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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
INTELLIGENT CONTROLS, INC.
(Name of Issuer)
INTELLIGENT CONTROLS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK
(Title of Class of Securities)
45815R 10 0
(CUSIP Number of Class of Securities)
Sharon L. Binette
Director of Shareholder Relations
Intelligent Controls, Inc.
74 Industrial Park Road
Saco, Maine 04072
(207) 283-0156
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
Gregory S. Fryer, Esq.
Verrill & Dana LLP
One Portland Square, P.O. Box 586
Portland, ME 04112
(207) 774-4000
MARCH 30, 1998
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee
<C> <C>
$1,543,750 $308.75
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<F*> Based upon $3.25 cash per share for 475,000 shares.
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[ ] Check here 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.
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<S> <C>
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
</TABLE>
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ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this statement relates
is Intelligent Controls, Inc., a Maine corporation (the "Company"), and the
address of its principal executive office is 74 Industrial Park Road, Saco,
Maine 04072.
(b) This statement on Schedule 13E-4 relates to an offer by the
Company to purchase up to 475,000 shares (or such lesser number of shares as
are properly tendered) of its common stock (the "Shares"), at $3.25 per
Share, net to the sellers, in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated March 30, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer"), copies of which are filed as Exhibits
99.a(1) and 99.a(2), respectively. The information set forth in the
introductory section immediately following the table of contents (the
"Introduction") and in Section 7 "Interest of Certain Persons; Transactions
and Arrangements Concerning the Shares" and Section 9 "Background and
Purpose of the Offer" of the Offer to Purchase is incorporated herein by
reference.
(c) The Shares are listed on the Emerging Company Marketplace of
the American Stock Exchange. The trading symbol for the Company's common
stock is "ITC". The information set forth in Section 6 "Price Range of
Shares; Dividends" of the Offer to Purchase is incorporated herein by
reference.
(d) This statement is being filed by the Company.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.
(a) The information set forth in Section 7 "Interest of Certain
Persons; Transactions and Arrangements Concerning the Shares" and Section 8
"Source and Amount of Funds" of the Offer to Purchase is incorporated herein
by reference.
(b) Inapplicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the "Introduction", Section 7
"Interest of Certain Persons; Transactions and Arrangements Concerning the
Shares", Section 9 "Background and Purpose of the Offer" and Section 10
"Certain Information About the Company" of the Offer to Purchase is
incorporated herein by reference.
(a)-(j) The information set forth in the "Introduction", Section 5
"Certain Conditions to the Offer", Section 7 "Interest of Certain Persons;
Transactions and Arrangements Concerning the Shares", Section 11 "Effects of
the Offer on the Market for Shares; Registration under the Exchange Act" and
Section 14 "Certain Limitations on Purchase of Shares by the Company" of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in Section 7 "Interest of Certain
Persons; Transactions and Arrangements Concerning the Shares" of the Offer
to Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in the "Introduction", Section 7
"Interest of Certain Persons; Transactions and Arrangements Concerning the
Shares", Section 8 "Source and Amount of Funds" and Section 9 "Background
and Purpose of the Offer" of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and Section 16 "Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 10 "Certain
Information About the Company", "--General", "--Historical Financial
Information" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Inapplicable.
(b) The information set forth in Section 12 "Certain Legal
Matters; Regulatory Approvals" of the Offer to Purchase is incorporated
herein by reference.
(c) The information set forth in Section 11 "Effects of the Offer on
the Market for Shares; Registration under the Exchange Act" of the Offer to
Purchase is incorporated herein by reference.
(d) Inapplicable.
(e) Reference is hereby made to the Offer to Purchase and the
related Letter of Transmittal, forms of which are attached hereto as
Exhibits 99.a(1) and 99.a(2), respectively, which are incorporated in their
entirety herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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Exhibit 99.a(1) - Form of Offer to Purchase, dated March 30, 1998.
Exhibit 99.a(2) - Form of Letter of Transmittal (including Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9).
Exhibit 99.a(3) - Form of Notice of Guaranteed Delivery.
Exhibit 99.a(4) - Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
Exhibit 99.a(5) - Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
Exhibit 99.a(6) - Press Release issued by the Company on March 30, 1998.
Exhibit 99.a(7) - Form of Letter to the Company's shareholders from the
President of the Company, dated March 30, 1998.
Exhibit 99.c(1) - Investment Agreement, dated March 26, 1998 among the
Company, Ampersand Specialty Materials and Chemicals III
Limited Partnership, Ampersand Specialty Materials and
Chemicals III Companion Fund Limited Partnership and
Roger E. Brooks, for the purchase of Common Stock of
the Company.
Exhibit 99.c(2) - Form of Stockholders Agreement among the Company,
Ampersand Specialty Materials and Chemicals III
Limited Partnership, Ampersand Specialty Materials and
Chemicals III Companion Fund Limited Partnership, Roger
E. Brooks Alan Lukas, Paul E. Lukas, and certain related
parties restricting the voting and transfer of shares of
Common Stock owned by each.
Exhibit 99.c(3) - Form of Employment Agreement between the Company and
Roger E. Brooks.
Exhibit 99.c(4) - Form of Employment Agreement between the Company and
Alan Lukas.
Exhibit 99.c(5) - Form of Employee Stock Restriction Agreement between the
Company and Roger E. Brooks and related promissory note,
pledge agreement and form of 83(b) Election.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
INTELLIGENT CONTROLS, INC.
By: /s/ ALAN LUKAS
---------------------------------
Alan Lukas, President and
Chief Executive Officer
Dated: March 30, 1998
EXHIBIT INDEX
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Exhibit No. Description
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<S> <C>
99.a(1) Form of Offer to Purchase, dated March 30, 1998.
99.a(2) Form of Letter of Transmittal (including Guidelines for
Certification of Taxpayer Identification Number of
Substitute Form W-9).
99.a(3) Form of Notice of Guaranteed Delivery.
99.a(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
99.a(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
99.a(6) Press Release issued by the Company on March 30, 1998.
99.a(7) Form of Letter to the Company's shareholders from the President
of the Company, dated March 30, 1998.
99.c(1) Investment Agreement, dated March 26, 1998 among the Company, Ampersand
Specialty Materials and Chemicals III Limited Partnership, Ampersand
Specialty Materials and Chemicals III Companion Fund Limited Partnership
and Roger E. Brooks.
99.c(2) Form of Stockholders Agreement among the Company, Ampersand Specialty
Materials and Chemicals III Limited Partnership, Ampersand Specialty
Materials and Chemicals III Companion Fund Limited Partnership, Roger
E. Brooks Alan Lukas, Paul E. Lukas, and certain related parties.
99.c(3) Form of Employment Agreement between the Company and Roger E. Brooks.
99.c(4) Form of Employment Agreement between the Company and Alan Lukas.
99.c(5) Form of Employee Stock Restriction Agreement between the Company and Roger
E. Brooks and related promissory note, pledge agreement and form of 83(b)
Election.
</TABLE>
EXHIBIT 99.A(1)
INTELLIGENT CONTROLS, INC.
OFFER TO PURCHASE FOR CASH UP TO 475,000 SHARES OF ITS
COMMON STOCK AT A PURCHASE PRICE OF $3.25 NET PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FRIDAY, MAY 1, 1998,
UNLESS THE OFFER IS EXTENDED.
Intelligent Controls, Inc., a Maine corporation ("INCON" or the
"Company"), invites shareholders to tender 475,000 shares of its Common
Stock ("Shares") at $3.25 per Share, net to the seller, in cash (the
"Purchase Price"), upon the terms and subject to the conditions set forth in
this Offer to Purchase and the related Letter of Transmittal (which together
constitute the "Offer"). All Shares properly tendered and not withdrawn
prior to the expiration of the Offer will be purchased on the terms and
conditions described below. THE OFFER IS CONDITIONED ON A MINIMUM NUMBER OF
SHARES BEING TENDERED AND IS SUBJECT TO SATISFACTION OF CERTAIN OTHER
CONDITIONS. SEE SECTION 5.
The Shares are listed and principally traded on the Emerging Company
Marketplace of the American Stock Exchange ("AMEX"). On March 27, 1998, the
last trading day before the Company announced its intention to commence the
Offer, the closing per Share sales price as reported on AMEX was $2 1/2.
The Company urges shareholders to obtain current market quotations for the
Shares prior to tendering any Shares pursuant to the Offer. See Section 6.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER ON WHETHER TO TENDER OR TO REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE HIS OR
HER OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER. SEE SECTION 7 FOR INFORMATION CONCERNING THE INTENTIONS OF ALAN
LUKAS AND PAUL E. LUKAS, THE COMPANY'S PRINCIPAL SHAREHOLDERS, IN CONNECTION
WITH THE OFFER, AND CONCERNING THE INTENTIONS OF OTHER DIRECTORS AND
EXECUTIVE OFFICERS.
The principal purpose of the Offer is to provide shareholders a
limited opportunity to sell a portion of, or perhaps all, their Shares at a
premium over recent market prices of the Shares. The Offer will also
provide the Company with treasury shares to resell in a proposed restricted
stock arrangement with a new executive officer. See Sections 9 and 13.
IMPORTANT
Any shareholder who wants to tender all or any portion of the Shares
should either (i) complete and sign a Letter of Transmittal or a facsimile
copy thereof in accordance with the instructions in such Letter of
Transmittal, mail or deliver it and any other required documents to American
Stock Transfer & Trust Company (the "Depositary"), and either mail or
deliver the certificates for such Shares to the Depositary (with all such
other documents) or follow the procedure for book-entry transfer set forth
in Section 2; or (ii) request such shareholder's broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for such
shareholder. A shareholder having Shares registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
that entity if the shareholder desires to tender any Shares. If a
shareholder is unable, prior to expiration of the Offer, to deliver Share
certificates or other necessary documents to the Depositary and cannot
comply with the procedures for book-entry transfer, the Shareholder may
tender Shares by following the procedures for guaranteed delivery set forth
in Section 2.
Questions, requests for additional copies of this Offer to Purchase or
other documents, and other requests for assistance should be directed to
Sharon L. Binette, Director of Shareholder Relations, as follows:
Sharon L. Binette
Director of Shareholder Relations
Intelligent Controls, Inc.
74 Industrial Park Road
P.O. Box 638
Saco, Maine 04072
(207) 283-0156
or
Call toll free (800) 872-3455
March 30, 1998
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE AND IN THE LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
TABLE OF CONTENTS
1. NUMBER OF SHARES; EXTENSION; PRORATION.......................... 2
2. PROCEDURES FOR TENDERING SHARES................................. 3
3. WITHDRAWAL RIGHTS............................................... 5
4. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE................ 6
5. CERTAIN CONDITIONS OF THE OFFER................................. 6
6. PRICE RANGE OF SHARES; DIVIDENDS................................ 7
7. INTEREST OF CERTAIN PERSONS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES........................... 8
8. SOURCE AND AMOUNT OF FUNDS...................................... 12
9. BACKGROUND AND PURPOSE OF THE OFFER............................. 12
10. CERTAIN INFORMATION ABOUT THE COMPANY........................... 12
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES;
REGISTRATION UNDER THE EXCHANGE ACT............................ 17
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVAL...................... 17
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES......................... 17
14. CERTAIN LIMITATIONS ON PURCHASES OF SHARES BY THE COMPANY....... 20
15. EXTENSION OF THE TENDER PERIOD; TERMINATION; AMENDMENTS......... 21
16. FEES AND EXPENSES............................................... 22
17. MISCELLANEOUS................................................... 22
TO ALL HOLDERS OF COMMON STOCK OF INTELLIGENT CONTROLS, INC.:
Intelligent Controls, Inc. ("INCON" or the "Company") hereby offers to
purchase up to 475,000 shares of its Common Stock (the "Shares") at $3.25
per Share, net to the seller, in cash (the "Purchase Price"), upon the terms
and conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (the "Letter of Transmittal," which together with this Offer
to Purchase constitute the "Offer"). See Section 1.
All Shares properly tendered and not withdrawn prior to the expiration
of the Offer will be purchased on the terms described in the Offer,
including the proration terms. The Offer is subject to satisfaction of
certain conditions: (i) a minimum of 325,000 Shares are tendered prior to
the expiration of the Offer ("Minimum Tender"), (ii) the Company will have
at least 300 shareholders of record at the conclusion of the Offer, (iii)
the shareholders of the Company approve at the next Annual Meeting of
Shareholders (to occur April 30, 1998) proposals to amend the Articles of
Incorporation to increase the authorized Common Stock of the Company to
8,000,000 Shares, to opt out of Section 910 of the Maine Business
Corporation Act and to allow the Company to repurchase Shares from capital
surplus, (iv) the Company consummates a planned sale to Ampersand Specialty
Materials and Chemicals III Limited Partnership and Ampersand Specialty
Materials and Chemicals III Companion Fund Limited Partnership
(collectively, "Ampersand") of 1,538,462 Shares at a price of $3.25 per
Share, and (v) other conditions described in Section 5.
If at the expiration of the Offer more than 475,000 Shares have been
tendered, the Company will buy Shares on a pro rata basis (with appropriate
adjustments to avoid purchases of fractional Shares) from all shareholders
who properly tendered Shares and do not withdraw them prior to the
expiration of the Offer. See Sections 1 and 3. The Company will return all
Shares not purchased because of proration.
Tendering shareholders will not be obligated to pay brokerage
commissions, solicitation fees or (subject to Instruction 6 of the Letter of
Transmittal) stock transfer taxes from the Company's purchase of Shares
pursuant to the Offer. In addition, the Company will pay all fees and
expenses of American Stock Transfer & Trust Company (the "Depositary") in
connection with the Offer. See Section 16.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER ON WHETHER TO TENDER OR TO REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE HIS OR
HER OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
The Company has been advised that Alan Lukas and Paul E. Lukas intend
to tender sufficient shares into the Offer to result in a purchase from them
of at least 200,000 Shares in the aggregate. The Company has been advised
that the other directors and executive officer intend not to tender Shares.
See Section 7.
The Shares are listed and principally traded on the Emerging Company
Marketplace of American Stock Exchange ("AMEX") under the symbol "ITC". On
March 27, 1998, the last trading day before the Company announced its
intention to commence the Offer, the closing per Share sales price as
reported on AMEX was $2 1/2. The Company urges shareholders to obtain
current market quotations for the Shares prior to tendering any Shares
pursuant to the Offer. See also Section 6 regarding entitlement to
dividends.
The 475,000 Shares that the Company is offering to purchase pursuant
to the Offer represent approximately 14.4% of the 3,296,375 Shares issued
and outstanding as of March 27, 1998. As described in Sections 5 and 7, the
Company plans to sell an additional 1,538,462 Shares to Ampersand prior to
(and as a condition to) closing the Offer, and up to 76,923 Shares to Roger
E. Brooks (exclusive of Shares to be sold to him from treasury stock)
shortly after closing of the Offer. The 475,000 Shares covered by the Offer
would represent approximately 9.7% of the outstanding Shares after giving
effect to these sales of additional Shares to Ampersand and Mr. Brooks. In
addition, as of March 27, 1998, an aggregate of up to 589,208 additional
Shares were issuable upon exercise of outstanding stock options.
Any Shares acquired by the Company pursuant to the Offer will be held
as treasury shares and will be available for issuance by the Company without
further shareholder action (except as required by applicable law or the
rules of any securities exchange on which the Shares are then listed) for
general or other corporate purposes. The Company intends to use up to
410,000 Shares acquired through the Offer to fund an issuance of treasury
stock to Mr. Brooks pursuant to his restricted stock arrangement. See
Section 7 and Section 9.
This Offer to Purchase and the Letter of Transmittal are being mailed
to holders of record of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the Company's shareholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
1. NUMBER OF SHARES; EXTENSION; PRORATION.
Number of Shares. Upon the terms and subject to the conditions of the
Offer, the Company will accept for purchase up to 475,000 Shares or such
lesser number of Shares as are properly tendered, and not withdrawn in
accordance with Section 3, prior to the Expiration Date (as defined below)
at a price of $3.25 per Share, net to the seller in cash, provided that the
Minimum Tender is satisfied and the other tender offer conditions have been
met or waived. The term "Expiration Date" means 5:00 P.M., New York City
time, on May 1, 1998, unless and until the Company extends the period of
time during which the Offer will remain open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by the Company, shall expire. If the Offer is
oversubscribed, Shares tendered and not withdrawn prior to the Expiration
Date will be prorated. The proration period also expires at the Expiration
Date.
The Company reserves the right to purchase more than 475,000 Shares
pursuant to the Offer. In accordance with applicable regulations of the
Securities and Exchange Commission (the "Commission"), the Company may
accept for payment pursuant to the Offer an additional amount of Shares not
to exceed 2% of the total outstanding Shares (approximately 9,500 Shares as
of March 27, 1998) without extending the Offer.
See below and Section 15 for a description of the Company's rights to
extend the time during which the Offer is open and to delay, terminate or
amend the Offer. See also Section 5 for a description of conditions of the
Offer.
Extension. If the following events occur:
(a) the Company increases or decreases the price to be paid for
the Shares, or the Company increases the number of Shares being sought
and any such increase in the number of Shares being sought exceeds 2%
of the outstanding Shares, or the Company decreases the number of
Shares being sought, and
(b) the Offer is scheduled to expire less than ten business
days from and including the date that notice (the "Notice") of such
increase or decrease is first published, sent or given in the manner
set forth in Section 15,
then the Offer will be extended so that it will not expire until at least
the end of the tenth business day from and including the date of such
Notice. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday, until 5:00 P.M., New York City
time, on such day.
Acceptance in Full. If the number of Shares properly tendered and not
withdrawn prior to the Expiration Date is greater than 325,000 Shares, but
less than or equal to 475,000 Shares (or such greater number of Shares as
the Company may elect to purchase pursuant to the Offer), the Company will,
upon the terms and subject to the conditions of the Offer, accept for
payment at the Purchase Price all Shares so tendered.
Proration. If at the Expiration Date more than 475,000 Shares (or
such greater number of Shares as the Company may elect to purchase pursuant
to the Offer) are properly tendered, the Company will accept all Shares
properly tendered and not withdrawn prior to the Expiration Date on a pro
rata basis (with appropriate adjustments to avoid purchases of fractional
shares).
If proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable following
the Expiration Date. Proration for each shareholder tendering Shares shall
be based on the ratio of the number of Shares tendered by such shareholder
to the total number of Shares tendered by all shareholders. Although the
Company does not expect to be able to announce the final results of any
proration until approximately seven trading days after the Expiration Date,
it will announce preliminary results of the prorations by press release as
promptly as practicable following the Expiration Date. Shareholders may
obtain such preliminary information from Sharon L. Binette, Director of
Shareholder Relations, and may also be able to obtain such information from
their brokers or other nominees. All Shares not purchased pursuant to the
Offer because of proration will be returned to the tendering shareholders at
the Company's expense as promptly as practicable following the Expiration
Date.
Minimum Tender. If the shareholders do not tender at least 325,000
Shares prior to the Expiration Date, the Company will not purchase any
Shares pursuant to the Offer. In such event, all Shares tendered by
shareholders will be returned to the tendering shareholders at the Company's
expense as promptly as practicable following the Expiration Date.
Minimum Number of Shareholders. A condition to the Offer is that the
Offer not result in the Company having fewer than 300 shareholders of
record. The Company will decrease the size of the Offer if and to the
extent necessary to satisfy this condition, or the Company may, at its sole
discretion, terminate the Offer without purchasing any Shares. The Company
presently has approximately 500 record holders and does not expect the Offer
to reduce the number of such holders below 300.
Other Conditions. Other tender offer conditions are described in
Section 5 below.
2. PROCEDURES FOR TENDERING SHARES.
Proper Tender of Shares. For Shares to be properly tendered pursuant
to the Offer:
(a) the certificates for such Shares or confirmation of
delivery of such Shares pursuant to the procedure for book-entry
transfer set forth below, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) including any
required signature guarantees, and any other documents required by
the Letter of Transmittal, must be received prior to the Expiration
Date by the Depositary at its address set forth on the back cover of
this Offer to Purchase; or
(b) the tendering shareholder must comply with the guaranteed
delivery procedure set forth below.
It is a violation of Section 14(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14e-4 promulgated
thereunder, for a person to tender Shares for such person's own account
unless the person so tendering:
(a) owns such Shares; or
(b) owns other securities convertible into or exchangeable
for Shares or owns an option, warrant or right to purchase Shares and
intends to acquire such Shares for tender by conversion, exchange or
exercise of such option, warrant or right.
Section 14(e) and Rule 14e-4 contain a similar restriction applicable to a
tender or guarantee of a tender on behalf of another person.
The acceptance of Shares by the Company for payment will constitute a
binding agreement between the tendering shareholder and the Company upon the
terms and subject to the conditions of the Offer, including the tendering
shareholder's representation that (i) such shareholder owns the Shares being
tendered within the meaning of Rule 14e-4 and (ii) the tender of such Shares
complies with Rule 14e-4.
Signature Guarantees and Method of Delivery. No signature guarantee
is required on a Letter of Transmittal (i) if such Letter of Transmittal is
signed by the registered institutional holder of Shares (which term, for
purposes of the Offer, includes any participant in The Depository Trust
Company, the Philadelphia Depository Trust Company or the Midwest Securities
Trust Company (collectively, the "Book-Entry Transfer Facilities") whose
name appears on a security position listing as the holder of such Shares)
tendered therewith and such holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal; or (ii) if Shares are tendered
for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office, branch or agency in
the United States (each such entity being hereinafter referred to as an
"Eligible Institution").
In all other cases, all signatures on a Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If a certificate representing Shares is registered in the name
of a person other than the signer of a Letter of Transmittal, or if payment
is to be made, or Shares not purchased or tendered are to be issued, to a
person other than the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as
the name of the registered holder appears on the certificate, with the
signature on the certificate or stock power guaranteed by an Eligible
Institution. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares (or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at a Book-
Entry Transfer Facility), (ii) a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and (iii) any other documents required
by the Letter of Transmittal. The method of delivery of all documents,
including stock certificates, the Letter of Transmittal and any other
required documents, is at the election and risk of the tendering
shareholder. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended.
Book-Entry Transfer. The Depositary will establish an account with
respect to the Shares at the Book-Entry Transfer Facilities for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in a Book-Entry Transfer
Facility's system may make book-entry transfer of Shares by causing such
Facility to transfer such Shares into the Depositary's account in accordance
with such Facility's procedure for such transfer. Even though delivery of
Shares may be effected through book-entry transfer into the Depositary's
account at one of the Book-Entry Transfer Facilities, either (i) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof)
with any required signature guarantees and any other required documents must
be transmitted to and received by the Depositary at its address set forth on
the back cover of this Offer to Purchase prior to the Expiration Date; or
(ii) the guaranteed delivery procedure set forth below must be followed.
Delivery of a Letter of Transmittal and any other required documents to one
of the Book-Entry Transfer Facilities does not constitute delivery to the
Depositary.
Guaranteed Delivery. If a shareholder desires to tender Shares
pursuant to the Offer and such shareholder's certificates cannot be
delivered to the Depositary prior to the Expiration Date or the procedure
for book-entry transfer cannot be completed on a timely basis or all
required documents cannot be delivered to the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered provided that all
of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail or facsimile
transmission) prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form
the Company has provided with this Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form
for transfer or confirmation of book-entry transfer of such Shares
into the Depositary's account at any Book-Entry Transfer Facility,
together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents required
by the Letter of Transmittal, are received by the Depositary within
five trading days after the date the Depositary receives such Notice
of Guaranteed Delivery.
Determination of Validity, Rejection of Shares, Waiver of Defects, No
Obligation to Give Notice of Defects. All questions as to the number of
Shares to be accepted, and the form, eligibility, validity (including time
of receipt) and acceptance for payment of any tender of Shares will be
determined by the Company, in its sole discretion, which determinations
shall be final and binding on all parties. The Company reserves the
absolute right to reject any or all tenders it determines not to be in
proper form or the acceptance for payment of or payment for which may, in
the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any defect or irregularity in the
tender of any particular Shares. No tender of Shares will be deemed to be
properly made until all defects and irregularities have been cured or
waived. Neither the Company nor the Depositary nor any other person is or
will be obligated to give notice of any defects or irregularities in
tenders, and neither of them will incur any liability for failure to give
such notice.
Federal Income Tax Withholding. To prevent back up federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer,
each shareholder who does not otherwise establish an exemption from such
withholding must certify to the Depositary such shareholder's correct social
security number or taxpayer identification number (or certify that such tax
payer is awaiting such number) and provide certain other information by
completing the Substitute Form W-9 included in the Letter of Transmittal. A
foreign shareholder who is an individual must submit a Form W-8 (obtainable
from the Depositary) in order to avoid back up withholding.
The Depositary will withhold 31% of the gross payment payable to a
foreign shareholder unless the Depositary determines that a reduced rate of
withholding or an exemption from withholding is applicable. For this
purpose, a foreign shareholder is a shareholder that is not (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or (iii) any estate or trust the income of
which is subject to United States federal income taxation regardless of the
source of such income. The Depositary will determine a shareholder's status
as a foreign shareholder and eligibility for a reduced rate of, or an
exemption from, withholding by reference to the shareholder's address and to
any outstanding certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding unless facts and
circumstances indicate that reliance is not warranted. A foreign
shareholder who has not previously submitted the appropriate certificates or
statements with respect to a reduced rate of, or exemption from, withholding
for which such shareholder may be eligible should consider doing so in order
to avoid over-withholding. A foreign shareholder may be eligible to capital
gain or loss treatment described in Section 13 or may otherwise be able to
establish that no tax or a reduced amount of tax was due.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 13.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section, a tender of Shares made
pursuant to the Offer is irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
thereafter accepted for payment by the Company, may also be withdrawn after
5:00 P.M., New York City time, on May 22, 1998.
For a withdrawal to be effective, the Depositary must timely receive a
written, telegraphic, telex or facsimile transmission notice of withdrawal
at its address set forth on the back cover of this Offer to Purchase. Such
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares tendered, the number of Shares
to be withdrawn and the name of the registered holder, if different from
that of the person who tendered such Shares. If the certificates for Shares
to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
tendering shareholder must also submit the serial numbers of the particular
certificates evidencing such Shares and the signature on the notice of
withdrawal must be guaranteed by an Eligible institution (except in the case
of Shares tendered by an Eligible Institution). If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 2,
the notice of withdrawal must specify the name and the account number at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of such facility.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties.
Neither the Company nor the Depositary nor any other person is or will be
obligated to give notice of any defects or irregularities in any notice of
withdrawal, and neither of them will incur any liability for failure to give
such notice. Any Shares properly withdrawn will thereafter be deemed not
tendered for purposes of the Offer. Withdrawn Shares may, however, be
retendered prior to the Expiration Date by again following any of the
procedures set forth in Section 2.
4. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE. For purposes of the
Offer, the Company will be deemed to have accepted for payment (and thereby
purchased), subject to proration, Shares which are tendered and not
withdrawn prior to the Expiration Date if and when it gives oral and written
notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer. The same Purchase Price per Share will be paid for
all such Shares.
Payment of the Purchase Price for Shares accepted for payment pursuant
to the Offer will be made by deposit of the aggregate Purchase Price
therefor with the Depositary, which will act as the agent for shareholders
whose Shares have been accepted for payment for the purpose of receiving
payment from the Company and transmitting payment to such shareholders. In
all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates for
such Shares (or of a timely confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal
(or duly executed photocopy thereof) and any other documents required by the
Letter of Transmittal. The Company expressly reserves the right, in its
sole discretion, to delay the acceptance for payment of or payment for
Shares in order to comply, in whole or in part, with any applicable legal
requirement or court order. See Sections 5 and 12. The Company's
reservation of the right to delay payment for Shares that the Company has
accepted for payment is limited by Rule 13e-4(f)(5) promulgated under the
Exchange Act, which rule requires that the Company pay the consideration
offered or return the Shares tendered promptly after termination or
withdrawal of a tender offer.
In the event of proration, the Company will determine the final
proration factor and pay for Shares accepted for payment promptly following
the Expiration Date. However, the Company does not expect to be able to
announce the final results of any proration until approximately seven
trading days after the Expiration Date. Certificates for all Shares not
purchased, including Shares not purchased because of proration, will be
returned (or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to the account maintained with one of the Book-Entry
Transfer Facilities by the participant therein who so delivered such Shares)
as soon as practicable following the Expiration Date without expense to the
tendering shareholders. Under no circumstances will the Company pay
interest on the aggregate Purchase Price or any portion thereof.
The Company will pay the stock transfer taxes, if any, payable on
account of the transfer to it of Shares purchased pursuant to the Offer;
provided, however, that if payment of the Purchase Price is to be made to,
or (in the circumstances permitted by the Offer) if unpurchased Shares are
to be registered in the name of any person other than the registered holder,
or if tendered certificates are registered in the name of any person other
than the person signing the Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder or such other
person) payable on account of such payment, transfer or tender will be
deducted from the Purchase Price paid to any such holder or person unless
evidence satisfactory to the Company of the payment of such taxes or
exemption therefrom is submitted. See Instruction 6 of the Letter of
Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY
AND TO SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL
MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE
GROSS PROCEEDS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE
OFFER. SEE SECTION 2.
5. CERTAIN CONDITIONS OF THE OFFER.
The Company's offer to purchase Shares pursuant to the Offer is
subject to the requirement that the following conditions have been
satisfied: (i) a minimum of 325,000 Shares are tendered prior to the
expiration of the Offer, (ii) the Company will have at least 300
shareholders of record at the conclusion of the Offer, (iii) the
shareholders of the Company approve at the next Annual Meeting of
Shareholders (to occur April 30, 1998) proposals to amend the Articles of
Incorporation to increase the authorized Common Stock of the Company to
8,000,000 Shares, to opt out of Section 910 of the Maine Business
Corporation Act and to allow the Company to repurchase Shares from capital
surplus, (iv) the Company consummates a planned sale to Ampersand of
1,538,462 Shares at a price of $3.25 per Share, and (v) the further
conditions described below.
The proposed amendments to the Articles of Incorporation and the
proposed sale of Shares to Ampersand are further described in the Company's
most recent definitive Proxy Statement which has previously been provided to
shareholders. Additional copies of such documents are available upon
request from the Company.
It is a non-waivable tender offer condition that the Company have at
least 300 shareholders of record at the conclusion of the Offer (the
"Minimum Shareholder Condition"). At the date of commencement of the Offer,
the Company had approximately 500 shareholders of record. Due primarily to
the number of Shares held by non-affiliates of the Company and the number of
Shares that the Company expects to be tendered by its two principal
shareholders (Alan Lukas and Paul E. Lukas), the Company does not expect
that the purchase of 475,000 shares pursuant to the Offer will cause the
number of shareholders of record to decrease to less than 300. If necessary
to avoid that result, however, the Company will reduce the number of Shares
being purchased through the Offer or, in its discretion, will terminate the
Offer without purchasing any Shares.
Notwithstanding any other provision of the Offer, the Company also
shall not be required to accept for payment or pay for any Shares tendered,
and may terminate or amend the Offer or may postpone the acceptance or
payment for Shares tendered, if at any time on or after March 27, 1998, and
at or before the time of acceptance for payment of or payment for any such
Shares, any of the following events shall have occurred (or shall have be
determined by the Company to have occurred) which, in the Company's sole
judgment in any such case and regardless of the circumstances giving rise
thereto (including any action or omission to act by the Company), makes it
inadvisable to proceed with the Offer or with such acceptance or payment:
(a) there shall be any claim, action or proceeding
threatened or pending by or before any court or other government
agency or authority, domestic or foreign, which relates in any manner
to the Offer or which could directly or indirectly, in the Company's
sole judgment, materially impair the Offer's contemplated benefits to
the Company;
(b) there shall have occurred any significant decrease in
the market price of the Shares ($2 1/2 per Share at the close of
business on March 27, 1998) or in the market prices of equity
securities generally in the United States;
(c) it is publicly disclosed or the Company learns that any
person or "group" (within the meaning of section 13(d)(3) of the
Exchange Act) has acquired, or proposes to acquire, more than five
percent of the outstanding Shares, other than acquisitions by
Ampersand or Roger E. Brooks that have been approved by the Company;
(d) any change shall occur or be threatened in the business,
condition (financial or other), income, operations or prospects of
the Company, taken as a whole, which, in the Company's sole
judgment, is or may be material to the Company or its shareholders;
or
(e) a tender or exchange offer for any or all of the Shares
(other than the Offer), or any merger, business combination or other
similar transaction with or involving the Company, shall have been
proposed, announced or made by any person.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition (including any action or omission to act by the Company) or
may be waived by the Company in whole or in part (except for the Minimum
Shareholder Condition, which may not be waived). The Company's failure at
any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right, and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any
determination by the Company concerning any of the events described in this
section and any related judgment by the Company regarding the inadvisability
of proceeding with the purchase of or payment for Shares tendered shall be
final and binding on all parties.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded on AMEX (Emerging Company Marketplace). The
following table sets forth for the fiscal periods indicated the high and low
closing per Share sales prices on AMEX and the dividends declared per Share
over the past two years as reported in published financial sources:
<TABLE>
<CAPTION>
High Low Dividends
---- --- ---------
<C> <C> <C> <C>
Fiscal 1988
1st Quarter
(through March 27, 1998) $2 3/4 $2 3/16 none
Fiscal 1997
4th Quarter $3 3/4 $2 3/8 none
3rd Quarter $2 7/8 $2 1/4 none
2nd Quarter $2 7/8 $1 7/8 none
1st Quarter $2 1/2 $1 5/8 none
Fiscal 1996
4th Quarter $2 7/8 $1 3/4 none
3rd Quarter $2 7/8 $1 7/8 none
2nd Quarter $4 1/4 $2 7/8 none
1st Quarter $4 5/8 $3 3/4 none
</TABLE>
On March 27, 1998, the last trading day before the Company announced
its intention to commence the Offer, the closing per Share sales price as
reported on AMEX was $2 1/2. The Company urges shareholders to obtain
current market quotations for the Shares prior to tendering any Shares
pursuant to the Offer.
As of March 27, 1998 the Company had approximately 500 shareholders of
record.
It has been the Company's policy to reinvest all earnings in the
business, and the Company has never paid dividends on its Common Stock.
Also, under credit agreements with its bank, the Company may not declare or
pay dividends to shareholders without the prior consent of the bank.
7. INTEREST OF CERTAIN PERSONS; TRANSACTIONS AND ARRANGEMENTS CONCERNING
THE SHARES.
Sale of Shares to Ampersand and Related Transactions (collectively,
the "Ampersand Transaction"). On March 26, 1998 the Company entered into an
Investment Agreement with Ampersand Specialty Materials and Chemicals III
Limited Partnership and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership, two affiliated venture capital funds
located at 55 William Street, Suite 240, Wellesley, Massachusetts 02181-
4003. Ampersand has agreed to purchase 1,538,462 Shares from the Company at
a price of $3.25 per Share in cash (an aggregate purchase price of
$5,000,001). The Investment Agreement also contemplates that the Company
will purchase Shares from existing shareholders through the Offer and that
Roger E. Brooks will purchase 486,923 Shares from the Company at $3.25 per
Share through a restricted stock arrangement.
