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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
GLEASON CORPORATION
(Name of Subject Company (Issuer))
TORQUE ACQUISITION CO., L.L.C.
(Bidder)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
377339106
(CUSIP Number of Class of Securities)
GLEASON CORPORATION
ATTN: EDWARD J. PELTA, ESQ.
VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
1000 UNIVERSITY AVENUE
P.O. BOX 22970
ROCHESTER, NEW YORK 14692
TELEPHONE:(716) 473-1000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
COPY TO:
BLAINE V. FOGG, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
CALCULATION OF FILING FEE:
TRANSACTION VALUATION** Amount of Filing Fee
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$193,509,856 $38,702
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** Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 8,413,472 shares of common stock, par
value $1.00 per share (the "Shares"), of Gleason Corporation, a Delaware
corporation (the "Company"), at a price of $23.00 per Share in cash. As
of November 30, 1999, there were 9,589,195 Shares issued and
outstanding. Certain stockholders of the Company, owning in the
aggregate (1) 1,458,983 Shares and (2) 472,322 unexercised options to
acquire Shares under various employee stock option plans of the Company
as of November 30, 1999, have agreed not to tender their Shares (which
in the aggregate total 1,931,305 Shares, including Shares underlying
options) pursuant to the Offer. Based on the foregoing, the maximum
number of Shares available to be tendered pursuant to the Offer is
8,413,472 Shares, which is equal to the number of Shares outstanding on
a fully diluted basis as of November 30, 1999 less the aggregate number
of Shares and options to acquire Shares owned by the non-tendering
stockholders. The amount of the filing fee calculated in accordance with
Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals
1/50th of one percent of the value of the transaction.
|X| Check box if any part 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.
<TABLE>
<S> <C>
Amount previously paid: $38,702 Filing party: Torque Acquisition Co., L.L.C.
Form or registration no.: Schedule 14D-1 Date filed: December 15, 1999
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(Continued on following pages)
This Amendment No. 4 to the Tender Offer Statement on
Schedule 14D-1 amends and supplements the Tender Offer Statement on
Schedule 14D-1 originally filed on December 15, 1999 (the "Schedule 14D-
1") by Torque Acquisition Co., L.L.C. ("Acquisition Company"), a Delaware
limited liability company and a wholly owned subsidiary of Vestar Capital
Partners IV, L.P., relating to the joint tender offer by Acquisition
Company and Gleason Corporation, a Delaware corporation (the "Company"), to
purchase all of the outstanding shares of common stock, par value $1.00 per
share, of the Company (the "Common Stock"), together with the associated
preferred share purchase rights (the "Rights" and, together with the Common
Stock, the "Shares"), at a purchase price of $23.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 15, 1999, and
the related Letter of Transmittal. Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Schedule 14D-1.
Acquisition Company hereby amends and supplements the Schedule 14D-1 as
follows:
ITEM 7. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
Item 11 is hereby amended and supplemented as follows:
As was contemplated and disclosed in the Offer to Purchase,
additional members of the management of the Company (the "New Management
Investors") have entered into a management subscription agreement (the
"Management Subscription Agreement"), pursuant to which they generally have
elected to retain their Shares and existing options to purchase Shares
following the completion of the transaction. A form of the Management
Subscription Agreement is attached hereto as Exhibit (c)(24).
In electing to retain their Shares and existing options, the New
Management Investors have generally agreed, among other things, not to
tender any shares of Common Stock pursuant to the Offer, to vote all Shares
held by them in favor of the Merger and the approval and adoption of the
Merger Agreement, and not to sell or transfer any Shares or existing
options.
As disclosed in the Offer to Purchase, the Offer is conditioned
upon, among other things, there being validly tendered and not withdrawn
prior to the expiration of the Offer that number of shares which would
result in the Acquisition Parties (as defined in the Offer to Purchase)
owning in the aggregate at least two-thirds of the Shares outstanding on a
fully diluted basis after giving effect to the repurchase of shares by the
Company in the Offer (the "Minimum Condition"). As disclosed in the Offer
to Purchase, the decision by the New Management Investors not to tender
their Shares and existing options in the Offer and to roll over such Shares
and existing options in the Merger has resulted in a reduction in the
number of Shares required to be tendered to satisfy the Minimum Condition.
The number of Shares which must now be tendered to satisfy the Minimum
Condition is 6,375,984 Shares.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
Item 11 is hereby amended and supplemented by the addition of the
following exhibit thereto:
(c)(24) Form of Management Subscription Agreement.
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: January 21, 2000
TORQUE ACQUISITION CO., L.L.C.
By: /s/ SANDER M. LEVY
--------------------------
Name: Sander M. Levy
Title: President
EXHIBIT INDEX
EXHIBITS
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(c)(24) Form of Management Subscription Agreement.
MANAGEMENT SUBSCRIPTION AGREEMENT
MANAGEMENT SUBSCRIPTION AGREEMENT, dated as of January
__, 2000 (the "Agreement"), by and among Gleason Corporation, a Delaware
corporation (the "Company"), and the members of the Company's management
identified on Schedule A attached hereto (each, an "Executive" and,
collectively, "Management").
