Per Share: $0.00
Grant Date: , 1997
Final Acceptance Date: , 1997
</TABLE>
WHEREAS, the respective general partner and Boards of Directors of Kirtland
Capital Partners III, L.P., an Ohio limited partnership, ISN Acquisition
Corporation, a Massachusetts corporation ("MergerCo."), and Instron Corporation
(the "Company") have approved the merger of MergerCo. into the Company in
accordance with the Massachusetts Business Corporation Law (the "Merger"); and
WHEREAS, the Company wishes to amend the Restricted Stock Award ("Award")
described above pursuant to Section 13 of the Instron Corporation 1992 Stock
Incentive Plan, as amended through the date hereof (the "Plan");
NOW, THEREFORE, pursuant to Section 13 of the Plan, the Company hereby
amends the Award to the Grantee named above as follows:
1. Effective upon the consummation of the merger of ISN Acquisition
Corporation into the Company, the number of shares of Restricted Stock covered
by the Award shall be [2/10 of the original award].
2. Paragraph 2 (c) of the Award is amended to read as follows:
(c) If the Grantee's employment with the Company and/or its
Subsidiaries is voluntarily terminated other than for Good Reason or
involuntarily terminated by the Company for Cause prior to vesting of the
shares of Restricted Stock granted herein, such unvested shares of
Restricted Stock shall be forfeited and returned to the Company unless the
Committee, in its sole discretion, determines to waive such forfeiture. The
Committee must exercise such right of waiver of forfeiture by written
notice to the Grantee or the Grantee's legal representative not later than
60 days following such termination of employment.
For purposes of this Award, "Cause" shall mean:
(i) a willful act of dishonesty by the Executive with respect to any
matter involving the Company or any Subsidiary or Affiliate of the Company,
or
(ii) conviction of the Executive of a crime involving moral turpitude,
or
(iii) the gross or willful failure by the Executive to substantially
perform the Executive's duties with the Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive without reasonable belief that the Executive's act, or
failure to act, was in the best interests of the Company and its Subsidiaries.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the
1
<PAGE> 2
affirmative vote of not less than two-thirds of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given a
reasonable opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i), (ii) or (iii) above, and specifying
the particulars thereof in detail.
For purposes of this Agreement "Good Reason" shall mean the occurrence of
any of the following events:
(i) failure to maintain the Executive in an executive position with
duties and responsibilities in the aggregate normally associated with an
executive at the Company at a vice president level or higher, the
Executive's title is reduced to below a vice president or, except for the
Treasurer of the Company, the Executive is no longer a member of the
Executive Committee of the Company; or
(ii) a reduction in the Executive's annual base salary as in effect on
the date hereof or as the same may be increased from time to time except
for across-the-board salary reductions similarly affecting all or
substantially all management employees; or
(iii) the relocation of the Company's offices at which the Executive
is principally employed immediately prior to the date of a Change in
Control to a location more than fifty (50) miles from such offices, or the
requirement by the Company for the Executive to be based anywhere other
than the Company's offices at such location, except for required travel on
the Company's business to an extent substantially consistent with the
Executive's business travel obligations immediately prior to the Change in
Control; or
(iv) the failure by the Company to pay to the Executive any portion of
his compensation or to pay to the Executive any portion of an installment
of deferred compensation under any deferred compensation program of the
Company within the later of fifteen (15) days of the date such compensation
is due or five (5) days after notice is actually received by the Company
from the Executive of such failure, without prior written consent of the
Executive.
3. Paragraph 3 of the Award is amended to read as follows:
3. VESTING OF RESTRICTED STOCK. The restrictions and conditions in
Paragraph 2 of this Agreement shall lapse on May 14, 2004 (the "Vesting
Date"); provided, however, that the vesting of such shares of Stock shall
accelerate automatically on the date (if any) on which the Company receives
a report from its independent auditors regarding the audit of the Company's
financial statements, which financial statements reflect that the Company's
EBITDA (as defined below) for any four consecutive quarters was at least
$26,900,000. For purposes of this Agreement, "EBITDA" means the Company's
consolidated net income as reflected in its consolidated financial
statements for the relevant period, excluding any extraordinary gains or
losses, and increased by the amount reflected in such financial statements
as expenses incurred for interest, taxes, depreciation, amortization of any
intangible assets and amortization of financing or related fees. Subsequent
to such Vesting Date or acceleration (as the case may be), the shares of
Stock on which all restrictions and conditions have lapsed shall no longer
be deemed Restricted Stock. The Committee also may at any time, in its
discretion, accelerate the vesting schedule specified in this Paragraph 3.
In the event of a Change of Control of the Company as defined in Section 15
of the Plan, any restrictions and conditions on shares of Stock subject to
this Award shall be deemed waived by the Committee, and such shares shall
automatically become fully vested; provided, however, that in the event of
a Change of Control of the Company as a result of the approval by
shareholders of the Company of the merger of ISN Acquisition Corporation
into the Company, any restrictions and conditions on shares of Stock
subject to this Award shall be deemed waived by the Committee only as to [
( 1) ] shares of Stock, and the remaining [ (2) ] shares of Stock
subject to this Award shall be subject to the preceding sentences of this
Paragraph 3.
2
<PAGE> 3
4. A new paragraph 9 is added to the Award to read as follows:
9. This Award is subject to the terms and conditions of the
Stockholders Agreement (as defined in the Plan).
INSTRON CORPORATION
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
[NOTE:
<TABLE>
<CAPTION>
NAME (1) (2)
---- ------ ------
<S> <C> <C>
McConnell................................................... 38,000 12,000
Andersen.................................................... 23,665 1,335
Barrett..................................................... 22,711 2,289
Burr........................................................ 23,355 1,645
Gharagozou.................................................. 19,690 5,310
Hindman..................................................... 22,239 2,761
</TABLE>
]
The foregoing Amendment to Restricted Stock Award Agreement is hereby
accepted and the terms and conditions thereof are hereby agreed to by the
undersigned as of , 1999.
---------------------------------------------
Grantee:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
3
<PAGE> 1
EXHIBIT (c)(7)
INSTRON CORPORATION
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1999 Stock Option Plan is to attract and
retain officers and other key employees for Instron Corporation, a Massachusetts
corporation, and its Subsidiaries and to provide to such persons incentives and
rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Affiliate" means with respect to any Person, any other Person (other
than the Company or any Subsidiary of the Company) that directly or
indirectly controls, is controlled by or is under common control with such
Person.
"Board" means the Board of Directors of the Company and, to the extent
of any delegation by the Board to a committee (or subcommittee thereof)
pursuant to Section 11 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning provided in Section 7 of
this Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Common Shares" means the Common Shares, par value $1.00 per share, of
the Company or any security into which such Common Shares may be changed by
reason of any transaction or event of the type referred to in Section 6 of
this Plan.
"Company" means Instron Corporation, a Massachusetts corporation.
"Date of Grant" means the date specified by the Board on which a grant
of Option Rights shall become effective (which date shall not be earlier
than the date on which the Board takes action with respect thereto).
"Director" means a member of the Board of Directors of the Company.
"Immediate Family" has the meaning ascribed thereto in Rule 16a-1(e)
under the Exchange Act (or any successor rule to the same effect) as in
effect from time to time.
"Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Market Value per Share" means, as of any particular date, the fair
market value of the Common Shares as determined in good faith by the Board.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 of this Plan.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time an officer or other key
employee of the Company or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the
Date of Grant.
"Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated association or other entity.
"Plan" means this Instron Corporation 1999 Stock Option Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(g) of this Plan.
1
<PAGE> 2
"Spread" means the excess of the Market Value per Share on the date
when Option Rights are surrendered in payment of the Option Price of other
Option Rights, over the Option Price provided for in the related Option
Right.
"Stockholders Agreement" means the Stockholders Agreement dated
, 1999 by and between the Company and all the
stockholders of the Company, as amended from time to time.
"Subsidiary" means a corporation, company or other entity (i) more
than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority)
are, or (ii) which does not have outstanding shares or securities (as may
be the case in a partnership, joint venture or unincorporated association),
but more than 50 percent of whose ownership interest representing the right
generally to make decisions for such other entity is, now or hereafter,
owned or controlled, directly or indirectly, by the Company except that for
purposes of determining whether any person may be a Participant for
purposes of any grant of Incentive Stock Options, "Subsidiary" means any
corporation with respect to which at the time of the grant in question the
Company owns or controls, directly or indirectly, more than 50 percent of
the total combined voting power represented by all classes of stock issued
by such corporation.
"Voting Power" means at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided
in Section 3(b) and Section 6 of this Plan, the number of Common Shares that may
be issued or transferred upon the exercise of Option Rights shall not exceed in
the aggregate Common Shares [insert number computed in accordance with
Section 1 of the Management Rollover Letter], plus any shares described in
Section 3(b). Such shares may be shares of original issuance or treasury shares
or a combination of the foregoing.
(b) The number of shares available in Section 3(a) above shall be adjusted
to account for shares relating to awards that expire, are forfeited or are
transferred, surrendered or relinquished upon the payment of any Option Price by
the transfer to the Company of Common Shares or upon satisfaction of any
withholding amount. Upon payment in cash of the benefit provided by any award
granted under this Plan, any shares that were covered by that award shall again
be available for issue or transfer hereunder.
(c) Notwithstanding anything in this Section 3, or elsewhere in this Plan,
to the contrary and subject to adjustment as provided in Section 6 of this Plan,
the aggregate number of Common Shares actually issued or transferred by the
Company upon the exercise of Incentive Stock Options shall not exceed
Common Shares [insert number computed in accordance with Section
1 of the Management Rollover Letter].
4. OPTION RIGHTS. The Board may, from time to time and upon such terms and
conditions as it may determine, authorize the granting to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements contained in the
following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this Plan.
(b) Each grant shall specify an Option Price per share, which may be
less than the Market Value per Share on the Date of Grant, except that
Incentive Stock Options shall be granted at the Market Value per Share on
the Date of Grant.
(c) Each grant shall specify whether the Option Price shall be payable
(i) in cash or by check acceptable to the Company, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the Optionee
for at least 6 months (or other consideration authorized pursuant to
Section 4(d)) having a value at the time of exercise equal to the total
Option Price, or (iii) by a combination of such methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any Option Right (other than an Incentive
Stock Option) may also be made in whole or in part in the form of
2
<PAGE> 3
Common Shares that are forfeitable or subject to restrictions on transfer
(based, in each case, on the Market Value per Share on the date of
exercise) or other Option Rights (based on the Spread on the date of
exercise). Unless otherwise determined by the Board at or after the Date of
Grant, whenever any Option Price is paid in whole or in part by means of
any of the forms of consideration specified in this Section 4(d), the
Common Shares received upon the exercise of the Option Rights shall be
subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to
the extent, determined with respect to the consideration surrendered, of
the Spread of any unexercisable portion of Option Rights.
(e) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments, with or without interest, upon
terms determined by the Board.
(f) Any grant may, at or after the Date of Grant, provide for the
automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using Common Shares or other
consideration specified in Section 4(d). Reload Option Rights shall cover
up to the number of Common Shares or Option Rights surrendered to the
Company upon any such exercise in payment of the Option Price or to meet
any withholding obligations. Reload Options may not have an Option Price
that is less than the applicable Market Value per Share at the time of
exercise and shall be on such other terms as may be specified by the
Directors, which may be the same as or different from those of the original
Option Rights.
(g) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain
unexercised.
(h) Each grant shall specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary that is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights
in the event of a Change in Control.
(i) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended
to qualify under particular provisions of the Code, (ii) options that are
not intended so to qualify, or (iii) combinations of the foregoing.
(j) No Option Right shall be exercisable more than 10 years from the
Date of Grant.
(k) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer and delivered to the
Optionee and containing such terms and provisions, consistent with this
Plan, as the Board may approve.
(l) Each grant of Option Rights shall be subject to the Stockholders
Agreement so long as such Stockholders Agreement remains in effect. Prior
to receiving any Common Shares, the Optionee shall have executed such
Stockholders Agreement as a party thereto, so long as such Stockholders
Agreement remains in effect.
5. TRANSFERABILITY. (a) Except as otherwise determined by the Board, no
Option Right or other derivative security granted under the Plan shall be
transferable by a Participant other than by will or the laws of descent and
distribution. Except as otherwise determined by the Board, Option Rights shall
be exercisable during the Optionee's lifetime only by him or her or by his or
her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of the
Common Shares that are to be issued or transferred by the Company upon the
exercise of Option Rights shall be subject to further restrictions on transfer.
(c) Notwithstanding the provisions of Section 5(a), Option Rights (other
than Incentive Stock Options) shall be transferable by a Participant without
payment of consideration therefor by the transferee, to any one or more members
of the Participant's Immediate Family (or to one or more trusts established
solely for the benefit of such Participant and/or one or more members of the
Participant's Immediate Family or to one or more partnerships in which the only
partners are such Participant and/or members of the Participant's Immediate
Family); provided,
3
<PAGE> 4
however, that (i) no such transfer shall be effective unless reasonable prior
notice thereof is delivered to the Company and such transfer is thereafter
effected in accordance with any terms and conditions that shall have been made
applicable thereto by the Company or the Board and (ii) any such transferee
shall be subject to the same terms and conditions hereunder as the Participant.
6. ADJUSTMENTS. The Board may make or provide for such adjustments in the
numbers of Common Shares covered by outstanding Option Rights granted hereunder,
in the Option Price, and in the kind of shares covered thereby, as the Board, in
its sole reasonable discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants or Optionees that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event, the Board, in its sole reasonable discretion, may provide
in substitution for any or all outstanding Options under this Plan such
alternative consideration as it, in good faith, may determine to be equitable in
the circumstances and may require in connection therewith the surrender of all
awards so replaced. The Board may also make or provide for such adjustments in
the numbers of shares specified in Section 3 of this Plan as the Board in its
sole reasonable discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 6;
provided, however, that any such adjustment to the number specified in Section
3(c) shall be made only if and to the extent that such adjustment would not
cause any Option intended to qualify as an Incentive Stock Option to fail so to
qualify.
7. CHANGE IN CONTROL. For purposes of this Plan, except as may be otherwise
prescribed by the Board in an agreement evidencing a grant made under the Plan,
a "Change in Control" shall mean if at any time any of the following events
shall have occurred:
(a) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders
of Common Shares outstanding immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all
of its assets to any other corporation or other legal person, and less than
a majority of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Common Shares outstanding
immediately prior to such sale or transfer;
(c) If Kirtland Capital Partners III L.P. together with its Affiliates
cease for any reason other than a public offering of the Company's equity
securities to own a majority of the combined voting power of the
outstanding securities of the Company;
(d) If, at any time after any public offering of any of the Company's
equity securities, any "person" (as such term is used in Sections 13(d)(3)
and 14(d)(2) of the Securities Exchange Act of 1934) becomes a "beneficial
owner" (as such term is defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), directly or indirectly, of securities
of the Company representing more than fifty percent (50%) of the combined
voting power of the Company's then outstanding securities; or
(e) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
8. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
4
<PAGE> 5
9. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board with the consent of the
Optionee) may include relinquishment of a portion of such benefit. The Company
and a Participant or such other person may also make arrangements for cash
withholding with respect to the payment of any taxes with respect to which
withholding is not required.
10. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.
11. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the
Board, which may from time to time delegate all or any part of its authority
under this Plan, except the authority to approve grants of options pursuant to
Section 4, to a committee of the Board (or subcommittee thereof) consisting of
not less than two Non-Employee Directors appointed by the Board. A majority of
the committee (or subcommittee) shall constitute a quorum, and the action of the
members of the committee (or subcommittee) present at any meeting at which a
quorum is present, or acts unanimously approved in writing, shall be the acts of
the committee (or subcommittee). To the extent of any such delegation,
references in this Plan to the Board shall be deemed to be references to any
such committee or subcommittee.
(b) The interpretation and construction by the Board of any provision of
this Plan or of any agreement, notification or document evidencing the grant of
Option Rights and any determination by the Board pursuant to any provision of
this Plan or of any such agreement, notification or document shall be final and
conclusive if made in good faith. No member of the Board shall be liable for any
such action or determination made in good faith.
12. AMENDMENTS, ETC. (a) The Board may at any time and from time to time
amend the Plan in whole or in part; provided, however, that any amendment which
must be approved by the shareholders of the Company in order to comply with
applicable law or the rules of the principal national securities exchange upon
which the Common Shares may be traded or quoted, shall not be effective unless
and until such approval has been obtained. Presentation of this Plan or any
amendment hereof for shareholder approval shall not be construed to limit the
Company's authority to offer similar or dissimilar benefits under other plans
without shareholder approval.
(b) The Board also may permit Participants to elect to defer the issuance
of Common Shares under the Plan pursuant to such rules, procedures or programs
as it may establish for purposes of this Plan. The Board also may provide that
deferred issuances and settlements include the payment or crediting of dividend
equivalents or interest on the deferral amounts.
(c) The Board may condition any grant authorized under this Plan on the
surrender or deferral by the Participant of his or her right to receive a cash
bonus or other compensation otherwise payable by the Company or a Subsidiary to
the Participant.
(d) In case of termination of employment by reason of death, disability or
normal or early retirement, or in the case of hardship or other special
circumstances, of a Participant who holds an Option Right not immediately
exercisable in full, or who holds Common Shares subject to any transfer
restriction imposed pursuant to Section 5(b) of this Plan, the Board may, in its
sole discretion, accelerate the time at which such Option Right
5
<PAGE> 6
may be exercised or the time at which such substantial risk of forfeiture or
prohibition or restriction on transfer will lapse or the time when such transfer
restriction will terminate or may waive any other limitation or requirement
under any such award.
(e) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any
Subsidiary, nor shall it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate such Participant's employment or
other service at any time.
(f) To the extent that any provision of this Plan would prevent any Option
Right that was intended to qualify as an Incentive Stock Option from qualifying
as such, that provision shall be null and void with respect to such Option
Right. Such provision, however, shall remain in effect for other Option Rights
and there shall be no further effect on any provision of this Plan.
13. TERMINATION. No grant shall be made under this Plan more than 10 years
after the date on which this Plan is first approved by the shareholders of the
Company, but all grants made on or prior to such date shall continue in effect
thereafter subject to the terms thereof and of this Plan.
6
<PAGE> 1
EXHIBIT (c)(8)
INSTRON CORPORATION
1999 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
WHEREAS, (the "Optionee") is an employee of Instron Corporation (the
"Company") or a Subsidiary;
WHEREAS, the grant of an incentive stock option to the Optionee has been
duly authorized by a resolution of the Compensation Committee (the "Committee")
of the Board of Directors (the "Board") of the Company duly adopted on
[ ] (the "Date of Grant"); and
WHEREAS, the option granted hereunder is intended to be an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986 (the "Code").
NOW, THEREFORE, pursuant to the Company's 1999 Stock Option Plan (the
"Plan"), the Company hereby grants to the Optionee an option (the "Option")
pursuant to this Incentive Stock Option Agreement (the "Agreement") to purchase
shares of the Company's common stock, par value $1.00 per share ("Stock"), at
the price of Dollars ($ ) per share (the "Option Price"), and agrees to cause
certificates for any shares of Stock purchased hereunder to be delivered to the
Optionee upon full payment of the Option Price, subject to the applicable terms
and conditions of the Plan and this Agreement.
1. EXERCISE OF OPTION. (a) Unless and until terminated as hereinafter
provided, the Option will become exercisable to the extent of one-fifth of the
Stock hereinabove specified on each of the first five anniversaries of the Date
of Grant for so long as the Optionee remains in the continuous employ of the
Company or a Subsidiary. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company or a Subsidiary will not be deemed
to have been interrupted, and the Optionee will not be deemed to have ceased to
be an employee of the Company or a Subsidiary, by reason of (i) the transfer of
his employment among the Company and its Subsidiaries or (ii) an approved leave
of absence. To the extent that the Option will have so become exercisable, it
may be exercised in whole or in part from time to time.
(b) Notwithstanding the provisions of Subsection (a) of this Section, the
Option will become immediately exercisable in full upon a change in control of
the Company. For purposes of this Agreement, the term "change in control" will
have the meaning given such term under the Plan as in effect on the Date of
Grant.
2. PAYMENT OF OPTION PRICE. The Option Price is payable (a) in cash or by
certified or cashier's check or other cash equivalent acceptable to the Company
payable to the order of the Company, (b) by surrender of Stock (including by
attestation) owned by the Optionee for (i) more than one year prior to the date
of exercise and for more than 2 years from the date on which the option was
granted, if they were originally acquired by the Optionee pursuant to the
exercise of an incentive stock option, or (ii) more than 6 months prior to the
date of exercise, if they were originally acquired by the Optionee other than
pursuant to the exercise of an incentive stock option, (c) by surrender of
exercisable Option Rights (based on the Spread on the date of exercise) or (d)
by a combination of surrender of Stock, and exercisable Option Rights and cash
or certified or cashier's check; provided, however, that it shall be a condition
to the surrender of Stock and/or Option Rights that the Optionee consent in
writing to the determination by the Board pursuant to the Plan of Market Value
per Share and the Spread.
3. TERM OF OPTION. The Option will terminate on the earliest of the
following dates:
(a) Three months after the Optionee ceases to be an employee of the
Company or a Subsidiary for any reason other than death or disability;
(b) Six months after the Optionee ceases to be an employee of the
Company or a Subsidiary as a result of his death or disability; or
(c) Ten years from the Date of Grant.
1
<PAGE> 2
4. TRANSFERABILITY. The Option may not be transferred except by will or the
laws of descent and distribution and may not be exercised during the lifetime of
the Optionee except by the Optionee or the Optionee's guardian or legal
representative acting on behalf of the Optionee in a fiduciary capacity under
state law and court supervision.
5. COMPLIANCE WITH LAW. The Company will make reasonable efforts to comply
with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Company will not be
obligated to issue any Stock pursuant to this Agreement if the issuance thereof
would result in a violation of any such law.
6. ADJUSTMENTS. The Board may make any adjustments in the Option Price and
in the number and kind of shares of stock or other securities covered by this
Agreement in accordance with Section 6 of the Plan.
7. WITHHOLDING. To the extent that the Company is required to withhold
federal, state, local or foreign taxes in connection with Stock obtained upon
the exercise of the Option, and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the receipt of such
Stock that the Optionee make arrangements satisfactory to the Company for
payment of the balance of such taxes required to be withheld. If requested by
the Optionee, the Board may accept relinquishment of a portion of such Stock.
8. EMPLOYMENT RIGHTS. The Plan and this Agreement will not confer upon the
Optionee any right with respect to the continuance of employment or other
service with the Company or any Subsidiary and will not interfere in any way
with any right that the Company or any Subsidiary would otherwise have to
terminate any employment or other service of the Optionee at any time.
9. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement will not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary, unless provided otherwise in any such plan.
10. NOTICES. Any notice necessary under this Agreement will be addressed to
the Company or the Committee at the principal executive office of the Company
and to the Optionee at the address appearing in the personnel records of the
Company for such Optionee, or to either party at such other address as either
party may designate in writing to the other. Any such notice will be deemed
effective upon receipt thereof by the addressee.
11. AGREEMENT SUBJECT TO THE PLAN; DEFINITIONS. The Option Rights granted
under this Agreement and all of the terms and conditions hereof are subject to
all of the terms and conditions of the Plan. In the event of any inconsistency
between this Agreement and the Plan, the terms of the Plan will govern. All
terms used herein with initial capital letters have the meanings assigned to
them in the Plan or in this Agreement.
12. AMENDMENTS. Any amendment to the Plan will be deemed to be an amendment
to this Agreement to the extent that the amendment is applicable hereto;
provided, however, that no amendment will adversely affect the rights of the
Optionee under this Agreement without the Optionee's consent.
13. SEVERABILITY. In the event that one or more of the provisions of this
Agreement is invalidated for any reason by a court of competent jurisdiction,
any provision so invalidated will be deemed to be separable from the other
provisions hereof, and the remaining provisions hereof will continue to be valid
and fully enforceable.
14. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the Commonwealth of Massachusetts.
2
<PAGE> 3
This Agreement is executed as of the day of ,
1999.
INSTRON CORPORATION
By:
------------------------------------
Title:
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Incentive Stock Option Agreement and a copy of the Stockholders
Agreement and accepts the Option subject to the applicable terms and conditions
of the Plan and a copy of the Stockholders Agreement and the terms and
conditions hereinabove set forth. The Optionee acknowledges that it is a
condition to the issuance of Stock upon exercise of the Option in whole or in
part that the Optionee shall have executed the Stockholders Agreement, if the
Stockholders Agreement is then in effect.
--------------------------------------
Optionee
3
<PAGE> 1
EXHIBIT (c)(9)
INSTRON CORPORATION
1999 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
WHEREAS, (the "Optionee") is an employee of Instron
Corporation (the "Company") or a Subsidiary;
WHEREAS, the grant of a stock option to the Optionee has been duly
authorized by a resolution of the Compensation Committee (the "Committee") of
the Board of Directors (the "Board") of the Company duly adopted on
[ ] (the "Date of Grant"); and
WHEREAS, the option granted hereunder is intended to be a nonqualified
stock option and will not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986 (the
"Code").
NOW, THEREFORE, pursuant to the Company's 1999 Stock Option Plan (the
"Plan"), the Company hereby grants to the Optionee an option (the "Option")
pursuant to this Nonqualified Stock Option Agreement (the "Agreement") to
purchase shares of the Company's common stock, par value $1.00
per share ("Stock"), at the price of per share (the "Option
Price"), and agrees to cause certificates for any shares of Stock purchased
hereunder to be delivered to the Optionee upon full payment of the Option Price,
subject to the applicable terms and conditions of the Plan and this Agreement.
1. EXERCISE OF OPTION. (a) Unless and until terminated as hereinafter
provided, the Option will become exercisable to the extent of one-fifth of the
Stock hereinabove specified on each of the first five anniversaries of the Date
of Grant for so long as the Optionee remains in the continuous employ of the
Company or a Subsidiary. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company or a Subsidiary will not be deemed
to have been interrupted, and the Optionee will not be deemed to have ceased to
be an employee of the Company or a Subsidiary, by reason of (A) the transfer of
his employment among the Company and its Subsidiaries or (B) an approved leave
of absence. To the extent that the Option will have so become exercisable, it
may be exercised in whole or in part from time to time.
(b) Notwithstanding the provisions of Subsection (a) of this Section, the
Option will become immediately exercisable in full upon the occurrence of a
change in control of the Company. For purposes of this Agreement, the term
"change in control" will have the meaning given such term under the Plan as in
effect on the Date of Grant.
2. PAYMENT OF OPTION PRICE. The Option Price is payable (a) in cash or by
certified or cashier's check or other cash equivalent acceptable to the Company
payable to the order of the Company, (b) by surrender of Stock (including by
attestation) owned by the Optionee for (i) more than one year prior to the date
of exercise and for more than 2 years from the date on which the option was
granted, if they were originally acquired by the Optionee pursuant to the
exercise of an incentive stock option, or (ii) more than 6 months prior to the
date of exercise, if they were originally acquired by the Optionee other than
pursuant to the exercise of an incentive stock option, (c) by surrender of
exercisable Option Rights (based on the Spread on the date of exercise) or (d)
by a combination of surrender of Stock, and exercisable Option Rights and cash
or certified or cashier's check; provided, however, that it shall be a condition
to the surrender of Stock an/or Option Rights that the Optionee consent in
writing to the determination by the Board pursuant to the Plan of Market Value
per Share and the Spread.
3. TERM OF OPTION. The Option will terminate on the earliest of the
following dates:
(a) Three months after the Optionee ceases to be an employee of the
Company or a Subsidiary for any reason other than death or disability;
1
<PAGE> 2
(b) Six months after the Optionee ceases to be an employee of the
Company or a Subsidiary as a result of his death or disability; or
(c) Ten years from the Date of Grant.
4. TRANSFERABILITY. (a) The Option may not be transferred except by will or
the laws of descent and distribution and may not be exercised during the
lifetime of the Optionee except by the Optionee or the Optionee's guardian or
legal representative acting on behalf of the Optionee in a fiduciary capacity
under state law and court supervision.
(b) Notwithstanding the provisions of Section 4(a), the Options shall be
transferable by a Participant without payment of consideration therefor by the
transferee, to any one or more members of the Participant's Immediate Family (or
to one or more trusts established solely for the benefit of such Participant
and/or one or more members of the Participant's Immediate Family or to one or
more partnerships in which the only partners are such Participant and/or members
of the Participant's Immediate Family); provided, however, that (i) no such
transfer shall be effective unless reasonable prior notice thereof is delivered
to the Company and such transfer is thereafter effected in accordance with any
terms and conditions that shall have been made applicable thereto by the Company
or the Board and (ii) any such transferee shall be subject to the same terms and
conditions hereunder as the Participant. Following transfer, any such Options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that the term "Optionee" shall be deemed
to refer to the transferee. The events of termination of employment of Sections
1 and 3 shall continue to be applied with respect to the original Optionee,
following which the Options shall be exercisable by the transferee only to the
extent, and for the period specified in this Agreement.
5. COMPLIANCE WITH LAW. The Company will make reasonable efforts to comply
with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Company will not be
obligated to issue any Stock pursuant to this Agreement if the issuance thereof
would result in a violation of any such law.
6. ADJUSTMENTS. The Board may make any adjustments in the Option Price and
in the number and kind of shares of stock or other securities covered by this
Agreement in accordance with Section 6 of the Plan.
7. WITHHOLDING. To the extent that the Company is required to withhold
federal, state, local or foreign taxes in connection with Stock obtained upon
the exercise of the Option, and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the receipt of such
Stock that the Optionee make arrangements satisfactory to the Company for
payment of the balance of such taxes required to be withheld. If requested by
the Optionee, the Board may accept relinquishment of a portion of such Stock.
8. EMPLOYMENT RIGHTS. The Plan and this Agreement will not confer upon the
Optionee any right with respect to the continuance of employment or other
service with the Company or any Subsidiary and will not interfere in any way
with any right that the Company or any Subsidiary would otherwise have to
terminate any employment or other service of the Optionee at any time.
9. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement will not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary, unless provided otherwise in any such plan.
10. NOTICES. Any notice necessary under this Agreement will be addressed to
the Company or the Committee at the principal executive office of the Company
and to the Optionee at the address appearing in the personnel records of the
Company for such Optionee, or to either party at such other address as either
party may designate in writing to the other. Any such notice will be deemed
effective upon receipt thereof by the addressee.
11. AGREEMENT SUBJECT TO THE PLAN; DEFINITIONS. The Option Rights granted
under this Agreement and all of the terms and conditions hereof are subject to
all of the terms and conditions of the Plan. In the event of any inconsistency
between this Agreement and the Plan, the terms of the Plan will govern. All
terms used herein with initial capital letters have the meanings assigned to
them in the Plan or in this Agreement.
2
<PAGE> 3
12. AMENDMENTS. Any amendment to the Plan will be deemed to be an amendment
to this Agreement to the extent that the amendment is applicable hereto;
provided, however, that no amendment will adversely affect the rights of the
Optionee under this Agreement without the Optionee's consent.
13. SEVERABILITY. In the event that one or more of the provisions of this
Agreement is invalidated for any reason by a court of competent jurisdiction,
any provision so invalidated will be deemed to be separable from the other
provisions hereof, and the remaining provisions hereof will continue to be valid
and fully enforceable.
14. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the Commonwealth of Massachusetts.
This Agreement is executed as of the day of ,
1999.
INSTRON CORPORATION
By:
------------------------------------
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Nonqualified Stock Option Agreement and a copy of the
Stockholders Agreement and accepts the Option subject to the applicable terms
and conditions of the Plan and the Stockholders Agreement and the terms and
conditions hereinabove set forth. The Optionee acknowledges that it is a
condition to the issuance of Stock upon exercise of the Option in whole or in
part that the Optionee shall have executed the Stockholders Agreement, if the
Stockholders Agreement is then in effect.
--------------------------------------
Optionee
3
<PAGE> 1
EXHIBIT (c)(10)
AMENDMENT TO INSTRON CORPORATION
1992 STOCK INCENTIVE PLAN
WHEREAS, the respective general partner and Boards of Directors of Kirtland
Capital Partners III L.P., an Ohio limited partnership, ISN Acquisition
Corporation, a Massachusetts corporation ("MergerCo."), and Instron Corporation
(the "Company") have approved the merger of MergerCo. into the Company (the
"Merger") in accordance with the Massachusetts Business Corporation Law;
WHEREAS, on , 1999 the stockholders of the Company approved the
Merger, and a Change of Control as defined in Section 15(d)(iii) of the Instron
Corporation 1992 Stock Incentive Plan (the "Plan"), as amended through the date
hereof, has occurred;
Pursuant to Section 13 of the Plan, the Company hereby amends the Plan,
effective on the consummation of the Merger, as follows:
1. Section 1 shall be amended to include the following:
"Affiliate" means with respect to any Person, any other Person
(other than the Company or any Subsidiary of the Company) that directly
or indirectly controls, is controlled by or is under common control with
such Person.
"Fair Market Value" prior to the Merger means on any given date the
last sale price at which Stock is traded on such date or, if no Stock is
traded on such date, the most recent date on which Stock was traded, as
reflected in the American Stock Exchange; except that the Committee may
prescribe another measure of value for the exercise of Stock
Appreciation Rights as provided in Section 7(e). Effective upon
consummation of the Merger, the term shall mean, as of any particular
date, the fair market value of the Stock as determined in good faith by
the Board.
"Merger" means the merger of ISN Acquisition Corporation into the
Company.
"Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated association or other entity.
2. Section 5(b) shall be amended and restated to read:
(b) Latest Grant Date. No further Awards shall be granted under the
Plan.
3. Section 6(a)(viii) of the Plan shall be deleted.
4. Section 15(d) of the Plan is amended and restated to read as
follows:
(d) "Change in Control" shall mean the occurrence of any one of the
following events:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other Person, and as a result of such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or Person immediately after such transaction are held in
the aggregate by the holders of Common Shares outstanding immediately
prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other
Person, and less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale or transfer is held in the aggregate by the holders
of Common Shares outstanding immediately prior to such sale or
transfer;
1
<PAGE> 2
(iii) If Kirtland Capital Partners III L.P. together with its
Affiliates cease for any reason other than a public offering of the
Company's equity securities to own a majority of the combined voting
power of the outstanding securities of the Company;
(iv) If, at any time after any public offering of any of the
Company's equity securities, any "person" (as such term is used in
Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934) becomes a "beneficial owner" (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934) (other
than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities; or
(v) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
2
<PAGE> 1
EXHIBIT (C)(11)
AMENDMENT TO NONQUALIFIED STOCK
OPTION AGREEMENT UNDER THE
INSTRON CORPORATION 1992 STOCK INCENTIVE PLAN
- ------------------ --------------
NUMBER OF SHARES DATE OF GRANT
WHEREAS, Instron Corporation (the "Company") granted (the
"Optionee") shares on the Date of Grant ;
WHEREAS, the respective general partner and Board of Directors of Kirtland
Capital Partners III, L.P., an Ohio limited partnership, ISN Acquisition
Corporation, a Massachusetts corporation ("MergerCo.") and the Company have
approved the merger of MergerCo. into the Company (the "Merger") in accordance
with the Massachusetts Business Corporation Law;
WHEREAS, the stockholders of the Company approved the Merger on
, 1999, and a Change of Control as defined in Section 15 of the Plan
has occurred;
WHEREAS, each Option is immediately vested and exercisable pursuant to
Section 5 of the Nonqualified Stock Option Agreement (the "Agreement");
WHEREAS, effective upon consummation of the merger of ISN Acquisition
Corporation into the Company and pursuant to Section 6 of the Agreement and
Section 3(b) of the Plan, the Option Shares will be adjusted as provided herein;
WHEREAS, pursuant to Section 13 of the Instron Corporation 1992 Stock
Incentive Plan (the "Plan"), as amended through the date hereof, the Company
hereby amends the Agreement effective upon the consummation of the Merger by
amending the Agreement as follows:
1. A new second paragraph is added to the Agreement following the end
of the first paragraph:
Effective upon consummation of the merger of ISN Acquisition
Corporation into the Company, and pursuant to the Plan, the Option
described in the preceding paragraph is converted into an Option to
purchase on or prior to the "Expiration Date" [ ] [ 2/10
of the number before the Merger] shares of Common Stock of the
Company (the "Option Shares") at a price of [ ] [five (5)]
times each Option's original exercise price of $ ] and subject
to the terms and conditions set forth hereinafter and in the Plan. To
the extent the preceding paragraph is inconsistent with this paragraph,
this paragraph shall govern.
2. Section 1 is amended to read:
Each Option is immediately vested and exercisable upon the
consummation of the Merger.
3. Section 4(d) of the Agreement is hereby deleted.
4. Section 5 is amended as follows:
5. EFFECT OF CERTAIN TRANSACTIONS. In the event of any stock dividend,
stock split or similar change in capitalization of the Company or any
merger, consolidation, dissolution or liquidation of the Company, then the
provisions of Section 3(b) of the Plan shall apply with respect to this
Option.
INSTRON CORPORATION
By:
--------------------------------------
1
<PAGE> 2
The foregoing Amendment to Agreement is hereby accepted and the terms and
conditions thereof are hereby agreed to by the undersigned as of ,
1999.
--------------------------------------
Optionee:
Optionee's Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
2
<PAGE> 1
EXHIBIT (c)(12)
AMENDMENT TO INCENTIVE STOCK
OPTION AGREEMENT UNDER THE
INSTRON CORPORATION 1992 STOCK INCENTIVE PLAN
- ------------------ --------------
Number of Shares Date of Grant
WHEREAS, Instron Corporation (the "Company") granted (the
"Optionee") shares on the Date of Grant ;
WHEREAS, the respective general partner and Board of Directors of Kirtland
Capital Partners III, L.P., an Ohio limited partnership, ISN Acquisition
Corporation, a Massachusetts corporation ("MergerCo.") and the Company have
approved the merger of MergerCo. into the Company (the "Merger") in accordance
with the Massachusetts Business Corporation Law;
WHEREAS, the stockholders of the Company approved the Merger on
, 1999, and a Change of Control as defined in Section 15 of the Plan
has occurred;
WHEREAS, each Option is immediately vested and exercisable pursuant to
Section 5 of the Nonqualified Stock Option Agreement (the "Agreement");
WHEREAS, effective upon consummation of the merger of ISN Acquisition
Corporation into the Company and pursuant to Section 6 of the Agreement and
Section 3(b) of the Plan, the Option Shares will be adjusted as provided herein;
WHEREAS, pursuant to Section 13 of the Instron Corporation 1992 Stock
Incentive Plan (the "Plan"), as amended through the date hereof, the Company
hereby amends the Agreement effective upon the consummation of the Merger by
amending the Agreement as follows:
1. A new second paragraph is added to the Agreement following the end
of the first paragraph:
Effective upon consummation of the merger of ISN Acquisition
Corporation into the Company, and pursuant to the Plan, the Option
described in the preceding paragraph is converted into an Option to
purchase on or prior to the "Expiration Date" [ ] [2/10 of
the number before the Merger] shares of Common Stock of the Company
(the "Option Shares") at a price of [ ] [five (5)] times
each Option's original exercise price of $ ] and subject to the
terms and conditions set forth hereinafter and in the Plan. To the
extent the preceding paragraph is inconsistent with this paragraph, this
paragraph shall govern.
2. Section 1 is amended to read:
Each Option is immediately vested and exercisable upon the
consummation of the Merger.
3. Section 4(d) of the Agreement is hereby deleted.
4. Section 3 is amended as follows:
5. EFFECT OF CERTAIN TRANSACTIONS. In the event of any stock
dividend, stock split or similar change in capitalization of the Company
or any merger, consolidation, dissolution or liquidation of the Company,
then the provisions of Section 3(b) of the Plan shall apply with respect
to this Option.
INSTRON CORPORATION
By:
--------------------------------------
--------------------------------------
--------------------------------------
1
<PAGE> 2
The foregoing Amendment to Agreement is hereby accepted and the terms and
conditions thereof are hereby agreed to by the undersigned as of ,
1999.
--------------------------------------
Optionee:
Optionee's Address:
--------------------------------------
--------------------------------------
--------------------------------------
2
<PAGE> 1
Exhibit (d)(3)
<PAGE> 2
INSTRON CORPORATION
100 Royall Street
Canton, Massachusetts 02021
, 1999
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Instron Corporation, a Massachusetts corporation
("Instron"), to be held on , 1999, at : a.m., local time, at
. At the Special Meeting, you will be asked to consider and vote
upon the merger (the "Merger") of ISN Acquisition Corporation, a newly formed
Massachusetts corporation, with and into Instron, pursuant to an Agreement and
Plan of Merger dated as of May 6, 1999 (the "Merger Agreement"). If the Merger
is approved and subsequently consummated, each outstanding share of Instron
common stock held by the public stockholders of Instron will be canceled and
converted automatically into the right to receive $22.00 in cash, without
interest.
ISN Acquisition Corporation was organized by Kirtland Capital Partners III
L.P., a private investment partnership, for the purpose of acquiring all of the
shares of Instron common stock held by the public stockholders of Instron. As a
result of the Merger, Instron will become a privately held company owned by
Kirtland Capital Partners III L.P., certain members of Instron's management and
certain other stockholders of Instron.
A Special Committee of the Board of Directors of Instron, consisting of
three independent directors, was formed to consider and evaluate the Merger. The
Special Committee has unanimously recommended to Instron's Board of Directors
that the Merger Agreement and the transactions contemplated thereby (the
"Transactions"), including the Merger, be approved. In connection with its
evaluation of the Merger, Instron's Board of Directors engaged The Beacon Group
Capital Services, LLC ("The Beacon Group") to act as its financial advisor and
to advise the Special Committee and the Board of Directors. The Beacon Group has
rendered its opinion dated as of May 6, 1999 to the effect that, as of the date
thereof and based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the cash merger consideration of
$22.00 per share was fair from a financial point of view to the public
stockholders of Instron. The written opinion of The Beacon Group is attached as
Appendix B to the enclosed Proxy Statement and should be read carefully and in
its entirety by stockholders.
INSTRON'S BOARD OF DIRECTORS, BASED ON THE RECOMMENDATION OF THE SPECIAL
COMMITTEE, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS AND DETERMINED
THAT THE TERMS OF THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF INSTRON. INSTRON'S BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS.
Approval of the Merger Agreement and the Transactions at the Special
Meeting requires the affirmative vote of holders of two-thirds of the
outstanding shares of Instron common stock entitled to vote at the Special
Meeting. Certain current stockholders of Instron, members of Instron's
management and certain of their respective affiliates have agreed, among other
things, to vote their shares of Instron common stock entitled to vote at the
Special Meeting (approximately 22.4% of the outstanding shares of Instron common
stock) in favor of the proposal to approve the Merger Agreement and the
Transactions.
The accompanying Proxy Statement provides you with a summary of the Merger
and additional information about the parties involved and their interests. If
the Merger is approved by the requisite holders of Instron common stock, the
closing of the Merger will occur as soon after the Special Meeting as all of the
other conditions to closing the Merger are satisfied.
PLEASE GIVE ALL THIS INFORMATION YOUR CAREFUL ATTENTION. WHETHER OR NOT YOU
PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL
MEETING. A FAILURE TO VOTE WILL COUNT AS A VOTE AGAINST THE MERGER. ACCORDINGLY,
YOU ARE REQUESTED TO PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND. THIS
WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON IF YOU SUBSEQUENTLY
CHOOSE TO ATTEND.
Sincerely,
JAMES M. MCCONNELL
President and Chief Executive Officer
<PAGE> 3
INSTRON CORPORATION
100 Royall Street
Canton, Massachusetts 02021
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Instron Corporation, a Massachusetts corporation ("Instron"), will
be held on , 1999 at : a.m., local time, at , for the
following purposes:
(1) To consider and vote upon a proposal to approve an Agreement and
Plan of Merger dated as of May 6, 1999 (the "Merger Agreement") and the
transactions contemplated thereby (the "Transactions"), including the
merger (the "Merger") of ISN Acquisition Corporation ("MergerCo"), a
corporation newly formed by Kirtland Capital Partners III L.P., with and
into Instron with Instron being the surviving corporation (the "Surviving
Corporation"). In the Merger, each outstanding share of common stock, par
value $1.00 per share, of Instron (the "Instron Common Stock") issued and
outstanding at the effective time of the Merger, other than shares held by
Instron, its subsidiaries, MergerCo, or dissenting stockholders, will be
canceled and converted automatically into the right to receive $22.00 in
cash, without interest. A copy of the Merger Agreement is attached as
Appendix A to the accompanying Proxy Statement and is described therein.
(2) To consider and act upon such other matters as may properly come
before the Special Meeting or any adjournment or postponement thereof.
Instron's Board of Directors (the "Instron Board") has fixed the close of
business on , 1999, as the record date for determining the
stockholders having the right to receive notice of, and to vote at, the Special
Meeting or any adjournment or postponement thereof. A form of proxy and a Proxy
Statement containing more detailed information with respect to the matters to be
considered at the Special Meeting accompany and form a part of this notice.
Approval of the Merger Agreement and the Transactions, including the
Merger, requires the affirmative vote of the holders of two-thirds of the
outstanding shares of Instron Common Stock entitled to vote at the Special
Meeting.
THE INSTRON BOARD HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE
TRANSACTIONS.
In accordance with Section 87, Chapter 156B of the Massachusetts General
Laws, you are advised as follows with respect to the proposal to approve the
Merger Agreement and the Transactions: if the Merger Agreement and the
Transactions are approved by the Instron stockholders at the Special Meeting and
effected by Instron, then any Instron stockholder (i) who files with Instron,
before the taking of the vote on the approval of the Merger Agreement and the
Transactions, written objection to the Merger Agreement and the Transactions
stating that he or she intends to demand payment for his or her shares if the
Merger Agreement and the Transactions are approved by the Instron stockholders
at the Special Meeting and (ii) whose shares are not voted in favor of the
Merger Agreement and the Transactions has or may have the right to demand in
writing from Instron as the Surviving Corporation of the Merger, within 20 days
after the date of mailing to him or her of notice in writing that such approval
has become effective, payment for his or her shares and an appraisal of the
value thereof. Instron and any such stockholder shall in such cases have the
rights and duties and shall follow the procedure set forth in Sections 85 to 98,
inclusive, of Chapter 156B of the Massachusetts General Laws. See "Appraisal
Rights" in the Proxy Statement that accompanies this notice and the full text
<PAGE> 4
of Sections 85 to 98 of Chapter 156B of the Massachusetts General Laws, which is
attached as Appendix C to the accompanying Proxy Statement and is described
therein.
By order of the Instron Board,
JILL E. PEEBLES, Clerk
Canton, Massachusetts
, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO NOT
SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
THE MERGER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THE MERGER NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE> 5
INSTRON CORPORATION
100 Royall Street
Canton, MA 02021
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Instron
Corporation, a Massachusetts corporation ("Instron" or the "Company"), in
connection with the solicitation by its Board of Directors (the "Instron Board")
of proxies to be used at a Special Meeting of Stockholders (as it may be
adjourned or postponed from time to time, the "Special Meeting") to be held on
, 1999 at : a.m., local time, at
. The purpose of the Special Meeting is for the Instron
stockholders to consider and vote upon a proposal to approve an Agreement and
Plan of Merger dated as of May 6, 1999 (the "Merger Agreement") and the
transactions contemplated thereby (the "Transactions"), including the merger
(the "Merger") of ISN Acquisition Corporation ("MergerCo"), a corporation newly
formed by Kirtland Capital Partners III L.P. ("Kirtland"), with and into Instron
with Instron continuing as the surviving corporation (the "Surviving
Corporation"). This Proxy Statement is dated , 1999 and is first
being mailed to Instron stockholders on or about , 1999.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN IN THE MERGER?
