<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
IMO INDUSTRIES INC.
(NAME OF SUBJECT COMPANY)
II ACQUISITION CORP.
(BIDDER)
COMMON STOCK, $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
452540107
(CUSIP NUMBER OF CLASS OF SECURITIES)
JOHN A. YOUNG
SECRETARY
II ACQUISITION CORP.
9211 FOREST HILL AVENUE
SUITE 109
RICHMOND, VIRGINIA 23235
(804) 560-4070
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
COPY TO:
MEREDITH M. BROWN, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
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CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
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<S> <C>
$133,276,944 $26,655
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</TABLE>
* For purposes of calculating the filing fee only. The amount assumes the
purchase of 18,904,531 shares of common stock, $1.00 par value (the
"Shares") at a price per Share of $7.05. Such number of Shares represents
the sum of 17,126,609, the number of outstanding Shares, and 1,777,922, the
number of Shares subject to outstanding options exercisable within 60 days
of the date hereof.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: None Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
</TABLE>
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<PAGE> 2
SCHEDULE 14D-1
CUSIP No. 452540107
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
II ACQUISITION CORP.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF, WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%
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10 TYPE OF REPORTING PERSON
CO
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</TABLE>
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by II Acquisition Corp., a Delaware corporation ("Purchaser") and an
affiliate of Constellation Capital Partners LLC, a private investment firm, to
purchase all outstanding shares of Common Stock, par value $1.00 per share (the
"Common Stock"), of Imo Industries Inc., a Delaware corporation (the "Company"),
and each associated right to purchase shares of the Company's Series B Junior
Participating Preferred Stock
2
<PAGE> 3
(individually, the "Right" and collectively, the "Rights") issued pursuant to
the Rights Agreement (as amended, the "Rights Agreement"), dated as of April 30,
1997, between the Company and First Chicago Trust Company of New York (such
shares of Common Stock and the Rights collectively referred to as the "Shares"),
at a price of $7.05 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated July 31, 1997 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Imo Industries Inc., a Delaware
corporation, which has its principal executive offices at 1009 Lenox Drive,
Building Four West, Lawrenceville, New Jersey 08648.
(b) The equity securities being sought are all the outstanding shares of
Common Stock, par value $1.00 per share, and each associated right to purchase
shares of the Company's Series B Junior Participating Preferred Stock issued
pursuant to the Rights Agreement, of the Company. The information set forth in
the Introduction and Section 1 ("Terms of the Offer; Expiration Date") of the
Offer to Purchase is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer
to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser. The information
concerning the name, state or other place of organization, principal business
and address of the principal office of Purchaser, and the information concerning
the name, residence or business address, present principal occupation or
employment and the name, principal business and address of any corporation or
other organization in which such employment or occupation is conducted, material
occupations, positions, offices or employments during the last five years and
citizenship of each of the executive officers and directors of Purchaser and
each of the persons controlling Purchaser are set forth in the Introduction,
Section 8 ("Certain Information Concerning Purchaser") and Schedule I of the
Offer to Purchase and are incorporated herein by reference.
(e) and (f) During the last five years, neither Purchaser, nor, to the best
knowledge of Purchaser, any of the persons listed in Schedule I of the Offer to
Purchase has been (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser") and Section 10 ("Background of the Offer; Contacts with the Company;
the Share Purchase Agreement") of the Offer to Purchase is incorporated herein
by reference.
(b) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information Concerning
Purchaser"), Section 10 ("Background of the Offer; Contacts with the Company;
the Share Purchase Agreement") and Section 11 ("Purpose of the Offer; Plans for
the Company After the Offer") of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Financing of the Offer")
of the Offer to Purchase is incorporated herein by reference.
3
<PAGE> 4
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company; the Share Purchase
Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After
the Offer") of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer
on the Market for Shares, NYSE Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 8 ("Certain Information
Concerning Purchaser") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser"), Section 10 ("Background of the Offer;
Contacts with the Company; the Share Purchase Agreement") and Section 11
("Purpose of the Offer; Plans for the Company After the Offer") of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. 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 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser") of the Offer to Purchase is incorporated herein by reference.
Audited information for Purchaser is not available due to the recent formation
of Purchaser which was incorporated on July 22, 1997.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser"), Section 10 ("Background of the Offer;
Contacts with the Company; the Share Purchase Agreement") and in Section 11
("Purpose of the Offer; Plans for the Company After the Offer") of the Offer to
Purchase is incorporated herein by reference.
(b)-(c) and (e) The information set forth in Section 15 ("Certain Legal
Matters and Regulatory Approvals") of the Offer to Purchase is incorporated
herein by reference.
(d) The information set forth in Section 13 ("Effect of the Offer on the
Market for the Shares, NYSE Listing and Exchange Act Registration") and in
Section 15 ("Certain Legal Matters and Regulatory Approvals") of the Offer to
Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Share Purchase Agreement, dated as of July 25, 1997, between
Purchaser and the Company, copies of which are attached hereto as Exhibits
(a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by reference.
4
<PAGE> 5
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Form of Offer to Purchase dated July 31, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Schroder & Co. Inc. to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement as published in The New York Times on July 31, 1997.
(a)(8) Joint Press release issued by the Company and Purchaser on July 25, 1997.
(a)(9) Form of Letter of Transmittal for Imo Industries Inc. Employees Stock Savings
Plan.
(b)(1) Senior Note dated July 23, 1997 issued to Janelia Farm Corp. by Purchaser.
(b)(2) Subordinated Note dated July 23, 1997 issued to Mitchell P. Rales by Purchaser.
(b)(3) Subordinated Note dated July 23, 1997 issued to Steven M. Rales by Purchaser.
(b)(4) Commitment Letter, dated July 24, 1997, between Purchaser and Constellation
Capital Partners LLC, and the Bank of Nova Scotia and NationsBank, N.A., as
Managing Agents.
(b)(5) Stock Subscription Agreement, dated as of July 23, 1997, between Purchaser and
Colfax Capital Corporation.
(c)(1) Share Purchase Agreement dated as of July 25, 1997 between Purchaser and the
Company.
(c)(2) Confidentiality Agreement dated May 19, 1997 between the Company and Constellation
Capital Partners LLC.
(c)(3) Letter of Intent dated as of July 30, 1997 between Purchaser and Danaher
Corporation.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this statement is true, complete and correct.
II ACQUISITION CORP.
By: /s/ PHILIP W. KNISELY
------------------------------------
Name: Philip W. Knisely
Title: President and Chief Executive
Officer
July 31, 1997
5
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<S> <C>
(a)(1) Form of Offer to Purchase dated July 31, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Schroder & Co. Inc. to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement as published in The New York Times on July 31, 1997.
(a)(8) Joint Press release issued by the Company and Purchaser on July 25, 1997.
(a)(9) Form of Letter of Transmittal for Imo Industries Inc. Employees Stock Savings
Plan.
(b)(1) Senior Note dated July 23, 1997 issued to Janelia Farm Corp. by Purchaser.
(b)(2) Subordinated Note dated July 23, 1997 issued to Mitchell P. Rales by Purchaser.
(b)(3) Subordinated Note dated July 23, 1997 issued to Steven M. Rales by Purchaser.
(b)(4) Commitment Letter, dated July 24, 1997, between Purchaser and Constellation
Capital Partners LLC, and the Bank of Nova Scotia and NationsBank, N.A., as
Managing Agents.
(b)(5) Stock Subscription Agreement, dated as of July 23, 1997, between Purchaser and
Colfax Capital Corporation.
(c)(1) Share Purchase Agreement dated as of July 25, 1997 between Purchaser and the
Company.
(c)(2) Confidentiality Agreement dated May 19, 1997 between the Company and Constellation
Capital Partners LLC.
(c)(3) Letter of Intent dated as of July 30, 1997 between Purchaser and Danaher
Corporation.
</TABLE>
6
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND ASSOCIATED RIGHTS
OF
IMO INDUSTRIES INC.
AT
$7.05 NET PER SHARE
BY
II ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 27, 1997, UNLESS THE OFFER IS EXTENDED. THE OFFER IS
CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER MORE THAN EIGHTY PERCENT (80%) OF
THE THEN OUTSTANDING SHARES AND (II) THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE ANTITRUST WAITING PERIODS.
The Board of Directors of Imo Industries Inc. (the "Company") has
unanimously determined that the Offer is fair to and in the best interests of
the Company and its stockholders, and recommends that stockholders accept the
Offer and tender their shares pursuant to the Offer.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $1.00 per share (the "Common Stock"), of the
Company, and associated rights to purchase shares of the Company's Series B
Junior Participating Preferred Stock (individually, a "Right" and collectively,
the "Rights") issued pursuant to the Rights Agreement, dated as of April 30,
1997, as amended, between the Company and First Chicago Trust Company of New
York (such shares of Common Stock and the Rights collectively referred to as the
"Shares"), should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) evidencing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedure for book-entry transfer set forth in
Section 3 or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Any stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such Shares
by following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
THE DEALER MANAGER FOR THE OFFER IS:
SCHRODER & CO. INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INTRODUCTION............................................................................ 1
1. TERMS OF THE OFFER; EXPIRATION DATE............................................... 2
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES..................................... 3
3. PROCEDURES FOR TENDERING SHARES................................................... 4
4. WITHDRAWAL RIGHTS................................................................. 7
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................................... 7
6. PRICE RANGE OF SHARES; DIVIDENDS.................................................. 8
7. CERTAIN INFORMATION CONCERNING THE COMPANY........................................ 8
8. CERTAIN INFORMATION CONCERNING PURCHASER.......................................... 11
9. FINANCING OF THE OFFER............................................................ 13
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE SHARE PURCHASE
AGREEMENT......................................................................... 15
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER....................... 26
12. DIVIDENDS AND DISTRIBUTIONS....................................................... 28
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NYSE LISTING AND EXCHANGE ACT
REGISTRATION...................................................................... 28
14. CERTAIN CONDITIONS OF THE OFFER................................................... 30
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.................................... 31
16. FEES AND EXPENSES................................................................. 34
17. MISCELLANEOUS..................................................................... 34
</TABLE>
i
<PAGE> 3
July 31, 1997
To the Holders of Common Stock of
IMO INDUSTRIES INC.:
INTRODUCTION
II Acquisition Corp., a Delaware corporation ("Purchaser") and an affiliate
of Constellation Capital Partners LLC ("Constellation"), a private investment
firm, hereby offers to purchase all outstanding shares of common stock, par
value $1.00 per share (the "Common Stock"), of Imo Industries Inc., a Delaware
corporation (the "Company"), and each associated right to purchase shares of the
Company's Series B Junior Participating Preferred Stock (individually, a "Right"
and collectively, the "Rights") issued pursuant to the Rights Agreement dated as
of April 30, 1997, as amended, between the Company and First Chicago Trust
Company of New York (the "Rights Agreement") (such shares of Common Stock and
the Rights collectively referred to as the "Shares"), at a price of $7.05 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
Schroder & Co. Inc., who is acting as Dealer Manager for the Offer (in such
capacity, the "Dealer Manager"), First Chicago Trust Company of New York (the
"Depositary") and D.F. King & Co., Inc. (the "Information Agent") incurred in
connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE OFFER IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY
AND ITS STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
Credit Suisse First Boston Corporation ("Credit Suisse First Boston"), the
Company's financial advisor, has delivered to the Company's Board of Directors
its written opinion that, as of the date of such opinion, the consideration to
be received by the tendering holders of Shares pursuant to the Offer is fair to
such holders of Shares from a financial point of view. A copy of the opinion of
Credit Suisse First Boston is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
NUMBER OF SHARES THAT SHALL CONSTITUTE MORE THAN EIGHTY PERCENT (80%) OF THE
SHARES THEN OUTSTANDING (THE "MINIMUM CONDITION"), AND (II) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE ANTITRUST WAITING PERIODS. SEE SECTION 14, WHICH
SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. THE OFFER IS NOT CONDITIONED ON
OBTAINING FINANCING.
The Offer is being made pursuant to a Share Purchase Agreement, dated as of
July 25, 1997 (the "Share Purchase Agreement"), between Purchaser and the
Company. Pursuant to the Share Purchase Agreement, Purchaser is making the Offer
for all outstanding Shares. THE OFFER IS NOT CONDITIONED ON FINANCING OR ON THE
RECEIPT OF CONSENTS FROM HOLDERS OF THE COMPANY'S 11 3/4% SENIOR SUBORDINATED
NOTES DUE MAY 1, 2006 (THE "NOTES"). THE SHARE PURCHASE AGREEMENT DOES NOT
CONTEMPLATE A MERGER OR CONSOLIDATION BETWEEN THE COMPANY AND PURCHASER. It is
expected that the Company will remain a separate entity after the consummation
of the Offer. The Share Purchase Agreement provides, however, that, promptly
upon the purchase by Purchaser of Shares pursuant to the Offer and from time to
time thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as will give
Purchaser representation on the Board equal to the product of the number of the
total directors on the Board (giving effect to the directors to be elected as
described in this sentence) multiplied by the percentage
<PAGE> 4
that the aggregate number of Shares then beneficially owned by Purchaser and its
affiliates following such purchase bears to the total number of Shares then
outstanding. In the Share Purchase Agreement, the Company has agreed to take all
actions necessary to cause Purchaser's designees to be elected as directors of
the Company, including increasing the size of the Board or securing the
resignations of incumbent directors or both. The Share Purchase Agreement is
more fully described in Section 10.
On July 2, 1997, UD Delaware Corp. ("UDDC"), an indirect wholly owned
subsidiary of United Dominion Industries Limited ("UDI"), commenced a tender
offer to purchase all of the outstanding Shares of the Company at $6.00 net per
Share (the "UDI Offer"). The UDI Offer was made pursuant to an Agreement and
Plan of Merger, dated as of June 26, 1997 (the "UDI Agreement"), among UDDC, UDI
and the Company, and was subject to, among other things, in addition to the
conditions that are applicable to Purchaser's Offer, the receipt of consents
from holders of a majority of the outstanding principal amount of the Notes to
amend certain provisions of the indenture governing the Notes so that such
provisions would not be applicable to a merger between UDDC and the Company (the
"UDI Merger"). Such consents were being solicited in connection with a tender
offer dated July 2, 1997, for any and all of the Notes (the "UDI Note Offer").
On July 25, 1997, the Company terminated the UDI Agreement and the Board
unanimously withdrew its recommendation of the UDI Offer and the UDI Merger. In
accordance with the terms of the UDI Agreement, UDI received the sum of $8
million as a "Termination Fee", and $2 million was deposited into an escrow
account for payment of certain expenses incurred by UDI and UDDC. On July 29,
1997, UDI and UDDC terminated the UDI Offer and the UDI Note Offer.
The Company has advised Purchaser that as of July 29, 1997, 17,126,609
Shares were issued and outstanding and that (i) no Shares were held by the
subsidiaries of the Company and (ii) 2,882,657 Shares were reserved for future
issuance to present or former employees or directors pursuant to employee and
director stock options granted pursuant to the Company's stock option plans. As
a result, as of the date of this Offer to Purchase, the Minimum Condition would
be satisfied if Purchaser acquired pursuant to the Offer 16,007,413 Shares
(assuming that all Shares reserved for issuance pursuant to the Company's stock
option plans are outstanding at the Expiration Date (as hereinafter defined)).
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date (as
hereinafter defined) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Wednesday, August
27, 1997, unless and until Purchaser, in its sole discretion (but subject to the
terms and conditions of the Share Purchase Agreement), shall have extended the
period during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by
Purchaser, shall expire.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser also expressly reserves the right, in
its sole discretion (but subject to the terms and conditions of the Share
Purchase Agreement), at any time and from time to time, (i) to delay acceptance
for payment of, or, regardless of whether such Shares were theretofore accepted
for payment, payment for, any Shares pending receipt of any regulatory approval
specified in Section 15, (ii) to terminate the Offer and not accept for payment
any Shares upon the occurrence of any of the conditions specified in Section 14
and (iii) to waive any condition or otherwise amend the Offer in any respect, by
giving oral or written notice of such delay, termination, waiver or amendment to
the Depositary and by making a public announcement thereof. The Share Purchase
Agreement provides that, without the consent of the Company, Purchaser will not
(i) decrease the price per Share payable pursuant to the Offer, (ii) change the
form of consideration payable pursuant to the Offer, (iii) reduce the maximum
number of Shares sought pursuant to the Offer, (iv) extend the expiration date
of the Offer (except that Purchaser may extend the expiration date of the Offer
(a) as
2
<PAGE> 5
required to comply with any rule, regulation or interpretation of the Commission
or (b) for one or more times each for an aggregate period of up to 15 days (and
not to exceed 60 days from the commencement of the Offer) for any reason other
than those specified in the immediately preceding clause (a)) or (v) impose
conditions to the Offer in addition to those set forth in Section 14. During any
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the rights of a tendering stockholder to withdraw his
or her Shares. See Section 4. Purchaser acknowledges that (i) Rule 14e-1(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the first sentence of this paragraph), any Shares upon
the occurrence of the conditions specified in Section 14 without extending the
period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which requires that material changes be
promptly disseminated to stockholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, Purchaser will extend the Offer to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act.
Subject to applicable law, if, prior to the Expiration Date, Purchaser
should decide to increase the consideration being offered in the Offer, such
increase in the consideration being offered will be applicable to all
stockholders whose Shares are accepted for payment pursuant to the Offer and,
if, at the time notice of any such increase in the consideration being offered
is first published, sent or given to holders of such Shares, the Offer is
scheduled to expire at any time earlier than the period ending on the tenth
business day from and including the date that such notice is first so published,
sent or given, the Offer will be extended at least until the expiration of such
ten-business-day period.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal and
other related materials will be mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), Purchaser
will accept for payment all Shares validly tendered prior to the Expiration Date
and not withdrawn promptly after the latest to occur of (i) the Expiration Date,
(ii) the expiration or termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (iii) the satisfaction or waiver of the other conditions to the Offer
set forth in Section 14, and will promptly pay for all Shares accepted for
payment subject to the expiration or termination of any applicable waiting
periods under the HSR Act. Subject to applicable rules of the Commission,
Purchaser expressly reserves the right to delay acceptance for payment of, or
payment for, Shares pending receipt of any regulatory approvals specified in
Section 15 or in order to comply in whole or in part with any other applicable
law.
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) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares
3
<PAGE> 6
into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined below) in connection
with a book-entry transfer and (iii) any other documents required under the
Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
Purchaser has filed with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division"), on
July 29, 1997, a Premerger Notification and Report Form under the HSR Act in
connection with the purchase of Shares pursuant to the Offer. Accordingly, it is
anticipated that the waiting period under the HSR Act applicable to the Offer
will expire at 11:59 p.m., New York City time, on Wednesday, August 13, 1997.
Prior to the expiration or termination of such waiting period, the FTC or the
Antitrust Division may extend such waiting period by requesting additional
information or documentary material from Purchaser. If such a request is made
with respect to the purchase of Shares in the Offer, the waiting period will
expire at 11:59 p.m., New York City time, on the tenth calendar day after
substantial compliance by Purchaser with such a request. Thereafter, the waiting
period may only be extended by court order. The waiting period under the HSR Act
may be terminated prior to its expiration by the FTC and the Antitrust Division.
Purchaser will request early termination of the waiting period, although there
can be no assurance that this request will be granted. Pursuant to the Share
Purchase Agreement, Purchaser may, but need not, extend the Offer for one or
more periods of 15 days (not to exceed 60 days from the date hereof) if the
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the initial Expiration Date. See Section 15 for additional
information regarding the HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from Purchaser and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid, regardless
of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3, such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES. In order for a holder of Shares
validly to tender Shares pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a book-
entry delivery of Shares, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) the Share
Certificates evidencing tendered Shares must be received by the Depositary at
such address or such Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
the tendering stockholder must comply with the guaranteed delivery procedures
described below.
4
<PAGE> 7
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry transfer, and any other required documents,
must, in any case, be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering stockholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the New York Stock Exchange Medallion
Signature Guarantee Program, or by any other "eligible guarantor institution,"
as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution"), except in cases where
Shares are tendered (i) by a registered holder of Shares who has not completed
either the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. If a Share Certificate is registered in the
name of a person other than the person who or which signs the Letter of
Transmittal, or if payment is to be made or a Share Certificate not accepted for
payment or not tendered is to be returned to a person other than the registered
holder(s), then the Share Certificate must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear on the Share Certificate, with the signature(s) on
such Share Certificate or stock powers guaranteed by an Eligible Institution.
See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three trading days on the New York Stock Exchange after the date of
execution of such Notice of Guaranteed Delivery.
5
<PAGE> 8
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee, in the form set forth in the form of Notice of Guaranteed Delivery
made available by Purchaser, by a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or which is a commercial bank or trust company having an office or
correspondent in the United States that is a member in good standing of the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program.
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 the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any Shares
of any particular stockholder, whether or not similar defects or irregularities
are waived in the case of other stockholders. No tender of Shares will be deemed
to have been validly made until all defects and irregularities have been cured
or waived. None of Purchaser, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and with respect to any and all other dividends,
distributions, Shares and other securities declared, paid or distributed in
respect of such Shares on or after July 31, 1997). All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Shares for payment. Upon such acceptance for payment, all prior proxies given by
such stockholder with respect to such Shares (and such other dividends,
distributions, Shares and other securities) will be revoked without further
action, and no subsequent proxies may be given nor any subsequent written
consent executed by such stockholder (and, if given or executed, will not be
deemed to be effective) with respect thereto. The designees of Purchaser will,
with respect to the Shares for which the appointment is effective, be empowered
to exercise all voting and other rights of such stockholder as they in their
sole discretion may deem proper at any annual or special meeting of the
Company's stockholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. Purchaser reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon Purchaser's payment for such Shares, Purchaser must be able to exercise
full voting rights with respect to such Shares (and such other Shares and
securities).
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
UNDER THE FEDERAL INCOME TAX LAWS, THE DEPOSITARY WILL BE REQUIRED TO
WITHHOLD 31 PERCENT OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN STOCKHOLDERS
PURSUANT TO THE OFFER. TO PREVENT SUCH BACKUP FEDERAL INCOME TAX WITHHOLDING
WITH RESPECT TO PAYMENT TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE
DEPOSITARY WITH SUCH STOCKHOLDER'S COR-
6
<PAGE> 9
RECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn by the tendering
stockholder at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
by such stockholder at any time after September 28, 1997. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this Section 4. Any such delay
will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover page of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account of the Book-Entry Transfer
Facility to be credited with the withdrawn Shares, in which case a notice of
withdrawal will be effective if delivered to the Depositary by any method of
delivery described in the first sentence of this paragraph. Withdrawals of
Shares may not be rescinded. Any Shares properly withdrawn will thereafter be
deemed not to have been validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered at any time prior to the Expiration Date by
following one of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
the Dealer Manager, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for
Shares pursuant to the Offer will be a taxable transaction for federal income
tax purposes and may also be a taxable transaction under applicable state, local
or foreign tax laws. In general, a stockholder will recognize gain or loss for
federal income tax purposes equal to the difference between the amount of cash
received in exchange for the Shares sold and such stockholder's adjusted tax
basis in such Shares. Gain or loss will be calculated separately for each
identifiable block of Shares sold. For federal income tax purposes, such gain or
loss will be capital gain or loss if the Shares are capital assets in the hands
of such stockholder, and will be long-term capital gain or loss if such Shares
have been held for more than one year. A stockholder's ability to deduct capital
losses may be limited.
Withholding. Unless a stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Internal Revenue Code of 1986, as amended, and Treasury Regulations
promulgated thereunder, such stockholder may be subject to backup withholding at
a rate of 31% with respect to any consideration received pursuant to the Offer.
See Section 3. Stockholders should consult their brokers to ensure compliance
with such procedures. Foreign stockholders should consult with their own tax
advisors regarding withholding taxes.