W I T N E S S E T H:
WHEREAS, the Company, Torque Acquisition Co., L.L.C., a
Delaware limited liability company and a wholly-owned subsidiary of Vestar
Capital Partners IV, L.P. ("Acquisition Company"), and Torque Merger Sub,
Inc., a Delaware corporation and a wholly-owned subsidiary of Acquisition
Company ("Merger Subsidiary"), have entered into an Agreement and Plan of
Merger, dated as of December 8, 1999 (the "Merger Agreement"), a copy of
which has been furnished to the Executive, providing that, upon the terms
and subject to the conditions thereof, (i) the Company and Acquisition
Company shall jointly commence a cash tender offer (the "Offer") to
purchase all shares of common stock, par value $1.00 per share (the "Common
Stock"), of the Company, together with the associated preferred share
purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), and (ii) Merger Subsidiary shall merge with and into the Company
(the "Merger") with the Company continuing as the surviving corporation;
WHEREAS, Acquisition Company, the Gleason Foundation and
certain other stockholders of the Company, including certain of the
Executives, have entered into a stockholders' agreement (the "Stockholders'
Agreement"), dated as of November 29, 1999, a copy of which is attached
hereto as Exhibit 1, providing for, among other things, continuity in the
management and ownership of the Company and limits on the manner and terms
by which the securities of the Company may be transferred, in each case,
following the consummation of the Merger;
WHEREAS, each Executive (i) is the record and beneficial
owner of, and has the sole right to vote and dispose of, the number of
outstanding Shares set forth opposite such Executive's name on Schedule A
attached hereto (except as otherwise provided on such Schedule) and (ii) is
the record and beneficial owner of Existing Options to acquire the number
of shares of Common Stock set forth on Schedule A attached hereto; and
WHEREAS, capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Merger Agreement and the
Stockholders' Agreement, as such agreements are amended from time to time.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement,
the following terms shall have the meanings ascribed to them below:
"Applicable Federal Rate" shall mean the 10-year federal
interest rate which is applicable from time to time during such period,
which rate shall be calculated from the Closing or, in the case of Common
Stock purchased upon exercise of Existing Options, the date of such
exercise.
"Appraisal" shall mean any determination of fair value of
the Common Stock by an Appraisal Firm in accordance with this Agreement.
"Appraisal Firm" shall mean an independent, nationally
recognized valuation or appraisal firm with no affiliation to the Company,
Acquisition Company the applicable Top Executive or any of their respective
affiliates.
"Board of Directors" shall mean the Board of Directors of
the Company.
"BSC" shall have the meaning set forth in Section 5.4 hereof.
"Call Option" shall have the meaning set forth in Section 6.1
hereof.
"Call Option Closing" shall have the meaning set forth in
Section 6.2(b) hereof.
"Call Period" shall have the meaning set forth in Section
6.2(a) hereof.
"Cause" shall mean any of the following: (i) the willful
failure by the Executive to perform such Executive's duties to the extent
such failure has not been cured within 10 days after a written demand for
performance is delivered to the Executive by the Board of Directors, which
demand specifically identifies the manner in which the Board of Directors
believes that the Executive has not performed such Executive's duties,
(ii) the willful failure by the Executive to comply in any material respect
with the lawful directive of the Board of Directors or such Executive's
superior officer(s), (iii) the engaging by the Executive in gross negli-
gence or the willful engaging by the Executive in any other conduct, in
each case, which is demonstrably and materially injurious to the Company or
its Subsidiaries, monetarily or otherwise, or (iv) the conviction of the
Executive of (A) a felony or crime involving dishonesty or fraud or (B) a
crime involving moral turpitude which would materially injure relationships
with customers, suppliers or employees of the Company or otherwise cause a
material injury to the Company.
"Closing" shall have the meaning set forth in Section 2.2
hereof.
"Closing Date" shall have the meaning set forth in Section
2.2 hereof.
"Committee" shall mean a special committee of the Board
of Directors, a majority of the members of which consists of Acquisition
Company Directors.
"Committee Determination" shall have the meaning set
forth in the definition of "Fair Market Value" below.
"Common Stock" shall mean, with respect to each
Executive, the shares of the Company's Common Stock retained by such
Executive in connection with the Merger, plus any shares of the Company's
Common Stock acquired by such Executive upon the exercise of Existing
Options following the Closing.
"Disability" shall mean the inability of the Executive to
perform the essential functions of such Executive's job, with or without
reasonable accommodation, by reason of a physical or mental infirmity, for
a continuous period of six months. The six-month period shall be deemed to
be continuous unless the Executive returns to work for at least 30
consecutive business days during such period and performs services at the
level and competence that services were performed prior to the start of the
six-month period. The reference date to determine Fair Market Value in the
event of the Disability of an Executive shall be the first day of such
six-month period.
"Executive's Group" shall have the meaning set forth in
Section 6.1 hereof.
"Fair Market Value" shall mean, with respect to each
share of Common Stock, the average closing prices per share of Common Stock
on all securities exchanges on which the Common Stock may at the time be
listed, or, if there have been no sales on any such exchanges on any day,
the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day the Common Stock is not
so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 p.m., Eastern time, or, if on any day the
Common Stock is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau Incorporated, or any
similar successor organization, in each such case, averaged over a period
of 21 days consisting of the applicable Termination Date and the 20
consecutive trading days prior to such Termination Date. If at any time the
Common Stock is not listed on any securities exchange or quoted in the
NASDAQ System or the over-the-counter market, "Fair Market Value" shall
mean (i) with respect to Common Stock held by an Executive other than a Top
Executive, the fair value of the Common Stock as of the applicable
Termination Date, as determined in good faith by a majority of the Board of
Directors, and (ii) with respect to Common Stock held by a Top Executive,
subject to the following paragraph, the fair value of the Common Stock as
of the applicable Termination Date (the "Committee Determination"), as
determined in good faith by the Committee, in each case, without taking
into account the lack of liquidity and minority position of the shares of
Common Stock subject to purchase by the Company pursuant to Article VI
hereof.