A: Upon consummation of the Merger, MergerCo will be merged with and into
Instron and the holders (the "Public Stockholders") of common stock, par value
$1.00 per share, of Instron (the "Instron Common Stock"), other than those
stockholders who exercise and perfect their appraisal rights, will receive a
cash payment of $22.00 for each of their outstanding shares of Instron Common
Stock. Immediately prior to consummation of the Merger, certain members of the
Instron Board, certain members of Instron's management and certain of their
respective affiliates will exchange a portion of their shares of Instron Common
Stock for shares of Series B Preferred Stock, par value $1.00 per share, of
Instron (the "Series B Preferred Stock"). Under the Merger Agreement, the Series
B Preferred Stock will be exchanged for a like number of shares of common stock,
par value $1.00 per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock"). Accordingly, as a result of the Merger, the Public
Stockholders will receive cash for their shares of Instron Common Stock while
the members of the Instron Board, Instron's management and certain of their
respective affiliates mentioned above will receive cash for a portion of their
shares and a continuing equity interest in the Surviving Corporation for the
remainder of their shares.
Q: WHO WILL OWN INSTRON AFTER THE MERGER?
A: After the Merger, Instron will be a privately held company owned by the
following individuals and entities (collectively with MergerCo, the "Investor
Group"):
The Equity Investor
Kirtland Capital Partners III L.P., an Ohio limited partnership, and
certain of its investors and its affiliates
The Other Investors
George S. Burr
Helen L. Burr
The Harold Hindman Trust -- 1969
(i)
<PAGE> 6
The Management Investors
James M. McConnell
Joseph E. Amaral
Kenneth L. Andersen
John R. Barrett
Jonathan L. Burr
The Jonathan L. Burr Trust -- 1965
Yahya Gharagozlou
Arthur D. Hindman
William J. Milliken
Linton A. Moulding
Jane Elizabeth Moulding
Norman L. Smith
Q: WHY IS INSTRON BEING ACQUIRED?
A: Instron is being acquired by the Investor Group because the Instron
Board and the Special Committee of the Instron Board (the "Special Committee")
believe that the Merger is a more desirable alternative than continuing to
operate Instron as a public company. In particular, the Instron Board and the
Special Committee considered the risks of continuing to operate Instron as a
public company and the opportunity to enable the Public Stockholders to achieve
liquidity with respect to their investment in Instron at a price that exceeds
the all time highest market price of the Instron Common Stock. To review the
background and reasons for the Merger in greater detail, see pages 11 through
19.
Q: WHY WAS THE SPECIAL COMMITTEE FORMED?
A: The Instron Board established the Special Committee consisting of
independent directors to review and evaluate the proposed transaction. The
Instron Board formed the Special Committee primarily because it believed that a
recapitalization transaction such as the Merger might present potential
conflicts of interest for Instron's senior management and certain members of the
Instron Board, who, unlike the Public Stockholders, would have a continuing
interest in Instron following consummation of such a transaction. The Special
Committee has determined that the Merger is fair to and in the best interests of
the Instron stockholders.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: As a Public Stockholder, you will receive $22.00 in cash, without
interest, for each share of Instron Common Stock that you own. This is the "Cash
Merger Consideration." For example: If you own 100 shares of Instron Common
Stock, upon completion of the Merger you will receive $2,200.00 in cash.
Q: IF THE MERGER IS CONSUMMATED, WHEN CAN I EXPECT TO RECEIVE THE CASH
MERGER CONSIDERATION FOR MY SHARES?
A: Promptly after the Merger is consummated, Instron will send you detailed
instructions regarding the surrender of your Instron Common Stock certificates.
You should not send your Instron Common Stock certificates to Instron or anyone
else until you receive these instructions. Instron will send payment of the Cash
Merger Consideration to you as promptly as practicable following its receipt of
your stock certificates and other required documents.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We expect the Merger to be consummated during the third quarter of 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of the Cash Merger Consideration by you will be a taxable
transaction for federal income tax purposes. To review the tax consequences to
you in greater detail, see pages 56 through 57. Your tax consequences will
depend on your personal situation. You should consult your tax advisors for a
full understanding of the tax consequences of the Merger to you.
(ii)
<PAGE> 7
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the Merger Agreement, which provides,
among other things, for the acquisition of Instron by the Investor Group, and
the Transactions. After the Merger, Instron will be a privately held company and
you will no longer own an equity interest in Instron. The Instron Board has
approved the Merger Agreement and the Transactions and recommends that you vote
"For" the approval of the Merger Agreement and the Transactions.
Q: WHAT DO I NEED TO DO NOW?
A: This Proxy Statement contains important information regarding the Merger
as well as information about Instron and the Investor Group. It also contains
important information about what the management of Instron, the Instron Board
and the Special Committee considered in evaluating the Merger. We urge you to
read this Proxy Statement carefully, including its Appendices. You may also want
to review the documents referenced under "Where You Can Find More Information."
Q: HOW DO I VOTE?
A: Just indicate on your proxy card how you want to vote, and sign and mail
it in the enclosed envelope as soon as possible, so that your shares will be
represented at the Special Meeting. Approval of the proposal to approve the
Merger Agreement and the Transactions requires the affirmative vote of holders
of two-thirds of the outstanding shares of Instron Common Stock entitled to vote
at the Special Meeting. Therefore, a failure to vote or a vote to abstain will
have the same effect as a vote against the proposal. The Special Meeting will
take place on , 1999 at : a.m., local time, at .
You may attend the Special Meeting and vote your shares in person, rather than
voting by proxy. In addition, you may withdraw your proxy up to and including
the day of the Special Meeting and either change your vote or attend the Special
Meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares of Instron Common Stock only if you
provide instructions on how to vote. You should instruct your broker how to vote
your shares, following the directions your broker provides. If you do not
provide instructions to your broker, your shares will not be voted and they will
be counted as votes against the proposal to approve the Merger Agreement and the
Transactions.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would like
to ask any additional questions about the Merger, you should contact:
Linton A. Moulding
Instron Corporation
100 Royall Street
Canton, Massachusetts 02021
Telephone: (781) 828-2500
You should note that Linton A. Moulding, as well as the other members of
Instron's management, are members of the Investor Group.
(iii)
<PAGE> 8
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT AND OTHER STATEMENTS MADE FROM TIME TO TIME BY
INSTRON, MERGERCO, OR THEIR AFFILIATES OR REPRESENTATIVES CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF, OR CURRENT EXPECTATIONS OF INSTRON AND MERGERCO AND MEMBERS OF
THEIR RESPECTIVE MANAGEMENT TEAMS, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH
STATEMENTS ARE BASED. SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT OF INSTRON AND MERGERCO THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS DISCUSSED HEREIN AND: (I)
THE LEVEL OF BOOKINGS WORLDWIDE FOR INSTRON AND ITS SUBSIDIARIES, PARTICULARLY
IN ASIA; (II) THE SUCCESS OF THE AUTOMOBILE INDUSTRY, WHICH IS THE MAJOR
PURCHASER OF CERTAIN OF INSTRON'S PRODUCTS; (III) THE OPERATING RESULTS OF
CERTAIN OF INSTRON'S SUBSIDIARIES; (IV) THE IMPACT OF FLUCTUATIONS IN EXCHANGE
RATES AND THE UNCERTAINTIES OF OPERATING IN A GLOBAL ECONOMY INCLUDING
FLUCTUATIONS IN THE ECONOMIC CONDITIONS OF THE FOREIGN AND DOMESTIC MARKETS
SERVED BY INSTRON WHICH CAN AFFECT THE DEMAND FOR ITS PRODUCTS AND SERVICES; (V)
INSTRON'S ABILITY TO SUCCESSFULLY MANAGE AND INTEGRATE THE PRODUCTS AND
OPERATIONS OF RECENTLY ACQUIRED COMPANIES; (VI) THE IMPACT OF YEAR 2000 ISSUES;
(VII) INSTRON'S ABILITY TO IDENTIFY AND SUCCESSFULLY CONSUMMATE STRATEGIC
ACQUISITIONS; AND (VIII) GENERAL ECONOMIC CONDITIONS. INSTRON AND MERGERCO
UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO
REFLECT CHANGES IN ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS, OR
CHANGES IN FUTURE OPERATING RESULTS OVER TIME.
(iv)
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ (i)
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... (i)
WHO CAN HELP ANSWER YOUR QUESTIONS.......................... (iii)
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... (iv)
SUMMARY..................................................... 1
Effects of the Merger..................................... 1
The Companies............................................. 1
The Special Meeting....................................... 2
Record Date; Voting Power................................. 2
Vote Required............................................. 2
Recommendations........................................... 2
Opinion of Financial Advisor.............................. 3
Terms of the Merger Agreement............................. 3
Share Ownership of Instron Following the Merger........... 5
Accounting Treatment...................................... 6
Financing of the Merger................................... 6
Conflicts of Interest..................................... 6
Regulatory Approvals...................................... 7
Appraisal Rights.......................................... 7
Federal Income Tax Consequences........................... 8
HISTORICAL MARKET INFORMATION............................... 9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 10
SPECIAL FACTORS............................................. 11
Background of the Merger.................................. 11
The Special Committee's and the Instron Board's
Recommendation......................................... 19
Instron Projections....................................... 22
Opinion of Financial Advisor.............................. 24
Comparable Companies...................................... 25
Purpose and Reasons of the Investor Group for the
Merger................................................. 30
Position of the Investor Group as to Fairness of the
Merger................................................. 31
Conflicts of Interest..................................... 31
Certain Effects of the Merger............................. 38
Financing of the Merger................................... 38
Conduct of Instron's Business After the Merger............ 39
THE SPECIAL MEETING......................................... 40
Date, Time, and Place of the Special Meeting.............. 40
Proxy Solicitation........................................ 40
Matters to Be Considered at the Special Meeting........... 40
Record Date and Quorum Requirement........................ 40
Voting Procedures......................................... 40
Voting and Revocation of Proxies.......................... 41
Voting Agreement.......................................... 41
Effective Time of the Merger and Payment for Shares....... 41
Other Matters to Be Considered............................ 42
THE MERGER.................................................. 43
Terms of the Merger Agreement............................. 43
Estimated Fees and Expenses of the Merger................. 49
</TABLE>
(v)
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
APPRAISAL RIGHTS............................................ 50
REGULATORY APPROVALS........................................ 51
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND
OTHERS.................................................... 52
CERTAIN INFORMATION CONCERNING MERGERCO AND THE INVESTOR
GROUP..................................................... 55
The Equity Investor....................................... 55
MergerCo. ................................................ 55
The Other Investors....................................... 55
The Management Investors.................................. 55
FEDERAL INCOME TAX CONSEQUENCES............................. 56
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA... 58
Unaudited Pro Forma Condensed Consolidated Statement of
Income Data............................................ 59
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Income Data.............................. 61
Unaudited Pro Forma Condensed Consolidated Balance Sheet
Data................................................... 63
Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet Data..................................... 64
Ratio of Earnings to Fixed Charges........................ 65
INDEPENDENT AUDITORS........................................ 66
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 66
LEGAL PROCEEDINGS........................................... 66
STOCKHOLDER PROPOSALS....................................... 66
OTHER MATTERS............................................... 67
WHERE YOU CAN FIND MORE INFORMATION......................... 67
</TABLE>
(vi)
<PAGE> 11
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. For a more complete
understanding of the Merger, and for a more complete description of the legal
terms of the Merger, you should read this Proxy Statement in its entirety
carefully, as well as the additional documents to which we refer you, including
the Merger Agreement. See "Where You Can Find More Information" (page 67).
EFFECTS OF THE MERGER
Pursuant to the Merger Agreement, MergerCo will be merged with and into
Instron with Instron being the Surviving Corporation. As a result of the Merger,
all of the capital stock of Instron will be owned by the Investor Group, and the
Instron Common Stock will no longer be publicly traded. The Public Stockholders
will no longer be stockholders of Instron and they will not participate in
Instron's future earnings and growth or bear the risk of any decreases in the
value of Instron. Instead, the Public Stockholders will have the right to
receive $22.00 in cash, without interest, for each share of Instron Common Stock
held by such stockholders. The Investor Group will have the opportunity to
benefit from any future earnings and growth of Instron and will bear the risk of
any decreases in the value of Instron. In addition, the Other Investors and the
Management Investors have interests in the Merger as directors and/or employees
of Instron or affiliates of directors and/or employees of Instron which are
different from, or in addition to, yours as an Instron stockholder. To review
these interests, see "-- Conflicts of Interest" and "Special
Factors -- Conflicts of Interest."
THE COMPANIES
Instron Corporation ("Instron")
100 Royall Street
Canton, Massachusetts 02021
(781) 828-2500
Instron designs, develops, manufactures, markets, and services materials
and structural testing systems, software, and accessories. These products are
used principally in research and development and quality control applications to
test the mechanical properties of various materials, components, and structures.
The materials tested include metals, plastics, textiles, composites, ceramics
and rubber. Instron systems test virtually all natural and man-made materials
from fragile fibers to the exotic materials needed for space exploration.
In the worldwide market for these systems, Instron is a leading producer of
static (electromechanical), dynamic (servohydraulic), simulation (structures),
hardness and impact testing systems. Instron offers a comprehensive range of
instruments and computer based systems that provide and enhance control of the
testing process, data collection and analysis.
Instron has sales and service offices in 14 United States cities and 17
foreign countries. Instron's principal manufacturing facilities are located in
the United States, the United Kingdom and Germany.
ISN Acquisition Corporation ("MergerCo")
c/o Kirtland Capital Partners III L.P.
2250 SOM Center Road
Suite 105
Willoughby Hills, Ohio 44094
(440) 585-9010
MergerCo was formed by Kirtland for the sole purpose of effecting the
Merger. MergerCo will be merged out of existence at the effective time of the
Merger (the "Effective Time"). MergerCo is not expected to have significant
assets or liabilities (other than those arising in connection with the
Transactions) or to engage in any activities (other than those incident to its
formation and the Transactions).
<PAGE> 12
Kirtland Capital Partners III L.P. ("Kirtland")
2250 SOM Center Road
Suite 105
Willoughby Hills, Ohio 44094
(440) 585-9010
Kirtland and its affiliates are a privately funded investment group with
over $300 million in committed equity capital. Kirtland's principal business is
searching for, negotiating, structuring, acquiring, holding, selling and
refinancing equity interests in operating businesses on behalf of itself and its
affiliates and performing all things incidental to or growing out of such
activities. Kirtland and its predecessor companies have been making investments
in operating companies since 1978.
THE SPECIAL MEETING (page 40)
The Special Meeting will be held on , 1999, at : a.m.,
local time, at . At the Special Meeting, the Instron
stockholders will be asked to consider and vote upon a proposal to approve the
Merger Agreement and the Transactions.
RECORD DATE; VOTING POWER (page 40)
Holders of record of Instron Common Stock at the close of business on
, 1999 are entitled to notice of and to vote at the Special Meeting.
As of such date, there were shares of Instron Common Stock issued
and outstanding held by approximately holders of record. Holders
of record of Instron Common Stock on the Record Date are entitled to one vote
per share on any matter that may properly come before the Special Meeting.
VOTE REQUIRED (page 40)
Approval by the Instron stockholders of the proposal to approve the Merger
Agreement and the Transactions will require the affirmative vote of two-thirds
of the outstanding shares of Instron Common Stock entitled to vote at the
Special Meeting. Accordingly, a failure to vote or a vote to abstain will have
the same legal effect as a vote against the Merger.
An "Against" vote on the enclosed proxy card will be a vote against the
Merger Agreement and the Transactions. If we do not receive "For" votes from
two-thirds of the outstanding shares of Instron Common Stock entitled to vote at
the Special Meeting, the Merger Agreement and the Transactions will not be
approved, you will not receive $22.00 in cash for each share of Instron Common
Stock you hold and you will continue to own shares in a publicly traded company.
A stockholder who gives a proxy with respect to voting on the Merger
Agreement and the Transactions may revoke it at any time before it is voted at
the Special Meeting by either (i) filing with the Clerk of Instron an instrument
revoking it, (ii) submitting a duly executed proxy bearing a later date or (iii)
voting in person at the Special Meeting.
The Other Investors and certain of their affiliates and the Management
Investors and certain of their affiliates have agreed, among other things, to
vote the shares of Instron Common Stock owned by such stockholders
(approximately 22.4% of the outstanding shares of Instron Common Stock) in favor
of the proposal to approve the Merger Agreement and the Transactions.
RECOMMENDATIONS (page 19)
The Instron Board established the Special Committee to review and evaluate
the proposed transaction. The Instron Board formed the Special Committee
primarily because it believed that a recapitalization transaction such as the
Merger might present potential conflicts of interest for Instron's senior
management and certain members of the Instron Board, who, unlike the Public
Stockholders, would have a continuing interest in Instron following consummation
of such a transaction. The Special Committee unanimously
2
<PAGE> 13
recommended that the Instron Board approve the Merger Agreement and the
Transactions and that the Instron Board recommend that the Instron stockholders
approve the Merger Agreement and the Transactions. Following the unanimous
recommendation of the Special Committee, the Instron Board, other than Harold
Hindman, George S. Burr and James M. McConnell, unanimously determined that the
Merger Agreement and the Transactions, including the Merger, were fair to and in
the best interests of the Instron stockholders and recommended that the
stockholders approve the Merger Agreement and the Transactions. Messrs. Hindman,
Burr and McConnell abstained from voting on the Merger Agreement and the
Transactions because each of them has an interest in the Merger as a member of
the Investor Group. The Special Committee and the Instron Board recommend that
the Instron stockholders vote "For" the approval of the Merger Agreement and the
Transactions. You also should refer to the factors that the Special Committee
and the Instron Board considered in determining whether to approve the Merger
Agreement and the Transactions on pages 19-22.
OPINION OF FINANCIAL ADVISOR (page 24)
The Beacon Group Capital Services, LLC ("The Beacon Group"), a nationally
recognized investment banking firm that served as financial advisor to the
Instron Board and the Special Committee, has rendered an opinion dated as of May
6, 1999 to the Instron Board that, as of the date of the opinion, and based on
the assumptions and subject to the limitations and qualifications set forth
therein, the Cash Merger Consideration was fair from a financial point of view
to the Public Stockholders. A copy of The Beacon Group's opinion, setting forth
the information reviewed, assumptions made and matters considered by The Beacon
Group, is attached to this Proxy Statement as Appendix B. You should read The
Beacon Group's opinion in its entirety.
TERMS OF THE MERGER AGREEMENT (page 43)
The Merger Agreement is attached to this Proxy Statement as Appendix A. You
are encouraged to read the Merger Agreement in its entirety. It is the legal
document that governs the Merger.
General. Upon consummation of the Merger, MergerCo will be merged with and
into Instron and the Public Stockholders will receive a cash payment of $22.00
for each of their outstanding shares of Instron Common Stock. Immediately prior
to the consummation of the Merger, the Other Investors and the Management
Investors will exchange a portion of their shares of Instron Common Stock for
shares of Series B Preferred Stock. The Merger Agreement provides that the
shares of Series B Preferred Stock will be exchanged for a like number of shares
of Surviving Corporation Common Stock. Accordingly, as a result of the Merger,
the Public Stockholders will receive cash for their shares of Instron Common
Stock while the Other Investors and the Management Investors will receive cash
for a portion of their shares and a continuing equity interest in the Surviving
Corporation for the remainder of their shares.
Conditions to the Merger. The completion of the Merger depends upon the
satisfaction of certain conditions, including:
- approval of the Merger Agreement and the Transactions by holders of
two-thirds of the outstanding shares of Instron Common Stock entitled to
vote at the Special Meeting;
- absence of a material adverse change in the business, assets, condition
(financial or otherwise) or results of operations of Instron and its
subsidiaries taken as a whole or any event or other circumstance which
would, individually or in the aggregate, reasonably be expected to result
in any such material adverse change;
- absence of a material disruption or material adverse change in the
banking, financial or capital markets generally or in the market for
senior credit facilities or for new issuances of high yield securities
which has caused either of the lenders to Kirtland to withdraw its
commitment to provide financing as contemplated by such lender's
financing commitment letter to Kirtland;
- Instron having no more than $13,000,000 of Net Indebtedness as of the
closing date of the Merger. "Net Indebtedness" is defined under the
Merger Agreement generally as all obligations of Instron and
3
<PAGE> 14
its subsidiaries for borrowed money or evidenced by a bond, note,
debenture or similar instrument, minus all cash and cash equivalents of
Instron and its subsidiaries;
- no more than 5% of the outstanding shares of Instron Common Stock having
taken actions to assert dissenters' rights under Sections 85 to 98,
inclusive, of the Massachusetts Business Corporation Law (Chapter 156B of
the General Laws of Massachusetts ) (the "MBCL"); and
- antitrust regulatory approval and the expiration of applicable waiting
periods relating thereto.
Each party may, at its option, waive the satisfaction of any condition to
such party's obligations under the Merger Agreement. EVEN IF THE INSTRON
STOCKHOLDERS APPROVE THE MERGER, THERE CAN BE NO ASSURANCE THAT THE MERGER WILL
BE CONSUMMATED.
Solicitation. Generally, Instron and its affiliates are prohibited from
initiating or soliciting, and are prohibited from participating in discussions
regarding, any proposal from a third party with respect to a merger,
consolidation, sale, or similar transaction involving Instron. Instron may,
under certain specified circumstances, take certain actions in connection with
unsolicited acquisition proposals.
Termination. Either Instron or MergerCo may terminate the Merger Agreement
under certain circumstances, including if:
- both parties consent in writing;
- the Instron stockholders do not approve the Merger Agreement;
- legal restraints or prohibitions prevent the consummation of the Merger;
or
- the other party breaches any of its representations, warranties or
covenants under the Merger Agreement and fails to timely cure any such
breach.
In addition, Instron generally may terminate the Merger Agreement if it
enters into a definitive agreement to effect another acquisition transaction
that is more favorable to the Instron stockholders from a financial point of
view than the Transactions (a "Superior Proposal"). Instron may also terminate
the Merger Agreement after 60 days following its receipt of a notice from
Kirtland that a lender to Kirtland has indicated to either Kirtland or MergerCo
that such lender will be unable to provide the financing contemplated by its
financing commitment letter to Kirtland (a "Kirtland Financing Notice").
MergerCo may terminate the Merger Agreement if the Instron Board withdraws,
modifies, or changes its approval or recommendation of the Transactions in a
manner material and adverse to MergerCo, or proposes or announces any intention
to enter into any agreement with respect to another acquisition transaction.
MergerCo also may terminate the Merger Agreement after 60 days following
delivery by Kirtland or MergerCo of a Kirtland Financing Notice.
Fees and Expenses. Generally, Instron, on the one hand, and Kirtland and
MergerCo, on the other hand, will pay their own fees, costs, and expenses
incurred in connection with the Merger Agreement and the Transactions. However,
Instron will pay MergerCo "liquidated damages" in an amount equal to $5,000,000
plus an amount equal to the reasonable out-of-pocket costs and expenses incurred
by Kirtland and MergerCo in connection with the Merger Agreement and the
Transactions (not to exceed $1,000,000) under certain circumstances, including
if:
- MergerCo terminates the Merger Agreement as a result of Instron having
wilfully breached its obligation to call a special meeting of
stockholders or to take certain actions with respect to the preparation
of this Proxy Statement;
- Instron terminates the Merger Agreement in connection with entering into
a definitive agreement to effect a Superior Proposal;
- MergerCo terminates the Merger Agreement because of a material and
adverse withdrawal, modification or change in the approval or
recommendation of the Instron Board of the Merger Agreement or the
Transactions; or
4
<PAGE> 15
- Either Instron or MergerCo terminates the Merger Agreement because the
Instron stockholders shall have failed to approve the Merger Agreement
and, within nine months of such termination, Instron enters into a
definitive agreement with respect to another acquisition transaction with
a person or an affiliate thereof who had made a proposal for an
acquisition transaction directly to the Instron stockholders or publicly
announced such a transaction or solicited proxies or consents in
opposition to the Merger prior to the Special Meeting.
Stock Options. Generally, each option to purchase shares of Instron Common
Stock will become fully vested and exercisable immediately prior to the Merger.
Holders of options outstanding immediately prior to the Effective Time, except
for certain options which will be assumed by the Surviving Corporation in the
Merger, will receive cash for such options based on the number of shares of
Instron Common Stock underlying the options to be cashed out and the difference
between the applicable per share exercise price of such options and the Cash
Merger Consideration.
SHARE OWNERSHIP OF INSTRON FOLLOWING THE MERGER (page 31)
The Equity Investor. The exact amount of the Equity Investor's investment
in MergerCo is dependent upon the level of Net Indebtedness of Instron as of the
closing date of the Merger. At April 3, 1999, Instron's Net Indebtedness was
approximately $3.9 million. Assuming that level of Net Indebtedness as of the
closing date of the Merger, the Equity Investor will contribute approximately
$49.6 million in cash to MergerCo in exchange for approximately 450,545 shares
of common stock of MergerCo, which shares will be converted into a like number
of shares of Surviving Corporation Common Stock in the Merger. Upon consummation
of the Transactions, the Equity Investor will own approximately 87.4% of the
outstanding shares of Surviving Corporation Common Stock. See "Unaudited Pro
Forma Condensed Consolidated Financial Data."
The Other Investors. Prior to the Merger, the Other Investors will exchange
an aggregate of 160,000 shares of Instron Common Stock for an aggregate of
32,000 shares of Series B Preferred Stock. These shares of Series B Preferred
Stock will be converted into a like number of shares of Surviving Corporation
Common Stock in the Merger. Upon consummation of the Transactions, the Other
Investors will own approximately 6.2% of the outstanding shares of Surviving
Corporation Common Stock.
The Management Investors. Prior to the Merger, the Management Investors
will exchange an aggregate of 165,210 shares of Instron Common Stock (including
an aggregate of 25,340 shares of restricted Instron Common Stock previously
issued under the Instron Corporation 1992 Stock Incentive Plan, as amended) for
an aggregate of 33,042 shares of Series B Preferred Stock. These shares of
Series B Preferred Stock will be converted into a like number of shares of
Surviving Corporation Common Stock in the Merger. Upon consummation of the
Transactions, the Management Investors will own approximately 6.4% of the
outstanding shares of Surviving Corporation Common Stock. In addition, options
to purchase up to an aggregate of 125,000 shares of Instron Common Stock held by
certain Management Investors will be assumed by the Surviving Corporation and
converted into options (the "Rollover Options") to purchase up to an aggregate
of 25,000 shares of Surviving Corporation Common Stock representing in the
aggregate approximately 4.6% of the Surviving Corporation Common Stock on a
fully diluted basis (assuming the exercise of all such options). These options
will be fully vested and immediately exercisable upon consummation of the
Merger. In addition, it is anticipated that the Surviving Corporation, upon
consummation of the Merger and pursuant to a stock option plan to be adopted by
the Surviving Corporation at that time, will grant options to purchase up to an
aggregate of approximately 24,000 shares of Surviving Corporation Common Stock
to the Management Investors, representing in the aggregate approximately 4.3% of
the Surviving Corporation Common Stock on a fully diluted basis (assuming the
exercise of all options, including the Rollover Options).
5
<PAGE> 16
ACCOUNTING TREATMENT
Instron believes that the Merger and the other Transactions will be
accounted for as a recapitalization for accounting purposes. Under the
recapitalization method of accounting, the historical cost basis of Instron's
assets and liabilities will be carried forward to the Surviving Corporation with
the aggregate cost of repurchasing the Instron Common Stock accounted for as a
reduction to stockholders' equity. Accordingly, the historical basis of
Instron's assets and liabilities will not be affected by the Merger and the
other Transactions.
FINANCING OF THE MERGER (page 38)
The total amount of funds necessary to consummate the Transactions is
expected to be approximately $174.2 million. These funds are expected to come
from the following sources:
- an equity investment made by the Equity Investor of approximately $49.6
million, assuming a Net Indebtedness of $3.9 million;
- borrowings by the Surviving Corporation of approximately $14.0 million
under a new credit facility;
- borrowings by the Surviving Corporation of approximately $100.0 million
from the issuance of debt instruments; and
- Instron's available cash reserves which, as of April 3, 1999, was
approximately $10.6 million.
Kirtland has received from National City Bank a letter dated May 3, 1999
(the "National City Letter") pursuant to which National City Bank has committed
to provide debt financing to Instron under the terms of a $50.0 million
revolving credit facility (the "Credit Facility"), of which approximately $14.0
million will be used to finance the consummation of the Transactions. In
addition, Kirtland currently anticipates that it will raise $100.0 million of
the funds necessary to consummate the Transactions through the issuance of debt
instruments in the private or public capital markets. However, in the event that
Kirtland is unable to obtain such debt financing, Kirtland has entered into a
letter agreement (the "DLJ Bridge Letter" and, together with the National City
Letter, the "Financing Letters") dated May 4, 1999, with DLJ Bridge Finance,
Inc. ("DLJ Bridge"), pursuant to which DLJ Bridge has committed to purchase from
Instron $100.0 million in principal amount of unsecured senior subordinated
increasing rate notes (the "Bridge Notes"). The Financing Letters are subject to
the satisfaction of various conditions, including the condition that no material
adverse change in the business, assets, condition (financial or otherwise) or
results of operations of Instron and its subsidiaries taken as a whole shall
have occurred and that there shall not have occurred any event or other
circumstance which would, individually or in the aggregate, reasonably be
expected to result in any such material adverse change prior to the Effective
Time.
CONFLICTS OF INTEREST (page 31)
The Other Investors. The Other Investors have interests in the Merger as
directors of Instron or affiliates of directors of Instron that are different
from, or in addition to, yours as a stockholder of Instron. In the Merger, a
portion of the shares of Instron Common Stock held by the Other Investors will
ultimately be converted into shares of Surviving Corporation Common Stock.
Accordingly, the Other Investors will continue to have an equity interest in
Instron after the Merger and the ultimate value of this interest could be more
or less than the $22.00 per share to be received by the Public Stockholders in
the Merger. In addition, a majority of the shares of Instron Common Stock held
by the Other Investors and certain of their affiliates will not be converted
into shares of Surviving Corporation Common Stock but will be converted in the
Merger into the right to receive the Cash Merger Consideration in the aggregate
amount of approximately $15.9 million.
The Management Investors. The Management Investors have interests in the
Merger as employees and/or directors of Instron or affiliates of such employees
and/or directors that are different from, or in addition to, yours as a
stockholder of Instron. In the Merger, a portion of the shares of Instron Common
Stock held by the Management Investors will ultimately be converted into shares
of Surviving Corporation
6
<PAGE> 17
Common Stock and certain options to purchase Instron Common Stock held by the
Management Investors will be assumed by the Surviving Corporation and converted
into the Rollover Options. Furthermore, the Surviving Corporation will grant
additional options to certain Management Investors. Accordingly, the Management
Investors will continue to have an equity interest in Instron after the Merger
and the ultimate value of this interest could be more or less than the $22.00
per share to be received by the Public Stockholders in the Merger. In addition,
a majority of the shares of Instron Common Stock and options held by the
Management Investors will not be converted into shares of Surviving Corporation
Common Stock or assumed by the Surviving Corporation, as the case may be, but
will be converted in the Merger into the right to receive the Cash Merger
Consideration and the right to receive cash for such options, respectively, in
the aggregate amount of approximately $14.9 million.
If the Merger is consummated, it is expected that those Management
Investors who were members of Instron's management prior to the Merger will
continue as members of management of the Surviving Corporation.
Other Agreements. Upon consummation of the Merger, the Surviving
Corporation and all of the stockholders of the Surviving Corporation, including
the Other Investors and the Management Investors, will enter into a stockholders
agreement (the "Stockholders Agreement") that will, among other things, restrict
their transfer of shares of Surviving Corporation Common Stock. The Other
Investors, the Management Investors and the Surviving Corporation also will
enter into a registration rights agreement (the "Registration Rights Agreement")
pursuant to which the Other Investors and the Management Investors will have
certain registration rights with respect to their shares of Surviving
Corporation Common Stock. Also, certain indemnification arrangements and
directors' and officers' liability insurance for existing directors and officers
of Instron will be continued by the Surviving Corporation after the Merger.
The Beacon Group. The Beacon Group served as financial advisor to the
Instron Board and the Special Committee. Two managing directors of The Beacon
Group are limited partner investors in Kirtland. The Instron Board, the Special
Committee and The Beacon Group believe that the foregoing relationships do not
affect The Beacon Group's ability to act independently and impartially as
financial advisor to the Instron Board and the Special Committee.
The Special Committee. The members of the Special Committee will be treated
in the Merger as Public Stockholders with respect to their shares of Instron
Common Stock. Members of the Special Committee will have the right to receive
Cash Merger Consideration in the aggregate amount of $605,000 for their shares
of Instron Common Stock. The three members of the Special Committee also
received an aggregate of $30,500 from Instron as compensation for serving on the
Special Committee. The Instron Board and the Special Committee believe that the
foregoing arrangements do not affect the Special Committee's independence or
impartiality.
REGULATORY APPROVALS (page 51)
Instron is required to make filings with or obtain approvals from certain
United States antitrust regulatory authorities in connection with the Merger.
These consents and approvals include the approval of the United States Federal
Trade Commission and the Department of Justice. An application and notice has
been filed with the Federal Trade Commission and the Department of Justice and
it is expected that the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, will expire on June 24, 1999.
However, we cannot predict with exact certainty whether or when we will obtain
such antitrust regulatory approval or the timing of such approval.
APPRAISAL RIGHTS (page 50)
Any Instron stockholder has the right to dissent from approval of the
Merger Agreement and, subject to strict compliance with certain requirements and
procedures set forth in Sections 85 to 98, inclusive, of the MBCL, to receive
payment of the "fair value," as defined in the MBCL, of his or her shares of
Instron Common Stock. To perfect these appraisal rights with respect to the
Merger, you must follow the required
7
<PAGE> 18
procedures precisely. The full text of Sections 85 to 98, inclusive, of the MBCL
is attached to this Proxy Statement as Appendix C.
FEDERAL INCOME TAX CONSEQUENCES (page 56)
Generally, the receipt of the Cash Merger Consideration in the Merger by
Public Stockholders will be a taxable transaction for federal income tax
purposes. Each holder's gain or loss per share of Instron Common Stock will be
equal to the difference between $22.00 and the holder's adjusted basis in that
particular share of the Instron Common Stock. Such gain or loss generally will
be a capital gain or loss. The federal income tax rule applicable to any gain
will generally depend on the length of time that such shares of Instron Common
Stock were held by the holder. Because the tax consequences to each holder of
Instron Common Stock will depend on each holder's particular circumstances and
tax position, you should consult your tax advisors as to the specific tax
consequences of the Merger to you.
8
<PAGE> 19
HISTORICAL MARKET INFORMATION
Instron Common Stock is traded on the American Stock Exchange ("AMEX")
under the symbol "ISN". The following table sets forth the high and low sales
prices for each quarterly period for the two most recent fiscal years and for
the current fiscal year to date as reported by AMEX.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1997:
First quarter............................................... $13.500 $12.000
Second quarter.............................................. 14.250 10.750
Third quarter............................................... 18.857 14.000
Fourth quarter.............................................. 19.188 15.125
1998:
First quarter............................................... 19.188 15.500
Second quarter.............................................. 20.625 18.375
Third quarter............................................... 19.125 11.500
Fourth quarter.............................................. 17.250 11.875
1999:
First quarter............................................... 18.375 15.188
Second quarter (through May 24, 1999)....................... 20.375 15.625
</TABLE>
Instron has declared a dividend of $.04 per share of Instron Common Stock
for each quarterly period for the two most recent fiscal years and for the first
quarter of the current fiscal year. Under the Merger Agreement, Instron has
agreed not to pay any dividends on Instron Common Stock prior to the closing of
the Merger.
As of , 1999, Instron had approximately holders
of record of Instron Common Stock.
The reported high and low sales prices per share of Instron Common Stock on
May 6, 1999, the last trading day preceding public announcement of the execution
of the Merger Agreement, was $16.375 and $16.125, respectively.
9
<PAGE> 20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated historical, financial
and other data of Instron for the five years ended December 31, 1998, which have
been derived from, and should be read in conjunction with, the consolidated
financial statements of Instron included in Instron's Annual Report on Form
10-K, which is incorporated by reference in this Proxy Statement, including the
Notes to Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
The selected consolidated data for the three months ended April 3, 1999 has
been derived from, and should be read in conjunction with, Instron's unaudited
condensed consolidated financial statements included in Instron's Quarterly
Report on Form 10-Q, incorporated by reference in this Proxy Statement. The
selected consolidated data for the three months ended March 28, 1998 has been
derived from Instron's unaudited condensed consolidated financial statements
included in Instron's Quarterly Report on Form 10-Q, which has not been included
or incorporated by reference in this Proxy Statement. Data for the three months
ended April 3, 1999 is not necessarily indicative of the results to be expected
for the full year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, ----------------------
---------------------------------------------------------- MARCH 28, APRIL 3,
1994 1995 1996(1) 1997 1998(2)(3) 1998(2)(3) 1999
-------- -------- -------- -------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Bookings of new orders............ $138,947 $155,092 $161,692 $150,020 $166,515 $ 33,983 $ 42,076
Total revenue..................... 136,192 150,571 153,113 155,660 183,029 33,869 48,745
Income from operations............ 8,082 8,921 9,145 12,571 9,646 (2,743) 2,694
Income before taxes............... 6,979 7,684 7,385 11,555 20,333 8,159 2,569
Net Income........................ 4,537 4,995 4,582 7,164 11,459 3,911 1,593
Backlog........................... 32,687 36,136 34,361 28,748 74,477 31,961 65,433
Research & development............ 8,062 8,782 8,616 6,959 8,485 1,449 2,708
Earnings before interest, taxes,
depreciation and amortization
(EBITDA)........................ 13,855 15,891 15,329 18,880 27,671 9,882 4,865
FINANCIAL POSITION:
Working capital................... $ 33,849 $ 38,259 $ 44,094 $ 41,942 $ 55,241 $ 40,583 $ 50,070
Total assets...................... 102,294 113,334 121,833 118,985 158,254 123,019 152,868
Total debt........................ 17,818 19,875 23,919 13,659 19,632 5,176 14,427
Stockholders' equity.............. 51,926 56,102 62,401 66,254 79,584 71,049 79,359
Capital expenditures.............. 4,286 4,510 4,473 4,176 5,841 2,039 1,475
PER SHARE OF COMMON STOCK:
Net income per basic share........ $ .72 $ .79 $ .72 $ 1.11 $ 1.72 $ .60 $ .24
Net income per diluted share...... .72 .78 .70 1.05 1.62 .55 .22
Dividends declared................ .12 .15 .16 .16 .16 .04 .04
Book value........................ 8.26 8.85 9.68 9.82 11.46 10.49 11.41
PERFORMANCE MEASUREMENT:
Revenue growth.................... 10.9% 10.6% 1.7% 1.7% 17.6% (6.0)% 43.9%
Pre-tax income as of % of total
revenue......................... 5.1 5.1 4.8 7.4 11.1 24.1 5.3
Effective income tax rate......... 35.0 35.0 38.0 38.0 43.6 52.1 38.0
Net income as a % of total
revenue......................... 3.3 3.3 3.0 4.6 6.3 11.5 3.3
Return on average stockholders'
equity.......................... 9.2 9.2 7.7 11.1 15.7 15.3 12.2
Total debt as a % of debt, plus
equity.......................... 25.5 26.2 27.7 17.1 19.8 6.8 15.4
Working capital ratio............. 1.9:1 1.9:1 2.2:1 2.0:1 1.9:1 1.9:1 1.8:1
-------- -------- -------- -------- -------- -------- --------
</TABLE>
- -------------------------
(1) In March 1996, Instron recorded a special items charge to operations to
implement a workforce reduction and consolidate certain manufacturing
operations. A pre-tax charge of $1.8 million ($1.1 million net of
taxes) was taken to cover these actions.
(2) A non-operating pre-tax gain of $11.1 million ($6.9 million net of
taxes) was recorded in connection with Instron's sale of 42 acres of
excess land in Canton, Massachusetts.
(3) Instron recorded a special items charge to operations to consolidate
its European operations and write-down the value of certain
non-performing assets. A pre-tax charge of $5.0 million ($4.2 million
net of taxes) was taken to cover these actions.
10
<PAGE> 21
SPECIAL FACTORS
BACKGROUND OF THE MERGER
From time to time, Instron has considered strategic transactions or
alliances within the materials and structural testing systems industry with a
goal towards enhancing shareholder value. In particular, management and the
Instron Board had been concerned that the trading price of the Instron Common
Stock did not appropriately reflect the financial and market position of the
company. In addition, the Instron Board believed that the markets have
undervalued the Instron Common Stock because of the limited public trading
market for the shares of Instron Common Stock. Accordingly, in the second
calendar quarter of 1998, the Instron Board sought to engage a financial advisor
to render advice to the Instron Board with respect to possible strategic
alternatives that might enhance shareholder value and create options for Instron
stockholders to achieve greater liquidity.
On June 8, 1998, representatives of The Beacon Group met with James M.
McConnell, the Chief Executive Officer and President of Instron, and Linton A.
Moulding, the Chief Financial Officer of Instron, and discussed in general terms
various alternatives pursuant to which Instron might enhance shareholder value
and create options for increasing stockholder liquidity. The alternatives
outlined by The Beacon Group included (i) acquiring strategic businesses or
assets that would add to or strengthen Instron's core businesses, (ii) divesting
or spinning off certain of Instron's non-core businesses, (iii) entering into
joint ventures and strategic alliances and (iv) a potential sale of Instron. The
Beacon Group also reviewed with Messrs. McConnell and Moulding the processes
involved if the company were to pursue the various alternatives and the
advisability and feasibility of pursuing a particular alternative. In addition
to meeting with The Beacon Group, Messrs. McConnell and Moulding met with other
investment banking firms in June 1998 to assess the desirability of engaging a
particular firm to assist the Instron Board in evaluating strategic
alternatives.
On June 30, 1998, the Executive Committee of the Instron Board (the
"Executive Committee"), which consisted of Mr. McConnell, Harold Hindman, the
Chairman of the Instron Board, and Richard W. Young, met to review and discuss
proposals from the three investment banking firms with whom Messrs. McConnell
and Moulding had met. At this meeting, the Executive Committee recommended that
the Instron Board retain The Beacon Group to assist the Instron Board in
exploring and considering strategic alternatives. Thereafter, on July 10, 1998,
the Instron Board retained The Beacon Group to act as its financial and
strategic advisor.
On July 13, 1998, representatives of The Beacon Group met with senior
management of Instron, including Messrs. McConnell and Moulding, to discuss the
process by which The Beacon Group would assist the Instron Board in evaluating
strategic alternatives. At this meeting, The Beacon Group indicated that it
would first need to conduct financial and other due diligence concerning Instron
and its business and operations. The representatives of The Beacon Group advised
Instron's management that, following completion of such due diligence, The
Beacon Group would present to the Instron Board an analysis of the strategic
alternatives available to Instron and The Beacon Group's assessment of the
alternative or alternatives that were most likely to enhance shareholder value
and provide stockholders with increased liquidity.
On August 11, 1998, the Instron Board held a meeting at which
representatives of The Beacon Group advised the Instron Board with respect to a
range of strategic alternatives that might be available to Instron to enhance
shareholder value and provide stockholders with greater liquidity. These
alternatives included, among other things, (i) remaining an independent company
and continuing to pursue Instron's operating and business strategy, which
included the acquisition of strategic businesses or assets that would add to or
strengthen Instron's core businesses, (ii) divesting Instron's non-core
businesses through asset sales or spin-off transactions, (iii) undertaking a
share repurchase program, (iv) entering into joint ventures and other strategic
alliances and (v) selling the company. The Beacon Group described certain
criteria used by it to evaluate these strategic alternatives, which included,
among others: preliminary indications of the value that might be received by
Instron stockholders based on various analyses (including an analysis of
comparable companies, an analysis of comparable mergers and acquisitions
transactions, various discounted cash flow analyses and a leveraged
recapitalization analysis); the ability of Instron to sustain growth given its
current assets, size and market capitalization; the stability of Instron's
income stream; the liquidity available to Instron stockholders
11
<PAGE> 22
from various strategic alternatives; and the certainty of and risks involved in
consummating various potential transactions. Based on the foregoing criteria,
The Beacon Group advised the Instron Board that a sale of the company offered
the greatest potential to enhance shareholder value and would provide the
Instron stockholders with the opportunity to achieve liquidity for their
investment in Instron.
Following the presentation by The Beacon Group, the Instron Board engaged
in a discussion concerning the various alternatives. The Instron Board concluded
that because Instron's non-core businesses were small and their divestiture
would be unlikely to have a material effect on Instron's market value,
divestitures of non-core businesses was not an alternative likely to enhance
shareholder value or provide liquidity to the Instron stockholders. The Instron
Board likewise concluded that spin-offs of non-core businesses would not be a
viable alternative because none of Instron's non-core businesses were large
enough to be stand-alone public companies. With respect to joint ventures, the
Instron Board determined that within the materials and structural testing
systems industry the opportunities for joint ventures and other strategic
alliances were limited. The Instron Board concluded that a share repurchase
program was not an attractive alternative because it would only exacerbate the
illiquidity of the Instron Common Stock.
In reviewing potential alternatives at the August 11, 1998 Instron Board
meeting, the Instron Board noted that while acquiring strategic businesses or
assets that could add to or strengthen Instron's core businesses would not
address stockholder liquidity concerns, Instron had been successful to date in
executing that operating and business strategy. The Instron Board discussed the
fact that it could continue to focus on add-on acquisitions where it could
leverage its market position to reduce costs and increase efficiency. However,
the Instron Board believed that in view of the markets in which the company
operated, in the future there would likely be fewer attractive acquisition
candidates and that enhancing shareholder value by maintaining the status quo
and pursuing add-on acquisitions was inherently risky. The Instron Board also
discussed the strategy of engaging in a sizable acquisition, which it believed
had the potential, among other things, to diversify Instron's revenue mix,
leverage and strengthen its distribution network with broader product offerings
and increase revenue and cash flow. However, the Instron Board believed that
undertaking such a significant acquisition would expose Instron to excessive
financial and operating risks associated with the execution of such a
transaction, particularly in view of the substantial management resources that
would be required to be devoted to such an acquisition. The Instron Board
concluded that a potential sale of Instron was the alternative that would most
likely allow Instron to satisfy the objectives of increasing shareholder value
and providing liquidity to the Instron stockholders.
Following the Instron Board's decision to explore a potential sale of the
company, The Beacon Group recommended at the August 11, 1998 Instron Board
meeting that Instron implement a multi-step process in order to solicit
potential bids. The first step would be a broad marketing effort designed to
attract as wide and competitive a field of interested parties as possible. The
second step would be to seek more specific proposals from a smaller group of
interested parties, whose offers would be evaluated based upon such criteria as
price, form of consideration and certainty of consummation of a transaction.
Pursuant to this bidding process, the smaller group of interested parties would
submit competing proposals to acquire Instron or its assets. As the third step,
Instron would enter into exclusive negotiations concerning a definitive
agreement with the party whose bid would be most likely to provide the best
value for the Instron stockholders. According to The Beacon Group, this process
was preferable to other alternatives, such as negotiating only with one party
throughout the process, because in a competitive bidding process parties were
more likely to submit their highest bid to avoid being outbid by a competing
party. Thus, in the opinion of The Beacon Group, this multi-step process was
most likely to increase the amount of consideration to be received by the
Instron stockholders.