Ampersand's purchase of Shares pursuant to the Investment Agreement is
subject to certain conditions, including without limitation the condition
that the Company's shareholders (a) approve a proposed amendment to the
Articles of Incorporation to increase the authorized common stock to
8,000,000 Shares, (b) approve a proposed amendment to the Articles of
Incorporation to provide that Section 910 of the Maine Business Corporation
Act will no longer apply to the Company, (c) approve a proposed 1998
Employee Stock Option Plan, and (d) approve a proposed restricted stock
arrangement with Mr. Brooks. The proposed amendments to the Articles of
Incorporation and the proposed 1998 Employee Stock Option Plan are further
described in the Company's most recent definitive Proxy Statement which has
previously been provided to shareholders.
Mr. Brooks will pay for his 486,923 Shares by delivering a promissory
note for $1,332,500 and cash in the amount of $250,000. A portion of the
Shares will be subject to a repurchase right in favor of the Company,
exercisable at his original purchase price of $3.25 per share. The note
will bear interest at the applicable federal rate (approximately 5.7%) and
will become due and payable in five years, or sooner in the event of
termination of Mr. Brooks' employment. Mr. Brooks' Shares will be pledged
to the Company as collateral to secure timely repayment of his note.
Pursuant to the Investment Agreement, the Company has agreed to grant
Ampersand and Mr. Brooks certain registration rights covering any Shares
owned by them. Ampersand and Mr. Brooks will have two "demand" registration
rights, by which the Company will file registration statements covering
their resale of Shares in an underwritten public offering meeting certain
standards. In addition, Ampersand and Mr. Brooks will have an unlimited
number of "piggyback" registration rights, by which the Company will allow
Ampersand and Mr. Brooks to include their Shares in registration statements
covering resales by other shareholders or covering (with certain exceptions)
offerings of Shares by the Company itself.
The Investment Agreement provides Ampersand a right of first refusal
on the Company's future sales of capital stock to third parties. Such
provision contains exceptions for (i) the grant of stock options to the
Company's employees or consultants pursuant to plans approved by the
Company's Board of Directors, or the issuance of Shares upon the exercise of
such options, (ii) the sale by the Company of Shares in a public offering,
and (iii) the issuance of Shares upon conversion or exercise of any
securities as to which Ampersand was previously offered a right of first
refusal under this provision.
The Company has also agreed to grant Ampersand and Mr. Brooks a right
(the "put" right) to require the Company to repurchase Shares held by them.
This right is triggered if (i) the Company receives a bona fide offer from
an unaffiliated third party to acquire the Company in a transaction that
values the Company's common stock at more than $10 per Share and (ii)
Ampersand endorses the offer but the Company declines to accept the offer.
The Company would thereafter be required to purchase the Shares held by
Ampersand and Mr. Brooks at a price equivalent to the third party's offer.
Prior to closing of Ampersand's purchase of Shares, the Company has
agreed that neither it nor its officers or directors will, directly or
indirectly, solicit or respond to any offers for the acquisition of all or
any material portion of the Company's assets or Shares, or negotiate with
respect to any unsolicited offer or indication of interest. Provided,
however, that the Company and its Board may negotiate with a third party in
connection with an unsolicited acquisition proposal, to the extent that the
Board determines in good faith upon advice of its counsel that such action
is necessary to comply with its fiduciary duties to the Company under
applicable law.
Under the Investment Agreement, the Company has made certain
representations and warranties to Ampersand, and has entered into
miscellaneous covenants with Ampersand, on terms that the Company considers
to be customary for agreements of this type. The parties have agreed to
indemnify each other against expenses arising from breach of a
representation, warranty, or covenant, to the extent such expenses exceed a
specified dollar threshold. In addition, the Company has agreed to issue
additional Shares to Ampersand for nominal consideration in the event that a
pending lawsuit between the Company and a former executive results in a
verdict or settlement exceeding a specified amount.
Following the closing of its Share purchase under the Investment
Agreement, Ampersand would hold Shares representing approximately 31.7% of
the then outstanding Shares (assuming consummation of the Offer, and without
giving effect to stock option exercises, if any, prior to closing).
Ampersand has represented to the Company that it has sufficient financial
resources to purchase the Shares pursuant to the terms of the Investment
Agreement, and will not be borrowing funds for this purpose.
A copy of the Investment Agreement is filed with the Commission as an
exhibit to the Issuer Tender Offer Statement on Schedule 13E-4 (the
"Schedule 13E-4").
Stockholders Agreement. As a condition to consummation of Ampersand's
Share purchase under the Investment Agreement, the Company, Ampersand, Mr.
Brooks, Alan Lukas, Paul E. Lukas, and certain related parties would enter
into a Stockholders Agreement restricting the voting and transfer of Shares
owned by each. At the time of entering into such Stockholders Agreement,
the Shares owned by these shareholders will represent at least 70% of the
outstanding Shares.
The shareholders who are parties to the Stockholders Agreement will
agree to vote their Shares (i) to limit the size of the Company's Board of
Directors to five Directors and (ii) to elect as those Directors Charles D.
Yie, Alan Lukas, the Chief Executive Officer (Mr. Brooks), and one designee
each of Ampersand and Alan Lukas. The two nominees of Mr. Lukas and
Ampersand may not be otherwise affiliated with them or the Company.
Ampersand may at any time designate someone other than Mr. Yie for election
to the Board, which person may be an affiliate of Ampersand.
The shareholders who are parties to the Stockholders Agreement will
also agree to vote their Shares in such a way that Ampersand will be able to
block certain significant transactions opposed by it, such as financing
transactions exceeding $5 million or a merger or other sale of the Company.
In the event the "put" right of Ampersand and Mr. Brooks is triggered as
described above, these shareholders will agree to vote their Shares in such
a way as to increase the size of the Board of Directors by two Directors,
and to elect two nominees of Ampersand to fill those positions. Moreover,
for a period of five years, these shareholders will agree not to make open-
market purchases of Shares and not to initiate or assist in proxy
solicitations, except with prior written consent from the Company's Board of
Directors. These restrictions on open-market purchases and proxy
solicitations will become inapplicable to Ampersand and Mr. Brooks if,
during the relevant five-year period, their "put" right is triggered and the
Company fails to purchase their shares within a designated period of time.
The shareholders who are parties to the Stockholders Agreement will
agree to grant each other certain rights of first refusal to purchase Shares
that a shareholder proposes to sell to a third party; and to grant each
other certain co-sale rights to participate in selling Shares to a third
party.
A copy of the proposed Stockholders Agreement is filed with the
Commission as an exhibit to the Schedule 13E-4.
Employment Agreement with Mr. Brooks. The Company has agreed to hire
Roger E. Brooks as its Chief Executive Officer, effective as of the date of
closing of the contemplated Share purchase by Ampersand. Under a form of
Employment Agreement approved by the INCON Board of Directors on March 18,
1998, Mr. Brooks will receive a salary of $175,000 per year plus a $600 per
month car allowance. The Company may terminate Mr. Brooks' employment at
any time, with or without cause. In the event of a termination without
cause, Mr. Brooks will be entitled to between six and twelve months'
severance compensation, at a rate equal to his then current salary, plus
continued participation in Company health insurance and other benefits
during such period. The term of the agreement runs through June 30, 2000,
and will automatically renew for successive one-year terms unless either Mr.
Brooks or the Company gives notice to the contrary at least 90 days before
the renewal date. If the Company gives notice of nonrenewal prior to the
third anniversary of the agreement, Mr. Brooks will be entitled to the same
severance and benefit arrangements as for a termination without cause.
The proposed Employment Agreement with Mr. Brooks is filed with the
Commission as an exhibit to the Schedule 13E-4, and is incorporated herein
by reference.
Mr. Brooks has been employed by the Company as a consultant since
February 5, 1998. The contract is terminable by either party at will. Mr.
Brooks receives a fee of $675 per day for his services under this
arrangement.
Employment Agreement with Mr. Lukas. Alan Lukas, who has served as
Chief Executive Officer of the Company since its founding in 1978, will
retain his role as Chairman of the Board when Mr. Brooks becomes the Chief
Executive Officer. In addition to his duties as Chairman, Mr. Lukas will
continue to be a full-time executive of the Company, serving as Vice
President for Product Development.
Under a form of Employment Agreement approved by the INCON Board of
Directors on March 18, 1998, Mr. Lukas will receive a $30,000 retainer for
his role as Chairman and a $120,000 salary as Vice President for Product
Development. Amounts paid as a retainer are in lieu of other compensation
to Directors for service on the Board of Directors.
The term of Mr. Lukas' employment runs through June 30, 2000, and will
automatically renew for successive one-year terms unless either he or the
Company gives notice to the contrary at least 90 days before the renewal
date. The term of his retention as Chairman runs through June 30, 2003.
The Company may terminate these arrangements with Mr. Lukas at any time,
with or without cause. In the event of a termination by the Company without
cause, Mr. Lukas will be entitled to (i) between six and twelve months'
severance compensation (but in any event through June 30, 2000), at a rate
equal to his then current salary, plus continued participation in Company
health insurance and other benefits during such period and (ii) continued
payment of his $30,000 retainer and health insurance benefits through June
30, 2003, in return for up to 400 hours of consulting services to the
Company per year.
A copy of the proposed Employment Agreement with Mr. Lukas is filed
with the Commission as an exhibit to the Schedule 13E-4, and is incorporated
herein by reference.
Restricted Stock Arrangement with Mr. Brooks. As discussed above,
subject to receipt of shareholder approval, the Company has agreed to sell
Roger E. Brooks 486,923 Shares at a price of $3.25 per Share. The Company
will have the right (but not the obligation) to repurchase some of the
Shares from Mr. Brooks at the initial purchase price of $3.25 per Share.
Initially, the repurchase right will extend to all of the Shares except
76,923 (representing the number of Shares for which Mr. Brooks is paying
cash at the time of the purchase). Thereafter, the repurchase right will
lapse as to 25,625 Shares for each three months of continued employment
(representing 1/16th of the remaining Shares); if Mr. Brooks is still
employed by the Company in four years, the repurchase right will have lapsed
entirely. In addition, the repurchase right will lapse as to 102,500 Shares
if the Company were to terminate Mr. Brooks' employment without cause (as
defined under his Employment Agreement). Finally, the repurchase right will
lapse in its entirety in the event of a "change in control" of the Company
(as defined).
From the standpoint of the Company, the effect of this so-called
restricted stock arrangement is that Mr. Brooks will own all 486,923 Shares,
but will be subject to a risk of forfeiture of at least a portion of the
Shares if he remains employed by the Company for less than four years.
Moreover, Mr. Brooks will forfeit Shares if and to the extent that he fails
to pay the full purchase price for the stock (plus all accrued interest)
when the underlying promissory note becomes due.
Mr. Brooks has advised the Company that he intends to treat this
transaction as a completed sale of the stock at fair market value for
purposes of Section 83(b) of the Internal Revenue Code and that such
treatment is proper for tax purposes. As such, he would be entitled to
capital gain or loss at the time of resale of the underlying Shares
(generally equal to the net resale price minus $3.25 per Share) and he would
not have taxable income -- nor would the Company have any deductible
compensation expense -- by virtue of any lapse of the Company's repurchase
rights or any payment against the promissory note.
The proposed Employee Restricted Stock Purchase Agreement with Mr.
Brooks and the related form of promissory note and pledge agreement are
filed with the Commission as exhibits to the Schedule 13E-4, and are
incorporated herein by reference.
Other Information Concerning the Shares. Alan Lukas is presently the
beneficial owner of approximately 35.3% of the outstanding Shares and Paul
E. Lukas is the beneficial owner of approximately 15.2% of the outstanding
Shares. These individuals, individually or collectively, may be deemed to
control the Company.
As of March 27, 1998, the Company's directors and executive officers
as a group beneficially owned an aggregate of approximately 36.1% of the
outstanding Shares (including 36,333 Shares that such persons have the right
to acquire through exercises of stock options within 60 days of March 30,
1998). See Schedule I.
The Company has been advised that Alan Lukas and Paul E. Lukas intend
to tender sufficient Shares into the Offer to result in a purchase from them
of at least 200,000 Shares in the aggregate (representing approximately 12%
of their combined ownership). The other directors and executive officer of
the Company are permitted to tender Shares pursuant to this Offer, but
(except for Alan Lukas and Paul E. Lukas) the Company has been advised that
no other director or executive officer intends to tender Shares.
The Company engaged in no transactions involving Shares during the 40
business days prior to March 30, 1998, except for the Ampersand Transaction
and except for grants or exercises of stock options pursuant to INCON stock
option plans.
Based upon information provided to the Company by its directors and
executive officers, neither the Company nor, to the Company's knowledge, any
of the directors or executive officers of the Company, any of its
associates, or any person controlling the Company or any executive officer
or director of any such person has effected any purchase or sale of Shares
during the 40 business days prior to the date hereof.
Except for the Ampersand Transaction and as otherwise set forth in
this Offer to Purchase, neither the Company nor, to the Company's knowledge,
any of its directors or executive officers, or any person controlling the
Company or any executive officer or director of any such person, is a party
to any contract, arrangement, understanding or relationship with any other
person relating, directly or indirectly, to the Offer or with respect to any
securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any such securities, joint ventures, loans or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies, consents or authorizations).
8. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases 475,000 Shares pursuant to the
Offer, the Company expects the maximum aggregate cost, including all fees
and expenses related to the Offer, to be approximately $1,625,000. It is
anticipated that the funds required to pay all such costs will be obtained
from the proceeds of the Ampersand Transaction. As described in Section 7,
the Company has agreed to sell Ampersand 1,538,462 Shares at a price per
share of $3.25, pursuant to the Ampersand Transaction. The Company
anticipates the proceeds from the Ampersand Transaction will equal
$5,000,001, less certain transactional costs.
9. BACKGROUND AND PURPOSE OF THE OFFER.
The principal purpose of the Offer is to provide shareholders a limited
opportunity to sell a portion of, or perhaps all, their Shares at a premium
over recent market prices of the Shares. The Offer will also provide the
Company with treasury shares to resell in a proposed restricted stock
arrangement with a new executive officer. The Offer also provides shareholders
with an opportunity to increase their proportionate ownership interest in the
Company, either by not participating in the Offer or by participating in the
Offer and reinvesting their after-tax proceeds in additional Shares.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR TO REFRAIN FROM
TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY
PERSON TO MAKE ANY SUCH RECOMMENDATION. EACH SHAREHOLDER IS URGED TO
EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THE SHAREHOLDER'S
OWN INVESTMENT AND TAX ADVISORS AND MAKE SUCH SHAREHOLDER'S OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
Any Shares acquired by the Company pursuant to the Offer will
initially be held as treasury shares and will be available for issuance by
the Company without further shareholder action (except as required by
applicable law or the rules of any securities exchanges on which the Shares
are then listed). Such Shares could be issued for general or other
corporate purposes, including stock splits or dividends, acquisitions, the
raising of additional capital for use in the Company's business and the
implementation of employee benefit plans. It is anticipated that 410,000
treasury Shares will be issued to Roger E. Brooks pursuant to his proposed
restricted stock arrangement as part of the Ampersand Transaction (described
in Section 7).
10. CERTAIN INFORMATION ABOUT THE COMPANY.
General. The Company develops, manufactures, and sells electronic
measurement systems to the petroleum and power utility industries and for
general level measurement and predictive maintenance applications. The
Company's products, including related applications and communication
software, enable the users to detect leaks, measure liquid levels, and to
perform predictive maintenance monitoring of equipment as an early indicator
of wear and potential failure. The Company is a Maine corporation founded
in 1978. Its principal executive offices are located at 74 Industrial Park
Road, Saco, Maine 04072, and its telephone number is (207) 283-0156.
Further information regarding the operations of the Company and
related matters is included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 27, 1997 (the "1997 10-KSB").
Historical Financial Information. The following table sets forth
certain historical financial information of the Company. The historical
financial information as of and for the years ended December 27, 1997 and
December 31, 1996 has been taken from the Company's audited financial
statements included in the 1997 10-KSB. Additionally, set forth below is
pro forma financial information which assumes the Ampersand Transaction and
the Offer had occurred as of January 1, 1997 for the December 31, 1997
fiscal year. More comprehensive financial information is included in the
1997 10-KSB.
The following historical financial information should be read in
conjunction with, the 1997 10-KSB.
INTELLIGENT CONTROLS, INC.
BALANCE SHEETS
December 27, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 300 $ 133,690
Accounts receivable, net of
allowance for doubtful
accounts of $50,000 in 1997
and $60,000 in 1996 2,200,062 1,960,979
Inventories 1,884,328 2,863,335
Prepaid expenses and other 227,704 312,837
Income tax receivable 119,099 160,000
Deferred income taxes 192,464 210,000
---------- ----------
Total current assets 4,623,957 5,640,841
Property and equipment, net 856,581 851,081
Other assets 27,176 19,979
Restricted cash - 199,120
---------- ----------
$5,507,714 $6,711,021
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Non-interest bearing overdraft $ 67,259 $ -
Note payable - bank 754,366 2,015,862
Accounts payable 769,097 881,349
Accrued expenses 520,709 673,767
Current portion of long-term debt 194,700 191,700
---------- ----------
Total current liabilities 2,306,131 3,762,678
Long-term debt, net of current portion 372,401 409,967
Deferred income taxes 67,295 58,450
Deposit from stockholder - 199,120
Stockholders' equity:
Common stock, no par value;
5,000,000 shares authorized;
3,274,306 shares issued in 1997
and 3,238,952 in 1996 2,293,841 2,252,041
Retained earnings 468,046 33,071
Treasury stock,
2,153 shares at cost in 1996 - (4,306)
---------- ----------
Total stockholders' equity 2,761,887 2,280,806
---------- ----------
$5,507,714 $6,711,021
========== ==========
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
INTELLIGENT CONTROLS, INC.
STATEMENTS OF INCOME
For the Years Ended December 27, 1997 and December 31, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $13,005,184 $9,890,728
Cost of sales 7,568,247 5,836,720
----------- ----------
Gross profit 5,436,937 4,054,008
Operating expenses:
Selling, general and administrative 3,777,699 3,511,273
Research and development 790,812 983,261
----------- ----------
4,568,511 4,494,534
----------- ----------
Operating income (loss) 868,426 (440,526)
Other expense:
Interest expense (157,230) (186,734)
Other expense (30,221) (23,853)
----------- ----------
(187,451) (210,587)
----------- ----------
Income (loss) before income
tax expense (benefit) 680,975 (651,113)
Income tax expense (benefit) 246,000 (231,000)
----------- ----------
Net income (loss) $ 434,975 $ (420,113)
=========== ==========
Net income (loss) per share
basic and diluted $ .13 $ (.13)
=========== ==========
Weighted average common
shares outstanding 3,249,749 3,231,058
Weighted average common
and common equivalent shares
outstanding $ 3,392,686 $3,231,058
=========== ==========
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
INTELLIGENT CONTROLS, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Pursuant to the Ampersand Transaction, Ampersand has agreed to invest
$5.0 million to purchase Shares and Roger E. Brooks has agreed to invest
$250,000 to purchase Shares, subject to satisfaction of certain conditions.
See Section 7. Additionally the Company has issued this Offer commencing
March 30, 1998 to purchase up to 475,000 Shares at $3.25 per a Share.
The Unaudited Pro Forma Financial Information gives effect to the
Share purchases by Ampersand and Roger E. Brooks, and the Offer, using the
assumptions and adjustments described in the accompanying Notes to Unaudited
Pro Forma Financial Statements and should be read in conjunction with the
historical financial statements of the Company included herein. The pro
forma information does not purport to be indicative of the results which
would have been reported if the above transactions had been in effect for
the period presented or which may result in the future.
The Unaudited Pro Forma Balance Sheet is presented to give effect to
the Ampersand Transaction and the Offer as if they had occurred on December
27, 1997, and to show the balance sheet of the Company net of the proceeds
of the Share purchases through the Ampersand Transaction and the cost of the
Offer. The Unaudited Pro Forma Income Statement assumes the Ampersand
Transaction and the Offer occurred at the beginning of the fiscal year ended
December 27, 1997 and reflects such costs as management restructuring salary
increases and reduced interest cost for assumed paydown of debt. See the
accompanying Notes to the Unaudited Pro Forma Financial Statements.
INTELLIGENT CONTROLS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
(assuming transaction date of December 27, 1997)
<TABLE>
<CAPTION>
DECEMBER 27,
1997 ADJUSTMENTS NOTE PRO FORMA
ASSETS
<S> <C> <C> <C> <C>
Cash & Cash Equivalents $ 300 4,850,000 1 2,648,984
(826,316) 2
(1,625,000) 3
250,000 4
Accounts Receivable,
net of allowance 2,200,062 2,200,062
Inventories 1,884,328 1,884,328
Prepaid Expenses and Other 227,704 227,704
Income Tax Receivable 119,099 119,099
Deferred Income Taxes 192,464 192,464
----------- ----------
Total Current Assets 4,623,957 7,272,641
Property, Plant & Equipment, net 856,581 856,581
Other Assets 27,176 27,176
----------- ----------
Total Assets $ 5,507,714 $8,156,398
=========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Non-Interest Bearing Overdraft 67,259 67,259
Notes Payable - Bank 754,366 (754,366) 2 0
Accounts Payable 769,097 769,097
Accrued Expenses 520,709 520,709
Current Portion of Long term Debt 194,700 (34,670) 2 160,030
----------- ----------
Total Current Liabilities 2,306,131 1,517,095
Long-term Debt 372,401 (37,280) 2 335,121
Deferred Income Taxes 67,295 67,295
----------- ----------
Common Stock 2,293,841 4,850,000 1 7,143,841
Common Stock - Restricted 1,582,500 4 1,582,500
Retained Earnings 468,046 468,046
Less:
Treasury Stock (1,625,000) 3 (1,625,000)
Officer Promissory Note (1,332,500) 4 (1,332,500)
----------- ----------
Total Liabilities & Stockholders'
Equity $ 5,507,714 $8,156,398
=========== ==========
</TABLE>
INTELLIGENT CONTROLS, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
(assuming transaction date of January 1, 1997)
<TABLE>
<CAPTION>
DECEMBER 27,
1997 ADJUSTMENTS NOTE PRO-FORMA
<S> <C> <C> <C> <C>
Net Sales $13,005,184 $13,005,184
Cost of Sales 7,568,247 7,568,247
----------- -----------
Gross Profit 5,436,937 5,436,937
Operating Expenses:
Selling, General and
Administrative 3,777,699 248,200 5 4,025,899
Research and Development 790,812 790,812
----------- -----------
4,568,511 4,816,711
Operating Income 868,426 620,226
Other Expense:
Interest Expense (157,230) 114,730 6 (42,500)
Other Expense (30,221) (30,221)
----------- -----------
(187,451) (72,721)
----------- -----------
Net Income Before Income
Tax Expense 680,975 547,505
Income Tax Expense (246,000) 48,049 7 (197,951)
----------- -----------
Net Income $ 434,975 $ 349,554
=========== ===========
Weighted Average Common Shares
Outstanding 3,249,749 4,800,134
Basic Net Income Per Share $ 0.13 $ 0.07
=========== ===========
Weighted Average Common
and Common Equivalent
Shares Outstanding 3,392,686 4,943,071
Diluted Net Income Per Share $ 0.13 $ 0.07
=========== ===========
</TABLE>
INTELLIGENT CONTROLS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. To record the purchase of 1,538,462 Shares by Ampersand at $3.25
per Share. Professional fees in the amount of $150,000 have been deducted
from the proceeds and off-set against contributed capital.
2. To record the assumed use of the Ampersand Transaction proceeds to pay
down the working capital line of credit (at $754,366) and a 9.5% term
note payable (at $71,950).
3. To record the buyback of 475,000 Shares at $3.25 per Share in accordance
with the Offer, including $81,250 in professional fees and printing costs.
4. To record the purchase of 486,923 restricted Shares by an officer at $3.25
per Share. Consideration for this purchase includes $250,000 in cash as
well as a $1,332,500 promissory note which has been reflected as an offset
to stockholders' equity.
5. To record additional compensation expense related to compensation
agreements of two officers in connection with the Investment Agreement.
6. To eliminate interest cost for the assumed paydown of the working capital
line of credit and the 9.5% term note payable on January 1, 1997.
7. To tax effect the additional compensation expense and the reduction in
interest costs noted in entries 1 and 2, above.
Book value per share at fiscal year-end 1996, 1997 and 1997 (pro
forma) was $.695, $.70 and $1.31, respectively. The ratio of earnings to
fixed charges for fiscal years 1997 and 1997 (pro forma) was $5.33 and
$13.88, respectively. For 1996, earnings were inadequate to cover fixed
charges; the deficiency for that year was $837,847.
Additional Information. Additional information concerning the Company
is set forth in the Company's most recent definitive Proxy Statement which
has previously been provided to shareholders, and in the 1997 10-KSB. The
Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4
with the Commission which includes certain additional information relating to
the Offer. Copies of such documents are available upon request from the
Company. The Company is subject to the informational reporting requirements of
the Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the Commission relating to its
business, financial condition and other matters. The Company is required to
disclose in such reports and proxy statements certain information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal owners of the
Company's securities and any material interest of such persons in
transactions with the Company.
Such material may be inspected and copied upon payment of the
prescribed rates at the public reference facilities of the Commission, at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices at 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies may also be obtained by mail upon payment of the
prescribed rates from the Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains an
internet web site at HTTP://WWW.SEC.GOV, containing reports, proxy and
informational statements and other information regarding companies who file
reports electronically with the Commission, including the Schedule 13E-4 and
other materials filed by the Company. The Schedule 13E-4 will not be
available at the Commission's regional offices.
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and could reduce the
number of shareholders. Nonetheless, the Company anticipates that there
will still be a sufficient number of Shares outstanding and publicly traded
following consummation of the Offer to ensure a continued trading market in
the Shares. Based on the published guidelines of AMEX, the Company does not
believe that its purchase of Shares pursuant to the Offer will cause the
remaining Shares to be delisted from AMEX Emerging Company Marketplace.
The Shares are not currently "margin securities" under the rules of
the Federal Reserve Board, and the Company believes that, following the
purchase of Shares pursuant to the Offer, the remaining Shares will not be
margin securities.
The Shares are registered under the Exchange Act which requires, among
other things, that the Company furnish certain information to its
shareholders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of the Company's shareholders. The
Company believes that its purchase of Shares pursuant to the Offer will not
result in the Shares becoming eligible for deregistration under the Exchange
Act. Additionally, the Company will decrease the size of the Offer if and
to the extent necessary to prevent becoming eligible for deregistration
under the Exchange Act.
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVAL.
The Company is not aware of any license or regulatory permit that
appears to be material to its business that might be adversely affected by
its acquisition of Shares pursuant to the Offer or of any approval or other
action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
Company's acquisition of Shares pursuant to the Offer. Should any such
approval or other action be required, the Company currently contemplates
that it will seek such approval or other action. The Company cannot predict
whether it may determine that it is required to delay the acceptance for
payment of or payment for Shares tendered pursuant to the Offer pending the
outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial condition or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. The Company's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 5.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain anticipated
Federal income tax consequences of a sale of Shares pursuant to the Offer.
This summary does not discuss all aspects of Federal income taxation that
may be relevant to a particular shareholder in light of personal
circumstances or to certain types of shareholders subject to special
treatment under the Federal income tax laws (for example, financial
institutions, tax-exempt organizations, foreign investors, dealers in
securities and shareholders who received their Shares pursuant to
compensation arrangements with the Company) and does not discuss any aspect
of state, local or foreign tax laws. Each shareholder is urged to consult
his or her own tax advisor as to the particular tax consequences of a sale
of Shares pursuant to the Offer.
The sale of Shares pursuant to the Offer will be a taxable transaction
for Federal income tax purposes and may also be taxable under applicable
state, local, foreign or other tax laws. The Federal income tax
consequences to a shareholder will be determined under Sections 301 and 302
(and possibly Section 1045) of the Internal Revenue Code of 1986, as amended
(the "Code") and may vary depending upon a shareholder's particular facts
and circumstances. Under Section 302 of the Code, a sale of Shares pursuant
to the Offer to Purchase will generally be treated as a sale or exchange if
such sale (i) is "substantially disproportionate" with respect to the
shareholder, (ii) results in a "complete termination" of the shareholder's
interest in the Company, or (iii) is "not essentially equivalent to a
dividend" with respect to the shareholder.
If any one of the three tests is satisfied, except as discussed below
regarding a possible deferral of gain, the shareholder tendering Shares
pursuant to the Offer will recognize gain or loss equal to the difference
between the amount of cash received by the shareholder pursuant to the Offer
and the shareholder's tax basis in the Shares sold. The gain or loss
recognized generally will be capital gain or loss if the Shares are held by
the shareholder as a capital asset and such gain or loss will be long term
capital gain or loss if the Shares have been held for a period of more than
one year. The maximum rate of Federal income tax on such gain, however,
will depend upon whether the Shares have been held for more than eighteen
months, or more than twelve months but not more than eighteen months.
In determining whether any of the three tests is satisfied, a
shareholder must take into account not only Shares actually owned but also
Shares that are "constructively owned" under Section 318 of the Code.
Generally, a shareholder will be considered to constructively own Shares
which the shareholder has an option to acquire and Shares owned (and in some
cases constructively owned) by certain related individuals or entities.
The sale of Shares pursuant to the Offer will be "substantially
disproportionate" with respect to a shareholder if the percentage of the
outstanding voting stock of the Company actually and constructively owned by
the shareholder immediately after the Offer is (a) less than 50% of the
total combined voting stock of the Company and (b) less than 80% of the
percentage of the outstanding voting stock of the Company actually and
constructively owned, in each case, by such shareholder immediately before
the sale of the Shares pursuant to the Offer. Shareholders should consult
their own tax advisor to determine whether the "substantially
disproportionate" test applies to their particular facts and circumstances.
The sale of the Shares pursuant to the Offer will be treated as a
"complete termination" of the shareholder's interest in the Company if
either (i) all shares actually and constructively owned by the shareholder
are sold pursuant to the Offer, or (ii) all of the Shares actually owned by
the shareholder are sold pursuant to the Offer and the shareholder is
eligible to waive and does effectively waive attribution of all Shares
constructively owned by the shareholder in accordance with Section 302(c) of
the Code.
If the sale of Shares by a shareholder fails to satisfy the
"substantially disproportionate" test or the "complete termination" test,
the shareholder may nevertheless receive sale or exchange treatment in the
event the sale pursuant to the Offer is "not essentially equivalent to a
dividend." A shareholder will generally meet this test in the event the
sale of Shares pursuant to the Offer by the shareholder results in a
"meaningful reduction" in the shareholder's proportional interest in the
Company. The determination as to whether a sale of Shares by a shareholder
pursuant to the Offer will be "not essentially equivalent to a dividend"
will depend on the individual shareholder's facts and circumstances. The
Internal Revenue Service has held in a published ruling that a 3.3%
reduction in the proportionate interest of a less than 1% shareholder in a
publicly held corporation who exercised no control over corporate affairs
constituted a "meaningful reduction." Shareholders should consult their own
tax advisors as to whether the "not essentially equivalent to a dividend
test" applies to their individual circumstances.
Shareholders should be aware that their ability to satisfy any of the
tests indicated above could be affected by any proration pursuant to the
Offer.
In addition, it may be possible for a shareholder to satisfy one or
more of the above tests by contemporaneously selling or otherwise disposing
of some or all of the Shares that are actually or constructively owned by a
shareholder but which are not purchased pursuant to the Offer. Shareholders
should also be aware that the acquisition of additional Shares or an option
to acquire additional Shares, or the acquisition by certain related parties,
could adversely affect whether such shareholder qualifies for any of the
tests set forth above.
In the event that none of the three tests is satisfied by the selling
shareholder and the Company has "sufficient" earnings and profits, the
selling shareholder will be treated as having received a dividend that must
be included in such selling shareholder's gross income in an amount equal to
the entire cash received by the shareholder pursuant to the Offer. In such
event, the selling shareholder will not be entitled to offset the amount
received by the shareholder's basis in the redeemed Shares and the basis in
the redeemed Shares will be added to the basis in the selling shareholder's
remaining Shares. In the event there are "insufficient" earnings and
profits, the shareholder will have a non-taxable return of capital to the
extent of the shareholder's tax basis and thereafter, capital gain to the
extent the distribution exceeds the earnings and profits.
In the case of a corporate shareholder, any amount received which is
treated as a dividend may be eligible for the 70% "dividends received"
deduction allowable to domestic corporate shareholders under Section 243 of
the Code subject to certain limitations which would include those relating
to "debt finance portfolio stock" under Section 246A of the Code and to the
holding period requirements set forth in Section 246 of the Code. Any
amount treated as a dividend by a corporate shareholder may constitute an
"extraordinary dividend" subject to Section 1059 of the Code. In such event
a corporate shareholder would be required to reduce the tax basis of its
remaining Shares (but not below zero) by the portion of any "extraordinary
dividend," which is deducted under the dividends received deduction. In the
event such portion exceeds the shareholder's tax basis in the remaining
Shares, the shareholder must treat any such excess as additional gain or
loss upon the subsequent sale or other disposition of the Shares. With
certain exceptions, a dividend will be considered extraordinary in the event
(i) the dividends attributable to Shares held for two years or less exceeds
10% of the greater of (a) the shareholder's adjusted basis in the Shares or
(b) the fair market value of the Shares, or (ii) except as otherwise set
forth in Treasury Regulations which have not yet been promulgated, any
amount treated as a dividend under Section 301 which is not part of a pro
rata redemption. It is not anticipated that the sales pursuant to the Offer
will be pro rata. Thus, it is anticipated that the extraordinary dividend
rules will apply to any amount received pursuant to the Offer which is
taxable as a dividend to a corporate shareholder. Corporate shareholders
should be aware of special aggregation rules that may apply under Section
1059. Corporate shareholders are urged to consult their own tax advisors as
to the effect of Section 1059 of the Code on their Shares.
The Code provides special tax incentives for equity investment in
certain types of small businesses, including those engaged in manufacturing,
such as the Company. Code Section 1202 permits noncorporate investors to
exclude up to half of the gain they realize on the disposition of qualified
small business stock which is held for more than five years. The effect of
this provision is, potentially, a 50% reduction in the capital gains tax
rate on profits from the resale of such stock. Application of this
provision, however, will preclude the application of the 20% maximum federal
fund rate for stock held more than 18 months as contained in the Taxpayer
Relief Act of 1997.
A shareholder who has purchased Company stock directly from the
Company will, generally, be entitled to favorable tax treatment if the
following conditions are met: (1) the purchaser is not a C corporation or
other disqualified entity; (2) he or she purchased the stock directly from
the Company (rather than in the open market from another shareholder) and
then holds the stock for more than five years after the date of issuance,
which must be after August 10, 1993; (3) for substantially all of the
purchaser's holding period, the Company has continued to use at least 80% of
its assets in the business of manufacturing (or some other qualified trade
or business); (4) neither the Company nor any related company repurchased
any Company stock from him or her (or from his or her "related persons")
within two years before or after the issuance date except for a de minimis
amount of less than 2% of what he or she owned immediately before the
redemption; and (5) the Company does not redeem more than 5% of the
aggregate value of its stock within one year before or after the issuance
date except for a de minimis amount not exceeding 2% of its outstanding
shares. In addition to the conditions summarized above, the Code (i) limits
the amount of gain that can be excluded by an investor who has realized more
than $10 million of gain (in the aggregate) on qualified stock of a given
issuer and (ii) provides that 42% of any excluded gain constitutes a tax
preference for alternative minimum tax purposes. Special rules may apply to
estates and trusts that purchase the stock.