7
<PAGE> 10
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING FINANCIAL INSTITUTIONS, BROKER-DEALERS, STOCKHOLDERS WHO
ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE
AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND
FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and
principally traded on the New York Stock Exchange. The following table sets
forth, for the fiscal quarters indicated, the high and low sales prices per
Share on the New York Stock Exchange as reported by the Dow Jones News Service
since January 1, 1995 and the cash dividends per share declared during such
periods.
<TABLE>
<CAPTION>
QUARTERLY CASH
HIGH LOW DIVIDENDS
---- --- --------------
<S> <C> <C> <C>
Fiscal 1995:
First Quarter.................................................. $11 1/2 $6 1/4 --
Second Quarter................................................. 9 1/8 6 1/2 --
Third Quarter.................................................. 9 7/8 8 1/4 --
Fourth Quarter................................................. 9 5 3/4 --
Fiscal 1996:
First Quarter.................................................. 7 5/8 5 3/4 --
Second Quarter................................................. 8 1/8 5 3/8 --
Third Quarter.................................................. 5 7/8 4 7/8 --
Fourth Quarter................................................. 5 1/2 2 3/4 --
Fiscal 1997:
First Quarter.................................................. 3 7/8 3 1/8 --
Second Quarter................................................. 5 7/8 2 1/4 --
Third Quarter (through July 30, 1997).......................... 7 5 3/4 --
</TABLE>
On June 25, 1997, the last full trading day prior to the announcement of
the execution of the UDI Agreement and of UDI's intention to commence the UDI
Offer, the closing price per Share as reported on the New York Stock Exchange
was $3 1/4. On July 25, 1997, the last full trading day prior to the
announcement of the execution of the Share Purchase Agreement and of Purchaser's
intentions to commence the Offer, the closing price per Share as reported on the
New York Stock Exchange was $5 15/16. On July 30, 1997, the closing price per
Share as reported on the New York Stock Exchange was $6 13/16.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Neither Purchaser nor the
Dealer Manager assumes any responsibility for the accuracy or completeness of
the information concerning the Company furnished by the Company or contained in
such documents and records or for any failure by the Company to disclose events
that may have occurred or may affect the significance or accuracy of any such
information but that are unknown to Purchaser or the Dealer Manager.
General. The Company is a Delaware corporation with its principal
executive offices located at 1009 Lenox Drive, Building Four West,
Lawrenceville, New Jersey 08648. The Company is an integrated
8
<PAGE> 11
multinational industrial manufacturer of a broad range of industrial products
through its five core business segments -- Power Transmission, Pumps,
Instrumentation, Morse Controls and Roltra-Morse. The Company's products are
designed to regulate and control motion, transfer liquids and monitor fluids.
The Company markets its products on a worldwide basis to a diverse customer
base. In November 1996, the Company announced that it was withdrawing
Roltra-Morse from divestiture because threats made by an unsuccessful bidder
made it impossible for the Company to receive fair value for the business. As a
result of this announcement, Roltra-Morse has been reclassified as a continuing
operation and the Company has re-focused its operations on its five core
business segments, as follows:
The Power Transmission business segment designs and produces electronic
adjustable-speed motor drives, gears and speed reducers.
The Pumps business segment designs and produces a broad range of rotary
pumps, including a proprietary line of two and three-screw pumps.
The Instrumentation business segment designs and produces transducers and
switches for sensing, measuring and controlling pressure, temperature and liquid
level and flow.
The Morse Controls business segment designs and produces push-pull cable
and remote control systems.
The Roltra-Morse business segment designs and produces automotive products
including actuators, window controls, latches and door panels/assemblies.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
unaudited financial statements contained in the Company's Quarterly Reports on
Form 10-Q for the periods ended March 31, 1997 and 1996 (collectively, the
"Company's Reports"). More comprehensive financial information is included in
the Company's Reports and other documents filed by the Company with the
Commission. The financial information that follows is qualified in its entirety
by reference to such reports and other documents, including the financial
statements and related notes contained therein. Such reports and other documents
may be examined and copies may be obtained from the offices of the Commission in
the manner set forth below.
IMO INDUSTRIES INC.
AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- --------------------
1996 1995(1) 1997 1996(2)
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................................... $468,645 $472,367 $119,546 $121,415
Gross profit...................................... 132,628 131,898 35,459 35,558
Selling, general and administrative expenses...... 95,232 87,875 23,931 22,332
Research and development expenses................. 9,290 7,736 2,267 2,275
Unusual items..................................... 24,573 10,208 12,900 --
Interest expense.................................. 33,317 31,463 8,402 8,290
Income (loss) from continuing operations before
extraordinary item.............................. (41,773) 12,529 (12,842) 1,940
Discontinued operations net of taxes.............. (8,142) 21,625 -- --
Extraordinary item -- loss on extinguishment of
debt............................................ (8,455) (4,444) -- --
Net income (loss)................................. $(58,370) $ 29,710 $(12,842) $ 1,940
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- --------------------
1996 1995(1) 1997 1996(2)
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Earnings (loss) per share:
Continuing operations before extraordinary
item......................................... $ (2.44) $ 0.73 $ (0.75) $ 0.11
Discontinued operations......................... (.48) 1.27 -- --
Extraordinary item.............................. (.49) (.26) -- --
Net income (loss)............................... (3.41) 1.74 (.75) .11
Weighted average number of shares outstanding..... 17,100 17,049 17,125 17,085
</TABLE>
- ---------------
(1) Restated to conform to 1996 presentation.
(2) Restated to conform to 1997 presentation.
<TABLE>
<CAPTION>
AT AT
--------------------------- ---------------------
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1996 1995(1) 1997(2) 1996(2)
------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................... $ 44,125 $ 62,777 $ 33,839 $ 87,974
Total current assets.............................. 202,507 205,015 212,409 169,852
Total assets...................................... 411,614 434,922 407,957 387,805
Total current liabilities......................... 158,382 142,238 178,570 81,878
Long-term debt.................................... 251,860 231,561 246,324 249,203
Total liabilities................................. 465,544 428,374 478,449 378,623
Total shareholders' equity (deficit).............. (54,884) 5,342 (71,328) 9,182
</TABLE>
- ---------------
(1) Restated to conform to 1996 presentation.
(2) The March 31, 1996 balance sheet data treat the Roltra-Morse business
segment of the Company as a discontinued operation, while the March 31, 1997
balance sheet data treat the Roltra-Morse business segment as a continuing
operation of the Company.
In connection with Purchaser's review of the Company and in the course of
the negotiations between Purchaser and the Company described in Section 10, the
Company provided Purchaser with certain business and financial information,
including unaudited financial data for the six months ended June 30, 1997,
including sales of $246.2 million, earnings before interest and income taxes of
$7.8 million and net loss of $10.4 million.
The Company has advised Purchaser that it does not as a matter of course
make public forecasts as to future performance or earnings. However, in
connection with Purchaser's due diligence review of the Company described in
Section 10, the Company provided to Purchaser certain projections relating to
the Company's forecasted operating results for future periods, including 1997,
1998 and 1999. Purchaser has been advised that such information was prepared by
the Company solely as part of the Company's annual planning process, independent
of the Company's potential sale to Purchaser. Such projections included
forecasts of sales of $485.9 million, $521.0 million and $564.0 million, gross
profit of $146.1 million, $163.9 million and $181.1 million, income from
operations of $22.7 million, $41.3 million and $53.1 million and net income
(loss) of $(13.6 million), $5.1 million and $16.1 million for 1997, 1998 and
1999, respectively.
PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY
OF WHICH ARE BEYOND THE COMPANY'S CONTROL. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THESE PROJECTIONS. THESE
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<PAGE> 13
PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY,
WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND
FINANCIAL CONDITIONS AND OTHER MATTERS INCLUDING ASSUMED INTEREST EXPENSE AND
EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF
WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL
AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PURCHASER. ACCORDINGLY, THERE CAN
BE NO ASSURANCE THAT THE PROJECTED RESULTS WILL BE REALIZED OR THAT ACTUAL
RESULTS WILL NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN
ADDITION, THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS AND FORECASTS AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY
BECAUSE SUCH INFORMATION WAS MADE AVAILABLE TO PURCHASER BY THE COMPANY. NONE OF
PURCHASER, THE COMPANY, THEIR FINANCIAL ADVISORS OR ANY OTHER ENTITY OR PERSON
ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOREGOING
PROJECTIONS. NONE OF PURCHASER, THE COMPANY OR ANY OF THEIR FINANCIAL ADVISORS
HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION
CONTAINED IN THESE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE
REVISE THESE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN
MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR
ALL OF THE ASSUMPTIONS UNDERLYING THESE PROJECTIONS ARE SHOWN TO BE IN ERROR.
The Shares are listed on the New York Stock Exchange and are registered
pursuant to Section 12(b) of the Exchange Act. Accordingly, the Company is
subject to the informational filing requirements of the Exchange Act and, in
accordance therewith, is required to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as to particular dates concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other information
should be available for inspection at the public reference facilities maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and also should be available for inspection at the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may also be obtained by mail, upon
payment of the Commission's customary fees. Requests should be directed to the
Commission's Public Reference Branch, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov). Such
information may also be inspected and copied at the offices of the New York
Stock Exchange at 20 Broad Street, New York, New York 10005.
8. CERTAIN INFORMATION CONCERNING PURCHASER. Purchaser, a newly
incorporated Delaware corporation organized in connection with the Offer, has
not carried on any activities other than in connection with the Offer. The
principal offices of Purchaser are located at 9211 Forest Hill Avenue, Suite
109, Richmond, Virginia 23235. Purchaser, an affiliate of Constellation, is a
corporation controlled by Mitchell P. Rales and Steven M. Rales (the
"Controlling Stockholders").
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant operating assets or liabilities or engage in activities other than
those incident to its formation and capitalization and the transactions
contemplated by the Offer. Because Purchaser is newly formed, no meaningful
operating information regarding Purchaser is available. However, a balance sheet
of Purchaser is set forth below. The Controlling Stockholders have represented
and warranted to the Company that for so long as the Offer remains outstanding,
they will cause the funds with
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<PAGE> 14
which Purchaser is currently capitalized to remain in Purchaser, available to be
used to consummate the purchase of Shares in the Offer. Notwithstanding any
other provision contained in this Offer to Purchase or the Letter of
Transmittal, at any time prior to the payment for Shares accepted for payment in
the Offer, Purchaser may assign its right to purchase Shares to any entity
directly or indirectly wholly owned by the Controlling Stockholders.
Steven M. Rales and Mitchell P. Rales beneficially and directly own 92% of
the outstanding common stock of Purchaser. The Controlling Stockholders also own
100% of Constellation, a private investment firm, and of Colfax Capital
Corporation ("Colfax"), a private investment firm. Approximately 39.4% of the
outstanding common stock of Danaher Corporation (the "Asset Purchaser") is
beneficially owned by the Controlling Stockholders, directly or through certain
limited liability companies. The Controlling Stockholders are directors of
Colfax, the Asset Purchaser and Purchaser, and are members of the Board of
Managers of Constellation. The offices of the Controlling Stockholders are
located at 1250 24th Street, N.W., Suite 800, Washington, D.C. 20037.
The name, citizenship, residence or business address, principal occupation
or employment, and five-year employment history for the Controlling
Stockholders, and each of the directors and executive officers of Purchaser and
certain other information are set forth in Schedule I hereto.
Except as described below or elsewhere in this Offer to Purchase, including
Schedule I hereto, (i) none of Purchaser, the Controlling Stockholders, nor, to
the best knowledge of Purchaser, any of the persons listed in Schedule I to this
Offer to Purchase, or any associate or majority-owned subsidiary of Purchaser,
the Controlling Stockholders or any of the persons so listed, beneficially owns
or has any right to acquire, directly or indirectly, any Shares and (ii) neither
Purchaser nor the Controlling Stockholders nor, to the best knowledge of
Purchaser, any of the persons or entities referred to above, nor any director,
executive officer or subsidiary of any of the foregoing, has effected any
transaction in the Shares during the past 60 days. Mr. Philip W. Knisely,
President and Chief Executive Officer of Purchaser, beneficially owns 3,000
Shares jointly with his wife and an additional 2,000 Shares held through an
individual retirement account. In addition, Mr. John A. Young, Vice President
and Secretary of Purchaser, beneficially owns 1,500 Shares through an individual
retirement account. Neither Mr. Knisely nor Mr. Young owns more than 1% of the
Shares.
Except as provided in the Share Purchase Agreement and as otherwise
described in this Offer to Purchase, none of Purchaser, the Controlling
Stockholders nor, to the best knowledge of Purchaser, any of the persons listed
in Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss, guaranties of
profits, division of profits or loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, since January 1, 1994, neither
Purchaser nor the Controlling Stockholders nor, to the best knowledge of
Purchaser, any of the persons listed on Schedule I hereto, has had any business
relationship or transaction with the Company or any of its executive officers,
directors or affiliates that is required to be reported under the rules and
regulations of the Commission applicable to the Offer. Except as set forth in
this Offer to Purchase, since January 1, 1994, there have been no contacts,
negotiations or transactions between any of Purchaser, the Controlling
Stockholders, or any of their respective subsidiaries or, to the best knowledge
of Purchaser, any of the persons listed in Schedule I to this Offer to Purchase,
on the one hand, and the Company or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
Financial Information of Purchaser. Set forth below is selected balance
sheet data of Purchaser as of July 24, 1997. Purchaser was incorporated on July
22, 1997, and has conducted no operations since then.
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<PAGE> 15
II ACQUISITION CORP.
SELECTED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
AT
JULY 24,
1997
--------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................................... $130,000
Total assets...................................................................... 130,000
Long-term debt.................................................................... 125,000
Total liabilities................................................................. 125,000
Total shareholders' equity........................................................ 5,000
</TABLE>
9. FINANCING OF THE OFFER. The total amount of funds required by
Purchaser to consummate the Offer and to pay related fees and expenses is
estimated to be approximately $130 million. Purchaser has obtained all of such
funds from the Controlling Stockholders and their affiliates. Purchaser has
issued a Senior Note in the amount of $50,000,000 (the "JFC Note") to Janelia
Farm Corp., a Virginia corporation that is wholly owned by the Controlling
Stockholders. The JFC Note, which will mature on May 15, 2007, bears interest at
a variable rate per annum equal to the sum of (a) the rate published from time
to time in the Wall Street Journal, as its "prime" rate, determined with respect
to the date that is two business days prior to the applicable interest payment
date ("Prime") and (b) 0.25%, payable on the fifteenth day of November and May
of each year. At the option of Purchaser, interest will be payable by adding to
the principal amount of the JFC Notes through May 15, 2002, after which time
interest will be payable solely in cash.
In addition, Purchaser has issued Subordinated Notes in the aggregate
amount of $75,000,000 to the Controlling Stockholders (the "Subordinated
Notes"). The Subordinated Notes will mature on May 15, 2007, and bear interest
at a variable rate per annum equal to the sum of (a) Prime and (b) 0.375%,
payable on the fifteenth day of November and May of each year. At the option of
Purchaser, interest will be payable by adding to the principal amount of the
Subordinated Notes through May 15, 2002, after which time interest will be
payable solely in cash. The Subordinated Notes are subordinated in right of
payment to the JFC Note.
Purchaser anticipates that indebtedness incurred under the JFC and
Subordinated Notes will be repaid from a variety of sources, which may include,
but may not be limited to, funds generated internally by affiliates of
Purchaser, bank financing and the public or private sale of debt or equity
securities. No decision has been made concerning the method Purchaser will
employ to repay such indebtedness. Such decision will be made based on
Purchaser's review from time to time of the advisability of particular actions,
as well as on prevailing interest rates and financial and other economic
conditions and such other factors as Purchaser may deem appropriate.
Purchaser currently intends to refinance the Company's obligations under
the Credit Agreement, dated as of April 29, 1996 (as amended, the "Credit
Agreement"), among the Company, Varo Inc., Warren Pumps Inc., the lenders from
time to time party thereto, the issuing banks from time to time party thereto
and Citicorp USA, Inc., as Agent. Purchaser currently intends to obtain such
funds pursuant to new credit facilities (the "Credit Facilities") of up to
$147,400,000 of senior, secured financing consisting of (a) a $70,000,000
revolving credit facility (the "Revolving Facility") and (b) a $77,400,000 term
loan facility (the "Term Facility") for which Purchaser has received a
commitment from The Bank of Nova Scotia ("Scotia") and NationsBank, N.A.
("NationsBank") (collectively, the "Managing Agents") pursuant to a commitment
letter (the "Commitment Letter") dated July 24, 1997 among Scotia, NationsBank,
Constellation and Purchaser. The Revolving Facility will also be used for the
general corporate and working needs of the Company and its Subsidiaries, to
refinance up to $40,000,000 of the Notes and, in an amount not to exceed
$20,000,000, to pay fees and expenses arising in connection with the acquisition
of the Company and certain other related transactions.
The Credit Facilities will (a) be secured by (i) a lien on all the capital
stock of the Company acquired by Purchaser in the Offer and in each of the
Company's Subsidiaries, (ii) all property and assets of the Company
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<PAGE> 16
and its domestic subsidiaries and (iii), subject to certain limits, a pledge of
all notes evidencing intercompany indebtedness owing to the Company or its
domestic subsidiaries and (b) be guaranteed by Purchaser.
The loans under the Credit Facilities will bear interest at the Company's
option either at (a) Scotia's alternative base rate or (b) Scotia's
reserve-adjusted LIBO rate plus, in each case, a margin determined by reference
to the Company's leverage ratio.
The obligation of the Managing Agents to provide the Credit Facilities and
the initial extension of credit is subject to a number of conditions including,
without limitation, (a) certain conditions customary to commitments of this
nature; (b) review and satisfaction of the final structure and documents related
to the transactions referred to in the Commitment Letter (including the Offer),
and the source and uses of proceeds used to consummate the transactions referred
to in the Commitment Letter; (c) Purchaser having acquired in the Offer the
higher of (i) 80% of the Shares outstanding on July 24, 1997 and (ii) a
sufficient number of Shares to control the Company's Board of Directors; (d)
Purchaser being obligated to purchase preferred stock of the Company in an
amount of $156,550,000 to redeem all Notes that can potentially be put to the
Company as a result of the change in control caused by the Offer and that
Purchaser is committed to purchase preferred stock of the Company in an amount
of not less than $40,000,000 (the "Initial Capital Contribution") within 60 days
following the date definitive documents relating to the Credit Facilities are
delivered by the Company and the lenders (the "Bank Closing Date") if the
Initial Sale (as defined below) has not been consummated; and (e) the Company
having a committed unsecured line of credit (the "Unsecured Line") in an amount
of $10,000,000 which shall be converted into preferred equity of the Company if
the Initial Sale does not occur within 60 days of the Bank Closing Date.
The Commitment Letter provides that in addition to the fee to be paid to
each of Scotia and NationsBank in accordance with the terms of a fee letter,
there is also to be a fee payable to the lenders with a commitment to make
Revolving Loans in the amount equal to the applicable LIBO rate margin which
will accrue on the daily average unused portion of all outstanding letters of
credit payable quarterly in arrears. In addition, the Commitment Letter provides
that a non-refundable fee will accrue on the daily average unused portion of the
Revolving Facility commitments payable quarterly in arrears and on the final
maturity of the Revolving Facility in an amount determined by the Company's
leverage ratio.
The definitive credit agreement for the Credit Facilities is expected to
provide for various representations, warranties and covenants. In addition to
customary affirmative covenants, the definitive credit agreement will provide
for (a) the sale of assets within 60 days following the Bank Closing Date
resulting in net cash proceeds to the Company of no less than $85,000,000 (the
"Initial Sale") and (b) a covenant from Purchaser to (i) purchase preferred
stock of the Company in an amount sufficient to pay for all Notes which may be
put to the Company resulting from the change in control caused by the Offer and
(ii) make the Initial Capital Contribution if the Initial Sale does not occur
within 60 days of the Bank Closing Date.
The definitive credit agreement will also provide for customary negative
and financial covenants including (a) additional indebtedness, (b) dividends and
similar distributions, (c) liens and encumbrances, (d) asset dispositions and
similar transfers, (e) investments, acquisitions and capital expenditures, (f)
mergers, consolidations and similar combinations, (g) transactions with
affiliates, and (h) financial ratios.
Although Purchaser expects that the Credit Facilities will be available to
provide funds in accordance with their respective terms, there can be no
assurance that the Credit Facilities will be consummated.
Purchaser intends to provide an unsecured line of credit in the amount of
$10,000,000 to the Company. Loans made pursuant thereto would mature on the
earlier of 60 days following the Bank Closing Date or the consummation of the
Initial Sale. If the consummation of the Initial Sale does not occur within 60
days following the Bank Closing Date all outstanding debt thereunder would be
converted into preferred stock of the Company having terms identical to the
terms of the preferred stock to be issued as described in the next paragraph and
having a liquidation preference equal to the principal amount of the loans to be
exchanged. This unsecured line of credit is intended to satisfy the condition in
the Commitment Letter that the Unsecured Line be in place.
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<PAGE> 17
Purchaser does not intend to prepay or refinance the Notes at this time.
However, under Section 4.10 of the indenture governing the Notes (the "Notes
Indenture"), if the Offer is consummated, each holder of Notes will have the
right to require the Company to purchase such Notes at a price equal to 101% of
the aggregate principal amount of the Notes to be so purchased. In order to
facilitate any required purchase of Notes and the potential need to make the
Initial Capital Contribution, Purchaser has entered into a Stock Subscription
Agreement, dated as of July 23, 1997, with Colfax (the "Colfax Agreement"),
pursuant to which Colfax has agreed to purchase up to 2,000 shares of preferred
stock, par value $0.01 per share, of Purchaser ("Purchaser Preferred Stock"), at
$100,000 per share, or up to an aggregate of $200,000,000. The Purchaser
Preferred Stock would pay cumulative dividends at the rate of 7% per annum,
payable only when declared, and would be subject to mandatory redemption on
December 31, 2001. Pursuant to the terms of the Colfax Agreement, Colfax has
agreed to purchase the Purchaser Preferred Stock when requested to do so by
Purchaser. Purchaser and the Company will enter into a comparable agreement
providing for the purchase by Purchaser of up to $200,000,000 of preferred stock
of the Company paying cumulative dividends of 7% per annum, payable only when
declared. Such preferred stock would be issued and sold when called for by the
Company after the consummation of the Offer made hereunder in an aggregate
amount not in excess of the amount needed to fund the purchase price payable by
the Company for Notes required to be purchased pursuant to Section 4.10 of the
Notes Indenture and to the fund the Initial Capital Contribution. The funds made
available pursuant to the Colfax Agreement would enable the Company to purchase
Notes as discussed above.
Copies of the Commitment Letter and the Colfax Agreement have been filed as
Exhibits to the Schedule 14D-1 and the foregoing summary is qualified in its
entirety by reference to such Exhibits.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE SHARE PURCHASE
AGREEMENT.
Background of the Offer; Contacts with the Company. In July, 1995, an
affiliate of Purchaser contacted the Company and expressed interest in the power
transmission business of the Company. The Company responded that it was not
interested in selling the power transmission business at that time and there
were no further contacts with respect to such business.
In February, 1997, representatives of an affiliate of Purchaser met with
representatives of Credit Suisse First Boston to discuss, among other things,
Purchaser's interest in acquiring the Company. Credit Suisse First Boston
indicated that the Company was evaluating its options at that time.
On March 21, 1997, the Company announced that it had engaged Credit Suisse
First Boston to assist it in evaluating strategic alternatives for enhancing
stockholder value and reducing leverage, including the possible merger or sale
of the Company. On May 13, 1997, Constellation was invited to participate in a
private auction of the Company. On May 19, 1997, Constellation entered into a
confidentiality agreement with the Company agreeing to keep certain information
confidential and not to take certain action to obtain control of the Company.
See "Confidentiality Agreement" in this Section 10.