Following this discussion, the Instron Board decided to adopt The Beacon
Group's recommendation to solicit interest from potential acquirors using a
multi-step process designed to result in competitive bidding for the company.
The Instron Board also authorized management, with the assistance of Instron's
financial and legal advisors, to prepare a confidential information package for
distribution to potential buyers and to enter into confidentiality agreements
with potential buyers.
12
<PAGE> 23
Following the August 11, 1998 Instron Board meeting, The Beacon Group began
the process of soliciting the interest of 49 parties in merging with or
acquiring Instron ("Phase I"). These potential buyers were comprised of certain
private companies, certain publicly traded companies engaged in businesses
related to one or more of Instron's businesses ("strategic buyers"), and
financial buyers engaged in the business of pursuing investment opportunities.
As part of such solicitation, The Beacon Group contacted senior executives or
directors of such potential buyers to inquire as to their interest in exploring
a possible business combination transaction with Instron. These potential buyers
were asked to execute a confidentiality agreement before The Beacon Group would
be permitted to distribute confidential information packages regarding Instron
to such potential buyers. A total of 23 potential buyers executed
confidentiality agreements and received confidential information packages. In
connection with the distribution of the confidential information packages, these
potential buyers were asked to submit indications of interest concerning a
possible business combination or acquisition transaction with Instron not later
than the end of the first week of January 1999. The other 26 potential buyers
who were contacted indicated to The Beacon Group that they did not have an
interest in exploring a transaction with Instron at that time.
At a meeting of the Instron Board held on November 4, 1998, The Beacon
Group updated the Instron Board on The Beacon Group's progress in soliciting
indications of interest from potential buyers. The Beacon Group informed the
Instron Board that it had received a number of preliminary indications of
interest from certain potential buyers and that it was continuing its efforts to
contact other potential buyers. At the November 4 meeting, The Beacon Group also
advised the Instron Board with respect to recent adverse conditions in the
financing markets and the markets for mergers and acquisitions, recent declines
in the operating results and valuation of Instron's principal competitor, and
recent comparable mergers and acquisitions activity in the analytical instrument
industry. However, The Beacon Group also noted that the financing markets and
the mergers and acquisitions markets appeared to be stabilizing. The Instron
Board then authorized The Beacon Group to continue its marketing efforts.
At a meeting of the Instron Board held on December 9, 1998, The Beacon
Group again updated the Instron Board on The Beacon Group's progress in
soliciting indications of interest from potential buyers. The Beacon Group also
noted that the mergers and acquisitions markets had continued to strengthen in
conjunction with the equity markets, but that the markets for acquisition
financing had not improved significantly making such financing more expensive
and difficult to obtain. At this meeting, The Beacon Group informed the Instron
Board that it was nearing the completion of its solicitation of preliminary
indications of interest and that it would at that time begin the second phase of
the process, after which The Beacon Group would make a formal presentation to
the Instron Board before beginning the final phase.
At the end of Phase I, The Beacon Group received ten preliminary
indications of interest from potential buyers who had received confidential
information packages. Of these indications of interest, five involved a merger
with a strategic buyer and five involved a recapitalization merger pursuant to
which a financial buyer would make an investment in Instron that would result in
Instron becoming a private company. These indications of interest either
specified a price or range of prices to be paid to the Instron stockholders from
$15.00 to $24.00 per share or indicated that the potential buyer would consider
paying a premium to the then current trading price of the Instron Common Stock.
At the direction of Instron, The Beacon Group invited five of the ten
potential buyers, each of whom had indicated a willingness to pay a significant
premium to the then current trading price of the Instron Common Stock, to
participate in the next phase of the process ("Phase II"). In connection with
Phase II of the bidding process, each of these five potential buyers (the "Phase
II Bidders") were permitted to conduct preliminary due diligence on Instron and
were given access to a data room in which Instron had assembled various
materials and documentation concerning the company's business and operations. In
addition, in January and February of 1999 four of the Phase II Bidders attended
presentations by Instron's management concerning its business and operations. As
part of the Phase II process, The Beacon Group requested that each of the Phase
II Bidders submit, on or about February 19, 1999, a formal proposal (a "Phase II
Proposal") specifying an estimated price that such bidder might be willing to
pay to the Instron stockholders, an outline of any significant comments or
requested changes to a draft of a merger agreement that was provided to such
bidders, such bidder's intentions with respect to Instron's current management,
a description
13
<PAGE> 24
of any additional due diligence items or activities that such bidder would
expect to undertake, the status of any proposed financing for the transaction,
and any other significant conditions relating to the transaction. The Beacon
Group informed each of the Phase II Bidders that following February 19, 1999,
Instron would evaluate the Phase II Proposals and select potential buyers with
which to conduct a final phase of negotiations with a view to receiving a final
proposal from the Phase II Bidders.
At the end of the Phase II process, another party submitted a preliminary
indication of interest which was rejected because it was at a price
significantly below the other indications of interest and contained other terms
and conditions which made the bid unattractive.
In connection with the Phase II process, only two of the five Phase II
Bidders submitted written proposals. Kirtland's Phase II Proposal expressed an
interest in pursuing a leveraged recapitalization merger with Instron pursuant
to which substantially all of the Instron stockholders would receive cash in the
merger at an estimated price per share of $22.00. Kirtland's proposal required
the continued participation and involvement of the existing senior management of
Instron and was conditioned upon, among other things, the execution of mutually
acceptable definitive documentation, the completion by Kirtland of further due
diligence satisfactory to Kirtland, the receipt by Kirtland of debt financing on
terms satisfactory to Kirtland and the negotiation of satisfactory arrangements
with the existing senior management of Instron concerning a continued ownership
interest in Instron following the transaction. Kirtland's proposal also included
initial comments from its legal counsel on the draft of the merger agreement.
The other Phase II Proposal was submitted by a Phase II Bidder that, like
Kirtland, also was a financial buyer ("Bidder A"). Pursuant to its Phase II
Proposal, Bidder A expressed an interest in pursuing a leveraged
recapitalization merger with Instron at an estimated price per share of $22.50.
Bidder A's proposal also provided for the continued participation and
involvement of the existing senior management of Instron and was conditioned
upon, among other things, the completion by Bidder A of further due diligence
satisfactory to Bidder A and the receipt by Bidder A of debt financing on terms
satisfactory to Bidder A. Bidder A's proposal did not include any comments from
its legal counsel on the draft of the merger agreement. Bidder A also expressed
to The Beacon Group its desire to negotiate the terms of any proposed
transaction on an exclusive basis with Instron.
At a meeting of the Instron Board held on March 10, 1999, the Instron Board
formed the Special Committee, consisting of Mr. Young, Dennis J. Moore and John
F. Smith, to consider and evaluate the two Phase II Proposals and any other
proposals that might be received by Instron. The Instron Board selected Messrs.
Young, Moore and Smith to serve as the members of the Special Committee because
they were not employed by Instron and would neither be employed by nor own an
equity interest in Instron following consummation of a transaction. The Instron
Board also authorized the Special Committee to participate in the negotiations
of the material terms and conditions of the proposed transactions under
consideration and to recommend to the Instron Board the advisability of entering
into a definitive agreement with respect to any such transaction. The Instron
Board formed the Special Committee primarily because it believed that a
recapitalization transaction in the form proposed by each of Kirtland and Bidder
A might present potential conflicts of interest for Instron's senior management
and certain members of the Instron Board, who, unlike the other Instron
stockholders, would have a continuing equity interest in Instron following
consummation of such a transaction. The Instron Board also considered the fact
that, in view of the foregoing potential conflicts of interest of Instron's
senior management, it would be advisable for senior management to retain
separate legal counsel to advise it in connection with the proposed transactions
under consideration. For the same reason, the Instron Board deemed it advisable
that the Other Investors retain separate legal counsel in connection with the
proposed transactions under consideration. Subsequent to the March 10, 1999
Instron Board meeting, the Management Investors and the Other Investors each
retained separate legal counsel.
At the March 10, 1999 Instron Board meeting, The Beacon Group advised the
Instron Board with respect to the status of the bidding process including its
analysis of the two Phase II Proposals that had been received and the additional
preliminary indication of interest. At this meeting, The Beacon Group provided
the Instron Board with a detailed analysis of the steps that The Beacon Group
had undertaken in the Phase I and Phase II bidding process. This analysis
included a description of the overall timetable for the Phase I and
14
<PAGE> 25
Phase II bidding process, a summary of the efforts made by The Beacon Group to
contact potential interested parties, a summary of the preliminary indications
of interest received to date in the bidding process, a review of the management
presentations attended by certain Phase II Bidders, an overview of the contacts
made and discussions with Kirtland and Bidder A, a discussion of valuation
considerations that supported the range of the per share prices proposed by
Kirtland and Bidder A, and a detailed timetable for the final phase of the
process. The Beacon Group also reviewed with the Instron Board the additional
preliminary indication of interest that was received in the Phase II process.
To facilitate the Instron Board's review of the two Phase II Proposals, The
Beacon Group also reviewed certain qualitative aspects of these proposals,
including the sources and availability of the debt financing required under the
proposals, the certainty of consummating a transaction, the approvals required
to consummate a transaction, the expected level of participation and involvement
in the company by senior management following consummation of a transaction and
the likelihood that a transaction would qualify for recapitalization accounting
treatment. The Beacon Group noted in particular that each of the proposals was
conditioned on further due diligence and the securing of debt financing. Both
The Beacon Group and Instron's legal counsel advised the Instron Board that
Instron should not grant exclusivity to either Kirtland or Bidder A but should
continue the bidding process with both of them and attempt to obtain, among
other things, (i) a higher price per share to be paid to the Instron
stockholders in a transaction, (ii) greater certainty with respect to any debt
financing required for a transaction and (iii) more specific terms of
management's continued involvement in the company following consummation of a
transaction.
Immediately following the March 10, 1999 Instron Board meeting, the Special
Committee met to discuss the remainder of the bidding process and the timing of
such process. At this meeting, Instron's legal counsel advised the Special
Committee with respect to the Special Committee's legal responsibilities and the
legal principles applicable to, and the legal consequences of, actions taken by
the Special Committee with respect to the Phase II Proposals made by Kirtland
and Bidder A as well as any other proposals that may be made in the future
concerning a potential transaction involving the company. In particular,
Instron's legal counsel advised the Special Committee with respect to the
Special Committee's fiduciary duties generally, the ability of the Special
Committee to withdraw or modify its recommendation of any transaction and the
provisions of the merger agreement relating thereto, and the necessity for
obtaining shareholder approval of any proposed transaction. The Special
Committee then considered the recommendations made by Instron's financial and
legal advisors at the March 10, 1999 Instron Board meeting and concluded that
Instron should adopt such recommendations and proceed to the final phase of the
bidding process.
Promptly following the meetings of the Instron Board and the Special
Committee on March 10, 1999, The Beacon Group contacted Kirtland and Bidder A
(the "Phase III Bidders"), each of whom continued to express an interest in
pursuing a recapitalization transaction with Instron. The Beacon Group informed
the Phase III Bidders that the Instron Board had formed the Special Committee
and had authorized the Special Committee to participate in the negotiations of
the material terms and conditions of any proposed transaction and to recommend
to the Instron Board the advisability of entering into a definitive agreement
with respect thereto. The Beacon Group also advised Kirtland and Bidder A that
Instron was not prepared to negotiate the terms of a proposed transaction
exclusively with either of them. The Beacon Group then invited the Phase III
Bidders to participate in the third and final phase of the bidding process
("Phase III"). In this regard, the Phase III Bidders were given the opportunity
to perform extensive due diligence on Instron, including the examination of
additional documentation requested by them or their financing sources, touring
Instron's United States and European facilities and interviewing Instron's
senior management. The Phase III Bidders were also given the opportunity to
comment further on a form of merger agreement that had been revised to reflect a
recapitalization transaction. As part of the Phase III process, each of the
Phase III Bidders were asked to complete their due diligence and submit a final
proposal to The Beacon Group by April 5, 1999.
During the period of March 21 through March 24, 1999, representatives of
Kirtland met with members of Instron's senior management, including Mr.
McConnell, and representatives of The Beacon Group in Germany and the United
Kingdom to tour Instron's research and development and manufacturing operations
in Darmstadt, Germany and High Wycombe, U.K., to meet members of Instron's
management teams at these facilities and to visit certain of Instron's
customers. During the period of March 24 through March 27, 1999,
15
<PAGE> 26
representatives of Bidder A participated in a substantially similar tour of
Instron's operations in Darmstadt and High Wycombe. During this period, each of
Kirtland's and Bidder A's legal counsel performed extensive due diligence on
Instron, requesting various documentation from Instron and visiting Instron's
Canton, Massachusetts headquarters. Representatives of Kirtland and Bidder A
also visited Instron's headquarters to perform additional financial due
diligence.
During the last two weeks of March 1999, legal counsel for the Phase III
Bidders reviewed the draft of the recapitalization merger agreement that had
been distributed to the Phase III Bidders. On March 18, 1999, Bidder A's legal
counsel provided Instron with a memorandum summarizing Bidder A's preliminary
comments on the draft of the recapitalization merger agreement that had been
distributed to the Phase III Bidders. On March 25, 1999, Kirtland's legal
counsel provided Instron with detailed comments on the draft of the
recapitalization merger agreement that had been distributed to the Phase III
Bidders.
On March 30, 1999, the Special Committee held a meeting to discuss the
status of the Phase III bidding process. Prior to this meeting, the Special
Committee received materials from Instron's legal and financial advisors
summarizing the status of each of the Phase III Bidders' legal and financial due
diligence and the negotiations with their legal counsel concerning the proposed
terms of the recapitalization merger agreement. The Special Committee also
received copies of Kirtland's detailed comments on the draft of the
recapitalization agreement, a proposed revised draft of the recapitalization
merger agreement responding to Kirtland's comments, the memorandum prepared by
Bidder A's legal counsel concerning its preliminary comments on the draft of the
recapitalization merger agreement, and a proposed revised draft of the
recapitalization agreement responding to such comments. At the March 30, 1999
meeting, the Special Committee discussed the fact that Kirtland had
substantially completed its legal and financial due diligence and had engaged in
extensive negotiations with Instron's legal counsel concerning the terms of the
recapitalization merger agreement. The Special Committee also discussed its
concern that, in contrast to Kirtland's progress, Bidder A was still in the
process of conducting its legal and financial due diligence and had not yet
provided Instron with a detailed markup of the recapitalization merger
agreement.
On April 5, 1999, The Beacon Group received final proposals (the "Phase III
Proposals") from each of the Phase III Bidders, accompanied by drafts of debt
financing commitment letters from such bidders' proposed lenders. Kirtland's
Phase III Proposal contemplated a recapitalization merger pursuant to which the
Instron stockholders (other than certain management and non-management
stockholders of Instron who Kirtland would require to have a continuing equity
interest in the company following consummation of the transaction) would receive
$20.50 per share in cash. Kirtland's proposal stated that, based upon
conversations between Kirtland and members of Instron's senior management,
Kirtland believed that it would be able to quickly agree on the arrangements for
management's ongoing ownership interest in the company. Kirtland's Phase III
Proposal also provided that the financing required to complete the transaction
would come from equity investments by Kirtland, members of Instron's management
and certain other non-management stockholders of Instron, and a combination of a
revolving credit facility and high yield debt. Kirtland's Phase III Proposal
also provided for a number of conditions to Kirtland's obligation to consummate
a transaction with Instron. These conditions consisted, among other things, of:
(i) the negotiation of arrangements with Instron's management concerning its
continued equity investment in Instron; (ii) revenues and earnings for Instron's
fiscal quarter ended April 3, 1999 being consistent with projections previously
provided to Kirtland in connection with its financial due diligence review of
Instron; (iii) Kirtland's lenders being reasonably satisfied with the results of
their due diligence review of Instron, which was expected to be completed within
two weeks; and (iv) Instron having debt (net of cash) at the closing of the
transaction not in excess of $11.5 million (the "Net Debt Closing Condition").
Bidder A's Phase III Proposal also contemplated a recapitalization merger
pursuant to which the Instron stockholders (other than certain management
stockholders and potentially non-management stockholders of Instron who would
have a continuing equity interest in the company following consummation of the
transaction) would receive $20.00 per share in cash. Bidder A's proposal stated
that prior to executing a definitive merger agreement, Bidder A anticipated
finalizing arrangements with Instron's management and other non-management
shareholders concerning their ongoing ownership interest in the company. Bidder
A's Phase III Proposal also provided that the financing required to complete the
transaction would come from
16
<PAGE> 27
equity investments by Bidder A, members of Instron's management and certain
other non-management stockholders of Instron, and a combination of a revolving
credit facility, high yield debt and mezzanine financing in the form of senior
preferred equity. Bidder A's Phase III Proposal was accompanied by commitment
letters from its lender that set forth the terms of the revolving credit, high
yield debt and mezzanine financing to be provided by such lender. Bidder A
indicated in its Phase III Proposal that it had conducted significant due
diligence and to date it had not identified any material issues. Bidder A stated
that it expected to complete its legal and financial due diligence by April 14,
1999. In addition, Bidder A indicated in its Phase III Proposal that it had
provided summary terms of the arrangements with Instron's management concerning
their ongoing ownership interest in the company to management and management's
legal counsel. Bidder A's Phase III Proposal also indicated that it would need
to review the results of Instron's fiscal quarter ended April 3, 1999 prior to
entering into a definitive agreement with Instron with respect to a transaction.
Finally, Bidder A stated in its Phase III Proposal that the $20.00 per share
price was below the $22.50 per share price referred to in its Phase II Proposal
as a result of several factors, including, without limitation, the results of
obtaining definitive terms of available bank financing and the amount of
expenses to be incurred by Instron in connection with the transaction.
On April 7, 1999, the Special Committee met to discuss the Phase III
Proposals submitted by Kirtland and Bidder A. In order to facilitate the Special
Committee's review of the two Phase III Proposals, The Beacon Group reviewed
certain quantitative aspects of these proposals, including the proposed cash
purchase price, the financing and capital structure contemplated by the
proposals and the material terms and conditions of the financing commitments
that had accompanied each of the proposals. The Beacon Group also reviewed for
the benefit of the Special Committee certain qualitative aspects of each of the
Phase III Proposals, including the sources and availability of the debt
financing required under the proposals, the certainty of consummating a
transaction with each of the Phase III Bidders in view of the conditions set
forth in their respective Phase III Proposals, and the expected level of
participation and involvement in the company by management and certain
non-management stockholders following consummation of the proposed transaction.
In addition, Instron's legal counsel updated the Special Committee on the status
of negotiations of the proposed merger agreements with each of Kirtland and
Bidder A.
Following The Beacon Group's review of the Phase III Proposals at the April
7, 1999 Special Committee meeting, certain members of the Special Committee
expressed some disappointment at the pricing of the two proposals, particularly
in view of the fact that the two Phase III Bidders had reduced their proposed
cash purchase price significantly from their previous proposals. At the meeting,
the Special Committee also discussed, with advice from The Beacon Group and
Instron's legal counsel, the implications of rejecting both Phase III Proposals.
Following a discussion by the Special Committee, the Special Committee concluded
that neither of the Phase III proposals should be accepted at the current time
and that The Beacon Group should extend the bidding process over the next
several weeks. The Special Committee decided that, during this time, the two
Phase III Bidders would be asked to reconsider their proposed pricing and that
The Beacon Group would contact certain potential strategic buyers who had been
contacted earlier in the process, but who had not been interested at that time
in exploring a possible transaction with Instron. The Special Committee
concluded that if either of the two Phase III Bidders indicated a willingness to
increase their proposed cash purchase price or amended its proposal to increase
its proposed cash purchase price to at least the range of the Phase II
Proposals, then at such time the Special Committee would consider whether to
proceed to exclusive negotiations with such bidder.
Following the April 7, 1999 meeting of the Special Committee, The Beacon
Group contacted Kirtland and Bidder A to report the results of the Special
Committee's meeting and, in particular, to express the Special Committee's
disappointment with the reduction of the bidders' proposed cash purchase price
from the pricing set forth in their Phase II Proposals. The Beacon Group also
informed the two bidders that the Special Committee would likely look favorably
on a significant increase in their pricing for a transaction to at least the
range of the Phase II Proposals, but that the Special Committee was not prepared
to continue negotiations at the present pricing. The Beacon Group also informed
the two Phase III Bidders that the Special Committee had authorized The Beacon
Group to contact certain potential strategic buyers who earlier in the process
had not been interested in exploring a possible transaction with Instron.
17
<PAGE> 28
On April 13, 1999, representatives of Kirtland met with Messrs. McConnell
and Moulding and representatives of The Beacon Group. At this meeting, Kirtland
expressed its continued strong interest in pursuing a transaction with Instron
and indicated a willingness to increase its proposed cash purchase price. After
significant discussions and negotiation, Kirtland increased its proposed cash
purchase price to $22.00 per share, provided that Instron agree that following
execution of a merger agreement and prior to consummation of a transaction
Instron would not pay any dividends to holders of Instron Common Stock,
including Instron's regular quarterly dividend. Kirtland also conditioned its
revised bid (the "Revised Kirtland Phase III Proposal") on certain
non-management stockholders of Instron (the Other Investors) participating in
the equity ownership of Instron following the transaction through the ownership
of preferred stock. Following this meeting, The Beacon Group informed Bidder A
that its proposed bid of $20.00 was no longer competitive and that to remain
competitive in the bidding process it would have to increase the price of its
bid significantly.
On April 14, 1999, Bidder A informed The Beacon Group that it continued to
have an interest in pursuing a transaction with Instron, but that it would not
increase its price beyond $20.50 per share. Bidder A also emphasized its
experience in taking public companies private and its belief that its proposal
would provide greater certainty of consummating a transaction.
On April 15, 1999, the Special Committee held a meeting to discuss the
status of the Phase III Proposals, including The Beacon Group's conversations
with Kirtland and Bidder A, the results of The Beacon Group's efforts to contact
other strategic buyers and the status of negotiations of the merger agreements.
The Beacon Group informed the Special Committee that none of the potential
strategic buyers that were contacted expressed an interest in exploring a
possible transaction with Instron. The Beacon Group reported that these
potential buyers either lacked the management resources at that time to explore
a strategic transaction with Instron or were at that time pursuing a strategic
transaction with another party that precluded them from participating in
discussions with Instron. Following The Beacon Group's report to the Special
Committee, Instron's legal counsel updated the Special Committee on the status
of negotiations with Kirtland and Bidder A concerning the terms of the proposed
merger agreements.
Following the updates provided by The Beacon Group and Instron's legal
counsel, the Special Committee discussed at the April 15 meeting the likelihood
that a strategic buyer would express an interest in exploring a potential
transaction with Instron at some later time, concluding that in view of the
length of the process undertaken by Instron to date (eight months) pursuant to
which 49 potential buyers were solicited and The Beacon Group's latest attempts
to resolicit the interest of certain of these potential buyers, it was not
likely that a strategic or other buyer would express an interest in exploring a
transaction with Instron in the foreseeable future. During this discussion, the
Special Committee also considered Instron's then current and projected financial
performance, Instron's business strategy and the uncertainties associated with
the successful implementation of that strategy. In addition, the Special
Committee considered the uncertainties associated with terminating the sale
process at that time and soliciting potential buyers at some time in the future
in view of the fact that Instron had received the bids from Kirtland and Bidder
A. Following this discussion and a review of the terms and conditions of the
Revised Kirtland Phase III Proposal and Bidder A's Phase III Proposal, the
Special Committee authorized Mr. Young to participate in exclusive negotiations
with Kirtland concerning a recapitalization transaction on the terms set forth
in the Revised Kirtland Phase III Proposal upon the satisfaction of the
following conditions: (i) receipt by Kirtland of an executed commitment letter
relating to its procurement of high yield debt financing; (ii) agreement and
understanding by management of Instron concerning the scope of the Net Debt
Closing Condition; (iii) the Other Investors indicating that they were in
agreement with the general terms concerning their equity ownership in Instron
following completion of the transaction; and (iv) Instron's independent public
accountants concluding as a preliminary matter that the transaction as proposed
by Kirtland would qualify for recapitalization accounting treatment.
On April 20, 1999, Mr. Young reported to the other members of the Special
Committee that Kirtland had satisfied the four conditions discussed at the April
15, 1999 Special Committee meeting and that Instron should therefore proceed
with exclusive negotiations with Kirtland, which the members of the Special
Committee agreed was appropriate. On April 20, 1999, Instron and Kirtland
entered into an exclusivity
18
<PAGE> 29
agreement (the "Exclusivity Agreement") pursuant to which the parties agreed to
negotiate exclusively with each other until April 30, 1999.
Following the execution of the Exclusivity Agreement, the parties,
primarily through their legal counsel and, in the case of Instron, with the
assistance of The Beacon Group, focused on negotiating the final terms of the
Merger Agreement and the related documentation. In addition, the Other Investors
and the Management Investors, through their respective legal counsel, negotiated
with Kirtland's legal counsel the terms of their ongoing ownership interest in
Instron following completion of the transaction.
On May 4, 1999, the Special Committee and the Instron Board held meetings
to consider the Merger Agreement and the Transactions. At the Special Committee
meeting, The Beacon Group and Instron's legal counsel updated the Special
Committee on the events since the April 15, 1999 meeting, including the
negotiations of the Merger Agreement and the arrangements with the Other
Investors and the Management Investors. The Beacon Group then summarized for the
Special Committee its financial analysis of the Transactions that it had
prepared for the Instron Board meeting that was to follow the Special Committee
meeting. The Beacon Group also informed the Special Committee that it was
prepared to render its oral opinion to the Instron Board to the effect that as
of the date thereof, and based on the assumptions and subject to the limitations
and qualifications set forth therein, the Cash Merger Consideration was fair
from a financial point of view to the Public Stockholders. Following a
discussion by the Special Committee, the Special Committee unanimously
recommended that the Instron Board approve the Merger Agreement and the
Transactions and that the Instron Board recommend that the Instron stockholders
approve the Merger Agreement and the Transactions.
Immediately following the May 4, 1999 meeting of the Special Committee, the
Instron Board met to discuss the approval of the Merger Agreement and the
Transactions. At the Instron Board meeting, the Special Committee, certain
members of senior management of Instron, The Beacon Group and Instron's legal
counsel updated the Instron Board on the events since the March 10, 1999 meeting
of the Instron Board. Instron's legal counsel also gave a presentation to the
Special Committee on the timetable for the execution of definitive documentation
relating to the Transactions and certain disclosure issues relating thereto. The
Beacon Group then provided the Instron Board with a detailed and lengthy
presentation of its financial analysis of the Transactions. Following this
presentation, The Beacon Group rendered its oral opinion to the Instron Board to
the effect that as of the date thereof, and based on the assumptions and subject
to the limitations and qualifications set forth therein, the Cash Merger
Consideration was fair from a financial point of view to the Public
Stockholders. Following a discussion by the Instron Board, the Instron Board
approved the Merger Agreement and the Transactions, with Messrs. Hindman, Burr
and McConnell abstaining from the vote in view of their participation in the
Transactions.
The parties finalized negotiations of the terms of the Merger Agreement and
the related agreements during the period of May 4 to May 6, 1999. On the evening
of May 6, 1999, the Merger Agreement and the related agreements were executed.
On May 7, 1999, Instron and Kirtland jointly issued a press release announcing
the proposed transaction.
THE SPECIAL COMMITTEE'S AND THE INSTRON BOARD'S RECOMMENDATION
As discussed above under "-- Background of the Merger," the Special
Committee unanimously recommended that the Instron Board approve the Merger
Agreement and the Transactions and that the Instron Board recommend that the
Instron stockholders approve the Merger Agreement and the Transactions.
Following the unanimous recommendation of the Special Committee, the Instron
Board, other than Harold Hindman, George S. Burr and Mr. McConnell, unanimously
determined that the Merger Agreement and the Transactions, including the Merger,
were fair to and in the best interests of the Instron stockholders and
recommended that the stockholders approve the Merger Agreement and the
Transactions. Messrs. Hindman, Burr and McConnell abstained from voting on the
Merger Agreement and the Transactions because each of them has an interest in
the Merger as a member of the Investor Group. The Special Committee and the
Instron Board recommend that the stockholders vote "For" the approval of the
Merger Agreement and the Transactions.
19
<PAGE> 30
In reaching its determination that the Merger Agreement and the
Transactions, including the Merger, are fair to and in the best interests of the
Instron stockholders, each of the Instron Board and the Special Committee
consulted with Instron's financial and legal advisors, drew on its knowledge of
the business, operations, properties, assets, financial condition, operating
results, historical market prices and prospects of Instron and considered the
following factors, each of which the Instron Board and the Special Committee
deemed favorable:
(1) the belief of the Instron Board and the Special Committee that the
Merger represents a more desirable alternative than continuing to
operate Instron as a public company. In particular, the Instron
Board and the Special Committee believe that the trading price of
the Instron Common Stock has not appropriately reflected the
financial and market position of the company and that the markets
have undervalued the Instron Common Stock because of the limited
public trading market for such stock. In addition, the Instron
Board and the Special Committee believe that continuing to operate
Instron as a public company entails meaningful risks in the
execution of Instron's business strategy. After considering the
foregoing, the Instron Board and the Special Committee concluded
that, while Instron's business strategy could ultimately prove
successful, the recapitalization of Instron would provide
stockholders with liquidity for their investment at a stock price
at which Instron would not likely trade as an independent public
company in the foreseeable future and at a price that exceeds the
all time highest market price of the Instron Common Stock. See
"-- Background of the Merger" and "-- Instron Projections."
(2) the Instron Board and the Special Committee believed that the
Merger was the best offer reasonably available for the Instron
stockholders. The Instron Board and the Special Committee believed
that there were no other prospective buyers that both had the
financial ability to complete a strategic transaction and would be
willing to pay an aggregate consideration greater than that to be
paid by the Investor Group in the Merger. In seeking to maximize
value to the Public Stockholders, Instron and its financial
advisors instituted a multi-step process pursuant to which they
solicited the interest of 49 prospective buyers, executed 23
confidentiality agreements with prospective buyers and thereafter
received 11 indications of interest at various times and, after
conducting a formal bidding process, received two definitive
proposals offering to acquire Instron. Of the two definitive
proposals, Kirtland's proposal offered the highest price on a per
share basis and contained fewer conditions than the other
proposal. In addition, following receipt of the two definitive
proposals, Instron and its financial advisors resolicited the
interest of certain prospective buyers who earlier in the process
had declined to make a definitive proposal for reasons unrelated
to Instron and those prospective buyers who were contacted again
declined to make a proposal. For these reasons and the other
reasons described herein, the Instron Board and the Special
Committee concluded that the Merger and the Transactions were fair
to and in the best interests of Instron and the Public
Stockholders. See "-- Background of the Merger" and " -- Opinion
of Financial Advisors."
(3) the relationship of the Cash Merger Consideration to the
historical market prices for the Instron Common Stock and the fact
that the Cash Merger Consideration represents a significant
premium to recent historical trading prices of the Instron Common
Stock and exceeds the all time highest market price of the Instron
Common Stock. See "Historical Market Information."
(4) the oral opinion of The Beacon Group delivered to the Instron
Board, which was confirmed by its written opinion to the Instron
Board, dated as of May 6, 1999, to the effect that, based upon and
subject to certain factors and assumptions stated therein, as of
such date, the Cash Merger Consideration to be received in the
Merger by the Public Stockholders was fair from a financial point
of view to the Public Stockholders (a copy of which is attached to
this Proxy Statement as Appendix B). See "-- Opinion of Financial
Advisor."
(5) the financial ability and willingness of the Investor Group to
consummate the Merger. The Instron Board and the Special Committee
considered the fact that the Equity Investor had obtained certain
equity and debt commitments sufficient to provide the necessary
financing with
20
<PAGE> 31
which to consummate the Transactions, including the Merger, and had
delivered to the Instron Board and the Special Committee binding
financing commitment letters provided by the Equity Investor's
lenders. In this regard, the Instron Board and the Special Committee
considered the fact that unlike many other recapitalization
transactions similar in structure to the Merger, the Merger Agreement
did not provide for an unlimited right by the Equity Investor to
abandon the Merger and the other Transactions in the event that any of
the conditions to the Equity Investor's debt financing were unable to
be satisfied. Alternatively, the Merger Agreement provides that the
Equity Investor will not be required to consummate the Transactions,
including the Merger, if there shall have occurred any material
disruption or material adverse change in the banking, financial or
capital markets generally or in the market for senior credit
facilities or for new issuances of high yield securities which has
caused either of the Equity Investor's lenders to withdraw its
commitment to provide financing. Based on the foregoing, the Instron
Board viewed as reasonable the risk that the financing condition
contained in the Merger Agreement would not be satisfied. See
"-- Financing of the Merger" and "The Merger -- Terms of the Merger
Agreement."
(6) the terms and conditions of the Merger Agreement. In particular,
the Instron Board and the Special Committee considered the fact
that the Merger Agreement provided that, subject to the
satisfaction of certain conditions, the Instron Board would be
able to withdraw or modify its recommendation to the Instron
stockholders regarding the Merger and enter into an agreement with
respect to a more favorable transaction with a third party, if
such a transaction becomes available prior to the consummation of
the Merger. The Instron Board and the Special Committee also
considered the fact that the Merger Agreement provided for the
payment of liquidated damages equal to approximately 3% of the
aggregate transaction value, as well as expense reimbursement
obligations, which the Instron Board and the Special Committee
believed would not have the effect of unreasonably discouraging
competing bids. See "The Merger -- Terms of the Merger
Agreement -- Solicitation of Acquisition Proposals,"
"-- Termination" and "-- Fees and Expenses."
(7) the fact that the Merger Agreement requires the Merger to be
submitted to the Instron stockholders for approval, which allows
for an informed vote of the Public Stockholders on the merits of
the transaction without requiring a tender of shares or other
potentially coercive transaction structure, and the fact that the
Merger Agreement provides that it may be terminated by Instron if
approval of the holders of two-thirds of the outstanding Instron
Common Stock is not received. See "The Merger -- Terms of the
Merger Agreement."
The Instron Board and the Special Committee also considered the following
factors, all of which the Instron Board and the Special Committee considered as
negative factors, in its deliberations concerning the approval of the Merger
Agreement and the Transactions:
(1) The Instron Board and the Special Committee considered the fact
that consummation of the Merger would preclude the Public
Stockholders from having the opportunity to participate in the
future growth prospects of Instron. In addition, the Instron Board
and the Special Committee recognized that the Other Investors and
the Management Investors will have the opportunity to benefit from
any increases in the value of Instron following the Merger by
reason of their continuing equity interest in the Surviving
Corporation and therefore may realize a substantial economic
benefit from the transaction. In particular, the Instron Board and
the Special Committee considered that the Other Investors and the
Management Investors will own approximately 6.2% and 6.4%,
respectively, of outstanding shares of Surviving Corporation
Common Stock. The Instron Board and the Special Committee also
considered that the Surviving Corporation will reserve
approximately 10.0% of the Surviving Corporation Common Stock on a
fully diluted basis (assuming the exercise of all options,
including the Rollover Options) for the grant of options to
management employees, of which 4.0% will be granted to those
Management Investors who are members of Instron's management upon
consummation of the Merger. The Instron Board and the Special
Committee further considered that certain
21
<PAGE> 32
Management Investors will amend their existing severance agreements or
will enter into new agreements relating to deferred compensation with
the Surviving Corporation, and that such amended or new agreements
will provide for the payment to them of potential severance benefits
and other compensation or benefits. See "-- Share Ownership of Instron
Following the Merger" and "-- Conflicts of Interest."
(2) The Instron Board and the Special Committee considered the fact
that the options to purchase shares of Instron Common Stock
previously granted to the Management Investors pursuant to
Instron's stock option plans would become immediately exercisable
as a result of the Merger. In addition, the Instron Board and the
Special Committee considered the fact that the restrictions on the
shares of Instron Common Stock previously issued to the Management
Investors pursuant to Instron's stock option plans would lapse as
a result of the Merger. The Instron Board and the Special
Committee also considered that the Merger would result in a
"change of control" under the terms of the severance agreements
between Instron and certain of the Management Investors, which
could result in such Management Investors receiving certain
payments under such agreements in the event of the termination of
their employment following the Merger. See "-- Conflicts of
Interest."
(3) The Instron Board and the Special Committee considered the
potential conflicts of interest of the Management Investors and
the Other Investors resulting from the foregoing economic and
other benefits that might be realized by them. However, the
Instron Board and the Special Committee believe that the
procedures that were followed in the bidding process and in the
negotiation of the Merger Agreement and the terms of the
Transactions properly addressed these conflicts of interest and
were fair to the Public Stockholders.
While the Instron Board and the Special Committee considered the foregoing
factors, they did not quantify or attach any particular weight to such factors,
and individual members of the Instron Board and the Special Committee may have
placed different emphasis on particular positive or negative factors in reaching
their determination that the Merger Agreement and the Transactions are fair to
and in the best interests of the Instron stockholders. However, in the opinion
of the Instron Board and the Special Committee, the positive factors set forth
above outweighed the negative factors set forth above and, accordingly, the
Instron Board and the Special Committee each approved the Merger Agreement and
the Transactions, including the Merger.
If the Instron stockholders do not approve the Merger Agreement and the
Transactions, or if the Merger and the other Transactions are not consummated
for any other reason, the Instron Board expects that Instron will continue to
pursue its business objectives principally of (i) designing, developing,
manufacturing and servicing materials and structural testing systems, software
and accessories, and (ii) seeking opportunities to grow through acquisitions of
complementary or related businesses and technologies. In addition, Instron may
seek other business combination opportunities.
INSTRON PROJECTIONS
In connection with Kirtland's review of Instron and in the course of the
negotiations between Instron and Kirtland described in "-- Background of the
Merger," Instron provided Kirtland and other interested parties with certain
non-public business and financial information. The non-public information
provided by Instron included certain projections of the future operating
performance of Instron (the "Instron Projections"). The Instron Projections
include management projections of, among other things, Instron's net sales, net
income and EBITDA. Instron provided certain projections as of February 1999
which covered the years 1999 through 2002. Subsequently, management reviewed
Instron's actual results in the first quarter of 1999 and in April 1999 revised
its projections for 1999 based on its review of the first quarter results and
other factors. The Special Committee and the Instron Board also reviewed the
Instron Projections in connection with approving the Merger Agreement and the
Transactions. The Instron Projections do not give effect to the Merger or the
financing thereof.
Instron does not, as a matter of course, publicly disclose projections as
to future revenues or earnings. The Instron Projections were not prepared with a
view to public disclosure and are included in this Proxy
22
<PAGE> 33
Statement only because such information was made available to Kirtland in
connection with its due diligence investigation of Instron and was considered by
the Special Committee and the Instron Board in connection with approving the
Merger Agreement and the Transactions. Accordingly, it is expected that there
will be differences between actual and projected results, and actual results may
be materially different than those set forth below. The Instron Projections were
not prepared with a view to compliance with the published guidelines of the
Commission regarding projections, nor were they prepared in accordance with the
guidelines established by the American Institute of Certified Public Accountants
for preparation and presentation of financial projections. Moreover,
PricewaterhouseCoopers LLP, Instron's independent auditors, has not examined,
compiled or applied any procedures to the Instron Projections in accordance with
standards established by the American Institute of Certified Public Accountants
and expresses no opinion or any assurance on their reasonableness, accuracy or
achievability. These forward-looking statements reflect numerous assumptions
made by Instron's management. In addition, factors such as industry performance,
general business, economic, regulatory, and market and financial conditions, all
of which are difficult to predict, may cause the Instron Projections or the
underlying assumptions to be inaccurate. Accordingly, there can be no assurance
that the Instron Projections will be realized, and actual results may be
materially more or less favorable than those contained in the Instron
Projections.
The inclusion of the Instron Projections herein should not be regarded as
an indication that the Investor Group, the Special Committee, the Instron Board,
Instron or any of their respective financial advisors considered or consider the
Instron Projections to be a reliable prediction of future events, and the
Instron Projections should not be relied upon as such. None of the Special
Committee, the Instron Board, Instron, the Investor Group, or any of their
financial advisors intends to update or otherwise revise the Instron Projections
to reflect circumstances existing after the date when made or to reflect the
occurrence of future events even in the event that any or all of the assumptions
underlying the Instron Projections are shown to be in error or to otherwise have
changed.
The Instron Projections that Instron provided to Kirtland and that The
Beacon Group analyzed in giving its fairness opinion and the Special Committee
and the Instron Board reviewed in connection with approving the Merger Agreement
and the Transactions are set forth below:
MANAGEMENT PROJECTIONS AS OF FEBRUARY 1999
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------
1999 2000 2001 2002
------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net Sales............................................. $232.1 $238.7 $250.8 $262.9
Gross Profit.......................................... 89.3 95.0 100.4 106.2
Operating Expense..................................... 70.5 73.5 76.4 79.0
------ ------ ------ ------
EBIT.................................................. 18.8 21.5 24.0 27.2
Net Income............................................ 11.3 12.6 14.4 16.6
====== ====== ====== ======
EBITDA................................................ 27.0 29.9 32.6 36.0
====== ====== ====== ======
</TABLE>
23
<PAGE> 34
REVISED MANAGEMENT PROJECTIONS AS OF APRIL 1999 FOR PROJECTED YEAR ENDING
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING
DECEMBER 31, 1999
---------------------------
NEW PROJECTED AS OF
FORECAST FEBRUARY 1999
-------- ---------------
(IN MILLIONS)
<S> <C> <C>
Net Sales................................................... $228.4 $232.1
EBIT........................................................ 18.1 18.8
EBITDA...................................................... 26.6 27.0
</TABLE>
OPINION OF FINANCIAL ADVISOR
The Beacon Group acted as financial advisor to the Instron Board and the
Special Committee in connection with the Transactions, including the Merger. On
May 4, 1999, The Beacon Group rendered its oral opinion to the Instron Board to
the effect that, as of that date and based on and subject to the assumptions
made, matters considered and limits of the reviews undertaken by The Beacon
Group described in its opinion, the Cash Merger Consideration to be received by
the Public Stockholders pursuant to the Merger was fair from a financial point
of view to such stockholders. The Beacon Group subsequently confirmed this
opinion, as of May 6, 1999, in writing. This written opinion is referred to in
this Proxy Statement as the "Beacon Opinion."
The full text of the Beacon Opinion is included in this Proxy Statement as
Appendix B. The Beacon Opinion is addressed to the Instron Board for its
information concerning the fairness from a financial point of view of the Cash
Merger Consideration and does not address the merits of the underlying decision
of Instron to engage in the Merger or the other Transactions and does not
constitute a recommendation to any holder of shares of Instron Common Stock as
to how such holder should vote with respect to the Merger Agreement or any other
matter relating to the Merger. The summary of the Beacon Opinion in this section
is qualified in its entirety by reference to the full text of the Beacon Opinion
included in this Proxy Statement as Appendix B. For specific information
concerning the procedures followed, assumptions made, matters considered and
qualifications and limitations of the review undertaken by The Beacon Group in
connection with the Beacon Opinion, holders of shares of Instron Common Stock
should read the Beacon Opinion in its entirety.
In connection with the Beacon Opinion, The Beacon Group reviewed, among
other things:
- the Merger Agreement;
- Annual Reports to stockholders and Annual Reports on Form 10-K of Instron
for the five years ended December 31, 1998;
- certain interim reports to stockholders of Instron and Quarterly Reports
on Form 10-Q of Instron;
- certain other communications from Instron to its stockholders;
- internal financial analyses and forecasts of Instron prepared by
Instron's management; and
- the potential pro forma impact of the Merger on the Surviving
Corporation.
In addition, The Beacon Group held discussions with members of the senior
management of Instron regarding the past and current business, operations and
financial condition and future prospects of Instron, reviewed the reported price
and trading activity of the shares of Instron Common Stock, compared certain
financial and stock market information concerning Instron with similar
information for some other companies the securities of which are publicly
traded, reviewed the financial terms of some recent business combinations in
industries and markets The Beacon Group deemed relevant and performed other
studies and analyses that The Beacon Group considered appropriate, including an
analysis of the pro forma capitalization of Instron after giving effect to the
Merger and proposed financing arrangements related to the Merger.
24
<PAGE> 35
In preparing the Beacon Opinion, The Beacon Group assumed and relied
without independent verification on the accuracy and completeness of the
financial and other information reviewed by it for purposes of the Beacon
Opinion. With respect to the financial forecasts reviewed and discussed, The
Beacon Group assumed that they had been reasonably prepared on bases reflecting
the best currently available estimates and judgments of Instron's management as
to the future financial performance of Instron. We refer to these financial
forecasts in this Proxy Statement as the Instron Projections, and they are
included in this Proxy Statement on page 22. The Beacon Group did not make an
independent evaluation or appraisal of the assets and liabilities of Instron or
any of its subsidiaries, and The Beacon Group was not furnished with any such
evaluation or appraisal. The Beacon Opinion is necessarily based on economic,
market, financial and other conditions as they existed on, and could be
evaluated as of, the date of the Beacon Opinion.
In evaluating the fairness of the Cash Merger Consideration from a
financial point of view, The Beacon Group also reviewed with the Instron Board
the breadth of the process undertaken by The Beacon Group to identify parties
potentially interested in effecting a transaction with Instron. In rendering the
Beacon Opinion, The Beacon Group considered the fact that, after contacting 49
potentially interested parties, no proposal was forthcoming that was more
attractive to the Instron stockholders than Kirtland's proposal.
A summary of the material financial analyses used by The Beacon Group in
preparing the Beacon Opinion and presented by The Beacon Group to the Instron
Board on May 4, 1999 follows. This summary includes information presented in
tabular form. In order to understand fully the financial analyses performed by
The Beacon Group, the tables must be read together with the text of each
description. The tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables without considering the
full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading
or incomplete view of the financial analyses performed by The Beacon Group.
Comparable Public Company Analysis. The Beacon Group reviewed and compared
financial information and public market multiples for Instron to corresponding
financial information and public market multiples for selected publicly traded
analytical instruments companies, which companies were considered by The Beacon
Group to be reasonably comparable to Instron for purposes of this analysis. The
companies listed in the following table, which are referred to in this Proxy
Statement as the "Comparable Companies," are the companies that The Beacon Group
used for this analysis:
COMPARABLE COMPANIES
<TABLE>
<S> <C>
Beckman Coulter, Inc. MTS Systems Corporation
Bio-Rad Laboratories Thermoquest Corporation
Browne & Sharpe Manufacturing Company Varian Associates
Mettler-Toledo International Inc. Waters Corporation
Modern Controls, Inc.
</TABLE>
Using publicly available information, The Beacon Group calculated and
analyzed, among other things:
- the Equity Value (as defined below) of the Comparable Companies and
Instron as a multiple of certain historical and projected financial
criteria, including net income and tangible book value; and
- the Aggregate Value (as defined below) of the Comparable Companies and
Instron as a multiple of the latest 12 months', or "LTM," sales, earnings
before interest, taxes, depreciation and amortization, or "EBITDA," and
earnings before interest and taxes, or "EBIT."
The "Equity Value" of each company was calculated by multiplying the number
of shares of common stock outstanding for each company by the closing market
price of the company's shares of stock on April 30, 1999, adjusted to include
the impact, if any, of outstanding options. The "Aggregate Value" of each
company was calculated by adding the Equity Value of the company to its Net Debt
(as defined below). The "Net Debt" of each company was calculated by adding the
book value of the company's debt, preferred stock and minority interest and
subtracting cash and cash equivalents. The estimated net income data for
25
<PAGE> 36
Instron and for each Comparable Company was based on information obtained from
Institutional Brokers Estimate System.