Notwithstanding the foregoing, in the event a Top
Executive objects to any Committee Determination within 10 days of written
notice thereof, there shall be an appraisal process to determine fair value
of the Common Stock held by such Top Executive. Such appraisal process
shall be conducted within 45 days of any such objection by an Appraisal
Firm selected by the Committee with the approval of the Top Executive,
which approval shall not be unreasonably withheld, and any Appraisal by
such Appraisal Firm shall be binding on such Top Executive and the Company
for purposes of this Agreement. The Company shall promptly provide to the
Appraisal Firm all information as may be reasonably necessary to conduct
the appraisal process and any additional information as may reasonably be
requested by the Appraisal Firm; provided, however, that none of the
Company, the Top Executive or any of their respective affiliates shall
provide to the Appraisal Firm any
information with respect to the Committee Determination. The Company shall
pay all necessary fees and expenses of the Appraisal Firm in connection
with the appraisal process; provided, however, that the Top Executive
shall pay such fees and expenses in the event that the Appraisal is (i)
equal to or greater than the Committee Determination and (ii) less than
110% of the Committee Determination; provided, further, that in no event
shall any such payment by such Top Executive exceed $50,000.
"Fair Market Value" with respect to Existing Options
shall mean the Fair Market Value of the Common Stock underlying such
Existing Options minus the exercise price of such Existing Options.
"Good Reason" shall mean (i) with respect to any
Executive who has entered into a written severance agreement (a "Severance
Agreement") with the Company, the definition of "Good Reason" set forth in
such Executive's Severance Agreement and (ii) with respect to all other
Executives, (A) without the consent of such Executive, a reduction by the
Company in such Executive's annual base salary except for across-the-board
salary reductions similarly affecting all members of management, (B)
without the consent of such Executive, the relocation of such Executive's
principal place of employment to a location outside of the metropolitan
area in which such Executive currently is employed or the Company's
requiring the Executive to be based anywhere other than such principal
place of employment (or permitted relocation thereof) except for required
travel on the Company's business or (C) the failure by the Company to
continue to provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's pension, savings,
life insurance, medical, health and accident, disability or other plans in
which the Executive was participating, except for across-the-board changes
similarly affecting all members of management.
"Original Cost" shall mean, with respect to each share of
Common Stock, $23.00 per share or, with respect to each share of Common
Stock purchased upon the exercise of Existing Options, the exercise price
thereof, in each case, as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations.
"Private Investment Memorandum" shall have the meaning
set forth in Section 5.4 hereof.
"Purchaser Representative" shall have the meaning set
forth in Section 5.4 hereof.
"Put Option" shall have the meaning set forth in Section
6.1 hereof.
"Put Option Closing" shall have the meaning set forth in
Section 6.3(c) hereof.
"Put Period" shall have the meaning set forth in Section
6.3(c) hereof.
"Repurchase Notes" shall have the meaning set forth in
Section 6.5(b) hereof.
"Retirement" shall mean each Executive's retirement as an
employee of the Company or any of its Subsidiaries on or after reaching an
age consistent with the Company's or its Subsidiaries' current retirement
plan or policy, if any, or such earlier age as may be otherwise determined
by a majority vote of the Board of Directors after at least four years'
employment of such Executive with the Company after the Closing, such
majority vote including the affirmative vote of at least one Acquisition
Company Director so long as Acquisition Company owns at least the Preferred
Minimum Threshold or shares of Common Stock (including shares of Common
Stock underlying the Warrants) in an amount equal to or greater than 50% of
the number of shares of Common Stock (including shares of Common Stock
underlying the Warrants) that Acquisition Company held immediately after
the Closing.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Termination Date" shall have the meaning set forth in
Section 6.2(a) hereof.
"Top Executive" shall mean the five most highly compensated
executive officers of the Company, including, in any event, James S. Gleason,
David J. Burns, Edward J. Pelta, John J. Perrotti and Gary Kimmet.
"Transactions" shall have the meaning set forth in Section
5.5(a) hereof.
"Violation" shall have the meaning set forth in Section
7.1(a) hereof.
"Voting Trust Agreement" shall have the meaning set forth
in Section 4.4 hereof.
ARTICLE II
EFFECT OF MERGER ON COMMON STOCK
AND EXISTING OPTIONS
Section 2.1 Treatment of Shares and Existing Options in
the Merger. Pursuant to the terms and subject to the conditions set forth
in the Merger Agreement, each Executive hereby agrees that, except as
otherwise provided on Schedule A attached hereto, (i) all of such
Executive's Shares, and all shares of Common Stock issued upon exercise of
an Existing Option prior to the Closing, shall each be converted in the
Merger into the right to receive one Retained Share, and (ii) except if and
to the extent exercised prior to or on the Closing, each Existing Option to
acquire shares of Common Stock set forth on Schedule A attached hereto
shall, as of the Closing, continue to represent an option to acquire the
same number of shares of the Company's Common Stock at the same exercise
price per share, subject to extension of the exercise period, if any, by
the Board of Directors.
Section 2.2 The Closing. The treatment of each
Executive's Shares and Existing Options in accordance with Section 2.1
hereof shall occur at the closing of the Merger (the "Closing") at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, at 4 Times Square, New
York, New York 10036, at 10:00 a.m., local time (or such other time and
place as may be designated by the Company), on a date (the "Closing Date")
to be specified by the parties to the Merger Agreement, which date shall be
no later than the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Executive as follows:
Section 3.1 Organization, Standing; Authorization; Binding
Obligation. (a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. The Company has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and
the performance by the Company of its obligations hereunder have been duly
and validly authorized by the Board of Directors, and no other action on
the part of the Company is necessary to authorize the execution, delivery
or performance by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby.
(b) This Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming its due authorization,
execution and delivery by each Executive, constitutes a valid, binding and
enforce able agreement of the Company.
Section 3.2 No Conflict. None of the execution, delivery
or performance by the Company of this Agreement will conflict with the
Company's certificate of incorporation or by-laws or result in any material
breach of any terms or provisions of, or constitute a material default
under, any material contract, agreement or other instrument to which the
Company is a party or by which the Company is bound.