On June 2, 1997, after reviewing the limited information contained in an
information memorandum prepared by Credit Suisse First Boston provided to
Constellation, Mr. John A. Young, Vice President of Constellation, informed the
Company by letter that Constellation, in partnership with the Asset Purchaser,
was interested in acquiring the Company at $6.00 to $7.50 per Share, payable in
cash and based on the information contained in the information memorandum and on
Constellation's internal review of the Company's publicly filed information. Mr.
Young stated in his letter that any definitive offer would not be subject to
financing.
On June 6, 1997, John M. Glazer of Credit Suisse First Boston, sent a
letter to Mr. Young inviting Constellation and the Asset Purchaser to attend due
diligence presentations at the Company on June 18 and 19, 1997.
On June 17, 1997, representatives of Credit Suisse First Boston informed
Mr. Young that Constellation would have to delay its due diligence review,
scheduled for June 18 and 19, until the week of July 7, 1997.
15
<PAGE> 18
On June 26, 1997, the Company announced that it had entered into the UDI
Agreement, which provided, among other things, for the UDI Offer to purchase all
outstanding Shares at $6.00 per Share, and for the UDI Note Offer.
On June 27, 1997, Mr. Young sent a letter (the "June 27 Letter") to Messrs.
Alan H. Howard and Jonathan K. Rouner of Credit Suisse First Boston indicating
Constellation's disappointment that the Company had entered into the UDI
Agreement without affording Constellation and the Asset Purchaser an opportunity
to conduct due diligence. The June 27 Letter requested that Constellation be
given access to management, the Company's facilities and the confidential
information provided to UDI and indicated that Constellation was prepared to
move quickly to conclude an agreement that would provide greater value to the
Company's stockholders than the UDI Offer even taking into account the breakup
fee payable to UDI under the UDI Agreement.
On June 30, 1997, Constellation was informed by representatives of Credit
Suisse First Boston that the Company's Board of Directors agreed to provide
Constellation and its representatives access to the same information and people
as was provided to UDI. Constellation conducted its due diligence review from
July 2, 1997 to July 23, 1997.
On July 22, 1997, counsel for Purchaser sent to counsel for the Company a
draft of the agreement that Purchaser would propose if the Board of Directors of
the Company determined to release Purchaser from the standstill provisions
contained in the Confidentiality Agreement and if Purchaser determined to make a
proposal to acquire the Shares. The draft agreement did not include a price for
the Shares. The differences between the draft agreement and the UDI Agreement
principally reflected the absence of a merger involving the Company after
successful completion of the Offer and an offer to purchase the Notes or a
solicitation of consents to amend the indenture governing the Notes. Purchaser's
purpose in delivering such a draft agreement was to expedite the Board's review
of any offer made by Purchaser if the Board determined to release Purchaser from
the standstill provisions contained in the Confidentiality Agreement.
On July 24, 1997, Philip W. Knisely, President and Chief Executive Officer
of Purchaser, sent a letter (the "July 24 Letter") to the Company's Board of
Directors indicating that if the Board were to release Constellation from the
standstill provisions of the Confidentiality Agreement, it would be willing to
offer $7.05 per Share in cash for the Company. The full text of the July 24
Letter follows:
July 24, 1997
Imo Industries Inc.
1009 Lenox Drive
Lawrenceville, NJ 08648-0550
Attention: Mr. Donald K. Farrar
Chairman and Chief Executive Officer
Dear Mr. Farrar:
Our review of Imo Industries ("Imo") has confirmed our interest in a
transaction with Imo, on a basis that represents a superior opportunity for
Imo's shareholders, employees, suppliers and customers.
If Imo's Board of Directors releases us from the standstill provisions of
our letter agreement dated May 19, 1997, we are prepared to propose an
all-cash acquisition of Imo, not conditioned on financing, at a price of
$7.05 per share.
Our proposal would take the form of a tender offer by a new company, II
Acquisition Corp. ("Purchaser"), that is wholly owned by Steven and
Mitchell Rales. Our offer would not be contingent on any kind of
refinancing, repurchase or consent solicitation relating to the Senior
Subordinated Notes or other Imo debt. Our offer would be for all Imo
shares, so that all shareholders would have the opportunity to participate
in it. Subject only to these changes, any agreement we would enter into
with you would closely track the United Dominion Industries Limited ("UDI")
Merger Agreement, including the provisions as to a termination fee and
payment of expenses.
16
<PAGE> 19
We are prepared to enter into the Share Purchase Agreement sent to your
counsel on July 21 by our counsel, with the changes set forth in the July
23 memorandum to your counsel, responding to your comments. We have sent
you earlier today a complete copy of the Share Purchase Agreement that
incorporates those changes.
As stated, our offer would not be subject to financing. Purchaser has on
hand the funds needed to complete the tender offer. The funds are in
Purchaser's account (No. RAAFF) at Credit Suisse First Boston Corporation.
We enclose a letter from the Rales brothers to Imo, undertaking that if the
Share Purchase Agreement is signed, the funds will remain available to
complete the tender offer in accordance with its terms.
We understand that Imo's credit agreement and note indenture contain
acceleration or put provisions in the event of a change of control of Imo.
In this connection, we have sent to you earlier today: (1) a bank
commitment letter as to the refinancing of Imo's credit agreement; (2) a
subscription agreement between Purchaser and an affiliate, Colfax Capital
Corporation, by which Colfax Capital agrees to purchase preferred stock of
Purchaser in an amount sufficient to enable Purchaser to fund Imo's payment
of the notes; and (3) a balance sheet of Colfax Capital.
We believe that the transaction we have outlined represents an opportunity
for your shareholders, and is in fact on terms substantially more favorable
to your shareholders than the UDI offer. The price we would be prepared to
offer represents a premium of 116.9% over the market price of Imo's stock
prior to the announcement of the UDI offer and is 17.5% higher than the
price offered by UDI.
We are prepared to move quickly to execute and close an agreement. We hope
that you and your fellow directors will view our willingness to make the
offer described above as we do -- an excellent opportunity for the
shareholders of Imo to realize full value for their shares.
We trust that Imo's Board of Directors will give prompt and serious
consideration to the proposal outlined above, and will not take any actions
that would adversely affect your shareholders' ability to receive the
benefits of this proposed transaction. Our desire is to work together with
you to reach agreement on a transaction which can be presented to your
shareholders as the joint effort of the directors and managements of both
companies.
In light of the timing of the UDI offer, it is very important that we hear
from you as promptly as practicable. Moreover, we have previously furnished
to you and your counsel the form of the transaction agreement, as well as
the commitment letter and subscription agreement referred to above, so that
essentially the only issue before the Board is the per share price.
Accordingly, please be advised that we are not prepared to make the
proposal referred to in this letter unless the proposal can be made and
accepted as contemplated by 9:00 P.M., EDT tonight.
We appreciate the courtesies and professionalism from you and your
colleagues during our recent due diligence review process. That process has
enabled us to confirm our favorable view of Imo.
We look forward to hearing from you, and to working together. I will be
available from 4:00 P.M. to 9:00 P.M. at 804-560-4072 to answer any
questions you may have regarding our offer.
Sincerely,
/s/ PHILIP W. KNISELY
Philip W. Knisely
President
Prior to 9:00 p.m. on July 24, 1997, Mr. Farrar informed Mr. Knisely that
the Company's Board of Directors would need until Sunday afternoon, July 27,
1997, to consider and react to the July 24 Letter. Representatives of Purchaser
informed representatives of the Company that the July 24 Letter would be
extended until midnight on July 24, 1997, provided the Company agreed not to
solicit any competing offers during such extension period. At midnight, certain
issues remained unresolved, and the parties negotiated for several more hours
that night. Negotiations were terminated at 3:00 in the morning on July 25,
1997. A
17
<PAGE> 20
number of additional discussions among the financial and legal advisors to the
Company and Purchaser were held in the late morning and early afternoon on July
25 without resolution. At approximately 5:00 p.m. on July 25, 1997,
Constellation was informed that the Company's Board of Directors had released
Constellation from the standstill provisions in the Confidentiality Agreement to
the extent necessary to permit Constellation and Purchaser to make the proposal
discussed in the July 24 Letter. After such release on July 25, 1997, the Board
of Directors of the Company approved the Share Purchase Agreement and the Offer.
The Board of Directors of the Company also withdrew its recommendation of the
UDI Offer and UDI Merger.
On the same day, the Company notified UDI that it was terminating the UDI
Agreement. Simultaneously therewith, Purchaser, on behalf of the Company,
deposited $10 million in an account with Credit Suisse First Boston and provided
Credit Suisse First Boston with irrevocable payment instructions to disburse $8
million of such funds to UDI and to disburse the remaining funds to UDI for
reimbursement of its expenses, all in accordance with the terms of the UDI
Agreement. The UDI Agreement was terminated when these actions were completed.
The Share Purchase Agreement was executed and delivered in the evening of July
25, 1997, and the Company and Purchaser announced the execution of such
agreement later that evening.
On July 28, 1997, the Company filed an amendment to its
Solicitation/Recommendation Statement on Schedule 14D-9, filed with the
Commission on July 2, 1997 in response to the UDI Offer, reflecting the
withdrawal of the Board's recommendation of the UDI Offer. On July 29, 1997, UDI
terminated the UDI Offer and the UDI Note Offer.
The Share Purchase Agreement. The following is a summary of the Share
Purchase Agreement, a copy of which has been filed as an Exhibit to the Schedule
14D-1 filed by Purchaser with the Commission in connection with the Offer. Such
summary is qualified in its entirety by reference to the Share Purchase
Agreement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed thereto in the Share Purchase Agreement.
The Offer. The Share Purchase Agreement provides for the commencement of
the Offer as promptly as reasonably practicable, but in no event later than five
business days after the first public announcement of the execution of the Share
Purchase Agreement. The obligation of Purchaser to accept for payment Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in Section 14 hereof.
Purchaser has expressly reserved the right to waive any such condition, to
increase the price per Share payable in the Offer, and to make any other changes
in the terms and conditions of the Offer; provided, however, that Purchaser has
agreed with the Company that, without the consent of the Company, no change in
the Offer may be made that decreases the price per Share payable in the Offer,
that changes the form of consideration payable in the Offer, that reduces the
maximum number of Shares sought pursuant to the Offer, that extends the
expiration date of the Offer (except that Purchaser may extend the expiration
date of the Offer (a) as required to comply with any rule, regulation or
interpretation of the Commission or (b) for one or more times each for an
aggregate period of up to 15 days (and not to exceed 60 days from the date of
commencement) for any reason other than those specified in the immediately
preceding clause (a)), or that imposes conditions to the Offer in addition to
those set forth in Section 14 hereof.
Termination of the UDI Offer. The Share Purchase Agreement provides that
the Company has given or is simultaneously giving notice to UDI of the
termination of the UDI Agreement and has effected payment to UDI of the $8
million fee contemplated by Section 8.03(a) of the UDI Agreement and the deposit
in escrow of $2 million for payment to UDI in reimbursement of "Expenses" (as
defined in the UDI Agreement) by Purchaser having deposited such sums in an
account with a recognized commercial or investment bank and providing
irrevocable instructions for transmission of such funds to UDI upon its request
and, in the case of the funds for reimbursement of Expenses, submission of
evidence of the incurrence hereof. The Share Purchase Agreement provides that
upon the happening of the foregoing, the termination of the UDI Agreement shall
have become effective.
The Company represents that the Company's Board of Directors has
unanimously withdrawn its recommendation of the UDI Agreement and the
transactions contemplated thereby and recommends that the Company's stockholders
not tender their Shares pursuant to the tender offer commenced by UDI pursuant
to
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the UDI Agreement. Within two business days of the date of the Share Purchase
Agreement, the Company has agreed to amend its outstanding Schedule 14D-9 dated
July 2, 1997, filed with the Commission in response to the UDI Offer, to reflect
the recommendations of the Company's Board of Directors described above, and to
file such amendment with the Commission and distribute it to the Company's
stockholders.
Certain Actions of the Company. In the Share Purchase Agreement, the
Company has represented that the Board, at a meeting duly called and held on
July 25, 1997, has, among other things, unanimously taken all action to avoid
the occurrence of a "Distribution Date" or a "Triggering Event" (each as defined
in the Rights Agreement) with respect to the purchase of Shares by Purchaser
pursuant to the Offer, and approved, for purposes of Article X of the Company's
Certificate of Incorporation, a Business Combination (as defined therein)
between Purchaser (or any affiliate of Purchaser) and the Company, whereby each
Share (other than dissenting Shares and Shares owned by Purchaser or its
affiliates) outstanding at the time of such Business Combination would be
cancelled and the holder thereof would be entitled to receive an amount in cash
equal to, (I) if such Business Combination occurs within one year of the date of
the Share Purchase Agreement, not less than $7.05, or (II) if such Business
Combination occurs after one year from the date of the Share Purchase Agreement,
an amount that is not less than $7.05 and that, in the opinion of a nationally
recognized investment bank addressed to the Board, is fair from a financial
point of view to such holders.
Rights Agreement. The Company represented in the Share Purchase Agreement
that as a result of the Board's withdrawal of its recommendation of the UDI
Agreement and the transactions contemplated thereby, any acquisition of Shares
that results in UDI becoming an "Acquiring Person" (as defined in the Rights
Agreement) shall constitute a "Triggering Event" under the Rights and the Rights
Agreement.
Stock Options. The Share Purchase Agreement provides that all stock
options granted under the Stock Option Plans shall, at the Consummation Date, to
the extent permitted by the applicable Stock Option Plan and stock option
agreement (if any), be canceled, and the holder thereof shall be entitled to
receive from the Company (or from Purchaser, if payment by the Company would not
be permitted under the Credit Agreement or the Indenture dated as of April 15,
1996, between the Company and IBJ Schroder Bank & Trust Company, as Trustee), on
the Consummation Date after the purchase of Shares pursuant to the Offer, or as
soon as practicable thereafter, in consideration for the cancellation of such
option, an amount in cash (subject to any applicable withholding tax) equal to
the product of (a) the number of Shares previously subject to such option and
(b) the excess, if any, of the Per Share Amount over the exercise price per
Share previously subject to such option (the "Option Spread Amount"). If the
cancellation of any option described above is not permitted by the Stock Option
Plan or stock option agreement applicable to such options (the "Inapplicable
Options"), then Purchaser agreed to pay to holders of such Inapplicable Options
an amount in cash equal to the applicable Option Spread Amount upon surrender of
such Inapplicable Options by such holders.
Conduct of Business. Pursuant to the Share Purchase Agreement, the Company
has covenanted and agreed that, between the date of the Share Purchase Agreement
and the election or appointment of Purchaser's designees to serve on the
Company's Board of Directors (the "Purchaser's Election Date"), unless Purchaser
shall otherwise agree in writing, each of the Company and its Subsidiaries shall
conduct its business only in, and the Company and its Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice; and the Company shall use all reasonable efforts to preserve
substantially intact the business organization of the Company and its
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and its Subsidiaries and to preserve the current
relationships of the Company and its Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations. The Share Purchase Agreement also provides that, except with the
prior written consent of Purchaser or as contemplated by the Share Purchase
Agreement, the Company agrees that neither the Company nor any Subsidiary shall,
between the date of the Share Purchase Agreement and the Purchaser's Election
Date, directly or indirectly do, or propose to do, any of the following: (a)
amend or otherwise change its Certificate of Incorporation or Bylaws or
equivalent organizational documents, each as amended to date (the "Constituent
Documents"); (b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of capital stock of any class of the Company or any Subsidiary, or any options,
warrants,
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<PAGE> 22
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any Subsidiary (except for the issuance
of a maximum of 2,000,000 Shares issuable pursuant to Stock Option Plans
outstanding on the date thereof) or (ii) any assets of the Company or any
Subsidiary, except for sales in the ordinary course of business and in a manner
consistent with past practice; (c) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except for such declarations, set asides,
dividends and other distributions made by any Subsidiary to the Company; (d)
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock; (e)(i) acquire (including,
without limitation, by merger, consolidation, or acquisition of stock or assets
or any other business combination) any corporation, partnership, other business
organization or any division thereof or any material amount of assets other than
in the ordinary course of business consistent with past practice; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, pledge in respect of or otherwise as an accommodation
become responsible for the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement, other than any contract or
agreement entered into in the ordinary course of business consistent with past
practice and which requires payments by the Company or its Subsidiaries in an
aggregate amount of less than $250,000; (iv) terminate, cancel or request any
material change in, or agree to any material change in, any Material Contract,
except in the ordinary course of business consistent with past practice; or (v)
authorize any single capital expenditure (excluding software development
activity) which is in excess of $500,000 or capital expenditures which are, in
the aggregate, in excess of $2,500,000 for the Company and its Subsidiaries
taken as a whole; (f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any Subsidiary who
are not officers of the Company, or grant any severance or termination pay to,
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company or any Subsidiary (other than in connection
with hiring and terminating employees in the ordinary course of the Company's
business), or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination or severance
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee or circulate to any employee any details of any
proposal to adopt or amend any such plan; (g) take any action, other than
reasonable and usual actions in the ordinary course of business consistent with
past practice, with respect to accounting policies or procedures (including,
without limitation, procedures with respect to the payment of accounts payable
and collection of accounts receivable); (h) make any material tax election or
settle or compromise any material federal, state, local or foreign income tax
liability; (i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice, of liabilities reflected or reserved against on
the Company's consolidated balance sheet included in its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 or subsequently incurred in the
ordinary course of business and consistent with past practice; or (j) settle or
comprise any pending or threatened suit, action or claim that is material or
which relates to any of the transactions contemplated by the Share Purchase
Agreement (the "Transactions"); or (k) announce an intention, enter into any
formal or informal agreement, or otherwise make a commitment, to do any of the
foregoing.
Designation of Directors. The Share Purchase Agreement provides that,
promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board as
shall give Purchaser representation on the Board equal to the product of the
total number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Purchaser or any affiliate of Purchaser
at such time bears to the total number of Shares then outstanding. Pursuant to
the Share Purchase Agreement, the Company agrees, at such time of purchase, to
promptly take all actions necessary to cause Purchaser's designees to be elected
as directors of the Company, including increasing the size of the Board or
securing the resignations of incumbent directors or both. The Share Purchase
Agreement also provides that, at such times, the Company
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shall use all reasonable efforts to cause persons designated by Purchaser to
constitute the same percentage as persons designated by Purchaser shall
constitute of the Board with respect to (a) each committee of the Board (some of
whom may be required to be independent as required by applicable law or
requirements of the New York Stock Exchange, Inc. (the "New York Stock
Exchange")), (b) each board of directors of each Subsidiary and (c) each
committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, the Share Purchase Agreement
provides that until the time Purchaser acquires a majority of the then
outstanding Shares on a fully diluted basis, the Company shall use all
reasonable efforts to ensure that all the members of the Board and each
committee of the Board and such boards and committees of the Subsidiaries as of
the date thereof who are not employees of the Company shall remain members of
the Board and of such boards and committees.
Amendments. The Share Purchase Agreement provides that following the
election or appointment of Purchaser's designees in accordance with the
immediately preceding paragraph, any amendment of the Share Purchase Agreement
or the Constituent Documents of the Company, any termination of the Share
Purchase Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Purchaser or any
waiver of any of the Company's rights thereunder will require the concurrence of
a majority of those directors of the Company then in office other than directors
designated by Purchaser or directors who are employees of the Company or, if no
such directors are then in office, no such amendment, termination, extension or
waiver shall be effected which is materially adverse to the holders of Shares
(other than Purchaser and its affiliates).
Access to Information; Confidentiality. Pursuant to the Share Purchase
Agreement, from the date of the Share Purchase Agreement to the consummation of
the Offer, the Company agreed to, and to cause its Subsidiaries to, afford the
officers, employees and agents of Purchaser and persons providing or committing
to provide Purchaser or its affiliates with financing for the Transactions
complete access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and each Subsidiary and to furnish Purchaser and persons providing or
committing to provide Purchaser or its affiliates with financing for the
Transactions with all financial, operating and other data and information as
Purchaser, through its officers, employees or agents, may reasonably request.
Purchaser agreed in the Share Purchase Agreement to keep all such information
obtained in accordance with this paragraph confidential in accordance with the
confidentiality agreement, dated May 19, 1997 (the "Confidentiality Agreement"),
between Constellation Capital Partners LLC and the Company.
No Solicitation of Transactions. The Company has agreed that neither the
Company nor any Subsidiary shall, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, the
Company or any Material Subsidiary or any business combination with the Company
or any Material Subsidiary or participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing and
the Company has agreed to immediately cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. Notwithstanding the foregoing, the Share
Purchase Agreement permits the Board to furnish information to, or enter into
discussions or negotiations with, any person in connection with an unsolicited
(from the date of the Share Purchase Agreement) proposal in writing by such
person to acquire the Company pursuant to a merger, consolidation, share
exchange, business combination or other similar transaction or to acquire all or
substantially all of the assets of the Company or any of its Subsidiaries, if,
and only to the extent that, (a) the Board, after consultation with independent
legal counsel (which may include its regularly engaged independent legal
counsel), determines in good faith that such action is required for the Board to
comply with its fiduciary duties to stockholders imposed by Delaware Law and (b)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person, the Company uses its reasonable efforts to
obtain from such person an executed confidentiality agreement on terms no less
favorable to the Company than those contained in the Confidentiality Agreement.
Moreover, the Company agreed (x) to notify Purchaser promptly if any such
proposal or offer, or any inquiry or contact with any person with respect
thereto, is made and shall
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inform Purchaser of the terms and conditions of any such proposal or offer of
the details of any such inquiry or contact and (y) not to release any third
party from, or waive any provision of, any confidentiality or, subject to the
fiduciary duties of the Board, standstill agreement to which the Company is or
may become a party.
Indemnification and Insurance. Pursuant to the Share Purchase Agreement,
the Certificate of Incorporation and Bylaws of the Company shall, for a period
of six years from the Consummation Date, contain provisions no less favorable
with respect to indemnification than are currently set forth in Article XIII of
the Bylaws of the Company, which provisions shall not be amended, repealed or
otherwise modified for such period in any manner that would affect adversely the
rights thereunder of individuals who at any time from and after the date of the
Share Purchase Agreement to and including the Consummation Date were directors,
officers, employees, fiduciaries or agents (collectively "Representatives") of
the Company in respect of acts or omissions occurring at or prior to the
Consummation Date (including, without limitation, the matters contemplated by
the Share Purchase Agreement), unless such modification shall be required by
law. Moreover, from and after the Purchaser's Election Date, the Share Purchase
Agreement prohibits the amendment, repeal or other modification of the
indemnification and advancement of expenses provisions of Article XIII of the
Bylaws of the Company or the Constituent Documents of any of its Subsidiaries in
any manner that would adversely affect the rights thereunder of individuals who
at any time from and after the date of this Agreement and to and including the
Consummation Date were Representatives of the Company or any of its Subsidiaries
in respect of acts or omissions occurring at or prior to the Consummation Date
(including, without limitation, the matters contemplated by the Share Purchase
Agreement), unless such modification is required by law.
The Share Purchase Agreement also provides that the Company shall, to the
fullest extent permitted under applicable law, indemnify and hold harmless, each
present and former Representative of the Company and each Subsidiary
(collectively, the "Indemnified Parties") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Consummation Date), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as a
Representative, whether occurring before or after the Consummation Date, for a
period of six years after the date of the Share Purchase Agreement (and shall
pay any expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
Delaware Law, and, with respect to Indemnified Parties who are or were directors
or officers of the Company, upon receipt from the Indemnified Party to whom
expenses are advanced of any undertaking to repay such advances required under
Delaware Law).
Pursuant to the Share Purchase Agreement, the Company for a period of six
years after the Consummation Date, agreed to maintain in effect, insurance
coverage, if available, equivalent to that provided by the directors' and
officers' liability insurance policies currently maintained by the Company
(provided that the Company may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring on or prior to the Consummation
Date; provided, however, that in no event shall the Company be required to
expend more than an amount per year equal to 250% of current annual premiums
paid by the Company for such insurance (which annual premiums the Company has
represented in the Share Purchase Agreement to be approximately $300,000).