The following table sets forth information concerning the overall ranges of
Equity Value as a multiple of net income and tangible book value and the overall
ranges of Aggregate Value as a multiple of sales, EBITDA and EBIT for all of the
Comparable Companies, and separately for MTS Systems Corporation, which in The
Beacon Group's judgment is Instron's closest comparable publicly-traded company
in terms of certain markets served (the "MTS Trading Multiples"), and the
multiples of the same financial metrics for Instron based on (i) the $17.00 per
share closing price of the Instron Common Stock as of April 30, 1999 (the
"Instron Trading Multiples") and (ii) the $22.00 per share Cash Merger
Consideration (the "Cash Merger Consideration Multiples"):
<TABLE>
<CAPTION>
EQUITY VALUE
AS OF APRIL 30, 1999 AS A MULTIPLE OF:
--------------------------------- AGGREGATE VALUE
NET INCOME AS A MULTIPLE OF LTM:
-------------------- TANGIBLE ---------------------
OVERALL COMPARABLE COMPANIES LTM 1999E 2000E BOOK VALUE SALES EBITDA EBIT
---------------------------- ---- ----- ----- ---------- ----- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Mean................................... 16.8x 13.1x 11.6x 1.9x 1.1x 7.9x 11.1x
Median................................. 14.8 13.1 12.5 1.9 1.0 7.5 11.3
High................................... 37.8 30.9 26.3 53.0 6.3 23.7 28.4
Low.................................... 6.2 6.1 4.9 0.6 0.4 5.8 7.4
MTS Trading Multiples.................. 10.7x 9.9x 8.1x 1.5x 0.8x 6.4x 8.2x
Instron Trading Multiples.............. 15.6 11.0 10.1 1.7 0.7 6.2 9.2
Cash Merger Consideration Multiples.... 20.8 14.3 13.0 2.2 0.9 7.9 11.8
</TABLE>
The Beacon Group noted that, while in its judgment MTS Systems Corporation
was Instron's closest comparable company in terms of markets served, no publicly
traded company was directly comparable to Instron and that the Comparable
Companies included certain higher growth, higher technology companies whose
characteristics are materially different from Instron's. Therefore, The Beacon
Group deemed the mean and median multiples derived in the foregoing analysis to
be instructive.
The Beacon Group calculated implied equity per share values for Instron
Common Stock by using Instron's balance sheet as of December 31, 1998, where
applicable, and by applying (1) Aggregate Value to LTM EBITDA multiples ranging
from 7.5x to 7.9x, (2) Aggregate Value to LTM EBIT multiples ranging from 11.1x
to 11.3x, (3) Equity Value to LTM net income multiples ranging from 14.8x to
16.8x and (4) Equity Value to 1999 estimated net income multiple of 13.1x, which
in each case were derived from the foregoing analysis, to Instron's LTM EBITDA,
LTM EBIT, LTM net income (in each case as of December 31, 1998) and estimated
1999 net income obtained from Institutional Brokers Estimate System,
respectively. Because MTS Systems Corporation is comparable to Instron in terms
of certain markets served, The Beacon Group also calculated an implied equity
value per share by applying MTS Systems Corporation's Aggregate Value to LTM
EBITDA multiple of 6.4x to Instron's LTM EBITDA as of December 31, 1998 and
using Instron's balance sheet as of December 31, 1998.
26
<PAGE> 37
The following table presents the ranges of implied equity per share values
for Instron Common Stock implied by these analyses compared with the $22.00 per
share Cash Merger Consideration:
<TABLE>
<CAPTION>
IMPLIED EQUITY
PER SHARE VALUE OF
INSTRON COMMON STOCK
------------------------
SELECTED COMPARABLE COMPANIES MULTIPLE RANGES APPLIED TO: LOW HIGH
--------------------------------------------------------- ------ ------
<S> <C> <C> <C>
Instron LTM EBITDA.......................................... $20.65 $21.77
Instron LTM EBIT............................................ $20.49 $20.87
Instron LTM Net Income...................................... $18.50 $21.00
Instron Estimated 1999 Net Income........................... $20.17 $20.17
MTS LTM EBITDA Multiple Applied to Instron LTM EBITDA....... $17.55
Per Share Cash Merger Consideration......................... $22.00
</TABLE>
Comparable Merger and Acquisition Transaction Analysis. Using primarily
publicly available information, The Beacon Group reviewed and analyzed 16
selected merger and acquisition transactions involving other companies in the
analytical instruments industry and related industries and derived certain
financial ratios which it compared with the same financial ratios for the
Merger. While The Beacon Group noted that no merger and acquisition transaction
reviewed was directly comparable to the Merger, The Beacon Group deemed three of
the reviewed transactions most relevant in evaluating the Cash Merger
Consideration (the "Comparable M&A Transactions"). In reviewing and presenting
this data, The Beacon Group noted that the merger and acquisition transaction
environment varies over time because of macroeconomic factors, including
interest rate and equity market fluctuations, and microeconomic factors,
including industry results and growth expectations, that no transaction reviewed
was identical to the Merger and that, accordingly, an assessment of the results
of the Comparable M&A Transactions analysis necessarily involves considerations
and judgments concerning differences in financial and operating characteristics
of Instron and other factors that would affect the acquisition value of the
companies to which Instron was being compared.
The Comparable M&A Transactions are:
<TABLE>
ACQUIROR ACQUIRED COMPANY
- ------------------------------------------------------------ ---------------------------------
<S> <C>
Investor Group.............................................. Buehler International Inc.
Waters Corporation.......................................... TA Instruments, Inc.
EG&G, Inc................................................... Perkin-Elmer Instruments Division
</TABLE>
With respect to the Comparable M&A Transactions and the Merger, The Beacon
Group, among other things, compared:
- the Equity Consideration Value (as defined below) of the acquired
companies and Instron as a multiple of LTM net income; and
- the Aggregate Consideration Value (as defined below) of the acquired
companies and Instron as a multiple of the LTM sales, EBITDA, EBIT and
net book capital.
The "Equity Consideration Value" of each acquired company and Instron was
calculated by multiplying the number of shares of common stock outstanding for
each company and Instron, respectively, by the aggregate consideration payable
per share of common stock in each Comparable M&A Transaction and in the Merger,
adjusted to include the impact, if any, of outstanding options. The "Aggregate
Consideration Value" of each acquired company and Instron was calculated by
adding the Equity Consideration Value of each company and Instron to the
company's and Instron's Net Debt, respectively.
In order to adjust for different growth and market characteristics of the
Comparable M&A Transactions, The Beacon Group analyzed the mean and median
multiples for the Comparable M&A Transactions. The following table presents the
overall mean and median of the Equity Consideration Value as a multiple of net
27
<PAGE> 38
income and the overall mean and median of Aggregate Consideration Value as a
multiple of sales, EBITDA, EBIT and net book capital for all of the Comparable
M&A Transactions and the multiples of the same financial metrics for Instron
based on the $22.00 per share Cash Merger Consideration.
<TABLE>
<CAPTION>
EQUITY
CONSIDERATION
AS A MULTIPLE AGGREGATE CONSIDERATION
OF LTM: AS A MULTIPLE OF LTM:
------------- --------------------------------
NET NET BOOK
SELECTED M&A TRANSACTION MULTIPLES INCOME SALES EBITDA EBIT CAPITAL
---------------------------------- ------------- ----- ------ ---- --------
<S> <C> <C> <C> <C> <C>
Mean............................................. 12.7x 1.3x 7.9x 10.9x 3.7x
Median........................................... 16.3 0.8 7.2 9.8 2.6
Cash Merger Consideration Multiples.............. 20.8x 0.9x 7.9x 11.8x 2.2x
</TABLE>
The Beacon Group calculated implied equity per share values for the Instron
Common Stock by using Instron's balance sheet as of December 31, 1998 (where
applicable) and by applying (1) the Aggregate Consideration Value to LTM EBITDA
multiples ranging from 7.2x to 7.9x, (2) the Aggregate Consideration Value to
LTM EBIT multiples ranging from 9.8x to 10.9x and (3) the Equity Consideration
Value to LTM net income multiples ranging from 12.7x to 16.3x, which in each
case were derived from the foregoing analysis, to the LTM EBITDA, LTM EBIT and
LTM net income, respectively, for Instron as of December 31, 1998.
The following table presents the range of implied equity per share values
for the Instron Common Stock implied by these analyses compared with the $22.00
per share Cash Merger Consideration:
<TABLE>
<CAPTION>
IMPLIED EQUITY
PER SHARE VALUE OF
INSTRON COMMON STOCK
--------------------------
SELECTED M&A TRANSACTION MULTIPLES APPLIED TO: LOW HIGH
---------------------------------------------- ------ ------
<S> <C> <C> <C>
Instron LTM EBITDA.......................................... $19.80 $21.77
Instron LTM EBIT............................................ $18.04 $20.11
Instron LTM Net Income...................................... $15.88 $20.38
Per Share Cash Merger Consideration......................... $22.00
</TABLE>
Discounted Cash Flow Analysis. The Beacon Group performed a discounted
cash flow analysis of the projected unlevered free cash flows of Instron, which
is defined as cash flow available after changes in working capital, capital
spending and tax obligations for the period 1999 through 2003 using the terminal
multiple method. The Beacon Group based this analysis on the Instron
Projections, without any discounts or adjustments to those projections, and a
range of discount rates and terminal values to determine the theoretical present
value of the entire company.
Applying discount rates ranging from 11.2% to 16.1% and terminal value
multiples of estimated Instron EBITDA in 2003 ranging from 6.5x to 8.0x, The
Beacon Group calculated the theoretical implied equity per share value of the
Instron Common Stock to range from $18.40 to $26.74. The Beacon Group arrived at
these discount rates based on its judgment of various factors, including
analysis of the estimated cost of capital and capital structures of selected
reasonably comparable public companies, and arrived at these terminal multiples
based on its review of the trading characteristics of the common stock of
selected reasonably comparable public companies and of reasonably comparable
acquisitions of selected companies.
The Beacon Group noted that a discounted cash flow analysis was generally
of more significance to a strategic buyer than a financial buyer such as
Kirtland or Bidder A. The Beacon Group also noted the significant degree of
dependency of the discounted cash flow analysis on the estimated terminal value
and, therefore, on the estimated Instron EBITDA for 2003.
Leveraged Recapitalization Analysis. The Beacon Group performed a
leveraged recapitalization analysis to determine the potential implied equity
value per share of Instron Common Stock that might be achieved in
28
<PAGE> 39
an acquisition of Instron in a leveraged recapitalization transaction based on
current market conditions. In conducting this analysis, The Beacon Group
utilized the Instron Projections, without any discounts or adjustments to those
projections, and assumed that financing for the Merger could be obtained in the
high yield and bank finance markets in an amount not in excess of a certain
multiple of the LTM EBITDA and that a minimum internal rate of return ranging
from 25% to 30% on equity invested during a five year period would be required
by the acquiror. This analysis resulted in an estimated implied equity value per
share of Instron Common Stock on a leveraged recapitalization basis of
approximately $20.50 to $22.00.
Implied Premium Analysis. Using publicly available information, The Beacon
Group performed an analysis of premiums paid in selected acquisitions of
manufacturing companies with transaction values between $150 million and $250
million from January 1, 1993 to April 1, 1999. The Beacon Group calculated the
mean and median premiums as of the announcement dates in those transactions over
the stock prices one day, one week, and four weeks, respectively, prior to the
announcement dates. The following table sets forth information concerning the
mean and median premiums The Beacon Group calculated and the implied premium of
the Cash Merger Consideration over the closing price of the Instron Common Stock
one day, one week, and four weeks prior to April 30, 1999, respectively.
<TABLE>
<CAPTION>
OFFER PRICE PREMIUM
TO SHARE PRICE:
--------------------------
AS OF APRIL 30, 1999 1 DAY 1 WEEK 4 WEEKS
SELECTED ACQUISITIONS OF MANUFACTURING COMPANIES PRIOR PRIOR PRIOR
------------------------------------------------ ----- ------ -------
<S> <C> <C> <C>
Mean........................................................ 34.8% 40.3% 42.3%
Median...................................................... 29.2% 31.3% 35.1%
Implied Cash Merger Consideration Premiums.................. 28.5% 34.4% 37.5%
</TABLE>
The Beacon Group calculated implied equity per share values for Instron
ranging from $21.49 to $23.08 by applying the premiums derived in the foregoing
analysis to the respective Instron closing stock price one day, one week, and
four weeks prior to April 30, 1999. The Beacon Group also noted that the Cash
Merger Consideration represents a premium of 29.4% over Instron's closing stock
price on April 30, 1999 and a premium of 6.7% over Instron's all-time high
closing stock price of $20.63 on May 5, 1998.
The information above is a brief summary of the material financial analyses
presented by The Beacon Group to the Instron Board on May 4, 1999. This summary
does not purport to be a complete description of the analyses performed by The
Beacon Group in connection with the rendering of the Beacon Opinion. The
preparation of a fairness opinion is a complex analytical process involving
various qualitative judgments as to the most appropriate and relevant methods of
financial analysis and the application of those methods to particular
circumstances and is not susceptible to partial analysis or summary description.
The Beacon Group believes that its analyses must be considered as a whole and
that selecting portions of its analyses, without considering all factors and
analyses, would create an incomplete view of the process underlying the Beacon
Opinion. In addition, The Beacon Group considered the significance and relevance
of the results of every portion of its analyses and did not assign relative
weights to any portion of its analyses, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
The Beacon Group's view of the actual value of Instron.
In performing its analyses, The Beacon Group made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Instron. The analyses
performed by The Beacon Group are not necessarily indicative of actual values,
trading values or actual future results that might be achieved, all of which may
be significantly more or less favorable than suggested by these analyses. No
public company utilized as a comparison is identical or directly comparable to
Instron, and none of the Comparable M&A Transactions or other business
combinations utilized as a comparison is identical or directly comparable to the
Merger and the other Transactions. Accordingly, a purely mathematical analysis
of publicly traded comparable companies and comparable business combinations
resulting from the Comparable Companies and Comparable M&A Transactions analyses
is not a meaningful method of using the relevant data; rather, these analyses
involve
29
<PAGE> 40
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the transaction or
the public trading or other values of the companies to which they are being
compared.
In connection with its analyses, The Beacon Group utilized estimates and
forecasts of future operating results provided by the management of Instron,
including the Instron Projections. 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 the analyses. Because the
analyses are inherently subject to uncertainty, being based on numerous factors
or events beyond the control of Instron, neither The Beacon Group nor Instron
assumes responsibility if future results or actual values are materially
different from these forecasts or assumptions. The analyses were prepared solely
as part of The Beacon Group's analysis of the fairness from a financial point of
view of the consideration to be received by the Public Stockholders pursuant to
the Merger, and were provided to the Instron Board in connection with the
delivery of the Beacon Opinion. The Beacon Group's analyses do not purport to be
an appraisal or to reflect the prices at which a company might actually be sold
or the prices at which any securities may be traded in the future. In addition,
the Beacon Opinion was one of many factors taken into consideration by the
Instron Board in making its determination to approve the Merger Agreement.
Consequently, the analyses described above should not be viewed as determinative
of the opinion of either the Instron Board or management of Instron with respect
to the value of Instron or whether either the Instron Board or management of
Instron would have been willing to agree to different terms for the Merger.
Pursuant to an engagement letter, dated as of July 10, 1998, between
Instron and The Beacon Group, Instron agreed to pay The Beacon Group a fee of
$1,265,000, which includes a non-refundable retainer of $125,000, for services
rendered in connection with the Transactions. The fee (less the $125,000
retainer, which has already been paid to The Beacon Group) will be payable at
the closing of the Merger. Instron has also agreed to reimburse The Beacon Group
for its reasonable out-of-pocket expenses, including travel and assorted other
expenses, and to indemnify The Beacon Group and certain of its affiliates
against certain liabilities in connection with their engagement, including
liabilities under the federal securities laws.
The Instron Board retained the Beacon Group on the basis of its experience
and expertise. As part of its strategic advisory business, The Beacon Group
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions, financings, private placements, principal investments
and other purposes. The Beacon Group participated in some of the negotiations
relating to the Merger Agreement and the Transactions.
PURPOSE AND REASONS OF THE INVESTOR GROUP FOR THE MERGER
The purpose of the Investor Group for engaging in the Transactions is to
acquire 100% ownership of Instron. The members of the Investor Group regard the
acquisition of Instron as an attractive investment opportunity because they
believe that Instron's future business prospects are favorable and that the
substantial increase in the debt to equity ratio of Instron after the Merger,
although resulting in greater investment risks, will create the potential for
the shareholders' equity value of Instron to increase more rapidly on a
percentage basis than the shareholders' equity value of an identical corporation
having a larger equity base and less debt. While the members of the Investor
Group are looking to achieve substantial returns on their investment in Instron,
they believe that such returns are available only to those investors like
themselves who are willing to bear the substantial risks associated with a
highly leveraged investment. The members of the Investor Group also believe that
by acquiring 100% ownership of Instron and operating Instron as a privately held
company, they will be able to more closely and directly monitor and influence
the performance of their investment. The Equity Investor also believes that
Instron's future business prospects can be improved through its active
participation with Instron's management in the strategic direction and
operations of Instron.
The Equity Investor's assessment of the risks and benefits of the Merger
and the other Transactions is based upon publicly available information
regarding Instron, the Equity Investor's due diligence investigation of Instron,
and the Equity Investor's experience in investing in similarly situated
companies. The proposed acquisition of Instron by the Investor Group has been
structured as a merger in order to, among other things,
30
<PAGE> 41
provide for the redemption of the Instron Common Stock held by the Public
Stockholders in connection with the transfer of the ownership of Instron from
the current stockholders to the Investor Group, to facilitate the required
financing for the Transactions, and to preserve Instron's corporate identity.
The Investor Group did not consider any alternative transaction structure other
than an acquisition of Instron pursuant to the terms of the Merger Agreement.
While the Investor Group believes that there will be significant opportunities
associated with its investment in Instron, there are also substantial risks that
such opportunities may not be fully realized.
As a result of the Merger, the Equity Investor will acquire, for an
investment of approximately $49.6 million, approximately 87.4% of the
outstanding shares of Surviving Corporation Common Stock; the Other Investors
will acquire, following the exchange of shares of Instron Common Stock with an
agreed total value in the aggregate of approximately $3.5 million, approximately
6.2% of the outstanding shares of Surviving Corporation Common Stock; and the
Management Investors will acquire, following the exchange of shares of Instron
Common Stock with an agreed total value in the aggregate of approximately $3.6
million, approximately 6.4% of the outstanding shares of Surviving Corporation
Common Stock. The Management Investors also will receive the Rollover Options
and additional options to purchase shares of Instron Common Stock granted
pursuant to a stock option plan to be adopted by the Surviving Corporation upon
consummation of the Merger which will represent, in the aggregate, 8.7% of the
outstanding shares of Surviving Corporation Common Stock on a fully diluted
basis (assuming the exercise of all Rollover Options and newly granted options).
The exchange by the Other Investors and the Management Investors of a portion of
their equity interest in Instron Common Stock (including a portion of their
outstanding stock options) for an equity interest in the Surviving Corporation
Common Stock will, among other things, enable the Merger to be accounted for as
a recapitalization for accounting purposes. The Other Investors and the
Management Investors also will receive the Cash Merger Consideration for the
remainder of their investment in Instron on the same terms as the Public
Stockholders and, with respect to the remainder of their outstanding stock
options, will receive a cash payment equal to the difference between the Cash
Merger Consideration and the exercise price for such options.
POSITION OF THE INVESTOR GROUP AS TO FAIRNESS OF THE MERGER
Each member of the Investor Group has considered the analyses and findings
of the Special Committee and the Instron Board (described in detail in "-- The
Special Committee's and the Instron Board's Recommendation") with respect to the
fairness of the Merger to the Public Stockholders. As of the date of this Proxy
Statement, each member of the Investor Group adopts the analyses and findings of
the Special Committee and the Board with respect to the fairness of the Merger
and believes that the Merger Agreement, the Merger and the other Transactions
are fair to and in the best interests of the Public Stockholders; provided that
no opinion is expressed as to the fairness to any stockholder making an
investment in the Surviving Corporation. No member of the Investor Group makes
any recommendation as to how the stockholders of Instron should vote on the
Merger Agreement. The Investor Group has financial interests in the Merger and
the Other Investors and the Management Investors have financial and other
interests in the Merger. See "-- Conflicts of Interest."
CONFLICTS OF INTEREST
In considering the recommendations of the Instron Board and the Special
Committee with respect to the Merger, you should be aware that the Management
Investors and the Other Investors, have interests in connection with the Merger
which may present them with actual or potential conflicts of interest as
summarized below. The Instron Board and the Special Committee were aware of
these interests and considered them among the other matters described under
"-- The Special Committee's and the Instron Board's Recommendation." The Instron
Board and the Special Committee generally considered the Other Investors' and
the Management Investors' conflicts of interest to be a negative factor in their
respective determinations that the Merger is fair and in the best interests of
the Public Stockholders. In particular, the Instron Board and the Special
Committee considered the fact that consummation of the Merger would preclude the
Public Stockholders from having the opportunity to participate in the future
growth prospects of
31
<PAGE> 42
Instron. In addition, the Instron Board and the Special Committee recognized
that the Management Investors and the Other Investors will have the opportunity
to benefit from any increases in the value of Instron following the Merger by
reason of their continuing equity interest in the Surviving Corporation and
therefore may realize a substantial economic benefit from the transaction.
Post-Merger Ownership and Control of the Surviving Corporation. It is
anticipated that immediately after the Merger the following individuals and
entities will beneficially own the number of shares of Surviving Corporation
Common Stock shown in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
SURVIVING CORPORATION PERCENTAGE OF SURVIVING
COMMON STOCK BENEFICIALLY CORPORATION COMMON
NAME OF BENEFICIAL OWNER OWNED STOCK(1)
------------------------ ------------------------- -----------------------
<S> <C> <C>
Kirtland Capital Partners III L.P. and two
affiliated entities............................. 450,545 83.3%
George S. Burr.................................... 12,000 2.22
Helen L. Burr..................................... 4,000 *
The Harold Hindman Trust -- 1969.................. 16,000 2.96
James M. McConnell................................ 19,585 3.62
Joseph E. Amaral (2).............................. 3,000 *
Kenneth L. Andersen (3)........................... 3,567 *
John R. Barrett................................... 458 *
Jonathan L. Burr (4).............................. 8,329 1.54
The Jonathan L. Burr Trust -- 1965................ 4,000 *
Yahya Gharagozlou................................. 1,062 *
Arthur D. Hindman (5)............................. 2,552 *
William J. Milliken............................... 2,280 *
Linton A. Moulding (as a joint tenant with his
wife, Jane Elizabeth Moulding) (6).............. 11,409 2.11
Norman L. Smith................................... 1,800 *
</TABLE>
- ---------------
* Less than 1%.
(1) These percentages are based on the number of outstanding shares of
Surviving Corporation Common Stock upon the consummation of the Merger
on a fully diluted basis (assuming the exercise of all Rollover
Options).
(2) The number shown also includes 3,000 shares which Mr. Amaral has the
right to acquire upon the exercise of his Rollover Options.
(3) The number shown also includes 3,300 shares which Mr. Andersen has the
right to acquire upon the exercise of his Rollover Options.
(4) The number shown also includes 8,000 shares which Mr. Burr has the
right to acquire upon the exercise of his Rollover Options.
(5) The number shown also includes 2,000 shares which Mr. Hindman has the
right to acquire upon the exercise of his Rollover Options.
(6) The number shown also includes 8,700 shares which Mr. Moulding has the
right to acquire upon the exercise of his Rollover Options.
Following consummation of the Merger, it is expected that those Management
Investors who were members of Instron's management prior to the Merger will
continue as management of the Surviving Corporation. The Board of Directors of
the Surviving Corporation following the Merger will be comprised of Mr.
McConnell, one person designated by Mr. McConnell, and at least three persons
designated by Kirtland.
32
<PAGE> 43
The Other Investors. The Other Investors have also agreed with Kirtland to
maintain an equity ownership position in Instron following the completion of the
Merger. To that end, the Other Investors will exchange an aggregate of 160,000
shares of Instron Common Stock for an aggregate of 32,000 shares of Series B
Preferred Stock immediately prior to the Effective Time. Such shares of Series B
Preferred Stock will be converted at the Effective Time into a like number of
shares of Surviving Corporation Common Stock in the Merger. Upon consummation of
the Transactions, the Other Investors will own approximately 6.2% of the
outstanding shares of Surviving Corporation Common Stock.
The Management Investors. The Management Investors have agreed with
Kirtland to maintain an equity ownership position in Instron following the
completion of the Merger. To that end, certain of the Management Investors will
exchange an aggregate of 165,210 shares of Instron Common Stock for an aggregate
of 33,042 shares of Series B Preferred Stock immediately prior to the Effective
Time. Such shares of Series B Preferred Stock will be converted at the Effective
Time into a like number of shares of Surviving Corporation Common Stock in the
Merger. Of the 165,210 shares of Instron Common Stock to be exchanged for shares
of Series B Preferred Stock, an aggregate of 25,340 shares representing shares
of restricted Instron Common Stock previously issued to certain Management
Investors will be exchanged for 5,068 shares of Series B Preferred Stock. Such
shares of Series B Preferred Stock will be converted at the Effective Time into
a like number of shares of restricted Surviving Corporation Common Stock. These
shares of restricted stock will be governed by the Instron Corporation 1992
Stock Incentive Plan (as such plan is amended as of the Effective Time) (the
"1992 Plan") and certain amended restricted stock award agreements (the
"Restricted Stock Award Agreements"). Upon consummation of the Transactions, the
Management Investors will own approximately 6.4% of the outstanding shares of
Surviving Corporation Common Stock.
In addition, options to purchase up to an aggregate of 125,000 shares of
Instron Common Stock held by certain Management Investors will be assumed by the
Surviving Corporation and converted into the Rollover Options to purchase up to
an aggregate of 25,000 shares of Surviving Corporation Common Stock. The
Rollover Options will be governed by the 1992 Plan and certain amended stock
option agreements (the "Stock Option Agreements"). Each Rollover Option will be
fully vested and exercisable upon the consummation of the Merger. The Rollover
Options will represent approximately 4.6% of the Surviving Corporation Common
Stock on a fully diluted basis (assuming the exercise of all Rollover Options)
immediately following the Effective Time.
Cash Payments to the Other Investors and the Management Investors. The
Other Investors and the Management Investors also will participate in the Merger
as Public Stockholders to the extent that they hold shares of Instron Common
Stock that are not ultimately converted into Surviving Corporation Common Stock,
or hold outstanding options to purchase shares of Instron Common Stock that are
not converted into Rollover Options. In the Merger, the Other Investors and the
Management Investors will be entitled to receive the Cash Merger Consideration
for their unconverted shares of Instron Common Stock. Certain of the Management
Investors also own shares of restricted Instron Common Stock for which they will
be entitled to receive the Cash Merger Consideration in the Merger. They also
will be entitled to receive cash based on the number of shares of Instron Common
Stock underlying their unconverted stock options and the difference between the
applicable per share exercise price of such options and the Cash Merger
Consideration. See "The Merger -- Cash-Out of Instron Stock Options."
The following table sets forth information as of the date of this Proxy
Statement as to the shares of Instron Common Stock owned of record by the Other
Investors and the shares of Instron Common Stock and
33
<PAGE> 44
the options to purchase shares of Instron Common Stock held by the Management
Investors for which cash payments will be received upon consummation of the
Merger.
<TABLE>
<CAPTION>
AMOUNT OF CASH TO BE
RECEIVED FOR
OTHER INVESTOR SHARES CASHED OUT SHARES CASHED OUT
-------------- ----------------- --------------------
<S> <C> <C>
George S. Burr....................................... 199,206 $ 4,382,532
Helen L. Burr........................................ 71,550 1,574,100
The Harold Hindman Trust -- 1969 (includes shares
owned of record by Harold Hindman, trustee of The
Harold Hindman Trust -- 1969)...................... 449,819* 9,896,018*
</TABLE>
- ---------------
* The Harold Hindman Trust -- 1969 will exchange 412,814 shares of Instron
Common Stock and Harold Hindman, a member of the Instron Board and
trustee of The Harold Hindman Trust -- 1969, will exchange 37,005 shares
of Instron Common Stock, or an aggregate of 449,819 shares of Instron
Common Stock, for cash in the aggregate amount of $9,896,018.
<TABLE>
<CAPTION>
AMOUNT OF CASH TO BE
RECEIVED FOR
MANAGEMENT INVESTOR SHARES CASHED OUT SHARES CASHED OUT
------------------- ----------------- --------------------
<S> <C> <C>
James M. McConnell................................... 116,895 $ 2,571,690
Joseph E. Amaral..................................... 33,423 735,306
Kenneth L. Andersen.................................. 35,473 780,406
John R. Barrett...................................... 25,443 559,746
Jonathan L. Burr..................................... 84,007 1,848,154
The Jonathan L. Burr Trust -- 1965................... 40,750 896,500
Yahya Gharagozlou.................................... 21,781 479,182
Arthur D. Hindman (includes shares held individually,
as beneficiary of The Arthur D. Hindman Trust, by
his wife, Nancy Hindman, and as custodian for his
three minor children).............................. 96,929 2,132,438
William J. Milliken.................................. 9,364 206,008
Linton A. Moulding................................... 31,852 700,744
Jane Elizabeth Moulding.............................. 0 0
Norman L. Smith (includes shares held by his wife,
Carolyn Smith)..................................... 19,720 433,840
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF CASH TO BE
SHARES UNDERLYING RECEIVED FOR STOCK
MANAGEMENT INVESTOR STOCK OPTIONS CASHED OUT OPTIONS CASHED OUT
------------------- ------------------------ --------------------
<S> <C> <C>
James M. McConnell............................. 162,000 $ 1,610,000
Joseph E. Amaral............................... 39,500 411,750
Kenneth L. Andersen............................ 33,625 355,594
John R. Barrett................................ 31,750 281,250
Jonathan L. Burr............................... 11,500 121,875
The Jonathan L. Burr Trust -- 1965............. 0 0
Yahya Gharagozlou.............................. 30,500 286,344
Arthur D. Hindman.............................. 28,500 282,500
William J. Milliken............................ 0 0
</TABLE>
34
<PAGE> 45
<TABLE>
<CAPTION>
AMOUNT OF CASH TO BE
SHARES UNDERLYING RECEIVED FOR STOCK
MANAGEMENT INVESTOR STOCK OPTIONS CASHED OUT OPTIONS CASHED OUT
------------------- ------------------------ --------------------
<S> <C> <C>
Linton A. Moulding............................. 9,000 93,750
Jane Elizabeth Moulding........................ 0 0
Norman L. Smith................................ 7,000 72,875
</TABLE>
Grant of New Options to the Management Investors. At the Effective Time,
Instron will adopt the Instron Corporation 1999 Stock Option Plan (the "1999
Plan") and reserve for issuance under the plan such number of shares of
Surviving Corporation Common Stock equal to 10% of the aggregate number of
shares of Surviving Corporation Common Stock outstanding on a fully diluted
basis immediately following the Effective Time (the "Available Shares"). The
Surviving Corporation will grant to certain Management Investors options to
purchase, in the aggregate, up to such number of shares of Surviving Corporation
Common Stock equal to 40% of the Available Shares. Options will be granted at
the Effective Time to Management Investors who were members of Instron's
management prior to the Merger. The options will be incentive stock options
intending to qualifying under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), up to the limitations set forth in the Code, and
non-qualified stock options to the extent of the excess over such limitations.
Each option will be exercisable at the fair market value per share determined in
good faith by the Board of Directors of the Surviving Corporation (estimated to
be $110.00 per share at the Effective Time), and will be exercisable to the
extent of one-fifth of the shares on each of the first five anniversaries of the
date of grant for so long as the optionee is in the continuous employ of the
Surviving Corporation. Unexercisable options will be forfeited upon termination
of employment. Upon a change in control of the Surviving Corporation, all
options will become immediately exercisable in full. Options will be exercisable
in cash, or by surrender of Surviving Corporation Common Stock owned by the
optionee. Each option will terminate three months after the optionee ceases to
be an employee of the Surviving Corporation or a subsidiary for any reason other
than death or disability, or six months after the optionee ceases to be an
employee as a result of death or disability, and in no event more than ten years
from the date of grant. Non-qualified stock options will be transferable to
members of an optionee's immediate family (including trusts and partnerships
established for the benefit of the optionee and his immediate family).
Confidentiality and Noncompetition Agreements with the Management
Investors. In order to induce Kirtland to enter into the Merger, at the
Effective Time each of the Management Investors who will continue as a member of
Instron's management after the Merger will enter into a Confidentiality and
Noncompetition Agreement with Instron. Under the agreement, each such Management
Investor will maintain confidentiality of trade secrets, customer lists and
other confidential business information of Instron and its subsidiaries, and
will not engage in Competition (as such term is defined in the Confidentiality
and Noncompetition Agreement) for so long as he is employed with Instron or any
of its subsidiaries and thereafter until the first anniversary of the date on
which he last worked for Instron.
Severance Agreements with the Management Investors. Each Management
Investor (other than Mr. McConnell) with an Executive Severance Agreement has
agreed to amend such agreement as of the Effective Time. The amendment modifies
the definition of good reason in the Executive Severance Agreement. The
Executive Severance Agreements currently provide that the termination by an
executive of such executive's employment with Instron for "good reason" will
entitle the executive to receive certain severance compensation and benefits.
The amendment revises part of the definition of "good reason". As amended, the
Executive Severance Agreement will provide that the termination by an executive
of such executive's employment with Instron constitutes "good reason" if the
Surviving Corporation fails to maintain the executive in an executive position
with duties and responsibilities in the aggregate normally associated with an
executive at the Surviving Corporation at a vice president level or higher, or
if the executive's title is reduced to below a vice president or, except for
John R. Barrett, the executive is no longer a member of the Executive Committee
of the Surviving Corporation. The amended Executive Severance Agreement will not
apply to any termination of employment that occurs after the second anniversary
of the Effective Time, or to any change in control that occurs after the
Effective Time.
35
<PAGE> 46
Deferred Compensation Agreement with James M. McConnell. At the Effective
Time, the Surviving Corporation and Mr. McConnell will enter into a Deferred
Compensation Agreement to replace severance compensation and benefits otherwise
payable to Mr. McConnell under his existing Executive Severance Agreement.
Pursuant to such agreement, the Surviving Corporation will credit $1,200,000 to
a nonforfeitable deferred compensation account for Mr. McConnell. The Surviving
Corporation will credit interest on the value of the account in arrears on the
last business day of each quarter at a rate of interest equal to the composite
"prime rate" as quoted in the Eastern Edition of the Wall Street Journal for
that day. The account will be paid to Mr. McConnell in five annual installments
commencing on the fifth anniversary of the Effective Time; provided that
commencement of payments will be accelerated in the event of Mr. McConnell's
disability, death or termination without cause. In addition, upon a change in
control of the Surviving Corporation, the account will be paid to Mr. McConnell
in a lump sum.
In the event that any amount to be paid under the Deferred Compensation
Agreement would be an "excess parachute payment" within the meaning of the Code,
then the Surviving Corporation may propose that the payments to be made under
the agreement be reduced to the minimum extent necessary so that no portion of
such payment, if so reduced, constitutes an excess parachute payment. If Mr.
McConnell agrees to any such reduction, interest credited to the account will be
reduced to the minimum extent necessary so that no portion of such interest to
be paid, as so reduced, constitutes an excess parachute payment. If Mr.
McConnell does not agree to such reduction, then the Surviving Corporation may
accelerate payments to Mr. McConnell to the extent required so that no payment
to Mr. McConnell under the agreement will constitute an excess parachute
payment. Mr. McConnell is entitled to receive in the same manner as provided in
Mr. McConnell's Executive Severance Agreement an additional "gross-up payment"
to the extent necessary to offset any federal, state and local income tax,
employment tax and excise tax upon the excess parachute payment.
Voting Agreement. Pursuant to a Voting Agreement dated as of May 6, 1999
(the "Voting Agreement"), the Other Investors and certain of their affiliates
and the Management Investors and certain of their affiliates agreed with
MergerCo to vote (or cause to be voted) at the Special Meeting all of the shares
of Instron Common Stock (the "Voting Shares") owned by them in favor of the
proposal to approve the Merger Agreement and the Transactions. The Other
Investors and certain of their affiliates and the Management Investors and
certain of their affiliates also agreed (i) not to sell, tender, transfer,
pledge, encumber, assign or otherwise dispose of any Voting Shares, or deposit
any Voting Shares into a voting trust or enter into a voting agreement or
arrangement with respect to voting any Voting Shares, or grant any proxy or
power of attorney with respect thereto, (ii) to waive their appraisal rights
with respect to the Voting Shares, and (iii) at the request of Kirtland, to take
further lawful actions as may be necessary or desirable to consummate and make
effective the transactions contemplated by the Voting Agreement. The Voting
Shares represent approximately 22.4% of the outstanding shares of Instron Common
Stock.
The Voting Agreement will terminate upon the earlier of the consummation of
the Merger or the termination of the Merger Agreement without consummation of
the Merger.
Stockholders Agreement. Upon consummation of the Merger, members of the
Investor Group will enter into the Stockholders Agreement. The Stockholders
Agreement provides that the stockholders of the Surviving Corporation may not
transfer their shares of Surviving Corporation Common Stock except under certain
circumstances. Under the Stockholders Agreement, the Surviving Corporation has a
right of first refusal in the event that an Other Investor or a Management
Investor wishes to sell shares of Surviving Corporation Common Stock, or, in the
event that the Surviving Corporation does not exercise its right of first
refusal, the nontransferring stockholders (other than any management stockholder
who is no longer an employee of the Surviving Corporation) will have the
opportunity to purchase such shares. The Stockholders Agreement also provides
that the Other Investors and the Management Investors will have the opportunity
to participate in certain sales of Surviving Corporation Common Stock by the
Equity Investor, and the Equity Investor has the right to cause the Other
Investors and the Management Investors to participate in certain such sales. In
addition, the Stockholders Agreement provides for certain "puts" and "calls"
upon the termination of a Management Investor's employment with the Surviving
Corporation.
36
<PAGE> 47
Registration Rights Agreement. Upon consummation of the Merger, the Equity
Investor, the Other Investors, the Management Investors and the Surviving
Corporation will enter into the Registration Rights Agreement, pursuant to which
the Other Investors and the Management Investors will have the right to
participate, or "piggy-back," in equity offerings initiated by the Surviving
Corporation that are registered under the Securities Act, subject, in the case
of the Management Investors, to the approval of the underwriters involved with
any such equity offering and other customary terms and conditions.
The foregoing summaries of the Confidentiality and Noncompetition
Agreements, the amendment to the Executive Severance Agreements, the Deferred
Compensation Agreement, the Voting Agreement, the Stockholders Agreement and the
Registration Rights Agreement are qualified in their entirety by reference to
the actual terms of such agreements, which are filed as exhibits to Instron's
Schedule 13E-3.
Fees and Expenses. Instron has agreed to pay for the reasonable fees and
expenses of the Other Investors' legal counsel up to an aggregate of $40,000.
Instron has also agreed to pay for the reasonable fees and expenses of the
Management Investors' legal counsel up to an aggregate of $85,000.
Indemnification and Insurance. Under the Merger Agreement, Instron will
indemnify and hold harmless any former or current director, officer, employee,
fiduciary or agent of Instron or any of its subsidiaries, and after the
Effective Time, the Surviving Corporation will indemnify and hold harmless, as
and to the full extent permitted by applicable law, each such indemnified party
against any losses, in connection with any threatened or actual claim, action,
suit, proceeding or investigation, based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer, employee, fiduciary or agent of Instron or any of its
subsidiaries, or is or was serving at the request of Instron or any of its
subsidiaries as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (ii) the
negotiation, execution or performance of the Merger Agreement or any of the
Transactions (whether asserted or arising before or after the Effective Time).
The parties also agree that all rights to indemnification existing in favor of,
and all limitations on the personal liability of, the directors, officers,
employees and agents of Instron and its subsidiaries provided for in Instron's
Restated Articles of Organization or Bylaws as in effect as of the date of the
Merger Agreement with respect to matters occurring prior to the Effective Time,
and including the Merger and the Transactions, shall continue in full force and
effect for a period of six years from the Effective Time.
Prior to the Effective Time, Instron will purchase an extended reporting
period endorsement under its existing directors' and officers' liability
insurance coverage for Instron's directors and officers which shall provide such
directors and officers with coverage at least as favorable as the current policy
for six years following the Effective Time. It is anticipated that the total
aggregate cost of such coverage will be approximately $160,000.
The Beacon Group. The Beacon Group served as financial advisor to the
Instron Board and the Special Committee. Two managing directors of The Beacon
Group are limited partner investors in Kirtland. The Instron Board, the Special
Committee and The Beacon Group believe that the foregoing relationships do not
affect The Beacon Group's ability to act independently and impartially as
financial advisor to the Instron Board and the Special Committee.
Special Committee. The members of the Special Committee will be treated in
the Merger as Public Stockholders with respect to their shares of Instron Common
Stock. Mr. Young owns 25,000 shares of Instron Common Stock and Mr. Moore owns
2,500 shares of Instron Common Stock. The third member of the Special Committee,
Mr. Smith, does not own any shares of Instron Common Stock. None of the members
of the Special Committee hold any options to purchase Instron Common Stock. Upon
consummation of the Merger, Mr. Young will be entitled to receive $550,000 as
Cash Merger Consideration for his shares of Instron Common Stock and Mr. Moore
will be entitled to receive $55,000 as Cash Merger Consideration for his shares
of Instron Common Stock.
The members of the Special Committee, which held five meetings from March
1999 through the date of this Proxy Statement, will receive compensation from
Instron in connection with these committee meetings.
37
<PAGE> 48
In connection with establishing the Special Committee, the Instron Board
approved the payment of a one-time fee of $7,500 for, and an amount equal to
$1,200 for each meeting of the Special Committee attended by, Mr. Young, the
Chairman of the Special Committee. Mr. Young received from Instron an aggregate
of $13,500 as compensation for serving as the chairman of the Special Committee.
The Instron Board also approved the payment of a one-time fee of $5,000 for, and
an amount equal to $700 for each meeting of the Special Committee attended by,
each of Messrs. Moore and Smith. Messrs. Moore and Smith each received from
Instron an aggregate of $8,500 as compensation for serving on the Special
Committee.
Members of the Special Committee will be entitled to certain
indemnification rights and to directors' and officers' liability insurance which
will be continued by Instron following the Merger as described above for the
current and former officers and directors of Instron.
The Instron Board and the Special Committee believe that the foregoing
arrangements do not affect the Special Committee's independence or impartiality.
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in Instron as the
Surviving Corporation will be owned by the Investor Group. The Public
Stockholders will no longer have any interest in, and will not be stockholders
of, Instron, and, therefore, will not participate in Instron's future earnings
and potential growth. Instead, the Public Stockholders will have the right to
receive $22.00 in cash, without interest, for each share of Instron Common Stock
held by them immediately prior to the Effective Time (other than shares in
respect of which appraisal rights have been perfected). An equity investment in
Instron as the Surviving Corporation in the Merger involves substantial risk,
including risks resulting from the limited liquidity of an investment in the
common stock of Instron as a privately held company and risks resulting from
Instron's increased leverage in connection with the financing of the
Transactions. Nonetheless, if Instron successfully executes its business
strategy, the value of such an equity investment could be considerably greater
than the original cost thereof. See " -- Conflicts of Interest" and "Cautionary
Statement Concerning Forward-Looking Information."
Following the Merger, Instron intends to delist the Instron Common Stock
from AMEX. The Surviving Corporation does not intend to apply to have the
Surviving Corporation Common Stock listed on any national securities exchange or
automated quotation system. The registration of Instron Common Stock under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), will terminate
in connection with the Merger.
FINANCING OF THE MERGER
Generally. It is estimated that an aggregate of approximately $174.2
million will be required to consummate the Transactions and pay related fees and
expenses. These funds are expected to come from the following sources:
- an equity investment made by the Equity Investor of approximately $49.6
million, assuming a Net Indebtedness of $3.9 million;
- borrowings by the Surviving Corporation of approximately $14.0 million
under the Credit Facility;
- borrowings by the Surviving Corporation of approximately $100.0 million
from the issuance of debt instruments; and
- Instron's available cash reserves which, as of April 3, 1999, were
approximately $10.6 million.
Debt Instruments. Kirtland currently anticipates that it will raise $100.0
million of the funds necessary to consummate the Transactions through the
issuance of debt instruments in the private or public capital markets. However,
in the event that Kirtland is unable to obtain such debt financing, Kirtland has
obtained the DLJ Bridge Letter pursuant to which DLJ Bridge has committed to
purchase from Instron $100.0 million in principal amount of Bridge Notes. If
issued by Instron and purchased by DLJ Bridge, it is anticipated that the Bridge
Notes would have the following features: (i) subordinated to Instron's senior
credit facility (which National City Bank has committed to provide in connection
with the Merger); (ii) guaranteed by Instron and its subsidiaries if such entity
is a guarantor of Instron's senior credit facility; (iii) interest paid
quarterly at a fluctuating rate not to exceed 17% and not to be less than 10%;
(iv) registration and resale rights with respect
38
<PAGE> 49
to the Bridge Notes; and (v) mandatory redemption upon Instron's issuance of
debt or equity or certain asset sales, in any case resulting in proceeds in
excess of the amount required to be paid under Instron's senior credit facility.
It also is anticipated that the Bridge Notes would contain covenants that are
customary for this type of financing including restrictions on indebtedness,
dividends, liens, affiliate transactions, stock repurchases, asset sales and
mergers.
Revolving Credit Facility. Kirtland also has received the National City
Letter in which National City Bank has committed to provide Instron with the
Credit Facility in connection with the Merger. It is expected that the Credit
Facility will have the following features: (i) maximum availability of $50.0
million subject to sublimits for the issuance of standby letters of credit and
borrowings denominated in a liquid currency other than U.S. dollars; (ii)
six-year term; (iii) collateralized by receivables, inventory, equipment and
other assets and a first priority lien on 100% of the common stock of Instron's
domestic subsidiaries and 65% of the common stock of Instron's foreign
subsidiaries; (iv) interest at alternative fluctuating rates, as selected by
Instron, of either a prime rate or the federal funds rate plus 0.5%, or a LIBOR
rate, in each case plus an applicable margin; (v) required payment of various
commitment and other fees; and (vi) customary financial and other
representations and warranties and covenants. The availability of the credit
contemplated by the National City Letter is dependent upon satisfaction of a
number of conditions, including delivery of all required documentation,
consummation of the Merger and other Transactions, receipt of all required
regulatory approvals, and there not having been any material litigation
involving Instron nor any material adverse change in the financial condition or
business of Instron. At the closing of the Merger, approximately $14.0 million
will be used to finance the consummation of the Transactions. Undrawn amounts
under the Credit Facility will be available to support working capital needs and
general corporate purposes.
The foregoing is only a summary of the National City Letter and is
qualified in its entirety by reference to the actual terms of the National City
Letter, which is filed as an exhibit to Instron's Schedule 13E-3.