Because less than 5 years have elapsed from the effective date of
Section 1202 and the anticipated closing date for the redemption of Shares
(August 12, 1998 is the earliest date the 5 years holding period can be
satisfied), any gain recognized upon a sale of Shares will not qualify for
the 50% capital gain exclusion (although the newly enacted capital gain
rates may apply in accordance with the provisions previously discussed).
Code Section 1045 may, however, permit shareholders who are individuals
to elect to defer their gain by reinvesting their redemption proceeds,
however, in any qualified small business stock. To qualify for this gain
deferral, the Shares sold must be qualified small business stock in the hands
of the selling individual, the tendered Shares must have been held for more
than 6 months, and the individual must elect the application of this section.
Generally speaking, the cost basis of the replacement qualified small business
stock will be reduced by the gain not recognized on the sale of the Shares and
there will be a carry over of the holding period of the Shares tendered.
These expected benefits could be reduced (or even eliminated) by
future statutes or regulations. Moreover, while state income tax laws often
define income and gain in manner similar to federal tax laws, investors
should not assume that these changes in federal law will necessarily result
in capital gains tax savings at the state level. Finally, it should be
noted that these tax benefits of Section 1202 and 1045 do not apply to INCON
shares issued prior to August 10, 1993, do not apply in cases where the
Shares are sold at a loss, and do not apply to Shares purchased from other
shareholders.
A foreign shareholder may be subject to dividend tax withholding at
either the 31% rate or a lower applicable treaty rate on the gross proceeds
of the sale of Shares pursuant to the Offer. Foreign shareholders should
consult their tax advisors regarding application of these withholding rules.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE TAX CONSEQUENCES OF A SALE OF SHARES PURSUANT TO THE OFFER MAY VARY
DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE
TENDERING SHAREHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE,
LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY
THE OFFER TO PURCHASE. DUE TO THE COMPLEXITY AND FACT SPECIFIC NATURE OF
THE ISSUES INVOLVED, PARTICULARLY WITH RESPECT TO THE PROVISIONS RELATING TO
QUALIFIED SMALL BUSINESS STOCK, EACH SHAREHOLDER IS URGED TO CONSULT WITH
SUCH SHAREHOLDER'S OWN TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SALES MADE PURSUANT TO
THE OFFER AND THE EFFECT OF THE CONSTRUCTIVE STOCK OWNERSHIP RULES MENTIONED
ABOVE.
14. CERTAIN LIMITATIONS ON PURCHASES OF SHARES BY THE COMPANY.
Although the Company is authorized by Maine law to purchase or redeem
its own shares of capital stock, the Company may not do so if (i) the
Company is insolvent, or (ii) such purchase or payment would render it
insolvent. Under Maine law, the Company may purchase its own Shares only to
the extent of unreserved and unrestricted earned surplus. If authorized by
the Articles of Incorporation or by the affirmative vote of at least a
majority of the outstanding shares of each class, whether or not entitled to
vote thereon by the provisions of the Articles of Incorporation, the Company
may also purchase the Shares to the extent of unreserved and unrestricted
capital surplus. For purposes of Maine law, "earned surplus" means that
portion of surplus of a corporation equal in an amount to the balance of its
net profits, income, gains and losses from the date of incorporation, or
from the latest date when the deficit was eliminated by application of its
capital surplus, after deducting subsequent distributions to shareholders
and transfers to stated capital and capital surplus to the extent that such
distributions and transfers are made out of earned surplus; "capital
surplus" means the entire surplus of a corporation other than its earned
surplus; "insolvent" means inability of the corporation to pay its debts as
they become due in the usual course of its business; "stated capital" means,
at any particular time, the sum of (1) the par value of all issued shares of
the corporation having a par value, and (2) such amounts not included in
clause (1) that have been transferred to stated capital of the corporation,
whether upon issue of shares as a share dividend or otherwise, less all
reductions from such sum as have been effected in a manner permitted by law;
and "surplus" means the excess of all net assets of a corporation over its
stated capital.
The Company's Articles of Incorporation presently do not authorize
repurchases of Shares from capital surplus. At the next Annual Meeting of
Shareholders (to occur April 30, 1998), the shareholders of the Company will
be asked to approve a proposal to amend the Articles of Incorporation to
allow the Company to repurchase Shares from capital surplus. Adoption of
this amendment is a condition to the Offer.
The Company's capital surplus (even before the Ampersand Transaction)
is sufficient to cover the aggregate Offer price. At the end of the
Company's most recent fiscal year, the Company's capital surplus was
approximately $2.3 million; consummation of the Ampersand Transaction would
further increase capital surplus by approximately $5.1 million.
Based on the Company's balance sheet as of December 27, 1997, which
balance sheet was prepared in accordance with generally accepted accounting
principles, the recorded amount of the Company's adjusted assets as of such
date exceeded the amount of the Company's adjusted liabilities and its
current assets exceeded its current liabilities. The Board of Directors has
determined, based upon the Board's familiarity with the Company's
operations, financial condition and prospects and the Board's discussions
with the Company's management and its advisors, that after giving effect to
the purchase pursuant to the Offer of Shares having an aggregate purchase
price of $1,543,750, the Company is not insolvent and will not be insolvent
as a result of the purchase of Shares pursuant to the Offer.
If a court, in a lawsuit brought by an unpaid creditor of the Company
or a representative of such creditors (such as a trustee in bankruptcy or
the Company as a debtor-in-possession), were to find that the Company (i)
was insolvent at the time the Company purchased Shares pursuant to the
Offer, (ii) was rendered insolvent by reason of such purchase, (iii) was
engaged, or was about to engage, in a business or a transaction for which
the assets remaining with the Company constituted an unreasonably small
capital, (iv) intended to incur, or believed, or reasonably should have
believed, that the Company would incur, debts and other liabilities beyond
its ability to pay as such debts and liabilities matured, or (v) entered
into such transaction with the actual intent to hinder, delay or defraud
creditors, then such court could, among other remedies, avoid the purchase
of Shares from shareholders and require that such shareholders return the
amount of cash received, or a portion thereof, in such purchase to the
Company, to a complaining creditor, or to a fund for the benefit of its
creditors. The measure of insolvency for purposes of the foregoing will
vary depending upon the law being applied. Generally, however, in addition
to the Maine definition of insolvency, the Company would be considered
insolvent if the fair value of the Company's assets were less than the
amount of the Company's total debts and liabilities or if the present fair
saleable value of the Company's property were less than the amount that
would be required to pay the Company's probable liability on its existing
debts as they become absolute or mature. There can be no assurance that a
court would value the Company's assets on the same basis as the Board of
Directors in determining whether the Company was insolvent at the time of
the purchase of Shares by the Company or that, regardless of the method of
valuation, a court would not determine that the Company was insolvent at
such time.
The Board of Directors and the Company's management believe, based on
management's internal projections and other financial information (including
the Company's historical and pro forma financial statements), that at the
time of the purchase of Shares pursuant to the Offer, the Company will be
solvent, will have sufficient capital for carrying on its business and will
be able to pay its debts as they mature.
15. EXTENSION OF THE TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, at any time and from time to
time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to the Depositary and making a
public announcement thereof. There can be no assurance that the Company
will exercise its right to extend the Offer. The Company also expressly
reserves the right, in its sole discretion, to terminate the Offer and not
accept for payment or pay for any Shares not theretofore accepted for
payment or paid for or, subject to applicable law, to postpone payment for
Shares upon the occurrence of any of the conditions specified in Section 5
by giving oral or written notice of such termination or postponement to the
Depositary and making a public announcement thereof. The Company's
reservation of the right to delay payment for Shares which it has accepted
for payment is limited by Exchange Act Rule 13e-4(f)(5), which requires that
the Company pay the consideration offered or return the Shares tendered
promptly after termination or withdrawal of the Offer. Subject to
compliance with applicable law, the Company further reserves the right, in
its sole discretion, to amend the Offer in any respect or to waive the
limitation on the maximum number of Shares to be purchased pursuant to the
Offer. Amendments to and extensions of the Offer may be made at any time
and from time to time by public announcement thereof, such announcement, in
the case of an extension, to be issued no later than 12:00 noon, New York
City time, on the next business day after the previously scheduled
Expiration Date. Any public announcement made pursuant to the Offer will be
disseminated promptly to shareholders in a manner reasonably designed to
inform shareholders. Without limiting the manner in which the Company may
choose to make a public announcement, the Company shall have no obligation
to publish, advertise or otherwise communicate any such public announcement,
except as required by applicable law, other than by issuing a release to the
Dow Jones News Service.
If the Company materially changes the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of
the Offer, the Company will disclose promptly such material change and
extend the Offer to the extent required by Exchange Act Rule 13e-
4(f)(1)(ii). This Rule requires that (other than with respect to a change
in price or a change in percentage of securities sought) the maximum period
during which an offer must remain open following material changes in the
terms of an offer or the information concerning an offer (other than with
respect to a change in price or a change in percentage of securities sought)
will depend on the facts and circumstances, including the relative
materiality of such terms or information. If (i) the Company increases or
decreases the price to be paid for Shares, or the Company increases the
number of Shares being sought and any such increase in the number of Shares
being sought exceeds 2% of the outstanding Shares, or the Company decreases
the number of Shares being sought; and (ii) the Offer is scheduled to expire
at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given, the Offer will be extended until
at least the end of such tenth business day.
16. FEES AND EXPENSES.
The Company has retained American Stock Transfer & Trust Company as
Depositary. The Depositary will receive reasonable and customary
compensation for its services. The Company will also reimburse the
Depositary for out-of-pocket expenses, including reasonable attorneys' fees.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than fees to the
Depositary as described above) for soliciting tenders of Shares pursuant to
the Offer. The Company will, however, on request through Sharon L. Binette,
Director of Shareholder Relations, reimburse such persons for customary
handling and mailing expenses incurred in forwarding materials with respect
to the Offer to the beneficial owners for which they act as nominees or
fiduciaries. No such broker, dealer, commercial bank, trust company or
other person has been authorized to act as the Company's agent for purposes
of this Offer. The Company will pay (or cause to be paid) any stock
transfer taxes payable because of its purchase of Shares pursuant to the
Offer, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
17. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the
Offer is not in compliance with applicable law. If the Company becomes
aware of any jurisdiction where the making of the Offer is not in compliance
with any valid applicable law, the Company will make a good faith effort to
comply with such law. If, after such good faith effort, the Company cannot
comply with such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares residing in such
jurisdiction. In any jurisdiction the securities or blue sky laws of which
require the Offer to be made by a licensed broker or dealer, the Offer is
being made on the Company's behalf by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Intelligent Controls, Inc.
March 30, 1998
SCHEDULE I
OWNERSHIP OF SHARES
As of March 27, 1998, there were 3,296,375 outstanding shares of
Intelligent Controls, Inc. common stock, the Company's only authorized class
of stock. Set forth below, as of such date, is information concerning all
persons known to the Company to beneficially own more than five percent of
the outstanding shares. All information is taken from or based upon
ownership filings made by such persons with the Commission, copies of which
were sent by such persons to the Company, or upon information provided by
such persons to the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
<S> <C> <C>
Alan Lukas 1,163,213 (1) 35.3%(1)
74 Industrial Park Road
Saco, Maine 04072
Paul E. Lukas 501,391 (2) 15.2%(2)
74 Industrial Park Road
Saco, Maine 04072
John D. Knight 248,240 (3) 7.0%(3)
6 Stonebrooke Road
Scarborough, ME 04074
- --------------------
<F1> Includes 1,039,983 shares owned directly by Alan Lukas, 3,333 shares
purchasable by him within the next 60 days under a stock option,
87,397 shares owned by his wife, 25,000 shares held by him as
custodian for his child, and 7,500 shares owned by Lukas Brothers, a
general partnership of which Alan Lukas and his brother Paul Lukas are
two of the three partners.
<F2> Includes 492,224 shares owned directly by Paul E. Lukas, 1,667 shares
purchasable by him within the next 60 days under a stock option, and
7,500 shares owned by Lukas Brothers.
<F3> Represents shares that are the subject of certain stock options
previously granted to Mr. Knight. These stock options are the subject
of a pending dispute between the Company and Mr. Knight, in which the
Company to date has refused to consummate Mr. Knight's attempted
exercise of the options in 1996.
</TABLE>
The following table shows, as of March 27, 1998, the number of shares
of Intelligent Controls, Inc. common stock which, to the Company's
knowledge, were beneficially owned by executive officers of the Company and
by each Director and other nominee for election as a Director. Except as
otherwise indicated, each person named owned less than one percent of the
outstanding common stock of the Company. All information is taken from or
based upon ownership filings made by such persons with the Commission,
copies of which were sent by such persons to the Company, or upon
information provided by such persons to the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED (1) OF CLASS (1)
<S> <C> <C>
Alan Lukas (2) 1,163,213 35.3%
Charlton H. Ames 9,682
George E. Hissong 10,500
Paul F. Walsh 16,000
Henry M. Powers 3,000
Charles D. Yie (3) 0
Roger E. Brooks (3) 0
All Directors, nominees, and
executive officers as a group 1,202,395 36.1%
- --------------------
<F1> Except as otherwise noted, all shares are owned directly. Includes
the following shares that are purchasable within the next 60 days
under outstanding stock options: Mr. Lukas, 3,333 shares; Mr. Ames,
7,000 shares; Mr. Hissong, 8,000 shares; Mr. Walsh, 16,000 shares; and
Mr. Powers, 2,000 shares.
<F2> Mr. Lukas' shares include 1,039,883 shares owned directly by him,
3,333 shares purchasable by him within the next 60 days under a stock
option, 87,397 shares owned by his wife, 25,000 shares held by a
custodian or trustee for his child, and 7,500 shares owned by Lukas
Brothers, a general partnership of which Mr. Lukas is one of the three
partners.
</TABLE>
Facsimile copies of the Letter of Transmittal will be accepted from
Eligible Institutions. A Letter of Transmittal and certificates for Shares
and any other required documents should be sent or delivered by each
shareholder or the shareholder's broker, dealer, commercial bank, trust
company or other nominee to the Depositary at its address set forth below.
The Depositary of the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Hand or Overnight Delivery: Facsimile Transmission
By Mail: (For Eligible Institutions Only):
(718) 234-5001
American Stock Transfer & American Stock Transfer &
Trust Company Trust Company
40 Wall Street, 46th Floor Confirm Facsimile by Telephone:
New York, NY 10005 (718) 921-8200
Any questions or requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal or the Notice of
Guaranteed Delivery may be directed to Sharon L. Binette, Director of
Shareholder Relations, at the telephone numbers and addresses listed below.
You may also contact your broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Offer. To confirm delivery of
your Shares, you are directed to contact the Depositary.
The information agent for the Offer is:
Sharon L. Binette
Director of Shareholder Relations
Intelligent Controls, Inc.
74 Industrial Park Road
P.O. Box 638
Saco, Maine 04072
(207) 283-0156
or
Call toll free (800) 872-3455
EXHIBIT 99.A2
THE OFFER WILL EXPIRE ON FRIDAY, MAY 1, 1998 AT 5:00 P.M., NEW YORK CITY
TIME, UNLESS EXTENDED BY THE COMPANY. TENDERING SHAREHOLDERS HAVE THE RIGHT
TO WITHDRAW SHARES TENDERED AT ANY TIME PRIOR TO EXPIRATION OF THE OFFER AND
THEY MAY WITHDRAW SHARES AFTER FRIDAY, MAY 22, 1998, UNLESS ACCEPTED BY THE
COMPANY BY THAT DATE.
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
INTELLIGENT CONTROLS, INC.
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 30, 1998
DEPOSITARY: AMERICAN STOCK TRANSFER & TRUST COMPANY
Facsimile Transmission
By Mail: (For Eligible Institutions Only):
By Hand or Overnight Delivery: (718) 234-5001
American Stock Transfer American Stock Transfer
& Trust Company & Trust Company
40 Wall Street Confirm Facsimile by Telephone:
New York, NY 10005 (718) 921-8200
(800) 937-5449
(781) 921-8200
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission to a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying
this Letter of Transmittal should be read carefully before this Letter is
completed.
Shares of Common Stock must be properly tendered prior to 5:00 P.M.,
New York City time, on Friday, May 1, 1998 to assure that at least a portion
of such shares will be purchased if more than 325,000 shares are properly
tendered by that date.
This Letter of Transmittal is to be completed by holders of shares of
Common Stock if either (1) certificates for such shares are to be forwarded
herewith or (2) delivery of shares is to be made by book-entry transfer to
the account maintained by the Depositary at The Depository Trust Company
("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia
Depository Trust Company ("PDTC") pursuant to the procedures set forth in
Section 2 of the Offer to Purchase. Holders of shares of Common Stock whose
certificates are not immediately available or who cannot deliver their
certificates and all other documents required hereby to the Depositary prior
to the Expiration Date (or who are unable to complete the procedure for
book-entry transfer on a timely basis) must tender their shares according to
the guaranteed delivery procedure set forth in Section 2 of the Offer to
Purchase. See Instruction 2.
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
List below the Certificate(s) Enclosed (Attach signed supplemental list if
necessary)
<TABLE>
<CAPTION>
Total No.
Name(s) and Address(es) of Registered of Shares Number of
Holder(s) (Please fill in exactly as Certificate Represented by Shares
Name(s) appear(s) on certificates No.(s)* Certificate(s)* Tendered**
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------- ----------- --------------- -----------
- ---------------------------------------- ----------- --------------- -----------
- ---------------------------------------- ----------- --------------- -----------
- ---------------------------------------- ----------- --------------- -----------
- ---------------------------------------- ----------- --------------- -----------
- ---------------------------------------- ----------- --------------- -----------
Total No. of Shares Tendered
- ------------------------------------------------------------------------------------------
<FN>
<F*> Need not be completed by Shareholders who tender Shares by book-entry
transfer.
<F**> If you desire to tender fewer than all Shares evidenced by any
certificate listed above, please indicate in this column the number
you wish to tender. Otherwise all Shares evidenced by such
certificates will be deemed to have been tendered.
</FN>
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC,
MSTC OR PDTC AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC,
MSTC OR PDTC MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ____________________________________
DTC, MSTC or PDTC Account Number _________________________________
Transaction Code Number __________________________________________
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY
PRIOR TO THE DATE HEREOF AND COMPLETE THE FOLLOWING:
Name of Registered Owner(s) ______________________________________
Date of Execution of Notice of Guaranteed Delivery _______________
Name of Institution which Guaranteed Delivery ____________________
DTC, MSTC or PDTC Account Number (if to be delivered by
book-entry transfer) ____________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to INTELLIGENT CONTROLS, INC., a Maine
corporation (the "Company"), the certificates described below representing
shares of its Common Stock (the "Shares"), at $3.25 per Share net to the
seller in cash, upon the terms and conditions set forth in the Offer to
Purchase dated March 30, 1998, receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which together constitute the "Offer").
The undersigned hereby sells, assigns and transfers to or upon the
order of the Company all Shares tendered hereby that are purchased pursuant
to the Offer and hereby irrevocably constitutes and appoints the Depositary
as attorney-in-fact of the undersigned, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with
an interest), to (a) deliver certificates for such Shares or transfer
ownership of such Shares on the account books maintained by DTC, MSTC or
PDTC, together in either case with all accompanying evidences of transfer
and authenticity, to or upon the order of the Company upon receipt by the
Depositary, as the undersigned's agent, of the purchase price, (b) present
such certificates for cancellation and transfer of such Shares on the
Company's books and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares, all in accordance with the
terms of the Offer. The undersigned hereby warrants that the undersigned
has full authority to sell, assign and transfer the Shares tendered hereby
and that the Company will acquire good title thereto, free and clear of all
liens, charges, encumbrances, conditional sale agreements or other
obligations relating to the sale or transfer thereof, and not subject to any
adverse claim, when and to the extent the same are purchased by it. Upon
request, the undersigned will execute and deliver any additional documents
necessary to complete the sale, assignment and transfer.
The undersigned understands that tenders of Shares pursuant to any of
the procedures described in the Offer to Purchase or in the Instructions
hereto will constitute an agreement between the undersigned and the Company
upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase, the Company may not be required to purchase any of
the Shares tendered hereby or may accept for purchase fewer than all of the
Shares tendered hereby. In either event, the undersigned understands that
certificate(s) for any Shares not purchased will be returned to the
undersigned at the address indicated above unless otherwise indicated under
the Special Delivery Instructions or Special Payment Instructions below.
The undersigned recognizes that the Company has no obligation, pursuant to
the Special Payment Instructions, to transfer any certificate for Shares
from the name of the registered holder thereof to another name if the
Company purchases none of the Shares represented by such certificates.
The check for the purchase price for such of the tendered Shares as
are purchased will be issued to the undersigned and mailed to the address
indicated above unless otherwise indicated under the Special Delivery
Instructions or Special Payment Instructions below.
All authority hereby conferred shall survive the death or incapacity
of the undersigned and all obligations of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned. Except as stated in the Offer, this tender is irrevocable.
SIGN HERE
(SEE INSTRUCTIONS 1, 5, 6 AND 9)
..............................................
..............................................
(Signature(s) of Owner(s)
Dated..................................., 1998
Name(s).......................................
.......................................
(Please Print)
Area Code and Telephone Numbers
(Day)...........................
(Night).........................
Tax ID or Social Security No.(s)..............
..............................................
GUARANTEE OF SIGNATURE(S)
(If Required by Instruction 1)
Authorized Signature..........................
Name..........................................
(Please Print)
Name of Firm..................................
Address.......................................
(Including Zip Code)
Dated...................., 1998
The shareholder represents to the Company that such shareholder owns
the Shares being tendered withing the meaning of Exchange Act Rule 14e-4 and
the tender of such Shares complies with Rule 14e-4.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certificates for unpurchased Shares and/or any
check are to be issued in the name of and sent to someone other than the
undersigned.
Issue Check and/or Certificates to:
Name(s) __________________________________________________________________
(Please Print)
Address __________________________________________________________________
___________________________________________________________________________
(Include Zip Code)
_____________________________________________
(Tax Identification or Social Security No.)
SIGNATURE
(IF SPECIAL PAYMENT INSTRUCTIONS ARE GIVEN)
(SEE INSTRUCTION 9)
___________________________________________________________________________
Signature(s) of Substitute Payee(s)
Dated __________________________________________, 1998
By signing and completing the form above, under the penalties of perjury,
I/we certify that the above tax identification or social security number(s)
is/are correct.
Note: Failure to complete and sign may result in backup withholding of 31%
of the payments due to you. See Instruction 9.
___________________________________________________________________________
Signature(s) of Owner(s) (if the box above has been completed):
___________________________________ ___________________________________
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 7)
To be completed ONLY if certificates for unpurchased Shares and/or the
check, issued in the name of the undersigned, are to be sent to someone
other than the undersigned or to the undersigned at an address other than
that shown above.
Deliver [ ] check and/or [ ] certificates to:
Name(s) __________________________________________________________________
(Please Print)
Address __________________________________________________________________
(Include Zip Code)
Signature(s) of Owner(s)
___________________________________ ___________________________________
SUBSTITUTE FORM W-9 BELOW MUST BE
COMPLETED - SEE INSTRUCTION 9
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
SUBSTITUTE FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
Part 1 -- PLEASE PROVIDE YOUR TIN IN TIN______________________________
THE BOX AT RIGHT AND CERTIFY BY SOCIAL SECURITY NUMBER OR
SIGNING AND DATING BELOW. EMPLOYER IDENTIFICATION
___________________________________________________________________________
Part 2 -- Check the box if you are NOT subject to backup withholding under
the provisions of section 3406(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject to backup withholding as
a result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no longer subject to backup
withholding. [ ]
___________________________________________________________________________
Part 3 --
Awaiting TIN [ ]
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM
IS TRUE, CORRECT AND COMPLETE.
SIGNATURE:__________________________ DATE:_____________, 1998
___________________________________________________________________________
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of any cash payment made to me will be withheld, but
that such dividend will be refuned to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
SIGNATURE: ______________________________ DATE: _________________, 1998
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. If this Letter of Transmittal is
signed by the registered institutional holder of the Shares (which
registered holder, for purposes of this document, shall include any
participant in DTC, MSTC or PDTC whose name appears on a security position
listing as the owner of the Shares) tendered herewith and payment is to be
made directly to such holder, or if such Shares are tendered for the account
of a member firm of a registered national securities exchange, a member of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office, branch or agency in the United States (each
being hereinafter referred to as an "Eligible Institution"), no signature
guarantee is required. In all other cases all signatures in the box
entitled "Sign Here" on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by
shareholders if either (1) certificates are to be forwarded herewith or (2)
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in Section 2 of the Offer to Purchase. Certificates for
all physically tendered Shares or confirmation of any book-entry transfer
into the Depositary's accounts at DTC, MSTC or PDTC of Shares tendered
electronically, as well as a properly completed and duly executed Letter of
Transmittal or facsimile thereof and any other documents required by this
Letter of Transmittal, must be received by the Depositary at the appropriate
address set forth herein prior to the Expiration Date of the Offer as
defined in Section 1 of the Offer to Purchase. If certificates representing
Shares are not immediately available (or if the book-entry transfer
procedure cannot be completed on a timely basis) or if time will not permit
all required documents to reach the Depositary prior to the Expiration Date,
Shares may be tendered by or through an Eligible Institution by properly
completing and duly executing and delivering a Notice of Guaranteed Delivery
and by otherwise complying with the guaranteed delivery procedures set forth
in Section 2 of the Offer to Purchase. Note that the Notice of Guaranteed
Delivery may be completed only by an Eligible Institution.
THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING SHARES AND OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF
DELIVERY IS BY MAIL, INSURED REGISTERED MAIL, RETURN RECEIPT REQUESTED, IS
RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Shares will be purchased. All tendering shareholders, by
execution of this Letter of Transmittal, waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided is inadequate, the
certificate numbers and number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER
BY BOOK-ENTRY TRANSFER). If fewer than all of the shares of Common Stock
evidenced by any certificate submitted are to be tendered, fill in the
number of Shares which are to be tendered in the column entitled "Number of
Shares Tendered" in the box captioned "Description of Shares Tendered." A
new certificate for the remainder of the Shares evidenced by the old
certificate(s) and for the number of Shares not purchased after proration,
if any, will be sent to you, unless otherwise specified in the "Special
Delivery Instructions" or "Special Payment Instructions" boxes on this
Letter of Transmittal, as soon as practicable after the Expiration Date of
the Offer. All Shares represented by certificates listed are deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND
ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the
registered holder of the Shares represented by the certificates
tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificate without any change whatsoever.
(b) If any of the Shares tendered hereby are held of record by
two or more joint holders, all such holders must sign this Letter of
Transmittal.
(c) If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates. Photocopies of this form of Letter of
Transmittal will be accepted if original signatures are affixed.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the certificates listed and transmitted hereby, no
endorsements of certificates or separate stock powers are required.
If, however, the certificates for unpurchased Shares are to be issued
to a person other than the registered holder(s), then the certificates
transmitted hereby must be endorsed or accompanied by appropriate
stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appears on the certificates. Signatures on such
certificates or stock powers must be guaranteed by an Eligible
Institution. See also Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate
when signing, and must submit proper evidence satisfactory to the
Company of their authority so to act.
(f) If this Letter of Transmittal is signed by a person other
than the registered holder(s) of the certificates listed, the
certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name of the registered
holder(s) appears on the certificates. Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution. See
also Instruction 1.
6. STOCK TRANSFER TAXES. The Company will pay all stock transfer
taxes, if any, payable on the transfer to it of Shares purchased pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
(in the circumstances permitted by the Offer) if unpurchased Shares are to
be registered in the name of, any person other than the registered holder,
or if tendered certificates representing Shares are registered in the name
of any person other than the registered holder, or if tendered certificates
are registered in the name of any person other than the person(s) signing
this Letter of Transmittal, the amount of any stock transfer taxes (whether
imposed on the registered holder or such other person) payable on account of
the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom,
is submitted to the Depositary.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates
representing unpurchased Shares and/or checks are to be issued in the name
of a person other than the signer of this Letter of Transmittal or if such
certificates and/or checks are to be delivered to someone other than the
signer of this Letter of Transmittal, the appropriate boxes on this Letter
of Transmittal should be completed.
8. IRREGULARITIES. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of
Shares will be determined by the Company, which determination shall be final
and binding. The Company reserves the absolute right to reject any or all
tenders determined by it to be not in appropriate form or which would, in
the opinion of the Company's counsel, be unlawful to pay for or accept. The
Company also reserves the absolute right to waive any of the conditions of
the Offer or any defect in any tender with respect to any particular Shares
or any particular shareholder, and the Company's interpretations of the
terms and conditions of the Offer (including these instructions) shall be
final and binding. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Company shall
determine. Neither the Company, nor the Depositary, shall be obligated to
give notice of defects or irregularities in tenders, nor shall they incur
any liability for failure to give any such notice. Tenders will not be
deemed to have been made until all defects and irregularities have been
cured or waived.
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN")
on Substitute Form W-9 attached as part of the Letter of Transmittal.
Failure to provide the information on the form may subject the tendering
shareholder to 31% withholding on the payment of the purchase price. The
box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future. If the box in Part 3 is
checked and the Depositary is not provided with a TIN within 60 days, the
Depositary will withhold 31% of all payments of the purchase price
thereafter until a TIN is provided to the Depositary. SEE IMPORTANT TAX
INFORMATION, BELOW.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Offer to Purchase, this
Letter of Transmittal and the Notice of Guaranteed Delivery, may be directed
to Sharon L. Binette, Director of Shareholder Relations, at the address set
forth below.
IMPORTANT: This Letter of Transmittal or facsimile thereof (together
with the certificates or confirmation of book-entry transfer and other
required documents), or the Notice of Guaranteed Delivery must be received
by the Depositary prior to 5:00 P.M., New York City time on May 1, 1998.
The information agent is:
Sharon L. Binette
Director of Shareholder Relations
Intelligent Controls, Inc.
74 Industrial Park Road, P.O. Box 638
Saco, ME 04072
(207) 283-0156
or
Call toll free (800) 872-3455
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares
are accepted for purchase is required by law to provide the Depositary (as
payer) with his/her correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 attached as part of the Letter of Transmittal. If such
shareholder is an individual, the TIN is his/her social security number. If
the Depositary is not provided with the correct TIN, the shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding.
Exempt shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. (In order for a foreign individual to qualify as an
exempt recipient, that shareholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements may be obtained from the Depositary.) See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold
31% of any payments made to the shareholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in any overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a
shareholder with respect to Shares purchased pursuant to the Offer, the
shareholder is required to notify the Depositary of his/her correct TIN by
completing the Substitute Form W-9 certifying that the TIN provided on such
Form is correct (or that such shareholder is awaiting a TIN and that (1) the
shareholder has not been notified by the Internal Revenue Service that he/she
is subject to backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue Service has notified the
shareholder that he/she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares.
If the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on
which number to report.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER
Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits
separated by only one hyphen: i.e. 00-0000000. The table below will help
determine the number to give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN OF:
<S> <C> <C>
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account
or, if combined funds, the first
individual on the account(1)
3. Custodian account of a minor (Uniform Gift The minor(2)
to Minors Act)
4. (a) The usual revocable savings trust The grantor-trustee(1)
(grantor is also trustee)
(b) So-called trust account that is not a The actual owner(1)
legal or valid trust under state law
5. Sole proprietorship The owner(3)
<CAPTION>
- ------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND EIN OF:
<S> <C> <C>
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension trust Legal entity(4)
8. Corporate The corporation
9. Association, club, religious, charitable, The organization
educational, or other tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture in The public entity
the name of a public entity (such as a state or
local government, school district, or prison)
that receives agricultural program payments
- ------------------------------------------------------------------------------------------
<FN>
<F1> List first and circle the name of the person whose number you furnish.
<F2> Circle the minor's name and furnish the minor's SSN.
<F3> You must show your individual name, but you may also enter your
business or "doing business as" name. You may use either your SSN or
EIN.
<F4> List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number
will be considered to be that of the first name listed.
</FN>
</TABLE>
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN"), obtain Form SS-
5, Application for a Social Security Number Card, or Form SS-4, Application
for Employee Identification Number, at the local office of the Social
Security Administration or the Internal Revenue Service ("IRS") and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
(Section references are to the Internal Revenue Code of 1986, as amended).
Payees specifically exempted from backup withholding on ALL payments of
interest and dividends include the following:
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies
the requirements of Section 401(f)(2).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United
States, or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies,
or instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section
4947.
For broker transactions, payees listed in items 1 through 13 above, and a
person registered under the Investment Advisers Act of 1940 who regularly
acts as a broker are exempt.
PAYMENTS OF DIVIDENDS AND PATRONAGE DIVIDENDS GENERALLY NOT SUBJECT TO
BACKUP WITHHOLDING INCLUDE THE FOLLOWING:
o Payments to nonresident aliens subject to withholding under section
1441.
o Payments to partnerships not engaged in a trade or business in the
United States and that have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
PAYMENTS OF INTEREST GENERALLY NOT SUBJECT TO BACKUP WITHHOLDING INCLUDE THE
FOLLOWING:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is
$600 or more and is paid in the course of the payer's trade or
business and you have not provided your correct TIN to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments of mortgage interest.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF
THE FORM, AND RETURN IT TO THE PAYER. If you are a non-resident alien or
foreign entity not subject to backup withholding, give the payer a completed
Form W-8, Certificate of Foreign Status.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041(A), 6042, 6044,
6045, 6049, 6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE
Section 6109 requires you give your correct TIN to persons who must file
information returns with the IRS to report interest, dividends, and certain
other income paid to you, mortgage interest you paid, the acquisition or
abandonment of secured property, cancellation of debt, or contributions you
made to an IRA. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. You must provide your TIN
whether or not you are required to file a tax return. Payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not give a TIN to a payer. Certain penalties may also apply.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certification or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
MISUSE OF TINs. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
EXHIBIT 99A3
NOTICE OF GUARANTEED DELIVERY
TO TENDER COMMON STOCK
OF
INTELLIGENT CONTROLS, INC.
The below form or a form substantially equivalent to that set forth
below must be used to accept the Offer (as defined below) if a shareholder's
stock certificates are not immediately available or the procedures for book-
entry transfer cannot be completed on a timely basis or time will not permit
the Letter of Transmittal and other required documents to reach the
Depositary prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase (as defined below)). Such form may be delivered by hand
or mail, or transmitted by facsimile transmission to the Depositary. See
Section 2 of the Offer to Purchase.
DEPOSITARY:
AMERICAN STOCK TRANSFER & TRUST COMPANY
Facsimile Transmission
By Mail: (For Eligible Institutions Only):
By Hand or Overnight Delivery: (718) 234-5001
American Stock Transfer American Stock Transfer
& Trust Company & Trust Company
40 Wall Street Confirm Facsimile by Telephone:
New York, NY 10005 (718) 921-8200
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN TO ONE OF THOSE
SHOWN ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tender to INTELLIGENT CONTROLS, INC. (the
"Company") upon the terms and conditions set forth in its Offer to Purchase
dated March 30, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares specified below, pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to
Purchase.