The Share Purchase Agreement provides that in the event the Company,
Purchaser or any of their respective successors or assigns (a) consolidates with
or merges into any other person (including a merger of the Company with or into
Purchaser) and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (b) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or
Purchaser, as the case may be, shall assume the obligations described above.
Employee Benefits. Pursuant to the Share Purchase Agreement, for a period
of one year from the Consummation Date, Purchaser has agreed to, or to cause the
Company, to, maintain the employee benefit plans (other than the Stock Option
Plans) which the Company maintains for the benefit of, or which are open to, a
majority of the employees of the Company on the terms in effect on the date of
the Share Purchase
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Agreement, or such other plans, arrangements or programs as will provide
employees with benefits that in the aggregate are substantially equivalent to,
and no less favorable than, those provided under the employee benefit plans
(other than the Stock Option Plans) as in effect on the date of the Share
Purchase Agreement. In addition, in the event of a merger or consolidation
between Purchaser or any affiliate of Purchaser and the Company, Purchaser
shall, or shall cause the surviving corporation of such merger or consolidation
to, assume and agree to perform specified "Change of Control Agreements" in the
same manner and to the same extent that the Company is required to perform such
agreements. Such Change of Control Agreements provide for payments to certain
officers and other employees of the Company upon termination of employment,
diminution of responsibility or salary or other circumstances following a change
of control of the Company. If Purchaser consummates the Offer, a change in
control will occur under the Change of Control Agreements.
Provision of Funds. Pursuant to the Share Purchase Agreement, the
Purchaser represented that it has received bank commitment letters and has
entered into a preferred stock subscription agreement with an affiliate relating
to the provision of sufficient funds (a) to satisfy the Company's obligations
under Section 4.10 of the Indenture with respect to the Notes; and (b) to
refinance the Credit Agreement. The Purchaser also represented that, in each
case, such funds will be provided to the Company substantially on the terms set
forth in the commitment letters and subscription agreement that have been
provided to the Company.
Representations and Warranties. The Share Purchase Agreement contains
various representations and warranties of the parties thereto, including
representations by the Company as to the Company's filings with the Commission,
consolidated financial statements of the Company and its Subsidiaries, the
absence of certain changes or events concerning the Company's business,
compliance with law and certain contracts, litigation, insurance, licenses and
permits, employee benefit plans, labor matters, ownership of assets, trademarks,
patents and copyrights, environmental matters, brokers, taxes, absence of
certain business practices and letters of credit, surety bonds and guarantees.
Purchaser represented and warranted to the Company in the Share Purchase
Agreement, among other things, that Purchaser has sufficient funds to permit
Purchaser to acquire all the outstanding Shares in the Offer, written evidence
of which has been provided to the Company and that such funds will remain in
Purchaser, available to be used to consummate the Offer, for as long as the
Offer remains outstanding and has not been terminated in accordance with the
terms of the Share Purchase Agreement or of the Offer.
Termination. The Share Purchase Agreement may be terminated and the Offer
may be abandoned at any time prior to the Consummation Date, notwithstanding any
requisite approval and adoption of the Share Purchase Agreement and the
transactions contemplated thereby by the stockholders of the Owners and the
Company: (a) by mutual written consent duly authorized by the Boards of
Directors of Purchaser and the Owners, the Company prior to Purchaser's Election
Date; (b) by Purchaser or the Company if (i) the Consummation Date shall not
have occurred on or before December 31, 1997 (so long as the party seeking such
termination has not failed to fulfill any obligation under the Share Purchase
Agreement, which failure has been the cause of, or resulted in, the failure of
the Consummation Date to occur on or before such date) or (ii) any court of
competent jurisdiction in the United States or other governmental authority
shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Offer and such order,
decree, ruling or other action shall have become final and nonappealable; (c) by
Purchaser if (i) due to an occurrence or circumstance that would result in a
failure to satisfy any condition to the Offer, Purchaser shall have (A) failed
to commence the Offer within five business days following the date of public
announcement of the execution of the Share Purchase Agreement, (B) terminated
the Offer without having accepted any Shares for payment thereunder or (C)
failed to pay for Shares pursuant to the Offer within 90 days following the
commencement thereof; unless such action or inaction under (A), (B) or (C) shall
have been caused by or resulted from the failure of Purchaser to perform in any
material respect any material covenant or agreement contained in the Share
Purchase Agreement or the material breach by Purchaser of any material
representation or warranty applicable to it contained in the Share Purchase
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the
Board or any committee thereof shall have withdrawn or modified in a manner
adverse to Purchaser its approval or recommendation of the Offer or the Share
Purchase Agreement, or shall have recommended another merger, consolidation,
business combination with, or acquisition of, the Company or its assets or
another tender offer or exchange offer for Shares, or shall
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<PAGE> 26
have resolved to do any of the foregoing; or (d) by the Company, upon approval
of the Board if (i) Purchaser shall have (A) failed to commence the Offer within
five business days following the date of public announcement of the execution of
the Share Purchase Agreement, (B) terminated the Offer without having accepted
any Shares for payment thereunder or (C) failed to pay for Shares pursuant to
the Offer within 90 days following the commencement thereof, unless such action
or inaction under (A), (B) or (C) shall have been caused by or resulted from the
failure of the Company to perform in any material respect any material covenant
or agreement of it contained in the Share Purchase Agreement or the material
breach by the Company of any material representation or warranty of it contained
in the Share Purchase Agreement or (ii) prior to the purchase of Shares pursuant
to the Offer, the Board shall have withdrawn or modified in a manner adverse to
Purchaser its approval or recommendation of the Offer or the Share Purchase
Agreement in order to approve the execution by the Company of a definitive
agreement providing for the acquisition of the Company or any of its assets by a
sale, merger or other business combination or in order to approve a tender offer
or exchange offer for Shares by a third party, in either case, as the Board
determines in good faith that such action is required for the Board to comply
with its fiduciary duties to stockholders, after consultation with its
independent legal counsel and financial advisers, and is on terms more favorable
to the Company's stockholders than the Offer (this provision of the Share
Purchase Agreement, together with the provision described in clause (c)(ii) of
this sentence, are collectively referred to as the "Fiduciary Out Clause");
provided, however, that (x) the Company shall have given notice to Purchaser
advising Purchaser that the Company has received a proposal for such a
transaction from a third party, specifying the material terms and conditions
(including the identity of the third party) and that the Company intends to
terminate the Share Purchase Agreement in accordance with this paragraph (d) and
either (q) Purchaser shall not have revised the terms of its offer to acquire
the Company within two business days from the date on which such notice is
deemed to have been given to Purchaser or (r) if the Expiration Date would
otherwise occur within the period in which the Company is prohibited by this
proviso from terminating the Share Purchase Agreement, the Purchaser shall not
have extended the Expiration Date until 12 hours after the end of such two
business day period, and given the Company timely notice of such extension or
(s) if within such two business day period Purchaser shall have revised such
terms, the Board of the Company, after receiving advice from the Company's
financial adviser, shall have determined in good faith that the third party's
proposal is superior to Purchaser's revised terms and (y) such termination under
this clause (ii) shall not be effective until the Company has made payment to
Purchaser of the Fee (as hereinafter defined) required to be paid pursuant to
the Share Purchase Agreement and has deposited with a mutually acceptable escrow
agent $12.0 million for reimbursement of Expenses (as hereinafter defined).
In the event of the termination of the Share Purchase Agreement, the Share
Purchase Agreement provides that it shall forthwith become void, and there shall
be no liability on the part of any party hereto, except under the provisions of
the Share Purchase Agreement related to fees and expenses described below and
confidentiality and except for liability of any party for breach of the Share
Purchase Agreement prior to its termination.
Fees and Expenses. The Share Purchase Agreement provides that in the event
that (a) any person (including, without limitation, the Company or any affiliate
thereof), other than Purchaser or any affiliate of Purchaser, shall have become
the beneficial owner of more than 20% of the then outstanding Shares, the Share
Purchase Agreement shall have been terminated (other than pursuant to the
Fiduciary Out Clause) and within 12 months of such termination a Third Party
Acquisition (as defined hereinafter) shall occur; or (b) any person shall have
commenced, publicly proposed or communicated to the Company a proposal that is
publicly disclosed for a tender or exchange offer for 25% or more of the then
outstanding shares (or which, assuming the maximum amount of securities that
could be purchased, would result in any person beneficially owning 25% or more
of the then outstanding Shares) or otherwise for the direct or indirect
acquisition of the Company or all or substantially all of its assets for per
Share consideration having a value greater than the Per Share Amount and (i) the
Offer shall have remained open for at least 20 business days, (ii) the Minimum
Condition shall not have been satisfied and (iii) the Share Purchase Agreement
shall have been terminated (other than pursuant to the Fiduciary Out Clause) and
(iv) within 12 months of such termination a Third Party Acquisition shall occur;
or (c) if the Minimum Condition shall not have been satisfied on or prior to the
date that is 60 days from the date of commencement of the Offer, Purchaser
desires to extend the Offer
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beyond such 60 day period but the Company declines to consent to such extension,
the Share Purchase Agreement is terminated (other than pursuant to the Fiduciary
Out Clause) and within 12 months of such termination a Third Party Acquisition
shall occur; or (d) the Share Purchase Agreement is terminated pursuant to the
Fiduciary Out Clause, then, in any such event, provided that Purchaser is not in
material breach of its obligations under the Share Purchase Agreement, the
Company shall pay Purchaser promptly (but in no event later than one business
day after (i) the consummation of the Third Party Acquisition, with respect to
the events described in clauses (a), (b) or (c), or (ii) such termination with
respect to clause (d)) a fee of $8 million (the "Fee") which amount shall be
payable in immediately available funds, plus "Expenses" (as defined below).
The Share Purchase Agreement also provides that so long as Purchaser is not
in material breach of its obligations under the Share Purchase Agreement and
Purchaser is not entitled to the Fee pursuant to the preceding paragraph, if (a)
the Share Purchase Agreement is terminated as described in clause (c) of the
third preceding paragraph due to the occurrence of the condition set forth in
paragraph (g) under Section 14 set forth below or (b) the Share Purchase
Agreement is terminated as described in clause (c) of the third preceding
paragraph because of the occurrence of the condition set forth in paragraph (f)
under Section 14 set forth below, then, in either case (a) or (b), the Company
shall promptly reimburse Purchaser for all Expenses.
"Expenses" is defined in the Share Purchase Agreement to mean the sum of
(i) all reasonable out-of-pocket expenses and fees up to $2.0 million in the
aggregate (including, without limitation, reasonable fees and expenses payable
to all banks, investment banking firms, other financial institutions and other
persons and their respective agents and counsel for arranging, committing to
provide or providing any financing for the Offer or structuring the Offer and
all reasonable fees of counsel, accountants, experts and consultants to
Purchaser and its affiliates, and all printing and advertising expenses)
actually incurred by Purchaser or its affiliates or on their behalf in
connection with the Offer, including, without limitation, the financing thereof,
and actually incurred by banks, investment banking firms, other financial
institutions and other persons and assumed by Purchaser and its affiliates in
connection with the negotiation, preparation, execution and performance of the
Share Purchase Agreement, the structuring and financing of the Offer and any
financing commitments or agreements relating thereto and (ii) all amounts paid
by Purchaser to UDI or its affiliates on behalf of the Company in connection
with the termination of the UDI Agreement. In the event that the Company shall
fail to pay the Fee or any Expenses when due, the term "Expenses" is deemed to
include the reasonable costs and expenses actually incurred or accrued by
Purchaser (including, without limitation, reasonable fees and expenses of
counsel) in connection with the collection under and enforcement of the fees and
expenses provision of the Share Purchase Agreement, together with interest on
such unpaid Fee and Expenses, commencing on the date that the Fee or such
Expenses became due, at a per annum rate equal to the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York, from time to time, in
the City of New York, as such bank's prime rate plus 1%.
"Third Party Acquisition" is defined in the Share Purchase Agreement to
mean the occurrence of any of the following events: (i) the acquisition of the
Company by merger, consolidation or other business combination transaction by
any person other than Purchaser or any of its affiliate (a "Third Party"); (ii)
the acquisition by any Third Party of all or substantially all of the assets of
the Company and its Subsidiaries, taken as a whole; (iii) the acquisition by a
Third Party of 50% or more of the outstanding Shares whether by tender offer,
exchange offer or otherwise; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; or (v)
the repurchase by the Company or any of its Subsidiaries of 50% or more of the
outstanding Shares.
Except as set forth above, all costs and expenses incurred in connection
with the Share Purchase Agreement and the Transactions shall be paid by the
party incurring such expenses, whether or not any such Transaction is
consummated.
Confidentiality Agreement. On May 19, 1997, Constellation entered into a
Confidentiality Agreement with the Company. The following is a summary of the
Confidentiality Agreement, a copy of which has been filed as an Exhibit to the
Schedule 14D-1 filed by Purchaser with the Commission in connection with the
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Offer. Such summary is qualified in its entirety by reference to the
Confidentiality Agreement. Under the Confidentiality Agreement, Constellation
agreed to use information furnished by the Company or its representatives,
compiled by Constellation or its representatives from such furnished
information, or gathered by Constellation by inspection of the Company and its
Subsidiaries, that is not otherwise generally available to the public (other
than as a result of disclosure by Constellation or its representatives) (the
"Evaluation Materials") exclusively for the purpose of evaluating an acquisition
transaction with the Company. In addition, Constellation agreed not to disclose
any of the Evaluation Materials other than under certain circumstances. Under
the Confidentiality Agreement, Constellation agreed that (i) for a period of one
year from the date of the Confidentiality Agreement, without the prior written
consent of the Company, it would not solicit for employment any person employed
by the Company on May 19, 1997 as a key employee and (ii) for a period of one
year from the date of the Confidentiality Agreement, without the prior approval
of the Company's Board of Directors, it would not, (A) acquire or make any
proposal to acquire any securities or property of the Company, (B) propose to
enter into any merger or business combination involving the Company or purchase
a material portion of the assets of the Company, (C) make or participate in any
solicitation of proxies to vote, or seek to advise or influence any person with
respect to the voting of any securities of the Company, (D) form, join or
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to any voting securities of the Company, (E) otherwise act to
seek to control or influence the management, the Board or policies of the
Company, (F) disclose any intention, plan or arrangement inconsistent with the
foregoing, or (G) take any action which might require the Company to make a
public announcement regarding the possibility of a business combination or
merger. On July 25, 1997 the Company's Board of Directors approved the Offer.
Pursuant to the Share Purchase Agreement, assuming the Minimum Condition has
been satisfied, upon acceptance for payment of Shares pursuant to the Offer, the
Confidentiality Agreement shall be deemed to have been terminated without
further action by the parties thereunder.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER.
Purpose of the Offer. The purpose of the Offer is for Purchaser to acquire
control of the Company and to purchase as many Shares as are tendered in the
Offer. Upon consummation of the Offer, the Company will become a direct
subsidiary of Purchaser. In the event 100% of the Shares outstanding on the
Expiration Date are not validly tendered and not withdrawn pursuant to the
Offer, a minority interest of the Company will remain outstanding. Purchaser
currently intends to purchase Shares not tendered in the Offer after the
consummation of the Offer in order to eliminate any such minority interest;
however, no assurance can be given that such purchases will be made. Any such
purchases could be effected at prices that may be higher or lower than the price
per Share offered pursuant to the Offer. Following the consummation of the
Offer, Purchaser intends to deregister and delist the Shares, if permitted by
applicable law. See Section 13. The Offer is being made pursuant to the Share
Purchase Agreement.
Although the Share Purchase Agreement does not provide for a merger between
Purchaser and the Company, Purchaser currently believes that such a merger would
be beneficial to its stockholders. Purchaser currently intends to consummate
such a merger in the future if and when practicable, although no assurance can
be made that such a merger would ever be consummated.
The indentures governing the Notes and the Credit Agreement contain certain
provisions limiting the ability of Purchaser to consummate a merger or other
consolidation with the Company. Purchaser intends to cause the Company to
refinance the Credit Agreement promptly upon the consummation of the Offer and
has entered into a commitment letter to that effect (see Section 9), but it has
no current intention of having the Company refinance the Notes. Consequently,
Purchaser has no current plans to effect a merger or business consolidation
between the Company and Purchaser. Purchaser may, however, explore the
possibility of purchasing the Notes and soliciting consents from holders of
Notes, but expects it would purchase Notes only at a price materially below the
price that had been offered by UDI in the UDI Note Offer. The Notes by their
terms cannot be redeemed by the Company until May 1, 2001, and then at premiums
starting at 6% and declining to 0% on May 1, 2004. Purchaser currently expects
that if the Notes are still outstanding on May 1, 2001, and the indenture
governing the Notes has not been amended by such date as contemplated by the UDI
Note Offer, Purchaser would seek to cause the Company to redeem the Notes at
such time in order to
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facilitate a merger between Purchaser and the Company. However, no assurance can
be given that Purchaser would cause the Company to redeem the Notes at that time
or that such a merger would be consummated.
In addition to limitations imposed by the indentures governing the Notes
and the Credit Agreement, Article X of the Company's Certificate of
Incorporation limits the ability of Purchaser to effect a merger or business
combination with the Company unless certain requirements are met. See Section
15. In order to satisfy the requirements of Article X and permit a future merger
between Purchaser and the Company, on July 25, 1997, the Board of Directors of
the Company approved a business combination between Purchaser and the Company,
provided that if such business combination occurs (a) within one year of the
date of the Share Purchase Agreement, holders of Shares would receive an amount
in cash that is not less than $7.05 per Share, and (b) after one year from the
date of the Share Purchase Agreement, an amount in cash that is not less than
$7.05 per Share and that, in the opinion of a nationally recognized investment
bank addressed to the Board of Directors of the Company, is fair from a
financial point of view to such holders.
If Purchaser purchases Shares pursuant to the Offer, the Share Purchase
Agreement provides that Purchaser shall be entitled to designate representatives
to serve on the Company's Board of Directors in proportion to Purchaser's
ownership of Shares following such purchase. See Section 10. Purchaser expects
that such representation would permit Purchaser to exert substantial influence
over the Company's conduct of its business and operations.
Appraisal Rights; Going Private Transactions. No appraisal rights are
available in connection with the Offer. However, pursuant to general principles
of the corporate law of the State of Delaware, the Board of Directors of the
Company will continue to owe fiduciary duties to the minority stockholders of
the Company. Moreover, under Delaware corporate law, Purchaser, as a majority
stockholder of the Company, may also owe fiduciary duties to the minority
stockholders in certain circumstances.
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to a business combination following the purchase of
Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining
Shares not held by it. Rule 13e-3 requires, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the proposed transaction and the consideration offered to
minority stockholders in such transaction be filed with the Commission and
disclosed to stockholders prior to consummation of the transaction.
Plans for the Company. It is currently expected that, following
consummation of the Offer, initially the business and operations of the Company
will, except as set forth in this Offer to Purchase (including the sale of
assets as described below), be continued by the Company substantially as they
are currently being conducted. Purchaser will continue to evaluate the business
and operations of the Company during the pendency of the Offer and after the
consummation of the Offer, and will take such actions as it deems appropriate
under the circumstances then existing. Purchaser intends to seek additional
information about the Company during this period. Thereafter, Purchaser intends
to review such information as part of a comprehensive review of the Company's
business, operations, capitalization and management with a view to maximizing
the Company's potential in conjunction with Purchaser's affiliates' businesses.
On July 30, 1997, Purchaser entered into a Letter of Intent (the "Asset
Letter") with the Asset Purchaser. A copy of the Asset Letter has been filed as
an Exhibit to the Schedule 14D-1 filed by Purchaser in connection with the
Offer. The Asset Purchaser is a publicly traded corporation with total assets as
of June 30, 1997 of $1,819 million, net revenues and net earnings for the fiscal
year ended December 31, 1996, of $1,812 million and $207 million, respectively,
and for the six months ended June 30, 1997, $969 million and $70 million,
respectively. Pursuant to the non-binding Asset Letter, Purchaser agrees to
cause the Company as soon as practicable after the consummation of the Offer to
sell to the Asset Purchaser, and the Asset Purchaser agrees to buy, all of the
Company's right, title and interest in the properties, assets and rights of the
Company principally relating to, or used, held for use or intended to be used in
connection with, the operations of the Company's Instrumentation division
("Instruments"), other than certain specifically excluded assets (the "Assets").
In the Asset Letter, the Asset Purchaser agrees to buy the Assets from the
Company for the sum of $85,000,000 plus the assumption of certain liabilities
related to the operations of Instruments. The
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transaction is subject, among other things, to the execution of definitive
documentation, approval of the boards of directors of the Company and the Asset
Purchaser and receipt by the Board of Directors of the Company of a fairness
opinion from a nationally recognized investment bank. The Offer is not
conditioned on completion of the sale of the Assets to the Asset Purchaser. In
addition, Purchaser is evaluating its options with regard to the Company's
investment in its Roltra-Morse assets.
Except as indicated above or in this Offer to Purchase, Purchaser does not
have any present plans or proposals that relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any Subsidiary, a sale or transfer of a
material amount of assets of the Company or any Subsidiary or any material
change in the Company's capitalization or dividend policy or any other material
changes in the Company's corporate structure or business, or the composition of
the Board or the Company's management.
12. DIVIDENDS AND DISTRIBUTIONS. The Share Purchase Agreement provides
that the Company shall not, between the date of the Share Purchase Agreement and
the Consummation Date, without the prior written consent of Purchaser, (a)
issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance,
sale, pledge, disposition, grant or encumbrance of any shares of capital stock
of any class of the Company or any Subsidiary, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any Subsidiary (except for the issuance
of a maximum of 2,000,000 Shares issuable pursuant to employee stock options
outstanding on the date of the Share Purchase Agreement and including up to
1,250 restricted Shares per quarter issuable to outside directors in accordance
with past practice pursuant to the Stock Option Plans), (b) declare, set aside,
make or pay any dividend or other distribution, payable in cash, stock, property
or otherwise, with respect to any of its capital stock, except for such
declarations, set asides, dividends and other distributions made by any
Subsidiary to the Company or (c) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock. See Section 10. If, however, the Company should, during the
pendency of the Offer, (i) split, combine or otherwise change the Shares or its
capitalization, (ii) acquire or otherwise cause a reduction in the number of
outstanding Shares or (iii) issue or sell any additional Shares (other than
pursuant to outstanding employee and director options, shares of any other class
or series of capital stock, other voting securities or any securities
convertible into, or options, rights, or warrants, conditional or otherwise, to
acquire, any of the foregoing, then, without prejudice to Purchaser's rights
under Section 14, Purchaser may (subject to the provisions of the Share Purchase
Agreement) make such adjustments to the purchase price and other terms of the
Offer (including the number and type of securities to be purchased) as it deems
appropriate to reflect such split, combination or other change, acquisition,
reduction, issuance or sale.
If, on or after July 31, 1997, the Company should declare or pay any
dividend on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer then, without prejudice to Purchaser's
rights under Section 14, (i) the purchase price per Share payable by Purchaser
pursuant to the Offer will be reduced (subject to the Share Purchase Agreement)
to the extent any such dividend or distribution is payable in cash and (ii) any
non-cash dividend, distribution or right shall be received and held by the
tendering stockholder for the account of Purchaser and will be required to be
promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all the rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Purchaser in its sole discretion.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NYSE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of
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Shares, which could adversely affect the liquidity and market value of the
remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the New York Stock Exchange for
continued listing and may be delisted from the New York Stock Exchange and
deregistered under Section 12(d) of the Exchange Act. Purchaser intends to cause
the delisting by the New York Stock Exchange and deregistration of the Shares
following consummation of the Offer.