Section 3.3 No Options or Rights. Except as set forth in
this Agreement, the Merger Agreement (including the Warrants contemplated
thereby), the Stockholders' Agreement, the Foundation Agreement, the Voting
Trust Agreement, the Existing Options, the New Options to be issued
following the Merger and the Letter Agreement dated November 29, 1999 by
and between James S. Gleason and Acquisition Company, (i) there are no
outstanding subscriptions, warrants, options, calls or commitments of any
character relating to or entitling any person to purchase or otherwise
acquire any capital stock of the Company from the Company, (ii) there are
no obligations or securities convertible into or exchangeable for any
shares of capital stock of the Company or any commitments of any character
relating to or entitling any person to purchase or otherwise acquire any
such obligations or securities, (iii) there are no preemptive or similar
rights to subscribe for or to purchase any capital stock of the Company and
(iv) the Company has not entered into any agreement to register its equity
securities under the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE
Each Executive, severally and not jointly, hereby
represents and warrants to the Company as follows:
Section 4.1 Authorization; Binding Obligation. The
Executive has the legal capacity and all requisite power and authority to
execute and deliver this Agreement and to perform all of such Executive's
obligations hereunder. This Agreement has been duly and validly authorized,
executed and delivered by the Executive and, assuming its due
authorization, execution and delivery by the Company, constitutes a legal,
binding and enforceable agreement of such Executive.
Section 4.2 No Conflict. None of the execution, delivery
or performance by the Executive of this Agreement shall conflict with or
result in any material breach of any terms or provisions of, or constitute
a material default under, any material contract, agreement or other
instrument to which such Executive is a party or by which such Executive is
bound.
Section 4.3 Investment Intention; No Resales. The
Executive shall retain the shares of Common Stock and options to acquire
Common Stock for investment, solely for such Executive's own account and
not with a view toward, or for resale in connection with, the distribution
or other disposition thereof.
Section 4.4 Other Agreements. Concurrently with the
execution hereof, each Executive who has not previously entered into the
Stockholders' Agreement shall enter into the Stockholders' Agreement,
substantially in the form attached hereto as Exhibit 1, and at or
immediately prior to the Closing each Executive shall enter into the
Voting Trust Agreement, substantially in the form attached hereto as
Exhibit 2 (the "Voting Trust Agreement").
Section 4.5 Share Ownership. The Executive is the record
and beneficial owner of all of the shares of Common Stock set forth on
Schedule A hereto except as otherwise set forth on such Schedule, and is
the record and beneficial owner of the number of Existing Options set
forth on Schedule A hereto.
ARTICLE V
CERTAIN COVENANTS AND
INVESTMENT REPRESENTATIONS OF THE EXECUTIVE
Section 5.1 Voting of Shares. Each Executive shall vote
or cause to be voted all Shares issued prior to the record date for voting
on the Merger, (i) in favor of the Merger and the approval and adoption of
the Merger Agreement and (ii) so long as the Merger Agreement is in effect,
against any action or agreement that would impede, interfere with or
prevent the Offer or the Merger at any meeting (whether annual or special,
and whether or not an adjourned or postponed meeting) of the Company's
stockholders.
Section 5.2 Restrictions on Transfer. From the date
hereof through the Closing, except as otherwise provided herein or in the
Stockholders' Agreement, such Executive shall not, directly or indirectly,
(i) sell, transfer, pledge, hypothecate, encumber, assign or otherwise
dispose of any shares of Common Stock or the beneficial ownership thereof,
or offer to do any of the foregoing, (ii) except as contemplated pursuant
to Section 5.1 hereof and except for the Voting Trust Agreement, grant any
proxy or power of attorney, deposit any shares of Common Stock into a
voting trust or enter into a voting agreement, understanding or arrangement
with respect to shares of Common Stock or (iii) enter into any contract,
option or other arrangement or undertaking with respect to the direct or
indirect sale, assignment or other disposition of or transfer of any
interest in or the voting of any shares of Common Stock or any other
securities of the Company. The Executive agrees and acknowledges that each
certificate representing the Common Stock shall be stamped or otherwise
imprinted at the Closing with a legend substantially in the form set forth
in Section 16 of the Stockholders' Agreement and which indicates that such
Common Stock is subject to this Agreement.
Section 5.3 Stock Unregistered. The Executive
acknowledges and represents that such Executive has been advised by the
Company that (i) the shares of Common Stock and Existing Options to be
retained have not been registered under the Securities Act; (ii) the Common
Stock must be held indefinitely and such Executive must continue to bear
the economic risk of the investment in the Common Stock unless the offer
and sale of the Common Stock is subsequently registered under the
Securities Act and all applicable state securities laws or an exemption
from such registration is available; (iii) following the Merger there will
not be any established market for the Common Stock and it is not
anticipated that there will be any public market for the Common Stock in
the foreseeable future thereafter; (iv) following the Merger, Rule 144
promulgated under the Securities Act will not be available with respect to
the sale of any securities of the Company, and the Company has made no
covenant to make such rule available; (v) when and if shares of Common
Stock may be disposed of without registration under the Securities Act in
reliance on Rule 144, such disposition can be made only in limited amounts
in accordance with the terms and conditions of such rule; (vi) if the Rule
144 exemption is not available, any offer or sale without registration will
require the availability of an exemption under the Securities Act; and
(vii) the shares of Common Stock will be subject to restrictions on
transfer and a notation shall be made in the appropriate records of the
Company indicating that the Common Stock is subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent, appropriate stop-transfer
instructions shall be issued to such transfer agent with respect to the
Common Stock.