NUMBER OF SHARES TENDERED:_________
Name(s) of Record Holder(s): Stock Certificate Nos. (if available)
- --------------------------------- ----------------------------------------
- --------------------------------- ----------------------------------------
(Please type or print)
Address(es) If Shares will be delivered by book-
entry transfer, check applicable box:
- --------------------------------- [ ] The Depository Trust Company
- --------------------------------- [ ] Midwest Securities Trust Company
Zip Code ------------------------ [ ] Philadelphia Depository Trust Company
Area Code and Telephone Number:
- ---------------------------------
Account Number _________________
Dated: ___________________, 1998
- ---------------------------------
- ---------------------------------
- ---------------------------------
(Signature(s))
GUARANTEE OF DELIVERY
The undersigned, a member firm of a registered national securities
exchange or a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office, branch or
agency in the United States, guarantees (i) that the above-named person(s)
"own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under
the Securities Exchange Act of 1934 and (ii) that it will deliver to the
Depositary certificates for the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, the Midwest Securities
Trust Company or the Philadelphia Depository Trust Company, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees, and any other documents
required by the Letter of Transmittal, within five trading days after the
date of receipt of this Notice of Guaranteed Delivery by the Depositary.
Firm:_________________________________
Sign Here:____________________________
(Authorized Signature)
Dated: _________________, 1998 Name:_________________________________
(Please Type or Print)
______________________________________
(Area Code and Telephone Number)
______________________________________
(Address) (Zip Code)
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. STOCK CERTIFICATES ARE
TO BE DELIVERED WITH A LETTER OF TRANSMITTAL.
EXHIBIT 99.A4
INTELLIGENT CONTROLS, INC.
OFFER TO PURCHASE FOR CASH
UP TO 475,000 SHARES OF ITS COMMON STOCK
AT $3.25 PER SHARE NET
THE OFFER WILL EXPIRE ON FRIDAY, MAY 1, 1998 AT 5:00 P.M., NEW YORK CITY
TIME, UNLESS EXTENDED BY THE COMPANY. TENDERING SHAREHOLDERS HAVE THE RIGHT
TO WITHDRAW SHARES TENDERED AT ANY TIME PRIOR TO EXPIRATION OF THE OFFER AND
THEY MAY WITHDRAW SHARES AFTER FRIDAY, MAY 22, 1998, UNLESS ACCEPTED BY THE
COMPANY BY THAT DATE.
March 30, 1998
TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND NOMINEES:
We are enclosing herewith the material listed below relating to the
offer by Intelligent Controls, Inc. (the "Company") to purchase up to
475,000 shares of the Company's Common Stock (the "Shares"), at $3.25 per
Share net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated March 30, 1998 (the
"Offer to Purchase") and in the related Letter of Transmittal (which
together constitute the "Offer").
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee). Please bring the
Offer to their attention as promptly as possible. No fees or commissions
will be payable to brokers, dealers or other persons for soliciting tenders
of Shares pursuant to the Offer. The Company will, however, upon request,
reimburse you for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Company will
also pay all transfer taxes on its purchase of Shares, subject to
Instruction 6 of the Letter of Transmittal. However, back-up tax
withholding at a 31% rate may be required unless an exemption is proved or
unless the required taxpayer identification information is provided. See
Instruction 9 to the Letter of Transmittal.
For your information and for forwarding to your clients, we are
enclosing the following documents:
(1) Letter dated March 30, 1998 from the President and Chief
Executive Officer of the Company, to the shareholders;
(2) Offer to Purchase dated March 30, 1998;
(3) Letter of Transmittal for your use and for the information of
your clients;
(4) Notice of Guaranteed Delivery to be used to accept the Offer if
stock certificates are not immediately available or if the procedure for
book-entry transfer (as described in the Offer to Purchase) cannot be
completed in a timely manner; and
(5) Form of letter to clients which may be sent to your clients for
whose accounts you hold Shares registered in your name (or in the name of
your nominee), with space provided for obtaining such clients' instructions
with regard to the Offer.
We urge you to contact your clients promptly. Please note that the
Offer will expire at 5:00 p.m., New York City time, on Friday, May 1, 1998,
unless the Offer is extended. Shares may be withdrawn at any time prior to
the expiration of the Offer and may be withdrawn after Friday, May 22, 1998,
unless accepted by the Company by that date.
The Offer is made solely by the Offer to Purchase and the related
Letter of Transmittal and is not being made to holders of Shares in any
jurisdiction in which the making or acceptance of the Offer would not be in
compliance with law.
The Offer is conditioned upon a minimum number of Shares being
tendered and certain other conditions.
As described in Section 2, "Procedures for Tendering Shares," of the
Offer to Purchase, tenders may be made without the concurrent deposit of
stock certificates (or concurrent compliance with the procedure for book-
entry transfer) if such tenders are made pursuant to a Notice of Guaranteed
Delivery by or though a broker or dealer which is a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office, branch or agency in the United States.
Certificates for Shares so tendered (or confirmation of book-entry
transfer), together with a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal,
must be received by the Depositary within five trading days after receipt by
the Depositary of a properly completed and duly executed Notice of
Guaranteed Delivery.
Additional copies of the enclosed material may be obtained from the
Information Agent at the addresses and telephone numbers set forth on the
Offer to Purchase. Any questions you may have with respect to the Offer
should be directed to the undersigned, Sharon L. Binette, Director of
Shareholder Relations, at 1-800-872-3455.
Very truly yours,
INTELLIGENT CONTROLS, INC.
By: /s/ SHARON L. BINETTE
---------------------------------
Director of Shareholder Relations
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, OR THE DEPOSITARY OR AUTHORIZE
YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY MATERIAL ON THEIR
BEHALF WITH RESPECT TO THE OFFER, OTHER THAN THE MATERIAL ENCLOSED HEREWITH
AND THE STATEMENTS SPECIFICALLY SET FORTH IN SUCH MATERIAL.
EXHIBIT 99.A5
INTELLIGENT CONTROLS, INC.
Offer to Purchase for Cash
Up to 475,000 Shares of its Common Stock
at a Purchase Price of
$3.25 per Share
March 30, 1998
To our Clients:
Enclosed for your consideration are the Offer to Purchase dated March
30, 1998 (the "Offer to Purchase") and the related Letter of Transmittal
(which together constitute the "Offer") distributed in connection with the
offer by INTELLIGENT CONTROLS, INC., a Maine corporation (the "Company"), to
purchase for cash up to 475,000 shares of its Common Stock (the "Shares"),
at a price of $3.25 per Share, upon the terms and subject to the conditions
of the Offer.
All Shares properly tendered and not withdrawn prior to the expiration
of the Offer will be purchased at the Purchase Price, net to the seller in
cash, upon the terms and subject to the conditions of the Offer, including
the proration terms thereof, provided that the minimum number of Shares are
tendered pursuant to the Offer. The Company will return all Shares not
subject to the conditions of the Offer, including Shares not purchased
because of proration or because the minimum is not satisfied. See Section 4
of the Offer to Purchase.
We are (or our nominee is) the record holder of Shares held for your
account. As such, we are the only ones who can tender those Shares, and
then only pursuant to your instructions. We are sending you the enclosed
Letter of Transmittal for your information only.
Please instruct us as to whether you wish us to tender any or all of
the Shares we hold for your account upon the terms and subject to the
conditions of the Offer.
We call your attention to the following:
1. The Offer is conditioned on a minimum number of Shares being
tendered.
2. The Offer, proration period and withdrawal rights expire at 5:00
p.m., New York City time, on Friday, May 1, 1998, unless the Offer is
extended.
3. The Offer is for up to 475,000 Shares, constituting approximately
14.4% of the Shares outstanding as of March 27, 1998.
4. Tendering shareholders will not be obligated to pay brokerage
commission solicitation fees or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes in connection with the Company's purchase
of Shares pursuant to the Offer.
If you want us to tender any or all of your Shares (held by us for
you), please so instruct us by completing, executing and returning to us the
attached instruction form. An envelope to return your instructions to us is
enclosed. If you authorize us to tender those Shares, we will tender all
such Shares unless you specify otherwise on the attached instruction form.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. THE
OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON MAY 1, 1998, UNLESS THE OFFER IS EXTENDED.
As described in Section 1 of the Offer to Purchase and provided
certain conditions are satisfied as set forth therein, in the event that
prior to the expiration of the Offer a greater number of Shares than 475,000
Shares are properly tendered and not withdrawn, the Company will accept all
Shares properly tendered and not withdrawn prior to the expiration of the
Offer on a pro rata basis (with adjustments to avoid purchases of fractional
Shares) based upon the number of such Shares.
The Company is not aware of any jurisdiction where the making of the
Offer is not in compliance with applicable law. If the Company becomes
aware of any jurisdiction where the making of the Offer is not in compliance
with any valid applicable law, the Company will make a good faith effort to
comply with such law. If, after such good faith effort, the Company cannot
comply with such law, the Offer will not be made to (nor will tender be
accepted from or on behalf of) the holders of Shares residing in such
jurisdiction. In any jurisdiction the securities or blue sky laws of which
require the Offer to be made by a licensed broker or dealer, the Offer is
being made on the Company's behalf by a registered broker or dealer licensed
under the laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 475,000 SHARES COMMON STOCK
OF
INTELLIGENT CONTROLS, INC.
AT A PURCHASE PRICE OF
$3.25 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated March 30, 1998, and the related Letter of
Transmittal (which together constitute the "Offer") in connection with the
offer by INTELLIGENT CONTROLS, INC., a Maine corporation (the "Company"), to
purchase for cash up to 475,000 Shares of its Common Stock (the "Shares"),
at a price of $3.25 per Share, upon the terms and subject to the conditions
of the Offer.
The undersigned hereby instruct(s) you to tender to the Company the
number of Shares specified below or, if no number is specified, all Shares
you hold for the account of the undersigned, upon the terms and subject to
the conditions of the Offer.
Aggregate number of Shares to be tendered by you for the undersigned:
____________ Shares
SIGNATURE(S)
Signature(s) ______________________________________________________________
Dated _______________________________________________________________, 1998
Name(s) and Address(es) (Please Print)_____________________________________
___________________________________________________________________________
___________________________________________________________________________
Area Code(s) and Telephone Number(s)_______________________________________
Taxpayer Identification or Social Security Number(s)_______________________
___________________________________________________________________________
EXHIBIT 99.A(6)
News Release
Contact: Alan Lucas, CEO
March 30, 1998 (207)283-0156, ext. 113
INTELLIGENT CONTROLS AGREES TO INVESTMENT BY AMPERSAND VENTURES
Brooks to be named CEO; Founder Alan Lukas to be Chairman
SACO, Maine, March 30, 1998 - Intelligent Controls, Inc. (INCON, Amex symbol
ITC), Ampersand Ventures and Roger E. Brooks announced today an agreement in
principle whereby Ampersand will make a $5 million investment in Intelligent
Controls. INCON is a supplier of measurement instrumentation to the
petroleum and power utility industries. Ampersand is a private equity firm
focused on investments in technology-based companies. Mr. Brooks is
formerly President and CEO of Dynisco, Inc., a leading supplier of
industrial instrumentation and equipment.
Under the terms of the agreement, INCON will issue $5 million of new common
stock to Ampersand at $3.25 per share. In addition, INCON will initiate a
public tender to purchase 475,000 shares of its outstanding common stock at
$3.25 per share (for a total of $1,543,750). On closing of the proposed
investment agreement, expected by May 15, 1998, Roger E. Brooks will
immediately join INCON as President & CEO as well as a director of the
Company. In the interim period, Brooks will be a full-time consultant to
the Company. Alan Lukas, President and founder of INCON, will be Chairman
of the Board of Directors as well as Vive President of Product Development.
At the upcoming annual meeting in Portland, April 30th, the shareholders
will be asked to elect directors and vote on a number of other matters, some
of which relate to this agreement. Following completion of this
transaction, Ampersand will be the largest shareholder owning approximately
32% of the common stock. The Lukas family will still own more than 25% and
Brooks, the new CEO, will own 10%.
According to INCON, a portion of the new equity financing will be used to
purchase a portion of the Company's outstanding common stock and to reduce
short term borrowing. The remainder of the financing will be used to expand
the Company's marketing and sales capabilities, both in the U.S. and
internationally, as well as to fund the development of new products and
potential acquisitions.
Alan Lukas, INCON's founder and current President and CEO noted, "INCON's
partnership with Ampersand and Brooks is ideal. By combining our leading-
edge technology and products with Ampersand's financial strength and
Brooks's proven track record in building successful technology companies, we
have positioned the Company to reach a new level of growth. This investment
allows us to take full advantage of our potential while remaining an
independent entrepreneurial organization. It also enables me to stay
actively engaged in the Company and concentrate on areas where I can work to
maximize INCON's value by creating new products."
Roger E. Brooks added, "I'm enthusiastic about INCON's prospects. Alan
Lukas and the INCON team have done an outstanding job of creating a solid
technology and product foundation. I enjoy the challenge of helping small
technology-based companies get to their next level. I look forward to
working with INCON in that process and, at the end of the day, creating
increased value for the Company's customers, employees and shareholders."
According to Ampersand General Partner Charles D. Yie, "INCON is an
excellent investment for Ampersand. A leader in the level and leak
detection marketplace, the Company offers us the opportunity to leverage
both our experience in over 30 technology-based companies, and Roger Brooks,
who has participated as a member of the Ampersand team for more than a
year."
Intelligent Controls, Inc. based in Saco, Maine is a leading supplier of
automatic tank gauging systems and line leak detection equipment as well as
general predictive maintenance instrumentation for the power utility market
and other industrial applications.
Roger E. Brooks served as President and CEO of Dynisco, Inc. from 1984-96.
Dynisco provides a broad range of measurement, test, control and equipment
products to the plastics and other industrial markets. During Brooks's
tenure, Dynisco revenues grew from $11 million to over $90 million through a
combination of internal growth, international expansion, new product
development and acquisitions. Prior to Dynisco, Brooks was a Director and
Executive Vice President of Thermo Electric Co., a manufacturer of
temperature instrumentation and control products. He is currently a
Director of Nobel System UK and American MSI Corporation.
Ampersand Ventures, based in Wellesley, Massachusetts, is a leader in
specialty materials and chemicals investing, with more than $200 million of
capital under management. Formed in 1987 as a spinoff from Paine Webber,
its investors include a select group of financial institutions and operating
companies, including the University of Texas, the Henry Luce Foundation, and
the pension funds of Fischer Scientific, Pfizer, and John Deere.
Additional information about Intelligent Controls, Inc. (INCON) can be found
on the Internet at www.intelcon.com or contact Alan Lukas at 207-283-0156
x113. For more information on Ampersand Ventures contact Paul Zigman at
781-239-0700.
EXHIBIT 99.A(7)
March 30, 1998
TO THE SHAREHOLDERS
OF
INTELLIGENT CONTROLS, INC.
IMPORTANT NOTICE
Dear Shareholder:
The Annual Shareholders Meeting of Intelligent Controls, Inc., a Maine
corporation, will be held at the Sheraton Tara Hotel at 363 Maine Mall Road,
South Portland, Maine at 5:00pm on Thursday, April 30, 1998.
I am pleased to announce that Intelligent Controls has reached an
agreement with Ampersand Ventures whereby Ampersand will make a $5 Million
investment in our company. As a result of this investment, the Board of
Directors has authorized the company to conduct a tender offer for up to
475,000 shares of its common stock at a price of $3.25 per share. Details
concerning the investment and the tender offer are explained in the enclosed
documents. I ask that you please review all the materials carefully before
making your decisions and casting your vote as a shareholder.
As part of this agreement, Roger E. Brooks has joined INCON full time
as a consultant and will become President & CEO as well as a director of the
company at the closing of the Ampersand investment. I welcome the
opportunity to work with Roger, an experienced CEO, and I plan to remain
actively involved with the company as Chairman and Vice President of Product
Development.
We urge you to read carefully the enclosed materials and thank you for
your prompt attention to this matter.
Sincerely,
INTELLIGENT CONTROLS, INC.
/s/ Alan Lukas
Alan Lukas,
President & CEO
EXHIBIT 99.C(1)
INVESTMENT AGREEMENT
This Investment Agreement (the "Agreement") is entered into as of this
26th day of March, 1998, by and among Intelligent Controls, Inc., a Maine
corporation (the "Company"), Ampersand Specialty Materials and Chemicals III
Limited Partnership, a Delaware limited partnership ("ASMC-III Fund"),
Ampersand Specialty Materials and Chemicals III Companion Fund Limited
Partnership, a Delaware limited partnership ("ASMC-III Companion Fund"),
and, for purposes of Article IX only, Roger E. Brooks, an individual
("Brooks"). ASMC-III Fund and ASMC-III Companion Fund are each herein
referred to as an "Investor" and collectively as the "Investors".
Introduction
------------
A. The Investors propose to purchase from the Company in accordance
with the terms and conditions hereof an aggregate of 1,538,462 newly issued
shares (the "Shares") of the Company's common stock, no par value (the
"Common Stock"), at a price per share of $3.25.
B. The Company proposes to make a tender offer (the "Tender Offer")
to purchase any and all up to a maximum of 615,385 shares (the "Tender Offer
Shares") of the Common Stock at a price per share of Common Stock of $3.25
net to the seller in cash.
C. The Board of Directors of the Company has authorized the issue and
sale of the Shares to the Investors on the terms and conditions contained
herein and recommended that the stockholders of the Company approve such
issue and sale.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth below:
Acquisition Proposal shall mean a bona fide written proposal from any
Person other than an Investor or an Affiliate thereof relating to the
acquisition, sale or merger of the Company, any sale of all or substantially
all of the Company's assets, any offering or distribution of the Company's
capital stock or any reorganization or recapitalization of the Company.
Affiliate shall have the meaning ascribed to it in Rule 405 under the
1933 Act.
Agreement shall have the meaning set forth in the Preamble to this
Agreement.
Benefit Plans shall have the meaning set forth in Section 3.19(a) of
this Agreement.
Brooks shall have the meaning set forth in the Preamble to this
Agreement.
Claims shall have the meaning set forth in Section 9.08 of this
Agreement.
Closing shall have the meaning set forth in Section 2.03 of this
Agreement.
Closing Date shall have the meaning set forth in Section 2.03 of this
Agreement.
Code shall have the meaning set forth in Section 3.19(a) of the
Agreement.
Common Stock shall have the meaning set forth in subparagraph A of the
Introduction to this Agreement.
Company shall have the meaning set forth in the Preamble to this
Agreement.
Company Filings shall have the meaning set forth in Section 3.08(a) of
this Agreement.
Company Offer Documents shall mean the Issuer Tender Offer Statement
on Schedule 13E-4 with respect to the Tender Offer filed by the Company with
the SEC and the form of transmittal letter contained therein and any and all
supplements or amendments thereto.
Company Proxy Statement shall have the meaning set forth in Section
3.08(a) of this Agreement.
Disclosure Documents shall have the meaning set forth in Section 3.07
of this Agreement.
Disclosure Schedule shall have the meaning set forth in the Preamble
to Article III of this Agreement.
Employment Agreement shall have the meaning set forth in Section
7.01(h) of this Agreement.
ERISA shall have the meaning set forth in Section 3.19(a) of this
Agreement.
Hazardous Substance shall have the meaning set forth in Section 3.21
of this Agreement.
Investor and Investors shall have the meanings set forth in the
Preamble to this Agreement.
Intellectual Property shall have the meaning set forth in Section 3.17
of this Agreement.
Knight Amount shall have the meaning set forth in Section 13.12 of
this Agreement.
knowledge shall mean all facts and matters which are known or which
reasonably should be known through reasonable investigation by Alan Lukas
and the other directors and executive officers of the Company.
Material Adverse Effect shall mean any material and adverse change in
the business, assets, operations or prospects of the Company and its
subsidiaries, taken as a whole.
1934 Act shall have the meaning set forth in Section 3.07 of this
Agreement.
1933 Act shall have the meaning set forth in Section 3.07 of this
Agreement.
Notice of Acceptance shall have the meaning set forth in Section 8.02
of this Agreement.
Offer shall have the meaning set forth in Section 8.01 of this
Agreement.
Offered Securities shall have the meaning set forth in Section 8.01 of
this Agreement.
Person shall mean an individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization or governmental entity (or any department, agency or political
subdivision thereof).
Proportionate Percentage shall mean with respect to an Investor a
fraction of which (a) the numerator is the number of shares of Common Stock
held by such Investor and (b) the denominator is the aggregate number of
shares of Common Stock held by all Investors.
Purchase Price shall have the meaning set forth in Section 2.01 of
this Agreement.
Real Property shall have the meaning set forth in Section 3.13 of this
Agreement.
Redemption Price shall have the meaning set forth in Section 5.11(a)
of this Agreement.
Registrable Securities shall mean all shares of capital stock of the
Company held by the Investors and Brooks, including without limitation any
other shares of capital stock of the Company acquired (or which may be
acquired upon the exercise or conversion of securities for or into shares of
capital stock) by the Investors or Brooks pursuant to any right of first
offer, right of first refusal or otherwise, and any other shares of capital
stock of the Company issued in respect of any of such securities (as a
result of stock splits, stock dividends, reclassifications,
recapitalizations or other events).
Request shall have the meaning set forth in Section 5.11(a) of this
Agreement.
Repurchase Date shall have the meaning set forth in Section 5.11(b) of
this Agreement.
SEC shall mean the United States Securities and Exchange Commission.
Service shall have the meaning set forth in Section 3.19(b) of this
Agreement.
Shares shall have the meaning set forth in subparagraph A of the
Introduction to this Agreement.
Stockholder Meeting shall have the meaning set forth in Section 5.07
of this Agreement.
Stockholders Agreement shall have the meaning set forth in Section
7.01(j) of this Agreement.
Tender Offer shall have the meaning set forth in subparagraph B of the
Introduction to this Agreement.
Tender Offer Shares shall have the meaning set forth in subparagraph B
of the Introduction to this Agreement.
Third Party Claim shall have the meaning set forth in Section 11.04(a)
of this Agreement.
ARTICLE II
THE INVESTMENT
Section 2.01. Sale and Purchase of Shares. Subject to the terms and
conditions hereof, and in reliance on the representations and warranties
contained herein, the Company shall issue and sell to each Investor, and
each Investor shall purchase from the Company, the number of Shares set
forth opposite the name of such Investor on Schedule 1 hereto, at a purchase
price of $3.25 per share (the "Purchase Price").
Section 2.02. Payment. The Investors shall pay the Purchase Price
for the Shares in full at the Closing by wire transfer of immediately
available funds to an account designated in writing by the Company.
Section 2.03. The Closing. The purchase and sale of the Shares shall
take place at a closing (the "Closing") to be held at the offices of Choate,
Hall & Stewart, 53 State Street, Exchange Place, Boston, Massachusetts at
10:00 a.m. local time on May 1, 1998 (the "Closing Date"), or at such other
place and time or on such other date as the parties may mutually agree.
Section 2.04. Deliveries by the Company. At the Closing, and upon
satisfaction or waiver of the conditions set forth in Section 7.02, the
Company will deliver or cause to be delivered to the Investors the
instruments, consents, opinions, certificates and other documents required
by Section 7.01.
Section 2.05. Deliveries by the Investor. At the Closing, and upon
satisfaction or waiver of the conditions set forth in Section 7.01, the
Investors will deliver or cause to be delivered to the Company the
instruments, opinions, certificates and other documents required by Section
7.02.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that the
statements contained in this Article III are correct and complete as of the
date hereof and will be correct and complete as of the Closing Date, except
as set forth in the Disclosure Schedule accompanying this Agreement (the
"Disclosure Schedule"). The items contained in the Disclosure Schedule
shall be arranged in sections corresponding to the numbered sections
contained in this Article III.
Section 3.01. Organization and Authority. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated
and has all necessary corporate and other power and authority to conduct its
business and own its properties as now conducted and as proposed to be
conducted. The Company and each of its subsidiaries is licensed or
qualified to do business as a foreign corporation in each jurisdiction in
which the nature of its business or the ownership of its properties makes
such licensing or qualification necessary and where the failure to so
qualify would have a Material Adverse Effect.
Section 3.02. Authorization and Enforceability. Subject only to the
receipt of stockholder approval, the Company has taken all required
corporate and other action necessary to authorize and permit it to execute
and deliver this Agreement and the other documents, instruments and
agreements contemplated hereby and to issue and sell the Shares as provided
in Article II. This Agreement is, and each of the other documents,
instruments and agreements of the Company contemplated hereby will be, the
valid and binding obligation of the Company, enforceable in accordance with
their respective terms.
Section 3.03. No Conflicts. The execution, delivery and performance
of this Agreement and the other documents, instruments and agreements
contemplated hereby by the Company will not result in any violation of, be
in conflict with or constitute a default under, any law, statute,
regulation, ordinance, contract, agreement, instrument, judgment, decree or
order to which the Company is a party or by which the Company is bound. The
Company is not a party to or bound by any contract, indenture, agreement,
order, law, rule or regulation which restricts in any material respect its
ability to perform its obligations under this Agreement.
Section 3.04. Subsidiaries. Except as set forth in Section 3.04 of
the Disclosure Schedule, the Company has no subsidiaries or, directly or
indirectly, owns or has the right to acquire any equity interest in any
corporation, joint venture, partnership or other entity. All of the
outstanding shares of capital stock of each subsidiary of the Company are
owned beneficially and of record by the Company, free and clear of all
liens, encumbrances, security interests and other restrictions. All of the
outstanding shares of capital stock of each subsidiary of the Company have
been validly issued and are fully paid and nonassessable. Except as
disclosed in the Disclosure Documents (as defined in Section 3.07), the
Company has no investment in, loan to or material advance of cash or other
extension of credit to any entity or individual.
Section 3.05. Capital Stock. The authorized capital stock of the
Company consists of 5,000,000 shares of Common Stock, of which 3,296,375
shares are issued and outstanding. The Company has outstanding options to
acquire 589,208 shares of Common Stock, the holders of which are set forth
on Section 3.05 of the Disclosure Schedule. The Disclosure Documents
contain a correct list of each Person who, to the Company's knowledge, owns
beneficially more than five percent of the issued and outstanding Common
Stock. Except as set forth in Section 3.05 of the Disclosure Schedule,
there are no outstanding options, warrants or agreements for the purchase
from, or sale or issuance by, the Company of any of its capital stock or
securities convertible into or exchangeable for its capital stock. All of
the outstanding shares of Common Stock are, and the Shares to be issued by
the Company will be, validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights on the part of the
holders of any class of securities of the Company. At the Closing, the
Investors will acquire good and marketable title to the Shares, free and
clear of all liens, encumbrances, liens, security interests and other
restrictions.
Section 3.06. Compliance with Law. The Company and each of its
subsidiaries is in compliance in all material respects with all foreign,
federal, state and local statutes, laws, ordinances, judgments, decrees,
orders or governmental rules, regulations, policies and guidelines
applicable to it. The Company has not received any notice from any
governmental or regulatory authority or otherwise of any alleged violation
or noncompliance.
Section 3.07. SEC Filings. The Company has delivered to the
Investors true and correct copies of (a) the Company's annual reports on
Form 10-KSB for the fiscal years ended December 31, 1996 and 1995, (b) the
Company's quarterly reports on Form 10 QSB for the fiscal quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997, (c) its proxy or
information statements relating to meetings of, or actions taken by written
consent of, the stockholders of the Company since June 1, 1995, and (d) any
other documents filed by the Company pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act"), since December 31, 1995 (each of the
foregoing collectively referred to as the "Disclosure Documents"). As of
their respective dates, the Disclosure Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), or the 1934 Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Disclosure
Documents, and none of the Disclosure Documents contained any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each registration statement, as
amended or supplemented, filed by the Company pursuant to the 1933 Act, as
of the date such statement or amendment became effective, did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
Section 3.08. Disclosure Documents.
(a) Each document required to be filed by the Company with the SEC in
connection with the transactions contemplated by this Agreement (the
"Company Filings"), including without limitation the Company Offer Documents
and the proxy or information statement of the Company (the "Company Proxy
Statement") to be filed with the SEC in connection with the Stockholder
Meeting (as defined in Section 5.07), when filed, will comply as to form
with the applicable requirements of the 1934 Act.
(b) At the time the Company Proxy Statement, or any amendment or
supplement thereto, is first mailed to stockholders of the Company and at
the time such stockholders vote on the approval of the transactions
contemplated by this Agreement, the Company Proxy Statement, as supplemented
or amended, will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. At the time of the filing of any Company Filings other than the
Company Proxy Statement, at the time of any distribution thereof and at the
time of consummation of the Tender Offer, such Company Filings will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 3.08 will not apply
to statements or omissions included in the Company Filings based upon
information furnished to the Company in writing by the Investor specifically
for use therein.
Section 3.09. Financial Statements. The financial statements
contained in the Disclosure Documents have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as indicated in the notes
thereto and subject, in the case of the unaudited financial statements, to
year-end and audit adjustments). The balance sheets contained in the
Disclosure Documents fairly present the financial position of the Company as
at the respective dates indicated, and in each case reflect all material
liabilities, contingent or otherwise, at such dates, required by generally
accepted accounting principles to be reflected therein. The statements of
operations, changes in stockholders' equity and cash flows contained in the
Disclosure Documents fairly present the results of operations and the
changes in financial position and cash flows of the Company for the
respective periods indicated. All unaudited financial statements contained
in the Disclosure Documents are subject to year end and audit adjustments
and do not contain all footnotes required by generally accepted accounting
principles. The other financial and statistical data set forth in the
Disclosure Documents is true and correct in all material respects and was
prepared on a basis consistent with the financial statements presented in
the Disclosure Documents and the Company's books and records.
Section 3.10. Material Adverse Change. Since September 30, 1997: (a)
there has been no change in the assets, liabilities or financial condition
of the Company or its subsidiaries from that set forth in the Disclosure
Documents, except for changes expressly contemplated by the Disclosure
Documents and for changes in the ordinary course of business which have not
been, either individually or in the aggregate, materially adverse to the
Company, its business or financial condition; and (b) no event or condition
has occurred which has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
Section 3.11. Tax Returns and Payments. Except as set forth in the
Disclosure Documents, the Company has filed all tax returns required by law
to be filed and has paid all taxes, assessments and other governmental
charges levied upon any of its properties, assets, income, franchises or
sales, other than those not yet delinquent and those, not substantial in
aggregate amount, being contested in good faith and by appropriate
proceedings. Except as set forth in the Disclosure Documents, the charges,
accruals and reserves in the financial statements of the Company in respect
of taxes for all fiscal periods are adequate, and there are no unpaid
assessments for additional taxes for any fiscal period nor, except as
described in the Disclosure Documents, any basis therefor.
Section 3.12. Litigation. Except as set forth in Section 3.12 of the
Disclosure Schedule, there are no suits, proceedings or investigations
pending or, to the Company's knowledge, threatened against or affecting the
Company or any of its subsidiaries, or, to the knowledge of the Company, any
of the directors or officers of the Company or any of its subsidiaries,
which could have a Material Adverse Effect or limit the ability of any such
director or officer to participate in the affairs of the Company, or with
respect to the transactions contemplated by this Agreement, and the Company
knows of no basis for any such suit, proceeding or investigation.
Section 3.13. Real Property. The Company has good and marketable
title to or a valid leasehold interest in all real property necessary for
the conduct of its business as now conducted or proposed to be conducted
(the "Real Property"). To the Company's knowledge, all of the Real Property
is in compliance in all material respects with all building, zoning,
subdivision, health, safety and other applicable federal, state and local
laws and regulations. The Company enjoys peaceful and quiet possession of
the Real Property, is not in material default under any leasehold and the
Company has not been informed that the lessor under any of such leases has
taken action or threatened to terminate the lease before the expiration date
specified in the lease.
Section 3.14. Personal Property. The Company has good and marketable
title to or a valid leasehold or license interest in each material item of
personal property necessary for the conduct of its business as now conducted
and as proposed to be conducted (including good and marketable title to all
material assets reflected on the balance sheets in the Disclosure Documents,
other than immaterial assets disposed of since the date of such balance
sheets in the ordinary course of business), free and clear of any security
interests or encumbrances of every kind, nature and description, except as
set forth in Section 3.14 of the Disclosure Schedule. All material
operating assets of the Company are in good operating condition and repair,
normal wear and tear excepted.
Section 3.15. Licenses and Permits. The Company and each of its
subsidiaries has all necessary franchises, permits, licenses and similar
authorizations from all federal, state and local agencies and authorities
with jurisdiction over the business or affairs of the Company or its
subsidiaries and all other rights necessary to conduct its businesses and
own its properties as currently conducted and as proposed to be conducted,
free from unusually burdensome restrictions.
Section 3.16. Government Approvals. Except as set forth in Section
3.16 of the Disclosure Schedule, the Company is not required to obtain any
order, consent, approval or authorization of, or make any declaration or
filing with, any governmental authority in connection with the execution,
delivery and performance of this Agreement, or the offer, issue, sale and
delivery of the Shares pursuant hereto.
Section 3.17. Intellectual Property. The Company owns or possesses
all patents, trademarks, service marks, trade names, copyrights, franchises,
licenses, and all royalty agreements and other rights with respect to the
foregoing (collectively, with any registrations and applications relating
thereto, the "Intellectual Property") necessary for the conduct of its
business as now conducted and as proposed to be conducted. The Company
holds all interests in the Intellectual Property purported to be owned by
it. Except as set forth in Schedule 3.17 of the Disclosure Schedule, to the
knowledge of the Company, it has not violated or infringed any Intellectual
Property owned by any other person or entity, and no claim has been made
asserting the invalidity, unenforceability or misuse of any of the
Intellectual Property of the Company. To the knowledge of the Company, no
person or entity is violating or infringing any Intellectual Property of the
Company.
Section 3.18. Brokers. Except as set forth in Section 3.18 of the
Disclosure Schedule, the Company has not dealt with any broker, finder,
commission agent or other similar person in connection with the offer or
sale of the Shares and the transactions contemplated by this Agreement, and
the Company is under no obligation to pay any broker's fee, finder's fee, or
commission in connection with such transactions.
Section 3.19. ERISA.
(a) The Company has provided the Investor with a correct and complete
list of all employee compensation and benefit plans, agreements,
commitments, practices or arrangements of any type (including, but not
limited to, plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) offered, maintained or
contributed to by the Company for the benefit of current or former employees
or directors of the Company, or with respect to which the Company has or may
have any liability, whether direct or indirect, actual or contingent
(including, but not limited to, liabilities arising from affiliation under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code"), or Section 4001 of ERISA) (collectively, the "Benefit
Plans"). There are no material compensation or benefit plans, agreements,
commitments, practices or arrangements of any type providing benefits to
employees or directors of the Company, or with respect to which the Company
may have any liability, other than the Benefit Plans.
(b) With respect to each Benefit Plan, the Company has delivered to
the Investor true and complete copies of: (i) any and all plan texts and
agreements (including, but not limited to, trust agreements, insurance
contracts and investment management agreements); (ii) any and all material
employee communications since January 1, 1996 (including all summary plan
descriptions and material modifications thereto); (iii) the two most recent
annual reports, if applicable; (iv) the most recent annual and periodic
accounting of plan assets, if applicable; (v) the most recent determination
letter received from the Internal Revenue Service (the "Service"), if
applicable; and (vi) in the case of any unfunded or self-insured plan or
arrangement, a current estimate of accrued and anticipated liabilities
thereunder.