According to published guidelines, the New York Stock Exchange would
consider delisting the Shares if, among other things, the number of holders of
Shares should fall below 400 (or below 1,200, if trading volume falls below
100,000 Shares for the most recent 12 months), the number of publicly held
Shares (exclusive of holdings of officers, directors and their families and
other concentrated holdings of 10 percent or more ("NYSE Excluded Holdings"))
should fall below 600,000 or the aggregate market value of publicly held Shares
(exclusive of NYSE Excluded Holdings) should fall below $8,000,000. The Company
has advised Purchaser that, as of July 29, 1997, there were 17,126,609 Shares
outstanding, held by approximately 18,000 holders of record. If, as a result of
the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer
meet the requirements of the New York Stock Exchange for continued listing and
the listing of the Shares is discontinued, the market for the Shares could be
adversely affected.
If the New York Stock Exchange were to delist the Shares, it is possible
that the Shares would continue to trade on another securities exchange or in the
over-the-counter market and that price or other quotations would be reported by
such exchange or through the Nasdaq Stock Market ("Nasdaq") or other sources.
The extent of the public market therefor and the availability of such quotations
would depend, however, upon such factors as the number of stockholders and/or
the aggregate market value of such securities remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration under the Exchange Act as described
below, and other factors. Purchaser cannot predict whether the reduction in the
number of Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for or marketability of the Shares.
The Shares are currently "margin securities," as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing banks to
extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares might no longer be eligible as
collateral for loans made by banks.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders of the Shares. Termination
of registration of the Shares under the Exchange Act, assuming there are no
other securities of the Company subject to registration, would substantially
reduce the information required to be furnished by the Company to its
stockholders and to the Commission and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a), and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Company. Furthermore, if the Purchaser acquires a
substantial number of Shares, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, as amended, may be impaired or eliminated. If registration of the Shares
under the Exchange Act were terminated, the Shares would no longer be "margin
securities" or be eligible for NASDAQ reporting.
It is the present intention of the Purchaser to seek to cause the Company
to make an application for termination of registration of the Shares under the
Exchange Act as soon as possible following the Offer if the requirements for
termination of registration are met.
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14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, Purchaser shall not be required to accept for payment or pay for
any Shares tendered pursuant to the Offer, and may terminate or amend the Offer
and may postpone the acceptance for payment of and payment for Shares tendered,
if (i) the Minimum Condition shall not have been satisfied, (ii) any applicable
waiting period under the HSR Act shall not have expired or been terminated prior
to the expiration of the Offer or (iii) at any time on or after the date of the
Share Purchase Agreement, and prior to the acceptance for payment of Shares, any
of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding brought by any governmental, administrative or regulatory
authority or agency, domestic or foreign, before any court or governmental,
administrative or regulatory authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by Purchaser, pursuant to the Offer, or seeking to obtain material
damages in connection with the Offer; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Purchaser or any of
Purchaser's affiliates of all or any material portion of their business, in
each case as a result of the Offer; (iii) seeking to impose or confirm
limitations on the ability of Purchaser to exercise effectively full rights
of ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Purchaser pursuant to the Offer, or otherwise
on all matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of the Share Purchase
Agreement and the transactions contemplated thereby; or (iv) seeking to
require divestiture by Purchaser of any Shares; provided that Purchaser
shall have used all reasonable efforts to cause any such action or
proceeding described in this paragraph (a) to be dismissed or withdrawn;
(b) there shall have been issued any injunction, order or decree by
any court or governmental, administrative or regulatory authority or
agency, domestic or foreign, resulting from any action or proceeding
brought by any person other than any governmental, administrative or
regulatory authority or agency, domestic or foreign, that (i) restrains or
prohibits the making of the Offer; (ii) prohibits or limits ownership or
operation by the Company, Purchaser or any of Purchaser's affiliates of all
or any material portion of its business or assets, or compels the Company,
Purchaser or any of Purchaser's affiliates to dispose of or hold separate
all or any material portion of its business or assets, in each case as a
result of the Offer; (iii) imposes limitations on the ability of Purchaser
to exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by Purchaser
pursuant to the Offer, or otherwise on all matters properly presented to
the Company's stockholders; or (iv) requires divestiture by Purchaser of
any Shares; provided that Purchaser shall have used all reasonable efforts
to cause any such injunction, order or decree described in this paragraph
(b) to be vacated or lifted;
(c) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) Purchaser, the Company or any
subsidiary or affiliate of Purchaser or the Company or (ii) the Offer, by
any legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, in the case of both
(i) and (ii) other than the routine application of the waiting period
provisions of the HSR Act to the Offer, that results in any of the
consequences referred to in clauses (i) through (iv) of paragraph (b)
above; provided that Purchaser shall have used all reasonable efforts to
cause any such action, order or injunction described in this paragraph (c)
to be vacated or lifted;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the New
York Stock Exchange, (ii) any decline, measured from the date hereof, in
the Standard & Poor's 500 Index by an amount in excess of 30%, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iv) any limitation (whether or not
mandatory) by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, on the extension of credit by
banks or other lending institutions, (v) a commencement of a war or armed
hostilities or other national or international calamity directly or
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<PAGE> 33
indirectly involving the United States or (vii) in the case of any of the
foregoing existing on the date hereof, a material acceleration or worsening
thereof;
(e) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the then outstanding Shares has been acquired by any
person, other than Purchaser or (ii)(A) the Board or any committee thereof
shall have withdrawn or modified in a manner adverse to Purchaser the
approval or recommendation of the Offer or the Share Purchase Agreement or
approved or recommended any takeover proposal or any other acquisition of
Shares other than the Offer or (B) the Board or any committee thereof shall
have resolved to do any of the foregoing;
(f)(i) any representation or warranty of the Company in the Share
Purchase Agreement shall not be true and correct; or
(ii) there shall have occurred, since the date of the Share
Purchaser Agreement, a change in the business, operations, financial
condition, assets or liabilities of the Company or any Subsidiary
with the effect that such failure of any such representation or warranty to
be true and correct or such change, when taken together with all other such
failures of such representations and warranties to be true and correct
(both favorable and adverse) and all other such changes (both favorable and
adverse), in the aggregate would have, a Material Adverse Effect; provided,
however that, for the purpose of the foregoing condition, in determining
whether any such representation or warranty is true or correct, any
qualification as to materiality or Material Adverse Effect contained in any
such representation and warranty shall be deemed not to apply;
(g) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under the Share Purchase Agreement;
(h) the Share Purchase Agreement shall have been terminated in
accordance with its terms; or
(i) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder;
which, in the sole judgment of Purchaser, in any such case, and regardless of
the circumstances (including any action or inaction by Purchaser or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser in whole or in part at any time and from
time to time in their sole discretion. The failure by Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
State Takeover Laws; Antitakeover Provisions in Certificate of
Incorporation. A number of states have adopted laws and regulations applicable
to attempts to acquire securities of corporations that are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana could, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror
31
<PAGE> 34
from voting on the affairs of a target corporation without the prior approval of
the remaining stockholders. The state law before the Supreme Court was by its
terms applicable only to corporations that had a substantial number of
stockholders in the state and were incorporated there. Subsequently, in TLX
Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled
that certain Oklahoma corporate governance statutes were unconstitutional
insofar as they applied to corporations incorporated outside Oklahoma because
they could subject such corporations to inconsistent regulations. Similarly, in
Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled
that four Tennessee takeover statutes were unconstitutional as applied to
corporations incorporated outside Tennessee. This decision was affirmed by the
United States Court of Appeals for the Sixth Circuit. In December 1988, a
federal district court in Florida held in Grand Metropolitan PLC v. Butterworth
that the provisions of the Florida Affiliated Transactions Act and the Florida
Control Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws such as those described above. Purchaser does not know whether any
of these laws will, by their terms, apply to the Offer and has not necessarily
complied with any such laws. Should any person seek to apply any state takeover
law, Purchaser will take such action as then appears desirable, which may
include challenging the validity or applicability of any such statute in
appropriate court proceedings. In the event it is asserted that one or more
state takeover laws are applicable to the Offer, and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment any Shares tendered pursuant to
the Offer, or be delayed in continuing or consummating the Offer. In such case,
Purchaser may not be obligated to accept for payment any Shares tendered. See
Section 14.
Section 203 of Delaware Law limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of outstanding voting stock of the corporation)
unless, among other things, the corporation's board of directors has given its
prior approval to either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder." The Company
has approved, among other things, the Offer for purposes of Section 203 of
Delaware Law.
Article Ten of the Company's Certificate of Incorporation provides that,
except as described below, the affirmative vote of not less than a majority of
the votes entitled to be cast by the holders of all the then outstanding shares
of voting stock of the Company, excluding voting stock beneficially owned by any
entity who has announced or publicly disclosed a plan to become the beneficial
owner of twenty percent of the voting stock of the Company (an "Interested
Stockholder"), is required to approve a "Business Combination" (defined to
include, among other things, any merger of the Company with any Interested
Stockholder or any agreement providing for such a merger). However, the vote
requirement does not apply if either (a) the merger is approved by a majority of
the "Continuing Directors" then in office or (2) certain price and procedural
requirements are met. The term "Continuing Directors" is defined to include any
director of the Company who is not an affiliate, associate or representative of
the Interested Stockholder and who was a member of the Board prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor who is not an affiliate, associate or representative of the Interested
Stockholder and is recommended or elected to succeed a Continuing Director by a
majority of the Continuing Directors then in office. Although this provision
will not affect the Offer, it may have an adverse effect on the Company's
ability to merge with Purchaser. The Company has represented in the Share
Purchase Agreement that the Board, at a meeting duly called and held on July 25,
1997, has unanimously approved a Business Combination between Purchaser and the
Company, whereby each Share (other than dissenting Shares and Shares owned by
Purchaser or its affiliates) outstanding at the time of such Business
Combination would be cancelled and the holder thereof would be entitled to
receive an amount in cash equal to, (a) if such Business Combination occurs
within one year of the date of the Share Purchase Agreement, not less than $7.05
or (b) if such Business Combination occurs after one year from the date of the
Share Purchase Agreement, an amount that
32
<PAGE> 35
is not less than $7.05 and that, in the opinion of a nationally recognized
investment bank addressed to the Board, is fair from a financial point of view
to such holders.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares by Purchaser pursuant to the Offer is subject to such requirements.
See Section 2.
Pursuant to the HSR Act, on July 29, 1997, Purchaser filed a Premerger
Notification and Report Form in connection with the purchase of Shares pursuant
to the Offer with the Antitrust Division and the FTC. Under the provisions of
the HSR Act applicable to the Offer, the purchase of Shares pursuant to the
Offer may not be consummated until the expiration of a 15-calendar day waiting
period following the filing by Purchaser. Accordingly, it is anticipated that
the waiting period under the HSR Act applicable to the purchase of Shares
pursuant to the Offer will expire at 11:59 p.m., New York City time, on August
13, 1997, unless such waiting period is earlier terminated by the FTC and the
Antitrust Division or extended by a request from the FTC or the Antitrust
Division for additional information or documentary material prior to the
expiration of the waiting period. Pursuant to the HSR Act, Purchaser will
request early termination of the waiting period applicable to the Offer. There
can be no assurance, however, that the 15-day HSR Act waiting period will be
terminated early. If either the FTC or the Antitrust Division were to request
additional information or documentary material from Purchaser with respect to
the Offer, the waiting period with respect to the Offer would expire at 11:59
p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Purchaser with such request. Thereafter, the waiting
period could be extended only by court order. If the acquisition of Shares is
delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Offer, subject to the terms of the Share Purchase Agreement, may, but need not,
be extended and, in any event, the purchase of and payment for Shares will be
deferred until 10 days after the request is substantially complied with, unless
the extended period expires on or before the date when the initial 15-day period
would otherwise have expired, or unless the waiting period is sooner terminated
by the FTC and the Antitrust Division. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. It is a condition
to the Offer that the waiting period applicable under the HSR Act to the Offer
expire or be terminated. See Section 2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Purchaser, the Company or
their respective affiliates and subsidiaries. Private parties and state
attorneys general may also bring legal action under federal or state antitrust
laws under certain circumstances. Based upon an examination of information
available to Purchaser relating to the businesses in which Purchaser, the
Company and their respective subsidiaries are engaged, the Purchaser believes
that the Offer will not violate the antitrust laws. Nevertheless, there can be
no assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See Section 14 for
certain conditions to the Offer, including conditions with respect to
litigation.
Federal Reserve Board Regulations. The margin regulations promulgated by
the Federal Reserve Board place restrictions on the amount of credit that may be
extended for the purpose of purchasing margin stock (including the Shares) if
such credit is secured directly or indirectly by margin stock. Purchaser
believes that the financing of the acquisition of the Shares will be in full
compliance with or not subject to the margin regulations.
Other Foreign Approvals. The Company owns property and conducts business
in a number of foreign countries and jurisdictions. In connection with the
acquisition of the Shares pursuant to the Offer, the laws of certain of those
foreign countries and jurisdictions may require the filing of information with,
or the obtaining of the approval of, governmental authorities in such countries
and jurisdictions. The governments in such
33
<PAGE> 36
countries and jurisdictions might attempt to impose additional conditions on the
Company's operations conducted in such countries and jurisdictions as a result
of the acquisition of the Shares pursuant to the Offer. There can be no
assurance that Purchaser will be able to cause the Company or its subsidiaries
to satisfy or comply with such laws or that compliance or non-compliance will
not have adverse consequences for the Company or any subsidiary after purchase
of the Shares pursuant to the Offer.
16. FEES AND EXPENSES. Neither Purchaser, nor any officer, director,
stockholder, agent or other representative of Purchaser or the Controlling
Stockholders will pay any fees or commissions to any broker, dealer or other
person (other than the Dealer Manager, the Information Agent and the Depositary)
for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies and other nominees will, upon request, be
reimbursed by Purchaser for customary mailing and handling expenses incurred by
them in forwarding materials to their customers.
Schroder & Co. Inc. ("Schroder") is acting as Dealer Manager in connection
with the Offer and has provided certain financial advisory services to Purchaser
and its affiliates in connection with the Offer. Purchaser has agreed to pay
Schroder reasonable and customary compensation for such services. In addition,
Purchaser has agreed to reimburse Schroder for reasonable out-of-pocket expenses
related to their engagement, including the reasonable fees and expenses of a
single counsel, and has agreed to indemnify each of Schroder and certain
affiliated persons against certain liabilities and expenses in connection with
its services, including, without limitation, certain liabilities under the
federal securities laws.
Purchaser has retained D.F. King & Co., Inc. as the Information Agent and
First Chicago Trust Company of New York as the Depositary in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telex, telecopy, telegraph and personal interview and may request banks,
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, D.F. King & Co., Inc. will be paid reasonable and customary compensation
for its services, and will also be reimbursed for certain out-of-pocket expenses
and will be indemnified against certain liabilities and expenses in connection
with the Offer, including certain liabilities under the federal securities laws.
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including under the federal securities laws.
17. MISCELLANEOUS. The Offer is made only by this Offer to Purchase and
the related Letter of Transmittal and is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Purchaser may,
in its discretion, take such action as it may deem necessary to make the Offer
in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. In those jurisdictions where securities laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by Schroder or 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 PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Purchaser has filed with the Commission the Schedule 14D-1,
together with exhibits, furnishing certain additional information with respect
to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits,
may be inspected at, and copies may be obtained from, the same places and in the
same manner as set forth in Section 7 (except that they will not be available at
the regional offices of the Commission).
II ACQUISITION CORP.
July 31, 1997
34
<PAGE> 37
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, business address, principal
occupation or employment and material occupations, positions, offices or
employments at the present time and during the last five years, of each director
and executive officer of Purchaser. The business address of Philip W. Knisely
and John A. Young is 9211 Forest Hill Avenue, Suite 109, Richmond, Virginia
23235 and the business address of Mitchell P. Rales, Steven M. Rales, Michael G.
Ryan and Joseph O. Bunting III is 1250 24th Street, N.W., Suite 800, Washington
D.C. 20037. Each officer and executive director is a United States citizen.
Directors are indicated by an asterisk.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL OCCUPATIONS FOR PAST FIVE YEARS
- ------------------------------ -------------------------------------------------------------
<S> <C>
Philip W. Knisely*............ Since 1995, Mr. Knisely has been on the Board of Managers and
has been President of Constellation Capital Partners LLC, a
private equity firm. He has also been Director and President
of American Enterprises MPT Corp. since 1996. From 1988 to
1995, he was President of AMF Industries, a privately held
diversified manufacturing company at 8100 AMF Drive,
Mechanicsville, VA 23111.
Steven M. Rales*.............. Mr. Rales is Chairman of the Board of Danaher Corporation, a
manufacturer of tools and process/environmental controls
products, and has held that position since 1984. Mr. Rales is
also a General Partner of Equity Group Holdings, a general
partnership located in Washington, D.C., with interests in
manufacturing companies, media operations, and publicly
traded securities, and has been since 1979. Mr. Rales is also
a director of Colfax Capital Corp., Janelia Farm Corp. and
American Enterprises MPT Corp. and has held those
directorships from 1997, 1988 and 1996, respectively. Mr.
Rales is also a Member of the Board of Managers of
Constellation Capital Partners LLC. Mr. Rales is also a
founder and has been Chairman of Colfax Communications, Inc.
since 1991. He is also a founder of Wabash National
Corporation and was its Chairman of the Board of Directors
until 1994.
Mitchell P. Rales*............ Mr. Rales has been a director of Danaher Corporation since
1984 and has been Chairman of its Executive Committee since
1990. He is also a General Partner of Equity Group Holdings
and has been since 1979. Mr. Rales is also a director of
Colfax Capital Corp., Janelia Farm Corp. and American
Enterprises MPT Corp. and has held those directorships from
1997, 1988 and 1996, respectively. Mr. Rales is also a Member
of the Board of Managers of Constellation Capital Partners
LLC. Mr. Rales is also a founder and has been a Director of
Colfax Communications, Inc., since 1991. He is also a founder
of Wabash National Corporation and was a Director until 1994.
John A. Young................. Since 1995, Mr. Young has been Vice President of
Constellation Capital Partners LLC. Mr. Young has also been
the Vice President of American Enterprises MPT Corp. since
1996. From 1992 to 1995, he was Director of Corporate
Development of AMF Industries located at 8100 AMF Drive,
Mechanicsville, VA 23111.
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL OCCUPATIONS FOR PAST FIVE YEARS
- ------------------------------ -------------------------------------------------------------
<S> <C>
Michael G. Ryan............... Mr. Ryan has been Chief Financial Officer of Equity Group
Holdings since 1985. Mr. Ryan is Vice President of
Constellation Capital Partners LLC, Colfax Communications,
Inc. and American Enterprises MPT Corp. and has held those
vice presidencies since 1995, 1991 and 1996, respectively. He
is also President of Colfax Capital Corp. and Janelia Farm
Corp. and has held those presidencies since 1997 and 1988,
respectively.
Joseph O. Bunting III......... Mr. Bunting has been Controller of Equity Group Holdings
since 1987. He is also a Vice President of Colfax
Communications, Inc., Constellation Capital Partners LLC,
Colfax Capital Corp., Janelia Farm Corp. and American
Enterprises MPT Corp. and has held those vice presidencies
since 1991, 1995, 1997, 1988 and 1996, respectively. He was
also Vice President of Yield House, Inc. through 1993.
</TABLE>
Purchaser. The name and position with Purchaser of each director and
executive officer of Purchaser are set forth below. The business address,
present principal occupation or employment, five-year employment history and
citizenship of each such person is set forth above.
<TABLE>
<CAPTION>
NAME POSITION WITH PURCHASER
- ------------------------------ --------------------------------------------------------------
<S> <C>
Philip W. Knisely............. President, Chief Executive Officer and Director
Steven M. Rales............... Director
Mitchell P. Rales............. Director
John A. Young................. Vice President and Secretary
Michael G. Ryan............... Vice President and Assistant Secretary, Assistant Treasurer
Joseph O. Bunting III......... Vice President and Treasurer
</TABLE>
36
<PAGE> 39
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
First Chicago Trust Company (201) 222-4720 First Chicago Trust Company
of New York of New York
Attention: Tenders & Exchanges or Attention: Tenders & Exchanges
P.O. Box 2569, Suite 4660 c/o THE DEPOSITORY
Jersey City, NJ 07303-2569 (201) 222-4721 TRUST COMPANY
55 Water Street, DTC TAD
Vietnam Veterans Memorial
Plaza
New York, NY 10041
By Overnight Courier: To Confirm Receipt of Notice
of Guaranteed Delivery:
First Chicago Trust Company (201) 222-4707
of New York
Attention: Tenders & Exchanges
Suite 4680-IMO
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A stockholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
CALL TOLL FREE: (800) 549-6650
or
CALL COLLECT:
(212) 269-5550
The Dealer Manager for the Offer is:
SCHRODER & CO. INC.
The Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
CALL TOLL FREE: (800) 426-7209
July 31, 1997
<PAGE> 1
STOCKHOLDERS WISHING TO TENDER THEIR SHARES SHOULD USE THIS
LETTER OF TRANSMITTAL.
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES B JUNIOR PARTICIPATING
PREFERRED STOCK PURCHASE RIGHTS)
OF
IMO INDUSTRIES INC.
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 31, 1997
BY
II ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 27, 1997 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
First Chicago Trust Company of New York First Chicago Trust Company of New York First Chicago Trust Company of New York
Attention: Tenders & Exchanges Attention: Tenders & Exchanges Attention: Tenders & Exchanges
P.O. Box 2569, Suite 4660 Suite 4680-IMO c/o THE DEPOSITORY TRUST COMPANY
Jersey City, NJ 07303-2569 14 Wall Street, 8(th) Floor 55 Water Street, DTC TAD
New York, NY 10005 Vietnam Veterans Memorial Plaza
New York, NY 10041
</TABLE>
By Facsimile Transmission:
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 2
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined in Section 2 of the Offer to Purchase (as defined
below)) is utilized, if a tender of Shares is to be made by book-entry transfer
into the account of First Chicago Trust Company of New York as Depositary (the
"Depositary"), at The Depository Trust Company ("DTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase.
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined
below)), or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis, may nevertheless tender their Shares according to
the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. See Instruction 2. Delivery of documents to a Book-Entry Transfer
Facility does not constitute delivery to the Depositary.
[ ]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------
Check Box of Book-Entry Transfer Facility:
[ ] DTC
[ ] PDTC
Account Number: Transaction Code Number:
-------------------------- --------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
---------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------
Name of Institution which Guaranteed Delivery:
-------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED NUMBER
CERTIFICATE BY SHARE OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
TOTAL SHARES
- ----------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares represented by certificates delivered
to the Depositary are being tendered. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
LADIES AND GENTLEMEN:
The undersigned hereby tenders to II Acquisition Corp., a Delaware
corporation ("Purchaser") and an affiliate of Constellation Capital Partners
LLC, a private investment firm, the above-described shares of common stock,
$1.00 par value per share (the "Shares"), of Imo Industries Inc., a Delaware
corporation (the "Company"), and the associated Series B Junior Participating
Preferred Stock Purchase Rights (the "Rights;" unless the context otherwise
requires, such Rights are deemed to be included in all references to the
"Shares"), issued pursuant to the Rights Agreement, dated as of April 30, 1997,
as amended, between the Company and First Chicago Trust Company of New York, as
Rights Agent, at a purchase price of $7.05 per Share, net to the seller in cash
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated July 31, 1997 (the "Offer to Purchase"), and in
this Letter of Transmittal (which together with the Offer to Purchase,
constitutes the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all of the Shares
that are being tendered hereby and any and all dividends, distributions
(including additional Shares) and rights declared, paid or issued with respect
to the tendered Shares on or after July 31, 1997 and payable or distributable to
the undersigned on a date prior to the transfer to the name of Purchaser on the
Company's stock transfer records of the Shares tendered herewith (collectively,
a "Distribution"), and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares (and any Distributions) 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 (and any Distributions) or transfer
ownership of such Shares (and any Distributions) on the account books maintained
by a Book-Entry Transfer Facility, together in either case with appropriate
evidences of transfer, to the Depositary for the account of Purchaser, (b)
present such Shares (and any Distributions) for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distributions), all in accordance
with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints Philip W. Knisely, John A. Young and
Michael G. Ryan, and each of them, or any other designees of Purchaser, as such
shareholder's attorneys-in-fact and proxies, each with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and accepted for payment by Purchaser
and with respect to any and all other shares or other securities issued or
issuable in respect of such Shares on or after July 31, 1997. Such appointment
will be effective upon the acceptance for payment of such Shares by Purchaser in
accordance with the terms of the Offer. Upon such acceptance for payment, all
prior powers of attorney and proxies given by such stockholder with respect to
such Shares (and such other shares and securities) will be revoked without
further action, and no subsequent proxies may be given nor any subsequent
written consents executed (and, if given or executed, will not be deemed
effective). The proxies (or other designees of Purchaser) will be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by consent in lieu of
any such meeting or otherwise. Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon Purchaser's
payment for such Shares Purchaser must be able to exercise full voting rights
with respect to such Shares.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distributions) tendered hereby and (b) when the Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title to the Shares (and any Distributions), free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned, upon request, shall execute and deliver any
signature guarantee or additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares (and any Distributions) tendered hereby. In addition, the
undersigned shall promptly remit and transfer to the Depositary for the account
of Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distribution and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by Purchaser in its
sole discretion.