Section 5.4 Additional Investment Representations. Each
Executive represents and warrants that (i) such Executive's financial
situation is such that such Executive can afford to bear the economic risk
of holding the Common Stock for an indefinite period of time, has adequate
means for providing for such Executive's current needs and contingencies,
and can afford to suffer the complete loss of his investment in the Common
Stock; (ii) such Executive has received and reviewed the Confidential
Private Investment Memorandum, dated January 11, 2000 (the "Private
Investment Memorandum"), and the attachments thereto and such Executive's
knowledge and experience in financial and business matters are such that
such Executive is capable of evaluating the merits and risks of the
investment in the Common Stock, as contemplated by this Agreement and the
Merger Agreement, or such Executive has been advised by Brighton Securities
Corp. ("BSC"), which is acting as the "purchaser representative" of such
Executive (the "Purchaser Representative") as set forth in Section 5.5
hereof and possesses such knowledge and experience; (iii) such Executive
understands that the Common Stock is a speculative investment which
involves a high degree of risk of loss of such Executive's investment
therein, that there are substantial restrictions on the transferability of
the Common Stock, and, on the Closing Date and for an indefinite period
following the Closing, there will be no public market for the Common Stock
and that, accordingly, it may not be possible for such Executive to
liquidate such Executive's investment in case of an emergency, if at all;
(iv) such Executive and, to the extent believed by such Executive to be
appropriate, such Executive's representatives, including such Executive's
professional, financial, tax and other advisors, have carefully reviewed
all documents furnished to them in connection with the investment in the
Company contemplated by the Merger Agreement, and such Executive
understands and acknowledges the risk factors related to the receipt of
Common Stock pursuant to the Merger Agreement; (v) in making the decision
to receive Common Stock in connection with the Merger, such Executive has
relied upon independent investigations made by such Executive and, to the
extent believed by such Executive to be appropriate, such Executive's
representatives, including his or her own professional, financial, tax and
other advisors; (vi) such Executive and such Executive's representatives
have been given the opportunity to examine all documents and to ask ques-
tions of, and to receive answers from, the Company and its representatives
concerning the terms and conditions of the retention of Common Stock and
Existing Options pursuant to the Merger Agreement and to obtain any
additional information which the Executive or such Executive's
representatives deem necessary; (vii) such Executive is an officer,
consultant, member of management or key employee of the Company; and (viii)
all information which such Executive has provided to the Company and its
representatives concerning such Executive and his financial position is
true, complete and correct as of the date of this Agreement, and such
Executive agrees to notify the Company promptly if at any time this ceases
to be the case.
Section 5.5 Purchaser Representative. (a) The Executive
acknowledges and agrees that, except as set forth on Schedule A attached
hereto, BSC is acting as such Executive's Purchaser Representative in
connection with the transactions contemplated by this Agreement (the
"Transactions"). The Executive acknowledges and agrees that BSC, as
Purchaser Representative, shall assist such Executive in evaluating the
merits and risks of participating in the Transactions.
(b) The Executive acknowledges that BSC is being
compensated by the Company for acting as Purchaser Representative to such
Executive and certain other members of Management. The Executive
understands that BSC's compensation is not contingent upon such Executive
or any other member of Management participating in the Transactions.
(c) The Executive hereby represents, warrants,
acknowledges and agrees as follows:
(i) such Executive understands that the Private
Investment Memorandum and the attachments thereto have been
prepared by the Company and that BSC has not verified their
accuracy, and such Executive agrees that BSC has no responsibility
or liability for the accuracy or inaccuracy of such documents;
(ii) such Executive has had a reasonable
opportunity to ask questions of and receive answers from BSC
concerning the Transactions, and all such questions have been
answered to the full satisfaction of such Executive;
(iii) such Executive acknowledges that such
Executive has been offered the opportunity to meet privately with
a representative of BSC to further assist such Executive in
evaluating the merits and risks of participating in the
Transactions;
(iv) such Executive acknowledges that any
projections or estimates of future prospects and any pro forma
financial information provided to such Executive were prepared by
the Company and are not the responsibility of BSC and that the
Company's attainment of any such projections or estimates cannot
be guaranteed; and
(v) the Transactions have not been approved or
disapproved by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority, nor have
any of the foregoing authorities passed upon or endorsed the
merits of the Transactions or such Executive's participation in
the Transactions.
(d) The Executive understands that BSC is relying upon
the accuracy of all information provided by such Executive and of all
representations and warranties of such Executive set forth in this
Agreement and in any other document delivered by such Executive to BSC. The
Executive agrees to indemnify, hold harmless and reimburse BSC and its
officers, directors, employees, agents, representatives, control persons
and affiliates from and against any and all losses, liabilities, claims,
damages and expenses incurred by them (including, without limitation, any
and all attorneys' fees and expenses incurred in investigating, preparing
or defending against any litigation commenced or threatened) based upon or
arising out of any actual or alleged inaccuracy of any such information
provided by such Executive or breach by such Executive of any
representation, warranty, covenant or agreement made by such Executive
herein or in any other document delivered to BSC by such Executive in
connection with this Agreement or the Transactions.
ARTICLE VI
CERTAIN SALES
Section 6.1 General. Upon the termination of any
Executive's employment with the Company or any of its Subsidiaries under
certain circumstances set forth in this Article VI, (i) the Company shall
have the right to purchase (a "Call Option") shares of Common Stock held by
such Executive and Permitted Transferees of such Executive (collectively,
the "Executive's Group"), and (ii) such Executive and the members of such
Executive's Group shall have the right to cause the Company to purchase
shares of Common Stock held by such Executive and the members of such
Executive's Group (a "Put Option"), in each case, to the extent and on the
terms set forth in this Article VI. For purposes of Articles VI and VII
hereof, all references to Common Stock shall be deemed to include the
Executive's Existing Options. All provisions of this Article VI are subject
to the provisions of Article VII hereof.