The definitive agreements for the issuance and sale of the debt securities
and the Credit Facility have not been negotiated and completed. Accordingly, the
terms of such arrangements described above may change as a result of the
negotiation of definitive agreements. In addition, the obligation of National
City Bank to provide its respective financing is subject to the satisfaction of
numerous conditions including, without limitation, the condition that no
material adverse change in the business, assets, condition (financial or
otherwise) or results of operations of Instron and its subsidiaries taken as a
whole shall have occurred and that there shall not have occurred any event or
other circumstance which would, individually or in the aggregate, reasonably be
expected to result in any such material adverse change prior to the Effective
Time.
CONDUCT OF INSTRON'S BUSINESS AFTER THE MERGER
Instron designs, develops, manufactures, markets, and services materials
and structural testing systems, software, and accessories. These products are
used principally in research and development and quality control applications to
test the mechanical properties of various materials, components, and structures.
The materials tested include metals, plastics, textiles, composites, ceramics
and rubber. Instron systems test virtually all natural and man-made materials
from fragile fibers to the exotic materials needed for space exploration.
The Investor Group is continuing to evaluate Instron's business, practices,
operations, properties, corporate structure, capitalization, management, and
personnel and will determine what changes, if any, will be desirable. Such
changes may include, without limitation, entering into an extraordinary
corporate transaction, a sale of assets, a change in the composition of the
Instron Board, or a change in Instron's dividend policy. Subject to the
foregoing, the Investor Group expects that the day-to-day business and
operations of Instron will be conducted substantially as they are currently
being conducted by Instron.
It is expected that the Management Investors who are members of Instron's
management prior to the Merger will remain as management of the Surviving
Corporation. Such Management Investors, other than John R. Barrett, will also
serve on the Executive Committee of the Surviving Corporation. The Investor
Group does not currently contemplate any material change in the composition of
management or personnel. The Board of Directors of the Surviving Corporation
will be comprised of Mr. McConnell, one person designated by Mr. McConnell, and
at least three persons designated by Kirtland.
39
<PAGE> 50
THE SPECIAL MEETING
DATE, TIME, AND PLACE OF THE SPECIAL MEETING
The Special Meeting will be held on , 1999, at : a.m.,
local time, at .
PROXY SOLICITATION
This Proxy Statement is being solicited by the Instron Board. All expenses
incurred in connection with solicitation of the enclosed proxy will be paid by
Instron. Officers, directors, and regular employees of Instron, who will receive
no additional compensation for their services, may solicit proxies by telephone
or personal call. In addition, Instron has retained MacKenzie Partners, Inc. to
solicit proxies for a fee of $5,500 plus expenses. Instron has requested brokers
and nominees who hold stock in their names to furnish this proxy material to
their customers, and Instron will reimburse such brokers and nominees for their
related out-of-pocket expenses. This Proxy Statement and the accompanying proxy
card are being mailed to stockholders on or about , 1999.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, Instron stockholders will be asked to consider and
vote upon a proposal to approve the Merger Agreement and the Transactions,
including the Merger. A copy of the Merger Agreement is attached as Appendix A
to this Proxy Statement. The Merger Agreement provides, among other things, for
the Merger of MergerCo with and into Instron with Instron as the Surviving
Corporation. Pursuant to the Merger Agreement, at the Effective Time, (i)
Instron's Restated Articles of Organization will be amended to adopt MergerCo's
Articles of Organization, and (ii) Instron's Amended and Restated Bylaws will be
amended to adopt MergerCo's Bylaws. In the Merger, (x) each holder of Instron
Common Stock, other than Instron, its subsidiaries, MergerCo, and those
dissenting stockholders who exercise and perfect their appraisal rights, will
receive a cash payment of $22.00 for each of their outstanding shares of Instron
Common Stock, (y) each holder of Series B Preferred Stock will receive one share
of Surviving Corporation Common Stock in exchange for each of their outstanding
shares of Series B Preferred Stock, and (z) each holder of common stock of
MergerCo will receive one share of Surviving Corporation Common Stock in
exchange for each of their outstanding shares of common stock of MergerCo.
RECORD DATE AND QUORUM REQUIREMENT
Instron Common Stock was the only class of voting security of Instron
outstanding as of the Record Date. The Instron Board has fixed the close of
business on , 1999 as the Record Date for the determination of
stockholders entitled to notice of, and to vote at, the Special Meeting. Each
holder of record of Instron Common Stock at the close of business on the Record
Date is entitled to one vote for each share then held on each matter submitted
to a vote of stockholders. At the close of business on the Record Date, there
were shares of Instron Common Stock issued and outstanding held
by approximately holders of record.
The holders of a majority of the outstanding shares entitled to vote at the
Special Meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business.
VOTING PROCEDURES
Approval of the Merger Agreement, which is attached as Appendix A hereto,
and the Transactions, including the Merger, will require the affirmative vote of
the holders of two-thirds of the outstanding shares of Instron Common Stock
entitled to vote at the Special Meeting. A failure to vote or a vote to abstain
will have the same legal effect as a vote cast against approval of the Merger
Agreement and the Transactions. Brokers and, in many cases, nominees will not
have discretionary power to vote on the proposal to be
40
<PAGE> 51
presented at the Special Meeting. Accordingly, beneficial owners of shares
should instruct their brokers or nominees how to vote. A broker non-vote will
have the same effect as a vote against the Merger.
If there are insufficient votes to approve the Merger Agreement and the
Transactions at the Special Meeting, proxies voted in favor of approval of the
Merger Agreement and the Transactions and proxies as to which no voting
instructions are given may be voted to adjourn the Special Meeting in order to
solicit additional proxies in favor of approval of the Merger Agreement and the
Transactions. If the Special Meeting is adjourned for any purpose, at any
subsequent reconvening of the Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting (except for any proxies which have been revoked or withdrawn),
notwithstanding that they may have been voted on the same or any other matter at
a previous meeting.
The Merger was not structured so that approval of at least a majority of
Instron stockholders not affiliated with Instron or the Investor Group is
required in order to consummate the Merger.
Any stockholder of Instron has the right to dissent from approval of the
Merger Agreement and the Transactions and, subject to strict compliance with
certain requirements and procedures set forth in Sections 85 to 98, inclusive,
of the MBCL, to receive payment of the "fair value," as defined in the MBCL, of
his or her shares of Instron Common Stock. See "Appraisal Rights."
VOTING AND REVOCATION OF PROXIES
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by (i) filing with the Clerk of Instron an instrument revoking
it, (ii) submitting a duly executed proxy bearing a later date or (iii) voting
in person at the Special Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Clerk of Instron
will be voted in accordance with the instructions indicated thereon, and if no
instructions are indicated, will be voted to approve the Merger Agreement and
the Transactions and in such manner as the persons named on the enclosed proxy
card in their discretion determine upon such other business as may properly come
before the Special Meeting.
The shares of Instron Common Stock represented by the accompanying proxy
card and entitled to vote will be voted if the proxy card is properly signed and
received by the Clerk of Instron prior to the Special Meeting.
VOTING AGREEMENT
Pursuant to the Voting Agreement, the Other Investors and certain of their
affiliates and the Management Investors and certain of their affiliates agreed
with MergerCo to vote (or cause to be voted) at the Special Meeting the Voting
Shares in favor of the proposal to approve the Merger Agreement and the
Transactions. The Other Investors and certain of their affiliates and the
Management Investors and certain of their affiliates also agreed (i) not to
sell, tender, transfer, pledge, encumber, assign or otherwise dispose of any
Voting Shares, or deposit any Voting Shares into a voting trust or enter into a
voting agreement or arrangement with respect to voting any Voting Shares or
grant any proxy or power of attorney with respect thereto, (ii) to waive their
appraisal rights with respect to the Voting Shares, and (iii) at the request of
Kirtland, to take further lawful actions as may be necessary or desirable to
consummate and make effective the transactions contemplated by the Voting
Agreement. The Voting Shares represent approximately 22.4% of the outstanding
shares of Instron Common Stock.
The Voting Agreement will terminate upon the earlier of the consummation of
the Merger or the termination of the Merger Agreement without consummation of
the Merger.
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The Effective Time of the Merger, which shall be the date and time of
filing of Articles of Merger with the Secretary of State of The Commonwealth of
Massachusetts, is currently expected to occur as soon as practicable after the
Special Meeting, subject to approval of the Merger Agreement and the
Transactions at the Special Meeting and satisfaction or waiver of the terms and
conditions of the Merger Agreement. Detailed
41
<PAGE> 52
instructions with regard to the surrender of Instron Common Stock certificates,
together with a letter of transmittal, will be forwarded to stockholders by
Instron's exchange agent, BankBoston, N.A. (the "Exchange Agent"), promptly
following the Effective Time. Stockholders should not submit their certificates
to the Exchange Agent until they have received such materials. The Exchange
Agent will send payment of the Cash Merger Consideration to stockholders as
promptly as practicable following receipt by the Exchange Agent of their
certificates and other required documents. No interest will be paid or accrued
on the cash payable upon the surrender of certificates. Stockholders should not
send any certificates at this time.
OTHER MATTERS TO BE CONSIDERED
The Instron Board is not aware of any other matters which will be brought
before the Special Meeting. If, however, other matters are presented, proxies
will be voted in accordance with the discretion of the holders of such proxies.
42
<PAGE> 53
THE MERGER
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that subject to satisfaction of
certain conditions, MergerCo will be merged with and into Instron, and that
following the Merger, the separate existence of MergerCo will cease and Instron
will continue as the Surviving Corporation. At the Effective Time, and subject
to the terms and conditions set forth in the Merger Agreement, each share of
issued and outstanding Instron Common Stock (other than shares of Instron Common
Stock owned by Instron or any of its wholly-owned subsidiaries, or owned by
MergerCo, or shares of Instron Common Stock as to which appraisal rights are
properly perfected and not withdrawn (collectively the "Excluded Shares")),
will, by virtue of the Merger, be canceled and converted into the right to
receive the Cash Merger Consideration. As a result of the Merger, the Instron
Common Stock will no longer be publicly traded and the equity of the Surviving
Corporation will be 100% owned by the Investor Group.
The terms of and conditions to the Merger are contained in the Merger
Agreement which is included in full as Appendix A to this Proxy Statement and is
incorporated herein by reference. The discussion in this Proxy Statement of the
Merger and the summary description of the principal terms of the Merger
Agreement are subject to and qualified in their entirety by reference to the
more complete information set forth in the Merger Agreement.
Merger Consideration. At the Effective Time, each share of Instron Common
Stock issued and outstanding immediately prior to the Effective Time (other than
the Excluded Shares) will be converted into the right to receive the Cash Merger
Consideration. All such shares of Instron Common Stock, when converted pursuant
to the Merger Agreement, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each certificate (a
"Certificate"), which immediately prior to the Effective Time evidenced shares
of Instron Common Stock, shall thereafter represent only the right to receive
the Cash Merger Consideration. The holders of Certificates previously evidencing
shares of Instron Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to the Instron Common Stock
except as otherwise provided in the Merger Agreement or by law and, upon the
surrender of Certificates in accordance with the Merger Agreement, shall only
represent the right to receive for their shares of Instron Common Stock, the
Cash Merger Consideration, without any interest thereon.
At the Effective Time, each share of Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time will be converted into one
share of Surviving Corporation Common Stock. All such shares of Series B
Preferred Stock, when converted pursuant to the Merger Agreement, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously evidencing such shares of Series
B Preferred Stock shall thereafter represent only the right to receive shares of
Surviving Corporation Common Stock. The holders of certificates previously
evidencing shares of Series B Preferred Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to the Series B
Preferred Stock except as otherwise provided in the Merger Agreement or by law.
The Management Investors will in the aggregate have 33,042 shares of Series B
Preferred Stock converted in the Merger into 33,042 shares of Surviving
Corporation Common Stock. In addition, the Other Investors will in the aggregate
have 32,000 shares of Series B Preferred Stock converted in the Merger into
32,000 shares of Surviving Corporation Common Stock.
Payment for Shares. Promptly after the Effective Time, MergerCo will cause
the Exchange Agent to mail to each holder of record of a Certificate (other than
holders of Excluded Shares) a form of letter of transmittal and instructions for
use in effecting the surrender of the Certificate in exchange for payment
therefor. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such duly executed letter of transmittal, and any
additional requested items, the holder of such Certificate will be entitled to
receive in exchange therefor cash in an amount equal to the product of (x) the
number of shares of Instron Common Stock represented by such Certificate and (y)
the Cash Merger Consideration (net of any applicable withholding taxes).
43
<PAGE> 54
Cash-Out of Instron Stock Options. The Merger Agreement provides that each
option to purchase shares of Instron Common Stock under Instron's stock option
plans will become fully vested and exercisable, immediately prior to the Merger.
Holders of options outstanding immediately prior to the Effective Time, other
than certain options held by certain Management Investors which are to be
assumed by the Surviving Corporation and converted into the Rollover Options
(the "Cash-Out Options"), will receive cash equal to the product of (x) the
number of shares of Instron Common Stock underlying the Cash-Out Option and (y)
the excess of the Cash Merger Consideration over the per share exercise price of
such Cash-Out Option (the "Option Consideration"). Such holder will be entitled
to receive the Option Consideration from Instron upon the cancellation of such
Cash-Out Option and the surrender and cancellation of the applicable option
agreement. In connection with the Merger, holders of Cash-Out Options to
purchase an aggregate of 566,187 shares of Instron Common Stock will be entitled
to receive as Option Consideration an aggregate of approximately $5.3 million.
In addition, options to purchase up to an aggregate of 125,000 shares of Instron
Common Stock held by certain Management Investors will be assumed by the
Surviving Corporation and converted into the Rollover Options. The Rollover
Options will be governed by the 1992 Plan and the Stock Option Agreements. The
Rollover Options will be fully vested and exercisable immediately upon
consummation of the Merger.
Payment for Restricted Stock Awards. In connection with the Merger
Agreement, all restricted stock awards granted under Instron's stock option
plans, other than certain restricted stock awards held by certain Management
Investors, have vested or will vest (as of the date of approval of the Merger
Agreement by the Instron stockholders at the Special Meeting) and the
restrictions associated with such restricted stock awards have or will be deemed
automatically waived. The shares of Instron Common Stock subject to such
restricted stock awards will be treated in the Merger as Instron Common Stock
and converted into the right to receive the Cash Merger Consideration. Certain
Management Investors have agreed to waive the vesting of their restricted stock
awards with respect to an aggregate of 25,340 shares of Instron Common Stock; as
a result, these shares of restricted stock will not be cashed out as described
above, and, instead, will be assumed by the Surviving Corporation. Prior to the
Effective Time, the 25,340 shares of Instron Common Stock subject to such
restricted stock awards will be exchanged for 5,068 shares of Series B Preferred
Stock and, in the Merger, such shares of Series B Preferred Stock will be
converted into a like number of shares of restricted Surviving Corporation
Common Stock. Such shares will continue to be subject to the 1992 Plan and will
be subject to the Restricted Stock Award Agreements.
Transfer of Shares. At the Effective Time, the stock transfer books of
Instron will be closed and there will be no further registration of transfer of
shares of Instron Common Stock thereafter on the records of Instron. If after
the Effective Time, any Certificates are presented to the Surviving Corporation
or the Exchange Agent, they will be surrendered and canceled in return for the
payment of the Cash Merger Consideration.
Conditions to the Merger. Each party's respective obligation to effect the
Merger is subject to the fulfillment or waiver, if permissible, at or prior to
the Closing Date, of each of the following conditions: (i) the approval and
adoption of the Merger Agreement and the Transactions by the affirmative vote of
the holders of two-thirds of the outstanding shares of Instron Common Stock
entitled to vote at the Special Meeting; (ii) the waiting period (and any
extension thereof) applicable to the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired or been
terminated; (iii) all necessary approvals, authorizations and consents of any
governmental or regulatory entity required to consummate the Merger shall have
been obtained and remain in full force and effect, and all waiting periods
relating to such approvals, authorizations and consents shall have expired or
been terminated; (iv) no preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental authority nor any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority shall be in effect which
would make the consummation of the Merger illegal, or otherwise restrict,
prevent or prohibit the consummation of any of the Transactions, including the
Merger; and (v) each of the Instron Board and the Board of Directors of MergerCo
(the "MergerCo Board") shall have received a letter from an appraisal firm
reasonably satisfactory to Instron indicating that
44
<PAGE> 55
immediately after the Effective Time, and after giving effect to the Merger and
the financing thereof, that the Surviving Corporation will not be insolvent or
have unreasonably small capital with which to engage in its business.
The obligations of MergerCo to effect the Merger are further subject to the
following conditions: (i) those representations and warranties of Instron set
forth in the Merger Agreement which are qualified by materiality or words of
similar effect shall be true and correct, and those representations and
warranties of Instron set forth in the Merger Agreement which are not so
qualified shall be true and correct in all material respects, in each case as of
the date of the Merger Agreement and as of the date of the closing date of the
Merger Agreement (the "Closing Date") as though made on and as of the Closing
Date (except to the extent such representations and warranties expressly relate
to a specific date, in which case such representations and warranties shall be
true and correct in all material respects as of such date); (ii) Instron shall
have performed in all material respects all obligations required to be performed
by it under the Merger Agreement; (iii) Instron shall have obtained or made all
third party consents, authorizations, orders or approvals identified in the
Merger Agreement or otherwise identified by MergerCo (unless not material); (iv)
there shall not have been entered any order of any governmental entity which
prohibits or limits Instron's or any of its subsidiaries' ability to own or
operate any of its business, properties or assets which is material to Instron
and its subsidiaries as a whole, or compels Instron or any of its subsidiaries
to dispose of or hold separate any portion of Instron's or its subsidiaries'
business, properties or assets which is material to Instron and its subsidiaries
as a whole; (v) there shall not have occurred any material adverse change in the
business, assets, condition (financial or otherwise) or results of operations of
Instron and its subsidiaries taken as a whole; (vi) there shall not have
occurred any material disruption or material adverse change in the banking,
financial or capital markets generally or in the market for senior credit
facilities or for new issuances of high yield securities which has caused either
of Kirtland's lenders to withdraw its respective commitment to provide financing
as contemplated by their respective financing commitment letters (a "Financing
Material Adverse Change"); (vii) as of immediately prior to the Effective Time,
no more than 5% of the outstanding shares of Instron Common Stock shall have
taken actions to assert dissenter's rights under the MBCL; (viii) the Commission
shall not have disapproved the statement in this Proxy Statement to the effect
that the Merger shall be treated as a recapitalization for accounting purposes;
(ix) there shall not be pending any action, claim, proceeding or investigation
instituted by any governmental entity challenging or prohibiting the
consummation of the Merger and the other Transactions; (x) the exchange of the
shares of Instron Common Stock of the Other Investors and the Management
Investors for Series B Preferred Stock contemplated by the Merger Agreement
shall have been completed to the reasonable satisfaction of MergerCo; and (xi)
Instron's Net Indebtedness on the Closing Date shall not exceed $13,000,000.
The obligation of Instron to effect the Merger is further subject to the
following conditions: (i) those representations and warranties of Kirtland and
MergerCo set forth in the Merger Agreement which are qualified by materiality or
words of similar effect shall be true and correct, and those representations and
warranties of Kirtland and MergerCo set forth in the Merger Agreement which are
not so qualified shall be true and correct in all material respects, in each
case, as of the date of the Merger Agreement and as of the Closing Date as
though made on the Closing Date (except to the extent such representations and
warranties expressly relate to a specific date, in which case such
representations and warranties shall be true and correct in all material
respects as of such date); and (ii) each of Kirtland and MergerCo shall have
performed all obligations required to be performed by it under the Merger
Agreement, except where any failure to perform would, individually or in the
aggregate, not materially impair or significantly delay the ability of Instron
to consummate the Merger.
EVEN IF THE STOCKHOLDERS APPROVE THE MERGER, THERE CAN BE NO ASSURANCE THAT
THE MERGER WILL BE CONSUMMATED.
Representations and Warranties. Instron has made representations and
warranties in the Merger Agreement regarding, among other things, its
organization and good standing, authority to enter into the Transactions,
compliance with all applicable laws, its capitalization, its financial
statements, its ownership of all subsidiaries and their organization and good
standing, requisite governmental and other consents and
45
<PAGE> 56
approvals, the content and submission of forms and reports required to be filed
by Instron with the Commission, absence of litigation to which Instron is a
party, the absence of certain changes in the business of Instron since December
31, 1998, requisite tax filings, maintenance of books and records, properties
owned or leased by the Company, ownership or licence for all material
intellectual property, environmental matters, employee benefits, labor matters,
brokers and finders fees, opinion of financial advisor, Year 2000 compliance,
insurance, absence of defaults under material contracts, and takeover laws.
Certain of Instron's representations and warranties in the Merger Agreement
are qualified by the term "Company Material Adverse Effect." For purposes of the
Merger Agreement, a "Company Material Adverse Effect" means a material adverse
effect on the business, results of operations or condition (financial or
otherwise) of Instron and its subsidiaries taken as a whole.
MergerCo and Kirtland have, jointly and severally, made representations and
warranties in the Merger Agreement regarding, among other things, their
organization and good standing, authority to enter into the Transactions, the
requisite governmental and other consents and approvals, required financing,
takeover laws, formation of MergerCo, MergerCo's beneficial ownership of shares
of Instron Common Stock, and the financial condition of Kirtland.
Certain of the representations and warranties of MergerCo and Kirtland are
qualified by the term "Parent Material Adverse Effect." For purposes of the
Merger Agreement, a "Parent Material Adverse Effect" means a material adverse
effect on the business, results of operations or condition (financial or
otherwise) of Kirtland.
The representations, warranties, and agreements in the Merger Agreement or
in any instrument delivered pursuant to the Merger Agreement will expire at the
Effective Time.
Covenants. Instron has agreed under the Merger Agreement that during the
period from the date of the Merger Agreement to the Effective Time, except as
otherwise contemplated by the Merger Agreement or otherwise agreed to in writing
by MergerCo or Parent, Instron shall, and shall cause each of its subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course, consistent with past practice, and use their best efforts to preserve
intact their present business organizations, keep available the services of
their present advisors, managers, officers and employees and preserve their
relationships with customers, suppliers, licensors and others having business
dealings with them and continue existing contracts as in effect on the date of
the Merger Agreement (for the term provided in such contracts). Specifically,
Instron has agreed not to, among other things, (i) pay dividends or make
distributions, or take certain actions with respect to its capital stock, (ii)
authorize the issuance of securities (except in connection with the
Transactions), (iii) acquire, dispose or encumber any assets outside the
ordinary course of business, (iv) make loans, advances or capital contributions
other than in the ordinary course of business, (v) pay any liabilities (other
than in the ordinary course of business or in connection with the Transactions),
(vi) take certain actions with respect to employee benefits, (vii) amend its
organizational documents (except in connection with the Transactions), or (viii)
settle or compromise any litigation.
Instron, MergerCo and Kirtland each have also agreed to prepare and file
certain filings required under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act (including this Proxy Statement), or any
other federal, state or foreign law relating to the Merger and the other
Transactions.
Financing. Under the Merger Agreement, each of Kirtland and MergerCo agreed
to use its reasonable best efforts to arrange the financing of the Transactions
and to satisfy the conditions set forth in the financing commitment letters from
Kirtland's lenders. In the event that they are unable to arrange any portion of
the financing in the manner or from the sources contemplated by such financing
commitment letters, Kirtland and MergerCo will arrange (or in the event that
such inability arises as a result of a Financing Material Adverse Change, use
its reasonable best efforts to arrange) any such portion from alternative
sources on substantially the same terms and with substantially the same
conditions as the portion of the financing that Kirtland and MergerCo were
unable to arrange. Instron will use its reasonable best efforts to assist
Kirtland and MergerCo in obtaining the financing for the Transactions.
46
<PAGE> 57
Solicitation of Acquisition Proposals. Under the Merger Agreement, Instron
is prohibited from authorizing or permitting any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it, to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing non-public information),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes a proposed or actual (A) merger, consolidation or
similar transaction involving Instron, (B) sale, lease or other disposition,
directly or indirectly, of any assets of Instron or its subsidiaries
representing 15% or more of the consolidated assets of Instron and its
subsidiaries, (C) issue, sale or other disposition by Instron of securities
representing 15% or more of the votes associated with the outstanding securities
of Instron, (D) tender offer or exchange offer in which any person or group
shall acquire beneficial ownership, or the right to acquire beneficial
ownership, of 15% or more of the outstanding shares of Instron Common Stock, or
(E) recapitalization, restructuring, liquidation, dissolution, or other similar
type of transaction with respect to Instron (an "Acquisition Proposal"), or (ii)
participate in any discussions or negotiations regarding an Acquisition
Proposal; provided, however, that at any time prior to the approval of the
Merger Agreement by the Instron stockholders, if Instron receives an Acquisition
Proposal that was unsolicited or that did not otherwise result from a breach of
the foregoing restrictions, Instron may furnish non-public information to and
participate in negotiations with the third party making the Acquisition Proposal
if (X) the Instron Board determines based on the advice of independent legal
counsel that failure to do so would be reasonably likely to constitute a breach
of its fiduciary duties to the Instron stockholders under applicable law, and
(Y) the Instron Board determines that such Acquisition Proposal is reasonably
likely to lead to an Acquisition Proposal that the Instron Board determines, on
the advice of its financial advisor, is more favorable to the Instron
stockholders from a financial point of view than the Transactions (a "Superior
Proposal"). Notwithstanding the foregoing, Instron shall, prior to furnishing
any non-public information with respect to Instron and its subsidiaries to such
third party, enter into a confidentiality agreement with such third party on
terms no less favorable than those in the confidentiality agreement executed by
Instron and Kirtland. Instron shall promptly notify (but in any event within two
calendar days) MergerCo of Instron's first receipt of a written Acquisition
Proposal by such third party and of the material terms and conditions thereof.
Instron generally shall have no duty to notify or update Kirtland or MergerCo on
the status of discussions or negotiations (including the status of such
Acquisition Proposal or any amendments or proposed amendments thereto) between
Instron and such third party.
The Merger Agreement also provides that at any time prior to the approval
of the Merger Agreement by the Instron stockholders, the Instron Board may (i)
withdraw or modify in a manner material and adverse to Kirtland or MergerCo its
approval or recommendation of the Merger Agreement or the Merger, (ii) approve
or recommend an Acquisition Proposal to its stockholders or (iii) cause Instron
to enter into any definitive acquisition agreement with respect to an
Acquisition Proposal, in each such case if (A) the Instron Board determines
based on the advice of independent legal counsel that failure to take such
action would be reasonably likely to constitute a breach of its fiduciary duties
to the Instron stockholders under applicable law, and (B) the Instron Board
determines based on the advice of its financial advisors that such Acquisition
Proposal constitutes a Superior Proposal.
Indemnification and Insurance. Under the Merger Agreement, Instron will
indemnify and hold harmless any person who is now, or has been at any time prior
to the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of Instron or any of its subsidiaries, and
after the Effective Time the Surviving Corporation will indemnify and hold
harmless, as and to the full extent permitted by applicable law, each such
indemnified party against, any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement in connection with any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of the Merger Agreement, or who becomes prior to the
Effective Time, a director, officer, employee, fiduciary or agent of Instron or
any of its subsidiaries is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer, employee,
47
<PAGE> 58
fiduciary or agent of Instron or any of its subsidiaries, or is or was serving
at the request of Instron or any of its subsidiaries as a director, officer,
employee, fiduciary or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (ii) the negotiation, execution or performance of
the Merger Agreement or any of the Transactions (whether asserted or arising
before or after the Effective Time). The parties also agree that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of, the directors, officers, employees and agents of Instron and its
subsidiaries provided for in Instron's Restated Articles of Organization or
Amended and Restated Bylaws as in effect as of the date of the Merger Agreement
with respect to matters occurring prior to the Effective Time, and including the
Merger and the Transactions, shall continue in full force and effect for a
period of six years from the Effective Time.
Prior to the Effective Time, Instron shall purchase an extended reporting
period endorsement under its existing directors' and officers' liability
insurance coverage for Instron's directors and officers which shall provide such
directors and officers with coverage at least as favorable as the current policy
for six years following the Effective Time. If, however, the total aggregate
cost of such coverage exceeds $175,000, then Instron will instead maintain, for
such six-year period, the maximum amount of comparable coverage as shall be
available for $175,000 on such terms.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger Agreement and
the Transactions by the Instron stockholders: (a) by mutual written consent of
MergerCo and Instron; (b) by either of Instron or MergerCo (i) if the Instron
stockholders shall have failed to give the required approval of the Merger
Agreement, (ii) if any governmental authority shall have issued a permanent
injunction or taken such other final and non-appealable action which permanently
restrains, enjoins or otherwise prohibits the Merger, or (iii) if, without any
material breach by the terminating party of its obligations under the Merger
Agreement, the Merger shall not have occurred on or before November 30, 1999;
(c) by Instron (i) in connection with entering into a definitive agreement to
effect a Superior Proposal, (ii) if MergerCo or Kirtland shall have breached in
any material respect any of their respective representations, warranties,
covenants or other agreements, which breach is not cured within 15 days
following receipt by MergerCo or Kirtland of notice of such breach, except, in
any case, for such breaches which are not reasonably likely to affect Kirtland's
or MergerCo's ability to consummate the Merger, or (iii) after 60 days following
receipt by Instron of a Kirtland Financing Notice; (d) by MergerCo (i) if
Instron shall have breached in any respect any of its respective
representations, warranties or covenants, which breach is not cured within 15
days following receipt by Instron of notice of such breach, except, in any case,
for such breaches of such representations and warranties which are not
reasonably likely to result in a Company Material Adverse Effect, (ii) if the
Instron Board shall (A) fail to include a recommendation in this Proxy Statement
of the Merger Agreement and the Transactions, (B) withdraw or modify or change,
or propose or announce any intention to withdraw or modify or change, in a
manner material and adverse to MergerCo, its approval or recommendation of the
Merger Agreement or the Transactions, (C) approve or recommend or propose to
announce any intention to approve or recommend any Acquisition Proposal, or (D)
propose or announce any intention to enter into any agreement, other than a
confidentiality agreement, with respect to an Acquisition Proposal, or (iii)
after 60 days following delivery by Kirtland or MergerCo to Instron of a
Kirtland Financing Notice.
Fees and Expenses. Generally, Instron, on the one hand, and Kirtland and
MergerCo on the other hand, will pay their own fees, costs, and expenses
incurred in connection with the Merger Agreement and the Transactions. However,
Instron will pay MergerCo "liquidated damages" in an amount equal to $5,000,000
plus an amount equal to the reasonable out-of-pocket costs and expenses incurred
by Kirtland and MergerCo in connection with the Merger Agreement and the
Transactions (not to exceed $1,000,000) under certain circumstances, including
if:
- MergerCo terminates the Merger Agreement as a result of Instron having
wilfully breached its obligation to call a special meeting of
stockholders or to take certain actions with respect to the preparation
of this Proxy Statement;
- Instron terminates the Merger Agreement in connection with entering into
a definitive agreement to effect a Superior Proposal;
48
<PAGE> 59
- MergerCo terminates the Merger Agreement because of a material and
adverse withdrawal, modification or change in the approval or
recommendation of the Instron Board of the Merger Agreement or the
Transactions; or
- Either Instron or MergerCo terminates the Merger Agreement because the
Instron stockholders shall have failed to approve the Merger Agreement
and, within nine months of such termination, Instron enters into a
definitive agreement with respect to another acquisition transaction with
a person or an affiliate thereof who had made a proposal for an
acquisition transaction directly to the Instron stockholders or publicly
announced such a transaction or solicited proxies or consents in
opposition to the Merger prior to the Special Meeting.
Amendment. Subject to applicable law, the Merger Agreement may be amended
by the parties to the Merger Agreement; provided, however, that, after the
Merger Agreement is approved by the Instron stockholders, no such amendment
shall be made that requires further approval by the Instron stockholders without
obtaining such approval. Any amendment to the Merger Agreement must be in
writing and signed by the parties to the Merger Agreement.
ESTIMATED FEES AND EXPENSES OF THE MERGER
Estimated fees and expenses incurred or to be incurred by the Surviving
Corporation in connection with the Transactions are approximately as follows:
<TABLE>
<S> <C>
Financial advisory fees..................................... $ 750,000
Lender fees and expenses.................................... 4,500,000
Legal, accounting and printing fees and expenses............ 1,750,000
Investment banking fees and expenses........................ 1,365,000
Exchange Agent fees and expenses............................ 35,000
Proxy solicitation fees and expenses........................ 25,000
Commission filing fee....................................... 30,333
Miscellaneous expenses...................................... 44,667
Total............................................. $8,500,000
</TABLE>
49
<PAGE> 60
APPRAISAL RIGHTS
Sections 85 through 98, inclusive, of the MBCL (a copy of which is attached
hereto as Appendix C) entitle any holder of record of shares of Instron Common
Stock who files a written objection to the proposal to approve the Merger
Agreement and the Transactions, including the Merger (the "Merger Proposal"),
before the vote to approve such proposal is taken at the Special Meeting and who
does not vote in favor of the Merger Proposal to demand in writing that the
Surviving Corporation pay to such stockholder in cash the fair value of such
shares (exclusive of any element of value arising out of the expectation or
accomplishment of the Merger).
Any person having a beneficial interest in shares of Instron Common Stock
that are held of record in the name of another person, such as a broker or
nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect such beneficial
owner's appraisal rights, if any.
Any stockholder of record contemplating making a demand for appraisal is
urged to review carefully the provisions of Sections 85 through 98 of the MBCL,
particularly the procedural statute specifying the requirements necessary to
perfect dissenter's appraisal rights thereunder. Appraisal rights will be lost
if the procedural requirements of Sections 85 through 98 of the MBCL are not
fully satisfied.
SET FORTH BELOW IS A SUMMARY OF THE PROCEDURES RELATING TO THE EXERCISE OF
APPRAISAL RIGHTS. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE PROVISIONS OF SECTIONS 85 THROUGH 98 OF THE MBCL AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX C HERETO AND TO ANY
AMENDMENTS TO SUCH SECTIONS AS MAY BE ADOPTED AFTER THE DATE OF THIS PROXY
STATEMENT.
Filing Written Objection. An Instron stockholder who intends to exercise
appraisal rights must deliver to Instron prior to the vote of the Instron
stockholders on the Merger Proposal, a written objection to the Merger Proposal,
stating that such stockholder intends to demand payment for the shares of
Instron Common Stock held by such stockholder if the Merger is consummated. Such
written objection should be addressed to Instron Corporation, 100 Royall Street,
Canton, Massachusetts 02021, Attention: Corporate Clerk. A vote against the
Merger Proposal will not satisfy the requirement that a written objection be
filed with Instron. The written objection to the Merger Proposal must be in
addition to and separate from any proxy or vote against the Merger Proposal.
No Vote in Favor of the Merger Proposal. Shares of Instron Common Stock for
which appraisal is sought must not be voted in favor of the Merger Proposal. The
submission of a signed blank proxy card will serve to waive appraisal rights,
but failure to return a proxy card or vote (or abstaining from vote) will not
waive appraisal rights.
Notice By Surviving Corporation. Within ten days after the Effective Time,
the Surviving Corporation will notify each holder of record of shares of Instron
Common Stock who has purported to comply with the provisions of Section 86 of
the MBCL and whose shares were not voted in favor of the Merger Proposal that
the Merger has become effective as provided in Section 88 of the MBCL. The
giving of such notice shall not be deemed to create any rights in the
stockholder receiving the same to demand payment for such holder's shares of
Instron Common Stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at such stockholder's last known address as it
appears in the records of Instron immediately prior to the Effective Time.
Written Demand. Within twenty days after the mailing of notice by the
Surviving Corporation, any dissenting stockholder who wishes to exercise
appraisal rights must demand in writing from the Surviving Corporation payment
for the fair value of such holder's shares of Instron Common Stock. Such written
demand should be sent to the Surviving Corporation, 100 Royall Street, Canton,
Massachusetts 02021, Attention: Corporate Clerk. The Surviving Corporation is
required to make payment of the fair value of the shares of Instron Common Stock
owned by each dissenting stockholder within thirty days (the "Payment Period")
after the expiration of the twenty day period during which a written demand for
payment may be made. If the Surviving Corporation and such stockholder shall
have agreed as to the fair value of such shares,
50
<PAGE> 61
the Surviving Corporation shall pay to said stockholder the agreed value of such
stockholder's shares of Instron Common Stock within the Payment Period.
Settlement or Appraisal. Any stockholder shall, with the Surviving
Corporation's written consent, have the right to withdraw such stockholder's
demand for appraisal and to accept the terms offered in the Merger Proposal
within four months after the expiration of the Payment Period. If the Surviving
Corporation and any stockholder seeking appraisal have not agreed on the fair
value of such holder's shares of Instron Common Stock within the Payment Period,
any such stockholder who has complied with Section 86 of the MBCL, or the
Surviving Corporation, by filing a bill in equity with the Superior Court of
Norfolk County in The Commonwealth of Massachusetts (the "Norfolk Superior
Court"), may demand a determination of the fair value of the shares of all such
stockholders. If no such bill is filed within such four-month period, no holder
of shares will be entitled to appraisal rights. Upon the filing of any such
bill, notice of the time and place fixed for a hearing will be given by the
Surviving Corporation to all stockholders who have demanded payment for their
shares and with whom agreements as to the fair value of their shares have not
been reached. After the hearing on such bill, the Norfolk Superior Court will
determine the stockholders who have complied with the provisions of Section 86
of the MBCL and who have become entitled to appraisal rights. After determining
those stockholders entitled to an appraisal, the Norfolk Superior Court shall
appraise the shares of Instron Common Stock, determining the fair value as of
the day preceding the Special Meeting and exclusive of any element of value
arising from the expectation or accomplishment of the Merger. Such determination
shall be binding on all such stockholders. Instron has not yet determined
whether it, as the Surviving Corporation, will file such a bill in equity and,
therefore, any dissenting stockholder who desires such a bill in equity to be
filed is advised to file it on a timely basis.
Payment and Costs. When the value is so determined, the Norfolk Superior
Court will direct payment by the Surviving Corporation of such value, with
interest thereon, if any, as the Norfolk Superior Court determines, to the
stockholders entitled to receive the same upon surrender to the Surviving
Corporation by such stockholders of the Certificates representing their shares
of Instron Common Stock. The cost of the appraisal proceeding (other than
attorneys' and experts' fees) and the reasonable compensation and expenses of
any master appointed by the Norfolk Superior Court may be apportioned in such
manner as appears to the Norfolk Superior Court to be equitable; however, all
costs of giving notice to the dissenting stockholders entitled to notice of the
filing of such an action will be paid by the Surviving Corporation.
Exclusive Remedy; Exception. The MBCL provides that the enforcement by a
stockholder of appraisal rights pursuant to the procedure summarized above is
such stockholder's exclusive remedy, except that this does not exclude the right
of such stockholder to maintain an appropriate proceeding to obtain relief on
the ground that such corporate action will be or is illegal or fraudulent as to
such stockholder. In addition, under Massachusetts law dissenting stockholders
may not be limited to the statutory remedy of judicial appraisal where
violations of fiduciary duty are found.
ANY INSTRON STOCKHOLDER WHO DESIRES TO EXERCISE APPRAISAL RIGHTS SHOULD
CAREFULLY REVIEW THE MBCL AND IS ADVISED TO CONSULT SUCH STOCKHOLDER'S LEGAL
ADVISOR BEFORE EXERCISING OR ATTEMPTING TO EXERCISE SUCH RIGHTS.
REGULATORY APPROVALS
Instron is required to make filings with or obtain approvals from certain
United States antitrust regulatory authorities in connection with the Merger.
These consents and approvals include the approval of the United States Federal
Trade Commission and the Department of Justice. An application and notice has
been filed with the Federal Trade Commission and the Department of Justice and
it is expected that the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, will expire on June 24, 1999.
However, we cannot predict with exact certainty whether or when we will obtain
such antitrust regulatory approval or the timing of such approval.
51
<PAGE> 62
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP
OF MANAGEMENT AND OTHERS
The following table sets forth, as of May 15, 1999, certain information
regarding the ownership of Instron Common Stock by: (i) the stockholders known
by Instron to be beneficial owners of more than five percent (5%) of the
outstanding shares of Instron Common Stock; (ii) each Director of Instron, (iii)
the Chief Executive Officer and the four other most highly compensated executive
officers of Instron; (iv) all Directors and executive officers of Instron as a
group; and (v) each of the other members of the Investor Group and certain other
persons who are listed under "Certain Information Concerning MergerCo and the
Investor Group."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
---------------------
NAME OF BENEFICIAL OWNER (2) NUMBER PERCENT
---------------------------- ---------- -------
<S> <C> <C>
Kirtland Capital Partners III L.P. (3)...................... 1,560,115 22.4%
2250 SOM Center Road
Suite 105
Willoughby Hills, Ohio 44094
David L. Babson & Co. (4)................................... 757,500 10.9
One Memorial Drive
Cambridge, MA 02142
Dimensional Fund Advisors Inc. (5).......................... 500,000 7.2
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
George S. Burr (6).......................................... 259,206 3.7
Harold Hindman (7).......................................... 529,819 7.6
John W. Lacey (8)........................................... 2,000 *
James M. McConnell (9)...................................... 364,318 5.2
Dennis J. Moore............................................. 2,500 *
Sheldon Rutstein............................................ -- --
John F. Smith............................................... -- --
Richard W. Young............................................ 25,000 *
Linton A. Moulding (10)..................................... 94,149 1.3
Joseph E. Amaral (11)....................................... 84,173 1.2
William J. Milliken (12).................................... 20,549 *
Yahya Gharagozlou (13)...................................... 50,591 *
All Directors and executive officers as a group (17 persons)
(14)...................................................... 1,929,997 27.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, Instron believes that each of the
stockholders listed above has sole voting and investment power with
respect to the shares of Instron Common Stock that are beneficially
owned by them.
(2) Unless otherwise set forth above, the address of the listed
stockholders is c/o Instron Corporation, 100 Royall Street, Canton,
Massachusetts 02021.
(3) The number of shares beneficially owned is based solely on information
as set forth on a Schedule 13D that reports shared voting power with
respect to 1,560,115 shares of Instron Common Stock and shared
dispositive power with respect to 1,560,115 shares of Instron Common
Stock. According to the Schedule 13D, Kirtland, the Other Investors
and the Management Investors may be deemed to be a group within the
meaning of Section 13(d) of the Exchange Act as a result of their
execution of the Voting Agreement. According to the Schedule 13D, all
securities reported are owned by the Other Investors and the
Management Investors, but if the group exists, the group would
beneficially own such securities. Kirtland disclaims beneficial
ownership of all such securities.
52
<PAGE> 63
(4) The number of shares beneficially owned is based solely on information
as set forth on a Schedule 13G dated January 21, 1999. The Schedule
13G provides ownership information as of December 31, 1998. David L.
Babson & Co. has sole voting and investment power with respect to
757,700 shares. David L. Babson & Co. is an investment counseling firm
managing stock and bond portfolios for a variety of clients, ranging
from large personal accounts to Fortune 500 and state government
retirement funds.
(5) The number of shares beneficially owned is based solely on information
as set forth on a Schedule 13G dated February 11, 1999. The Schedule
13G provides ownership information as of December 31, 1998.
Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment
manager to certain other investment vehicles, including commingled
group trusts (collectively, the "Portfolios"). In its role as
investment advisor and investment manager, Dimensional possesses both
voting and investment power over the securities of Instron owned by
the Portfolios. All securities reported are owned by the Portfolios,
and Dimensional disclaims beneficial ownership of such securities.
(6) The number shown excludes 91,550 shares which are owned by Mr. Burr's
wife, as to which Mr. Burr disclaims beneficial ownership.
(7) Mr. Hindman has sole voting and investment power with respect to
37,005 of these shares. The number shown also includes 492,814 shares
of which Mr. Hindman has shared voting and investment power as trustee
of the Harold Hindman Trust -- 1969. The number shown excludes 60,863
shares which are owned by Mr. Hindman's wife, as to which Mr. Hindman
disclaims beneficial ownership.
(8) Mr. Lacey has sole voting and investment power with respect to 1,000
of these shares. The number shown also includes 1,000 shares held by
Mr. Lacey's wife.
(9) Mr. McConnell has sole voting and investment power with respect to
214,525 of these shares, which includes 4,706 shares allocated to Mr.
McConnell's account pursuant to Instron's 401(k) Plan. The number
shown also includes 149,500 shares which Mr. McConnell has the right
to acquire within 60 days of May 15, 1999 upon the exercise of stock
options granted under Instron's stock option plans.
(10) Mr. Moulding has sole voting and investment power with respect to
31,852 of these shares, which includes 6,852 shares allocated to Mr.
Moulding's account pursuant to Instron's 401(k) Plan. The number shown
also includes 13,547 shares held jointly with his wife and 48,750
shares which Mr. Moulding has the right to acquire within 60 days of
May 15, 1999 upon the exercise of stock options granted under
Instron's stock option plans.
(11) Mr. Amaral has sole voting and investment power with respect to 33,423
of these shares, which includes 4,423 shares allocated to Mr. Amaral's
account pursuant to Instron's 401(k) Plan. The number shown also
includes 50,750 shares which Mr. Amaral has the right to acquire
within 60 days of May 15, 1999 upon the exercise of stock options
granted under the Instron's stock option plans.
(12) Mr. Milliken has sole voting and investment power with respect to
20,764 of these shares, which includes 264 shares allocated to Mr.
Milliken's account pursuant to Instron's 401(k) Plan.
(13) Mr. Gharagozlou has sole voting and investment power with respect to
27,091 of these shares, which includes 2,091 shares allocated to Mr.
Gharagozlou's account pursuant to Instron's 401(k) Plan. The number
shown also includes 23,500 shares which Mr. Gharagozlou has the right
to acquire within 60 days of May 15, 1999 upon the exercise of stock
options granted under Instron's stock option plans.
(14) The share information provided are based on information provided by
the Directors and executive officers of Instron, except for
information concerning shares allocated to the accounts of such
persons under Instron's 401(k) Plan, which information was provided by
the trustee of Instron's
53
<PAGE> 64
401(k) Plan. The indicated ownership includes 433,625 shares which all
executive officers as a group have a right to acquire within 60 days
of May 15, 1999 upon the exercise of stock options granted under
Instron's stock option plans.
There have been no transactions in the Instron Common Stock effected during
the past 60 days by Instron or any member of the Investor Group other than
transactions pursuant to Instron's 401(k) Plan and the issuance by Instron of an
aggregate of 21,610 shares of Instron Common Stock pursuant to the exercise of
employee stock options.
The Equity Investor has not purchased any shares of Instron Common Stock
since January 1, 1997.
54
<PAGE> 65
CERTAIN INFORMATION CONCERNING MERGERCO
AND THE INVESTOR GROUP
The Investor Group consists of Kirtland, MergerCo, the Other Investors and
the Management Investors.
THE EQUITY INVESTOR
Kirtland is an Ohio limited partnership of which Kirtland Partners Ltd.
("Kirtland Ltd.") is the general partner. Kirtland Ltd. is an Ohio limited
liability company. The principal business and office address of Kirtland and
Kirtland Ltd. is 2250 SOM Center Road, Suite 105, Willoughby Hills, Ohio 44094.
John F. Turben, John G. Nestor, Raymond A. Lancaster and William R.
Robertson are each members of Kirtland Ltd. and, either directly or through one
or more intermediaries, may be deemed to control both Kirtland and Kirtland Ltd.
Each such person is a full-time employee of Kirtland Ltd. The principal business
and office address of each of the foregoing is 2250 SOM Center Road, Suite 105,
Willoughby Hills, Ohio 44094.