No authority herein conferred or agreed to be conferred by this Letter of
Transmittal shall be affected by, and all such authority shall survive the death
or incapacity of the undersigned. All obligations of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, trustees in
bankruptcy, personal and legal representatives, successors and assigns of the
undersigned.
<PAGE> 4
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) and, unless
theretofore accepted for payment by Purchaser pursuant to the Offer, may also be
withdrawn at any time after September 28, 1997. See Section 4 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation and warranty that the
undersigned owns the Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificate(s)
for Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated herein under "Special Delivery
Instructions," please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. Unless otherwise indicated herein under "Special Payment
Instructions," please credit any Shares tendered herewith by book-entry transfer
that are not accepted for payment by crediting the account at the Book-Entry
Transfer Facility designated above. The undersigned recognizes that Purchaser
has no obligation, pursuant to the Special Payment Instructions, to transfer any
Shares from the name(s) of the registered holder(s) thereof if Purchaser does
not accept for payment any of the Shares so tendered.
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING THE SHARES THAT YOU OWN
HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of shares represented by the lost or destroyed certificates:
Please fill in the remainder of this Letter of Transmittal.
<PAGE> 5
- --------------------------------------------------------------------------------
IMPORTANT:
SHAREHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
X
----------------------------------------------------
X
----------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated:
-------------------------------------------------------
(Must be signed by the registered holder(s) exactly
as name(s) appear(s) on Share Certificate(s) or on a
security position listing or by person(s) authorized
to become registered holders(s) by certificates and
document transmitted herewith. If signature is by
trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative
capacity, please provide the following information
and see Instruction 5.)
Name(s):
--------------------------------------------
----------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
-----------------------------------
Address:
---------------------------------------------
----------------------------------------------------
----------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( )
-----------------------------
(AREA CODE)
Tax Identification or Social Security No.:
---------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------
Name:-----------------------------------------------
Name of Firm:
----------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( )
-----------------------------
(AREA CODE)
Dated:
------------------------------------------------------- ,
1997
<TABLE>
<C> <C> <S>
SIGN
HERE
-
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 6
- --------------------------------------------------------------------------------
IMPORTANT:
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
X
-------------------------------------------------------- SIGN
HERE
X
--------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated:
--------------------------------------------------
(Must be signed by the registered holder(s) exactly as
name(s) appear(s) on Share Certificate(s) or on a
security position listing or by person(s) authorized to
become registered holders(s) by certificates and
document transmitted herewith. If signature is by
trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please
provide the following information and see Instruction
5.)
Name(s):
------------------------------------------------
--------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
----------------------------------
Address:
------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( )
--------------------
(AREA CODE)
Tax Identification or Social Security No.:
--------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------
Name:
---------------------------------------------------
Name of Firm:
-------------------------------------------
Address:
------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( )
-----------------------------------
(AREA CODE)
Dated: , 1997
----------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered herewith, unless
such holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" above, or (b)
if such Shares are tendered for the account of a firm which is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of a recognized Medallion Program approved by the Securities
Transfer Association (each of the foregoing being referred to as an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5 of this Letter
of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by stockholders either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if tenders are to be made pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at a Book-Entry Transfer Facility, as well
as a properly completed and duly executed Letter of Transmittal (or a facsimile
hereof), with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date (as defined in Section 1
of the Offer to Purchase).
Stockholders whose certificates for Shares ("Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary prior to the Expiration Date or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis may tender their Shares by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth
in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by the Purchaser, must be received by the Depositary on or
prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry
Confirmation) evidencing all tendered Shares, in proper form for transfer, in
each case together with the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal, must be received by the
Depositary within three New York Stock Exchange, Inc. trading days after the
date of execution of such Notice of Guaranteed Delivery.
TENDERING STOCKHOLDERS SHOULD USE THIS LETTER OF TRANSMITTAL AND THE NOTICE
OF GUARANTEED DELIVERY PROVIDED WITH THE OFFER TO PURCHASE. STOCKHOLDERS WILL BE
ABLE TO TENDER (OR WITHDRAW) THEIR SHARES PURSUANT TO THE OFFER UNTIL 12:00
MIDNIGHT, NEW YORK CITY TIME, ON AUGUST 27, 1997 (OR SUCH LATER DATE TO WHICH
THE OFFER MAY BE EXTENDED).
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer) If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Number of Shares Tendered." In such cases, new
certificates for the Shares that were evidenced by your old certificates, but
which were not tendered by you, will be sent to you, unless otherwise provided
in the appropriate box on this Letter of Transmittal, as soon as practicable
after the Expiration Date. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must
<PAGE> 8
correspond with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the 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.
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 proper evidence
satisfactory to Purchaser of their authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or not purchased are to be issued in the
name of, a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates and stock powers must be guaranteed by an
Eligible Institution, unless the signature is that of an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay any stock transfer taxes with respect to the purchase of
Shares pursuant to the Offer. If, however, payment of the purchase price is to
be made to, or if certificate(s) for Shares not tendered or accepted for payment
are to be registered in the name of, any person other than the registered
owner(s), or if tendered certificate(s) 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 owner(s) or such 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 an
exemption therefrom, is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed. A stockholder who tenders
by book-entry transfer may request that Shares not accepted for payment be
credited to such account maintained at a Book-Entry Transfer Facility as such
stockholder may designate under "Special Payment Instructions." If no such
instructions are given, such Shares not accepted for payment will be returned by
crediting the account at the Book-Entry Transfer Facility designated above.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Purchaser in whole or in part at any time and from time to time in its sole
discretion, subject to the terms of the Share Purchase Agreement, dated as of
July 25, 1997, between the Company and Purchaser.
9. BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal income tax
law, a stockholder whose tendered Shares are accepted for payment is required to
provide the Depositary with such stockholder's correct taxpayer identification
number ("TIN"), generally the stockholder's social security or federal employer
identification number, and certain other information, on Substitute Form W-9
below. If the Depositary is not provided with the correct TIN, the Internal
Revenue Service may subject the stockholder or other payee to a $50 penalty. In
addition, payments that are made to such stockholder or other payee with respect
to Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain stockholders (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, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. 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 an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the
<PAGE> 9
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, 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
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, the Supplement, this Letter of Transmittal and
the Notice of Guaranteed Delivery may also be obtained from the Information
Agent or from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding special
payment/special delivery instructions and indicating the number of Shares lost.
The stockholder will then be instructed as to the steps that must be taken in
order to replace the certificate. This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF
GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
<PAGE> 10
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
- ----------------------------------------------------------------------------------------------------------
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX ------------------------------
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number
DEPARTMENT OF THE TREASURY BELOW
INTERNAL REVENUE SERVICE or
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION ------------------------------
NUMBER ("TIN") Employer ID Number
- ----------------------------------------------------------------------------------------------------------
</TABLE>
PART 2--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued for me), and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding
because of under-reporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding, do not cross out such Item (2).
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SIGNATURE DATE PART 3--AWAITING TIN [ ]
----------------------------------------------- --------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
<PAGE> 11
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) 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 (2)
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 all reportable payments made to me will be withheld but that such amounts
will be refunded to me if I then provide a taxpayer identification number within
sixty (60) days.
Signature: Date:
----------------------------- ------------------------------
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
20th Floor
New York, New York 10005
CALL TOLL FREE: (800) 549-6650
The Dealer Manager for the Offer is:
SCHRODER & CO. INC.
The Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
CALL TOLL FREE: (800) 426-7209
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK AND
ASSOCIATED RIGHTS OF IMO INDUSTRIES INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock, par value $1.00 per
share (the "Common Stock"), and associated rights to purchase shares of Series B
Junior Participating Preferred Stock ("Rights") issued pursuant to the Rights
Agreement dated as of April 30, 1997, as amended, between Imo Industries Inc., a
Delaware corporation (the "Company"), and First Chicago Trust Company of New
York (such shares of Common Stock and the Rights collectively referred to as the
"Shares"), of the Company, are not immediately available, (ii) if Share
Certificates and all other required documents cannot be delivered to First
Chicago Trust Company of New York, as Depositary (the "Depositary"), prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase (as
defined below)) or (iii) if the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or mail or transmitted by facsimile transmission to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
First Chicago Trust Company of New York
<TABLE>
<CAPTION>
By Facsimile
By Mail: Transmission: By Hand:
<S> <C> <C>
First Chicago Trust Company of New York (201) 222-4720 First Chicago Trust Company of New York
Attention: Tenders & Exchanges or Attention: Tenders & Exchanges
P.O. Box 2569, Suite 4660 (201) 222-4721 c/o THE DEPOSITORY TRUST COMPANY
Jersey City, NJ 07303-2569 55 Water Street, DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
<CAPTION>
To Confirm Receipt of Notice
By Overnight Courier: of Guaranteed Delivery:
<S> <C> <C>
First Chicago Trust Company of New York (201) 222-4707
Attention: Tenders & Exchanges
Suite 4680-IMO
14 Wall Street, 8(th) Floor
New York, NY 10005
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to II Acquisition Corp, a Delaware
corporation and an affiliate of Constellation Capital Partners LLC, a private
investment firm, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated July 31, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, amended from time to time, together
constitute the "Offer"), receipt of each of which is hereby acknowledged, the
number of Shares (including the associated Rights) specified below pursuant to
the guaranteed delivery procedure described in Section 3 of the Offer to
Purchase.
Number of Shares:
- --------------------------------------------------------------------------------
Certificate Nos. (If Available):
- --------------------------------------------------------------------------------
Check one box if Shares will be delivered by book-entry transfer:
- -------------------------------------------------------
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account No.:
- --------------------------------------------------------------------------------
Signature(s) of Holder(s):
================================================================================
Dated:
- --------------------- , 1997
Name(s) of Holders:
================================================================================
Please Type or Print
Address:
- --------------------------------------------------------------------------------
Zip Code
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or which is a commercial bank or trust company having an office or correspondent
in the United States that is a member in good standing of the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program, guarantees
to deliver to the Depositary, at one of its addresses set forth above, Share
Certificates evidencing 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 or the Philadelphia Depository Trust
Company, in each case with delivery of a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase) in the
case of a book-entry delivery, and any other required documents, all within
three New York Stock Exchange trading days of the date hereof.
Please Type or Print
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Name: ------------------------------ Title:
---------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Dated:
- --------------------------- , 1997
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND ASSOCIATED RIGHTS OF IMO INDUSTRIES INC.
AT $7.05 NET PER SHARE BY II ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, AUGUST 27, 1997, UNLESS THE OFFER IS EXTENDED.
July 31, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by II Acquisition Corp., a Delaware corporation
("Purchaser") and an affiliate of Constellation Capital Partners LLC, a private
investment firm, to act as Dealer Manager in connection with Purchaser's offer
to purchase all outstanding shares of common stock, par value $1.00 per share
(the "Common Stock"), of Imo Industries Inc., a Delaware corporation (the
"Company"), and each associated right to purchase shares of the Company's Series
B Junior Participating Preferred Stock (individually, a "Right" and
collectively, the "Rights") issued pursuant to the Rights Agreement dated as of
April 30, 1997, as amended, between the Company and First Chicago Trust Company
of New York (such shares of Common Stock and the Rights collectively referred to
as the "Shares"), at a price of $7.05 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in Purchaser's Offer to Purchase, dated July 31, 1997 (the "Offer to Purchase"),
and the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer") enclosed herewith. Please furnish copies of the
enclosed materials to those of your clients for whose accounts you hold Shares
registered in your name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
NUMBER OF SHARES THAT SHALL CONSTITUTE MORE THAN EIGHTY PERCENT (80%) OF THE
THEN OUTSTANDING SHARES, AND (II) THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE ANTITRUST WAITING PERIODS.
Enclosed for your information and use are copies of the following
documents:
1. Offer to Purchase, dated July 31, 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to First Chicago Trust Company of New York (the
"Depositary") by the Expiration Date (as defined in the Offer to Purchase)
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date;
4. A letter to stockholders of the Company from Donald K. Farrar,
Chairman, President and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 27, 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (the "Share Certificates") or, timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), (ii) a
Letter of Transmittal (or facsimile thereof) properly completed and duly
executed or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry transfer and (iii) any other required documents in
accordance with the instructions contained in the Letter of Transmittal.
<PAGE> 2
If a holder of Shares wishes to tender Shares, but such Stockholders's
Share Certificates are not immediately available or such Stockholder cannot
deliver the Share Certificates and all other required documents, or cannot
complete the procedure for book-entry transfer, prior to the expiration of the
Offer, a tender of Shares may be effected by following the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer) in connection with the solicitation of tenders
of Shares pursuant to the Offer. However, Purchaser will reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. Purchaser will pay or cause to be paid any
stock transfer taxes payable with respect to the transfer of Shares to it,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D. F. King & Co., Inc. (the "Information Agent") at its address and telephone
number set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone numbers set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
Schroder & Co. Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU
OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PURCHASER, THE
COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND ASSOCIATED RIGHTS OF IMO INDUSTRIES INC.
AT $7.05 NET PER SHARE BY II ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 27, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated July 31,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") in connection with
the offer by II Acquisition Corp., a Delaware corporation ("Purchaser") and an
affiliate of Constellation Capital Partners LLC, a private investment firm, to
purchase all outstanding shares of common stock, par value $1.00 per share (the
"Common Stock"), of Imo Industries Inc., a Delaware corporation (the "Company"),
and each associated right to purchase shares of the Company's Series B Junior
Participating Preferred Stock (individually, a "Right" and collectively, the
"Rights") issued pursuant to the Rights Agreement dated as of April 30, 1997, as
amended, between the Company and First Chicago Trust Company of New York (such
shares of Common Stock and the Rights collectively referred to as the "Shares"),
at a price of $7.05 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $7.05 per Share, net to the seller in cash
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously determined
that the Offer is fair to and in the best interests of the Company and its
stockholders, and recommends that stockholders accept the Offer and tender
their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, August 27, 1997, unless the Offer is
extended.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least the number of Shares that shall constitute more than eighty percent
(80%) of the Shares then outstanding and (ii) the expiration or termination
of any applicable antitrust waiting periods.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes with respect to the purchase of
Shares by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. 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 is made only by the Offer to Purchase and the related Letter of
Transmittal and is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the Offer or the
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. However, Purchaser may, in its discretion, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction. In those
jurisdictions where the securities laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by Schroder & Co. Inc. or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO THE OFFER TO
PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK AND ASSOCIATED RIGHTS
OF IMO INDUSTRIES INC. BY II ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated July 31, 1997, and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer"), in
connection with the offer by II Acquisition Corp., a Delaware corporation and an
affiliate of Constellation Capital Partners LLC, a private investment firm, to
purchase all outstanding shares of common stock, par value $1.00 per share (the
"Common Stock"), of Imo Industries Inc., a Delaware corporation (the "Company"),
and each associated right to purchase shares of the Company's Series B Junior
Participating Preferred Stock (individually, a "Right" and collectively, the
"Rights") issued pursuant to the Rights Agreement dated as of April 30, 1997, as
amended, between the Company and First Chicago Trust Company of New York (such
shares of Common Stock and the Rights collectively referred to as the "Shares").
This will instruct you to tender the number of Shares indicated below (or, if no
number is indicated below, all Shares) that are held by you for the account of
the undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Shares to Be Tendered*:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
SIGN HERE
- --------------------------------------------------------------------------------
SIGNATURE(S)
- --------------------------------------------------------------------------------
(PRINT NAME(S))
- --------------------------------------------------------------------------------
(PRINT ADDRESS(ES))
- --------------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER(S))
- --------------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
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:
e.g., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: e.g., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
=========================================================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual
is not a legal or valid owner.(1)
trust under State law
- ---------------------------------------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or Legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. You may also enter your business or "doing
business as" name. Furnish the owner's social security number or the
employer identification number of the sole proprietorship.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
- The United States, or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision, agency or instrumentality
thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer is securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all time under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payment of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments or patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if (i) this interest is $600 or
more, (ii) the interest is paid in the course of the payer's trade or business
and (iii) you have not provided your correct taxpayer identification number to
the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file a 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,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your correct taxpayer identification number to a payer, 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.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- If you falsify
certifications or affirmations, you are subject to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
Unless otherwise noted herein, all references to section numbers or to
regulations are references to the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
<PAGE> 1
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED
JULY 31, 1997 AND THE RELATED LETTER OF TRANSMITTAL AND IS NOT BEING MADE TO,
NOR WILL TENDERS BE ACCEPTED FROM, OR ON BEHALF OF, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE SECURITIES, BLUE SKY OR OTHER LAWS OF SUCH JURISDICTION.
HOWEVER, PURCHASER MAY, IN ITS DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM
NECESSARY TO MAKE THE OFFER IN ANY JURISDICTION AND EXTEND THE OFFER TO HOLDERS
OF SHARES IN SUCH JURISDICTION. IN THOSE JURISDICTIONS WHERE SECURITIES LAWS
REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE
DEEMED TO BE MADE ON BEHALF OF PURCHASER BY SCHRODER & CO. INC. OR ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES B JUNIOR PARTICIPATING
PREFERRED STOCK PURCHASE RIGHTS)
OF
IMO INDUSTRIES INC.
AT
$7.05 NET PER SHARE OF COMMON STOCK
BY
II ACQUISITION CORP.
II Acquisition Corp., a Delaware corporation ("Purchaser") and an affiliate
of Constellation Capital Partners LLC, a private investment firm, is offering to
purchase for cash all the outstanding shares (the "Shares") of Common Stock, par
value $1.00 per share (the "Common Stock"), of Imo Industries Inc., a Delaware
corporation (the "Company"), and each associated right to purchase shares of the
Company's Series B Junior Participating Preferred Stock (individually a "Right"
and collectively the "Rights") issued pursuant to the Rights Agreement, dated as
of April 30, 1997, as amended (the "Rights Agreement"), between the Company and
First Chicago Trust Company of New York, at a purchase price of $7.05 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated July 31, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer"). Holders of Shares
whose certificates for such Shares ("Share Certificates") are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary (as defined below) prior to the Expiration Date (as
defined below), or who cannot complete the procedure for book-entry transfer on
a timely basis, may nevertheless tender their Shares by following the procedure
for guaranteed delivery set forth in Section 3 of the Offer to Purchase. Unless
the context otherwise requires, all references to Shares shall include the
associated Rights. The holders of the Shares are sometimes referred to herein as
"stockholders".
The purpose of the Offer is for Purchaser to acquire control of the Company
and to purchase as many Shares as are tendered in the Offer.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, AUGUST 27, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
NUMBER OF SHARES THAT SHALL CONSTITUTE MORE THAN EIGHTY PERCENT (80%) OF THE
SHARES THEN OUTSTANDING (THE "MINIMUM CONDITION"), AND (II) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE ANTITRUST WAITING PERIODS. THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to First Chicago Trust Company
of New York (the "Depositary") of Purchaser's acceptance for payment of such
Shares pursuant to the Offer. Upon the terms and subject to the conditions of
the Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payments
from Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. 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) the Share Certificates evidencing such Shares
or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (collectively, the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii)
a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with any required signature guarantees, or an Agent's Message (as
defined in Section 2 of the Offer to Purchase) in connection with a book-entry
transfer and (iii) any other documents required under the Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Share Purchase Agreement, dated as of July
25, 1997 between the Company and Purchaser) to extend the period of time during
which the Offer is open by giving oral or written notice of such extension to
the Depositary. Any such extension will be followed as promptly as practicable
by public announcement thereof to be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
<PAGE> 2
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable except that such Shares may be withdrawn by the tendering
stockholder at any time prior to the Expiration Date (as defined below) and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn by such Stockholder at any time after September 28, 1997. The
term "Expiration Date" means 12:00 Midnight, New York City time, on August 27,
1997 unless and until Purchaser shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall refer
to the latest time and date at which the Offer, as so extended by Purchaser,
shall expire. For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in Section 3 of the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase, any notice of withdrawal must also specify
the name and number of the account of the Book-Entry Transfer Facility to be
credited with the withdrawn Shares.
The Board of Directors of the Company has unanimously determined that the
Offer is fair to and in the best interests of the Company and the stockholders,
and recommends that the stockholders accept the Offer and tender their Shares
pursuant to the Offer.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Shares Exchange Act of 1934, as amended,
is contained in the Offer to Purchase and is incorporated herein by reference.
Purchaser is requesting stockholder lists and security position listings
from the Company, and the Offer to Purchase and the related Letter of
Transmittal and other tender offer materials will be mailed to record
stockholders and will be furnished to brokers, banks, and similar persons whose
names, or the names of whose nominees, appear on the Company's list of
stockholders or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase and the related Letters of
Transmittal and all other tender offer materials may be directed to the
Information Agent or the Dealer Manager as set forth below, and copies will be
furnished promptly at Purchaser's expense. No fees or commissions will be
payable to brokers, dealers or other persons, other than the Dealer Manager, the
Information Agent and the Depositary for soliciting tenders of Shares pursuant
to the Offer. The fees and commissions payable to the Dealer Manager are
described in the Offer to Purchase.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
20th Floor
New York, New York 10005
CALL TOLL FREE: (800) 549-6650
The Dealer Manager for the Offer is:
SCHRODER & CO. INC.
The Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
CALL TOLL FREE: (800) 426-7209
July 31, 1997
<PAGE> 1
For additional information, contact:
Imo Industries Inc.
R.A. Derr II,
Vice President & Treasurer
Director, Investor Relations
(609) 896-7632
II Acquisition Corp.
John A. Young
Vice President
(804) 560-4074
NEWS RELEASE
FOR IMMEDIATE RELEASE
IMO INDUSTRIES ANNOUNCES SALE TO II ACQUISITION CORP., AN AFFILIATE OF
CONSTELLATION CAPITAL PARTNERS LLC, AND TERMINATES SALE TO UNITED DOMINION
INDUSTRIES
LAWRENCEVILLE, NJ (July 25, 1997) -- Imo Industries Inc. (NYSE:IMD) announced
today that it has executed a definitive agreement with II Acquisition Corp.
("Acquisition Corp."), an affiliate of Constellation Capital Partners LLC,
pursuant to which Acquisition Corp. will commence a cash tender offer for all
outstanding shares of Imo common stock at a price of $7.05 per share, net in
cash.
Imo had previously announced on June 26, 1997 that it had entered into a merger
agreement with United Dominion Industries Limited pursuant to which a wholly
owned subsidiary of United Dominion ("UD") commenced on July 2, 1997 a cash
tender offer for all of the outstanding shares of Imo common stock at a price of
$6 per share. Earlier today, the Imo Board of Directors unanimously determined
that the Acquisition Corp. offer was on terms more favorable to Imo's
stockholders. In addition, Imo withdrew its approval of United Dominion's tender
offer and the other transactions contemplated by the merger agreement with
United Dominion and exercised its right to terminate the merger agreement.