Section 6.2 Call Option. (a) Subject to Section 6.8
hereof, if any Executive's employment with the Company or any of its
Subsidiaries is terminated for any reason, the Company shall have the right
to purchase, which right shall be exercised as set forth in Section 6.2(b)
hereof within 90 days following (i) the date of such termination (the
"Termination Date") or (ii) in the event that the Executive or any of the
Executive's heirs have the right to exercise a Put Option pursuant to
Section 6.3(a) or (b) hereof, respectively, the expiration of the Put
Period (as defined in Section 6.3(c) hereof) (in either case, the "Call
Period"), and each of such Executive and the members of such Executive's
Group shall be required to offer to the Company upon the Company's exercise
of such right, all but not less than all of the Common Stock then held by
such Executive and each member of such Executive's Group, at a price per
share equal to the applicable purchase price determined pursuant to
Section 6.4 hereof.
(b) The Company shall exercise a Call Option by sending
written notice (the "Exercise Notice"; the date of which being herein
referred to as the "Notice Date") prior to the end of the Call Period in
accordance with Section 9.4 hereof to the Executive whose employment has
been terminated, which Exercise Notice shall also state a date not later
than 60 days following the Notice Date for the closing (a "Call Option
Closing") of the purchase of shares of Common Stock pursuant to such Call
Option; provided, however, that in the case of a termination of employment
due to the Executive's death, such Exercise Notice shall to the extent
practicable also be sent to each member of such Executive's Group. Any Call
OptionClosing shall take place at the principal executive offices of the
Company at 1000 University Avenue, Rochester, New York 14692.
Section 6.3 Put Option. (a) Except in the case of James
S. Gleason, if the Executive's employment with the Company or any of its
Subsidiaries is terminated due to (i) Disability, such Executive and
members of the Executive's Group shall have the right, prior to the
expiration of the Put Period, to sell to the Company, and the Company shall
be required to purchase, all but not less than all of the shares of Common
Stock held by such Executive or member of the Executive's Group, at a price
per share equal to the lesser of Fair Market Value and Original Cost plus
interest thereon at the Applicable Federal Rate or (ii) Retirement, such
Executive or member of the Executive's Group shall have the right, prior
to the expiration of the Put Period, to cause the Company to purchase, and
the Company shall be required to purchase, all but not less than all of the
shares of Common Stock held by such Executive and the members of such
Executive's Group, at a price per share equal to the lesser of Fair Market
Value and Original Cost.
(b) If the Executive's employment with the Company or any
of its Subsidiaries is terminated due to death, such Executive's heirs
shall have the right, prior to the expiration of the Put Period in the case
of clause (i) below and within 10 days of the end of the calendar year in
the case of clause (ii) immediately below, to cause the Company to
purchase, and the Company shall be required to purchase, such number of
shares of Common Stock held by such Executive's heirs and the members of
such Executive's Group as is equal to (i) the cash proceeds of the life
insurance, if any, available to the Company from such Executive's life
insurance policy for the benefit of the Company divided by Fair Market
Value, plus (ii) a pro rata amount, based on an annual aggregate purchase
of shares under this clause (ii) of $250,000, of the Executive's shares not
purchased pursuant of clause (i) measured annually together with the shares
of any other Executive whose heirs shall have executed a Put Option under
this Section 6.3(b); provided, however, that in the case of any Put Option
resulting from the death of Mr. Gleason, the amount set forth in
subparagraphs (i) and (ii) above shall be limited to the amount necessary
to pay estate taxes solely in respect of the Common Stock held by Mr.
Gleason prior to his death to the extent then due and payable (i.e., estate
taxes required to be paid as a result of the death of a second spouse to
whom assets were passed tax-free under the marital deduction upon the death
of the first spouse).
(c) If the Executive or any of the Executive's heirs
intend to exercise a Put Option pursuant to Section 6.3(a) or (b) hereof,
respectively, the Executive or the Executive's heirs, as applicable, shall
send an Exercise Notice to the Company within 90 days of the applicable
Termination Date (the "Put Period"). The closing of any purchase pursuant
to this Section 6.3 (a "Put Option Closing") shall take place at the
principal executive offices of the Company at 1000 University Avenue,
Rochester, New York 14692, within 60 days following the Notice Date or
within 10 days following the end of the calendar year in the case of
purchases pursuant to Section 6.3(b)(ii).