(c) With respect to each Benefit Plan: (i) if intended to qualify
under Section 401(a) of the Code, such plan so qualifies, and its trust is
exempt from taxation under Section 501(a) of the Code; (ii) such plan has
been administered and enforced in accordance with its terms and all
applicable laws, regulations and rulings in all material respects; (iii) no
breach of fiduciary duty has occurred with respect to which the Company or
any Benefit Plan may be liable or otherwise damaged in any material respect;
(iv) no material disputes nor any audits or investigations by any
governmental authority are pending or threatened; (v) no "prohibited
transaction" (within the meaning of either Section 4975(c) of the Code or
Section 406 of ERISA) has occurred with respect to which the Company or any
Benefit Plan may be liable or otherwise damaged in any material respect;
(vi) all contributions, premiums, and other payment obligations have been
accrued on the financial statements of the Company in accordance with
generally accepted accounting principles, and, to the extent due, have been
made on a timely basis; (vii) all contributions or benefit payments made or
required to be made under such plan meet the requirements for deductibility
under the Code; (viii) the Company has expressly reserved in itself the
right to amend, modify or terminate such plan, or any portion of it, at any
time without liability to itself; (ix) no such plan requires the Company to
continue to employ any employee or director; and (x) no Benefit Plan is, or
has ever been, subject to Title IV of ERISA.
(d) With respect to each Benefit Plan which provides welfare benefits
of the type described in Section 3(1) of ERISA: (i) no such plan provides
medical or death benefits with respect to current or former employees or
directors of the Company beyond their termination of employment, other than
coverage mandated by Sections 601-608 of ERISA and 4980B(f) of the Code,
(ii) no such plan is or is provided through a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA; and (iii) no such
plan has reserves, assets, surpluses or prepaid premiums.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to severance pay, (ii)
accelerate the time of payment or vesting under any Benefit Plan, or (iii)
increase the amount of compensation or benefits due to any individual. No
payment made or contemplated under any Benefit Plan constitutes an "excess
parachute payment" within the meaning of Section 280G of the Code.
Section 3.20. Affiliate Transactions. Except as set forth in the
Disclosure Documents or in Section 3.20 of the Disclosure Schedule, (a) the
Company is not a party to any contract or arrangement, or indebted, either
directly or indirectly, to any of its officers, directors or stockholders,
their relatives or Affiliates, and (b) none of such persons or entities is
indebted to the Company or has any direct or indirect ownership interest in,
or any contractual relationship with, any person or entity which is or was
an Affiliate of the Company or with which the Company has a business
relationship, or any person or entity which, directly or indirectly,
competes with the Company.
Section 3.21. Environmental Matters. The occupancy and use of the
Company's properties and the conduct of the Company's operations and
business are in compliance in all material respects with all applicable
federal, state and local laws, ordinances, regulations, standards and
requirements relating to pollution, environmental protection, hazardous
substances and related matters. There is no material liability attaching to
such premises or assets or the ownership or operation thereof as a result of
any hazardous substance that may have been discharged on or released from
such premises, or disposed of on-site or off-site, or any other circumstance
occurring prior to the Closing Date or existing as of the Closing Date. For
purposes of this Section 3.21, "hazardous substance" shall mean oil or any
other substance which is included within the definition of a "hazardous
substance", "pollutant", "toxic substance", "toxic waste", "hazardous
waste", "contaminant" or other words of similar import in any federal, state
or local environmental law, ordinance or regulation.
Section 3.22. Absence of Undisclosed Liabilities. Except (i) as
reflected in the Disclosure Documents, (ii) for obligations of future
performance under the contracts entered into in the ordinary course of
business, and (iii) as set forth in Section 3.22 of the Disclosure Schedule,
as of the Closing Date the Company will have no material liabilities or
obligations, whether absolute, accrued, contingent or otherwise and whether
due or to become due, required by generally accepted accounting principles
to be set forth on the consolidated balance sheet of the Company and its
subsidiaries or in the notes thereto. For purposes of this Section 3.22,
liabilities and obligations will be deemed "material" if they involve
$100,000 or more.
Section 3.23. Voting Provisions. Except as set forth in the
Disclosure Documents, neither the Articles of Incorporation nor the By-Laws
of the Company, nor any agreement to which the Company is a party or which
relates to the Company, contains any provision requiring a higher voting
requirement with respect to action taken by the Company's Board of Directors
or other governing body, or the holders of its capital stock, than that
which would apply in the absence of such provisions.
Section 3.24. Registration Rights. Except as set forth in Section
3.24 of the Disclosure Schedule, the Company has not granted any Person the
right to require the Company to register any securities of the Company under
the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the
account of any other Person.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor, severally and not jointly, represents and warrants to
the Company that the statements contained in this Article IV are correct and
complete as of the date hereof and will be correct and complete as of the
Closing Date.
Section 4.01. Organization and Authority. Such Investor is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate and other
power and authority to conduct its business and own its properties as now
conducted and as proposed to be conducted.
Section 4.02. Authorization and Enforceability. Such Investor has
taken all required partnership and other action necessary to authorize and
permit it to execute and deliver this Agreement and the other documents,
instruments and agreements contemplated hereby and to purchase the Shares as
provided in Article II. This Agreement is, and each of the other documents,
instruments and agreements of such Investor contemplated hereby will be, the
valid and binding obligation of such Investor, enforceable in accordance
with their respective terms.
Section 4.03. No Conflicts. The execution, delivery and performance
of this Agreement and the other documents, instruments and agreements
contemplated hereby by such Investor will not result in any violation of, be
in conflict with or constitute a default under, any law, statute,
regulation, ordinance, contract, agreement, instrument, judgment, decree or
order to which such Investor is a party or by which such Investor is bound.
Such Investor is not a party to or bound by any contract, indenture,
agreement, order, law, rule or regulation which restricts in any material
respect its ability to perform its obligations under this Agreement.
Section 4.04. Purchase for Investment. Such Investor is purchasing
the Shares for investment and not with a view to the distribution thereof.
Such Investor understands that (a) the Shares must be held indefinitely
unless registered under the 1933 Act or an exemption from such registration
is available; and (b) routine sales of the Shares made in reliance upon Rule
144 under the 1933 Act can be made only in accordance with the terms and
conditions of such rule.
Section 4.05. Receipt of Information. To the knowledge of such
Investor, it has received all information that it has requested from the
Company and believes that such information is sufficient to make an informed
decision with respect to the purchase of the Shares.
Section 4.06. Financial Resources; Knowledge and Experience. Such
Investor possesses the financial resources to purchase the Shares to be
purchased by it hereunder and to bear the risk of economic loss with respect
to its purchase of the Shares, including the loss of its entire investment.
Such Investor has such knowledge and experience in financial and business
matters that it is able to evaluate the merits and make an informed
investment decision with respect to its purchase of the Shares.
Section 4.07. Brokers. Such Investor is under no obligation to pay
to any person, other than Corporate Finance Dimensions, any broker's fee,
finder's fee, or commission in connection with the transactions contemplated
by this Agreement.
Section 4.08. Legend. A legend substantially in the following form
will be placed on certificates representing the Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS
OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF EFFECTIVE
REGISTRATION STATEMENTS COVERING SUCH SECURITIES UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
Section 4.09. Investor Status. Such Investor is an "accredited
investor" as such term is defined in Regulation D under the 1933 Act and a
"financial and institutional investor" within the meaning of Section
10501(4) of the Revised Maine Securities Act. Neither such Investor nor any
Person who controls such Investor within the meaning of applicable federal
securities laws has been convicted of any felony or misdemeanor or is
subject to any order, judgment, decree, suspension or expulsion described in
Rule 262(b) under the 1933 Act.
Section 4.10. Certain Contracts; SEC Filings. Except for this
Agreement and the Stockholders Agreement, there is no contract, arrangement
or understanding to which such Investor or any Person controlling such
Investor is a party which pertains to the voting or disposition of capital
stock of the Company or which otherwise pertains to the exercise of control
over the affairs of the Company. Each document required to be filed by such
Investor with the SEC in connection with the transactions contemplated by
this Agreement (including without limitation Schedule 13D filings) when
filed, will comply as to form with the applicable requirements of the 1934
Act and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees that it shall duly perform and
observe each and all of the covenants and agreements hereinafter set forth
in this Article V:
Section 5.01. Conduct of the Business.
(a) The Company will, prior to the Closing:
(i) maintain its corporate existence;
(ii) preserve its business organization intact, retain its
permits, licenses and franchises, preserve the existing
contracts and goodwill of its customers, suppliers,
personnel and others having business relations with it;
(iii) conduct its business only in the ordinary course; and
(iv) use its best efforts to operate in such a manner as to
assure that the representations and warranties set forth
in Article III in this Agreement will be true and correct
as of the Closing Date.
(b) Except with the Investors' prior written consent, the Company
will not, prior to the Closing:
(i) make any material change in its method of management or
operations;
(ii) dispose of or acquire any material assets or properties;
(iii) incur any indebtedness for borrowed money, make any loans
or advances, assume, guarantee or endorse or otherwise
become responsible for the obligation of any other person
or entity, or subject any of its properties or assets to
any lien, security interest or encumbrance, other than in
the ordinary course of business;
(iv) modify, amend, cancel or terminate any existing agreement
material to its business, including the making of any
prepayment on any existing obligation;
(v) make any direct or indirect redemption, purchase or other
acquisition of any securities of the Company;
(vi) enter into any contract or agreement with respect to
which the Company has any liability or obligation
involving more than $100,000, contingent or otherwise, or
which may otherwise have any continuing effect after the
Closing, other than in the ordinary course of business,
or which may place any material limitation on method of
conducting or scope of its business; or
(vii) take any action that would have a Material Adverse Effect
on the value of the Company or its business.
Section 5.02. Exclusivity. Prior to the Closing, the Company will
not, and its officers, directors, representatives and affiliates and Paul E.
Lukas will not, directly or indirectly, solicit or respond to any offers for
the acquisition of all or any material portion of the assets or stock of the
Company, including by merger or otherwise, or negotiate with respect to any
unsolicited offer or indication of interest with respect to any such
acquisition, except that the Company and its Board of Directors may
negotiate with a third party in connection with an unsolicited Acquisition
Proposal to the extent that the Board of Directors of the Company determines
in good faith upon the advice of its counsel that such action is necessary
to comply with its fiduciary duties to the Company under applicable law.
Section 5.03. Access. Until the Closing Date, the Company will grant
the Investor, their representatives, and the legal, accounting and other
advisors to the Investors, during normal business hours, access to any
properties, corporate records, books of account, contracts and other
documents of the Company, and to any employees, advisors, consultants and
other personnel of the Company, requested by any of them. No investigation
or findings of the Investors shall affect the representations and warranties
of the Company hereunder.
Section 5.04. Efforts. The Company will use all commercially
reasonable efforts to cause the conditions specified in Section 7.01 to be
satisfied as soon as practicable.
Section 5.05. Public Disclosure. The Company will not disclose any
information regarding this Agreement or the transactions contemplated hereby
prior to the Closing except (a) through a joint press release in a form
mutually acceptable to the Company and the Investors following the execution
of this Agreement, (b) as required by applicable law or court order (after
notice to and discussion with the Investors), and (c) with the written
consent of the Investors.
Section 5.06. Cooperation with Filings. The Company and the Investor
shall cooperate with one another (a) in connection with the preparation of
the Company Filings, (b) in determining whether any action by or in respect
of, or filing with, any governmental body, agency or official, or authority
is required, or any actions, consents, approvals or waivers are required to
be obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement, and (c) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Filings and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 5.07. Meeting of Stockholders. The Company shall cause a
meeting of its stockholders (the "Stockholder Meeting") to be duly called
and held as soon as reasonably practicable following the date hereof, but in
no event later than May 15, 1998, for the purpose of voting on, among other
things, (a) an amendment to the Company's Articles of Incorporation to
exempt the Company from the provisions of Section 910 of the Maine Statute,
(b) an increase in the number of authorized shares of Common Stock, (c) an
increase in the number of shares of Common Stock authorized for issuance
under the Company's stock option plan and (d) the grant of restricted stock
or stock options to Brooks under the Employment Agreement (as defined in
Section 7.01). In connection with the Stockholder Meeting, the Company will
(x) promptly prepare and file with the SEC, will use its best efforts to
have cleared by the SEC and will thereafter mail to its stockholders as
promptly as practicable the Company Proxy Statement and all other proxy
materials for such meeting, and (y) otherwise comply with all legal
requirements applicable to such meeting.
Section 5.08. Reports. The Company will furnish to the Investors
prior to Closing, and for as long as the Investors hold in the aggregate at
least 150,000 Shares (such number to be appropriately adjusted for stock
splits, stock dividends, reverse splits and similar events affecting the
Common Stock), the following reports:
(a) Annual Reports. Within 90 days after the end of each fiscal
year, a consolidated balance sheet of the Company and its subsidiaries as at
the end of such fiscal year and the related consolidated statements of
earnings, stockholders' equity and cash flows for such year, in each case
setting forth in comparative form the corresponding figures for the next
preceding fiscal year, all in reasonable detail and accompanied by the
report on such consolidated financial statements by Coopers & Lybrand LLP,
or such other independent certified public accountants of recognized
national standing selected by the Company and reasonably satisfactory to the
Investors;
(b) Monthly Reports. Within 15 days after the end of each month, an
unaudited consolidated balance sheet of the Company and its subsidiaries as
at the end of such month and the related consolidated statements of
earnings, stockholders' equity and cash flows for such month;
(c) Annual Budgets. At least 60 days prior to the beginning of each
fiscal year, a comprehensive consolidated budget of the Company and its
subsidiaries setting forth projected revenues, expenses and cash flows of
the Company and its subsidiaries for each month during such upcoming fiscal
year;
(d) Quarterly Budgets. At least 30 days prior to the beginning of
each fiscal quarter, a comprehensive budget of the Company and its
subsidiaries setting forth projected revenues, expenses and cash flows of
the Company and its subsidiaries for each month during such upcoming fiscal
quarter;
(e) Audit Reports. Within five days after receipt thereof, copies of
all reports (including, without limitation, audit reports and so called
management letters) or written comments submitted to the Company or its
subsidiaries by independent certified public accountants or other management
consultants in connection with each annual, interim or special audit in
respect of the financial statements or the accounts or the financial or
accounting systems or controls of the Company and its subsidiaries made by
any such accountants or other management consultants;
(f) Securities Filings, Etc. Within five days after they become
available, copies of (i) all press releases issued by the Company, and all
notices, proxy statements, financial statements, reports and documents as
the Company shall send or make available generally to its stockholders or to
financial analysts, and (ii) all periodic and special reports, documents and
registration statements (other than on Form S 8) which the Company furnishes
or files with the SEC or with the American Stock Exchange; and
(g) Other Information. Such other information relating to the
Company as from time to time may reasonably be requested by the Investors.
Section 5.09. Venture Capital Exception. If either Investor or any
investor of an Investor is subject to the plan asset regulations under ERISA
(Department of Labor Regulation 2510.3 101), until six months following such
time as the Investors no longer hold shares of Common Stock, the Company
shall use its best efforts so that the Investors shall be permitted to
routinely consult from time to time with the Company's management with
respect to the business and affairs of the Company and, if requested by the
Investors, exercise other "management rights" as may be necessary to qualify
the securities of the Company owned by the Investors as a "venture capital
investment" within such regulations, it being agreed that all the rights of
the Investor under this Agreement and all rights which the Investors may
then have with respect to the management of any other companies in which the
Investors hold investments shall be considered in determining whether the
Investors are permitted to exercise "management rights" to the extent
required under such regulations for venture capital investments.
Section 5.10. Operating Company. The Company will not take any
action that would cause it to cease to be an "operating company" within the
meaning of Department of Labor Regulation 2510.3 101.
Section 5.11. Repurchase Obligation.
(a) In the event the Company refuses to accept a bona fide
Acquisition Proposal which would imply a valuation for the Common Stock in
excess of $10.00 per share (such amount to be appropriately adjusted for
stock splits, stock dividends, reverse splits and similar events affecting
the Common Stock), the Company shall, upon the written request (the
"Request") of the holders of a majority of the Common Stock held by the
Investors and Brooks as a group, repurchase all shares of capital stock of
the Company held by the Investors and Brooks at the price per share (the
"Redemption Price") which the Investors and Brooks would have received had
such Acquisition Proposal been accepted and consummated.
(b) The closing of a repurchase of shares pursuant to Section 5.11(a)
shall take place at the Company's principal offices on such date (the
"Repurchase Date") and at such time as the Investors shall specify;
provided, however, that such date shall not be less than sixty (60) days
after the date the Request is received by the Company.
(c) If the funds of the Company legally available for repurchase of
shares pursuant to Section 5.11(a) are insufficient to repurchase all shares
requested to be repurchased on the Repurchase Date, those funds which are
legally available will be used to repurchase the maximum possible number of
such shares, ratably based on the number of shares held by each holder of
shares to be so repurchased. At any time thereafter when additional funds
of the Company become legally available for the repurchase of shares, such
funds will be used to repurchase the balance of the shares which the Company
was theretofore obligated to repurchase, ratably on the basis set forth in
the immediately preceding sentence. Interest shall accrue on the Redemption
Price for any shares not repurchased on the Repurchase Date at 12% per
annum, commencing on the Repurchase Date.
(d) In the event the Company for whatever reason (including
insufficient legally available funds) fails to repurchase any shares
required hereunder to be repurchased on the Repurchase Date, the Investors
shall, in accordance with the Stockholders Agreement, have the right to
designate a majority of the members of the Company's Board of Directors.
ARTICLE VI
COVENANTS OF THE INVESTORS
Section 6.01. Efforts. The Investors will use all commercially
reasonable efforts to cause the conditions specified in Section 7.02 to be
satisfied as soon as practicable.
Section 6.02. Public Disclosure. The Investors will not disclose any
information regarding this Agreement or the transactions contemplated hereby
prior to the Closing except (a) through a joint press release in a form
mutually acceptable to the Company and the Investors following the execution
of this Agreement, (b) as required by applicable law or court order (after
notice to and discussion with the Company), and (c) with the written consent
of the Company.
Section 6.03. Cooperation with Filings. The Company and the
Investors shall cooperate with one another (a) in connection with the
preparation of the Company Filings, (b) in determining whether any action by
or in respect of, or filing with, any governmental body, agency or official,
or authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement, and (c) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Company Filings and seeking timely to
obtain any such actions, consents, approvals or waivers.
ARTICLE VII
CONDITIONS TO THE CLOSING
Section 7.01. Conditions to Obligations of the Investors. Unless
waived in writing by the Investors, the obligation of the Investors
hereunder to purchase the Shares is subject to the satisfaction at or prior
to the Closing of the following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article III shall be true and accurate in all
material respects on and as of the Closing Date with the same effect as
though made on and as of such date.
(b) Performance of Covenants. The Company shall have performed and
complied in all material respects with each and every covenant, agreement
and condition required to be performed or complied with by it hereunder on
or prior to the Closing Date.
(c) Certificate. The Investors shall have received a certificate
signed by the Company confirming the satisfaction by the Company of the
conditions set forth in the preceding subsections of this Section 7.01.
(d) Licenses, Consents, etc. Received. The Company shall have
obtained and delivered to the Investors copies of all consents, licenses,
approvals and permits of other parties required to be obtained to permit it
to consummate the transactions contemplated hereby.
(e) No Injunctions. The consummation of the transactions
contemplated hereby shall not violate any order, decree or judgment of any
court or governmental body having competent jurisdiction.
(f) Issuance of the Shares. The Company shall have issued and
delivered the Shares to the Investors.
(g) Certificates; Documents. The Investors shall have received
copies of each of the following, certified to their satisfaction by an
authorized officer of the Company: (i) the Company's Articles of
Incorporation, certified by the Secretary of State of Maine, (ii) a
certificate of the Secretary of State of Maine as to the legal existence and
good standing of the Company, (iii) the Company's Bylaws, (iv) resolutions
of the Company's Board of Directors approving the transactions contemplated
by this Agreement, and (v) the incumbency of officers and the genuineness of
the signatures thereof. The Investors shall also have received such other
certificates, documents and materials as they shall reasonably request.
(h) Employment Agreement. The Company shall have entered into an
employment agreement with Brooks in substantially the form of Exhibit
7.01(h) hereto (the "Employment Agreement").
(i) Stockholder Approval. The stockholders of the Company shall have
voted (i) to amend the Company's Articles of Incorporation to increase the
authorized Common Stock to 8,000,000 shares, (ii) to provide that Section
910 of the Maine Statute shall not be applicable to the Company, (iii) to
approve the 1998 Employee Stock Option Plan, and (iv) to approve the
restricted stock arrangement with Brooks.
(j) Stockholders Agreement. The Company, Alan Lukas, Paul E. Lukas,
Karen E. Lukas, Alan Lukas, as custodian for Andrew B. Lukas, James H. Young
II, Trustee, the Andrew B. Lukas Trust dated December 4, 1994, Lukas
Brothers and Brooks shall have entered into a stockholders agreement in
substantially the form of Exhibit 7.01(j) hereto (the "Stockholders
Agreement").
(k) Listing of Shares. The Shares shall have been approved for
listing (if necessary) on the American Stock Exchange.
(l) Opinion of Counsel to Company. The Investors shall have received
an opinion of Verrill & Dana, LLP, counsel for the Company, dated as of the
Closing Date, in form and substance satisfactory to the Investors.
(m) Actions and Proceedings. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated hereby or
incident hereto and all other legal matters required for such transactions
shall be reasonably satisfactory to the Investors and their counsel.
(n) Section 910 of the Maine Statute. The Company's Articles of
Incorporation shall have been validly amended to provide that Section 910 of
the Maine Statute shall not be applicable to the Company.
(o) Amendment of Bylaws. The Company's Bylaws shall have been
amended and restated so as to be in the form of 7.01(o) hereto.
Section 7.02. Conditions to Obligations of the Company. Unless
waived in writing by the Company, the obligation of the Company to issue and
sell the Shares is subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article IV shall be true and accurate in all
material respects on and as of the Closing Date with the same effect as
though made on and as of such date.
(b) Covenants Performed. The Investors shall have performed and
complied in all material respects with each and every covenant, agreement
and condition required to be performed or complied with by them under this
Agreement on or prior to the Closing Date.
(c) Officer's Certificate. The Investors shall have delivered to the
Company a certificate confirming the satisfaction by the Investors of the
conditions set forth in the preceding subsections of this Section 7.02.
(d) Licenses, Consents, Etc. Received. The Investors shall have
delivered to the Company copies of all consents, licenses, approvals and
permits of other parties required to be obtained to permit it to consummate
the transactions contemplated hereby.
(e) No Injunction. The consummation of the transactions contemplated
hereby shall not violate any order, decree or judgment of any court or
governmental body having competent jurisdiction.
(f) Purchase Price. The Investors shall have paid the Purchase
Price for the Purchased Shares.
(g) Employment Agreement. Brooks shall have entered into the
Employment Agreement.
(h) Stockholders Agreement. The Investors shall have entered into
the Stockholders Agreement.
(i) Actions and Proceedings. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated hereby or
incident hereto and all other legal matters required for such transactions
shall be reasonably satisfactory to the Company and its counsel.
ARTICLE VIII
RIGHT OF FIRST REFUSAL
Section 8.01. Offer. The Company will give the Investors at least 20
days prior written notice of any proposed sale or issuance by the Company of
any shares of its capital stock or any other securities exercisable for or
convertible into shares of its capital stock (the "Offered Securities"),
except for (a) the grant of options to purchase shares of Common Stock, and
the issuance of shares of Common Stock upon the exercise of such options, to
employees of or consultants to the Company pursuant to stock option plans
approved by the Company's Board of Directors, (b) the sale by the Company of
shares of Common Stock in a public offering, and (c) the issuance of shares
of capital stock upon conversion or exercise of any Offered Securities as to
which the Investors were offered the opportunity to purchase their
Proportionate Percentages under this Article VIII or as to which the
Investors were not required to be offered such opportunity hereunder. Such
notice will identify the number of shares or amount of Offered Securities to
be issued, the approximate date of issuance, and the price and other terms
and conditions of the issuance. Such notice will also include an offer (the
"Offer") to sell to each Investor its Proportionate Percentage of such
Offered Securities at the price and on the other terms as are proposed for
such sale or issuance, which Offer by its terms shall remain open for a
period of 15 days from the date of receipt of such notice and which offer
may be accepted by the Investors in their sole discretion.
Section 8.02. Acceptance and Closing. Each Investor shall give
written notice to the Company of its intention to accept an Offer prior to
the end of the 15-day period of such Offer, setting forth the portion of the
Offered Securities which such Investor elects to purchase (the "Notice of
Acceptance"). Upon the closing of the sale or issuance of such Offered
Securities, such Investor shall purchase from the Company, and the Company
shall sell to such Investor, the Offered Securities subscribed for by such
Investor at the terms specified in the Offer, which shall be the same terms
at which all other persons or entities acquire such securities in connection
with such sale or issuance.
Section 8.03. Sale to Others. To the extent the Investors do not
subscribe for all of the Offered Securities, the Company shall have 120 days
from the end of the foregoing 15-day period to sell all those Offered
Securities not subscribed for the Investors to any other Persons, at a price
and on terms and conditions which are no more favorable to such other
Persons or less favorable to the Company than those set forth in the Offer.
Any Offered Securities not purchased by the Investors or such other Persons
in accordance with this Article VIII may not be sold or otherwise disposed
of until they are again offered to the Investor under the procedures
specified in this Article VIII.
ARTICLE IX
REGISTRATION RIGHTS
Section 9.01. Demand Registration Rights.
(a) If the holders of a majority of the Registrable Securities
request the Company to file a registration statement under the 1933 Act for
a firm commitment underwritten public offering of not less than 20% of the
Registrable Securities (or any lesser percentage if the anticipated
aggregate offering price of such offering, net of underwriting discounts and
commissions, exceeds $2,000,000), the Company shall (i) within 10 days
notify all holders of Registrable Securities of such request and (ii) use
its best efforts to so register under the 1933 Act the Registrable
Securities initially requested to be registered and the Registrable
Securities of all other holders who request within 20 days after receiving
the Company's notice that their Registrable Securities be included therein.
The Company is obligated to effect a maximum of two such demand
registrations requested by holders of Registrable Securities, none of which
shall be within the same six-month period.
(b) If the underwriter managing the offering determines that, because
of marketing considerations, all of the Registrable Securities requested to
be registered may not be included in the offering, the underwriter may
reduce the number of Registrable Securities included therein. Such
reduction shall be applied first to shares other than Registrable
Securities. Any remaining reduction shall be applied pro rata among the
holders of the Registrable Securities based upon the number of shares
requested by each such holder to be included in the registration. If any
such reduction results in the inclusion of less than 85% of the Registrable
Securities requested to be included therein by the holders that initiated
such registration, such registration shall not reduce the number of
registrations available to such holders under this Section 9.01.
(c) If the Company includes in any registration required under this
Section 9.01 a number of shares other than Registrable Securities that
exceeds the number of Registrable Securities to be included, then such
registration shall be deemed to be a registration under Section 9.02 instead
of this Section 9.01. In all other cases where the Company includes in such
registration any shares other than Registrable Securities, such registration
shall remain subject to this Section 9.01, provided, however, that in no
event shall other shares be included in such registration if such inclusion
would (i) prevent holders of Registrable Securities from registering all
Registrable Securities requested by them or (ii) adversely affect the
offering price of the Registrable Securities in such registration.
(d) Notwithstanding anything to the contrary contained herein, the
Company shall have the right to delay a registration requested pursuant to
this Section 9.01 for up to sixty (60) days following the receipt of such
request by the Company if the Board of Directors of the Company determines,
after consultation with legal counsel, that such registration would require
disclosure of a confidential event or condition and that such disclosure
would not be in the best interests of the Company's stockholders; provided,
however, that the Company shall have the right to delay registrations under
this Section 9.01(d) for no more than an aggregate of ninety (90) days in
any twelve-month period.
Section 9.02. Piggyback Registration Rights.
(a) Whenever the Company proposes to register any Common Stock for
its own or others' account under the 1933 Act, other than a registration
relating to employee benefit plans or a registration solely relating to
shares to be sold under Rule 145 under the Act, the Company shall give each
holder of Registrable Securities prompt written notice of its intent to do
so. Upon the written request of any such holder given within 20 days after
receipt of such notice, the Company will use its best efforts to cause to be
included in such registration all of the Registrable Securities which such
holder requests.
(b) If the Company is advised in writing in good faith by any
managing underwriter of the securities being offered pursuant to any
registration statement under this Section 9.02 that, because of marketing
considerations, the number of shares to be sold by persons other than the
Company is greater than the number of such shares which can be offered
without adversely affecting the offering, the Company may reduce the number
of shares offered for the accounts of such persons to a number deemed
satisfactory by such managing underwriter. Such reduction shall be applied
first to shares other than Registrable Securities. Any remaining reduction
shall be applied pro rata among the holders of the Registrable Securities
based upon the number of shares requested by each such holder to be included
in the registration.
Section 9.03. Selection of Underwriter. The underwriter of any
offering under Section 9.01 shall be selected by holders of a majority of
the Registrable Securities initiating such registration; provided, however,
that such underwriter shall be reasonably acceptable to the Company. The
underwriter of any offering requested under Section 9.02 and 9.03 shall be
selected by the Company.
Section 9.04. Registration Procedures. If and when the Company is
required by the provisions of this Agreement to use its best efforts to
effect the registration of any of the Registrable Securities under the Act,
the Company shall:
(a) as expeditiously as possible (and, in the case of a registration
under Section 9.01, within 60 days of any request thereunder) file with the
SEC a registration statement, in form and substance required by the Act,
with respect to such Registrable Securities and use its best efforts to
cause that registration statement to become effective;
(b) as expeditiously as possible, prepare and file with the SEC any
amendments and supplements to the registration statement and the prospectus
included in the registration statement as may be necessary to keep the
registration statement effective, in the case of a firm commitment
underwritten public offering, until completion of the distribution of all
securities described therein and, in the case of any other offering, until
the earlier of the sale of all Registrable Securities covered thereby or 120
days after the effective date thereof;
(c) as expeditiously as possible, furnish to each holder that
requested that Registrable Securities be included in such registration, such
reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the 1933 Act, and such
other documents as such holder may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities owned by
such holder;
(d) as expeditiously as possible, use its best efforts to register or
qualify the Registrable Securities covered by the registration statement
under the securities or Blue Sky laws of such states as the holders thereof
shall reasonably request, and do any and all other acts and things that may
be necessary or desirable to enable the holders thereof to consummate the
public sale or other disposition in such states of the Registrable
Securities owned by the holders; provided, however, that the Company shall
not be required in connection with this paragraph (d) to qualify as a
foreign corporation or execute a general consent to service of process in
any jurisdiction;
(e) in connection with each registration covering an underwritten
public offering, the Company and each participating holder agrees to enter
into a written agreement with the managing underwriter in such form and
containing such provisions (including, if the underwriter so requests,
customary contribution provisions on the part of the Company) as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature,
provided that the holders shall not be obligated to enter into any such
underwriting agreement if the indemnification provisions thereof are more
burdensome on such holder than those contained herein or if any standback
requirement therein is for a period that exceeds the period required by this
Agreement;
(f) at the request of any participating holder, the Company will
furnish to each underwriter, if any, and the participating holders, a legal
opinion of its counsel and a letter from its independent certified public
accountants, each in customary form and substance, at such time or times as
such documents are customarily provided in the type of offering involved;
(g) whenever the Company is registering any Common Stock under the
1933 Act and a holder of Registrable Securities is selling securities under
such registration or determines that it may be a controlling person under
the 1933 Act, the Company will keep such holder advised in writing of the
initiation, progress and completion of such registration, will allow such
holder and such holders's counsel to participate in the preparation of the
registration statement and to have access to all relevant corporate records,
documents and information, will include in the registration statement such
information as such holder may reasonably request and will take all such
other action as such holder may reasonably request;
(h) each holder of Registrable Securities included in a registration
shall furnish to the Company such information regarding such holder and the
distribution proposed by such holder as the Company may reasonably request
in writing and as shall be required in connection with the registration,
qualification or compliance referred to in this Agreement;
(i) as of the effective date of any registration statement relating
thereto, cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed, and, if not so listed, to be listed on the New York Stock
Exchange or the NASDAQ Stock Market National Market System; and
(j) as of the effective date of any registration statement relating
thereto, provide a transfer agent and registrar for all such Registrable
Securities.
Section 9.05. Payment of Expenses. The Company shall bear all
expenses (excluding underwriting commissions) applicable to registrations,
qualifications, underwriting and other matters pursuant to this Article IX,
including the reasonable fees and expenses of counsel to the holders of the
Registrable Securities; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceedings pursuant to
Section 9.01 if the registration request is subsequently withdrawn at any
time at the request of the holders of a majority of the Registrable
Securities, unless the holders of the majority of the Registrable Securities
agree to forfeit their right to the demand registration pursuant to Section
9.01.
Section 9.06. 1934 Act Registration Requirements. The Company shall
at all times remain subject to the reporting requirements of either Section
13 or Section 15(d) of the 1934 Act. The Company shall file with the SEC in
a timely manner such information as the Commission may require under either
of said Sections, and shall take all action as may be required to be taken
under the 1934 Act to permit sales of the Registrable Securities pursuant to
Rule 144 (or any similar or successor exemptive rule hereafter in effect)
and the use of Form S 3 for registration of the Registrable Securities.
Section 9.07. Action Under State Laws. The Company shall register or
qualify the securities covered by a registration statement which includes
Registrable Securities under the securities or Blue Sky laws of such
jurisdictions as each selling holder or managing underwriter of Registrable
Securities shall reasonably request, and do any and all other acts and
things which may be necessary or advisable to enable such holder to
consummate the disposition of the securities in such jurisdiction, but in no
event shall the provisions of this Article IX be deemed to require the
Company to register or qualify as a foreign corporation or as a broker or
dealer in any jurisdiction.
Section 9.08. Indemnification Relating to Registration. The Company
hereby agrees to indemnify each holder of the Registrable Securities, each
partner of such holder, each officer and director of such holder, and each
person, if any, who controls any such holder within the meaning of
applicable federal or state securities laws against all claims, losses,
damages, liabilities and expenses (collectively, "Claims") under the
applicable federal or state securities laws, or common law or otherwise
arising out of or relating to (a) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, offering circular or other document relating thereto (each as
amended or supplemented) or any preliminary prospectus, except insofar as
such Claims are caused solely by any untrue statement or omission contained
in information furnished in writing to the Company by such holder expressly
for use therein, (b) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein complete or not misleading, or (c) any violation by the
Company of the 1933 Act or any other securities law, or any rule or
regulation promulgated thereunder. If the offering pursuant to any
registration statement provided for under this Article IX is made through
underwriters, the Company agrees to indemnify such underwriters and each
person who controls such underwriters within the meaning of the applicable
federal or state securities laws to the same extent as hereinabove provided
with respect to the indemnification of the holders of the Registrable
Securities.