<PAGE> 2
Imo's Board has approved Acquisition Corp.'s tender offer, has determined that
Acquisition Corp.'s tender offer is fair to, and in the best interests of, Imo's
stockholders and recommends that Imo's stockholders accept Acquisition Corp.'s
tender offer. Imo's Board of Directors was advised by Credit Suisse First Boston
Corporation that the consideration to be received by tendering holders of Imo
common stock pursuant to Acquisition Corp.'s tender offer is fair to such
holders from a financial point of view.
Pursuant to the terms of the United Dominion merger agreement, $8 million is
being paid to United Dominion as a result of Imo's termination of the merger
agreement and United Dominion will be reimbursed for up to $2 million of its
expenses incurred in connection with the transactions by the merger agreement.
Unlike the UD agreement, the Acquisition Corp. agreement does not contemplate an
offer to purchase Imo's 11 3/4% Senior Subordinated Notes due 2006 or solicit
consents from the holders of the notes to amend the indenture governing the
notes or contemplate a merger with Imo following completion of the tender offer.
Acquisition Corp.'s tender offer for the shares of Imo common stock is
conditioned on the receipt of more than 80% of the outstanding shares. Any
shares not purchased in the tender offer will remain outstanding.
Imo Chairman and Chief Executive Officer Donald K. Farrar said, "Acquisition
Corp.'s offer of $7.05 per share exceeds United Dominion's offer by more than
17% and does not include any financing condition. Imo's Board of Directors
believes Acquisition Corp.'s offer will provide Imo's stockholders better value
than United Dominion's offer. Acquisition Corp. has also indicated that, after
successful completion of its tender offer, it looks forward to working with us
in order to improve our operations and continue to deliver superior products to
our customers."
"Imo has solid operating companies and we look forward to working with our new
associates in their continuous improvement efforts on quality, cost and
service", said Philip W. Knisley, President of Constellation and of Acquisition
Corp.
Acquisition Corp. will commence its tender offer for all the common stock of Imo
on or before August 1, 1997.
If an Imo stockholder that has tendered shares pursuant to UD's offer wishes to
withdraw such tender, such stockholder must deliver a written or facsimile
transmission notice of withdrawal to First Chicago Trust Company of New York
prior to 12:00 midnight, New York City time, on July 30, 1997, unless the UD
offer is extended (in which case a tendering stockholder can withdraw his tender
at any time prior to the expiration of the UD offer).
IF UD elects to terminate its offer, it is required to promptly return any
shares tendered. Certain additional procedures that must be followed to withdraw
such tender, as well as First Chicago's address and facsimile numbers, are set
forth in UD's offer to purchase dated July 2, 1997 that was previously
distributed to Imo stockholders. Stockholders with any questions regarding UD's
offer can also contact MacKenzie Partners, the information agent for UD's offer,
at 1-800-322-2885.
Imo Industries, with 1996 sales of $469 million, is a diversified manufacturer
of pumps, fluid sensors, motion control products, remote control systems, and
automobile components, with operations worldwide.
Constellation Capital is a private equity firm based in Richmond, VA.
Constellation also owns Ameridrives International, a manufacturer of mechanical
power transmission clutches and couplings.
# # #
<PAGE> 1
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES
OF COMMON STOCK AND ASSOCIATED RIGHTS
OF IMO INDUSTRIES INC. AT $7.05 NET PER SHARE BY
II ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME ON WEDNESDAY AUGUST 27, 1997, UNLESS THE OFFER IS EXTENDED.
July 31, 1997
To Participants in the Imo Industries Inc. Employees Stock Savings Plan:
Enclosed for your consideration are the Offer to Purchase, dated July 31,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer"), relating to an
offer by II Acquisition Corp., a Delaware corporation ("Purchaser") and an
affiliate of Constellation Capital Partners LLC, a private investment firm, to
purchase all outstanding shares of common stock, par value $1.00 per share (the
"Common Stock"), of Imo Industries Inc., a Delaware corporation (the "Company"),
and each associated right to purchase shares of the Company's Series B Junior
Participating Preferred Stock (individually, a "Right" and collectively, the
"Rights") issued pursuant to the Rights Agreement dated as of April 30, 1997, as
amended, between the Company and First Chicago Trust Company of New York (such
shares of Common Stock and the Rights collectively referred to as the "Shares")
at a purchase price of $7.05 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer. The Offer is being made in connection with the Share Purchase Agreement,
dated as of July 25, 1997, between Imo Industries Inc. and II Acquisition Corp.
(the "Agreement").
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT AS A
PARTICIPANT IN THE COMPANY'S EMPLOYEES STOCK SAVINGS PLAN (THE "PLAN"). A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD IN ACCORDANCE WITH
THE TERMS OF THE PLAN, TO THE EXTENT CONSISTENT WITH APPLICABLE LAWS. THE LETTER
OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED
BY YOU TO TENDER SHARES HELD IN YOUR PLAN ACCOUNT.
Accordingly, we request information as to whether you wish to have us
tender any or all of the Shares held in your Plan account, upon the terms and
conditions set forth in the Offer.
Please note the following:
1. The tender price is $7.05 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all of the outstanding Shares.
3. The Board of Directors of the Company has unanimously determined
that the Offer is fair to and in the best interests of the Company and its
stockholders, and recommends that stockholders accept the Offer and tender
their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, August 27, 1997, unless the Offer is
extended.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least the number of Shares that shall constitute more than eighty percent
(80%) of the Shares then outstanding, and (ii) the expiration or
termination of any applicable antitrust waiting periods. Purchaser reserves
the right (but shall not be obligated), in accordance with applicable rules
and regulations of the United States Securities and Exchange Commission,
subject to the limitations set forth in the Agreement, to waive any of the
conditions to the Offer.
6. Shares in Plan accounts as to which we have not received
instructions from Participants will not be tendered in the Offer.
If you wish to have us tender any or all of the Shares held in your Plan
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form contained in this letter. An envelope to return your
instruction to us is enclosed. If you authorize tender of your Shares, all such
Shares will be tendered unless otherwise indicated in such instruction form.
PLEASE FORWARD YOUR INSTRUCTIONS TO US SO THAT THEY ARE RECEIVED BY US NO LATER
THAN 5:00 P.M., NEW YORK TIME, ON MONDAY, AUGUST 18, 1997, TO ALLOW US AMPLE
TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE> 2
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least the number of Shares that shall constitute more than eighty percent
(80%) of the Shares then outstanding, and (ii) the expiration or
termination of any applicable antitrust waiting periods. Purchaser reserves
the right (but shall not be obligated), in accordance with applicable rules
and regulations of the United States Securities and Exchange Commission,
subject to the limitations set forth in the Agreement, to waive any of the
conditions to the Offer.
6. Shares in Plan accounts as to which we have not received
instructions from Participants will not be tendered in the Offer.
If you wish to have us tender any or all of the Shares held in your Plan
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form contained in this letter. An envelope to return your
instruction to us is enclosed. If you authorize tender of your Shares, all such
Shares will be tendered unless otherwise indicated in such instruction form.
PLEASE FORWARD YOUR INSTRUCTIONS TO US SO THAT THEY ARE RECEIVED BY US NO LATER
THAN 5:00 P.M., NEW YORK TIME, ON MONDAY AUGUST 18, 1997, TO ALLOW US AMPLE TIME
TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made only by the Offer to Purchase and the related Letter of
Transmittal and is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the Offer or the
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. However, Purchaser may, in its discretion, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction. In those
jurisdictions where the securities laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by Schroder & Co. Inc. or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Very truly yours,
Eagle Trust Company
<PAGE> 3
INSTRUCTION WITH RESPECT TO THE OFFER TO
PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK AND
ASSOCIATED RIGHTS OF IMO INDUSTRIES INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated July 31, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Offer"), in connection with the offer by II Acquisition Corp., a Delaware
corporation (the "Purchaser") and an affiliate of Constellation Capital Partners
LLC, a private investment firm, to purchase all outstanding shares of common
stock, par value $1.00 per share (the "Common Stock"), of Imo Industries Inc., a
Delaware corporation (the "Company"), and each associated right to purchase
shares of the Company's Series B Junior Participating Preferred Stock
(individually, a "Right" and collectively, the "Rights") issued pursuant to the
Rights Agreement dated as of April 30, 1997, as amended, between the Company and
First Chicago Trust Company of New York (such shares of Common Stock and the
Rights collectively referred to as the "Shares").
This will instruct you to tender the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
NOTE: Shares in Plan accounts as to which we have not received instructions will
not be tendered in the Offer.
Number of Shares to be Tendered:(1)
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINT NAME(S)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER(S)
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER(S)
- ---------------
(1) Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE> 1
Exhibit (b)(1)
II ACQUISITION CORP.
SENIOR NOTE
$50,000,000 July 23, 1997
FOR VALUE RECEIVED, the undersigned, II ACQUISITION CORP. (herein
called the "Borrower"), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to JANELIA FARM CORP., a Virginia
corporation, or registered assigns, the principal sum of FIFTY MILLION DOLLARS
($50,000,000), as such principal sum may be adjusted in respect of interest
accruing on the principal amount hereof as provided below, on May 15, 2007, with
interest (computed on the basis of a 360-day year consisting of twelve 30-day
months) on the unpaid balance thereof at a variable per annum equal to the sum
of (a) the rate published from time to time in the Wall Street Journal as the
"prime" rate, determined with respect to the date that is two business days
prior to the applicable payment date, and (b) 0.25%, from the date hereof,
payable semiannually in arrears on the first day of November and May in each
year, with the first interest payment being due on November 15, 1997; provided
that, at the option of the Borrower exercised by written notice to the
registered holder hereof, the interest becoming due on any interest payment date
up to and including May 15, 2002 may be paid by adding to the principal amount
hereof on any such date an aggregate amount equal to the amount of interest then
due and payable. The increase of the principal amount hereof as described in the
previous sentence shall constitute full payment of such interest. Beginning on
November 15, 2002, interest will be payable solely in cash.
Payments of principal of and interest on this Note are to be made at
the main office of the holder, or at such other place as the holder shall
designate to the Borrower hereof in writing, in lawful money of the United
States of America.
All repayments of interest or principal, and all interest being
added to the principal amount, shall be recorded by the registered holder hereof
and appropriate notations to evidence the foregoing information with respect to
the principal amount then outstanding shall be endorsed by such registered
holder on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of such registered
holder to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder.
<PAGE> 2
The Borrower may at any time and from time to time, upon notice to
the holder of this Note, prepay all or any portion of the indebtedness
represented by this Note, with interest accrued to the date fixed for
prepayment.
THIS SENIOR NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) THIS SENIOR
NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT, OR (II) THE HOLDER HEREOF
PROVIDES THE BORROWER WITH (A) A WRITTEN OPINION OF LEGAL COUNSEL, WHICH
COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO
THE BORROWER, TO THE EFFECT THAT THE PROPOSED TRANSFER OF THIS SENIOR NOTE MAY
BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT, OR (B) A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") REASONABLY
SATISFACTORY TO THE BORROWER TO THE EFFECT THAT UNDER THE SECURITIES ACT THE
PROPOSED TRANSFER OF THIS SENIOR NOTE WITHOUT REGISTRATION WILL NOT RESULT IN A
RECOMMENDATION BY THE STAFF OF THE COMMISSION THAT ACTION BE TAKEN WITH RESPECT
THERETO, OR (C) SUCH OTHER EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO THE
BORROWER THAT THE PROPOSED TRANSFER OF THIS SENIOR NOTE MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT.
This Senior Note shall be governed by and construed and enforced in
accordance with the law of the State of Delaware.
II ACQUISITION CORP.
By: /s/ JOSEPH O. BUNTING, III
------------------------------
Name: Joseph O. Bunting, III
Title: Vice President and Treasurer
<PAGE> 1
Exhibit (b)(2)
II ACQUISITION CORP.
SUBORDINATED NOTE
No. R-1 July 23, 1997
$37,500,000
FOR VALUE RECEIVED, the undersigned, II ACQUISITION CORP. (herein
called the "Borrower"), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to MITCHELL P. RALES, or
registered assigns, the principal sum of THIRTY SEVEN MILLION, FIVE HUNDRED
THOUSAND DOLLARS ($37,500,000), as such principal sum may be adjusted in respect
of interest accruing on the principal amount hereof as provided below, on May
15, 2007, with interest (computed on the basis of a 360-day year consisting of
twelve 30-day months) on the unpaid balance thereof at a variable rate per annum
equal to the sum of (a) the rate published from time to time in the Wall Street
Journal as the "prime" rate, determined with respect to the date that is two
business days prior to the applicable interest payment date, and (b) 0.375%,
from the date hereof, payable semiannually in arrears on the fifteenth day of
November and May in each year, with the first interest payment being due on
November 15, 1997; provided that, at the option of the Borrower exercised by
written notice to the registered holder hereof, the interest becoming due on any
interest payment date up to and including May 15, 2002 may be paid by adding to
the principal amount hereof on any such date an aggregate amount equal to the
amount of interest then due and payable. The increase of the principal amount
hereof as described in the previous sentence shall constitute full payment of
such interest. Beginning on November 15, 2002, interest will be payable solely
in cash.
Payments of principal of and interest on this Note are to be made at
the main office of the holder, or at such other place as the holder shall
designate to the Borrower hereof in writing, in lawful money of the United
States of America.
All repayments of interest or principal, and all interest being
added to the principal amount, shall be recorded by the registered holder hereof
and appropriate notations to evidence the foregoing information with respect to
the principal amount then outstanding shall be endorsed by such registered
holder on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of such registered
holder to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder.
<PAGE> 2
1. Prepayment. The Borrower may at any time and from time to time,
upon notice to the holder of this Note, prepay all or any portion of the
indebtedness represented by this Note, with interest accrued to the date fixed
for prepayment subject to the subordination provisions set forth below.
2. Subordination. The Borrower agrees, and the registered holder by
accepting this Note agrees, that all indebtedness evidenced by this Note is
subordinated in right of payment, to the extent and in the manner provided
herein, to the prior indefeasible payment in full, for a period of time in
excess of all applicable preference or other similar periods under applicable
bankruptcy, insolvency or creditors' rights law, to the Note, issued by the
Borrower to Janelia Farm Corp. dated July 23, 1997 and any refinancing or
extension thereof and any indebtedness for money borrowed issued after the date
hereof, except indebtedness that is designated as being pari passu or
subordinated in right of payment to this Note (the "Senior Debt"), and that the
subordination is for the benefit of, and shall be enforceable by, the holder of
the Senior Debt.
(a) Liquidation; Dissolution; Bankruptcy. Upon any distribution or
payment to creditors of the Borrower in a liquidation, dissolution, winding up
or reorganization of the Borrower of any kind or character and whether voluntary
or involuntary or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Borrower, its property or to its creditors as
such or in an assignment for the benefit of creditors or any marshaling of the
assets and liabilities of the Borrower:
(i) the holder of the Senior Debt shall be entitled to receive
indefeasible payment in full of all amounts owing with respect to the
Senior Debt (including, without limitation, interest and expenses accrued
after the occurrence of any such event or the commencement of any such
proceeding at the rate specified in the Senior Debt regardless of whether
or not such interest is allowable as a bankruptcy claim in such
proceeding) before the registered holder shall be entitled to receive,
directly or indirectly, any payment of or distribution with respect to
principal, premium, if any, or interest on this Note; and
(ii) until the Senior Debt is paid in full, any payment or
distribution to which the registered holder would be entitled but for
these subordination provisions shall be made to the holder of the Senior
Debt, as its interest may appear, except that the registered holder may
receive securities that are subordinated to at least the same extent as
this Note to the Senior Debt.
2
<PAGE> 3
(b) Default on Senior Debt. The Borrower may not pay principal of,
premium, if any, or interest on this Note and may not repurchase, redeem or
otherwise retire this Note (collectively, "pay this Note"), and the registered
holder agrees that it shall not ask, demand or sue for, or take or receive from
Borrower, directly or indirectly, in cash, securities or other property or by
way of set-off, any payment of this Note; provided, however, that so long as no
default on the Senior Debt occurs and is continuing, following any applicable
grace periods, that then permits the holder of such Senior Debt to accelerate
its maturity in accordance with its terms and that no such default would be
caused by such payment, the Borrower may pay this Note in an amount not to
exceed the accrued interest thereon.
(c) When Distribution Must Be Paid Over. In the event that a payment
or distribution is made to the registered holder at a time when such payment or
distribution is prohibited by paragraphs (a) and (b) hereof, the registered
holder who receives the payment or distribution shall hold it in trust for the
benefit of, and promptly pay it over (in the same form as received but with any
necessary endorsements) to, the holder of the Senior Debt as its interest may
appear, or its agent or representative or the trustee under the indenture or
other agreement (if any) pursuant to which the Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
obligations with respect to the Senior Debt remaining unpaid to the extent
necessary to pay such obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holder of
the Senior Debt.
(d) Notice by the Borrower. The Borrower shall promptly notify the
registered holder in writing of any facts known to the Borrower that would cause
a payment of any amounts with respect to this Note to violate the provisions
hereof, but failure to give such notice shall not affect the subordination of
this Note to the Senior Debt.
(e) Subrogation. After all Senior Debt is indefeasibly paid in full
for a period of time in excess of all applicable preference or similar periods
under applicable bankruptcy, insolvency or creditors' rights laws, and until
this Note is paid in full, the registered holder shall be subrogated (equally
and ratably with all other debt that is pari passu with this Note) to the rights
of the holder of the Senior Debt to receive distributions applicable to the
Senior Debt to the extent that distributions otherwise payable to the registered
holder have been applied to the payment of Senior Debt. A distribution made
under the subordination provisions of this Note to the holder of the Senior Debt
which otherwise would have been made to the registered
3
<PAGE> 4
holder is not, as between the Borrower and the registered holder, a payment by
the Borrower on this Note.
(f) Relative Rights. This Note defines the relative rights of the
registered holder and the holder of the Senior Debt. Nothing in this Note shall:
(i) impair, as between the Borrower and the registered holder, the
obligation of the Borrower, which is absolute and unconditional, to pay
principal of and interest on this Note in accordance with its terms;
(ii) affect the relative rights of the registered holder and
creditors of the Borrower other than their rights in relation to the
holder of the Senior Debt; or
(iii) prevent the registered holder from exercising any available
remedies, subject to the rights of the holder of the Senior Debt to
receive distributions and payments otherwise payable to the registered
holder.
(g) Subordination May Not Be Impaired. No right of any present or
future holder of Senior Debt to enforce the subordination of the obligations
with respect to this Note shall be prejudiced or impaired by any act or failure
to act by the Borrower or by any act or failure to act or waiver of any terms of
this Note, by any such holder, or by any noncompliance by the Borrower with the
terms of the subordination provisions of this Note, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. The holder
of the Senior Debt may extend, renew, modify or amend the terms of the Senior
Debt or any security therefor and release, sell or exchange such security and
otherwise deal freely with the Borrower, all without the consent of or notice
to, and without affecting the liabilities and obligations of, the Borrower or
the registered holder. No provision in any supplemental agreement or document
which modifies the subordination provisions of this Note or otherwise affects
the superior position of the holder of the Senior Debt shall be effective
against the holder of the Senior Debt if such holder has not consented thereto
in accordance with the provisions of the document governing such Senior Debt.
(h) The Registered Holder Entitled to Rely. Upon any payment or
distribution pursuant to these subordination provisions, the registered holder
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in paragraph (a)
above are pending, (ii) upon a certificate of the liquidating trustee or agent
or other person making such payment or distribution to the registered holder or
(iii) upon the representatives for the
4
<PAGE> 5
holder of the Senior Debt for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the holder of the Senior Debt
and other indebtedness of the Borrower, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to the subordination provisions of this Note.
(i) Reliance by the Holder of the Senior Debt on Subordination
Provisions. The registered holder, by accepting this Note, acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to the holder of the Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of this Note,
to acquire and continue to hold, or to continue to hold, such Senior Debt, and
such holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt. These subordination provisions are intended to be for
the benefit of, and shall be enforceable directly by, the holder of the Senior
Debt. The registered holder hereby waives to the fullest extent permitted by law
any right to compel marshaling or to otherwise seek to compel the holder of the
Senior Debt to follow any particular order of realization upon any collateral
for or any particular order or manner of enforcement of remedies with respect to
the Senior Debt.
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) THIS
SUBORDINATED NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT, OR (II) THE
HOLDER HEREOF PROVIDES THE BORROWER WITH (A) A WRITTEN OPINION OF LEGAL COUNSEL,
WHICH COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY
SATISFACTORY TO THE BORROWER, TO THE EFFECT THAT THE PROPOSED TRANSFER OF THIS
SUBORDINATED NOTE MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT,
OR (B) A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") REASONABLY SATISFACTORY TO THE BORROWER TO THE EFFECT THAT UNDER
THE SECURITIES ACT THE PROPOSED TRANSFER OF THIS SUBORDINATED NOTE WITHOUT
REGISTRATION WILL NOT RESULT IN A RECOMMENDATION BY THE STAFF OF THE COMMISSION
THAT ACTION BE TAKEN WITH RESPECT THERETO, OR (C) SUCH OTHER EVIDENCE AS MAY BE
REASONABLY SATISFACTORY TO THE BORROWER THAT THE PROPOSED TRANSFER
5
<PAGE> 6
OF THIS SUBORDINATED NOTE MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT.
This Subordinated Note shall be governed by and construed and
enforced in accordance with the law of the State of Delaware.
II ACQUISITION CORP.
By: /s/ JOSEPH O. BUNTING, III
------------------------------
Name: Joseph O. Bunting, III
Title: Vice President and Treasurer
6
<PAGE> 1
Exhibit (b)(3)
II ACQUISITION CORP.
SUBORDINATED NOTE
No. R-2 July 23, 1997
$37,500,000
FOR VALUE RECEIVED, the undersigned, II ACQUISITION CORP. (herein
called the "Borrower"), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to STEVEN M. RALES, or registered
assigns, the principal sum of THIRTY SEVEN MILLION, FIVE HUNDRED THOUSAND
DOLLARS ($37,500,000), as such principal sum may be adjusted in respect of
interest accruing on the principal amount hereof as provided below, on May 15,
2007, with interest (computed on the basis of a 360-day year consisting of
twelve 30-day months) on the unpaid balance thereof at a variable rate per annum
equal to the sum of (a) the rate published from time to time in the Wall Street
Journal as the "prime" rate, determined with respect to the date that is two
business days prior to the applicable interest payment date, and (b) 0.375%,
from the date hereof, payable semiannually in arrears on the fifteenth day of
November and May in each year, with the first interest payment being due on
November 15, 1997; provided that, at the option of the Borrower exercised by
written notice to the registered holder hereof, the interest becoming due on any
interest payment date up to and including May 15, 2002 may be paid by adding to
the principal amount hereof on any such date an aggregate amount equal to the
amount of interest then due and payable. The increase of the principal amount
hereof as described in the previous sentence shall constitute full payment of
such interest. Beginning on November 15, 2002, interest will be payable solely
in cash.
Payments of principal of and interest on this Note are to be made at
the main office of the holder, or at such other place as the holder shall
designate to the Borrower hereof in writing, in lawful money of the United
States of America.
All repayments of interest or principal, and all interest being
added to the principal amount, shall be recorded by the registered holder hereof
and appropriate notations to evidence the foregoing information with respect to
the principal amount then outstanding shall be endorsed by such registered
holder on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of such registered
holder to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder.
<PAGE> 2
1. Prepayment. The Borrower may at any time and from time to time,
upon notice to the holder of this Note, prepay all or any portion of the
indebtedness represented by this Note, with interest accrued to the date fixed
for prepayment subject to the subordination provisions set forth below.