Section 6.4 Purchase Price. Subject to Sections 6.6 and
6.7 hereof, in the event of a purchase of shares of Common Stock by the
Company pursuant to a Call Option pursuant to Section 6.2 hereof, the
purchase price per share shall be:
(i) in the case of a termination of employment
due to (A) death or (B) Retirement, equal to Fair Market Value;
(ii) in the case of a termination of employment
(A) for Cause or (B) due to a resignation by the Executive without
Good Reason on or prior to the third anniversary of the Closing,
equal to the lesser of Fair Market Value and Original Cost;
(iii) in the case of a termination of employment
due to a resignation by the Executive without Good Reason after
the third anniversary but prior to the fourth anniversary of the
Closing, equal to (A) with respect to 30% of the shares of Common
Stock held by such Executive and the members of such Executive's
Group, Fair Market Value, and (B) with respect to all other shares
of Common Stock held by such Executive and the members of such
Executive's Group, the lesser of Fair Market Value and Original
Cost;
(iv) in the case of a termination of employment
due to a resignation by the Executive without Good Reason after
the fourth anniversary but prior to the fifth anniversary of the
Closing, equal to (A) with respect to 40% of the shares of Common
Stock held by such Executive and the members of such Executive's
Group, Fair Market Value, and (B) with respect to all other shares
of Common Stock held by such Executive, the lesser of Fair Market
Value and Original Cost;
(v) in the case of a termination of employment
due to a resignation by the Executive with Good Reason or due to a
termination by the Company without Cause on or prior to the first
anniversary of the Closing, equal to the lesser of (A) Fair Market
Value and (B) Original Cost plus interest thereon at the
Applicable Federal Rate;
(vi) in the case of a termination of employment
due to a resignation by the Executive with Good Reason or due to a
termination by the Company without Cause after the first
anniversary but prior to the second anniversary of the Closing,
equal to (i) with respect to 20% of the shares of Common Stock
held by such Executive and the members of such Executive's Group,
Fair Market Value, and (ii) with respect to all other shares of
Com mon Stock held by such Executive and the members of such
Executive's Group, the lesser of (A) Fair Market Value and (B)
Original Cost plus interest thereon at the Applicable Federal
Rate;
(vii) in the case of a termination of employment
due to a resignation by the Executive with Good Reason or due to a
termination by the Company without Cause after the second
anniversary but prior to the third anniversary of the Closing,
equal to (i) with respect to 40% of the shares of Common Stock
held by such Executive and the members of such Executive's Group,
Fair Market Value, and (ii) with respect to all other shares of
Common Stock held by such Executive and the members of such
Executive's Group, the lesser of (A) Fair Market Value and (B)
Original Cost plus interest thereon at the Applicable Federal
Rate;
(viii) in the case of a termination of
employment due to a resignation by the Executive with Good Reason
or due to a termination by the Company without Cause after the
third anniversary but prior to the fourth anniversary of the
Closing, equal to (i) with respect to 60% of the shares of Common
Stock held by such Executive and the members of such Executive's
Group, Fair Market Value, and (ii) with respect to all other
shares of Common Stock held by such Executive and the members of
such Executive's Group, the lesser of (A) Fair Market Value and
(B) Original Cost plus interest thereon at the Applicable Federal
Rate;
(ix) in the case of a termination of employment
due to a resignation by the Executive with Good Reason or due to a
termination by the Company without Cause after the fourth
anniversary but prior to the fifth anniversary of the Closing,
equal to (i) with respect to 80% of the shares of Common Stock
held by such Executive and the members of such Executive's Group,
Fair Market Value, and (ii) with respect to all other shares of
Common Stock held by such Executive and the members of such
Executive's Group, the lesser of (A) Fair Market Value and (B)
Original Cost plus interest thereon at the Applicable Federal
Rate;
(x) in the case of a termination of employment
due to a resignation by the Executive with or without Good Reason
or due to a termination by the Company without Cause on or after
the fifth anniversary of the Closing, equal to Fair Market Value;
or
(xi) other than with respect to Mr. Gleason, in
the case of a termination of employment due to a Disability, equal
to Fair Market Value.
Section 6.5 Payment of Purchase Price. (a) Except as set
forth in Section 6.5(b) hereof, in the event of any purchase of Common
Stock by the Company pursuant to this Article VI, the applicable purchase
price shall be paid in cash payable at the Call Option Closing or the Put
Option Closing, as applicable, by check or wire transfer in immediately
available funds to an account specified in writing by the Executive or, if
applicable, the Executive's heirs or members of the Executive's Group.
(b) Notwithstanding the foregoing, the Company may pay
the applicable purchase price for any purchase of shares of Common Stock
pursuant to this Article VI in the form of unsecured subordinated notes
(the "Repurchase Notes") payable in five equal annual installments from the
applicable Closing Date if (i) any such purchase for cash by the Company
would result in a Violation (as defined in Section 7.1(a) hereof), (ii) the
Executive's employment was terminated by the Company for Cause or (iii) the
Executive resigned without Good Reason. The Repurchase Notes shall bear
interest at a rate of 7% per annum, compounding annually; provided,
however, that if the Executive's employment was terminated by the Company
for Cause, such Repurchase Notes shall bear no interest.
Section 6.6 Reductions in Purchase Price. In the event
that the Company exercises any Call Option pursuant to Section 6.2 hereof
or the Executive exercises any Put Option pursuant to Section 6.3 hereof,
the aggregate purchase price, as determined pursuant to Section 6.4 hereof,
payable by the Company for the shares of Common Stock held by the Executive
and the members of such Executive's Group which are the subject of such
Call Option, shall be reduced by any amounts, if any, which such Executive
is then obligated to pay to the Company.
Section 6.7 Increases in Purchase Price. Notwithstanding
the foregoing, the Board of Directors may, in its sole discretion, increase
the value of any of the purchase prices set forth in Section 6.4 hereof if
such increase is approved by the affirmative vote of at least one
Acquisition Company Director so long as Acquisition Company shall not own
less than the Preferred Minimum Threshold and less than such number of
shares of Common Stock (including shares of Common Stock underlying the
Warrants) as is equal to or greater than 50% of the number of shares of
Common Stock (including shares of Common Stock underlying the Warrants)
that Acquisition Company held immediately after the Closing.
Section 6.8 Required Approvals. Notwithstanding the
foregoing, (i) any election by the Company pursuant to Section 6.2 hereof
to purchase shares of Common Stock held by any Executive other than a Top
Executive shall require the approval of a majority of the Board of
Directors, and (ii) any election by the Company pursuant to Section 6.2
hereof to purchase shares of Common Stock held by any Top Executive shall
be made by the Committee.