In connection with any registration statement in which a holder of the
Registrable Securities is participating, and as a condition to the
obligation of the Company to cause any Registrable Securities of such holder
to be included in a registration statement pursuant to this Article IX, such
holder will furnish to the Company in writing such information as shall
reasonably be requested by the Company for use in any such registration
statement or prospectus and will indemnify the Company, its directors and
officers, each person, if any, who controls the Company within the meaning
of the applicable federal and state securities laws, the underwriters
engaged in any offering covered by this Article IX and each person who
controls such underwriters within the meaning of the applicable federal and
state securities laws, against any Claims resulting from any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact required to be stated in the
registration statement or prospectus and necessary to make the statements
therein complete or not misleading, but only to the extent that such untrue
statement or omission is contained in information so furnished in writing by
such holder expressly for use therein.
If the indemnification provided for above from an indemnifying party
is unavailable to an indemnified party in respect of any Claims, then the
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Claims in such proportion as is
appropriate to reflect the relative faults of the indemnifying party and the
indemnified party in connection with the actions or failure to act which
resulted in such Claims, plus any other relevant equitable considerations.
The relative faults of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether any action
or failure to act, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has
been made, or relates to information furnished by, the indemnifying party or
the indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the Claims shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in this paragraph.
Section 9.09. Other Registration Rights. The Company will not grant
any holder or prospective holder of any of shares of its capital stock or
any other securities exercisable for or convertible into shares of its
capital stock the right to require the Company to register, or include in
any registration by the Company, any of its securities under the 1933 Act if
such rights would (a) conflict or interfere in any way with the rights of
the holders of Registrable Securities under this Article IX (including
without limitation, allowing such holder or prospective holder to include
any securities in any registration filed under Section 9.01 hereof unless
such holder or prospective holder is entitled to include securities in any
such registration only to the extent that the inclusion of its securities
will not reduce the amount of the Registrable Securities which would
otherwise be included), or (b) allow such holder or prospective holder to
include such securities in any registration covered by Section 9.02, unless
such holder is permitted to include such securities only after the holders
of shares of Registrable Securities have included all shares of Registrable
Securities requested by them to be included therein.
ARTICLE X
TERMINATION
Section 10.01. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Company and the Investors;
(b) by the Company or the Investors, if the Closing shall not have
occurred by May 15, 1998;
(c) by the Company or the Investors, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach shall not have been cured
within 10 days following receipt by the breaching party of written notice of
such breach from the other party;
(d) by the Company or the Investors, if, at the Stockholder Meeting
(including any adjournment or postponement), the requisite vote of the
Company's stockholders in favor of the matters set forth in Section 5.07
shall not have been obtained; or
(e) by the Investors, if the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to the Investors its
favorable recommendation for the approval by stockholders of the matters set
forth in Section 5.07.
Notwithstanding the foregoing, no party may terminate this Agreement
at any time when such party is in breach or violation of this Agreement.
Any party terminating this Agreement shall give immediate written notice
thereof to the other parties.
Section 10.02. Effect of Termination.
(a) Except as provided in Section 10.02(b), in the event of a
termination of this Agreement pursuant to Section 10.01, this Agreement
shall thereupon become void and there shall be no liability on the part of
any party to any other party under this Agreement, except that the
provisions of Sections 5.05, 5.06, 6.02, 6.03 and Articles XI and XII hereof
shall continue in full force and effect, and except that nothing herein
shall relieve any party from liability for any breach of this Agreement
prior to such termination or to relieve the Company of its obligations under
Section 13.04 with regard to costs and expenses incurred prior to
termination.
(b) If this Agreement is terminated by the Investors pursuant to
Section 10.01(c) or (e), the Company shall pay the Investors a termination
fee of $300,000, such amount to be payable within three (3) business days
after termination of this Agreement and to be allocated between the
Investors in proportion to the number of Shares to be purchased by each as
set forth on Schedule 1 hereto.
ARTICLE XI
INDEMNIFICATION
Section 11.01. Survival. The representations, warranties and
covenants contained herein shall survive the Closing and any investigation
made by the Investors or the Company for two years following the Closing
Date. No claim for a breach of the representations, warranties and
covenants contained herein shall be brought after the second anniversary of
the Closing Date, except for (i) claims arising from the representations and
warranties contained in Section 3.05, which shall survive indefinitely,
(ii) claims arising from the representations and warranties contained in
Sections 3.11 which shall survive until the expiration of the applicable
statute(s) of limitation (including any extensions thereof) and (iii) claims
of which the indemnifying party under this Article XI has been notified with
reasonable specificity by the indemnified party under this Article XI or
before the second anniversary of the Closing Date.
Section 11.02. Indemnification by the Company. Subject to Sections
11.01, the Company hereby indemnifies and holds the Investors harmless from
and against (a) any and all claims, liabilities, obligations, costs,
damages, losses and expenses of any nature, arising out of, resulting from
or relating to any breach of the representations, warranties or covenants of
the Company under this Agreement, and (b) all costs and expenses (including
reasonable attorneys fees) incurred in connection therewith; provided,
however, that the Company shall only be liable under this Section 11.02 if
and to the extent that the amounts specified in clauses (a) and (b) in the
aggregate exceed $50,000.
Section 11.03. Indemnification by the Investors. Subject to Section
11.01, each Investor, severally and not jointly, hereby indemnifies and
holds the Company harmless from and against (a) any and all claims,
liabilities, obligations, costs, damages, losses and expenses of any nature,
arising out of, resulting from or relating to any breach of the
representations, warranties or covenants of such Investor under this
Agreement, and (b) all costs and expenses (including reasonable attorneys
fees) incurred in connection therewith; provided, however, that an Investor
shall only be liable under this Section 11.03 if and to the extent that the
amounts specified in clauses (a) and (b) for which one or both Investors are
liable exceed $50,000 in the aggregate.
Section 11.04. Procedures for Indemnification of Third Party Claims.
(a) A party or parties entitled to indemnification hereunder with
respect to a third party claim will give the indemnifying party prompt
written notice of any legal proceeding, claim or demand instituted by any
third party (in each case, a "Third Party Claim") in respect of which the
indemnified party is entitled to indemnification hereunder.
(b) The indemnifying party shall have the right, by giving written
notice to the indemnified party within 15 days after receipt of notice from
the indemnified party and stating that it is responsible for such Third
Party Claim, at its option and expense, to defend against, negotiate, settle
or otherwise deal with any Third Party Claim with respect to which it is the
indemnifying party and to have the indemnified party represented by counsel,
reasonably satisfactory to the indemnified party, selected by the
indemnifying party; provided, that the indemnified party may participate in
any proceeding with counsel of its choice and at its expense; provided,
further, that the indemnified party, at any time when it believes in good
faith that any Third Party Claim with respect to which the indemnifying
party is defending is having a Material Adverse Effect on the business of
the Company, may assume the defense and settlement of such Third Party Claim
in good faith and be fully indemnified therefor; and provided, further, that
the indemnifying party may not enter into a settlement of any such Third
Party Claim without the consent of the indemnified party unless such
settlement requires no more than a monetary payment for which the
indemnified party is fully indemnified or involves other matters not binding
upon or affecting the indemnified party.
ARTICLE XII
DISPUTE RESOLUTION
In the event of any controversy or claim arising out of or relating to
this Agreement (including its validity) or any act or omission of a party
hereunder (a "dispute"), either party (by written notice to the others) may
invoke the procedures of this Article. Promptly after such notice is given,
senior management of the parties will meet to attempt to negotiate a
settlement of all pending disputes. If for any reason the parties have not
entered into a written settlement of the dispute(s) within thirty (30) days
after the original notice, any party may within one year of the original
notice give notice demanding arbitration. Thereafter all pending disputes
shall be settled by arbitration before a panel of three arbitrators, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (or such other rules and procedures as the parties may hereafter
consent to in writing). The arbitration shall occur in Boston,
Massachusetts, or such other location as is mutually acceptable to the
parties. Except as the parties may hereafter consent in writing, at least
one of the arbitrators shall be licensed to practice law in Maine and
experienced in Maine corporate law, at least one of the arbitrators shall be
licensed to practice law in Massachusetts and experienced in Massachusetts
contracts law, and the arbitrators shall be required to decide each claim in
accordance with applicable law and to set forth briefly in writing the
award, the rationale of the decision, and those facts considered by the
arbitrators to be material to such decision. The arbitral award shall be
deemed binding upon each party, and judgment on the award may be entered in
any court having jurisdiction thereof. This Agreement to arbitrate shall be
enforceable under the Uniform Arbitration Act. In any arbitration
proceeding under this Article and in any action to compel arbitration under
this Article or to enforce an arbitral award, the prevailing party shall be
entitled to an award of its reasonable expenses, including attorneys' fees.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Notices. All notices to a party hereunder shall be in
writing and shall be deemed to have been adequately given if delivered in
person, by facsimile transmission with receipt acknowledged or by delivery
by a recognized courier for overnight delivery, or mailed, certified mail,
return receipt requested, to such party at its address set forth on below
(or such other address as it may from time to time designate in writing to
the other parties hereto).
If to the Company, to: Intelligent Controls, Inc.
74 Industrial Park Road
P. O. Box 638
Saco, ME 04072
Attn: President
Fax: (207) 286-1439
With a copy to: Verrill & Dana, LLP
One Portland Square
Portland, ME 04112-0556
Attn: Gregory S. Fryer, Esquire
Fax: (207) 774-7499
If to the Investors, to: c/o Ampersand Ventures
55 Williams Street, Suite 240
Wellesley, MA 02181
Attn: Charles D. Yie
Fax: (781) 239-0824
With a copy to: Choate, Hall & Stewart
Exchange Place
Boston, Massachusetts 02109
Attn: Robert V. Jahrling, Esquire
Fax: (617) 248-4000
If to Brooks, to: Roger E. Brooks
16 Deerfield Road
Sherborn, MA 01770
Section 13.02. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their
respective successors and assigns, provided that neither this Agreement nor
any right hereunder may be assigned by any party without the written consent
of the Investor and the Company.
Section 13.03. Amendments and Waivers. This Agreement may be
modified or amended only by a writing signed by the Company and the
Investor. No waiver of any term or provision hereof shall be effective
unless in writing signed by the party waiving such term or provision.
Section 13.04. Expenses. All costs and expenses incurred by any
party (including Brooks) in connection with this Agreement and the
transactions contemplated hereby, including without limitation all legal
fees, shall be borne by the Company, regardless of whether the transactions
contemplated hereby are actually consummated; provided, however, that if
this Agreement is terminated by the Company pursuant to Section 10.01(c),
then the Company shall not be responsible for the costs and expenses
incurred by the Investors in connection with this Agreement or the
transactions contemplated hereby.
Section 13.05. Counterparts. This Agreement may be executed in two
or more counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
Section 13.06. Headings. The headings of Articles and Sections
herein are inserted for convenience of reference only and shall be ignored
in the construction or interpretation hereof.
Section 13.07. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of The Commonwealth of
Massachusetts, without regard to the choice of law provisions thereof.
Section 13.08. No Waiver. No failure to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The rights provided are
cumulative and not exclusive of any rights provided by law.
Section 13.09. Integration. This writing, together with Exhibits and
Disclosure Schedule hereto, embodies the entire agreement and understanding
between the parties with respect to this transaction and supersedes all
prior discussions, understandings and agreements concerning the matters
covered hereby.
Section 13.10. Limitation on Scope of Agreement. If any provision of
this Agreement is unenforceable or illegal, such provision shall be enforced
to the fullest extent permitted by law and the remainder of the Agreement
shall remain in full force and effect.
Section 13.11. Third-Party Beneficiaries. Nothing in this Agreement
shall be construed as giving any person, firm, corporation or other entity,
other than the parties hereto and their permitted successors and assigns,
any right, remedy or claim under or in respect of this Agreement or any
provision thereof.
Section 13.12. Resolution of Knight Litigation. If in connection
with the dispute which is currently the subject of litigation between the
Company and John Knight the Company pays or becomes obligated to pay,
pursuant to a final judgment or settlement, an amount (the "Knight Amount")
in cash or other consideration in excess of $40,000, the Company shall
immediately issue to the Investors an aggregate number of shares of Common
Stock determined by dividing (i) the Knight Amount minus $40,000 by (ii)
3.25 (subject to appropriate adjustment for any stock splits, stock
dividends, reverse splits and similar events affecting the Common Stock.
Such shares of Common Stock shall be allocated between the Investors in
proportion to the number of Shares purchased by each as set forth on
Schedule 1 hereto. The Knight Amount shall not include any amount paid by
the Company to repurchase shares of Common Stock held by John Knight to the
extent the purchase price does not exceed $3.25 per share (or, if greater,
the then prevailing market price for the Common Stock).
[The remainder of this page is intentionally blank]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
INTELLIGENT CONTROLS, INC.
By: ____________________________
Title: _________________________
AMPERSAND SPECIALTY MATERIALS AND
CHEMICALS III LIMITED PARTNERSHIP
By: ASMC-III Management Company
Limited Partnership
By: ASMC-III MCLP LLP, its general
partner
By: ____________________________
Charles D. Yie, General Partner
AMPERSAND SPECIALTY MATERIALS
AND CHEMICALS III COMPANION FUND
LIMITED PARTNERSHIP
By: ASMC-III Management Company
Limited Partnership
By: ASMC-III MCLP LLP, its general
partner
By: ____________________________
Charles D. Yie, General Partner
For purposes of Article IX only:
________________________________
Roger E. Brooks
Schedule 1
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<TABLE>
<CAPTION>
Name of Investor Number of Shares Purchase Price
---------------- ---------------- --------------
<S> <C> <C>
Ampersand Specialty Materials and 1,513,847 $4,920,002.75
Chemicals III Limited Partnership
Ampersand Specialty Materials and 24,615 $ 79,998.75
Chemicals III Companion Limited
Partnership
_________ _____________
Total 1,538,462 $5,000,001.50
========= =============
</TABLE>
[Disclosure Schedule Omitted]
EXHIBIT 99.C(2)
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is entered into as of
____________, 1998 by and among Intelligent Controls, Inc., a Maine
corporation (the "Company"), Alan Lukas, Karen S. Lukas, Alan Lukas as
custodian for Andrew B. Lukas, James H. Young II, Trustee, the Andrew B.
Lukas Trust dated December 4, 1994, Paul E. Lukas, Lukas Brothers, a general
partnership, Roger E. Brooks, Ampersand Specialty Materials and Chemicals
III Limited Partnership, a Delaware limited partnership (the "ASMC-III
Fund"), Ampersand Specialty Materials and Chemicals III Companion Fund
Limited Partnership, a Delaware limited partnership (together with the ASMC-
III Fund, the "Investors"), and those stockholders of the Company who
subsequently become parties to this Agreement as provided herein.
Introduction
------------
The Company has entered into an Investment Agreement dated as of March
26, 1998 (the "Investment Agreement") with the Investors providing for the
purchase of shares of common stock of the Company by the Investors and
certain other matters. The Investors' obligation to purchase such shares of
common stock from the Company is conditioned upon the Company and the other
parties hereto entering into this Agreement for the purpose of providing for
the governance and continuity of management of the Company and restricting
the transfer of Company stock. The parties hereto acknowledge that the
restrictions on transfer contained in this Agreement are reasonable and in
the Company's best interests.
Alan Lukas has also agreed to grant to the Investors an option (the
"Option") to purchase an aggregate of 100,000 shares of common stock of the
Company currently held by him.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01. Certain Definitions. As used herein, the following
terms have the meanings set forth below:
"Affiliate" means, with respect to any person, any person or entity
that, directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, such person, and, with
respect to any natural person, also includes any Immediate Family Member of
such person.
"Board" means the Board of Directors of the Company.
"Common Stock" means the Company's common stock, no par value, and any
replacement class of stock.
"Immediate Family Member" means, with respect to any natural person,
his or her spouse, children or their issue, parents or siblings.
"Proportionate Percentage" means, with respect to any Stockholder, a
fraction, the numerator of which is the number of shares of Common Stock
held by such Stockholder and the denominator of which is the total number of
shares of Common Stock held by all Stockholders, excluding those held by the
Transferring Stockholder (as defined in Section 3.02 below).
"Public Sale" means any sale of Common Stock by a Stockholder on the
Emerging Company Market of the American Stock Exchange or on any national
securities exchange or over-the-counter market.
"Restricted Period" means the five-year period commencing on the date
of this Agreement.
"Securities" means all outstanding capital stock of the Company,
including any securities convertible into or exchangeable for capital stock
of the Company, or any right, warrant or option to acquire capital stock of
the Company or such convertible or exchangeable securities.
"Stockholder" means any person other than the Company who is or
hereafter becomes a holder of Securities of the Company and who is or
hereafter becomes a party to this Agreement as provided herein.
ARTICLE II
BOARD OF DIRECTORS; VOTING
Section 2.01. Board Size. At all meetings (and written actions in
lieu of meetings) of stockholders of the Company at which the number of
directors of the Company is to be determined, each Stockholder shall vote
all of such Stockholder's Securities to fix the number of directors of the
Company at five, subject, however, to the provisions of Section 2.03.
Section 2.02. Election of Directors. At all meetings (and written
actions in lieu of meetings) of stockholders of the Company at which
directors are to be elected, each Stockholder shall vote all of such
Stockholder's Securities to elect, as directors of the Company, the
following: (a) two nominees designated by the Investors, one of whom shall
be neither an Affiliate of the Investors nor a current or former employee
of, or consultant to, the Company, which nominees shall initially be Charles
D. Yie and George E. Hissong, (b) Alan Lukas, for as long as he shall own at
least 300,000 shares (such number to be appropriately adjusted for stock
splits, stock dividends, combinations, recapitalizations and similar events
affecting the Common Stock) of Common Stock, (c) the Chief Executive Officer
of the Company, and (d) one nominee designated by Alan Lukas, who shall be
neither a current or former employee of, or consultant to, the Company nor
an Immediate Family Member of Alan Lukas, and who shall be reasonably
acceptable to the Investors, which nominee shall initially be Paul F. Walsh.
Section 2.03. Default. Notwithstanding Sections 2.01 and 2.02, if
for whatever reason (including insufficient legally available funds) the
Company fails to repurchase on the Repurchase Date (as defined in the
Investment Agreement) all Securities that it is required to repurchase under
Section 5.11 of the Investment Agreement, then the Stockholders shall
immediately take all necessary action to increase the number of directors of
the Company to seven, and to elect as directors to fill the seats thus
created two persons designated by the Investors (in addition to the two
directors the Investors are entitled to designate pursuant to Section
2.02(a)).
Section 2.04. Removal. Each Stockholder agrees to vote such
Stockholder's Securities at all meetings (and written actions in lieu of
meetings) of stockholders of the Company to remove any director, if so
requested by the person entitled to designate such director under Section
2.02 or 2.03 or if such director no longer fulfills the criteria for
designation of such director set forth in Section 2.02. Each Stockholder
agrees not to vote such Stockholder's Securities in favor of the removal of
any director other than in accordance with the preceding sentence.
Section 2.05. Vacancies. Each Stockholder agrees to vote such
Stockholder's Securities at all meetings (and written actions in lieu of
meetings) of stockholders of the Company to fill any vacancy on the Board
caused by the resignation or removal of any director with a nominee selected
by the person entitled to designate such director under Section 2.02 or
2.03.
Section 2.06. Meetings. The Board will meet not less often than
quarterly. Each director shall be given at least five days' prior notice of
any meeting and will be permitted to participate in any meeting by
telephone. Any director may call a meeting of the Board.
Section 2.07. Subsidiaries. The Company will cause the board of
directors of any subsidiaries of the Company to have the same composition as
the Board, as provided in this Article II, except with respect to INCON
International FSC, Inc. to the extent required to comply with applicable
laws, and to cause all such subsidiaries to be in compliance with the terms
of this Article II as if each such subsidiary was subject to the provisions
hereof to the same extent as the Company.
Section 2.08. Protective Provisions. If at any time the Company
proposes to undertake any of the following actions and, pursuant to the
Company's Bylaws or otherwise, approval of the stockholders of the Company
is required with respect thereto, each Stockholder shall, at the request of
the Investors, vote all Securities held by such Stockholder against such
proposed action:
(a) merge or consolidate with any person, sell or lease or otherwise
dispose of all or substantially all of its assets, sell or otherwise dispose
of any of its capital stock, enter into any reorganization or
recapitalization, or enter into any joint venture, partnership or similar
arrangement;
(b) engage in any line of business other than the business in which
the Company is currently engaged;
(c) (i) make any acquisition of stock, limited liability company
interests, partnership interests or other securities of any other person,
(ii) make any acquisition of assets of any other person, other than in the
ordinary course of the Company's business, or (iii) make any loan or advance
to any person or make any investment in or with any other person, other than
in the ordinary course of business;
(d) amend or restate its Articles of Incorporation or Bylaws;
(e) enter into or materially modify any debt financing arrangement
involving borrowed money, capital leases, installment purchases or
guarantees, in excess of $5,000,000 in each case;
(f) purchase, redeem or otherwise acquire any shares of its capital
stock or options, warrants, convertible securities or other rights to
acquire any such capital stock, other than (i) redemptions of capital stock
held by employees of the Company in connection with the termination of their
employment at a price per share equal to or less than the fair market value
thereof and (ii) acquisitions of stock in connection with "cashless"
exercises of employee stock options;
(g) enter into any transaction which results in the liquidation of
the Company; or
(h) buy, sell or lease any assets, borrow or lend any money, or deal
with or enter into or modify any other transactions or agreements (other
than bona fide employment arrangements entered into in the ordinary course
of business) with any director, officer or stockholder of the Company, or
any of their relatives or Affiliates, other than (i) as expressly
contemplated by this Agreement or (ii) those that are fully disclosed in
advance to the Company's Board of Directors and approved by a disinterested
majority of the Board of Directors, including at least one director
designated by the Investors.
Each Stockholder hereby irrevocably constitutes and appoints the
Investors the true and lawful attorneys of such Stockholder, with full power
of substitution, in the place and stead of such Stockholder and in the name
of such Stockholder, to vote all Securities held by such Stockholder,
whether at a meeting or pursuant to a written consent, in accordance with
the provisions of this Section 2.08.
ARTICLE III
TRANSFER RESTRICTIONS;
CO-SALE RIGHTS
Section 3.01. No Transfer. No Stockholder may sell, pledge, give,
assign, distribute, hypothecate, mortgage or transfer (all hereinafter
referred to as "transfer") any Securities owned by such Stockholder,
directly or indirectly, to any other person or entity, except upon
compliance with the other provisions of this Article III.
Section 3.02. Right of First Refusal. If any Stockholder desires to
transfer any of such Stockholder's Securities, such Stockholder (a
"Transferring Stockholder") will give each other Stockholder notice of the
proposed transfer (the "Offer Notice"). The Offer Notice will identify the
Securities which the Transferring Stockholder proposes to transfer (the
"Offered Securities"), the proposed transferee of such Securities (if such
transfer is not a Public Sale) and the price and other terms and conditions
upon which such Stockholder wishes to transfer the Offered Securities. Such
Offer Notice will also include an offer (the "Offer") to transfer to each
other Stockholder such other Stockholder's Proportionate Percentage of the
Offered Securities at the price and on the other terms and conditions as are
proposed for such transfer, which Offer by its terms shall remain open for a
period of 20 days from the date of such Offer Notice.
Section 3.03. Acceptance. Each other Stockholder shall give notice
to the Transferring Stockholder of his, her or its intention to accept the
Offer within 20 days after the date of the Offer Notice. The notice from
each other Stockholder shall set forth the portion of the Offered Securities
which such other Stockholder elects to purchase and shall specify the
maximum number of additional Offered Securities such Stockholder will
purchase if any other Stockholders decline to purchase their full
Proportionate Percentage of the Offered Securities. If any Stockholder
fails to subscribe for such Stockholder's full Proportionate Percentage of
the Offered Securities, the other subscribing Stockholders shall be entitled
to purchase such Offered Securities as are not subscribed for by such
Stockholder, up to the number of additional Offered Securities specified in
their notice in the same relative proportion in which they were initially
entitled to purchase the Offered Securities. The Transferring Stockholder
shall notify each Stockholder within five days following the expiration of
the 20-day period described above of the amount of Offered Securities which
each Stockholder will purchase pursuant to the foregoing sentence. Upon
such notice (the "Settlement Notice") by the Transferring Stockholder of the
Securities to be acquired by each other Stockholder, each such other
Stockholder shall be deemed to have accepted the Offer.
Section 3.04. Payment. If any of the Offered Securities are
subscribed for, the Settlement Notice shall specify the place, time and date
for the closing of the purchase and sale of the Offered Securities, which
date shall be the 40th day (60th day if the price proposed to be paid for
all of the Offered Securities, as specified in the Offer Notice, exceeds
$500,000) following the date of the Settlement Notice or such other place,
time and date as the parties may mutually agree. Upon the closing of any
such transfer, the subscribing Stockholders shall acquire from the
Transferring Stockholder, and the Transferring Stockholder shall transfer to
such Stockholders, the Offered Securities subscribed for by such
Stockholders at the price and on the terms specified in the Offer. The
Transferring Stockholder shall not be obligated to transfer any of the
Offered Securities to any such Stockholder at the closing if such
Stockholder defaults on his, her or its obligation to acquire such
Securities.
Section 3.05. Transfer to Third Parties. If the other Stockholders
do not subscribe for or acquire all of the Offered Securities, and if the
transfer proposed in the Offer Notice is a Public Sale, the Transferring
Stockholder shall have 180 days from the end of the foregoing 20-day period
to transfer all of the Offered Securities not purchased by the other
Stockholders at a price and on terms and conditions which are no more
favorable to the transferees than those set forth in the Offer. If the
transfer proposed in the Offer Notice is not a Public Sale, the Transferring
Stockholder shall have 180 days from the end of the foregoing 20-day period
to transfer all of the Offered Securities not purchased by the other
Stockholders to the person(s) and in the amounts set forth in the Offer
Notice, at a price and on terms and conditions which are no more favorable
to such person(s) than those set forth in the Offer. The Transferring
Stockholder may not transfer any of the Offered Securities to persons or in
amounts not set forth in the Offer Notice without first offering such
Offered Securities to the other Stockholders in accordance with the
provisions of this Article III.
Section 3.06. Co-Sale Rights. In addition to the other rights set
forth in this Article III, in connection with any proposed transfer pursuant
to this Article III which is not a Public Sale, each other Stockholder shall
have the right, by giving notice thereof to the Transferring Stockholder
within 20 days after receipt of the Offer Notice, to include in the proposed
transfer by the Transferring Stockholder the same proportion of its holdings
of each class of Securities as the Transferring Stockholder transfers of its
holdings of each class in such transaction. The Transferring Stockholder
will not transfer any Securities in a transaction covered by this Section
3.06 unless the transferee also acquires any Securities requested by the
other Stockholders pursuant to the preceding sentence to be included in such
transfer, at the respective price and terms specified in the Offer Notice,
and as to which the other Stockholders comply with the following paragraph.
The Transferring Stockholder shall have 180 days after the close of the 20-
day period specified above to transfer the Securities described in the Offer
Notice at the price and on the terms specified therein, together with any
additional Securities to be included in such transfer pursuant to the
preceding paragraph.
Any Stockholder whose Securities are being transferred pursuant
hereto, in order to be entitled to have such Securities transferred, shall
deliver on no less than 15 days notice from the Transferring Stockholder, at
the time and place specified by the Transferring Stockholder, certificates
representing the Securities to be transferred, duly endorsed for transfer to
the transferee designated by the Transferring Stockholder, free and clear of
all liens, restrictions, claims and encumbrances, except as provided in this
Agreement and under applicable securities laws.
Section 3.07. Exceptions to Restrictions. Notwithstanding any other
provision of this Agreement, the following transfers of Securities may be
consummated without restriction:
(a) transfers of Securities of a Stockholder, representing an
aggregate of not more than 10% of the Securities of any class held by such
Stockholder, to the trustees of a trust revocable by such Stockholder alone,
the beneficiaries of which consist solely of the Stockholder and transferees
enumerated in clause (d) below;
(b) transfers of Securities between a Stockholder and such
Stockholder's guardian or conservator;
(c) transfers of Securities of a deceased Stockholder to the
Stockholder's executors or administrators or to trustees under the
Stockholder's will and thereafter to transferees enumerated in clause (d)
below;
(d) transfers of Securities of a Stockholder, representing an
aggregate of not more than 10% of the Securities of any class held by such
Stockholder, to any Immediate Family Member of the Stockholder (or to
custodians for the benefit of any Immediate Family Member of the
Stockholder);
(e) Public Sales of less than 10,000 shares of Common Stock in the
aggregate (such number to be appropriately adjusted for stock splits, stock
dividends, combinations, recapitalizations and similar events affecting the
Common Stock) by a Stockholder in any twelve-month period;
(f) charitable gifts of less than 5,000 shares of Common Stock in the
aggregate (such number to be appropriately adjusted for stock splits, stock
dividends, combinations, recapitalizations and similar events affecting the
Common Stock) by a Stockholder in any twelve-month period; and
(g) the grant of the Option by Alan Lukas to the Investors and the
transfer of shares of Common Stock to the Investors upon exercise thereof;
provided, however, that (i) all Securities transferred pursuant to
clauses (a), (b), (c) and (d) of this Section 3.07 shall remain subject to
the restrictions contained herein in the hands of the transferee, (ii) no
transfer under any of such clauses may be effected or shall be deemed to
have occurred unless the transferee has complied with Section 5.05 and (iii)
such Securities may not be further transferred by the transferees under
clauses (a), (b), (c) and (d) above.
Section 3.08. Legends. All certificates or instruments representing
Securities issued to any party to this Agreement shall bear substantially
the following legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OTHER OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT
BETWEEN THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH
IS ON FILE WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE
HOLDER HEREOF UPON WRITTEN REQUEST TO THE CLERK.
ARTICLE IV
STANDSTILL
Section 4.01. Proxy Solicitation. During the Restricted Period, no
Stockholder shall, directly or indirectly, take, or cause any of its or his
Affiliates to take, any of the following actions without the prior written
consent of the Board, (i) make or in any way participate in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities and Exchange Commission) to vote, or seek to advise or
influence any person with respect to the voting of any voting securities of
the Company or any of its Affiliates or make any communication exempted from
the definition of "solicitation" by Rule 14a-1(l)(2)(iv) under the
Securities and Exchange Act of 1934, as amended (the "1934 Act"), (ii) form,
join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the 1934 Act) with respect to any voting securities of the
Company or any of its Affiliates, (iii) grant any proxy or enter into any
voting trust or voting agreement or any other arrangement of a similar
effect, (iv) seek election to the Board, (v) disclose any intention, plan or
arrangement inconsistent with any of the foregoing, or (vi) advise, assist
or encourage any other persons in connection with any of the foregoing.
Section 4.02. Open-Market Purchases. During the Restricted Period,
no Stockholder shall purchase, or cause any of its or his Affiliates to
purchase, any shares of Common Stock on the Emerging Company Market of the
American Stock Exchange or on any national securities exchange or over-the-
counter market without the prior written consent of the Board.
Section 4.03. Exception. Notwithstanding anything contained herein
to the contrary, if for whatever reason (including insufficient legally
available funds) the Company fails to repurchase on the Repurchase Date (as
defined in the Investment Agreement) all Securities that it is required to
repurchase under Section 5.11 of the Investment Agreement, the provisions of
Sections 4.01 and 4.02 of this Agreement shall thereupon cease to apply to
the Investors.
ARTICLE V
GENERAL PROVISIONS
Section 5.01. Notices. Any notice or other communication given
pursuant to this Agreement shall be in writing and shall be personally
delivered, sent by nationally recognized overnight courier, or mailed by
first class certified or registered mail, postage prepaid, return receipt
requested as follows:
(a) If to any Stockholder other than the Investor, at the
address of such Stockholder on the Company's stock records
(b) If to the Investor:
c/o Ampersand Ventures
55 William Street, Suite 240
Wellesley, MA 02181
Attn: Charles D. Yie
with a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attn: Robert V. Jahrling, Esq.
(b) If to the Company:
Intelligent Controls, Inc.
74 Industrial Park Road
P. O. Box 368
Saco, ME 04072
Attn: President
with a copy to:
Verrill & Dana, LLP
One Portland Square
P.O. Box 586
Portland, ME 04112-0586
Attn: Gregory S. Fryer, Esq.
or to such other address as the parties shall have designated by
notice to the other parties.
Section 5.02. Binding Effect and Benefit. This Agreement shall be
binding upon, and inure to the benefit of, the Company and the Stockholders
and their respective heirs, legal representatives, successors and assigns.
Section 5.03. Waivers, Entire Agreement, Modifications. This
Agreement and the rights and obligations herein may not be waived, amended
or modified except in writing and signed by each of the parties hereto. A
waiver in writing on one occasion shall not be construed as a consent to or
a waiver of any right or remedy on any future occasion. This writing
contains the full, final and exclusive statement of the agreement of the
parties hereto with respect to the matters contained herein. No promises,
agreements or representations with respect to the matters contained herein
shall be binding upon any of the parties unless set forth herein.
Section 5.04. Governing Law, Construction. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws
of the State of Maine. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision hereof shall be prohibited by or
invalid under any such law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating or nullifying
the remainder of such provision or any other provisions of this Agreement.
Section 5.05. Transferees of Stockholders; Additional Stockholders.
Except for transfers consummated in compliance with Sections 3.02 through
3.06 or pursuant to Section 3.07(e) or (f), no Stockholder shall transfer
any Securities (except to the Company) unless the person, firm, corporation
or other entity so acquiring such Securities shall first become a signatory
to this Agreement, by signing a supplemental signature page hereto, agreeing
to be bound by all the terms of this Agreement, and each such transferee
shall thereupon become a party hereto. The Company shall not transfer any
Securities on its books which have been transferred in violation of this
Agreement, or treat as the owner of such Securities, or accord the right to
vote as owner or pay dividends or interest to, any person or entity to which
any Securities shall have been transferred, from and after any transfer of
any Securities made in violation of this Agreement.
Section 5.06. Failure to Deliver Securities. If any Stockholder or
transferee of a Stockholder fails to deliver the Securities to be acquired
by any other Stockholder or by any third party hereunder, the acquiror may
elect to establish a segregated account in the amount of the price to be
paid therefor, such account to be turned over to such Stockholder or
transferee upon delivery of the certificates or instruments representing the
Securities. If a segregated account is so established, the Company shall
take such action as is appropriate to transfer record title to the
Securities from such Stockholder or transferee to the acquiror. Each
Stockholder and each transferee of a Stockholder subject to this Section
5.06 hereby irrevocably grants the Company a power of attorney to effectuate
the purposes of this Section 5.06.
Section 5.07. Counterparts. This Agreement may be executed in one or
more counterparts, and with counterpart signature pages, each of which shall
be an original, but all of which together shall constitute one Agreement.
Section 5.08. Third Party Beneficiaries. Nothing in this Agreement
shall be construed as giving any person, firm, corporation or other entity,
other than the parties hereto and their permitted successors and assigns,
any right, remedy or claim under or in respect of this Agreement or any
provision thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date and year first above written.
INTELLIGENT CONTROLS, INC.