MERGERCO
ISN Acquisition Corporation, a Massachusetts corporation and a wholly owned
subsidiary of Kirtland, was created solely for the purpose of engaging in the
Transactions.
THE OTHER INVESTORS
George S. Burr has been a Director of Instron since 1946. Mr. Burr is
retired and currently serves as Vice Chairman of the Instron Board.
Helen L. Burr is the wife of George S. Burr.
The Harold Hindman Trust -- 1969 is a trust of which Harold Hindman is a
trustee. Mr. Hindman has been a Director of Instron since 1946. Mr. Hindman is
retired and currently serves as Chairman of the Instron Board. Prior to 1990,
Mr. Hindman was Chairman of the Instron Board and Chief Executive Officer of
Instron.
The business address for each of the Other Investors is c/o Instron
Corporation, 100 Royall Street, Canton, Massachusetts 02021.
THE MANAGEMENT INVESTORS
The following Management Investors are executive officers of Instron and
are expected to be executive officers of the Surviving Corporation:
James M. McConnell joined Instron in 1990 as President and Chief Executive
Officer. From 1987 to 1990, Mr. McConnell was President and Chief Executive
Officer of Automatic Switch Company, and from 1986 to 1987, he was President of
Rosemont, Inc. (both are wholly-owned subsidiaries of Emerson Electric Co.)
Joseph E. Amaral joined Instron in 1978. Since 1985, Mr. Amaral has held
positions as Corporate Technology Manager, Corporate Product Planning Manager,
and Vice President, Corporate Technical Director. In March 1995, he was elected
Vice President, General Manager of North America Operations.
Kenneth L. Andersen joined Instron in 1983. Since 1983, Mr. Andersen has
held positions as Director of Software Business Group, Director of Structures
Business Group, and Corporate Marketing Director. In 1993, he was elected Vice
President of Sales, North America.
John R. Barrett joined Instron in 1988 as Assistant Treasurer. From 1979 to
1988, Mr. Barrett held various financial management positions with
Computervision Corporation. In 1993, he was elected Treasurer of Instron and, in
1999, he was elected Treasurer and Vice President of Corporate Development.
55
<PAGE> 66
Jonathan L. Burr joined Instron in 1979. He has held positions as Personnel
Administrator, Director of Personnel, and Corporate Director of Human Resources.
In 1993, he was elected Vice President, Corporate Director of Human Resources.
Mr. Burr is the son of George S. Burr, Vice Chairman of the Board of Directors.
Yahya Gharagozlou joined Instron in 1981. He has held positions as
Corporate Product Manager for Software, Marketing Manager, Product Planning
Manager, and Director of Engineering. In, 1996, he was elected Vice President,
Corporate Technical Director.
Arthur D. Hindman joined Instron in 1979. Since 1979, Mr. Hindman has held
positions as Manager, Marketing Administration; International Sales Manager, and
General Manager, Asia/Latin America. In 1993, he was elected Vice President and
General Manager, Asia Pacific/Latin America. Mr. Hindman is the son of Harold
Hindman, Chairman of the Board of Directors.
William Milliken joined Instron in 1997 as Vice President, Corporate
Director of Manufacturing. From 1988 to 1997, Mr. Milliken was Director of
Manufacturing for Otis Elevator's Asia division. From 1978 to 1988 he held
various financial and manufacturing management positions with General Motors
Corporation.
Linton A. Moulding joined Instron in 1985. He has held positions as
Corporate Controller, Director of US Operations, Corporate Vice President of
Manufacturing, and Vice President of Finance and Treasurer. In 1993, he was
elected Chief Financial Officer of Instron.
Norman L. Smith joined Instron Limited, a subsidiary of Instron, in 1982 as
Marketing Director Designate and assumed the position of Marketing Director in
1983. In January 1996, he was promoted to Deputy Managing Director and was
elected Vice President of Instron and Managing Director of Instron Limited in
November 1996.
The business address for each of the Management Investors is c/o Instron
Corporation, 100 Royall Street, Canton, Massachusetts 02021.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are generally applicable to holders
of Instron Common Stock. This discussion is based on currently existing
provisions of the Code, existing and proposed Treasury Regulations thereunder,
and current administrative rulings and court decisions, all of which are subject
to change. Any such change, which may or may not be retroactive, could alter the
tax consequences to the holders of Instron Common Stock as described herein.
Special tax consequences not described below may be applicable to particular
classes of taxpayers, including financial institutions, broker-dealers, persons
who are not citizens or residents of the United States or who are foreign
corporations, foreign partnerships, or foreign estates or trusts as to the
United States, persons who will own, actually or constructively, stock of
Instron after the Merger, and holders who acquired their stock through the
exercise of an employee stock option or otherwise as compensation.
The receipt of the Cash Merger Consideration in the Merger by holders of
Instron Common Stock will be a taxable transaction for federal income tax
purposes. Each holder's gain or loss per share of Instron Common Stock will be
equal to the difference between $22.00 and the holder's adjusted basis in that
particular share of the Instron Common Stock. Such gain or loss generally will
be a capital gain or loss. In the case of individuals, trusts, and estates, such
capital gain will be subject to a maximum federal income tax rate of 20% for
shares of Instron Common Stock held for more than 12 months prior to the date of
disposition.
A holder of Instron Common Stock may be subject to backup withholding at
the rate of 31% with respect to Cash Merger Consideration received pursuant to
the Merger, unless the holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (b) provides a
correct taxpayer identification number ("TIN"), certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. To prevent the possibility of
backup federal income tax withholding on payments made with respect to shares of
Instron Common Stock pursuant to the Merger, each holder must provide the
Exchange Agent with his or her correct
56
<PAGE> 67
TIN by completing a Form W-9 or substitute Form W-9. A holder of Instron Common
Stock who does not provide Instron with his or her correct TIN may be subject to
penalties imposed by the Internal Revenue Service (the "IRS"), as well as backup
withholding. Any amount withheld under these rules will be creditable against
the holder's federal income tax liability. Instron (or its agent) will report to
the holders of Instron Common Stock and the IRS the amount of any "reportable
payments," as defined in Section 3406 of the Code, and the amount of tax, if
any, withheld with respect thereto.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS BASED UPON PRESENT LAW. THE FOREGOING DISCUSSION DOES NOT DISCUSS TAX
CONSEQUENCES UNDER THE LAWS OF STATES OR LOCAL GOVERNMENTS OR OF ANY OTHER
JURISDICTION OR TAX CONSEQUENCES TO CATEGORIES OF STOCKHOLDERS THAT MAY BE
SUBJECT TO SPECIAL RULES, SUCH AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, AND DEALERS IN STOCKS AND
SECURITIES. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A STOCKHOLDER WHO
CONTINUES TO OWN, ACTUALLY OR CONSTRUCTIVELY, STOCK OF INSTRON AFTER THE MERGER
OR WHO ACQUIRED HIS OR HER SHARES OF INSTRON COMMON STOCK PURSUANT TO THE
EXERCISE OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION. EACH HOLDER OF INSTRON
COMMON STOCK SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH HOLDER, INCLUDING THE APPLICATION AND EFFECT
OF FEDERAL, STATE, LOCAL, AND OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES
IN SUCH TAX LAWS.
57
<PAGE> 68
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial data of
Instron has been prepared to give effect to the Merger and the other
Transactions as a leveraged recapitalization (the "Recapitalization") for
financial reporting purposes. Accordingly, the historical basis of Instron's
assets and liabilities will not be affected by the transactions. For a
discussion of the Merger and the other Transactions, see "The Merger."
The pro forma adjustments presented are based upon available information
and certain assumptions that Instron believes are reasonable under the
circumstances. The historical condensed consolidated statement of income data
for the three months ended April 3, 1999, and the historical condensed
consolidated balance sheet data as of April 3, 1999, were derived from the
unaudited condensed consolidated financial statements of Instron included in
Instron's Quarterly Report on Form 10-Q incorporated by reference in this Proxy
Statement. The historical condensed consolidated statement of income data for
the year ended December 31, 1998 were derived from the audited consolidated
financial statements of Instron included in Instron's Annual Report on Form 10-K
incorporated by reference in this Proxy Statement.
The unaudited pro forma condensed consolidated statement of income data of
Instron for the three months ended April 3, 1999 give effect to the Merger as if
it had occurred on January 1, 1999. The unaudited pro forma condensed
consolidated statement of income data of Instron for the year ended December 31,
1998 give effect to (i) the Merger as if it had occurred on January 1, 1998,
(ii) the acquisition of Satec on August 4, 1998 as if that acquisition had
occurred on January 1, 1998, and (iii) the acquisition of the remaining interest
in IST on September 27, 1998, as if that acquisition had occurred on January 1,
1998. The unaudited pro forma consolidated balance sheet data of Instron as of
April 3, 1999 give effect to the Merger assuming that it was completed on April
3, 1999.
The unaudited pro forma financial data should be read in conjunction with
the historical consolidated financial statements of Instron and notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the other financial data included elsewhere or incorporated by
reference in this Proxy Statement, as well as the information concerning the
Merger, including the sources and uses therefor, contained in "The Merger."
The pro forma financial data and related notes are provided for
informational purposes only and do not necessarily reflect the results of
operations or financial position of Instron that would have actually resulted
had the events referred to above or in the notes to the unaudited pro forma
financial data been consummated as of the date and for the period indicated and
are not intended to project Instron's financial position or results of
operations for any future period.
58
<PAGE> 69
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME DATA
FOR THE THREE MONTH PERIOD ENDED APRIL 3, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD ENDED RECAPITALIZATION PRO FORMA
APRIL 3, 1999 ADJUSTMENTS APRIL 3, 1999
------------- ---------------- -------------
<S> <C> <C> <C>
Revenue:
Sales.......................................... $ 40,377 $ 40,377
Service........................................ 8,368 8,368
---------- --------
Total Revenue............................. 48,745 48,745
Cost of Revenue:
Sales............................................... 23,026 23,026
Service............................................. 5,828 5,828
---------- --------
Total Cost of Revenue..................... 28,854 28,854
---------- --------
Gross Profit.............................. 19,891 19,891
Operating expenses:
Selling and administrative.......................... 14,489 $ 125(b) 14,426
(188)(c)
Research and development............................ 2,708 2,708
---------- ------- --------
Total operating expenses....................... 17,197 (63) 17,134
---------- ------- --------
Income from operations......................... 2,694 63 2,757
Other (income) expense:
Interest expense............................... 376 3,290(a) 3,666
Interest income................................ (232) (232)
Foreign exchange (gains) losses................ (19) (19)
---------- ------- --------
Total other expenses........................... 125 3,290 3,415
Income (loss) before income taxes................... 2,569 (3,227) (658)
Provision (benefit) for income taxes................ 976 (1,226)(d) (250)
---------- ------- --------
Net income (loss)................................... $ 1,593 $(2,001) $ (408)
========== ======= ========
Weighted average number of basic common shares...... 6,744,776 515,587
========== ========
Income (loss) per share -- basic.................... $ 0.24 $ (0.79)(h)
========== ========
Weighted average number of diluted common shares.... 7,096,126 515,587
========== ========
Income (loss) per share -- diluted.................. $ 0.22 $ (0.79)(h)
========== ========
Dividends declared.................................. $ 0.04 $ --(e)
========== ========
</TABLE>
59
<PAGE> 70
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME DATA
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED PRO FORMA PRO FORMA
DECEMBER 31, INCLUDING RECAPITALIZATION DECEMBER 31,
1998 ACQUISITIONS(G) ACQUISITIONS ADJUSTMENTS 1998
------------ --------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Sales.......................... $ 152,879 $33,283 $186,162 $186,162
Service........................ 30,150 3,436 33,586 33,586
---------- ------- -------- --------
Total Revenue............... 183,029 36,719 219,748 219,748
Cost of Revenue:.................
Sales.......................... 91,410 22,094 113,504 113,504
Service........................ 19,644 2,369 22,013 22,013
---------- ------- -------- --------
Total Cost of Revenue....... 111,054 24,463 135,517 135,517
---------- ------- -------- --------
Gross Profit................ 71,975 12,256 84,231 84,231
Operating expenses:
Selling and administrative....... 48,869 10,046 58,915 $ 500(b) 58,665
(750)(c)
Research and development......... 8,485 3,315 11,800 11,800
Special items charge............. 4,975 4,975 4,975
---------- ------- -------- ------- --------
Total operating expenses.... 62,329 13,361 75,690 (250) 75,440
---------- ------- -------- ------- --------
Income from operations...... 9,646 (1,105) 8,541 250 8,791
Other (Income) Expense
Gain on sale of land........... (11,076) (11,076) (11,076)
Interest expense............... 1,175 740 1,915 13,159(a) 15,074
Interest income................ (943) (943) (943)
Foreign exchange losses........ 157 37 194 194
---------- ------- -------- ------- --------
Total other (income)
expenses.................. (10,687) 777 (9,910) 13,159 3,249
Income (loss) before income
taxes.......................... 20,333 (1,882) 18,451 (12,909) 5,542
Provision (benefit) for income
taxes.......................... 8,874 (715) 8,159 (4,905)(d) 3,254
---------- ------- -------- ------- --------
Net income (loss)................ $ 11,459 $(1,167) $ 10,292 $(8,004) $ 2,288
========== ======= ======== ======= ========
Weighted average number of basic
common shares.................. 6,667,914 515,587
========== ========
Earnings per share -- basic...... $ 1.72 $ 4.44(h)
========== ========
Weighted average number of
diluted common shares.......... 7,066,257 520,828
========== ========
Earnings per share -- diluted.... $ 1.62 $ 4.39(h)
========== ========
Dividends declared............... $ 0.16 $ --(e)
========== ========
</TABLE>
60
<PAGE> 71
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
APRIL 3, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C> <C>
(a) Reflects the following:
Interest resulting from borrowings of $14,000 under the
$50,000 revolving credit facility at an assumed interest
rate of LIBOR plus 2.5% (7.4%).............................. $ 259 $ 1,036
Interest resulting from $100,000 of gross proceeds related
to the issuance of debt securities at an assumed interest
rate of 11.5%............................................... 2,875 11,500
Amortization of debt issuance costs of $6,225 associated
with the revolving credit facility and the issuance of debt
securities.................................................. 156 623
------- -------
Total....................................................... $ 3,290 $13,159
======= =======
(b) Reflects the annual fee payable to Kirtland for management
and financial consulting services provided to Instron....... $ 125 $ 500
======= =======
(c) Estimated cost savings, principally related to directors'
fees, legal costs and administrative support, as a direct
result of the Recapitalization.............................. $ (188) $ (750)
======= =======
(d) Reflects the tax effect of the pro forma adjustments
assuming an effective tax rate of 38%....................... $(1,226) $(4,905)
======= =======
(e) Instron does not currently expect to declare dividends after
the Recapitalization.
(f) The Unaudited Pro Forma Condensed Consolidated Statements of
Income exclude the following non-recurring items that are
directly attributable to the Recapitalization:
1. A compensation charge associated with the cash settlement
relating to 566,187 stock options that will be retired as a
result of the Recapitalization........................... $ 5,300
2. A non-cash compensation charge relating to the conversion
and acceleration of 15,250 stock options into fully vested
and exercisable equivalent options to purchase shares of
Surviving Corporation Common Stock....................... 130
3. A compensation charge related to the cash settlement for
the retirement of 224,760 shares of restricted common
stock.................................................... 2,147
4. A non-cash charge related to the acceleration of vesting
and conversion of restricted common stock into Surviving
Corporation Common Stock................................. 140
5. Acceleration of the deferred compensation related to
restricted stock......................................... 2,540
6. Charge related to the modification of certain existing
employment agreements....................................... 1,200
---------
11,457
Total tax benefit of the non recurring items that are
directly related to the Recapitalization assuming an
effective tax rate of 38%................................... (4,350)
-------
Total....................................................... $ 7,107
-------
</TABLE>
61
<PAGE> 72
(g) Represents the pre-acquisition results for Satec for the period January 1,
1998 to August 4, 1998 and the pre-acquisition results for the remaining
interest in IST for the period January 1, 1998 to September 27, 1998.
(h) Pro forma basic and diluted earnings per share have been calculated giving
effect to the new capital structure of the Surviving Corporation. Pro forma
diluted earnings per share reflect the dilutive effect of all Rollover
Options.
(i) Because interest rates in connection with the Credit Facility and the debt
securities have not been determined as of the date hereof, the pro forma
data is indicative of Instron's best current estimate of interest expense. A
1/8 percentage point increase or decrease in the assumed interest rates on
the Credit Facility and the debt securities would change the annual net
interest expense by approximately $35 and $140 for the three months ended
April 3, 1999, and the year ended December 31, 1998, respectively.
(j) The Unaudited Pro Forma Condensed Consolidated Statements of Income have not
been adjusted to reflect the following non-recurring costs (benefits):
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
APRIL 3, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C> <C>
1. Estimated operating cost savings related to the
closure of the German manufacturing facility.......... $ -- 940
======= ========
2. Non-cash non-recurring operating costs (benefits)
related to the acquisition of Satec and the remaining
interest in IST.................................... $ (270) $ 690
======= ========
3. Special items charge for the cost of consolidating
European operations and to write down the value of
non-performing assets.............................. $ -- $ 4,975
======= ========
4. Gain on the sale of excess land in Canton,
Massachusetts...................................... $ -- $(11,076)
======= ========
</TABLE>
62
<PAGE> 73
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA
AS OF APRIL 3, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
RECAPITALIZATION
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 10,554 $ (10,554)(k) $ --
Accounts receivable, net.............................. 54,041 54,041
Inventories........................................... 39,603 39,603
Deferred income taxes................................. 2,956 2,956
Prepaid expenses and other current assets............. 2,974 2,974
-------- --------- --------
Total current assets.......................... 110,128 (10,554) 99,574
Property, plant and equipment, net...................... 23,781 23,781
Goodwill................................................ 11,998 11,998
Deferred income taxes................................... 925 505(l) 1,430
Other assets............................................ 6,036 6,225(k) 12,261
-------- --------- --------
Total assets.................................. $152,868 $ (3,824) $149,044
======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable and current portion of
long-term debt..................................... $ 7,549 $ 14,000(k) $ 14,000
(7,549)(k)
Accounts payable...................................... 13,982 13,982
Accrued liabilities................................... 22,146 22,146
Accrued compensation and benefits..................... 5,251 1,200(m) 6,451
Accrued income taxes.................................. 1,026 (3,845)(l) (2,819)
Advance payments received on contracts................ 10,104 10,104
-------- --------- --------
Total current liabilities..................... 60,058 3,806 63,864
Long-term debt.......................................... 6,878 100,000(k) 100,000
(6,878)(k)
Pension and other long-term liabilities................. 6,573 6,573
-------- --------- --------
Total liabilities............................. 73,509 96,928 170,437
Total shareholders' equity (deficit).......... 79,359 (100,752)(n) (21,393)
-------- --------- --------
Total liabilities and shareholders' equity
(deficit)................................... $152,868 $ (3,824) $149,044
======== ========= ========
</TABLE>
63
<PAGE> 74
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET DATA -- (CONTINUED)
AS OF APRIL 3, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C> <C>
(k) The sources and uses of funds are as follows
SOURCES:
Cash on hand...................................................... $ 10,554
Borrowing under Credit Facility................................... 14,000
Proceeds from sale of debt securities............................. 100,000
Proceeds from the Equity Investor for issuance of new shares of
Surviving Corporation Common Stock............................... 49,560
Value of shares and options rolled over to the Surviving
Corporation...................................................... 9,905
---------
184,019
=========
USES:
Value of shares and options rolled over to the Surviving
Corporation...................................................... $ 9,905
Cash paid to purchase shares and options from existing
shareholders..................................................... 151,187
Cash paid to reduce existing debt:
Current...................................................... 7,549
Long Term.................................................... 6,878
Estimated transaction fees:
Debt related...................................... $ 6,225
Equity related.................................... 2,275
-------
$8,500.. 8,500
---------
$ 184,019
=========
The exact amount of the Equity Investor's investment in the
Surviving Corporation depends upon the level of Instron's Net
Indebtedness as of the closing date of the Recapitalization. At
April 3, 1999, Instron's Net Indebtedness was approximately $3.9
million.
(l) Tax benefit related to the non recurring items that are directly
attributable to the Recapitalization (see Note F):
Deferred tax assets.......................................... $ 505
Current tax.................................................. 3,845
---------
$ 4,350
=========
(m) Liability related to the modification of certain existing
employment agreements.............................................. $ 1,200
=========
(n) Adjustments related to Shareholders' Equity (Deficit):
Increase for:
Issuance of new shares of Surviving Corporation Common
Stock.................................................................. $ 49,560
Tax benefits related to the non recurring recapitalization
charges................................................................ 4,350
---------
53,910
---------
Decrease for:
Purchase of shares from existing shareholders................. (151,187)
Equity related fees........................................... (2,275)
Cost related to the modification of certain existing
employment agreements.................................................. (1,200)
---------
155,662
---------
Net Pro Forma adjustment................................. $(100,752)
=========
</TABLE>
64
<PAGE> 75
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA
----------------------
THREE MONTHS THREE MONTHS
YEAR YEAR ENDED YEAR ENDED
ENDED ENDED APRIL 3, ENDED APRIL 3,
1997 1998 1999 1998 1999
------- ------- ------------ ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes
and losses from equity
investees........................ $12,295 $21,140 $2,569 $6,349 $ (658)
Add:
Portion of rents representative
of interest factor............ 1,232 1,333 333 1,333 333
Interest on indebtedness......... 1,465 1,175 376 14,451 3,510
Amortization of debt expenses.... -- -- -- 623 156
------- ------- ------ ------ -------
Income as adjusted................. 14,992 23,648 3,278 22,756 3,341
------- ------- ------ ------ -------
Fixed charges:
Portion of rents representative
of interest factor............ 1,232 1,333 333 1,333 333
Interest on indebtedness......... 1,465 1,175 376 14,451 3,510
Amortization of debt expenses.... -- -- -- 623 156
------- ------- ------ ------ -------
Fixed charges...................... 2,697 2,508 709 16,407 3,999
------- ------- ------ ------ -------
Ratio of earnings to fixed
charges.......................... 5.6 9.4 4.6 1.4 (A)
======= ======= ====== ====== =======
</TABLE>
- ---------------
(A) Due to Instron's Pro Forma loss in the three month period ended April 3,
1999, the ratio coverage was less than 1:1. Instron would have had to
generate additional earnings of $658,000 to achieve a coverage ratio of 1:1
for the period.
65
<PAGE> 76
INDEPENDENT AUDITORS
The consolidated balance sheets as of December 31, 1998 and December 31,
1997, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three fiscal years in the period ended December
31, 1998, incorporated by reference in this Proxy Statement, have been audited
by PricewaterhouseCoopers LLP, independent auditors. A representative of
PricewaterhouseCoopers LLP will be at the Special Meeting to answer appropriate
questions from stockholders and will have the opportunity to make a statement,
if so desired.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Instron
(SEC File No. 001-05641) are incorporated by reference in this Proxy Statement:
(i) Instron's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
(ii) Instron's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 3, 1999; and
(iii) Instron's Current Report on Form 8-K filed on May 12, 1999.
All documents filed by Instron with the Commission pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act after the date hereof and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and shall be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein or contained in this Proxy Statement shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
LEGAL PROCEEDINGS
On or about May 10, 1999, Instron learned that a putative class action
complaint captioned Charles Miller, et al. v. Instron Corp., George S. Burr,
John W. Lacey, Harold Hindman, Richard W. Young, Sheldon Rutstein, James M.
McConnell, Dennis J. Moore, John F. Smith and Kirtland Capital Partners, Civil
No. 99-2143-E, had been filed in Suffolk Superior Court in Boston, Massachusetts
(the "Class Action Complaint"). The Class Action Complaint alleges that, in
connection with the proposed Merger, Instron and certain of its officers and
directors breached their fiduciary duties by failing to maximize the value of
the Instron Common Stock. The relief sought in the Class Action Complaint
includes, among other things, injunctive relief and compensatory and/or
rescissory damages. Instron is currently reviewing the allegations made in the
Class Action Complaint and intends to defend the claims vigorously.
STOCKHOLDER PROPOSALS
If the Merger is not consummated for any reason, stockholder proposals
intended to be presented at Instron's 2000 Annual Meeting of Stockholders must
be received by Instron on or before December 16, 1999 in order to be considered
for inclusion in Instron's proxy statement and form of proxy for that meeting.
These proposals must also comply with the rules of the Commission governing the
form and content of proposals in order to be included in Instron's proxy
statement and form of proxy and should be directed to: Clerk, Instron
Corporation, 100 Royall Street, Canton, Massachusetts, 02021.
If the Merger is not consummated for any reason, a stockholder who wishes
to present a proposal at Instron's 2000 Annual Meeting of Stockholders, other
than a proposal to be considered for inclusion in Instron's proxy statement and
form of proxy as described above, must deliver the proposal to Instron at the
address set forth above. Such written proposal must be delivered not less than
75 days nor more than 120 days prior to the date of the scheduled annual
meeting; provided, however, that in the event that less than 90 days notice or
prior public disclosure of the scheduled date of the meeting is given or made to
stockholders,
66
<PAGE> 77
such written proposal must be received no later than the close of business on
the 15th day following the day on which such notice of the scheduled date of the
meeting was mailed or such disclosure was made, whichever first occurs. The
proposal must also comply with the other requirements contained in Instron's
Amended and Restated By-laws, including supporting documentation and other
information. Proxies solicited by the Instron Board will confer discretionary
voting authority with respect to these proposals, subject to the Commission's
rules governing the exercise of this authority.
OTHER MATTERS
Management knows of no other business to be presented at the Special
Meeting. If other matters do properly come before the meeting, or any
adjournment or postponement thereof, it is the intention of the persons named in
the proxy to vote on such matters according to their best judgment unless the
authority to do so is withheld in such proxy.
WHERE YOU CAN FIND MORE INFORMATION
Instron files annual, quarterly, and current reports, proxy statements, and
other information with the Commission. You may read and copy any reports,
statements, or other information that Instron files at the Commission's public
reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Instron public filings are also available to the public
from commercial document retrieval services and at the Internet World Wide Web
site maintained by the Commission at http://www.sec.gov. Reports, proxy
statements, and other information concerning Instron also may be inspected at
the offices of the American Stock Exchange, 86 Trinity Place, New York, NY
10006-1881.
The Commission allows Instron to "incorporate by reference" information
into this document, which means that Instron can disclose important information
to you by referring you to another document filed separately with the
Commission. The information incorporated by reference is deemed to be a part of
this document, except for any information superseded by information contained
directly in this document. This document incorporates by reference certain
documents that Instron has previously filed with the Commission. These documents
contain important business information about Instron and its financial
condition.
Instron may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through Instron or the Commission or
the Commission's Internet World Wide Web site described above. Documents
incorporated by reference are available from Instron without charge, excluding
all exhibits unless specifically incorporated by reference as an exhibit to this
document. Stockholders may obtain documents incorporated by reference in this
document upon written or oral request to the following address or telephone
number:
INSTRON CORPORATION
100 Royall Street
Canton, MA 02021
Telephone: (781) 828-2500
Attention: Linton A. Moulding
Instron will send any document so requested to the requesting stockholder
by first class mail or other equally prompt means within one day of receiving
such request. You should note that James M. McConnell, as well as the other
executive officers of Instron, are participants in the Merger.
Instron and the Investor Group have filed a Schedule 13E-3 with the
Commission with respect to the Transactions, including the Merger. As permitted
by the Commission, this Proxy Statement omits certain information contained in
the Schedule 13E-3. The Schedule 13E-3, including any amendments and exhibits
filed or incorporated by reference as a part thereof, is available for
inspection or copying as set forth above. Statements contained in this Proxy
Statement or in any document incorporated herein by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete and in each instance reference is made to such contract or
other document filed as an exhibit to the Schedule 13E-3 or such other document,
and each such statement shall be deemed qualified in its entirety by such
reference.
67
<PAGE> 78
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM INSTRON, PLEASE DO SO AT LEAST
FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO RECEIVE
TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the Special Meeting. Instron
has not authorized anyone to provide you with information that is different from
what is contained in this document. This document is dated , 1999.
You should not assume that the information contained in this document is
accurate as of any date other than that date, and the mailing of this document
to stockholders does not create any implication to the contrary. This Proxy
Statement does not constitute a solicitation of a proxy in any jurisdiction
where, or to or from any person to whom, it is unlawful to make such proxy
solicitation in such jurisdiction.
68
<PAGE> 79
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
KIRTLAND CAPITAL PARTNERS III L.P.,
ISN ACQUISITION CORPORATION
AND
INSTRON CORPORATION
DATED AS OF MAY 6, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 80
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE MERGER.................................................................... A-1
1.1 The Merger.................................................. A-1
1.2 Effective Time.............................................. A-2
1.3 Closing..................................................... A-2
1.4 Directors and Officers...................................... A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS........................................................... A-2
2.1 Effect on Capital Stock..................................... A-2
2.2 Company Stock Options and Related Matters................... A-3
ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES................................... A-4
3.1 Payment for Shares of Company Common Stock.................. A-4
3.2 Appraisal Rights............................................ A-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO................... A-5
4.1 Organization................................................ A-5
4.2 Authorization; Validity of Agreement; Necessary Action...... A-6
4.3 Consents and Approvals; No Violations....................... A-6
4.4 Required Financing.......................................... A-6
4.5 Takeover Laws............................................... A-7
4.6 Formation of MergerCo; No Prior Activities.................. A-7
4.7 Beneficial Ownership........................................ A-7
4.8 Financial Condition of Parent............................... A-7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... A-7
5.1 Existence; Good Standing; Authority; Compliance With Law.... A-7
5.2 Authorization, Validity and Effect of Agreements............ A-8
5.3 Capitalization.............................................. A-8
5.4 Subsidiaries................................................ A-9
5.5 Other Interests............................................. A-10
5.6 No Violation; Consents...................................... A-10
5.7 SEC Documents............................................... A-10
5.8 Litigation.................................................. A-11
5.9 Absence of Certain Changes.................................. A-11
5.10 Taxes....................................................... A-11
5.11 Books and Records........................................... A-11
5.12 Properties.................................................. A-12
5.13 Intellectual Property....................................... A-12
5.14 Environmental Matters....................................... A-13
5.15 Employee Benefit Plans...................................... A-14
5.16 Labor Matters............................................... A-16
5.17 No Brokers.................................................. A-16
5.18 Opinion of Financial Advisors............................... A-16
5.19 Year 2000................................................... A-16
5.20 Insurance................................................... A-16
5.21 Contracts................................................... A-16
5.22 Takeover Laws............................................... A-17
</TABLE>
A-(i)
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.23 Vote Required............................................... A-17
5.24 Definition of the Company's Knowledge....................... A-17
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER.................................. A-17
6.1 Conduct of Business by the Company.......................... A-17
ARTICLE VII
ADDITIONAL AGREEMENTS................................................... A-19
7.1 Stockholders Meeting........................................ A-19
7.2 Other Filings............................................... A-20
7.3 Additional Agreements....................................... A-20
7.4 Fees and Expenses........................................... A-21
7.5 No Solicitations............................................ A-21
7.6 Officers' and Directors' Indemnification.................... A-22
7.7 Access to Information; Confidentiality...................... A-23
7.8 Financial and Other Statements.............................. A-24
7.9 Public Announcements........................................ A-24
7.10 Employee Benefit Arrangements............................... A-24
7.11 Required Financing.......................................... A-24
7.12 Recapitalization Accounting Treatment....................... A-25
7.13 Delisting................................................... A-25
7.14 Exchange of Common Stock.................................... A-25
7.15 Solvency Letters............................................ A-25
7.16 Purchase of Company Shares.................................. A-25
ARTICLE VIII
CONDITIONS TO THE MERGER................................................ A-26
8.1 Conditions to the Obligations of Each Party to Effect the
Merger...................................................... A-26
8.2 Conditions to Obligations of MergerCo....................... A-26
8.3 Conditions to Obligations of the Company.................... A-28
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER....................................... A-28
9.1 Termination................................................. A-28
9.2 Effect of Termination....................................... A-29
9.3 Amendment................................................... A-30
9.4 Extension; Waiver........................................... A-31
ARTICLE X
GENERAL PROVISIONS...................................................... A-31
10.1 Notices..................................................... A-31
10.2 Interpretation.............................................. A-31
10.3 Non-Survival of Representations, Warranties, Covenants and
Agreements.................................................. A-31
10.4 Miscellaneous............................................... A-32
10.5 Assignment.................................................. A-32
10.6 Severability................................................ A-32
10.7 Choice of Law/Consent to Jurisdiction....................... A-32
10.8 No Agreement Until Executed................................. A-32
</TABLE>
A-(ii)
<PAGE> 82
PARENT AND MERGERCO DISCLOSURE SCHEDULE
<TABLE>
<CAPTION>
SECTION TITLE
- ------- -----
<S> <C>
4.2 Exceptions to Parent's and MergerCo's Representations
</TABLE>
COMPANY DISCLOSURE SCHEDULE
<TABLE>
<CAPTION>
SECTION TITLE
- ------- -----
<S> <C>
2.2 Rollover of Certain Options
5.1 Organizational and Good Standing
5.1(d) Organizational Documents of the Company Subsidiaries
5.3 Capitalization
5.4 Subsidiaries
5.5 Other Interests
5.6 Consents
5.8 Litigation
5.9 Absence of Changes
5.10 Taxes
5.12 Properties
5.13 Intellectual Property
5.14 Environmental Matters
5.15 Employee Benefit Plans
5.16 Labor Matters
5.20 Insurance
5.24 Definition of Knowledge
6.1(a) Rollover Stockholders
6.1(c) Conduct of Business Pending the Merger
6.1(g) Certain Executive Officers
6.1(h) Rights, Preferences and Designations of the Series B Stock
7.10 Employee Benefit Arrangements
8.2(c) Consents of Third Parties
</TABLE>
A-(iii)
<PAGE> 83
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 6, 1999, by
and among Kirtland Capital Partners III L.P., an Ohio limited partnership
("Parent"), ISN Acquisition Corporation, a Massachusetts corporation and a
wholly owned subsidiary of Parent ("MergerCo"), and Instron Corporation, a
Massachusetts corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of MergerCo and the Company and
the general partner of Parent (the "General Partner") have approved the merger
of MergerCo with and into the Company (the "Merger") in accordance with the
Massachusetts Business Corporation Law (the "MBCL") and, upon the terms and
subject to the conditions set forth in this Agreement, holders of shares of
common stock, par value $1.00 per share, of the Company (the "Common Stock")
issued and outstanding immediately prior to the Effective Time (as hereinafter
defined) will be entitled, subject to the terms and conditions hereof, to the
right to receive cash;
WHEREAS, the Board of Directors of the Company (the "Company Board") has,
in light of and subject to the terms and conditions set forth herein, (i)
determined that (A) the consideration to be paid for each share of Common Stock
in the Merger is fair to the stockholders of the Company, and (B) the Merger is
otherwise in the best interests of the Company and its stockholders, and (ii)
resolved to approve and adopt this Agreement and the transactions contemplated
or required by this Agreement, including the Merger (collectively, the
"Transactions"), and to recommend approval and adoption by the stockholders of
the Company of this Agreement and the Transactions;
WHEREAS, as a condition to the willingness of Parent and MergerCo to enter
into this Agreement, certain stockholders of the Company (the "Voting Agreement
Stockholders") have entered into a Voting Agreement, dated as of the date
hereof, with Parent and MergerCo (the "Voting Agreement"), pursuant to which
each Voting Agreement Stockholder has agreed, among other things, to vote his
shares of Common Stock in favor of the approval of the Transactions and the
approval of any other matter relating to consummation of the Transactions, upon
the terms and subject to the conditions set forth in the Voting Agreement;
WHEREAS, Parent, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Transactions, and also to prescribe various conditions to the Transactions; and
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, Parent, MergerCo and the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, the Company and MergerCo shall consummate the Merger
pursuant to which (a) MergerCo shall be merged with and into the Company and the
separate corporate existence of MergerCo shall thereupon cease, (b) the Company
shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the Commonwealth of Massachusetts, and (c) the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The Company shall
take such steps as are permitted under the MBCL to (i) amend the Articles of
Organization of the Company (the "Articles of Organization") so that the
Articles of Organization of MergerCo, as in effect immediately prior
A-1
<PAGE> 84
to the Effective Time, shall be the Articles of Organization of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Organization, and (ii) amend the Bylaws of the Company (the "Bylaws") so that
the Bylaws of MergerCo, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by law, by the Articles of Organization of the Surviving Corporation
and by such Bylaws. Notwithstanding the foregoing, the name of the Surviving
Corporation shall be "Instron Corporation" and the Articles of Organization and
Bylaws of the Surviving Corporation shall so provide. The Merger shall have the
effects specified in the MBCL. The purpose of the Surviving Corporation shall be
to carry on a manufacturing, contracting, merchandising, and research business,
and in general, to carry on any business or other activity which may be lawfully
carried on by a corporation organized under Chapter 156B of the Massachusetts
General Laws (the "MGL").
1.2 Effective Time. On the Closing Date (as hereinafter defined), MergerCo
and the Company shall duly execute and file articles of merger (the "Articles of
Merger") with the Secretary of State of the Commonwealth of Massachusetts in
accordance with the MBCL. The Merger shall become effective at such time as the
Articles of Merger, accompanied by payment of the filing fee (as provided in
Chapter 156B, Section 114 of the MBCL), have been examined by and received the
endorsed approval of the Secretary of State of the Commonwealth of Massachusetts
(the "Effective Time").
1.3 Closing. The closing of the Merger (the "Closing") shall occur as
promptly as practicable (but in no event later than the second business day)
after all of the conditions set forth in Article VIII shall have been satisfied
or, if permissible, waived by the party entitled to the benefit of the same,
and, subject to the foregoing, shall take place at such time and on a date to be
specified by the parties (the "Closing Date"); provided, however, that in no
event shall the Closing occur earlier than July 8, 1999. The Closing shall take
place at the offices of Jones, Day, Reavis & Pogue, 901 Lakeside Avenue,
Cleveland, Ohio 44114, unless another place is agreed to by the parties hereto.
1.4 Directors and Officers. The directors of MergerCo immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
and the officers of the Company immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, each to hold office in
accordance with the Articles of Organization and Bylaws of the Surviving
Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Common
Stock or Series B Stock (as hereinafter defined) or any shares of capital stock
of MergerCo:
(a) Each share of common stock, par value $.01 per share, of MergerCo
(the "MergerCo Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into one fully paid and nonassessable
share of common stock, par value $1.00 per share, of the Surviving
Corporation (the "Surviving Corporation Common Stock") following the
Merger.
(b) Each share of Common Stock that is owned by the Company, or by any
wholly owned Subsidiary (as defined in Section 10.2) of the Company or by
MergerCo shall automatically be canceled and retired and shall cease to
exist, and no cash or other consideration shall be delivered or deliverable
in exchange therefor.
(c) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares owned by the Company, any of
its wholly owned Subsidiaries or MergerCo and Dissenting Shares (as defined
in Section 3.2)) shall be converted into the right to receive $22.00 per
share, net to the seller in cash, payable to the holder thereof, without
any interest thereon (the "Merger Consideration"), upon surrender and
exchange of the Certificate (as hereinafter defined) representing such
share of Common Stock.
A-2
<PAGE> 85
(d) Each share of Series B Preferred Stock, par value $1.00 per share,
of the Company (the "Series B Stock") issued and outstanding immediately
prior to the Effective Time (other than shares owned by the Company or any
of its wholly owned Subsidiaries) shall be converted into one fully paid
and nonassessable share of Surviving Corporation Common Stock following the
Merger.
(e) All shares of Common Stock, when converted as provided in Section
2.1(c), shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each Certificate (as hereinafter
defined) previously evidencing such shares shall thereafter represent only
the right to receive the Merger Consideration. The holders of Certificates
previously evidencing shares of Common Stock outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to the
Common Stock except as otherwise provided herein or by law and, upon the
surrender of Certificates in accordance with the provisions of Section 3.1,
shall only represent the right to receive for their shares of Common Stock,
the Merger Consideration, without any interest thereon.
(f) All shares of Series B Stock, when converted as provided in
Section 2.1(d) shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate
previously evidencing such shares of Series B Stock shall thereafter
represent only the right to receive shares of Surviving Corporation Common
Stock. The holders of certificates previously evidencing shares of Series B
Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to the Series B Stock except as otherwise
provided herein or by law.
2.2 Company Stock Options and Related Matters.
(a) Each option (collectively, the "Options") granted under the Company's
1992 Stock Incentive Plan (the "1992 Plan"), the 1984 United Kingdom Share
Option Scheme (the "1984 Plan"), the 1982 Incentive Stock Option Plan (the "1982
Plan") and the 1979 Non-Qualified Plan (the "1979 Plan" and, together with the
1992 Plan, the 1984 Plan and the 1982 Plan, the "Stock Option Plans"), which is
outstanding (whether or not then exercisable) as of immediately prior to the
Effective Time and which has not been exercised or canceled prior thereto (other
than the Options identified in Section 2.2 of the Company Disclosure Schedule
(as hereinafter defined), such Options being hereinafter referred to as the
"Rollover Options"), shall, at the Effective Time, be canceled and upon the
surrender and cancellation of the option agreement representing such Option, the
Company shall (x) pay to the holder thereof cash in an amount equal to the
product of (i) the number of shares of Common Stock provided for in such Option
and (ii) the excess, if any, of the Merger Consideration over the exercise price
per share provided for in such Option, which cash payment shall be treated as
compensation and shall be net of any applicable federal or state withholding tax
(the "Option Consideration"). The Company shall take all actions necessary to
ensure that (i) all Options, to the extent not exercised prior to the Effective
Time, shall terminate and be canceled as of the Effective Time and thereafter be
of no further force or effect, and (ii) no Options are granted after the date of
this Agreement.
(b) Each Rollover Option which is outstanding (whether or not then
exercisable) as of immediately prior to the Effective Time shall, at the
Effective Time, be automatically converted into an option to acquire 0.2 fully
paid and nonassessable shares of Surviving Corporation Common Stock at an
exercise price per share equal to (i) five (5) multiplied by (ii) the exercise
price per share provided for in the Option for which such Rollover Option is
surrendered; provided, however, that such exercise price shall be rounded up to
the nearest whole cent. From and after the Effective Time, the Rollover Options
shall be governed by the terms of the Stock Option Plans applicable to the
Option for which such Rollover Option is surrendered. The adjustments provided
herein with respect to any Rollover Options that are "incentive stock options"
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be and are intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
(c) Except as set forth in Section 2.2 of the Company Disclosure Schedule,
the Stock Option Plans shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any of the Company Subsidiaries shall be of no further force and effect and
shall be deemed to be deleted as of the Effective Time and no holder of an
Option or any participant in any Stock Option Plan or any other plans,
A-3
<PAGE> 86
programs or arrangements (other than holders of Rollover Options) shall have any
right thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof.
(d) Except as set forth in Section 2.2 of the Company Disclosure Schedule,
Parent and MergerCo acknowledge that all restricted stock awards granted under
the Stock Option Plans shall immediately vest and the restrictions associated
therewith shall automatically be deemed waived as provided by the Stock Option
Plans but in no event later than the date on which the Company's stockholders
approve this Agreement and the Transactions.
ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES
3.1 Payment for Shares of Company Common Stock.
(a) From and after the Effective Time, such bank or trust company as shall
be mutually acceptable to MergerCo and the Company shall act as exchange agent
(the "Exchange Agent"). At or prior to the Effective Time, MergerCo shall
deposit, or MergerCo shall otherwise take all steps necessary to cause to be
deposited, with the Exchange Agent in an account (the "Exchange Fund") the
aggregate Merger Consideration (net of any applicable withholding taxes) to
which holders of shares of Common Stock shall be entitled at the Effective Time
pursuant to Section 2.1(c).
(b) Promptly after the Effective Time, MergerCo shall cause the Exchange
Agent to mail to each record holder of Certificates (the "Certificates") that
immediately prior to the Effective Time represented shares of Common Stock a
form of letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and instructions for
use in surrendering such Certificates and receiving the Merger Consideration in
respect thereof.
(c) In effecting the payment of the Merger Consideration with respect to
shares of Common Stock represented by Certificates entitled to payment of the
Merger Consideration pursuant to Section 2.1(c) (the "Cashed Shares"), upon the
surrender of each such Certificate, the Exchange Agent shall pay the holder of
such Certificate the Merger Consideration multiplied by the number of Cashed
Shares (net of any applicable withholding taxes), in consideration therefor.
Upon such payment such Certificate shall forthwith be canceled.
(d) Until surrendered in accordance with paragraph (c) above, each such
Certificate (other than Certificates representing shares of Common Stock held by
MergerCo or any of its affiliates, in the treasury of the Company or by any
wholly owned Subsidiary of the Company or Dissenting Shares) shall represent
solely the right to receive the Merger Consideration relating thereto. No
interest or dividends shall be paid or accrued on the Merger Consideration. If
the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the Certificate formerly representing
shares of Common Stock surrendered therefor is registered, it shall be a
condition to such right to receive such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person surrendering such shares of Common Stock
shall pay to the Exchange Agent any transfer or other taxes required by reason
of the payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or shall establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable.
(e) No dividends or other distributions with respect to shares of Common
Stock shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Common Stock represented thereby.
(f) Promptly following the date which is 180 days after the Effective Time,
the Exchange Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the Transactions,
and the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a share of Common Stock may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration therefor the Merger
Consideration relating thereto without any interest or dividends thereon.
A-4
<PAGE> 87
(g) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing shares of Common Stock are
presented to the Surviving Corporation or the Exchange Agent, they shall be
surrendered and canceled in return for the payment of the Merger Consideration
relating thereto, as provided in this Article III.
(h) None of Parent, MergerCo, the Company or the Exchange Agent shall be
liable to any person in respect of any cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to seven
years after the Effective Time, any such shares, cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
3.2 Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the contrary, any shares
of Common Stock ("Dissenting Shares") which are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders of
the Company who have filed with the Company, before the taking of the vote of
the stockholders of the Company to approve this Agreement, written objections to
such approval stating their intention to demand payment for such shares of
Common Stock, and who have not voted such shares of Common Stock in favor of the
adoption of this Agreement, will not be converted as described in Section 2.1
hereof, but will thereafter constitute only the right to receive payment of the
fair value of such shares of Common Stock in accordance with the applicable
provisions of Chapter 156B of the MBCL (the "Appraisal Rights Provisions");
provided, however, that all shares of Common Stock held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such shares of Common Stock under the Appraisal
Rights Provisions shall thereupon be deemed to have been canceled and retired
and to have been converted, as of the Effective Time, into the right to receive
the Merger Consideration, without interest, in the manner provided in Section
2.1. Persons who have perfected statutory rights with respect to Dissenting
Shares as aforesaid will not be paid by the Surviving Corporation as provided in
this Agreement and will have only such rights as are provided by the Appraisal
Rights Provisions with respect to such Dissenting Shares. Notwithstanding
anything in this Agreement to the contrary, if Parent, MergerCo or the Company
abandon or are finally enjoined or prevented from carrying out, or the
stockholders rescind their adoption of, this Agreement, the right of each holder
of Dissenting Shares to receive the fair value of such Dissenting Shares in
accordance with the Appraisal Rights Provisions will terminate, effective as of
the time of such abandonment, injunction, prevention or rescission. The Company
shall give MergerCo prompt notice of any demands received by the Company for the
exercise of appraisal rights with respect to shares of Common Stock and Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent (which shall not be unreasonably withheld), make any payment
with respect to, or settle or offer to settle, any such demands.