ARTICLE VII
CERTAIN LIMITATIONS ON THE COMPANY'S
OBLIGATION TO PURCHASE COMMON STOCK
Section 7.1 Limitation on Purchases. (a) The Company
shall not be obligated to purchase any shares of Common Stock at any time
pursuant to Article VI hereof (regardless of whether it has delivered an
Exercise Notice pursuant to Section 6.2(b) hereof) or make any payment
pursuant to the terms of any Repurchase Notes to the extent that such
purchase or payment would (i) conflict with or violate any law, rule,
regulation, judgment, injunction, order or decree applicable to the Company
or any of its Subsidiaries or any of their properties or assets or (ii)
result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default under, or give rise to any right of
termination, cancellation or acceleration of any obligation under, or
result in the creation of any lien upon any property or asset of the
Company or any of its Subsidiaries under, any provision of any material
contract, including any financing arrangement, to which the Company or any
of its Subsidiaries is a party or by which any of them or their properties
or assets may be bound (any of such results described in subparagraphs (i)
or (ii) above being hereinafter referred to as a "Violation").
(b) To the extent any purchase of shares of Common Stock
pursuant to Article VI hereof or any payment pursuant to the terms of any
Repurchase Notes constitutes a Violation, and the Company does not
purchase such shares of Common Stock during the relevant period for
purchase specified in Article VI hereof or make any requisite payment
pursuant to the terms of any Repurchase Notes, the Company's right or
obligation to make such purchase or payment shall be suspended. In the
event that the Company's right or obligation to purchase shares of Common
Stock pursuant to Article VI hereof has been suspended and the Company has
not purchased any shares of Common Stock or delivered any Repurchase Notes
pursuant to Article VI hereof, the Executive and the members of such
Executive's Group shall be prohibited from selling such unpurchased shares
of Common Stock, for one year following the applicable Termination Date.
Subject to Section 7.1(c) hereof, when any such purchase or payment shall
no longer result in a Violation, such right or obligation of the Company
shall be reinstated with the same effect as if such suspension had not
occurred.
(c) (i) To the extent any purchase of shares of Common
Stock pursuant to Article VI hereof would result in a Violation, then any
shares of Common Stock which the Company has elected to purchase from any
Executive and the members of such Executive's Group pursuant to Section 6.2
hereof or which the Company is required to purchase pursuant to Section 6.3
hereof, shall be purchased, and (ii) any payment required to be made
pursuant to the terms of any Repurchase Notes shall be made, in each case
by the Company no later than the tenth day following the date that the
Company learns that such purchase or payment shall no longer result in a
Violation pursuant to Section 7.1(a) hereof. Any purchase of Shares
following any suspension of such purchase shall be made at the same pur-
chase price set forth in Article VI hereof as would have been applicable
had such purchase not been suspended, and the Company shall give the
Executive five days' prior written notice of any such purchase.
(d) The Company shall use commercially reasonable efforts
to retain the right to purchase shares of Common Stock pursuant to Article
VI hereof under any financing arrangement or other contract to which the
Company or any of its Subsidiaries is a party or by which any of them or
their properties or assets may be bound.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination. This Agreement shall
terminate immediately upon the termination of the Stockholders' Agreement
pursuant to Section 21 thereof.
Section 8.2 Amendment; Waiver. This Agreement may be
amended, modified or supplemented at any time and from time to time by
written agreement of the parties hereto, provided that any amendment
approved by the Company shall require the approval of at least one
Acquisition Company Director. Except as otherwise provided in this
Agreement, any failure of any of the parties hereto to comply with any
obligation, covenant, agreement or condition herein may be waived by the
party or parties entitled to the benefits thereof by a written agreement
signed by the party granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Binding Effect. The provisions of this
Agreement shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns.
Section 9.2 Severability. If any term or provision of
this Agreement shall be held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms
and provisions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
Section 9.3 Headings. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise
affect the provisions hereof.
Section 9.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by an overnight courier
service, such as Federal Express, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
If to the Company:
Gleason Corporation
1000 University Avenue
P.O. Box 22970
Rochester, New York 14692
Telephone No.: (716) 473-1000
Telecopy No.: (716) 461-4092
Attention: Secretary
with copies to:
Torque Acquisition Co., L.L.C.
c/o Vestar Capital Partners IV, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Telephone: No.: (212) 351-1600
Telecopy: No.: (212) 808-4922
Attention: Sander M. Levy
and
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Blaine V. Fogg, Esq.
If to an Executive, to the name and address on the signature
page hereto.
Section 9.5 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law thereof.
Section 9.6 Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto which form a part hereof
(including the documents and instruments referred to herein and therein)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties hereto with
respect to the subject matter hereof.
Section 9.7 Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the
same agree ment and shall become effective when two or more counterparts
have been signed by each of the parties hereto and delivered to the other
parties hereto, it being understood that all parties hereto need not sign
the same counterpart.
Section 9.8 Specific Performance. Each of the parties
hereto acknowledges and agrees that in the event of any breach of this
Agreement, each non-breaching party would be irrevocably and immediately
harmed and could not be made whole by monetary damages. It is accordingly
agreed that the parties hereto (i) shall waive, in any action for specific
performance, the defense of adequacy of a remedy at law and (ii) shall be
entitled, in addition to any other remedy to which they may be entitled in
law or in equity, to compel specific performance of this Agreement in any
action instituted in a court of competent jurisdiction.
Section 9.9 Interpretation. The descriptive headings used
herein are inserted for convenience of reference only and are not intended
to be part of or affect the meaning or interpretation of this Agreement.
"Include," "includes" and "including" shall be deemed to be followed by
"without limitation" whether or not they are in fact followed by such words
or words of like import.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
GLEASON CORPORATION
By: _________________________
Name:
Title:
MANAGEMENT
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Name:
Title:
Address:
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Name:
Title:
Address:
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Title:
Address:
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Name:
Title:
Address:
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Name:
Title:
Address:
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Name:
Title:
Address:
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Name:
Title:
Address:
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Name:
Title:
Address:
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Name:
Title:
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