By:__________________________ _______________________________
Name: Alan Lukas
Title:
AMPERSAND SPECIALTY MATERIALS _______________________________
AND CHEMICALS III LIMITED Paul E. Lukas
PARTNERSHIP
By: ASMC-III Management Company _______________________________
Limited Partnership Roger E. Brooks
By: ASMC-III MCLP LLP, its general _______________________________
partner Karen S. Lukas
By:_______________________________ _______________________________
Charles D. Yie, General Partner Alan Lukas, as custodian for Andrew
B. Lukas
AMPERSAND SPECIALTY MATERIALS _______________________________
AND CHEMICALS III COMPANION James H. Young II, Trustee, the
Andrew
FUND LIMITED PARTNERSHIP B. Lukas Trust dated December 4, 1994
By: ASMC-III Management Company LUKAS BROTHERS
Limited Partnership
By:____________________________
By: ASMC-III MCLP LLP, its general Alan Lukas, General Partner
partner
By:_______________________________
Charles D. Yie, General Partner
EXHIBIT 99.C(3)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of the ____ day
of ____________, 1998, is entered into by Intelligent Controls, Inc., a
Maine corporation with its principal place of business at 74 Industrial Park
Road, Saco, Maine 04072 (the "Company"), and Roger E. Brooks, an individual
residing at 16 Deerfield Road, Sherborn, MA 01770 (the "Executive").
Recitals:
A. The Company desires to have the Executive serve as the President
and Chief Executive Officer of the Company upon the terms and conditions
hereinafter set forth.
B. The Executive desires to be employed in such capacities upon the
terms and conditions hereinafter set forth.
C. Concurrently with the execution of this Agreement, the Company is
completing the sale of 1,538,462 shares of its common stock to Ampersand
Specialty Materials and Chemicals III Limited Partnership, a Delaware
limited partnership, and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership, a Delaware limited partnership (the
"Investors"), pursuant to an Investment Agreement dated as of
_______________, 1998 by and among the Company, the Investors and the
Executive (the "Investment Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:
1. Term of Employment. Upon the other terms and conditions set forth
in this Agreement, the Company hereby agrees to employ the Executive, and
the Executive hereby accepts employment with the Company, commencing on
_____________, 1998 (the "Commencement Date") and ending on June 30, 2000;
provided, however, that the term of the Executive's employment hereunder
shall be automatically extended for periods of one (1) year after such date,
unless and until the Company or the Executive shall have delivered to the
other written notice of its or his election to terminate this Agreement as
of such date or the end of any one-year extension period, such notice to be
delivered at least ninety (90) days prior to the date of termination. The
period of time during which the Executive is employed hereunder is hereafter
referred to as the "Employment Period".
2. Titles; Duties. The Executive shall serve as the President and
Chief Executive Officer of the Company, subject to the general direction and
control of the board of directors of the Company (the "Board"). The
Executive hereby accepts such employment and agrees to undertake the duties
and responsibilities inherent in such positions and such other executive
duties and responsibilities as the board of directors shall from time to
time assign to him. The Executive agrees to devote his entire business
time, attention and energies to the business and interests of the Company
during the Employment Period; provided, however, that the Executive shall
have the right to continue serving on the advisory board of American MSI
Corporation and to serve as a director of up to one other company. The
Executive agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the Company.
3. Compensation and Benefits.
(a) Salary; Car Allowance. During the Employment Period, the Company
shall pay the Executive, in equal bi-weekly installments, a base salary at
the rate of $175,000 per year, subject to annual increases in the discretion
of the Board based on the Executive's performance. In addition, the Company
shall pay the Executive a car allowance at the rate of $600 per month.
(b) Bonuses. During the Employment Period, the Executive shall be
eligible to receive an annual bonus of up to 30% of the Executive's annual
base salary, the first of such bonuses to accrue beginning on the date as of
which the Investment Agreement is executed. The Executive's eligibility to
receive such bonus shall be dependent on the achievement of financial and
operating objectives determined by the Board.
(c) Executive Benefit Plans. During the Employment Period, the
Executive shall be eligible to participate in any life insurance, medical,
retirement, pension or profit-sharing or other benefit plans or arrangements
now or hereafter generally made available by the Company to executive
officers of the Company to the extent the Executive qualifies under the
provisions of any such plans (collectively, the "Benefits").
(d) Vacation. During the Employment Period, the Executive shall be
entitled to vacations (taken consecutively or in segments), not to exceed an
aggregate of four (4) weeks per year.
(e) Apartment. For a period ending on the earlier of (i) the first
anniversary of the Commencement Date and (ii) the date the Executive secures
a permanent residence in the State of Maine, the Company shall reimburse
Executive, or pay directly, all reasonable expenses associated with a
furnished apartment.
(f) Expense Reimbursement. The Company shall reimburse the Executive
for all reasonable expenses properly incurred by him on behalf of the
Company in the performance of his duties hereunder and in accordance with
policies set by the Board; provided that proper vouchers are submitted to
the Company by the Executive evidencing such expenses and the purposes for
which the same were incurred.
(g) Restricted Stock. As additional consideration for his provision
of services hereunder, the Company will offer the Executive the opportunity
to purchase on, or within thirty (30) days following, the Commencement Date
486,923 shares of the Company's common stock, no par value (the "Common
Stock"), at $3.25 per share pursuant to a Restricted Stock Agreement in form
of Exhibit A hereto.
(h) Loan. In connection with the purchase of Common Stock pursuant
to Section 3(g), the Company shall extend a loan to the Executive in the
original principal amount of $1,332,500 and bearing interest at the
applicable federal rate determined under Section 1274 of the Internal
Revenue Code of 1986, as amended (the "Loan"). The Loan shall be fully
recourse only with respect to $200,000 of the principal amount thereof and
the interest on such portion of the principal amount, and shall be evidenced
by a promissory note in the form of Exhibit B hereto. The Loan shall be
secured by a pledge of shares of Common Stock owned by the Executive
pursuant to a Pledge Agreement in the form of Exhibit C hereto.
4. Employment Termination. The employment of the Executive pursuant
to this Agreement shall terminate upon the occurrence of any of the
following:
(a) At the election of the Company, for cause, immediately upon
written notice by the Company to the Executive. For purposes of this
Agreement, "cause" shall be deemed to exist upon a good faith finding by the
Board that the Executive has (i) committed an act constituting fraud,
embezzlement or other felony, (ii) breached his fiduciary duties to the
Company or (iii) wilfully failed to perform his duties and responsibilities
hereunder.
(b) At the election of the Company, without cause, immediately upon
written notice by the Company to the Executive, subject to the provisions of
Section 5(b).
(c) The death or disability of the Executive. For purposes of this
Agreement, "disability" shall mean the degree of incapacitation as a result
of illness or accident and whether physical or mental which, in the opinion
of an independent medical expert selected by the Company and approved by the
Executive (which approval shall not be unreasonably withheld), makes it
reasonably unlikely that the Executive will be able to perform his normal
duties for a period of one hundred twenty (120) days, whether or not
consecutive, during any 360-day period.
(d) At the election of the Executive, for any reason, upon at least
ninety (90) days prior written notice to the Company.
5. Effect of Termination.
(a) Termination by the Company for Cause. In the event the
Executive's employment is terminated for cause pursuant to Section 4(a), the
Company shall pay or provide to the Executive the compensation and Benefits
otherwise payable to him under Section 3 through the last day of his actual
employment by the Company, but shall have no responsibility for any
compensation or benefits to the Executive for any time period subsequent to
such termination.
(b) Termination by the Company without Cause. In the event the
Executive's employment is terminated without cause pursuant to Section 4(b),
the Company shall (i) continue to pay him, on a [bi-weekly] basis, his base
salary specified in Section 3(a), as in effect at the time of such
termination, for the twelve-month period commencing on the date of such
termination, and (ii) continue to provide him, for the twelve-month period
commencing on the date of such termination, with the Benefits to which he
would otherwise have been entitled hereunder had his employment not been
terminated; provided, however, that if pursuant to terms of any plan or
arrangement under which Benefits are provided the Company is unable to
continue to provide those Benefits to the Executive for all or a portion of
such twelve-month period at a cost comparable to that which would apply if
the Executive remained an employee of the Company, the Company shall have
the right to discontinue providing those Benefits to the Executive and in
lieu thereof to pay the Executive a cash amount equal to the cost to the
Company of continuing to provide those Benefits for the remainder of such
twelve-month period, assuming the Executive remained an employee of the
Company; and provided further, that in the event Executive has secured full
time employment in a comparable position, any such obligation on the part of
the Company shall cease upon the later of the date Executive has secured
such comparable employment, or six (6) months from the date of termination.
(c) Termination due to Death. In the event the Executive's
employment is terminated due to his death, the Company shall pay or provide
to the estate of the Executive the compensation and Benefits which would
otherwise be payable to the Executive under Section 3 through the date of
termination of his employment, but the Company shall have no responsibility
for any compensation or benefits to the Executive or his estate for any time
period subsequent to such termination.
(d) Termination due to Disability. In the event the Executive's
employment is terminated due to his disability, the Company shall for the
twelve-month period commencing on the date of such termination (i) continue
to pay him, on a [bi-weekly] basis, an amount equal to the difference
between (A) his base salary specified in Section 3(a), as in effect at the
time of such termination, and (B) the pre-tax equivalent amount received by
the Executive pursuant to any disability insurance provided to the Executive
by the Company and (ii) continue to provide him with the Benefits to which
he would otherwise have been entitled hereunder had his employment not been
terminated; provided, however, that if pursuant to terms of any plan or
arrangement under which Benefits are provided the Company is unable to
continue to provide those Benefits to the Executive for all or a portion of
such twelve-month period at a cost comparable to that which would apply if
the Executive remained an Executive of the Company, the Company shall have
the right to discontinue providing those Benefits to the Executive and in
lieu thereof to pay the Executive a cash amount equal to the cost to the
Company of continuing to provide those Benefits for the remainder of such
twelve-month period, assuming the Executive remained an Executive of the
Company.
(e) Voluntary Termination by the Executive. In the event the
Executive's employment is terminated by the Executive pursuant to Section
4(d), the Company shall pay or provide to the Executive the compensation and
Benefits otherwise payable to him under Section 3 through the last day of
his actual employment by the Company, but shall have no responsibility for
any compensation or benefits to the Executive for any time period subsequent
to such termination. Provided, however, that for all purposes of this
Agreement, the Executive's resignation of his employment following the
occurrence of any of the following shall constitute a termination of the
Executive's employment by the Company without cause pursuant to Section
4(b):
(i) any material reduction in the Executive's duties,
responsibilities, or authority, as described herein;
(ii) any modification or termination of, or adjustment of the
terms of the Executive's participation in, any bonus, incentive, or
other employee benefit plan unless such modification, termination, or
adjustment is applicable to employees or executives of the Company
generally or unless after taking into account all such modifications,
terminations, and adjustments not generally applicable to employees or
executives, the economic value to the Executive of all such plans in
the aggregate remains substantially equivalent, in the aggregate, to
their value as of the Commencement Date; or
(iii) any material failure of the Company to comply with the
terms of this Agreement.
(f) Termination upon Nonrenewal. If the Executive's employment
terminates on or before June 30, 2001 because the Company (but not the
Executive) has given notice of nonrenewal in accordance with Section 1
above, then the Executive shall thereupon be entitled to the same severance
pay and Benefits as would be provided under Section 5(b) upon a termination
by the Company without cause.
6. Confidential Information.
(a) Confidential Information. The Executive acknowledges and
understands that in the performance of his service as an employee under this
Agreement, he will obtain knowledge of Confidential Information. The
Executive agrees that he shall not, either during the Employment Period or
at any time thereafter, except as required in the performance of his
services for the Company, (i) use or disclose any Confidential Information
outside the Company, or (ii) remove or aid in the removal from the premises
of the Company any Confidential Information or any property or material
relating thereto.
(b) Delivery of Material. The Executive shall deliver promptly to
the Company on the termination of his employment, or at any other time the
Company may so request, all memoranda, notes, records, reports, manuals,
computer disks, videotapes, drawings, blueprints and other documents (and
all copies thereof) which, and to the extent they, embody Confidential
Information which he may then possess or have under his control.
(c) Customer Lists. The Executive acknowledges that (i) all existing
lists of customers, vendors and advertisers of the Company developed during
the course of the Executive's employment by the Company are and shall be the
sole and exclusive property of the Company and that the Executive neither
has nor shall have any right, title or interest therein, (ii) such lists are
and must continue to be confidential, and (iii) such lists are not readily
accessible to competitors of the Company.
(d) Definitions. For the purposes of this Section 6, "Confidential
Information" shall mean any information, including, without limitation,
trade "know-how", trade secrets, subscriber, advertiser and customer lists,
pricing policies, operational methods, methods of doing business, technical
processes, formulae, designs and design projects, inventions, software
programs, business plans, projects, research projects, and other business
affairs of the Company which (i) is or is designed to be used in the
business of the Company or results from its research or development
activities, and (ii) is conceived, developed, discovered or received by, or
made available to, the Executive during the period that the Executive is
employed by the Company, in the course of his employment with the Company.
Confidential Information does not include, and no restriction of the
Executive contained in this Agreement shall apply to, any of the following
information: (i) that at or prior to the time of its availability,
disclosure to or development, conception or discovery by the Executive, was
generally known by the public; (ii) was available to the public on a non-
confidential basis prior to its availability, disclosure to or development,
conception or discovery by the Executive; or (iii) is now or subsequently
becomes rightfully known in the industry of which the Company is a part.
The phrase "business of the Company" in Sections 6 and 7 shall mean the
business in which the Company is now engaged or which may hereafter become
engaged during the course of the Executive's employment by the Company. The
term "Company" in Sections 6, 7 and 8 shall mean the Company and any
subsidiary of the Company.
7. Non-Competition Covenants.
(a) Non-Competition Covenants. The Executive agrees that he will
not, during the Non-Competition Period, compete directly or indirectly with
the business of the Company. The phrase "compete directly or indirectly
with the business of the Company" shall mean (1) engaging or having a
material interest, directly or indirectly, as owner, employee, officer,
director, partner, sales representative, stockholder, capital investor,
lessor, renderer of consultation services or advice, either alone or in
association with others, in the operation of any aspect of a business or
enterprise which is competitive with the business in which the Company is
engaged during the Employment Period; (2) soliciting any employee of the
Company to leave the employ of the Company; (3) soliciting any of the
employees of the Company to become employees of any other person or entity;
or (4) soliciting any customer of the Company with respect to the business
of the Company.
(b) Non-Competition Period. For the purposes of this Section 7,
"Non-Competition Period" shall mean the period during which the Executive is
employed by the Company and the one-year period commencing on the last day
of the Executive's employment by the Company.
8. Injunctive and Other Equitable Relief.
(a) The Executive acknowledges that the services to be rendered by
him under the terms of this Agreement are of a special, unique and
extraordinary character, which gives them a peculiar value, the loss of
which cannot be reasonably or adequately compensated in damages in any
action at law. By reason of this, the Executive consents and agrees that if
he violates any of the provisions of Section 6 and 7 hereof, the Company
shall be entitled, in addition to any other remedies it may have at law, to
the remedies of injunction, specific performance and other equitable relief
for a breach by the Executive of Sections 6 and 7 of this Agreement. This
Section 8 shall not, however, be construed as a waiver of any of the rights
which the Company may have for damages or otherwise.
(b) Any waiver by the Company of a breach of any provision of Section
6 and 7 hereof shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
(c) The Executive agrees that each provision of Section 6 and 7 shall
be treated as a separate and independent clause, and the unenforceability of
any one clause shall in no way impair the enforceability of the other
clauses herein. Moreover, if one or more of the provisions contained in
Section 6 and 7 shall for any reason be held to be excessively broad as to
scope, activity or subject so as to be unenforceable at law, such provision
or provisions shall be construed by the appropriate judicial body by
limiting and reducing it or them so as to be enforceable to the maximum
extent compatible with the applicable law as it shall then appear.
(d) The Executive's obligations under Section 6 and 7 shall survive
the termination of his employment regardless of the manner of such
termination and shall be binding upon his heirs, executors, administrators
and legal representatives.
9. Other Agreements. The Executive hereby represents and warrants
that he is not bound by the terms of any agreement with any previous
employer or other party to refrain from using or disclosing any trade secret
or confidential or proprietary information in the course of his employment
with the Company or to refrain from competing, directly or indirectly, with
the business of such previous employer or any other party. The Executive
further represents and warrants that his performance of all the terms of
this Agreement and as an Executive of the Company does not and will not
breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to his
employment with the Company.
10. Entire Agreement; Amendments. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter
hereof, and no statement, representation, warranty or covenant has been made
by any party except as expressly set forth herein. This Agreement
supersedes and cancels all prior agreements between the parties, whether
written or oral, relating to the employment of the Executive. No
alteration, amendment or modification of any of the terms and provisions
hereof shall be valid unless made pursuant to an instrument in writing
signed by all of the parties hereto.
11. Applicable Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Maine.
12. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed, first class, postage prepaid, certified
mail, return receipt requested, or sent by nationally recognized overnight
courier service, to each of the parties at its or his address as set forth
at the beginning of this Agreement or as any of the parties may designate in
conformity with the foregoing.
13. Headings. The Section headings set forth in this Agreement are
for reference purposes only and shall not be considered as part of this
Agreement in any respect nor shall they in any way affect the substance of
any provisions contained in this Agreement.
14. Successor and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. In
addition, this Agreement shall be binding upon and inure to the benefit of
the Executive and his heirs, legal representatives and assigns; provided,
however, that the obligations of the Executive hereunder may not be assigned
without the prior written approval of the Board.
15. Severability. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be
of no force and effect, but the illegality or unenforceability of such
provision shall have no effect upon and shall not impair the enforceability
of any other provision of this Agreement.
16. Dispute Resolution. In the event of any controversy or claim
arising out of or relating to the Executive's employment, this Agreement or
any act or omission of a party hereunder (a "dispute"), either party (by
written notice to the other) may invoke the procedures of this Section.
Promptly after such notice is given, the Executive and one or more
disinterested representatives of the Company's Board of Directors will meet
to attempt to negotiate a settlement of all pending disputes. If for any
reason the Executive and the Company have not entered into a written
settlement of the dispute(s) within 30 days after the original notice,
either party may within one year of the original notice give notice
demanding arbitration. Thereafter all pending disputes shall be settled by
arbitration before a panel of three arbitrators, in accordance with the
rules of the American Arbitration Association pertaining to commercial
disputes (or such other rules and procedures as the parties may hereafter
consent to in writing). The arbitration shall occur in Portland, Maine, or
such other location as is mutually acceptable to the parties. Except as the
parties may hereafter consent in writing, the arbitrator(s) shall be
required to decide each claim in accordance with applicable law and to set
forth briefly in writing the award, the rationale of the decision, and those
facts considered by the arbitrator(s) to be material to such decision. The
arbitral award shall be deemed binding upon each party, and judgment on the
award may be entered in any court having jurisdiction thereof. This
agreement to arbitrate shall be enforceable under the Uniform Arbitration
Act.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
INTELLIGENT CONTROLS, INC.
By: ___________________________
Title:
EXECUTIVE:
________________________________
Roger E. Brooks
EXHIBIT A: Form of Restricted Stock Agreement
dated _____________, 1998 (Filed as Exhibit 99.C(5)
EXHIBIT B: Form of Promissory Note
of Brooks dated ____________, 1998 (Filed as Exhibit 99.C(5)
EXHIBIT C: Form of Pledge Agreement (Filed as Exhibit 99.C(5)
EXHIBIT 99.C4
[3/26/98 DRAFT]
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of the ____ day
of ____________, 1998, is entered into by Intelligent Controls, Inc., a
Maine corporation with its principal place of business at 74 Industrial Park
Road, Saco, Maine 04072 (the "Company"), and Alan Lukas, an individual
residing at 16 Stapleford Drive, Falmouth, Maine 04105 (the "Executive").
Recitals:
---------
A. The Executive is the founder of the Company and has served as
President and Chief Executive Officer of the Company since 1978.
B. The Executive and other members of the Company's Board of
Directors have voted to appoint Roger E. Brooks as President and Chief
Executive Officer of the Company as of May 1, 1998 or thereabouts.
C. The Company and the Executive desire to define the Executive's
future roles and responsibilities and to set forth the terms of the
Company's continued employment of the Executive in these capacities.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:
1. Term of Employment/Retention. (a) The Company hereby agrees to
employ the Executive, and the Executive hereby accepts employment (his
"Employment") with the Company, commencing on _____________, 1998 (the
"Commencement Date") and ending on June 30, 2000; provided, however, that
the term of his Employment hereunder shall be automatically extended for
periods of one (1) year after such date, unless and until the Company or the
Executive shall have delivered to the other written notice of its or his
election to terminate this Agreement as of such date or the end of any one-
year extension period, such notice to be delivered at least ninety (90) days
prior to the date of termination. The period of time during which the
Executive is employed hereunder is hereafter referred to as the "Employment
Period".
(b) In addition, the Company hereby agrees to retain the Executive as
Chairman of the Board of Directors and/or a consultant through June 30, 2003
or the date of the Annual Meeting of Shareholders in such year, whichever
occurs first, and the Executive hereby accepts this retention (his
"Retention"). If the Employment Period (as defined above) ends before such
date, then the period of time between such date and the end of the
Employment Period shall be referred to herein as the "Supplemental Retention
Period". The Supplemental Retention Period may only be extended by written
agreement of the Company and the Executive.
2. Titles; Duties. (a) During the Employment Period, the Executive
shall serve as a Vice President of the Company, subject to the general
direction and control of the Chief Executive Officer of the Company.
Initially the Executive's title shall be Vice President for Product
Development, such title to be subject to appropriate adjustment if and when
the Executive's duties as a Vice President are revised by the Chief
Executive Officer or the Board of Directors (the "Board"). The Executive
hereby accepts such employment and agrees to undertake the duties and
responsibilities inherent in such position and such other executive duties
and responsibilities as the Chief Executive Officer shall from time to time
assign to him. The Executive agrees to devote his entire business time,
attention and energies to the business and interests of the Company during
the Employment Period; provided, however, that the Executive shall have the
right to serve as a director of up to one other company. The Executive
agrees to abide by the rules, regulations, instructions, personnel practices
and policies of the Company and any changes therein which may be adopted
from time to time by the Company.
(b) For at least two years from the date of this Agreement, the
Company shall use its best efforts to cause the Board to designate the
Executive as Chairman of the Board.
(c) During the Supplemental Retention Period, the Executive shall (i)
serve as Chairman of the Board if so designated by the Board and (ii) serve
as a consultant to the Company. The Executive shall be required during the
Supplemental Retention Period to make himself available for up to 400 hours
of services per year. Either the Board or the Company's chief executive
officer shall define the nature and timing of the Executive's services
during such period, subject however to the Executive's prior approval (which
shall not be unreasonably withheld).
3. Compensation and Benefits.
(a) Salary. During the Employment Period, the Company shall pay the
Executive, in equal bi-weekly installments, a base salary at the rate of
$120,000 per year, subject to annual increases in the discretion of the
Board based on the Executive's performance.
(b) Bonuses. During the Employment Period, the Executive shall be
eligible to receive an annual bonus of up to 25% of the Executive's annual
base salary, the first of such bonuses to accrue beginning on the date as of
which the Investment Agreement is executed. The Executive's eligibility to
receive such bonus shall be dependent on the achievement of financial and
operating objectives determined by the Board.
(c) Additional Retainer. During the Employment Period and the
Supplemental Retention Period, the Company shall also pay the Executive a
retainer at the rate of $30,000, to be paid in equal bi-weekly installments.
This retainer shall be for services to the Company as a Director and/or
consultant, and shall be in lieu of any other compensation to which the
Executive would otherwise be entitled as a Director of the Company or any of
its subsidiaries.
(d) Executive Benefit Plans. During the Employment Period, the
Executive shall be eligible to participate in any life insurance, medical,
retirement, pension or profit-sharing or other benefit plans or arrangements
now or hereafter generally made available by the Company to him or executive
officers of the Company to the extent the Executive qualifies under the
provisions of any such plans (collectively, the "Benefits"). The Benefits
include, without limitation, participation in the Company's corporate
membership at the Woodlands Country Club or a comparable facility, on terms
equivalent to those in effect at the date of this Agreement. During the
Supplemental Retention Period, the Executive and his family shall be
entitled to participate in the Company's health insurance program, on the
same terms as were in effect for him at the end of the Employment Period;
provided that if the Executive and his family are ineligible to participate
in such program, then the Company may instead reimburse him for the
reasonable cost of obtaining comparable health insurance coverage.
(e) Vacation. During the Employment Period, the Executive shall be
entitled to vacations (taken consecutively or in segments), not to exceed an
aggregate of four (4) weeks per year.
(f) Expense Reimbursement. The Company shall reimburse the Executive
for all reasonable expenses properly incurred by him on behalf of the
Company in the performance of his duties hereunder and in accordance with
policies set by the Board; provided that proper vouchers are submitted to
the Company by the Executive evidencing such expenses and the purposes for
which the same were incurred.
(g) Future Stock Options. If and to the extent that the Company
grants its executive officers stock options or other stock-related
incentives, the Board shall in good faith consider whether the Executive
should be permitted to participate in such incentives. Provided, however,
that the Executive shall in no event be entitled to additional stock-related
incentives in respect of (i) the purchase of 486,923 shares of common stock
by Mr. Brooks pursuant to his restricted stock arrangement with the Company
or (ii) grants of options under the 1998 Stock Option Plan (or successor
plans) if the common stock underlying such options does not exceed 300,000
shares in the aggregate.
4. Termination of Employment and/or Retention. The Executive's
Employment and/or Retention shall terminate upon the occurrence of any of
the following:
(a) At the election of the Company, for cause, immediately upon
written notice by the Company to the Executive. For purposes of this
Agreement, "cause" shall be deemed to exist upon a good faith finding by the
Board that the Executive has (i) committed an act constituting fraud,
embezzlement or other felony, (ii) breached his fiduciary duties to the
Company or (iii) wilfully failed to perform his duties and responsibilities
hereunder. Provided, however, that during the Employment Period, the
Company may not terminate his Retention for cause unless it has terminated
his Employment for cause.
(b) At the election of the Company, without cause, immediately upon
written notice by the Company to the Executive, subject to the provisions of
Section 5(b).
(c) The death or disability of the Executive. For purposes of this
Agreement, "disability" shall mean the degree of incapacitation as a result
of illness or accident and whether physical or mental which, in the opinion
of an independent medical expert selected by the Company and approved by the
Executive (which approval shall not be unreasonably withheld), makes it
reasonably unlikely that the Executive will be able to perform his normal
duties for a period of one hundred twenty (120) days, whether or not
consecutive, during any 360-day period.
(d) At the election of the Executive, for any reason, upon at least
ninety (90) days prior written notice to the Company. Provided, however,
that during the Employment Period the Executive may not terminate his
Retention unless he has also offered to terminate his Employment.
5. Effect of Termination.
(a) Termination by the Company for Cause. In the event the
Executive's Employment (and/or Retention, as the case may be) is terminated
for cause pursuant to Section 4(a), the Company shall pay or provide to the
Executive the compensation and Benefits otherwise payable to him under
Section 3 through the last day of his actual Employment (and/or Retention,
as the case may be) by the Company, but shall have no responsibility for any
compensation or benefits to the Executive for any time period subsequent to
such termination.
(b) Termination by the Company without Cause. (1) In the event the
Executive's Employment is terminated without cause pursuant to Section 4(b),
the Company shall (i) continue to pay him, on a bi-weekly basis, his base
salary specified in Section 3(a), as in effect at the time of such
termination, for the twelve-month period commencing on the date of such
termination or until June 30, 2000, whichever is later (the "Severance
Period"), and (ii) continue to provide him, through the Severance Period,
with the Benefits to which he would otherwise have been entitled hereunder
had his Employment not been terminated; provided, however, that if pursuant
to terms of any plan or arrangement under which Benefits are provided the
Company is unable to continue to provide those Benefits to the Executive for
all or a portion of the Severance Period at a cost comparable to that which
would apply if the Executive remained an employee of the Company, the
Company shall have the right to discontinue providing those Benefits to the
Executive and in lieu thereof to pay the Executive a cash amount equal to
the cost to the Company of continuing to provide those Benefits for the
remainder of such period, assuming the Executive remained an employee of the
Company; and provided further, that in the event Executive has secured full
time employment in a comparable position, the Severance Period shall be
deemed to end as of the later of the date Executive has secured such
comparable employment, or six (6) months from the date of termination of his
Employment.
(2) In the event the Executive's Retention is terminated without
cause pursuant to Section 4(b), the Company through June 30, 2003 shall
continue to (i) pay him, on a bi-weekly basis, the retainer specified in
Section 3(c), as in effect at the time of such termination, and (ii) make
health insurance benefits available to him and his family as specified in
the last sentence of Section 3(d).
(c) Termination due to Death. In the event the Executive's
Employment and Retention is terminated due to his death, the Company shall
pay or provide to the estate of the Executive the compensation and Benefits
which would otherwise be payable to the Executive under Section 3 through
the date of termination, but the Company shall have no responsibility for
any compensation or benefits to the Executive or his estate for any time
period subsequent to such termination.
(d) Termination due to Disability. In the event the Executive's
Employment and/or Retention is terminated due to his disability, the Company
shall for the twelve-month period commencing on the date of such termination
(i) continue to pay him, on a bi-weekly basis, an amount equal to the
difference between (A) his base salary under Section 3(a) plus (as the case
may be) his retainer under Section 3(c), in each case as in effect at the
time of such termination, and (B) the pre-tax equivalent amount received by
the Executive pursuant to any disability insurance provided to the Executive
by the Company and (ii) continue to provide him with the Benefits to which
he would otherwise have been entitled hereunder had his Employment and/or
Retention (as the case may be) not been terminated; provided, however, that
if pursuant to terms of any plan or arrangement under which Benefits are
provided the Company is unable to continue to provide those Benefits to the
Executive for all or a portion of such twelve-month period at a cost
comparable to that which would apply if the Executive remained an Executive
of the Company, the Company shall have the right to discontinue providing
those Benefits to the Executive and in lieu thereof to pay the Executive a
cash amount equal to the cost to the Company of continuing to provide those
Benefits for the remainder of such twelve-month period, assuming the
Executive remained an Executive of the Company.
(e) Voluntary Termination by the Executive. In the event the
Executive's Employment and/or Retention is terminated by the Executive
pursuant to Section 4(d), the Company shall pay or provide to the Executive
the compensation and Benefits otherwise payable to him under Section 3
through the last day of his actual Employment and/or Retention (as the case
may be) by the Company, but shall have no responsibility for any
compensation or benefits to the Executive for any time period subsequent to
such termination.
(f) Termination upon Nonrenewal. If the Executive's Employment
terminates on or before June 30, 2001 because the Company (but not the
Executive) has given notice of nonrenewal in accordance with Section 1(a)
above, then the Executive shall thereupon be entitled to the same severance
pay and Benefits as would be provided under Section 5(b) upon a termination
of his Employment by the Company without cause.
6. Confidential Information.
(a) Confidential Information. The Executive acknowledges and
understands that in the performance of his service as an employee under this
Agreement, he will obtain knowledge of Confidential Information. The
Executive agrees that he shall not, either during the Employment Period or
at any time thereafter, except as required in the performance of his
services for the Company, (i) use or disclose any Confidential Information
outside the Company, or (ii) remove or aid in the removal from the premises
of the Company any Confidential Information or any property or material
relating thereto.
(b) Delivery of Material. The Executive shall deliver promptly to
the Company on the termination of his Employment and/or Retention (as the
case may be), or at any other time the Company may so request, all
memoranda, notes, records, reports, manuals, computer disks, videotapes,
drawings, blueprints and other documents (and all copies thereof) which, and
to the extent they, embody Confidential Information which he may then
possess or have under his control.
(c) Customer Lists. The Executive acknowledges that (i) all existing
lists of customers, vendors and advertisers of the Company developed during
the course of the Executive's Employment and/or Retention (as the case may
be) by the Company are and shall be the sole and exclusive property of the
Company and that the Executive neither has nor shall have any right, title
or interest therein, (ii) such lists are and must continue to be
confidential, and (iii) such lists are not readily accessible to competitors
of the Company.
(d) Definitions. For the purposes of this Section 6, "Confidential
Information" shall mean any information, including, without limitation,
trade "know-how", trade secrets, subscriber, advertiser and customer lists,
pricing policies, operational methods, methods of doing business, technical
processes, formulae, designs and design projects, inventions, software
programs, business plans, projects, research projects, and other business
affairs of the Company which (i) is or is designed to be used in the
business of the Company or results from its research or development
activities, and (ii) is conceived, developed, discovered or received by, or
made available to, the Executive during the period that the Executive is
employed or retained by the Company, in the course of his employment with or
retention by the Company. Confidential Information does not include, and no
restriction of the Executive contained in this Agreement shall apply to, any
of the following information: (i) that at or prior to the time of its
availability, disclosure to or development, conception or discovery by the
Executive, was generally known by the public; (ii) was available to the
public on a non-confidential basis prior to its availability, disclosure to
or development, conception or discovery by the Executive; or (iii) is now or
subsequently becomes rightfully known in the industry of which the Company
is a part. The phrase "business of the Company" in Sections 6 and 7 shall
mean the business in which the Company is now engaged or which may hereafter
become engaged during the course of the Executive's Employment and/or
Retention (as the case may be) by the Company. The term "Company" in
Sections 6, 7 and 8 shall mean the Company and any subsidiary of the
Company.
7. Non-Competition Covenants.
(a) Non-Competition Covenants. The Executive agrees that he will
not, during the Non-Competition Period, compete directly or indirectly with
the business of the Company. The phrase "compete directly or indirectly
with the business of the Company" shall mean (1) engaging or having a
material interest, directly or indirectly, as owner, employee, officer,
director, partner, sales representative, stockholder, capital investor,
lessor, renderer of consultation services or advice, either alone or in
association with others, in the operation of any aspect of a business or
enterprise which is competitive with the business in which the Company is
engaged during the Employment Period; (2) soliciting any employee of the
Company to leave the employ of the Company; (3) soliciting any of the
employees of the Company to become employees of any other person or entity;
or (4) soliciting any customer of the Company with respect to the business
of the Company.
(b) Non-Competition Period. For the purposes of this Section 7,
"Non-Competition Period" shall mean the period during which the Executive is
employed by the Company and the one-year period commencing on the last day
of the Executive's Employment and/or Retention (as the case may be) by the
Company.
8. Injunctive and Other Equitable Relief.
(a) The Executive acknowledges that the services to be rendered by
him under the terms of this Agreement are of a special, unique and
extraordinary character, which gives them a peculiar value, the loss of
which cannot be reasonably or adequately compensated in damages in any
action at law. By reason of this, the Executive consents and agrees that if
he violates any of the provisions of Section 6 and 7 hereof, the Company
shall be entitled, in addition to any other remedies it may have at law, to
the remedies of injunction, specific performance and other equitable relief
for a breach by the Executive of Sections 6 and 7 of this Agreement. This
Section 8 shall not, however, be construed as a waiver of any of the rights
which the Company may have for damages or otherwise.