(b) Each dissenting stockholder who becomes entitled under the MBCL to
payment for Dissenting Shares shall receive payment therefor after the Effective
Time from the Surviving Corporation (but only after the amount thereof shall
have been agreed upon or finally determined pursuant to the MBCL), and such
shares of Common Stock shall be canceled.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGERCO
Parent and MergerCo jointly and severally hereby represent and warrant to
the Company as follows:
4.1 Organization. Parent is a limited partnership duly organized and
validly existing under the laws of the State of Ohio and MergerCo is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts, and each has all requisite power and
authority and all
A-5
<PAGE> 88
necessary governmental approvals to own, lease and operate their properties and
to carry on their businesses as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not have a material adverse effect on the
business, results of operations or condition (financial or otherwise) of Parent
(a "Parent Material Adverse Effect"). Parent is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a Parent Material Adverse Effect.
4.2 Authorization; Validity of Agreement; Necessary Action. Each of Parent
and MergerCo has full power and authority to execute and deliver this Agreement
and to consummate the Transactions. The execution, delivery and performance by
Parent and MergerCo of this Agreement and the consummation of the Transactions
have been duly authorized by all necessary partnership action on behalf of
Parent (the "Parent Board") and the Board of Directors of MergerCo (the
"MergerCo Board") and by the stockholders of MergerCo, and, except as set forth
in Section 4.2 of the schedule attached to this Agreement setting forth
exceptions to Parent's and MergerCo's representations and warranties set forth
herein (the "Parent and MergerCo Disclosure Schedule"), no other action on the
part of Parent and MergerCo is necessary to authorize the execution and delivery
by Parent and MergerCo of this Agreement and the consummation of the
Transactions. This Agreement has been duly executed and delivered by Parent and
MergerCo and, assuming due and valid authorization, execution and delivery
hereof by the Company, is a valid and binding obligation of each of Parent and
MergerCo, as the case may be, enforceable against each of them in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
4.3 Consents and Approvals; No Violations. Except as set forth in Section
4.2 of the Parent and MergerCo Disclosure Schedule and except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the HSR Act (as hereinafter defined), the antitrust and
competition laws of foreign countries and state securities or state "Blue Sky"
laws, none of the execution, delivery or performance of this Agreement by Parent
or MergerCo, the consummation by Parent or MergerCo of the Transactions or
compliance by Parent or MergerCo with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the limited
partnership agreement of Parent or the articles of organization or bylaws of
MergerCo, (ii) require any filing with, or permit, authorization, consent or
approval of, any Governmental Entity (as hereinafter defined), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or MergerCo is a party or by which
either of them or any of their respective properties or assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or MergerCo or any of their properties or assets, excluding
from the foregoing clauses (ii), (iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
4.4 Required Financing. Parent and MergerCo have revolving credit facility
and high yield bridge financing commitments in place which, if funded in
accordance with their terms, together with equity capital commitments from the
limited partners of Parent and certain additional equity capital commitments
from certain of the limited partners of Parent (the "Side-by-Side Equity
Commitments"), will provide sufficient funds to consummate the Transactions
(collectively, the "Transaction Costs"), including, without limitation, to (i)
pay the Merger Consideration pursuant to Section 2.1(c), (ii) refinance the
outstanding indebtedness of the Company, (iii) pay any fees and expenses in
connection with the Transactions or the financing thereof and (iv) provide for
the working capital needs of the Company following the Merger, including,
without limitation, if applicable, letters of credit. Neither Parent nor
MergerCo has any reason to believe that any condition to such financing
commitments cannot or will not be waived or satisfied prior to the Effective
Time. Parent has provided to the Company true, complete and correct copies of
all financing commitment letters
A-6
<PAGE> 89
executed by the revolving credit facility lender and the high yield bridge
lender (collectively, the "Lenders"), including any exhibits, schedules or
amendments thereto (the "Financing Letters"). Parent has provided to the Company
true, complete and correct copies of each Side-by-Side Equity Commitment letter
executed by the limited partner of Parent signatory thereto, including any
exhibits, schedules or amendments thereto. The advisory board of Parent has
approved an investment by Parent of $40,000,000 of Fund Capital (as hereinafter
defined) in the Company and, from and after the date of this Agreement, the
advisory board of Parent shall not withdraw or change such approval unless this
Agreement shall have been terminated in accordance with its terms.
4.5 Takeover Laws. Neither Parent nor MergerCo was, immediately prior to
the execution of this Agreement, an "interested stockholder" within the meaning
of Chapter 110F of the MGL.
4.6 Formation of MergerCo; No Prior Activities. MergerCo was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement.
As of the date hereof and as of the Effective Time, except for (i) obligations
or liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and (ii) this Agreement and any
other agreements or arrangements contemplated by this Agreement or in
furtherance of the transactions contemplated hereby, MergerCo has not incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
4.7 Beneficial Ownership. Except to the extent permitted by Section 7.16
hereof or as a result of the execution by Parent and MergerCo of the Voting
Agreement, neither Parent nor MergerCo "beneficially owns" (as defined in Rule
13d-3 under the Exchange Act) any shares of Common Stock or any securities
convertible into or exchangeable for Common Stock.
4.8 Financial Condition of Parent. Parent has provided to the Company true,
complete and correct copies of the audited financial statements of Parent for
the fiscal year ended December 31, 1998 and the unaudited financial statements
of Parent for the interim period ended March 31, 1999. Such financial statements
fairly present the financial position of Parent as of the respective dates
thereof, and the other related statements (including the related notes) included
therein fairly present the results of operations of Parent for the respective
fiscal periods set forth above. Parent has equity commitments from its limited
partners in an aggregate amount in excess of $185,000,000 (the "Fund Capital").
The General Partner may, in its sole discretion, call such portion of the Fund
Capital as is necessary to satisfy any of Parent's or MergerCo's obligations
under or arising out of this Agreement and the performance by Parent and
MergerCo thereof. None of the Fund Capital has been pledged or is subject to any
material lien, security interest or other encumbrance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules delivered at or prior to
the execution hereof to Parent and MergerCo, which shall refer to the relevant
Sections of this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and MergerCo as follows:
5.1 Existence; Good Standing; Authority; Compliance With Law.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has all
requisite corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority and governmental approvals
would not reasonably be expected to have a Company Material Adverse Effect (as
hereinafter defined). Except as set forth in Section 5.1 of the Company
Disclosure Schedule, the Company is duly qualified or licensed to do business
and is in good standing (with respect to jurisdictions that recognize such
concept) in each jurisdiction in which the nature of its business or the
A-7
<PAGE> 90
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect. For purposes of this Agreement, a "Company Material Adverse Effect"
shall mean a material adverse effect on the business, results of operations or
condition (financial or otherwise) of the Company and the Company Subsidiaries
taken as a whole.
(b) Except as set forth in Section 5.1 of the Company Disclosure Schedule,
each of the Company Subsidiaries is a corporation, partnership or limited
liability company (or similar entity or association in the case of those Company
Subsidiaries organized and existing other than under the laws of a State of the
United States) duly incorporated or organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or other power and authority to own its properties and to
carry on its business as it is now being conducted, and is duly qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing could not reasonably be expected to have a Company Material Adverse
Effect.
(c) Neither the Company nor any of the Company Subsidiaries is in violation
of any order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation to which the
Company or any Company Subsidiary or any of their respective properties or
assets is subject, where such violation could have a Company Material Adverse
Effect. The Company and the Company Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their businesses
as now conducted, where the failure to obtain any such license, permit or
authorization or to take any such action could have a Company Material Adverse
Effect.
(d) Except as set forth in Section 5.1(d) of the Company Disclosure
Schedule, copies of the Articles of Organization and Bylaws and the other
charter documents, bylaws, organizational documents and partnership, limited
liability company and joint venture agreements (and in each such case, all
amendments thereto) of each of the Company Subsidiaries have been provided to
MergerCo or its representatives and are true and correct in all material
respects.
5.2 Authorization, Validity and Effect of Agreements. Each of the Company
and the Company Subsidiaries has the requisite power and authority to enter into
the Transactions and to execute and deliver this Agreement. The Company Board
has approved this Agreement and the Transactions. In connection with the
foregoing, the Company Board has taken such actions and votes as are necessary
on its part to render the provisions of Chapter 110C and Chapter 110F of the MGL
and all other applicable takeover statutes inapplicable to this Agreement and
the Transactions. Subject only to the approval of this Agreement by the holders
of the Common Stock, the execution by the Company of this Agreement and
consummation of the Transactions have been duly authorized by all requisite
corporate action on the part of the Company. This Agreement, assuming due and
valid authorization, execution and delivery thereof by Parent and MergerCo,
constitutes a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
5.3 Capitalization. The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock and 1,000,000 shares of preferred stock, par
value $1.00 per share, of the Company (the "Preferred Stock"). As of the date of
this Agreement, (i) 6,956,838 shares of Common Stock were issued and
outstanding, (ii) 791,500, 650,000, 190,000 and 900,000 shares of Common Stock
have been authorized and reserved for issuance pursuant to the 1979 Plan, the
1982 Plan, the 1984 Plan and the 1992 Plan, respectively, subject to adjustment
on the terms set forth in the applicable Stock Option Plans, (iii) 200,588,
69,546 and 437,851 Options were outstanding under the 1979 Plan, the 1984 Plan
and the 1992 Plan, respectively, (iv) no Options were outstanding under the 1982
Plan, (v) no shares of Preferred Stock were issued and outstanding, (vi) 108,262
shares of Common Stock and no shares of Preferred Stock were held in the
treasury of the Company and (vii) 100,000 shares of Preferred Stock had been
designated as Series A
A-8
<PAGE> 91
Junior Participating Cumulative Preferred Stock, par value $1.00 per share. As
of the date of this Agreement, the Company had no shares of Common Stock
reserved for issuance other than as described above. Section 5.3 of the Company
Disclosure Schedule sets forth a description of the Common Stock, the Preferred
Stock and the Series A Junior Participating Cumulative Preferred Stock. All such
issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. The parties acknowledge and agree that 75,000 shares of Preferred Stock
will be designated by the Company as the Series B Stock prior to the Closing
Date and up to such amount will be issued to the Rollover Stockholders (as
hereinafter defined) prior to the Closing Date in accordance with Section 7.14
hereof. The Series B Stock, when issued, will be duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. The Company has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter. Except as set forth above and for the Options (all of which have been
issued under the Stock Option Plans), there are not as of the date of this
Agreement issued, reserved for issuance or outstanding, (i) any shares of
capital stock or other voting securities of the Company, (ii) any securities
convertible into or exchangeable or exercisable for shares of capital stock or
voting securities of the Company, or (iii) any warrants, calls, options or other
rights to acquire from the Company or any Company Subsidiary, and no obligation
of the Company or any Company Subsidiary to issue, any capital stock or voting
securities of the Company. Section 5.3 of the Company Disclosure Schedule sets
forth a full list of Options, including the name of the person to whom such
Options have been granted, the number of shares subject to each Option, the per
share exercise price for each Option and the vesting schedule for each Option.
Except as set forth in Section 2.2 hereof and Section 5.3 of the Company
Disclosure Schedule and as provided in the Stock Option Plans, the vesting
schedule of all Options shall not be changed or affected by the execution of
this Agreement or consummation of the Transactions. Other than the Voting
Agreement and other than awards made pursuant to any of the Stock Option Plans,
there are no agreements or understandings to which the Company or any Company
Subsidiary is a party with respect to the voting of any shares of capital stock
of the Company or which restrict the transfer of any such shares, nor does the
Company have knowledge of any third party agreements or understandings with
respect to the voting of any such shares or which restrict the transfer of any
such shares. Other than (i) as set forth above, (ii) awards made pursuant to any
of the Stock Option Plans, and (iii) as expressly contemplated by this Agreement
and the Transactions, there are no outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
shares of capital stock, partnership interests or any other securities of the
Company or any Company Subsidiary. Except as set forth in Section 5.3 of the
Company Disclosure Schedule and as expressly contemplated by this Agreement and
the Transactions, neither the Company nor any Company Subsidiary is under any
obligation, contingent or otherwise, by reason of any agreement to register the
offer and sale or resale of any of their securities under the Securities Act.
5.4 Subsidiaries. Except as set forth in Section 5.4 of the Company
Disclosure Schedule, the Company owns directly or indirectly each of the
outstanding shares of capital stock or other equity interest of each of the
Company Subsidiaries. Each of the outstanding shares of capital stock of each of
the Company Subsidiaries having corporate form is duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in Section 5.4 of the
Company Disclosure Schedule, each of the outstanding shares of capital stock or
other equity interest of each of the Company Subsidiaries is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
Company Subsidiary as of the date of this Agreement is set forth in Section 5.4
of the Company Disclosure Schedule: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized capital stock, share capital
or other equity interest, to the extent applicable; and (iii) the name of each
stockholder or equity interest holder and the number of issued and outstanding
shares of capital stock, share capital or other equity interest held by it.
There are no (i) securities convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of any Company Subsidiary, or (ii)
warrants, calls, options or other rights to acquire from any Company Subsidiary,
and no obligation of any Company Subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable or exercisable for any capital stock, voting securities or
ownership interests
A-9
<PAGE> 92
in, any Company Subsidiary. There are no outstanding contractual obligations of
any Company Subsidiary to repurchase, redeem or otherwise acquire any such
securities of Company Subsidiaries or to issue, deliver or sell, or cause to be
issued, delivered or sold, any such securities.
5.5 Other Interests. Except as set forth in Section 5.5 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, limited liability company, joint venture,
business, trust or other entity (other than investments in short-term investment
securities).
5.6 No Violation; Consents. Except as set forth in Section 5.6 of the
Company Disclosure Schedule, neither the execution and delivery by the Company
of this Agreement nor consummation by the Company of the Transactions in
accordance with the terms hereof, will conflict with or result in a breach of
any provisions of the Articles of Organization, Bylaws, or the organizational
documents of the Company or any Company Subsidiary. Except as set forth in
Section 5.6 of the Company Disclosure Schedule, the execution and delivery by
the Company of this Agreement and consummation by the Company of the
Transactions in accordance with the terms hereof will not violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties of the
Company or the Company Subsidiaries under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of (x) any note, bond, mortgage, indenture, deed of trust or (y) any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which the Company or any of the Company Subsidiaries
is a party, or by which the Company or any of the Company Subsidiaries or any of
their properties is bound, except as otherwise would not have a Company Material
Adverse Effect. Other than the filings provided for in Article II of this
Agreement, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), the antitrust and competition laws of foreign countries, the Exchange
Act, the Securities Act, or applicable state securities and "Blue Sky" laws
(collectively, the "Regulatory Filings"), the execution and delivery of this
Agreement by the Company does not, and the performance of this Agreement by the
Company and consummation of the Transactions does not, require any consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, except where the failure to obtain any
such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have a
Company Material Adverse Effect.
5.7 SEC Documents. The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since December
31, 1995 (collectively, the "Company SEC Reports"), all of which were prepared
in accordance with the applicable requirements of the Exchange Act, the
Securities Act and the rules and regulations promulgated thereunder (the
"Securities Laws"). All required Company SEC Reports have been filed with the
SEC and constitute all forms, reports and documents required to be filed by the
Company under the Securities Laws since December 31, 1995. As of their
respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the applicable requirements of the Securities Laws and
(ii) 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 the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company SEC Reports (including the related
notes and schedules) fairly presents the consolidated financial position of the
Company and the Company Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings and cash flows of the Company included
in or incorporated by reference into the Company SEC Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and the Company
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act.
A-10
<PAGE> 93
5.8 Litigation. Except as set forth in Section 5.8 of the Company
Disclosure Schedule, no action, proceeding or investigation by any Governmental
Entity and no suit, action or proceeding by any person, in each such case, with
respect to the Company or any Company Subsidiary or any of their respective
properties, is pending, or, to the knowledge of the Company, threatened, other
than, in each case, those the outcome of which, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect or that would not reasonably be expected to prevent or materially delay
consummation of the Transactions.
5.9 Absence of Certain Changes. Except as set forth in Section 5.9 of the
Company Disclosure Schedule, since December 31, 1998 the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course of
business and there has not been: (i) any Company Material Adverse Effect; (ii)
any declaration, setting aside or payment of any dividend or other distribution
with respect to the Common Stock; (iii) any material commitment, contractual
obligation (including, without limitation, any management or franchise
agreement, any lease (capital or otherwise) or any letter of intent), borrowing,
liability, guaranty, capital expenditure or transaction (each, a "Commitment")
entered into by the Company or any of the Company Subsidiaries outside the
ordinary course of business except for Commitments for expenses of attorneys,
accountants and investment bankers incurred in connection with the Transactions;
or (iv) any material change in the Company's accounting principles, practices or
methods.
5.10 Taxes.
(a) Except as set forth in Section 5.10 of the Company Disclosure Schedule,
each of the Company and the Company Subsidiaries (i) has timely filed all Tax
Returns (as hereinafter defined) which the Company was required to file (after
giving effect to any filing extension granted by a Governmental Entity) and (ii)
has paid all Taxes (as hereinafter defined) required to be paid by it, except,
in each case, where the failure to file such Tax Returns or pay such Taxes would
not have a Company Material Adverse Effect. Except as set forth in Section 5.10
of the Company Disclosure Schedule, the most recent audited financial statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 reflect, to the knowledge of the Company, an adequate reserve
for all material Taxes payable by the Company and the Company Subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis. Except as set forth in
Section 5.10 of the Company Disclosure Schedule, (w) no deficiencies for any
Taxes have been proposed, asserted or assessed against the Company or any of the
Company Subsidiaries, (x) no federal income Tax Returns for a taxable period
beginning after December 31, 1990 have been or are being audited, (y) no
agreements or consents are in effect for the extension or waiver of the time in
which to file any Tax Return or assess or collect any Taxes from the Company or
any Company Subsidiary, and (z) neither the Company nor any Company Subsidiary
is a party to any Tax sharing agreement, agreement for an exemption with any
Governmental Entity, or agreement, contract, arrangement or plan that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(b) For purposes of this Agreement, "Taxes" means all federal, state, local
and foreign net or gross income, alternative or add-on minimum, environmental,
gross receipts, property, sales, use, franchise, employment, withholding, excise
and other taxes, tariffs or governmental charges of any nature whatsoever,
together with any interest, penalties or additions to Tax with respect thereto.
(c) For purposes of this Agreement, "Tax Returns" means all reports,
returns (including information returns), declarations, statements or other
information required to be supplied to a Governmental Entity in connection with
Taxes.
5.11 Books and Records.
(a) The books of account and other financial records of the Company and
each of the Company Subsidiaries are true, complete and correct in all material
respects, have been maintained in accordance with good business practices, and
are accurately reflected in all material respects in the financial statements
included in the Company SEC Reports.
A-11
<PAGE> 94
(b) The minute books and other records of the Company and each of the
Company Subsidiaries have been made available to MergerCo or its
representatives, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action of the stockholders and directors and any committees of the Company Board
and the boards of directors of each of the Company Subsidiaries and all actions
of the partners or managers of each of the Company Subsidiaries, as applicable,
except in each such case as would otherwise not have a Company Material Adverse
Effect.
5.12 Properties.
(a) All of the real estate properties owned or leased by the Company or any
of the Company Subsidiaries and material to the business and operations of the
Company and the Company Subsidiaries taken as a whole are set forth in Section
5.12 of the Company Disclosure Schedule. Except as set forth in Section 5.12 of
the Company Disclosure Schedule, the Company or a Company Subsidiary owns fee
simple title to each of the owned real properties identified in Section 5.12 of
the Company Disclosure Schedule (the "Company Properties"), free and clear of
liens which secure the payment of money, mortgages or deeds of trust, monetary
charges which are liens, security interests or other encumbrances on title which
secure the payment of money (collectively, "Encumbrances"), and the Company
Properties are not subject to any easements, rights of way, covenants,
conditions, restrictions or other written agreements, laws, ordinances and
regulations materially and adversely affecting the current use or occupancy of
any of the Company Properties by the Company or the Company Subsidiaries, as
applicable (collectively, "Property Restrictions"), except for (i) Property
Restrictions imposed or promulgated by law or any governmental body or authority
with respect to real property, including zoning regulations, that do not
materially and adversely affect the current use of the property by the Company,
(ii) Property Restrictions disclosed on any title policies or reports or surveys
received by, made available to, or otherwise obtained by, MergerCo, (iii)
Property Restrictions that would be disclosed by current, accurate surveys or
title policies or reports, and (iv) mechanics', carriers', suppliers', workmen's
or repairmen's liens and other Encumbrances, Property Restrictions and other
limitations of any kind, if any, which, individually or in the aggregate, are
not material in amount, do not materially detract from the value of or
materially interfere with the present use of any of the Company Properties
subject thereto or affected thereby, and do not otherwise materially impair
business operations conducted by the Company and the Company Subsidiaries and
which have arisen or been incurred only in the ordinary course of business.
Except as set forth in Section 5.12 of the Company Disclosure Schedule, (A) the
Company has not received any written notice of any material violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the Company Properties by any Governmental
Entity; (B) to the Company's knowledge, there are no material structural defects
relating to any of the Company Properties; (C) to the Company's knowledge, there
is no Company Property whose building systems are not in working order in any
material respect; and (D) to the Company's knowledge, there is no physical
damage, other than ordinary wear and tear, for which the Company is responsible
to any Company Property in excess of $250,000 for which there is no insurance in
effect covering the full cost of the restoration.
(b) The Company and the Company Subsidiaries own good title, free and clear
of all Encumbrances, to all of the personal property and assets shown on the
Company's balance sheet at December 31, 1998 as reflected in the Company SEC
Reports (the "Balance Sheet") or acquired after December 31, 1998, except for
(A) assets which have been disposed of to nonaffiliated third parties since
December 31, 1998 in the ordinary course of business, (B) Encumbrances reflected
in the Balance Sheet, (C) Encumbrances or imperfections of title which are not,
individually or in the aggregate, material in character, amount or extent and
which do not materially detract from the value or materially interfere with the
present or presently contemplated use of the assets subject thereto or affected
thereby, and (D) Encumbrances for current Taxes not yet due and payable. All of
the machinery, equipment and other tangible personal property and assets owned
or used by the Company and the Company Subsidiaries are in good condition and
repair to the extent necessary to permit the Company and the Company
Subsidiaries to conduct their businesses as they are currently being conducted.
5.13 Intellectual Property. The Company or the Company Subsidiaries are the
owner of, or a licensee under a valid license for, all items of intangible
property which are material to the business of the Company
A-12
<PAGE> 95
and the Company Subsidiaries as currently conducted, taken as a whole,
including, without limitation, trade names, unregistered trademarks and service
marks, brand names, software, patents and copyrights, except where the failure
to own or be a licensee for such intangible property would not have a Company
Material Adverse Effect. Except as disclosed in Section 5.13 of the Company
Disclosure Schedule, there are no claims pending or, to the Company's knowledge,
threatened, that the Company or any Company Subsidiary is in violation of any
such intellectual property right of any third party which would have a Company
Material Adverse Effect, and, to the Company's best knowledge, no third party is
in violation of any intellectual property rights of the Company or any Company
Subsidiary which would have a Company Material Adverse Effect.
5.14 Environmental Matters. The Company and the Company Subsidiaries are in
compliance with all Environmental Laws (as hereinafter defined), except for any
noncompliance that, either singly or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. As used in this Agreement,
"Environmental Laws" shall mean all federal, state, local and foreign laws,
rules, regulations, ordinances and orders that purport to regulate the release
of hazardous substances or other materials into the environment, or impose
limitations, requirements or obligations relating to environmental protection.
As used in this Agreement, "Hazardous Materials" means any "hazardous waste" as
defined in either the United States Resource Conservation and Recovery Act or
regulations adopted pursuant to said act, any "hazardous substance" or
"pollutant or contaminant" as defined in the United States Comprehensive
Environmental Response, Compensation and Liability Act and, to the extent not
included in the foregoing, any medical waste, petroleum or oil or fractions
thereof. There is no administrative or judicial enforcement or cost recovery
proceeding pending, or to the best knowledge of the Company threatened, against
the Company or any Company Subsidiary under any Environmental Law. Neither the
Company nor any Company Subsidiary or, to the best knowledge of the Company, any
legal predecessor of the Company or any Company Subsidiary, has received any
written notice that it is potentially responsible under any Environmental Law
for any costs of response or for damages to natural resources, as those terms
are defined under the Environmental Laws, at any location and neither the
Company nor any Company Subsidiary has transported or disposed of, or allowed or
arranged for any third party to transport or dispose of, any waste containing
Hazardous Materials at any location included on the National Priorities List, as
defined under the Comprehensive Environmental Response, Compensation, and
Liability Act, or any location proposed for inclusion on that list or at any
location on any analogous state list. Except for any release that, either
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect, there has been no release on the real property
owned or leased by the Company or any Company Subsidiary, or, to the Company's
knowledge, on the real property owned or leased by any predecessor entity, which
real property currently is owned or leased by the Company or any Company
Subsidiary, of Hazardous Materials, or, with respect to any real property
located outside of the United States, any hazardous or toxic material or
substance regulated under any foreign Environmental Law, in a manner that could
result in an order to perform a response action or in material liability under
the Environmental Laws and, except as set forth in Section 5.14 of the Company
Disclosure Schedule, there is no hazardous waste treatment, storage or disposal
facility, underground storage tank, landfill, surface impoundment, underground
injection well, or, to the Company's knowledge, friable asbestos or PCB's, as
those terms are defined under the Environmental Laws, located at any of the real
property owned or leased by the Company or any Company Subsidiary or, to the
Company's knowledge, any predecessor entity, or at any facilities utilized by
the Company or the Company Subsidiaries. The Company has disclosed and made
available to MergerCo all studies, analyses and test results in the possession,
custody or control of the Company or any Company Subsidiary relating to the
environmental conditions on or under any of the properties or assets owned,
leased or operated by the Company or any Company Subsidiary. Except as set forth
in Section 5.14 of the Company Disclosure Schedule, the Company and the Company
Subsidiaries hold all permits, licenses or authorizations required under
applicable Environmental Laws ("Environmental Permits" ) or have submitted on a
timely basis complete applications for the renewal of any Environmental Permit
which has expired but has not yet been renewed.
A-13
<PAGE> 96
5.15 Employee Benefit Plans.
(a) Section 5.15 of the Company Disclosure Schedule sets forth a list of
every Company Benefit Plan (as hereinafter defined) that is maintained by the
Company or an Affiliate (as hereinafter defined) on the date hereof.
(b) Each Company Benefit Plan which has been intended to qualify under
Section 401(a) of the Code has received a favorable determination or approval
letter from the Internal Revenue Service (the "IRS") regarding its qualification
under such section and neither the Company nor any Affiliate knows that any such
Company Benefit Plan has been maintained in a manner that would preclude
qualified status.
(c) Except as set forth in Section 5.15 of the Company Disclosure Schedule,
neither the Company nor any Affiliate knows of any failure of any party to
comply with any laws applicable with respect to the Company Benefit Plans. With
respect to any Company Benefit Plan, there has been no (i) "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Code Section 4975, for which an
exemption is not available or (ii) material failure to comply with any provision
of ERISA, other applicable law, or any agreement, which, in either case, would
subject the Company or any Affiliate to liability (including, without
limitation, through any obligation of indemnification or contribution) for any
damages, penalties, or taxes, or any other material loss or expense. No
litigation or governmental administrative proceeding (or investigation) or other
proceeding (other than those relating to routine claims for benefits) is pending
or, to the Company's knowledge, threatened with respect to any such Company
Benefit Plan.
(d) Neither the Company nor any Affiliate has incurred any liability under
title IV of ERISA which has not been paid in full as of the date of this
Agreement. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any employee pension benefit plan ever maintained by the
Company or any Affiliate and subject to Code Section 412 or ERISA Section 302.
With respect to any Company Benefit Plan maintained by the Company or any
Affiliate and subject to Title IV of ERISA, there has been no (nor will there be
any as a result of the Transactions) (i) "reportable event," within the meaning
of ERISA Section 4043 or the regulations thereunder, for which the notice
requirement is not waived by the regulations thereunder, and (ii) event or
condition which presents a material risk of a plan termination or any other
event that may cause the Company or any Affiliate to incur liability or have a
lien imposed on its assets under Title IV of ERISA. Neither the Company nor any
Affiliate has ever maintained a Multiemployer Plan (as hereinafter defined).
(e) With respect to each Company Benefit Plan, complete and correct copies
of the following documents (if applicable to such Company Benefit Plan) have
previously been delivered to MergerCo or its representatives: (i) all documents
embodying or governing such Company Benefit Plan, and any funding medium for
such Company Benefit Plan (including, without limitation, trust agreements) as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Company Benefit Plan under
Code Section 401(a), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules and accountants' opinions attached thereto;
(iv) the current summary plan description for such Company Benefit Plan (or
other descriptions of such Company Benefit Plan provided to employees) and all
modifications thereto; and (v) any insurance policy (including any fiduciary
liability insurance policy or fidelity bond) related to such Company Benefit
Plan.
(f) With respect to each group health plan benefitting any current or
former employee of the Company or any Affiliate that is subject to Section 4980B
of the Code, or was subject to Section 162(k) of the Code, the Company and each
Affiliate have complied in all material respects with (i) the continuation
coverage requirements of Section 4980B of the Code and Section 162(k) of the
Code, as applicable, and Part 6 of Subtitle B of Title I of ERISA and (ii) the
Health Insurance Portability and Accountability Act of 1996, as amended.
(g) With respect to any insurance policy providing funding for benefits
under any Company Benefit Plan, (i) there is no liability of the Company or any
Affiliate in the nature of a retroactive rate adjustment,
A-14
<PAGE> 97
loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the date
hereof, and (ii) to the knowledge of the Company, no insurance company issuing
any such policy is in receivership, conservatorship, liquidation or similar
proceeding and no such proceedings with respect to any insurer are imminent.
(h) Except as set forth in Section 5.15 of the Company Disclosure Schedule,
no Company Benefit Plan provides benefits, including, without limitation, death
or medical benefits, beyond termination of service or retirement other than (i)
coverage mandated by law, (ii) death or retirement benefits under any qualified
Company Benefit Plan, or (iii) deferred compensation benefits reflected on the
books of the Company or an Affiliate.
(i) Except as set forth in Section 5.15 of the Company Disclosure Schedule,
the execution and performance of this Agreement will not (i) constitute a stated
triggering event under any Company Benefit Plan that will result in any payment
(whether of severance pay or otherwise) becoming due from the Company or any
Affiliate to any officer, employee, or former employee (or dependents of such
employee), or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any employee, officer or director of the Company
or any Affiliate.
(j) Except as set forth in Section 5.15 of the Company Disclosure Schedule,
(i) any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Company or any Affiliate
who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Company Benefit Plan currently in
effect would not be characterized as an "excess parachute payment" (as such term
is defined in Section 280G(b)(1) of the Code), and (ii) the disallowance of a
deduction under Section 162(m) of the Code for employee remuneration will not
apply to any amount paid or payable by the Company or any Affiliate under any
contract, Company Benefit Plan, program, arrangement or understanding currently
in effect.
(k) For purposes of this Section:
(i) "Company Benefit Plan" means (A) all employee benefit plans within
the meaning of ERISA Section 3(3) maintained by the Company or any
Affiliate, including, but not limited to, multiple employer welfare
arrangements (within the meaning of ERISA Section 3(40)), plans to which
more than one unaffiliated employer contributes and employee benefit plans
(such as foreign or excess benefit plans) which are not subject to ERISA;
(B) all stock option plans, stock purchase plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (A)
above maintained by the Company or any Affiliate, including without
limitation, any arrangement intended to comply with Code Section 120, 125,
127, 129 or 137; and (C) all plans or arrangements providing compensation
to employee and non-employee directors maintained by the Company or any
Affiliate. In the case of a Company Benefit Plan funded through a trust
described in Code Section 401(a), or any other funding vehicle, each
reference to such Company Benefit Plan shall include a reference to such
trust, organization or other vehicle;
(ii) An entity "maintains" a Company Benefit Plan if such entity
sponsors, contributes to, or provides benefits under or through such
Company Benefit Plan, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under or through such
Company Benefit Plan, or if such Company Benefit Plan provides benefits to
or otherwise covers employees of such entity (or their spouses, dependents,
or beneficiaries);
(iii) An entity is an "Affiliate" of the Company for purposes of this
Section 5.15 if it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Company for purposes of ERISA Section 302(d)(8)(C); and
A-15
<PAGE> 98
(iv) "Multiemployer Plan" means an employee pension or welfare benefit
plan to which more than one unaffiliated employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.
5.16 Labor Matters. Except as set forth in Section 5.16 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization. There
is no unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the Company
Subsidiaries relating to their business, except for any such proceeding which
would not reasonably be expected to have a Company Material Adverse Effect. To
the Company's knowledge there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or threatened
involving employees of the Company or any of the Company Subsidiaries.
5.17 No Brokers. Neither the Company nor any of the Company Subsidiaries
has entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of such entity or MergerCo to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or consummation of
the Transactions, except that the Company has retained The Beacon Group Capital
Services, L.L.C. ("Beacon Group") as its financial advisor in connection with
the Transactions, a true copy of any and all agreements between the Company and
Beacon Group, including the engagement letter entered into between the Company
and Beacon Group, have been delivered to MergerCo. Other than the foregoing
arrangements, the Company is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or consummation of the Transactions.
5.18 Opinion of Financial Advisors. The Company has received the opinion of
Beacon Group to the effect that, as of the date hereof, the Merger Consideration
is fair to the holders of the Common Stock from a financial point of view.
5.19 Year 2000. There is no impediment to the Company being year 2000
compliant by December 31, 1999 (i.e., that products, hardware, software and
other date-sensitive equipment manufactured, sold, owned, licensed or used by
the Company will be capable of correctly processing date data (including, but
not limited to, calculating, comparing and sequencing) accurately prior to,
during and after the calendar year 2000 when used, assuming that all third party
products, hardware, software and other date-sensitive equipment used in
combination therewith are capable of properly exchanging date data), except to
the extent that any such impediment would not have a Company Material Adverse
Effect.
5.20 Insurance. The Company and the Company Subsidiaries are covered by
insurance in scope and amount customary and reasonable for the businesses in
which they are engaged. Except as disclosed in Section 5.20 of the Disclosure
Schedule, each insurance policy to which the Company or any of the Company
Subsidiaries is a party is in full force and effect and will not require any
consent as a result of the consummation of the Transactions. Neither the Company
nor any of the Company Subsidiaries is in material breach or default (including
with respect to the payment of premiums or the giving of notices) under any
insurance policy to which it is a party, and no event has occurred which, with
notice or the lapse of time, would constitute such a material breach or default
by the Company or any of the Company Subsidiaries or would permit termination,
modification or acceleration, under such policies; and the Company has not
received any notice from the insurer disclaiming coverage or reserving rights
with respect to any material claim or any such policy in general.
5.21 Contracts. Neither the Company nor any of the Company Subsidiaries is
in breach, nor has the Company or any Company Subsidiary received in writing any
claim that it has breached, any of the terms or conditions of any material
agreement, contract or commitment (excluding leases) to which it is a party or
by which any of its assets and properties are bound (collectively, "Material
Contracts") in such a manner as would permit any other party to cancel or
terminate the same prior to its stated term or would permit any other party to
collect material damages from the Company under any such Material Contract.
Neither the Company nor any of the Company Subsidiaries is in breach, nor has
the Company or any Company
A-16
<PAGE> 99
Subsidiary received in writing any claim that it has breached, any of the terms
or conditions of any lease to which it is a party and which is material to the
business of the Company and the Company Subsidiaries taken as a whole
(collectively, "Material Leases"), in such a manner as would permit any other
party to cancel or terminate the same prior to its stated term or would permit
any other party to collect material damages from the Company under any such
Material Lease. Each Material Contract and Material Lease is in full force and
effect and to the Company's knowledge is not subject to any material default
thereunder by any party obligated to the Company or any of the Company
Subsidiaries thereunder. The Company is not a party to any "poison pill,"
shareholder rights plan, rights agreement or similar agreement, instrument, plan
or arrangement.
5.22 Takeover Laws. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States including, without limitation,
Chapter 110F of the MGL, applicable to the Company or any of the Company
Subsidiaries is applicable to the execution, delivery and performance of this
Agreement or the consummation of the Merger or the other Transactions.
5.23 Vote Required. The affirmative vote of the holders of two-thirds of
the outstanding shares of Common Stock entitled to vote thereon is the only vote
of any class of capital stock of the Company required by the MBCL, the Articles
of Organization or the Bylaws to adopt this Agreement and approve the
Transactions.
5.24 Definition of the Company's Knowledge. As used in this Agreement, the
phrase "to the knowledge of the Company" or any similar phrase means the actual
(and not the constructive or imputed) knowledge (following a reasonable inquiry)
of those individuals identified in Section 5.24 of the Company Disclosure
Schedule.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by the Company. During the period from the date of
this Agreement to the Effective Time, except as otherwise contemplated by this
Agreement, the Company shall, and shall cause each of the Company Subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course, consistent with past practice, and use their best efforts to preserve
intact their present business organizations, keep available the services of
their present advisors, managers, officers and employees and preserve their
relationships with customers, suppliers, licensors and others having business
dealings with them and continue existing contracts as in effect on the date
hereof (for the term provided in such contracts). Without limiting the
generality of the foregoing, neither the Company nor any of the Company
Subsidiaries will (except as expressly permitted by this Agreement or as
contemplated by the Transactions or to the extent that Parent or MergerCo shall
otherwise consent in writing):
(a) (i) declare, set aside or pay any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of
any of its capital stock, (ii) split, combine or reclassify any of its
capital stock or (iii) repurchase, redeem or otherwise acquire any of its
securities, except, in the case of clause (iii), for (X) the acquisition of
shares of Common Stock from holders of Options in full or partial payment
of the exercise price payable by such holders upon exercise of Options
outstanding on the date of this Agreement and (Y) the acquisition of shares
of Common Stock from the stockholders of the Company set forth in Section
6.1(a) of the Company Disclosure Schedule (collectively, the "Rollover
Stockholders") upon the exchange of such shares for shares of Series B
Stock in connection with the Transactions;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (including
indebtedness having the right to vote) or equity equivalents (including,
without limitation, stock appreciation rights), other than (X) the issuance
of shares of Common Stock upon the exercise of Options outstanding on the
date of this
A-17
<PAGE> 100
Agreement in accordance with their present terms and (Y) the issuance of
the Series B Stock to the Rollover Stockholders in exchange for shares of
Common Stock in connection with the Transactions;
(c) acquire, sell, lease, encumber, transfer or dispose of any assets
outside the ordinary course of business (whether by asset acquisition,
stock acquisition or otherwise), except as set forth in Section 6.1(c) of
the Company Disclosure Schedule;
(d) make any loans, advances or capital contributions other than in
the ordinary course of business consistent with prior practice;
(e) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than any payment, discharge or satisfaction (i) in the ordinary course of
business consistent with past practice, or (ii) in connection with the
Transactions;
(f) change any of the accounting principles or practices used by it
(except as required by generally accepted accounting principles, in which
case written notice shall be provided to MergerCo prior to any such
change);
(g) except as required by law, (i) enter into, adopt, amend or
terminate any Company Benefit Plan, (ii) enter into, adopt, amend or
terminate any agreement, arrangement, plan or policy between the Company or
any of the Company Subsidiaries (other than terminations of agreements,
arrangements, plans or policies in accordance with the terms thereof
existing on the date of this Agreement) and one or more of their directors
or officers, or (iii) increase in any manner the compensation or fringe
benefits of any director of the Company or the compensation or fringe
benefits of any officer of the Company or any Company Subsidiary set forth
in Section 6.1(g) of the Company Disclosure Schedule, or, except for normal
increases in the ordinary course of business consistent with past practice,
any employee of the Company or any Company Subsidiary, or pay any benefit
not required by any Company Benefit Plan or arrangement as in effect as of
the date hereof;
(h) adopt any amendments to the Articles of Organization or Bylaws,
other than (X) to authorize the shares of Series B Stock to be issued to
the Rollover Stockholders and to establish the rights, preferences and
designations thereof (such rights, preferences and designations of such
Series B Stock shall be as set forth in Section 6.1(h) of the Company
Disclosure Schedule) and (Y) as otherwise expressly provided by the terms
of this Agreement;
(i) except as set forth in Section 5.1 of the Company Disclosure
Schedule, adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(j) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement);
(k) waive, release or amend its rights under any confidentiality,
"standstill" or similar agreement that the Company entered into in
connection with its consideration of a potential strategic transaction;
provided, however, that the Company may waive, release or amend its rights
under any such confidentiality, "standstill" or similar agreement if the
Company Board determines based on the advice of independent legal counsel
that failure to do so would be reasonably likely to constitute a breach of
its fiduciary duties to the Company's stockholders under applicable law; or
(l) enter into an agreement to take any of the foregoing actions.
A-18
<PAGE> 101
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Stockholders Meeting.
(a) The Company, acting through the Company Board, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as practicable following
the execution of this Agreement for the purpose of considering and taking
action upon this Agreement and the Transactions (it being understood that
the date of the Special Meeting shall be reasonably acceptable to Parent);
(ii) as promptly as practicable (but in no event later than
twenty-five (25) days following the date of this Agreement) prepare and
file with the SEC a preliminary proxy statement relating to this Agreement
and the Transactions;
(iii) use its reasonable efforts to (A) obtain and furnish the
information required to be included by the SEC in a definitive proxy
statement (the "Proxy Statement") and, after consultation with MergerCo, to
respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause the Proxy Statement to be mailed to
its stockholders not later than five (5) business days following clearance
from the SEC, and (B) obtain the necessary approval of this Agreement and
the Transactions by its stockholders; and
(iv) subject to the fiduciary duties of the Company Board as provided
in Section 7.5, include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval of this Agreement and the Transactions.
(b) Each of the Company, on the one hand, and Parent and MergerCo, on the
other hand, agree promptly to correct any information provided by either of them
for use in the Proxy Statement if and to the extent that such information shall
have become false or misleading, and the Company further agrees to take all
necessary steps to cause the Proxy Statement as so corrected to be filed with
the SEC and to be disseminated to the stockholders of the Company, in each case,
as to the extent required by applicable federal securities laws.
(c) As soon as practicable following the date of this Agreement, the
Company and MergerCo shall together prepare and file with the SEC a Rule 13e-3
Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3"). The Company and
MergerCo shall use all reasonable best efforts to have the Schedule 13E-3
cleared by the SEC as soon as practicable following such filing. Each of the
Company, Parent and MergerCo shall furnish all information about itself, its
business and operations and its owners and all financial information to Parent
and MergerCo as may be reasonably necessary in connection with the preparation
of the Schedule 13E-3. Each of the Company, Parent and MergerCo agrees promptly
to correct any information provided by it for use in the Schedule 13E-3 if and
to the extent that such information shall have become false or misleading in any
material respect. Each of the Company and MergerCo shall notify the other of the
receipt of any comments of the SEC with respect to the Schedule 13E-3. Each of
the Company and MergerCo shall give the other and its counsel the opportunity to
review Schedule 13E-3 prior to its being filed with the SEC and shall give the
other and its counsel the opportunity to review all amendments and supplements
to the Schedule 13E-3 and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC.
(d) None of the information supplied by the Company specifically for
inclusion or incorporation by reference in (i) the Proxy Statement, (ii) the
Schedule 13E-3 or (iii) the Other Filings (as hereinafter defined), will, at the
respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement and the Schedule 13E-3, as of the
date it or any amendment or supplement thereto is mailed to stockholders and at
the time of any meeting of stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement and the Schedule 13E-3, insofar as they relate
to the
A-19
<PAGE> 102
Company or other information supplied by the Company for inclusion therein, will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder. The Company makes no
representation, warranty or covenant with respect to information concerning
Parent or MergerCo included in the Proxy Statement or the Schedule 13E-3 or
information supplied by Parent or MergerCo for inclusion in the Proxy Statement
or the Schedule 13E-3.
(e) None of the information supplied by Parent or MergerCo specifically for
inclusion or incorporation by reference in (i) the Proxy Statement, (ii) the
Schedule 13E-3 or (iii) the Other Filings, will, at the respective times filed
with the SEC or other Governmental Entity and, in addition, in the case of the
Proxy Statement and the Schedule 13E-3, as of the date it or any amendment or
supplement thereto is mailed to stockholders and at the time of any meeting of
stockholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
and the Schedule 13E-3, insofar as they relate to Parent or MergerCo or other
information supplied by Parent or MergerCo for inclusion therein, will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
7.2 Other Filings. As promptly as practicable (but in no event later than
thirty (30) days following the date of this Agreement in the case of any filing
under the HSR Act), the Company, Parent and MergerCo each shall properly prepare
and file any other filings required under the Exchange Act or any other federal,
state or foreign law relating to the Merger and the Transactions (including
filings, if any, required under the HSR Act) (collectively, the "Other
Filings"). Each of the Company, MergerCo and Parent shall promptly notify the
other of the receipt of any comments on, or any request for amendments or
supplements to, any of the Other Filings by the SEC or any other Governmental
Entity or official, and each of the Company, Parent and MergerCo shall supply
the other with copies of all correspondence between it and each of its
Subsidiaries and representatives, on the one hand, and the SEC or the members of
its staff or any other appropriate governmental official, on the other hand,
with respect to any of the Other Filings. The Company, Parent and MergerCo each
shall use its respective reasonable best efforts to obtain and furnish the
information required to be included in any of the Other Filings. Parent and
MergerCo hereby covenant and agree to use their respective reasonable best
efforts to secure termination of any waiting periods under the HSR Act and
obtain the approval of the Federal Trade Commission (the "FTC") or any other
Governmental Entity for the Transactions, including without limitation, promptly
entering into a consent decree or other arrangement with the FTC or other
Governmental Entity as may be necessary to secure termination of such waiting
periods or obtain such other approval. Parent and MergerCo shall make any
undertakings (including undertakings to make divestitures) required in order to
comply with the antitrust requirements or laws of any Governmental Entity,
including the HSR Act, in connection with the Transactions.
7.3 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Transactions and to cooperate with each other in
connection with the foregoing, including the taking of such actions as are
necessary to obtain any necessary consents, approvals, orders, exemptions and
authorizations by or from any public or private third party, including without
limitation any that are required to be obtained under any federal, state or
local law or regulation or any contract, agreement or instrument to which the
Company or any Company Subsidiary is a party or by which any of their respective
properties or assets are bound, to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the Transactions,
to cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
Transactions, and to effect all necessary registrations and Other Filings,
including, but not limited to, filings under the HSR Act, if any, and
submissions of information requested by governmental authorities. For purposes
of the foregoing sentence, the obligation of the Company, Parent and MergerCo to
use their "reasonable best efforts" to obtain waivers, consents and approvals to
loan agreements, leases and other contracts shall not include any obligation to
A-20
<PAGE> 103
agree to an adverse modification of the terms of such documents or to prepay or
incur additional obligations to such other parties.
7.4 Fees and Expenses. Except as set forth in Section 9.2 hereof, whether
or not the Merger is consummated, all fees, costs and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
incurring such costs or expenses.