(b) Any waiver by the Company of a breach of any provision of Section
6 and 7 hereof shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
(c) The Executive agrees that each provision of Section 6 and 7 shall
be treated as a separate and independent clause, and the unenforceability of
any one clause shall in no way impair the enforceability of the other
clauses herein. Moreover, if one or more of the provisions contained in
Section 6 and 7 shall for any reason be held to be excessively broad as to
scope, activity or subject so as to be unenforceable at law, such provision
or provisions shall be construed by the appropriate judicial body by
limiting and reducing it or them so as to be enforceable to the maximum
extent compatible with the applicable law as it shall then appear.
(d) The Executive's obligations under Section 6 and 7 shall survive
the termination of his Employment and/or Retention (as the case may be)
regardless of the manner of such termination and shall be binding upon his
heirs, executors, administrators and legal representatives.
9. Other Agreements. The Executive hereby represents and warrants
that he is not bound by the terms of any agreement with any previous
employer or other party to refrain from using or disclosing any trade secret
or confidential or proprietary information in the course of his employment
with the Company or to refrain from competing, directly or indirectly, with
the business of such previous employer or any other party. The Executive
further represents and warrants that his performance of all the terms of
this Agreement and as an Executive of the Company does not and will not
breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to his
employment with the Company.
10. Entire Agreement; Amendments. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter
hereof, and no statement, representation, warranty or covenant has been made
by any party except as expressly set forth herein. This Agreement
supersedes and cancels all prior agreements between the parties, whether
written or oral, relating to the employment of the Executive. No
alteration, amendment or modification of any of the terms and provisions
hereof shall be valid unless made pursuant to an instrument in writing
signed by all of the parties hereto.
11. Applicable Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Maine.
12. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed, first class, postage prepaid, certified
mail, return receipt requested, or sent by nationally recognized overnight
courier service, to each of the parties at its or his address as set forth
at the beginning of this Agreement or as any of the parties may designate in
conformity with the foregoing.
13. Headings. The Section headings set forth in this Agreement are
for reference purposes only and shall not be considered as part of this
Agreement in any respect nor shall they in any way affect the substance of
any provisions contained in this Agreement.
14. Successor and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. In
addition, this Agreement shall be binding upon and inure to the benefit of
the Executive and his heirs, legal representatives and assigns; provided,
however, that the obligations of the Executive hereunder may not be assigned
without the prior written approval of the Board.
15. Severability. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be
of no force and effect, but the illegality or unenforceability of such
provision shall have no effect upon and shall not impair the enforceability
of any other provision of this Agreement.
16. Dispute Resolution. In the event of any controversy or claim
arising out of or relating to the Executive's Employment and/or Retention
(as the case may be), this Agreement or any act or omission of a party
hereunder (a "dispute"), either party (by written notice to the other) may
invoke the procedures of this Section. Promptly after such notice is given,
the Executive and one or more disinterested representatives of the Company's
Board of Directors will meet to attempt to negotiate a settlement of all
pending disputes. If for any reason the Executive and the Company have not
entered into a written settlement of the dispute(s) within 30 days after the
original notice, either party may within one year of the original notice
give notice demanding arbitration. Thereafter all pending disputes shall be
settled by arbitration before a panel of three arbitrators, in accordance
with the rules of the American Arbitration Association pertaining to
employment disputes (or such other rules and procedures as the parties may
hereafter consent to in writing). The arbitration shall occur in Portland,
Maine, or such other location as is mutually acceptable to the parties.
Except as the parties may hereafter consent in writing, the arbitrator(s)
shall be required to decide each claim in accordance with applicable law and
to set forth briefly in writing the award, the rationale of the decision,
and those facts considered by the arbitrator(s) to be material to such
decision. The arbitral award shall be deemed binding upon each party, and
judgment on the award may be entered in any court having jurisdiction
thereof. This agreement to arbitrate shall be enforceable under the Uniform
Arbitration Act. In any action to compel arbitration under this Section or
to enforce an arbitral award, the prevailing party shall be entitled to an
award of its reasonable expenses, including attorneys fees.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
INTELLIGENT CONTROLS, INC.
By: __________________________________
Title:
EXECUTIVE:
______________________________________
Alan Lukas
EXHIBIT 99.C(5)
INTELLIGENT CONTROLS, INC.
EMPLOYEE RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the ___ day of ________, 1998, by and
between INTELLIGENT CONTROLS, INC., a Maine corporation (the "Company"), and
Roger E. Brooks ("Purchaser").
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions
of this Agreement, the Company hereby agrees to sell to Purchaser and
Purchaser agrees to purchase from the Company on the Closing Date (as herein
defined), 486,923 shares (the "Shares") of the Company's common stock, no
par value (the "Common Stock"), at a price of $3.25 per share (the "Issue
Price"). The purchase price for the Shares shall be paid by Purchaser as
follows:
(i) $250,000 in cash; and
(ii) $1,332,500 by promissory note in the form attached hereto
as Exhibit A (the "Note"). As security for the payment of the Note
and any renewal or modification thereof, Purchaser hereby grants to
the Company a security interest in, and pledges and delivers to the
Company, the Shares, to be held in escrow pursuant to Section 7
hereof.
2. Closing. The purchase and sale of the Shares shall occur at a
closing (the "Closing") to be held at such time and place as designated by
the Company by written notice to Purchaser. The Closing shall take place at
the principal office of the Company or at such other place as shall be
designated by the Company. At the Closing, the Company will issue a
certificate representing the Shares registered in the name of Purchaser
against receipt of the Note and a certified check in the amount of $250,000.
3. (a) Repurchase Option. In the event Purchaser's employment with
the Company is terminated as provided in Section 4 of that certain
Employment Agreement between the Company and Purchaser dated as of
_____________, 1998 (the "Employment Agreement"), the Company shall have the
option to repurchase up to all of the Unvested Shares (as defined below) at
the Issue Price. In the event the Company exercises its repurchase option
as set forth in this Section 3(a), the Company shall, within thirty (30)
days after Purchaser's termination of employment, give to Purchaser a
written notice specifying the number of Unvested Shares it is electing to
repurchase and the time for closing, which closing shall be held at the
Company's principal office and shall occur no earlier than 10 days and no
later than 20 days after the date such notice is given. Upon the date of
any such notice from the Company, the interest of Purchaser in the Unvested
Shares specified in such notice shall automatically terminate, except for
Purchaser's right to receive payment from the Company for such Unvested
Shares. Payment for such Unvested Shares may, at the option of the Company,
be made by cancellation of the corresponding amount due under the Note.
(b) Vesting. The repurchase option set forth in Section 3(a) with
respect to the Shares shall lapse and such Shares shall automatically become
vested (all Shares as to which such repurchase option shall have not lapsed
being referred to as "Unvested Shares"):
(i) with respect to 76,923 Shares at the time of the Closing;
(ii) with respect to 25,625 of the remaining number of Shares
upon the passage of every three months;
(iii) with respect to all of the remaining Shares upon the sale
of all or substantially all of the Company's assets or stock, or a
upon a "change of control" of the Company. A "change of control"
means:
(A) any person or entity, other than an existing Company
shareholder, becomes the beneficial owner of 50% or more of the
voting power of the Company;
(B) a change in the majority of the Company's directors,
other than a change approved by the Company's current
shareholders; or
(C) a sale of substantially all of the Company by sale of
assets, stock, merger, consolidation or other reorganization;
provided, however, that a reorganization or recapitalization of
the Company not constituting a sale to a purchaser for value
will not constitute a sale resulting in a lapse of such
repurchase option; and
(iv) with respect to 102,500 of the remaining number of Shares
in the event of termination of Purchaser's employment with the Company
pursuant to Sections 4(b) or 4(c) of the Employment Agreement (or upon
an event treated as a termination without "cause" pursuant to Section
5(e) or 5(f) of the Employment Agreement), in addition to any Shares
which have previously vested.
4. Stock Splits, etc. If from time to time during the term of this
Agreement:
(a) there is any stock dividend or liquidating dividend of cash
and/or property, stock split or other change in the character or
amount of any of the outstanding securities of the Company; or
(b) there is any consolidation, merger or sale of all or
substantially all of the assets of the Company;
then, in such event, any and all new, substituted or additional securities
or other property to which Purchaser is entitled by reason of his ownership
of the Shares shall be immediately subject to this Agreement and be included
in the word "Shares" for all purposes with the same force and effect as the
Shares presently subject to the terms of this Agreement. While the
aggregate purchase price shall remain the same after each such event, the
number of shares vesting thereafter under Section 3(b) of this Agreement and
the purchase price per share upon exercise of the repurchase option
described in Section 3 shall be appropriately adjusted.
5. Legends. All certificates representing any of the Shares subject
to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REPURCHASE OPTION IN FAVOR OF THE COMPANY AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
6. Purchaser's Representations. In connection with his purchase of
the Shares, Purchaser hereby represents and warrants to the Company as
follows:
(a) Investment Intent; Capacity to Protect Interests. Purchaser is
purchasing the Shares solely for his own account for investment and not with
a view to or for sale in connection with any distribution of the Shares or
any portion thereof and not with any present intention of selling, offering
to sell or otherwise disposing of or distributing the Shares or any portion
thereof in any transaction other than a transaction exempt from registration
under the Act. Purchaser also represents that the entire legal and
beneficial interest of the Shares is being purchased, and will be held, for
Purchaser's account only, and neither in whole or in part for any other
person. Purchaser either has a pre-existing business or personal
relationship with the Company or its officers, directors or controlling
persons or by reason of Purchaser's business or financial experience or the
business or financial experience of Purchaser's professional advisors who
are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, could be
reasonably assumed to have the capacity to evaluate the merits and risks of
an investment in the Company and to protect Purchaser's own interests in
connection with this transaction.
(b) Information Concerning Company. Purchaser has heretofore
discussed the Company and its plans, operations and financial condition with
the Company's officers and has heretofore received all such information as
Purchaser has deemed necessary and appropriate to enable Purchaser to
evaluate the financial risk inherent in making an investment in the Shares,
and Purchaser has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
(c) Economic Risk. Purchaser realizes that the purchase of the
Shares will be a highly speculative investment and involves a high degree of
risk, and Purchaser is able to hold the Shares for an indefinite period of
time and suffer a complete loss on his investment.
(d) Restricted Securities. Purchaser understands and acknowledges
that:
(i) the sale of the Shares has not been registered under the
Act, and the Shares must be held indefinitely unless subsequently
registered under the Act or an exemption from such registration is
available and the Company is under no obligation to register the
Shares;
(ii) the share certificate(s) representing the Shares will be
stamped with the legends specified in Section 7 hereof; and
(iii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(e) Disposition under Rule 144. Purchaser understands that the
Shares are restricted securities within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"); that the exemption
from registration under Rule 144 will not be available in any event for at
least one year from the date of purchase and payment for the Shares, and
even then will not be available unless (i) a public trading market then
exists for the Common Stock, (ii) adequate information concerning the
Company is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares
may be made only in limited amounts in accordance with such terms and
conditions.
(f) Further Limitations on Disposition. Without in any way limiting
his representations set forth above, Purchaser further agrees that he shall
in no event make any disposition of all or any portion of the Shares unless
and until:
(i) there is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(ii)(A) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (B) Purchaser shall have furnished the Company with an
opinion of Purchaser's counsel to the effect that such disposition
will not require registration of such Shares under the Act, and (C)
such opinion of Purchaser's counsel shall have been concurred in by
counsel for the Company and the Company shall have advised Purchaser
of such concurrence.
7. Escrow. As security for the faithful performance of the terms of
this Agreement and the Note and to ensure the availability for delivery of
the Shares upon exercise of the repurchase option of the Company herein
provided, Purchaser agrees to deliver to and deposit with the Secretary of
the Company, to be held in escrow by the Company as pledgee, two stock
assignments duly endorsed (with date and number of shares blank) with the
certificate or certificates evidencing the Shares. Such documents are to be
held by the Company pursuant to the terms of that certain Pledge Agreement
between the Company and Purchaser of even date herewith. After the Note has
been fully repaid, the Company shall deliver to Purchaser all vested Shares.
8. Transfers not Recognized. The Company shall not be required (i)
to transfer on its books any of the Shares which shall have been transferred
in violation of any of the provisions of this Agreement, or (ii) to treat as
owner of such Shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such Shares shall have been so
transferred.
9. Rights as Stockholder. Subject to the provisions of Section 3 and
Section 7, Purchaser shall, during the term of this Agreement, exercise all
rights and privileges of a stockholder of the Company with respect to the
Shares, including without limitation the right to vote and the right to
receive any dividends payable with respect thereto.
10. Taxes. Purchaser acknowledges that an amount equal to the fair
market value of the Shares, to the extent in excess of the Issue Price,
shall constitute income received by Purchaser for income tax purposes, and
that provision must be made for income taxes to be withheld by the Company
with respect to the Shares, whenever and to the extent that the Shares vest
pursuant to Section 3(b) of this Agreement, or upon the execution of this
Agreement if Purchaser makes an election pursuant to Section 83(b) of the
Internal Revenue Code. Purchaser agrees that Purchaser will make
appropriate provisions for the collection and payment of such withholding
taxes, in whatever manner is reasonably determined by the Company, including
without limitation payment by Purchaser to the Company of cash in the amount
of required withholding taxes or withholding from other compensation due
Purchaser. The parties believe that the fair market value of the Shares at
the Closing Date equals the Issue Price.
11. Miscellaneous. (a) Any notice hereunder shall be in writing
personally delivered by courier or mailed by registered or certified mail,
postage prepaid, and addressed to Purchaser at the address appearing in the
records of the Company or to the Company at its principal executive offices,
or at such other address as may be specified by Purchaser or the Company to
the other party by notice given in the manner herein provided. A notice
shall be deemed to have been given and received upon the earlier of (i)
three business days after the date on which it is deposited in the U.S.
mails or (ii) receipt by the party to whom such notice is directed.
(b) No waiver by a party hereto of a breach of any provision of this
Agreement shall be deemed to be a waiver of any preceding or subsequent
breach of the same or any other provision thereof.
(c) Purchaser acknowledges that the remedy at law for any breach of
this Agreement will be inadequate, and agrees that the Company shall, in
addition to whatever other remedies it may have, be entitled to injunctive
relief.
(d) This Agreement shall be governed by the laws of the State of
Maine. This Agreement sets forth the entire agreement between the parties
concerning the subject matter hereof and supersedes any prior agreements and
understandings relating to the subject matter hereof. No amendment or
modification hereof will be effective unless it is in writing and signed by
the parties.
(e) The Company may assign its rights and delegate its duties under
this Agreement, including its rights under Section 3 hereof. If any such
assignment or delegation requires consent of any state securities
authorities, the parties agree to cooperate in requesting such consent.
This Agreement shall inure to the benefit of the successors and assigns of
the Company and, subject to the restrictions on transfer herein set forth,
be binding upon Purchaser, his heirs, executors, administrators, successors
and assigns.
(f) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Company, or a parent or subsidiary of the Company,
to terminate Purchaser's employment, for any reason, with or without cause.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
INTELLIGENT CONTROLS, INC.
By: _____________________________
Title:
PURCHASER:
_________________________________
Roger E. Brooks
EXHIBIT A: Form of Purchaser's
Promissory Note
PROMISSORY NOTE
$1,332,500.00 Boston, Massachusetts
[___________, 1998]
FOR VALUE RECEIVED, the undersigned, Roger E. Brooks, hereby promises
to pay to the order of Intelligent Controls, Inc. (the "Payee"), as
hereinafter provided, the principal sum of ONE MILLION THREE HUNDRED THIRTY
TWO THOUSAND FIVE HUNDRED DOLLARS, with interest on all unpaid principal,
from and including the date hereof, at the rate of [insert applicable
federal rate] per annum. Interest shall be computed on the basis of a year
of 360 days and actual number of days elapsed.
Said principal sum and interest thereon shall be due and payable on
demand on or after [___________________], 2003.
The undersigned shall have the right at any time or times, without
penalty, to prepay, up to the entire unpaid principal balance hereof,
provided that there is paid with each such payment all interest accrued and
unpaid on the amount thereof to the date of payment.
The amount of all principal and (to the extent permitted by then
applicable law) all interest which is not paid when due (whether on demand
or by acceleration) shall bear interest, until payment of such overdue
amount in full, at the rate of twelve percent (12%) per annum, or the
maximum rate of interest, if lower, permitted by applicable law.
All payments of interest and principal shall be made at the principal
office of the Payee, at 74 Industrial Park Road, Saco, Maine 04072, or at
such other place as the holder hereof may from time to time designate. All
payments hereunder shall first be applied to unpaid accrued interest and the
balance, if any, to principal. If, however, the holder has incurred costs
and expenses of collection in enforcing this note, as described below, such
payments shall first be applied thereto.
The occurrence of any of the following events shall constitute a
default under this note:
A. default in the payment of any principal or interest hereunder when
due;
B. assignment for the benefit of creditors by the undersigned;
C. commencement of any proceeding under any law of any jurisdiction,
now or hereafter in force, relating to bankruptcy, insolvency or
otherwise to the protection or relief of debtors or the
readjustment of indebtedness, by or against the undersigned; or
D. termination of the undersigned's employment by the Payee for any
reason.
Upon any default described in paragraphs B and C above, this note
shall automatically become immediately due and payable. Upon any default
described in paragraph A above, this note, at the option of the holder,
shall become immediately due and payable. Upon any default described in
paragraph D above, this note, at the option of the holder, shall become due
and payable on or after the 90th day following the date the undersigned's
employment by the Payee is terminated, provided that if such termination of
employment is due to the undersigned's death or disability in accordance
with Section 4(c) of the Employment Agreement dated ___________, 1998
between the undersigned and the Payee (the "Employment Agreement") or
effected by the Payee without "cause" in accordance with Section 4(b) of the
Employment Agreement [or upon an event treated as a termination without
"cause" pursuant to Section 5(e) or 5(f) thereof], then this note, at the
option of the holder, shall only become due and payable on or after the
first anniversary of the date the undersigned's employment by the Payee is
so terminated.
The undersigned hereby, to the fullest extent permitted by applicable
law, (a) waives presentment, demand, notice, protest and all other demands
and notices, in connection with delivery, acceptance, performance, default,
acceleration or enforcement of or under this note; and (b) agrees to pay to
the holder, on demand, all costs and expenses of collection, including,
without limitation, reasonable attorneys' fees and legal expenses, incurred
by the holder in enforcing this note, whether or not litigation is
commenced.
No failure by the holder to exercise, or delay by the holder in
exercising, any right or remedy hereunder shall operate as a waiver thereof
or of any other right or remedy and no single or partial exercise of any
right or remedy shall preclude any other or further exercise thereof or of
any other right or remedy. Acceptance by the holder of any payment after
the maturity of this note has been accelerated shall not constitute a waiver
of such acceleration.
This note shall be full recourse only with respect to $200,000 of the
principal amount hereof and the interest on such portion of the principal
amount (such principal and interest being herein referred to as the
"Recourse Amount"). All payments of principal and interest hereunder shall
be deemed to have been applied first to principal and interest due hereunder
which is not included in the Recourse Amount.
This note is secured by and entitled to the benefits of a Pledge
Agreement of even date between the Payee and the undersigned.
This note shall be assignable by the Payee. The word "holder", as
used herein, shall mean the Payee or any endorsee of this note who is in
possession of it, or the bearer if this note is at the time payable to
bearer.
A record of all payments of interest and principal shall be kept on
separate records of the holder and no such record need be made or kept on
this note.
This note shall take effect as an instrument under seal and shall be
governed by and construed in accordance with the law of the State of Maine.
WITNESS:
___________________________ ______________________________
ROGER E. BROOKS
Address: 16 Deerfield Road
Sherborn, MA 01770
PLEDGE AGREEMENT
The undersigned, Roger E. Brooks, an individual residing at
16 Deerfield Road, Sherborn, MA 01770 (the "Pledgor"), hereby agrees with
Intelligent Controls, Inc., a Maine corporation having its principal place
of business at 74 Industrial Park Road, Saco, Maine 04072 (the "Pledgee"),
as follows:
1. Pledge. For valuable consideration, the receipt whereof is hereby
acknowledged by the Pledgor, the Pledgor hereby pledges, assigns and
transfers to the Pledgee, and grants to the Pledgee a continuing security
interest in, the shares of stock listed on Schedule A hereto (the "Original
Stock") and all other Collateral (as hereinafter defined), to secure the due
and punctual payment and performance of all of the liabilities and
obligations of the Pledgor under that certain promissory note (the "Note")
of even date herewith made by the Pledgor and payable to the order of the
Pledgee in the original principal amount of $1,332,500, including principal,
interest and costs and expenses of collection, and all liabilities and
obligations of the Pledgor under this Agreement (collectively, the
"Obligations"). The Original Stock and all proceeds thereof, including,
without limitation, all stock dividends and "stock splits", if any, to which
the Pledgor may be entitled (collectively, with the Original Stock, the
"Stock"), all payments in lieu of fractional shares of Stock, all dividends,
distributions and other payments made on or in respect of any Stock and all
other property which the Pledgor may become entitled to receive on account
thereof, are sometimes referred to herein collectively as the "Collateral".
2. Payment and Performance of Obligations. The Pledgor shall pay,
perform and observe each of the Obligations when due or required.
3. Voting Power. Prior to an event of default (as defined in the
Note), the Pledgor shall be entitled to exercise all voting powers
pertaining to the Stock for all purposes not inconsistent with the
provisions of this Agreement. The Pledgee shall have the right, in its
discretion, to cause the transfer to itself or its nominee of any or all
Collateral, at any time or times, upon and after the occurrence of any such
event of default and to exercise all voting powers pertaining to the Stock
for all purposes. Such transfer shall not constitute a sale or other
disposition of Collateral.
4. Disposition of Collateral.
(a) Upon and after any event of default which is then continuing, the
Pledgee shall have, in addition to rights and remedies otherwise available
to it, all of the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") then in effect in the State of
Maine.
(b) If any notice to the Pledgor of the sale or other disposition of
Collateral is required by then applicable law, seven (7) days' prior notice
(or, if longer, the shortest period of time permitted by then applicable
law) to the Pledgor of the time and place of any public sale of Collateral
or of the time after which any private sale or any other intended
disposition is to be made shall constitute reasonable notification.
(c) The Pledgee is authorized, at any such date, if the Pledgee deems
it advisable to do so, in order to comply with any applicable securities
laws, to restrict (i) the prospective bidders or purchasers to persons who
will represent and agree, among other things, that they are purchasing the
Stock for their own account for investment, and not with a view to the
distribution or resale thereof, or (ii) the manner of such sale or other
disposition. Sales made subject to such restrictions shall be deemed to
have been made in a commercially reasonable manner.
(d) If all or any part of the Collateral is sold on credit or for
future delivery, the Collateral so sold may be retained by the Pledgee until
the purchase price is paid in full. The Pledgee shall incur no liability in
case of the failure of the purchaser to pay for the Collateral as so sold,
or of the failure of the Pledgee to make any sale of Collateral after giving
notice thereof, and in case of any such failure, such Collateral may again
be sold upon the same notice as in the case of an original sale.
(e) All moneys received by the Pledgee from any collection or any
sale or other enforcement or disposition of Collateral shall be applied to
Obligations as provided in paragraph 5 hereof.
(f) Upon payment in full of all Obligations, the Pledgor shall be
entitled to the return of all Collateral, including cash, which has not been
used or applied toward the payment of Obligations (unless another person is
legally entitled thereto). If there is a deficiency, the Pledgor shall be
responsible for the same, together with interest thereon at the rate of
twelve percent (12%) per annum, except as otherwise specifically provided in
the Note. Any return of Collateral by the Pledgee to the Pledgor shall be
without representation or warranty of any nature whatsoever and wholly
without recourse.
5. Application of Proceeds. The Pledgee shall apply all moneys
received by it from any collection or any sale or other enforcement or
disposition of Collateral to Obligations in the following order: first, to
the payment of any costs and expenses of collection of the Note and any
costs and expenses incurred in enforcing its rights hereunder, including,
without limitation, reasonable attorneys' fees and legal expenses, next to
interest on the Note, and the balance, if any, to principal of the Note.
6. Duty of Pledgee. The Pledgee shall have no duty as to the
collection or protection of any Collateral (beyond reasonable care in the
custody and preservation of Collateral while actually in its possession) or
to preserve any rights with respect to any Collateral, including, without
limitation, rights against prior parties; and the sole duty of the Pledgee
shall be to receive payments and any Stock issued to the Pledgor, as and
when received by the Pledgee, and to apply any such payments against
Obligations as provided in paragraph 5.
7. Rights of Pledgee. The Pledgee, in its discretion, may apply any
and all proceeds of disposition of Collateral and other amounts collected or
received, pursuant to this Agreement or in the exercise of its rights,
remedies and powers hereunder, against Obligations, and may exercise said
rights, remedies and powers without regard to the existence of any other
security or sources of payment for any of the Obligations.
8. Representations and Warranties. The Pledgor hereby represents and
warrants to the Pledgee as follows:
(a) The Pledgor is the sole owner, and (as to Collateral to be
acquired after the date hereof) shall be the sole owner, of the Collateral,
and has and shall have the right to transfer all Collateral and to grant a
security interest therein to the Pledgee as provided in this Agreement.
(b) All of the Collateral is and shall be genuine, free and clear of
any restriction on transfer (except under any applicable securities laws),
lien, security interest, option or other charge or encumbrance, except in
favor of the Pledgee.
(c) No other pledge or assignment of any Collateral has or shall have
been made.
9. Duties of Pledgor. Until all of the Obligations have been paid
and performed in full, the Pledgor
(a) Shall furnish to the Pledgee such stock powers and other
instruments of transfer as may be required by the Pledgee to assure the
transferability of Collateral.
(b) Shall pay or cause to be paid, on or before the date when due,
all taxes and assessments heretofore or hereafter levied or assessed against
the Collateral, or any part thereof, or on this Agreement or on any of the
Obligations.
(c) Shall furnish to the Pledgee, promptly upon receipt thereof,
copies of all material notices, requests and other writings received by the
Pledgor relating to Collateral, and shall give prompt written notice to the
Pledgee of any claim which may be made attacking or questioning the validity
of this Agreement or of the security interest granted hereby, and of any
legal proceeding which may be instituted against the Pledgor with respect
thereto; and, at the cost and expense of the Pledgor, shall diligently
endeavor to cure any alleged defect and shall take all necessary action for
the defense of such legal proceeding; and the Pledgee (whether or not named
as a party to any such legal proceeding) is hereby authorized and empowered
to take such additional action, as, in its judgment, may be necessary for
the defense of any such legal proceeding or the perfection, preservation or
protection of this Agreement and of the security interest granted hereby.
(d) Shall promptly execute and deliver all notices and other writings
and take all such other action reasonably requested, at any time or times,
by the Pledgee to perfect, preserve and protect and continue perfected the
security interest granted hereby or to enable the Pledgee to exercise and
enforce its rights, remedies and powers hereunder with respect to
Collateral.
(e) Shall deliver, if received by the Pledgor, all Collateral,
immediately upon receipt thereof by the Pledgor (duly endorsed or assigned
to the Pledgee as appropriate), in the identical form received by the
Pledgor.
(f) Shall not sell, assign, transfer, encumber or otherwise dispose
of all or any part of the Collateral, or permit the Collateral to be sold,
assigned, transferred or otherwise disposed of or encumbered, except in
favor of the Pledgee, without the prior written consent of the Pledgee.
10. Power of Attorney. The Pledgor hereby irrevocably constitutes
and appoints the Pledgee the true and lawful attorney of the Pledgor, with
full power of substitution, in the place and stead of the Pledgor and in the
name of the Pledgee or the Pledgor or otherwise, at any time or times, in
the discretion of the Pledgee, to take any action and to execute any
instrument or document which the Pledgee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
(a) To receive, endorse and collect all checks and other orders or
instruments for the payment of money made payable to the Pledgor
representing any dividend payment or other distribution in respect of any or
all other Collateral and to give full discharge for the same.
(b) To execute endorsements, assignments or other instruments of
conveyance or transfer with respect to any or all Collateral.
(c) To demand, sue for, collect, receive and give acquittance for any
monies due and to become due under or in respect of any or all Collateral.
(d) To file any claims or take any action or institute any
proceedings which the Pledgee may deem necessary or advisable for the
collection of any or all Collateral or otherwise to enforce the rights of
the Pledgee with respect thereto.
This power of attorney shall not be affected by any subsequent disability or
incapacity of the Pledgor. No discretionary right, remedy or power granted
to the Pledgee in this Agreement shall be deemed to impose any obligation
whatsoever on the Pledgee with respect thereto (such rights, remedies and
powers being solely for the protection of the Pledgee). If, however, the
Pledgee elects to exercise any of such rights, remedies or powers, the
Pledgee shall not be accountable for more than it actually receives as a
result thereof, and it shall not be responsible to the Pledgor, except for
willful misconduct or bad faith.
11. Waivers. The Pledgor hereby waives presentment, demand, notice
and protest, notice of acceptance of this Agreement, and, except as
otherwise provided in paragraph 4, of all action by the Pledgee in reliance
hereon. No course of dealing by the Pledgee and no failure or delay by the
Pledgee in exercising any right, remedy or power hereunder shall operate as
a waiver thereof, and no single or partial exercise thereof shall preclude
any other or further exercise thereof or the exercise of any other right,
remedy or power of the Pledgee. No amendment, modification or waiver of any
provision of this Agreement shall in any event be effective unless contained
in a writing signed by the Pledgee, and then only to the extent specifically
set forth therein. The rights, remedies and powers of the Pledgee, not only
hereunder and under the Note, but also under the Employee Restricted Stock
Purchase Agreement of even date herewith between the Pledgor and the Pledgee
and under applicable law, are cumulative and may be exercised by the Pledgee
at such time or times as the Pledgee may elect.
12. Notices. No notice to or demand upon the Pledgor, in any
instance, shall entitle the Pledgor to any other or further notice or demand
under similar or other circumstances, unless expressly required by this
Agreement or applicable law. All demands, notices and other communications
from the Pledgee to the Pledgor hereunder shall be in writing and shall be
deemed effective when delivered in hand or when sent by certified or
registered mail, return receipt requested, or delivered to an express
courier service and addressed to the Pledgor at the address of the Pledgor
set forth in the introductory paragraph hereof, or such other address of
which notice hereafter becomes effective as provided in this paragraph. All
notices and other communications from the Pledgor to the Pledgee hereunder
shall be in writing and shall be deemed effective when actually received by
the Pledgee. Receipt shall be presumed if the Pledgor receives a return
receipt from the post office, indicating delivery of such notice or other
communication to the Pledgee at the address of the Pledgee set forth in the
introductory paragraph hereof, marked, "Att: Board of Directors" or such
other address of which notice hereafter becomes effective as provided in
this paragraph.
13. Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid, such
invalidity shall not affect any other provision which can be given effect
without the invalid provision or application, and to this end the provisions
hereof shall be severable.
14. Captions. The captions in this Agreement have been included for
convenience of reference only, shall not define or limit the provisions
hereof and shall not have any legal or other significance whatsoever.
15. Miscellaneous. This Agreement shall be governed by and construed
in accordance with the law of the State of Maine, shall be binding upon the
Pledgor and his heirs, legal representatives and assigns, and shall inure to
the benefit of the Pledgee and its successors and assigns. This Agreement
shall remain in full force and effect until all of the Obligations have been
paid and performed in full.
WITNESS the execution hereof under seal this ___ day of _______, 1998.
WITNESS: INTELLIGENT CONTROLS, INC.
By: ______________________________
Title:
WITNESS:
___________________________________
ROGER E. BROOKS
SCHEDULE A
PLEDGED STOCK
<TABLE>
<CAPTION>
STOCK CERTIFICATE NO. NO. OF SHARES
- -----------------------------------------------------------------------
<S> <C> <C>
Common Stock, no par value,
of Intelligent Controls, Inc. ___________ 76,923
Common Stock, no par value, of
Intelligent Controls, Inc. ___________ 410,000
</TABLE>
Election Under Section 83(b) of the Internal Revenue Code
Pursuant to the provisions of Section 83(b) of the Internal Revenue
Code, the undersigned (the "Taxpayer") hereby elects to include in gross
income, for the taxable year set forth below, the excess, if any, of the
fair market value of the property described below (valued as of the time of
transfer) over the amount (if any) paid therefor. Pursuant to the
provisions of Section 1.83-2(e)(7) of the Treasury regulations, the Taxpayer
hereby states that copies of this election have been furnished to the
persons described in Section 1.83-2(d) of such regulations.
(1) Name of Taxpayer: Roger E. Brooks
(2) Address of Taxpayer: 16 Deerfield Road
Sherborn, Massachusetts 01770
(3) Social Security Number: [_______________________]
(4) Description of Property
Covered by Election: 486,923 shares (the "Shares") of
common stock, no par value, of
Intelligent Controls, Inc., a Maine
corporation (the "Company")
(5) Date Property
Transferred: , 1998
(6) Taxable Year For Which
Election is Made: 1998
(7) Fair Market Value of
Property At Time of
Transfer:* $1,582,500
(8) Amount Paid for Property: $1,582,500
(9) Nature of Restrictions
to Which Property is
Subject: The Shares vest as follows: (i)76,923
Shares on the date of issuance; (ii)
25,625 of the remaining number of
Shares upon the passage of every three
months; (iii) immediately with respect
to all of the remaining Shares, upon
the sale of all or substantially all
of the Company's assets or stock, or a
upon a "change of control" of the
Company. A "change of control" means:
(A) any person or entity, other than
an existing Company shareholder,
becomes the beneficial owner of 50% or
more of the voting power of the
Company; (B) a change in the majority
of the Company's directors, other than
a change approved by the Company's
current shareholders; or (C) a sale of
substantially all of the Company by
sale of assets, stock, merger,
consolidation or other reorganization;
provided, however, that the
reorganization or recapitalization of
the Company not constituting a sale to
a purchaser for value will not
constitute a sale resulting in vesting
of such Shares; and (iv) with respect
to 102,500 of the remaining number of
Shares, upon the Purchaser's death or
disability, or upon any of certain
events deemed to constitute a
termination of Purchaser's employment
by the Company without cause, in
addition to any Shares which have
previously vested. Unvested Shares are
subject to repurchase by the issuer
upon termination of the Taxpayer's
employment by the Company at the
amount paid therefor.
Dated: _________________, 1998 _________________________________
Roger E. Brooks
* (determined without regard to any restrictions other than restrictions
which by their terms will never lapse)
Instructions Re: Section 83(b) Election
1. When to File -The election must be filed not later than 30 days
after the date the property is transferred. If mailed, it should be sent
Registered Mail -Return Receipt Requested and the white Post Office receipt,
showing the date of registration (which under these circumstances is deemed
the date of filing), along with the green return receipt, establishing the
date of actual delivery, should be permanently retained with the taxpayer's
tax records for the year involved.
2. Where to File -One original copy of the election should be filed
with the Internal Revenue office with which the taxpayer files his income
tax returns. In addition, one original copy of the election must be
submitted with the taxpayer's income tax return for the taxable year
involved.
3. Additional Copies -Section 1.83-2(d) of the Treasury regulations
requires that a copy of the election be furnished to (1) the person for whom
the services are performed, and (2) the person to whom the property is
transferred if the property is transferred to someone other than the person
who performed the services.
4. Revocability -Once filed, an election under Section 83(b) can be
revoked only in exceptional cases, and then only with the consent of the
Commissioner of Internal Revenue.