7.5 No Solicitations.
(a) The Company represents and warrants that it has terminated any
discussions or negotiations relating to, or that may be reasonably be expected
to lead to, any Acquisition Proposal (as hereinafter defined) and will promptly
request the return of all confidential information regarding the Company
provided to any third party prior to the date of this Agreement pursuant to the
terms of any confidentiality agreements. Except as permitted by this Agreement,
the Company shall not, and shall not authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it to, directly or indirectly,
(i) solicit, initiate or encourage (including by way of furnishing non-public
information), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes an Acquisition Proposal, or (ii)
participate in any discussions or negotiations regarding an Acquisition
Proposal; provided, however, that, at any time prior to the approval of this
Agreement by the stockholders of the Company, if the Company receives an
Acquisition Proposal that was unsolicited or that did not otherwise result from
a breach of this Section 7.5(a), the Company may furnish non-public information
with respect to the Company and the Company Subsidiaries to the person who made
such Acquisition Proposal (a "Third Party") and may participate in negotiations
regarding such Acquisition Proposal if (A) the Company Board determines based on
the advice of independent legal counsel that failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties to the
Company's stockholders under applicable law, and (B) the Company Board
determines that such Acquisition Proposal is reasonably likely to lead to a
Superior Proposal (as hereinafter defined). Notwithstanding the foregoing, the
Company shall, prior to furnishing non-public information with respect to the
Company and the Company Subsidiaries to such Third Party, enter into a
confidentiality agreement with such Third Party with terms no less favorable to
the Company than those contained in the Confidentiality Agreement, provided that
such confidentiality agreement need not include the same standstill provisions
as those contained in the Confidentiality Agreement, it being understood that if
there are no standstill provisions in such confidentiality agreement or if such
provisions are more favorable to such Third Party than those in the
Confidentiality Agreement, the Confidentiality Agreement shall be deemed amended
to exclude the existing standstill provision or include such more favorable
provisions, as the case may be. The Company shall promptly notify (but in any
event within two (2) calendar days) MergerCo of the Company's first receipt of a
written Acquisition Proposal by such Third Party and of the material terms and
conditions thereof. Notwithstanding anything to the contrary in this Agreement,
the Company shall not be required to disclose to Parent or MergerCo the identity
of the Third Party making any such Acquisition Proposal and, except as provided
in Section 9.1(c)(i), shall have no duty to notify or update Parent or MergerCo
on the status of discussions or negotiations (including the status of such
Acquisition Proposal or any amendments or proposed amendments thereto) between
the Company and such Third Party.
(b) Subject to Section 9.1(d)(ii) hereof, at any time prior to the approval
of this Agreement by the stockholders of the Company, the Company Board may (i)
withdraw or modify in a manner material and adverse to Parent or MergerCo its
approval or recommendation of this Agreement or the Merger, (ii) approve or
recommend an Acquisition Proposal to its stockholders or (iii) cause the Company
to enter into any definitive acquisition agreement with respect to an
Acquisition Proposal, in each such case if (A) the Company Board determines
based on the advice of independent legal counsel that failure to take such
action would be reasonably likely to constitute a breach of its fiduciary duties
to the Company's stockholders under applicable law, and (B) the Company Board
determines based on the advice of its financial advisors that such Acquisition
Proposal constitutes a Superior Proposal. Any such withdrawal, modification or
change of the recommendation of the Company Board of this Agreement shall not
change the approval of the Company Board of this Agreement for purposes of
causing any state takeover statute or other state law to be inapplicable to the
Transactions, including the Merger.
A-21
<PAGE> 104
(c) Nothing contained in this Section 7.5 shall prohibit the Company from
at any time taking and disclosing to its stockholders a position contemplated by
Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or making any
disclosure required by Rule 14a-9 promulgated under the Exchange Act.
(d) As used in this Agreement, the term "Acquisition Proposal" shall mean
any proposed or actual (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any assets
of the Company or the Company Subsidiaries representing 15% or more of the
consolidated assets of the Company and the Company Subsidiaries, (iii) issue,
sale or other disposition by the Company of (including by way of merger,
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 15% or more of the votes associated with the
outstanding securities of the Company, (iv) tender offer or exchange offer in
which any person shall acquire beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act), or the right to acquire beneficial
ownership, or any "group" (as such term is defined under the Exchange Act) shall
have been formed which beneficially owns or has the right to acquire beneficial
ownership of, 15% or more of the outstanding shares of Common Stock, (v)
recapitalization, restructuring, liquidation, dissolution, or other similar type
of transaction with respect to the Company or (vi) transaction which is similar
in form, substance or purpose to any of the foregoing transactions; provided,
however, that the term "Acquisition Proposal" shall not include the Merger and
the Transactions.
(e) As used in this Agreement, the term "Superior Proposal" means an
Acquisition Proposal that the Company Board determines based on the advice of
its financial advisors is more favorable to the stockholders of the Company from
a financial point of view than the Transactions (taking into account all of the
terms and conditions of such Acquisition Proposal, including any conditions to
consummation and the likelihood of such Acquisition Proposal being consummated).
7.6 Officers' and Directors' Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of the Company or any of the Company
Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer, employee,
fiduciary or agent of the Company or any of the Company Subsidiaries, or is or
was serving at the request of the Company or any of the Company Subsidiaries as
a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (ii) the negotiation,
execution or performance of this Agreement or any of the Transactions, whether
in any case asserted or arising before or after the Effective Time, the parties
hereto agree to cooperate and use their reasonable best efforts to defend
against and respond thereto. It is understood and agreed that the Company shall
indemnify and hold harmless, and after the Effective Time the Surviving
Corporation shall indemnify and hold harmless, as and to the full extent
permitted by applicable law, each Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such threatened or actual claim, action, suit, proceeding or investigation,
and in the event of any such threatened or actual claim, action, suit,
proceeding or investigation (whether asserted or arising before or after the
Effective Time), (A) the Company, and the Surviving Corporation after the
Effective Time, shall promptly pay expenses in advance of the final disposition
of any claim, suit, proceeding or investigation to each Indemnified Party to the
full extent permitted by law, (B) the Indemnified Parties may retain counsel
satisfactory to them, and the Company and the Surviving Corporation, shall pay
all fees and expenses of such counsel for the Indemnified Parties within thirty
days after statements therefor are received, and (C) the Company and the
Surviving Corporation will use their respective reasonable best efforts to
assist in the vigorous defense of any such matter; provided, however, that
neither the Company nor the Surviving Corporation shall be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld); and provided further, however, that the Surviving
Corporation shall have no obligation hereunder to any Indemnified Party when
A-22
<PAGE> 105
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 7.6, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Company and, after the Effective Time, the
Surviving Corporation, thereof, provided that the failure to so notify shall not
affect the obligations of the Company and the Surviving Corporation except to
the extent such failure to notify materially prejudices such party.
(b) Parent and MergerCo agree that all rights to indemnification existing in
favor of, and all limitations on the personal liability of, the directors,
officers, employees and agents of the Company and the Company Subsidiaries
provided for in the Articles of Organization or Bylaws as in effect as of the
date hereof with respect to matters occurring prior to the Effective Time, and
including the Merger and the Transactions, shall continue in full force and
effect for a period of six (6) years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claims (each a "Claim")
asserted or made within such period shall continue until the disposition of such
Claim. Prior to the Effective Time, the Company shall purchase an extended
reporting period endorsement ("Reporting Tail Coverage") under the Company's
existing directors' and officers' liability insurance coverage for the Company's
directors and officers in a form acceptable to the Company which shall provide
such directors and officers with coverage for six (6) years following the
Effective Time of not less than the existing coverage under, and have other
terms not materially less favorable to, the insured persons than the directors'
and officers' liability insurance coverage presently maintained by the Company;
provided, however, than in any event the total aggregate cost of such Reporting
Tail Coverage shall not exceed $175,000 (the "Maximum Amount"); and provided,
further, that if such coverage cannot be obtained for such cost, the Company
will maintain, for such six-year period, the maximum amount of comparable
coverage as shall be available for the Maximum Amount on such terms.
(c) This Section 7.6 is intended for the irrevocable benefit of, and to
grant third party rights to, the Indemnified Parties and shall be binding on all
successors and assigns of Parent, MergerCo, the Company and the Surviving
Corporation. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Section 7.6.
(d) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person or entity, then, and in each such case,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this Section 7.6.
7.7 Access to Information; Confidentiality. From the date hereof until the
Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company's and Company Subsidiaries' officers,
employees, customers, suppliers, lenders and agents to, afford to MergerCo and
to the officers, employees and agents of MergerCo complete access at all
reasonable times to such officers, employees, agents, properties, books, records
and contracts, and shall furnish MergerCo such financial, operating and other
data and information as MergerCo may reasonably request. Prior to the Effective
Time, Parent and MergerCo shall hold in confidence all such information on the
terms and subject to the conditions contained in that certain confidentiality
agreement between Parent and the Company dated October 30, 1998 (the
"Confidentiality Agreement"). The Company hereby waives the provisions of the
Confidentiality Agreement as and to the extent necessary to permit the making
and consummation of the Transactions. At the Effective Time, such
Confidentiality Agreement shall terminate. Each party shall give prompt written
notice to the other of any fact, event or circumstance known to it that would be
reasonably likely to cause or constitute a material breach of any of its
representations or warranties contained herein or a Company Material Adverse
Effect or Parent Material Adverse Effect, as applicable.
A-23
<PAGE> 106
7.8 Financial and Other Statements. Notwithstanding anything contained in
Section 7.7, during the term of this Agreement, the Company shall also provide
to MergerCo or its representatives the following documents and information:
(a) As soon as reasonably available after filing with the SEC, the
Company will deliver to MergerCo or its representatives the Company's
Quarterly Report on Form 10-Q as filed under the Exchange Act for each
fiscal quarter ending after the date of this Agreement. As soon as
reasonably available after filing with the SEC, the Company will deliver to
MergerCo or its representatives the Company's Annual Report on Form 10-K,
as filed under the Exchange Act for each fiscal year ending after the date
of this Agreement. The Company will also deliver to MergerCo or its
representatives, contemporaneously with its being filed with the SEC, a
copy of each Current Report on Form 8-K. As soon as reasonably available,
the Company will deliver to MergerCo or its representatives copies of
financial reports for each calendar month ending after the date of this
Agreement prepared by the Company's management in the ordinary course of
business.
(b) Promptly upon receipt thereof, the Company will furnish to
MergerCo or its representatives copies of all internal control reports
submitted to the Company or any Company Subsidiary by independent
accountants in connection with each annual, interim or special audit of the
books of the Company or any such Company Subsidiary made by such
accountants.
(c) As soon as practicable, the Company will furnish to MergerCo or
its representatives copies of all such financial statements and reports as
the Company or any Company Subsidiary shall send to its stockholders, the
SEC or any other regulatory authority, to the extent any such reports
furnished to any such regulatory authority are not confidential and except
as legally prohibited thereby.
7.9 Public Announcements. The Company and MergerCo shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or any of the Transactions and shall not issue
any such press release or make any such public statement without the prior
consent of the other party, which consent shall not be unreasonably withheld;
provided, however, that a party may, without the prior consent of the other
party, issue such press release or make such public statement as may be required
by law or the applicable rules of any stock exchange if it has used its best
efforts to consult with the other party and to obtain such party's consent but
has been unable to do so in a timely manner. In this regard, the parties shall
make a joint public announcement of the Transactions contemplated thereby no
later than (i) the close of trading on the American Stock Exchange on the day
this Agreement is signed, if such signing occurs during a business day or (ii)
the opening of trading on the American Stock Exchange on the business day
following the date on which this Agreement is signed, if such signing does not
occur during a business day.
7.10 Employee Benefit Arrangements. Section 7.10 of the Company Disclosure
Schedule sets forth each employment or severance agreement to which the Company
or any Company Subsidiary is presently a party. MergerCo agrees that the Company
will honor, and from and after the Effective Time, the Surviving Corporation
will honor, all obligations under such employment and severance agreements.
7.11 Required Financing. Each of Parent and MergerCo hereby agrees to use
its reasonable best efforts to arrange the financing in respect of the
Transactions and to satisfy the conditions set forth in the Financing Letters.
Parent and MergerCo shall keep the Company informed of the status of their
financing arrangements for the Transactions, including providing written
notification to the Company as promptly as possible (but in any event within
forty-eight (48) hours) with respect to (i) any indication that either of the
Lenders may be unable to provide the financing as contemplated by the Financing
Letters, including without limitation, any indication from either of the Lenders
that there has occurred a material disruption or material adverse change in the
banking, financial or capital markets generally or in the market for senior
credit facilities or for new issuances of high yield securities which has caused
or could cause such Lender to withdraw its commitment to provide financing as
contemplated by the Financing Letters, (ii) the ability of Parent or MergerCo to
satisfy any of the conditions set forth in the Financing Letters, and (iii) any
adverse developments relating to the financing contemplated by the Financing
Letters. Parent shall provide written notice to the Company within twenty-four
(24) hours if either of the Lenders has indicated to Parent or MergerCo that
such Lender
A-24
<PAGE> 107
will be unable to provide the financing contemplated by the applicable Financing
Letter (a "Parent Financing Notice"). In the event Parent and MergerCo are
unable to arrange any portion of such financing in the manner or from the
sources contemplated by the Financing Letters, Parent and MergerCo shall arrange
(or, in the event that such inability to arrange financing arises under the
circumstances contemplated by Section 8.2(f) hereof, use its reasonable best
efforts to arrange) any such portion from alternative sources on substantially
the same terms and with substantially the same conditions as the portion of the
financing that Parent and MergerCo were unable to arrange. The Company shall use
its reasonable best efforts to assist Parent and MergerCo in obtaining their
financing; provided, however, that the obligation of the Company to use its
reasonable best efforts in connection with the foregoing shall only apply to
reasonable and customary activities in this regard and shall not include any
obligation to obtain any extraordinary waivers, consents or approvals to loan
agreements, leases or other contracts or to agree to an adverse modification of
the terms of any of such documents, to prepay or incur additional obligations to
any other parties or to incur or become liable for any other costs or expenses.
7.12 Recapitalization Accounting Treatment. Each of the Company, Parent and
MergerCo shall use its reasonable best efforts to cause the Transactions,
including the Merger, to be accounted for as a recapitalization and such
accounting treatment to be accepted by their respective accountants and by the
SEC, and each of the Company, Parent and MergerCo agrees that it shall not take
or omit to take any action that would cause such accounting treatment not to be
obtained.
7.13 Delisting. Each of the parties hereto agrees to cooperate with each
other in taking, or causing to be taken, all actions necessary to delist the
Common Stock from the American Stock Exchange, provided that such delisting
shall not be effective until after the Effective Time of the Merger.
7.14 Exchange of Common Stock. Not later than the Effective Time, the
Company shall (i) designate 75,000 shares of Preferred Stock of the Company as
the Series B Stock and (ii) take all such actions as may be necessary to
exchange each share of Common Stock held by the Rollover Stockholders that is
set forth opposite their respective names in Section 6.1(a) of the Company
Disclosure Schedule for 0.2 shares of Series B Stock and complete such exchange,
in each case, pursuant to documentation reasonably acceptable in form and
substance to MergerCo. In effecting such exchange, all fractional shares of
Series B Stock otherwise issuable in connection therewith shall not be issued
but shall be rounded to the nearest number of whole shares of Series B Stock.
7.15 Solvency Letters. Parent or MergerCo shall engage an appraisal firm,
reasonably satisfactory to the Company, to deliver a letter (the "Solvency
Letter") addressed to the Company, the Company Board, MergerCo and the MergerCo
Board (and on which the Company Board and the MergerCo Board shall be entitled
to rely), which Solvency Letter shall be reasonably satisfactory to the Company
and the Company Board, indicating that immediately after the Effective Time, and
after giving effect to the Merger, the financings contemplated by this Agreement
and any other of the Transactions, the Surviving Corporation will not (i) be
insolvent or (ii) have unreasonably small capital with which to engage in its
business. Notwithstanding anything to the contrary in this Agreement, Parent
and/or MergerCo shall pay all fees, costs and expenses of such appraisal firm in
connection with the preparation and delivery of the Solvency Letter.
7.16 Purchase of Company Shares. The Company acknowledges that MergerCo may
acquire up to 9.9% of the outstanding shares of Common Stock prior to the
Effective Time in one or more privately negotiated transactions. In connection
with the foregoing, Parent and MergerCo hereby represent and warrant that they
are (a) aware that the United States securities laws prohibit any person who has
material, non-public information concerning a company from purchasing or selling
securities of such company or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, and (b) familiar with the
Exchange Act and that they will not purchase or sell any shares of Common Stock
in contravention of the Exchange Act, including, without limitation, Rule 10b-5
thereunder. Each of Parent and MergerCo agrees that it shall indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement in connection with any threatened or actual claim, action,
A-25
<PAGE> 108
suit, proceeding or investigation, whether civil, criminal or administrative,
arising out of or relating to any transactions in the Common Stock contemplated
by the first sentence of this Section 7.16.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver, where permissible, at or prior to the Closing Date,
of each of the following conditions:
(a) Stockholder Approval. This Agreement and the Transactions,
including the Merger, shall have been approved and adopted by the
affirmative vote of the stockholders of the Company as required by the MBCL
and the Articles of Organization.
(b) Hart-Scott-Rodino Act. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated.
(c) Other Regulatory Approvals. All necessary approvals,
authorizations and consents of any governmental or regulatory entity
required to consummate the Merger shall have been obtained and remain in
full force and effect, and all waiting periods relating to such approvals,
authorizations and consents shall have expired or been terminated.
(d) No Injunctions, Orders or Restraints; Illegality. No preliminary
or permanent injunction or other order, decree or ruling issued by a court
of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission (an "Injunction") nor any statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect which would (i) make the
consummation of the Merger illegal, or (ii) otherwise restrict, prevent or
prohibit the consummation of any of the Transactions, including the Merger.
(e) Solvency Letter. Each of the Company Board and the MergerCo Board
shall have received the Solvency Letter.
8.2 Conditions to Obligations of MergerCo. The obligations of MergerCo to
effect the Merger are further subject to the following conditions:
(a) Representations and Warranties. Those representations and
warranties of the Company set forth in this Agreement which are qualified
by materiality or a Company Material Adverse Effect or words of similar
effect shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except to
the extent such representations and warranties expressly relate to a
specific date, in which case such representations and warranties shall be
true and correct as of such date), and those representations and warranties
of the Company set forth in this Agreement which are not so qualified shall
be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent such representations and warranties
expressly relate to a specific date, in which case such representations and
warranties shall be true and correct in all material respects as of such
date). Notwithstanding the foregoing, the representations and warranties of
the Company set forth in Section 5.3 shall be true and correct on the date
of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations and warranties
expressly relate to a specific date, in which case such representations and
warranties shall be true and correct as of such date).
(b) Performance and Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement, including, without limitation, the covenants
contained in Articles 6 and 7 hereof.
(c) Consents, etc. Any consent, authorization, order or approval of
(or filing or registration with) any third party (i) identified on Section
8.2(c) of the Company Disclosure Schedule, or (ii) otherwise
A-26
<PAGE> 109
identified by MergerCo after the date of this Agreement shall have been
obtained or made, except, in the case of clause (ii) hereof, where the
failure to have obtained or made any such consent, authorization, order,
approval, filing or registration, would not reasonably be expected to have
a Company Material Adverse Effect.
(d) No Injunction. There shall not have been entered any order in any
action or proceeding by any state or federal government or governmental
authority or by any United States or state court of competent jurisdiction
(a "Governmental Entity") which prohibits or limits the ownership or
operation by the Company (or any of the Company Subsidiaries) of any
portion of the Company's or the Company Subsidiaries' business, properties
or assets which is material to the Company and the Company Subsidiaries as
a whole, or compels the Company (or any Company Subsidiary) to dispose of
or hold separate any portion of the Company's or the Company Subsidiaries'
business, properties or assets which is material to the Company and the
Company Subsidiaries as a whole.
(e) No Company Material Adverse Change. There shall not have occurred
any material adverse change in the business, assets, condition (financial
or otherwise) or results of operations of the Company and the Company
Subsidiaries taken as a whole nor any event or other circumstance which
would, individually or in the aggregate, reasonably be expected to result
in any such material adverse change.
(f) No Financing Material Adverse Change. There shall not have
occurred any material disruption or material adverse change in the banking,
financial or capital markets generally or in the market for senior credit
facilities or for new issuances of high yield securities which has caused
either of the Lenders to withdraw its commitment to provide financing as
contemplated by the Financing Letters.
(g) Dissenting Shares. As of immediately prior to the Effective Time,
no more than 5% of the outstanding shares of Common Stock shall have taken
actions to assert dissenter's rights under Chapter 156B of the MBCL.
(h) Accounting Treatment. The Proxy Statement shall contain a
statement to the effect that the Merger shall be treated as a
recapitalization for accounting purposes and the SEC shall not have
disapproved such statement in the Proxy Statement.
(i) Governmental Litigation. There shall not be pending any action,
claim, proceeding or investigation instituted by any Governmental Entity
challenging or prohibiting the consummation of the Merger and the
Transactions.
(j) Exchange Complete. The exchange contemplated by Section 7.14
hereof shall have been completed to the reasonable satisfaction of
MergerCo.
(k) Indebtedness. On the Closing Date the Company shall have no more
than $13,000,000 of Net Indebtedness as reflected in a certificate signed
by the Chief Financial Officer of the Company in form and substance
reasonably satisfactory to MergerCo. For purposes of this Section 8.2(k),
"Net Indebtedness" shall mean all obligations of the Company and the
Company Subsidiaries for borrowed money (including the current portion
thereof) or evidenced by a bond, note, debenture or similar instrument,
including without limitation, all obligations arising under the credit
facility identified in Section 5.6 of the Company Disclosure Schedule,
minus all cash and cash equivalents of the Company and the Company
Subsidiaries. Furthermore, for purposes of determining the Company's Net
Indebtedness under this Section 8.2(k), (i) all checks deposited by the
Company on or prior to the Closing Date, even if such checks have not
"cleared" the bank or financial institution into which such checks were
deposited, shall be deemed to be an increase in "cash", and (ii) all checks
issued by the Company on or prior to the Closing Date, even if such checks
have not been "cashed" by the recipients thereof on or prior to the Closing
Date, shall be deemed to be a decrease in "cash." Notwithstanding the
foregoing, the term "Net Indebtedness" shall not include any obligations of
the Company or any Company Subsidiary under any letters of credit.
A-27
<PAGE> 110
(l) Officer's Certificate. The Company shall have furnished MergerCo
with a certificate dated as of the Closing Date signed on its behalf by an
executive officer to the effect that the conditions set forth in Sections
8.1 and 8.2 have been satisfied.
8.3 Conditions to Obligations of the Company. The obligation of the Company
to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. Those representations and
warranties of Parent and MergerCo set forth in this Agreement which are
qualified by materiality or a Parent Material Adverse Effect or words of
similar effect shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties expressly relate
to a specific date, in which case such representations shall be true and
correct as of such date), and those representations and warranties of
Parent and MergerCo set forth in this Agreement which are not so qualified
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on the Closing Date
(except to the extent such representations and warranties expressly relate
to a specific date, in which case such representations and warranties shall
be true and correct in all material respects as of such date).
(b) Performance of Obligations of Parent and MergerCo. Each of Parent
and MergerCo shall have performed all obligations required to be performed
by it under this Agreement, including, without limitation, the covenants
contained in Articles 6 and 7 hereof, except where any failure to perform
would, individually or in the aggregate, not materially impair or
significantly delay the ability of the Company to consummate the Merger.
(c) MergerCo Officer's Certificate. MergerCo shall have furnished the
Company with a certificate dated as of the Closing Date signed on its
behalf by an executive officer to the effect that the conditions to be
satisfied by MergerCo set forth in Sections 8.1 and 8.3 have been
satisfied.
(d) Parent Officer's Certificate. Parent shall have furnished the
Company with a certificate dated as of the Closing Date signed on its
behalf by an executive officer to the effect that the conditions to be
satisfied by Parent set forth in Sections 8.1 and 8.3 have been satisfied.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) by the mutual written consent of MergerCo and the Company.
(b) by either of the Company or MergerCo:
(i) if the stockholders of the Company shall have failed to give
the required approval at the Special Meeting (including any adjournment
or postponement thereof); or
(ii) if any Governmental Entity shall have issued an Injunction or
taken any other action (which Injunction or other action the parties
hereto shall use their reasonable best efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the Merger, and
such Injunction shall have become final and non-appealable; or
(iii) if, without any material breach by the terminating party of
its obligations under this Agreement, the Merger shall not have occurred
on or before November 30, 1999.
(c) by the Company:
(i) in connection with entering into a definitive agreement to
effect a Superior Proposal in accordance with Section 7.5; provided,
however, that prior to terminating this Agreement pursuant to this
Section 9.1(c)(i), (A) the Company shall have paid the Liquidated
Amount, as set forth in
A-28
<PAGE> 111
Section 9.2(b), and (B) the Company shall have provided MergerCo with
forty-eight (48) hours' prior written notice of the Company's decision
to so terminate. Such notice shall indicate in reasonable detail the
terms and conditions of such Superior Proposal, including, without
limitation, the amount and form of the proposed consideration and
whether such Superior Proposal is subject to any material conditions.
Notwithstanding the foregoing, the Company is not required to disclose
to Parent or MergerCo the identity of the person making such Superior
Proposal; or
(ii) if Parent or MergerCo shall have breached in any material
respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement, which breach cannot be
or has not been cured within fifteen (15) days after the giving of
written notice to Parent or MergerCo except, in any case, for such
breaches which are not reasonably likely to affect adversely Parent's or
MergerCo's ability to consummate the Merger; or
(iii) after sixty (60) days following receipt by the Company of a
Parent Financing Notice.
(d) by MergerCo:
(i) if the Company shall have breached in any respect any of its
representations, warranties or covenants contained in this Agreement,
which breach cannot be or has not been cured within fifteen (15) days
after the giving of written notice to the Company except, in any case,
for breaches of such representations and warranties which are not
reasonably likely to result in a Company Material Adverse Effect;
(ii) if the Company Board shall (A) fail to include a
recommendation in the Proxy Statement of this Agreement and the
Transactions, including the Merger, (B) withdraw or modify or change, or
propose or announce any intention to withdraw or modify or change, in a
manner material and adverse to MergerCo, the approval or recommendation
by the Company Board of this Agreement or the Transactions, including
the Merger, (C) approve or recommend or propose to announce any
intention to approve or recommend any Acquisition Proposal, or (D)
propose or announce any intention to enter into any agreement (other
than a confidentiality agreement contemplated by Section 7.5 hereof)
with respect to an Acquisition Proposal; or
(iii) after sixty (60) days following delivery by Parent or
MergerCo to the Company of a Parent Financing Notice.
9.2 Effect of Termination.
(a) Subject to Sections 9.2(b) and (d) hereof, in the event of the
termination of this Agreement pursuant to Section 9.1 hereof, this Agreement
shall forthwith become null and void and have no effect, without any liability
on the part of any party hereto or its affiliates, trustees, directors, officers
or stockholders and all rights and obligations of any party hereto shall cease
except for the agreements contained in Section 7.4, the third sentence of
Section 7.16 and Articles 9 and 10; provided, however, that nothing contained in
this Section 9.2(a) shall relieve any party from liability for any fraud or
willful breach of this Agreement.
(b) The Company shall pay to MergerCo an amount in cash equal to (A)
$5,000,000 (the "Liquidated Amount"), plus (B) the Parent/MergerCo Expenses (as
hereinafter defined) if (W) MergerCo terminates this Agreement under Section
9.1(d)(i) as a result of the Company having wilfully breached its obligations
under Section 7.1(a)(i) or Section 7.1(a)(iii), or (X) the Company terminates
this Agreement pursuant to Section 9.1(c)(i) or (Y) MergerCo terminates this
Agreement pursuant to Section 9.1(d)(ii) or (Z) either the Company or MergerCo
terminates this Agreement pursuant to Section 9.1(b)(i), if, prior to the
Special Meeting, (i) an Acquisition Proposal shall have been made directly to
the Company's stockholders generally or any person shall have publicly announced
an Acquisition Proposal or solicited proxies or consents in opposition to the
Merger and (ii) within nine (9) months immediately following the date of such
termination the Company and the party who shall have made such Acquisition
Proposal or any affiliate thereof enter into a definitive agreement with respect
thereto. Notwithstanding the foregoing, in no event shall the Company be
obligated to pay the Liquidated Amount or the Parent/MergerCo Expenses more than
once. For purposes of this Section 9.2, "Parent/MergerCo Expenses" shall be an
amount equal to the reasonable out-of-pocket costs
A-29
<PAGE> 112
and expenses incurred by Parent and MergerCo in connection with this Agreement
and the Transactions, including without limitation, fees and disbursements of
its outside legal counsel, investment bankers, accountants and other consultants
retained by or on behalf of Parent and MergerCo together with the other
out-of-pocket costs and expenses incurred by Parent and MergerCo in connection
with analyzing and structuring the Transactions, negotiating the terms and
conditions of this Agreement and any other agreements or other documents
relating to the Transactions, arranging financing, conducting due diligence and
other activities related to this Agreement and the Transactions (collectively,
the "Parent/MergerCo Expenses"); provided, however, that the aggregate amount of
all Parent/MergerCo Expenses to be reimbursed by the Company shall not exceed
$1,000,000.
(c) Any payment of the Liquidated Amount required by Section 9.2(b) hereof
shall be payable by the Company to MergerCo by wire transfer of immediately
available funds (i) in the case of clause (W) or (Y) thereof, within three (3)
business days after the date of termination, (ii) in the case of clause (Z)
thereof, within three (3) business days after the date of entering into such
definitive agreement, and (iii) in the case of clause (X) thereof, prior to
terminating this Agreement pursuant to Section 9.1(c)(i) hereof, in any such
case to an account designated by MergerCo. Any payment of the Parent/MergerCo
Expenses required by Section 9.2(b) hereof shall be payable by the Company to
MergerCo by wire transfer of immediately available funds promptly following
receipt by the Company of reasonable documentation of all Parent/ MergerCo
Expenses.
(d) Notwithstanding anything to the contrary in this Agreement, Parent and
MergerCo hereto expressly acknowledge and agree that, with respect to any
termination of this Agreement pursuant to Section 9.1(c)(i) or Section
9.1(d)(ii) hereof, or Section 9.1(b)(i) or Section 9.1(d)(i) hereof in
circumstances where the Liquidated Amount and the Parent/MergerCo Expenses are
payable in accordance with Section 9.2(b) hereof, the payment of the Liquidated
Amount and the Parent/MergerCo Expenses shall constitute liquidated damages with
respect to any claim for damages or any other claim which Parent or MergerCo
would otherwise be entitled to assert against the Company or any of the Company
Subsidiaries or any of their respective assets, or against any of their
respective directors, officers, employees, partners, managers, members or
shareholders, with respect to this Agreement and the Transactions and shall
constitute the sole and exclusive remedy available to Parent and MergerCo. The
parties hereto expressly acknowledge and agree that, in light of the difficulty
of accurately determining actual damages with respect to the foregoing upon any
termination of this Agreement pursuant to Section 9.1(c)(i) or Section
9.1(d)(ii) hereof, or Section 9.1(b)(i) or Section 9.1(d)(i) hereof in
circumstances where the Liquidated Amount and the Parent/MergerCo Expenses are
payable in accordance with Section 9.2(b) hereof, the rights to payment under
Section 9.2(b): (i) constitute a reasonable estimate of the damages that will be
suffered by reason of any such proposed or actual termination of this Agreement
pursuant to Section 9.1(c)(i) or Section 9.1(d)(ii) hereof, or Section 9.1(b)(i)
or Section 9.1(d)(i) hereof in circumstances where the Liquidated Amount and the
Parent/MergerCo Expenses are payable in accordance with Section 9.2(b) hereof,
and (ii) shall be in full and complete satisfaction of any and all damages
arising as a result of the foregoing. Except for nonpayment of the amounts set
forth in Section 9.2(b), Parent and MergerCo hereby agree that, upon any
termination of this Agreement pursuant to Section 9.1(c)(i) or Section
9.1(d)(ii) hereof, or Section 9.1(b)(i) or Section 9.1(d)(i) hereof in
circumstances where the Liquidated Amount and the Parent/MergerCo Expenses are
payable in accordance with Section 9.2(b) hereof, in no event shall Parent or
MergerCo (A) seek to obtain any recovery or judgment against the Company or any
of the Company Subsidiaries or any of their respective assets, or against any of
their respective directors, officers, employees, partners, managers, members or
shareholders, and (B) be entitled to seek or obtain any other damages of any
kind, including, without limitation, consequential, indirect or punitive
damages.
9.3 Amendment. This Agreement may be amended by the parties hereto by an
instrument in writing signed on behalf of each of the parties hereto at any time
before or after any approval hereof by the stockholders of the Company and
MergerCo, but in any event following authorization by the MergerCo Board and the
Company Board; provided, however, that after any such stockholder approval, no
amendment shall be made which by law requires further approval by stockholders
without obtaining such approval.
A-30
<PAGE> 113
9.4 Extension; Waiver. At any time prior to the Closing, the parties hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or sent if delivered personally or sent by facsimile or
sent by prepaid overnight carrier to the parties at the following addresses (or
at such other addresses as shall be specified by the parties by like notice):
(a) if to Parent or MergerCo:
Kirtland Capital Partners
2550 SOM Center Road
Suite 105
Willoughby Hills, OH 44904
Attn: Raymond A. Lancaster
Facsimile: (440) 585-9699
with a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, OH 44114
Attn: Charles W. Hardin, Esq.
Facsimile: (216) 579-0212
(b) if to the Company:
Instron Corporation
100 Royall Street
Canton, MA 02021
Attn: James M. McConnell
Facsimile: (781) 575-5765
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Stuart M. Cable, P.C.
Joseph L. Johnson III, P.C.
Facsimile: (617) 570-8150
10.2 Interpretation. When a reference is made in this Agreement to a
subsidiary or subsidiaries of Parent, MergerCo or the Company, the word
"Subsidiary" means any corporation more than 50% of whose outstanding voting
securities, or any partnership, joint venture or other entity more than 50% of
whose total equity interest, is directly or indirectly owned by Parent, MergerCo
or the Company, as the case may be. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Non-Survival of Representations, Warranties, Covenants and
Agreements. Except for Sections 7.6, 7.16 and 10.7 none of the representations,
warranties, covenants and agreements contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, and thereafter
A-31
<PAGE> 114
there shall be no liability on the part of either Parent, MergerCo or the
Company or any of their respective officers, directors or stockholders in
respect thereof. Except as expressly set forth in this Agreement, there are no
representations or warranties of any party hereto, express or implied.
10.4 Miscellaneous. This Agreement (i) constitutes, together with the
Confidentiality Agreement, the Company Disclosure Letter and the Parent and
MergerCo Disclosure Schedule, the entire agreement and supersedes all of the
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof, (ii) shall be binding
upon and inure to the benefits of the parties hereto and their respective
successors and assigns and is not intended to confer upon any other person
(except as set forth below) any rights or remedies hereunder and (iii) may be
executed in two or more counterparts which together shall constitute a single
agreement. Section 7.6 is intended to be for the benefit of those persons
described therein and the covenants contained therein may be enforced by such
persons. The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in the Massachusetts Courts (as hereinafter
defined), this being in addition to any other remedy to which they are entitled
at law or in equity.
10.5 Assignment. Except as expressly permitted by the terms hereof, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties.
10.6 Severability. If any provision of this Agreement, or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
10.7 Choice of Law/Consent to Jurisdiction. All disputes, claims or
controversies arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the Transactions shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts without regard to its rules of conflict of laws. Each of the
Company, Parent and MergerCo hereby irrevocably and unconditionally consents to
submit to the sole and exclusive jurisdiction of the courts of the Commonwealth
of Massachusetts and of the United States District Court for the District of
Massachusetts (the "Massachusetts Courts") for any litigation arising out of or
relating to this Agreement, or the negotiation, validity or performance of this
Agreement, or the Transactions (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in the Massachusetts Courts and agrees not to plead
or claim in any Massachusetts Court that such litigation brought therein has
been brought in any inconvenient forum. Each of the parties hereto agrees, (a)
to the extent such party is not otherwise subject to service of process in the
Commonwealth of Massachusetts, to appoint and maintain an agent in the
Commonwealth of Massachusetts as such party's agent for acceptance of legal
process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the Commonwealth of Massachusetts. For
purposes of implementing the parties' agreement to appoint and maintain an agent
for service of process in the Commonwealth of Massachusetts, each of Parent and
MergerCo does hereby appoint CT Corporation, 2 Oliver Street, Boston,
Massachusetts 02109, as such agent.
10.8 No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall not
constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Chapter 110F of the MGL
and any applicable provision of the Articles of Organization, the terms of this
Agreement, and (ii) this Agreement is executed by the parties hereto.
A-32
<PAGE> 115
IN WITNESS WHEREOF, Parent, MergerCo and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd.,
its General Partner
By: /s/ Raymond A. Lancaster
-----------------------------------
Name: Raymond A. Lancaster
Title: Executive Vice President
ISN ACQUISITION CORPORATION
By: /s/ Raymond A. Lancaster
-----------------------------------
Name: Raymond A. Lancaster
Title: President
By: /s/ Thomas N. Littman
-----------------------------------
Name: Thomas N. Littman
Title: Treasurer
INSTRON CORPORATION
By: /s/ James M. McConnell
-----------------------------------
Name: James M. McConnell
Title: President
By: /s/ John R. Barrett
-----------------------------------
Name: John R. Barrett
Title: Treasurer
A-33
<PAGE> 116
APPENDIX B
CONFIDENTIAL
May 6, 1999
Board of Directors
Instron Corporation
100 Royall Street
Canton, MA 02021-1089
Gentlemen:
Instron Corporation (the "Company") has requested that The Beacon Group
Capital Services, LLC ("Beacon") deliver to the Company's Board of Directors
Beacon's opinion concerning the fairness from a financial point of view to the
holders of outstanding shares of the Company's Common Stock, par value $1.00 per
share, (the "Shares") other than holders of Excepted Shares, as hereinafter
defined, of the consideration to be received by those holders in the merger
transaction (the "Merger") provided for by an Agreement and Plan of Merger,
dated as of May 6, 1999, (the "Agreement") by and among the Company, Kirtland
Capital Partners III L.P. ("Parent") and ISN Acquisition Corp. ("MergerCo"), a
corporation formed by, and a wholly-owned subsidiary of, Parent.
The Agreement provides, among other things, that (i) MergerCo will be
merged with and into the Company, (ii) the Company will be the surviving
corporation (the "Surviving Corporation"), and (iii) each outstanding Share,
other than (a) Shares held by the Company as treasury stock, by any wholly owned
subsidiary of the Company or by MergerCo, (b) Shares exchanged for Series B
Preferred Stock, par value $1.00 per share, of the Company prior to the Merger
and (c) Dissenting Shares, as defined in the Agreement (collectively, the
"Excepted Shares"), will be converted into the right to receive $22 in cash,
without interest. The Merger is expected to be considered by the stockholders of
the Company at a special stockholders meeting to be held as soon as practicable
and, if approved by the stockholders at that meeting, consummated on or shortly
after that meeting.
As part of its strategic advisory business, Beacon engages in the valuation
of businesses and their securities in connection with mergers and acquisitions,
financings, private placements, principal investments and other purposes. In
this regard, Beacon has been serving as a financial advisor to the Company and
participated in certain of the negotiations relating to the Agreement and the
Merger. Beacon is also familiar with Parent and two Beacon Managing Directors
are limited partner investors in Parent.
In connection with its opinion, Beacon reviewed, among other things, the
Agreement, Annual Reports to stockholders and Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1998, certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company, certain other
communications from the Company to stockholders, certain internal financial
analyses and forecasts for the Company prepared by its management and the
potential pro forma impact of the Merger on the Surviving Corporation. Beacon
also held discussions with members of senior management of the Company regarding
the past and current business, operations and financial condition and the future
prospects of the Company, reviewed the reported price and trading activity of
the Shares, compared certain financial and stock market information concerning
the Company with similar information concerning certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in industries and markets Beacon deemed relevant
and performed other studies and analyses that Beacon considered appropriate.
For purposes of its opinion, Beacon assumed and relied without independent
verification on the accuracy and completeness of the financial and other
information reviewed by it. Beacon did not make an independent evaluation or
appraisal of the assets and liabilities of the Company or any of its
subsidiaries and was not furnished with any such evaluation or appraisal.
B-1
<PAGE> 117
Beacon's opinion is provided for the information of the Board of Directors
of the Company in connection with its consideration of the Agreement and the
Merger and does not constitute a recommendation to any stockholder of the
Company as to how that stockholder should vote in connection with the Agreement
and the Merger. Beacon's opinion is necessarily based on economic, market,
financial and other conditions as they exist on, and could be evaluated as of,
the date hereof.
Based on and subject to the foregoing and other matters Beacon considers
relevant, it is Beacon's opinion that, as of the date hereof, the consideration
to be received by holders of Shares, other than Excepted Shares, is fair from a
financial point of view to such holders.
Very truly yours,
/s/ THE BEACON GROUP CAPITAL SERVICES, LLC
The Beacon Group Capital Services, LLC
B-2
<PAGE> 118
APPENDIX C
MASSACHUSETTS BUSINESS CORPORATION LAW
CHAPTER 156B
85. A stockholder in any corporation organized under the laws of
Massachusetts which shall have duly voted to consolidate or merge with another
corporation or corporations under the provisions of sections seventy-eight or
seventy-nine who objects to such consolidation or merger may demand payment for
his stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eighty-six to ninety-eight,
inclusive, and such stockholder and the resulting or surviving corporation shall
have the rights and duties and follow the procedure set forth in those sections.
This section shall not apply to the holders of any shares of stock of a
constituent corporation surviving a merger if, as permitted by subsection (c) of
section seventy-eight, the merger did not require for its approval a vote of the
stockholders of the surviving corporation.
86. If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
87. The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his shares and
an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts."
88. The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
89. If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the
C-1
<PAGE> 119
case of a consolidation or merger from the resulting or surviving corporation,
payment for his stock, the corporation upon which such demand is made shall pay
to him the fair value of his stock within thirty days after the expiration of
the period during which such demand may be made.
90. If during the period of thirty days provided for in section eighty-nine
the corporation upon which such demand is made and any such objecting
stockholder fail to agree as to the value of such stock, such corporation or any
such stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
91. If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
92. After hearing the court shall enter a decree determining the fair value
of the stock of those stockholders who have become entitled to the valuation of
and payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
93. The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
94. On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for notation thereon of the
pendency of the bill, and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
95. The costs of the bill, including the reasonable compensation and
expenses of any master appointed by the court, but exclusive of fees of counsel
or of experts retained by any party, shall be determined by the court and taxed
upon the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
96. Any stockholder who has demanded payment for his stock as provided in
this chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall
C-2
<PAGE> 120
not be entitled to the payment of dividends or other distribution on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the date of the vote approving the proposed corporate
action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or
in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to
and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97. The shares of the corporation paid for by the corporation pursuant to
the provisions of this chapter shall have the status of treasury stock or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
98. The enforcement by a stockholder of his right to receive payment for
his shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
C-3
<PAGE> 121
[0411 - INSTRON CORPORATION] [FILE NAME: INS02B.ELX] [VERSION - 3] [6/25/99]
INS02B DETACH HERE
- --------------------------------------------------------------------------------
PROXY
INSTRON CORPORATION
100 ROYALL STREET
CANTON, MASSACHUSETTS 02021
P
The undersigned stockholder of Instron Corporation ("Instron") hereby
R appoints James M. McConnell, Linton A. Moulding and John R. Barrett, and
each of them, as Proxies, each with the power of substitution and
resubstitution for and in the name of the undersigned, to vote all of the
O shares of Instron Common Stock, par value $1.00 per share, the undersigned
may be entitled to vote upon all matters at Instron's Special Meeting of
Stockholders (the "Special Meeting") to be held on , 1999,
X at commencing at : A.M. (local time) in
, , and at all adjournments or postponements
thereof, with all powers the undersigned would possess if then and there
Y personally present. Without limiting the general authorization and power
hereby given, the undersigned directs said Proxies to cast the
undersigned's vote as specified on the reverse side hereof. IF NO
DIRECTION IS GIVEN, THE UNDERSIGNED'S VOTE WILL BE CAST "FOR" THE PROPOSAL
IN PARAGRAPH 1 ON THE REVERSE SIDE HEREOF. IN THEIR DISCRETION, THE
PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF. Stockholders who plan to attend the Special Meeting
may revoke their proxy by casting their vote at the meeting in person.
- ---------------- ----------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ---------------- ----------------
<PAGE> 122
DETACH HERE
- -------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
1. To approve the Agreement and Plan [ ] [ ] [ ]
of Merger dated as of May 6, 1999
by and among Instron Corporation,
ISN Acquisition Corporation and
Kirtland Capital Partners III
L.P. and the transactions
contemplated thereby, including
the merger of ISN Acquisition
Corporation with and into Instron
Corporation.
2. To vote at the discretion of the Proxies upon such other matters as may
properly come before the Special Meeting or any adjournment or postponement
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INSTRON
CORPORATION.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY IN THE
ENCLOSED ENVELOPE.
For joint accounts, each owner should sign.
Executors, administrators, trustees, corporate
officers and other acting in a representative
capacity should give full title or authority.
Signature: Date: Signature: Date:
--------------- --------- ---------------- -------
<PAGE> 1
Exhibit (d)(4)
<PAGE> 2
[0411 - INSTRON CORPORATION] [FILE NAME: INS02B.ELX] [VERSION - 3] [6/25/99]
INS02B DETACH HERE
- --------------------------------------------------------------------------------
PROXY
INSTRON CORPORATION
100 ROYALL STREET
CANTON, MASSACHUSETTS 02021
P
The undersigned stockholder of Instron Corporation ("Instron") hereby
R appoints James M. McConnell, Linton A. Moulding and John R. Barrett, and
each of them, as Proxies, each with the power of substitution and
resubstitution for and in the name of the undersigned, to vote all of the
O shares of Instron Common Stock, par value $1.00 per share, the undersigned
may be entitled to vote upon all matters at Instron's Special Meeting of
Stockholders (the "Special Meeting") to be held on , 1999,
X at commencing at : A.M. (local time) in
, , and at all adjournments or postponements
thereof, with all powers the undersigned would possess if then and there
Y personally present. Without limiting the general authorization and power
hereby given, the undersigned directs said Proxies to cast the
undersigned's vote as specified on the reverse side hereof. IF NO
DIRECTION IS GIVEN, THE UNDERSIGNED'S VOTE WILL BE CAST "FOR" THE PROPOSAL
IN PARAGRAPH 1 ON THE REVERSE SIDE HEREOF. IN THEIR DISCRETION, THE
PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF. Stockholders who plan to attend the Special Meeting
may revoke their proxy by casting their vote at the meeting in person.
- ---------------- ----------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ---------------- ----------------
<PAGE> 3
DETACH HERE
- -------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
1. To approve the Agreement and Plan [ ] [ ] [ ]
of Merger dated as of May 6, 1999
by and among Instron Corporation,
ISN Acquisition Corporation and
Kirtland Capital Partners III
L.P. and the transactions
contemplated thereby, including
the merger of ISN Acquisition
Corporation with and into Instron
Corporation.
2. To vote at the discretion of the Proxies upon such other matters as may
properly come before the Special Meeting or any adjournment or postponement
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INSTRON
CORPORATION.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY IN THE
ENCLOSED ENVELOPE.
For joint accounts, each owner should sign.
Executors, administrators, trustees, corporate
officers and other acting in a representative
capacity should give full title or authority.
Signature: Date: Signature: Date:
--------------- --------- ---------------- -------