2. Subordination. The Borrower agrees, and the registered holder by
accepting this Note agrees, that all indebtedness evidenced by this Note is
subordinated in right of payment, to the extent and in the manner provided
herein, to the prior indefeasible payment in full, for a period of time in
excess of all applicable preference or other similar periods under applicable
bankruptcy, insolvency or creditors' rights law, to the Note, issued by the
Borrower to Janelia Farm Corp. dated July 23, 1997 and any refinancing or
extension thereof and any indebtedness for money borrowed issued after the date
hereof, except indebtedness that is designated as being pari passu or
subordinated in right of payment to this Note (the "Senior Debt"), and that the
subordination is for the benefit of, and shall be enforceable by, the holder of
the Senior Debt.
(a) Liquidation; Dissolution; Bankruptcy. Upon any distribution or
payment to creditors of the Borrower in a liquidation, dissolution, winding up
or reorganization of the Borrower of any kind or character and whether voluntary
or involuntary or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Borrower, its property or to its creditors as
such or in an assignment for the benefit of creditors or any marshaling of the
assets and liabilities of the Borrower:
(i) the holder of the Senior Debt shall be entitled to receive
indefeasible payment in full of all amounts owing with respect to the
Senior Debt (including, without limitation, interest and expenses accrued
after the occurrence of any such event or the commencement of any such
proceeding at the rate specified in the Senior Debt regardless of whether
or not such interest is allowable as a bankruptcy claim in such
proceeding) before the registered holder shall be entitled to receive,
directly or indirectly, any payment of or distribution with respect to
principal, premium, if any, or interest on this Note; and
(ii) until the Senior Debt is paid in full, any payment or
distribution to which the registered holder would be entitled but for
these subordination provisions shall be made to the holder of the Senior
Debt, as its interest may appear, except that the registered holder may
receive securities that are subordinated to at least the same extent as
this Note to the Senior Debt.
2
<PAGE> 3
(b) Default on Senior Debt. The Borrower may not pay principal of,
premium, if any, or interest on this Note and may not repurchase, redeem or
otherwise retire this Note (collectively, "pay this Note"), and the registered
holder agrees that it shall not ask, demand or sue for, or take or receive from
Borrower, directly or indirectly, in cash, securities or other property or by
way of set-off, any payment of this Note; provided, however, that so long as no
default on the Senior Debt occurs and is continuing, following any applicable
grace periods, that then permits the holder of such Senior Debt to accelerate
its maturity in accordance with its terms and that no such default would be
caused by such payment, the Borrower may pay this Note in an amount not to
exceed the accrued interest thereon.
(c) When Distribution Must Be Paid Over. In the event that a payment
or distribution is made to the registered holder at a time when such payment or
distribution is prohibited by paragraphs (a) and (b) hereof, the registered
holder who receives the payment or distribution shall hold it in trust for the
benefit of, and promptly pay it over (in the same form as received but with any
necessary endorsements) to, the holder of the Senior Debt as its interest may
appear, or its agent or representative or the trustee under the indenture or
other agreement (if any) pursuant to which the Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
obligations with respect to the Senior Debt remaining unpaid to the extent
necessary to pay such obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holder of
the Senior Debt.
(d) Notice by the Borrower. The Borrower shall promptly notify the
registered holder in writing of any facts known to the Borrower that would cause
a payment of any amounts with respect to this Note to violate the provisions
hereof, but failure to give such notice shall not affect the subordination of
this Note to the Senior Debt.
(e) Subrogation. After all Senior Debt is indefeasibly paid in full
for a period of time in excess of all applicable preference or similar periods
under applicable bankruptcy, insolvency or creditors' rights laws, and until
this Note is paid in full, the registered holder shall be subrogated (equally
and ratably with all other debt that is pari passu with this Note) to the rights
of the holder of the Senior Debt to receive distributions applicable to the
Senior Debt to the extent that distributions otherwise payable to the registered
holder have been applied to the payment of Senior Debt. A distribution made
under the subordination provisions of this Note to the holder of the Senior Debt
which otherwise would have been made to the registered
3
<PAGE> 4
holder is not, as between the Borrower and the registered holder, a payment by
the Borrower on this Note.
(f) Relative Rights. This Note defines the relative rights of the
registered holder and the holder of the Senior Debt. Nothing in this Note shall:
(i) impair, as between the Borrower and the registered holder, the
obligation of the Borrower, which is absolute and unconditional, to pay
principal of and interest on this Note in accordance with its terms;
(ii) affect the relative rights of the registered holder and
creditors of the Borrower other than their rights in relation to the
holder of the Senior Debt; or
(iii) prevent the registered holder from exercising any available
remedies, subject to the rights of the holder of the Senior Debt to
receive distributions and payments otherwise payable to the registered
holder.
(g) Subordination May Not Be Impaired. No right of any present or
future holder of Senior Debt to enforce the subordination of the obligations
with respect to this Note shall be prejudiced or impaired by any act or failure
to act by the Borrower or by any act or failure to act or waiver of any terms of
this Note, by any such holder, or by any noncompliance by the Borrower with the
terms of the subordination provisions of this Note, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. The holder
of the Senior Debt may extend, renew, modify or amend the terms of the Senior
Debt or any security therefor and release, sell or exchange such security and
otherwise deal freely with the Borrower, all without the consent of or notice
to, and without affecting the liabilities and obligations of, the Borrower or
the registered holder. No provision in any supplemental agreement or document
which modifies the subordination provisions of this Note or otherwise affects
the superior position of the holder of the Senior Debt shall be effective
against the holder of the Senior Debt if such holder has not consented thereto
in accordance with the provisions of the document governing such Senior Debt.
(h) The Registered Holder Entitled to Rely. Upon any payment or
distribution pursuant to these subordination provisions, the registered holder
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in paragraph (a)
above are pending, (ii) upon a certificate of the liquidating trustee or agent
or other person making such payment or distribution to the registered holder or
(iii) upon the representatives for the
4
<PAGE> 5
holder of the Senior Debt for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the holder of the Senior Debt
and other indebtedness of the Borrower, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to the subordination provisions of this Note.
(i) Reliance by the Holder of the Senior Debt on Subordination
Provisions. The registered holder, by accepting this Note, acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to the holder of the Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of this Note,
to acquire and continue to hold, or to continue to hold, such Senior Debt, and
such holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt. These subordination provisions are intended to be for
the benefit of, and shall be enforceable directly by, the holder of the Senior
Debt. The registered holder hereby waives to the fullest extent permitted by law
any right to compel marshaling or to otherwise seek to compel the holder of the
Senior Debt to follow any particular order of realization upon any collateral
for or any particular order or manner of enforcement of remedies with respect to
the Senior Debt.
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) THIS
SUBORDINATED NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT, OR (II) THE
HOLDER HEREOF PROVIDES THE BORROWER WITH (A) A WRITTEN OPINION OF LEGAL COUNSEL,
WHICH COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY
SATISFACTORY TO THE BORROWER, TO THE EFFECT THAT THE PROPOSED TRANSFER OF THIS
SUBORDINATED NOTE MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT,
OR (B) A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") REASONABLY SATISFACTORY TO THE BORROWER TO THE EFFECT THAT UNDER
THE SECURITIES ACT THE PROPOSED TRANSFER OF THIS SUBORDINATED NOTE WITHOUT
REGISTRATION WILL NOT RESULT IN A RECOMMENDATION BY THE STAFF OF THE COMMISSION
THAT ACTION BE TAKEN WITH RESPECT THERETO, OR (C) SUCH OTHER EVIDENCE AS MAY BE
REASONABLY SATISFACTORY TO THE BORROWER THAT THE PROPOSED TRANSFER
5
<PAGE> 6
OF THIS SUBORDINATED NOTE MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT.
This Subordinated Note shall be governed by and construed and
enforced in accordance with the law of the State of Delaware.
II ACQUISITION CORP.
By: /s/ JOSEPH O. BUNTING, III
------------------------------
Name: Joseph O. Bunting, III
Title: Vice President and Treasurer
6
<PAGE> 1
Exhibit (b)(4)
CONFIDENTIAL
July 24, 1997
Constellation Capital Partners LLC
II Acquisition Inc.
c/o Constellation Capital Partners LLC
9211 Forest Hill Avenue, Suite 109
Richmond, VA 23235
Imo Industries Inc.
Commitment Letter
Dear Sirs:
You have provided us with certain information regarding your
proposed acquisition by way of a tender offer (the "Acquisition") by II
Acquisition Corp., a newly-formed Delaware corporation ("II Acquisition") of the
capital stock of Imo Industries Inc. ("Imo" or the "Borrower"). The Acquisition
and the other transactions described in this commitment letter and the Term
Sheet (as defined below) are referred to as the "Transaction"). Concurrently
with the above, we understand that the Borrower is interested in obtaining a
commitment for up to $147,400,000 of senior, secured financing consisting of (i)
a $70,000,000 revolving credit facility (the "Revolving Facility") and (ii) a
$77,400,000 (or such lesser amount as may be outstanding as term loans under the
Existing Agreement referred to below) term loan facility (the "Term Facility";
the Term Facility and the Revolving Facility are collectively referred to as the
"Credit Facilities"). We further understand that proceeds from the Credit
Facilities will be used on the date of the initial credit extensions to
refinance certain indebtedness of the Borrower and its subsidiaries (to be
identified), and that the proceeds of the Revolving Facility will also be used
in an amount not to exceed $20,000,000 to pay fees and expenses arising in
connection with the Transaction.
The Bank of Nova Scotia ("Scotiabank") and NationsBank, N.A.
("NationsBank"; Scotiabank and NationsBank are collectively referred to herein
as the "Managing Agents") are pleased to inform you that they each hereby (i)
commit to provide up to $73,700,000 of the Credit Facilities and (ii) Scotiabank
and an affiliate of NationsBank ("NCMI") undertake to use reasonable commercial
efforts to form a syndicate of other financial institutions identified by us in
consultation with you (together with Scotiabank and
<PAGE> 2
NationsBank, the "Lenders") that will participate in the Credit Facilities. In
addition, Scotiabank agrees to act as administrative agent (in such capacity,
the "Administrative Agent") and as documentation agent (the "Documentation
Agent"), while NCMI will act as syndication agent (the "Syndication Agent") for
such syndicate of Lenders. Our commitments, undertakings and agreements
hereunder are subject to (a) the terms and conditions set forth herein and in
the term sheet annexed hereto as Annex I (the "Term Sheet") and the provisions
set forth in Annex II hereto, (b) the terms and conditions contained in the
confidential fee letter, dated the date hereof among each of you and the
Managing Agents and each other fee. letter between each of you and/or Imo and
either Scotiabank or NationsBank (all collectively referred to as the "Fee
Letters"), (c) the absence of any material disruption of or material adverse
change in current financial, banking or capital market conditions that, in our
judgment, could materially impair the satisfactory syndication of the Credit
Facility, and (d) the absence of any liabilities not previously disclosed to the
Managing Agents on or prior to the date hereof which, in the Managing Agents'
good faith determination, individually or in the aggregate materially adversely
effects the Borrower's or the Borrower and its subsidiaries' (taken as a whole)
respective financial condition, operations or prospects. In the event any of the
foregoing conditions, events or circumstances are either not satisfied or prove
to be unsatisfactory to us, we reserve the right to either terminate our
commitments, undertakings and agreements hereunder (and thereafter have no other
or further obligations hereunder or in connection with the Credit Facilities) or
to propose alternative financing amounts or structures that assure adequate
protection for Scotiabank, NationsBank and the Lenders. Furthermore, as a
condition to our commitments, you agree that no other agents, co-agents or
arrangers will be appointed, no other titles will be awarded and no compensation
(other than as expressly set forth in the Term Sheet and the Fee Letters) will
be paid in connection with the Credit Facilities unless you and we shall so
agree.
As we discussed, it is the intent of Scotiabank and NationsBank to
solicit commitments from the Lenders promptly following the execution of this
commitment letter in an amount sufficient to allow each of us to achieve its
respective desired hold level in the Credit Facilities. Nonetheless, neither of
our commitments is subject to syndication of the Credit Facilities. Scotiabank
and NCMI will manage all aspects of the syndication, including decisions as to
the selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, the allocations of the commitments
among the Lenders and the amount and distribution of fees among the Lenders. In
that regard, you agree to actively assist us, in all commercially reasonable
respects, in the syndication of the Credit Facilities, which assistance will
require, among other things, that you provide all information we deem to be
reasonably necessary to successfully complete the syndication, including all the
information prepared by you or on your behalf relating to the Transaction and
the Borrower and its subsidiaries, and their business, assets, financial
2
<PAGE> 3
condition, operations and prospects, as we may deem to be reasonably necessary,
and all projections (the "Projections"), as we may reasonably request in
connection with the arrangement and syndication of the Credit Facilities. You
hereby represent and covenant that (a) all factual information (the
"Information") that has been or will be made available to the Managing Agents by
you or on your behalf is or will be, when furnished, complete and correct in all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made and (b) the Projections
that have been or will be made available to the Managing Agents by you or on
your behalf have been or will be prepared in good faith based upon reasonable
assumptions. In arranging and syndicating the Credit Facilities, the Managing
Agents and NCMI will use and rely on the Information and Projections without
independent verification thereof.
In addition, you agree to make certain members of your management,
as well as, to the best of your ability, the Borrower's management and your
consultants and advisors, available during regular business hours to answer
questions regarding the Transaction (including the Borrower) and the Credit
Facilities, to review and assist in the preparation of the syndication
memorandum relating to the Credit Facilities, to meet with prospective Lenders
and to use your best efforts to ensure that our syndication efforts benefit from
your lending relationships.
By your signature below you each hereby jointly and severally
indemnify and hold harmless Scotiabank and NationsBank, each other Lender
committing to participate in the Credit Facilities and each of our and their
respective affiliates, directors, officers, agents and employees, and jointly
and severally agree to promptly pay all of the fees and expenses, in each case
following demand, as set forth in Annex II hereto (with the terms and provisions
of such Annex II hereby being incorporated by reference), whether or not
definitive credit, security and other documentation (collectively, the "Credit
Documentation") is ultimately executed and delivered or the Transaction or any
of the other transactions contemplated hereby or in connection therewith are
ultimately consummated.
This commitment letter, the Term Sheet, Annex II hereto and the Fee
Letters are delivered to you with the understanding that neither this letter,
the Term Sheet, such Annex II or the Fee Letters, nor the substance hereof or
thereof, shall be disclosed to any third party (including, without limitation,
other lenders, underwriters, placement agents, or advisors or any similar
persons), without our prior written consent, except in the case of (i) those in
a confidential relationship to you, such as legal counsel or accountants, (ii)
as required by law or any court or governmental agency or (iii) to the Board of
Directors (and their advisors) of the Borrower (and in each such event of
permitted disclosure you agree
3
<PAGE> 4
promptly to inform us). This commitment letter, the Term Sheet, Annex II hereto
and the Fee Letters constitute the entire understanding among the parties hereto
with respect to the subject matter hereof and thereof and supersede any prior
agreements, written or oral, with respect hereto or thereto. THIS COMMITMENT
LETTER, THE TERM SHEET, ANNEX II HERETO AND THE FEE LETTERS SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
EACH OF THE UNDERSIGNED PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF OR IN CONNECTION WITH, THIS COMMITMENT LETTER,
THE TERM SHEET, ANNEX II HERETO AND THE FEE LETTERS, AND ANY OTHER COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY OF THE UNDERSIGNED PARTIES IN CONNECTION HEREWITH OR THEREWITH. IN NO EVENT
SHALL ANY PARTY TO THIS COMMITMENT LETTER BE LIABLE FOR CONSEQUENTIAL DAMAGES.
If you agree with the foregoing, please sign and return to us the
enclosed copy of this commitment letter and each Fee Letter no later than 5:00
p.m., New York time, on August 1, 1997. Our commitments, undertakings and
agreements hereunder will terminate at such time unless (a) a copy of this
commitment letter and each Fee Letter, each signed by you, has been delivered to
us, and (b) you have made all payments required to be paid hereunder and
thereunder; provided, however, that, any term or provision hereof to the
contrary notwithstanding (i) the two immediately preceding paragraphs shall
survive any termination of our commitments, undertakings and agreements pursuant
to this paragraph, and (ii) following your execution and delivery of this
commitment letter and each Fee Letter as required by clauses (a) and (b) above,
our commitments, undertakings and agreements hereunder will terminate at 5:00
p.m., New York time, on October 31, 1997 unless, on or prior to such time,
definitive Credit Documentation satisfactory to us and our counsel has
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<PAGE> 5
been executed and delivered by you, the Lenders and us (with the date of such
execution and delivery being referred to as the "Closing Date").
We look forward to working with you.
Very truly yours,
THE BANK OF NOVA SCOTIA
By /s/ JAMES R. TRIMBLE
----------------------------------
Name: James R. Trimble
Title: Senior Relationship Manager
NATIONSBANK, N.A.
By /s/ ELIZABETH S. DUFF
----------------------------------
Name: Elizabeth S. Duff
Title: Vice President
Agreed to and Accepted
this 24th day of July, 1997
CONSTELLATION CAPITAL PARTNERS LLC
By /s/ JOHN A. YOUNG
----------------------------------
Name: John A. Young
Title: Vice President
II ACQUISITION CORP.
By /s/ JOHN A. YOUNG
----------------------------------
Name: John A. Young
Title: Vice President
5
<PAGE> 6
ANNEX I
TERM SHEET
(Unless otherwise defined, terms used
in this Term Sheet have the meanings
ascribed thereto in the commitment letter,
dated July 24, 1997 (the "Commitment Letter"),
to which this Term Sheet is annexed).
I. PARTIES
Borrower: Imo Industries Inc. (the "Borrower")
Guarantors: II Acquisition Corp. ("II Acquisition"), the parent of
the Borrower, and all direct and indirect subsidiaries of
the Borrower (collectively, the "Guarantors"), provided,
however, that non-U.S. subsidiaries shall only be
required to deliver guarantees to the extent it would not
result in material increased tax or similar liabilities
for the Borrower and its subsidiaries on a consolidated
basis.
Documentation Agent The Bank of Nova Scotia ("Scotiabank").
and Administrative
Agent:
Syndication Agent: An affiliate ("NCMI" ) of NationsBank, N.A. ("NBNA").
Managing Agents: Scotiabank and NBNA.
Letter of Credit Scotiabank (in such capacity, the "Issuer").
Issuer:
Lenders: Scotiabank, NBNA and a group of financial institutions
(collectively, the "Lenders") as may be consented to by
the Administrative Agent, the Issuer (in the case of
Revolving Loan Lenders) and the Borrower, such consent
not to be unreasonably withheld.
<PAGE> 7
II. THE CREDIT FACILITIES
Closing Date: The date the definitive documentation relating to the
Credit Facilities is delivered by the Borrower and the
Lenders which shall occur no later than October 31, 1997.
General Description A maximum amount of $147,400,000 in senior,
of the Credit first-priority financing to be provided to the Borrower
Facilities: pursuant to a revolving credit facility (the "Revolving
Facility") and a term loan facility (the "Term
Facility"). The Term Facility and the Revolving Facility
are collectively referred to herein as the "Credit
Facilities". Loans made under the Credit Facilities are
herein collectively referred to as "Loans", with Loans
under the Term Facility being herein collectively
referred to as "Term Loans" and Loans under the Revolving
Facility being herein collectively referred to as
"Revolving Loans".
Revolving Facility: Pursuant to the Revolving Facility (i) Revolving Loans
may be borrowed, prepaid and reborrowed by the Borrower,
and (ii) letters of credit ("Letters of Credit") may be
issued, reimbursed and re-issued for the account of the
Borrower and its subsidiaries, in each case from time to
time prior to the Revolving Facility Commitment
Termination Date (as set forth below).
Revolving Facility $70,000,000.
Commitment Amount:
Purpose: The proceeds of Revolving Loans shall be used to provide
for (i) the general corporate and working capital needs
of the Borrower and its subsidiaries, (ii) to refinance
the outstanding principal amount of revolving loans under
the Borrower's existing bank credit facilities (the
"Existing Agreement"), (iii) to pay fees and expenses
related to the
2
<PAGE> 8
Transaction (in an amount not to exceed $20,000,000), and
(iv) to refinance (referred to as the "Sub Debt
Refunding") up to $40,000,000 of the Borrower's 11 3/4%
senior subordinated notes due 2006 (the "Senior
Subordinated Notes") through either redemptions pursuant
to the put provision in the event of a change of control
as defined therein or (subject to certain conditions)
open market purchases, provided, however, that on a pro
forma basis after giving effect to each Sub Debt
Refunding and the aggregate amount of Revolving Loans
used to make intercompany loans to non-U.S. Subsidiaries
(referred to as "Foreign Loans"), the Borrower must (a)
maintain availability under the Revolving Facility of no
less than $25,000,000 and (b) remain in compliance with
all other terms and conditions of the Credit
Documentation.
Revolving Facility The fifth anniversary of the Closing Date.
Commitment
Termination
Date:
Letter of Credit Sub- Outstanding Letters of Credit and related reimbursement
Facility Availability: obligations may not exceed $30,000,000. Letters of Credit
may be issued for the benefit of the Borrower and its
subsidiaries. The reimbursement obligations for all
Letters of Credit will be the Borrower's. Each issuance
of a Letter of Credit will constitute usage under the
Revolving Facility and will reduce availability of
Revolving Loans, dollar for dollar. Letters of Credit
must expire on the earlier of (i) one Year from the date
of issuance and (ii) the Revolving Facility Commitment
Termination Date.
Term Facility: The Term Facility will be made available to the Borrower
in a single borrowing on the date the conditions
precedent described below are satisfied pursuant to which
nonrevolving Term Loans will be made. Once repaid, Term
Loans cannot be reborrowed.
Term Facility $77,400,000 (or such lesser amount as may be outstanding
Commitment Amount: as term loans under the Existing Agreement on the date of
the making of the initial Loans).
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<PAGE> 9
Purpose: Proceeds of Term Loans shall be used to refinance the
term loans of the Borrower outstanding under the Existing
Agreement.
Amortization of Commencing on a to be determined ("TIBD") date the Term
the Term Facility: Loans will amortize each year in equal quarterly
installments in the following aggregate principal amounts
for each such year set forth below:
Annual
Principal
Year Amount
---- ------
1 TBD
2 TBD
3 TBD
4 TBD
5 TBD
Final Maturity for The fifth anniversary of the Closing Date.
All Term Loans:
III. COMMON TERMS APPLICABLE TO ALL FACILITIES
Interest Rate: At the Borrower's option, the Loan will bear interest at
either Scotiabank's (i) alternate base rate or, (ii)
reserve-adjusted LIBO rate plus, in each case, the
following applicable margins. The Applicable Margins
shall be determined by the Borrower's Leverage Ratio
(defined as the ratio of total debt to EBITDA (each to be
defined in a manner acceptable to the Managing Agents))
on a rolling four quarter basis) as follows:
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<PAGE> 10
----------------------------------------
Leverage Applicable Applicable
Ratio Base Rate LIBO Rate
Margin Margin
----------------------------------------
<3.00:1 0.0 bp 125.0 bp
----------------------------------------
>=3.00:1 and 25.0 bp 150.0 bp
<3.50:1
----------------------------------------
>=3.50:1 and 50.0 bp 175.0 bp
<4.00:1
----------------------------------------
>=4.00:1 and 75.0 bp 200.0 bp
<4.50:1
----------------------------------------
>=4.50:1 and 100.0 bp 225.0 bp
<5.00:1
----------------------------------------
>=5.00:1 125.0 bp 250.0 bp
----------------------------------------
Interest Payment Interest periods for LIBO rate Loans shall be, at the
Dates: Borrower's option, one, two, three or six months or, if
available to all Lenders, twelve months. Interest on LIBO
rate Loans shall be payable on the last business day of
the applicable interest period for such Loans and, if
earlier, the third-month anniversary of the commencement
of such period. Interest on alternate base rate Loans
shall be payable monthly in arrears.
Letter of Credit A fee payable to the Lenders with a commitment to make
Fees and Payment Revolving Loans ("Revolving Loan Lenders") in the amount
Dates: equal to the Applicable LIBO Rate Margin will accrue on
the daily average unused portion of all outstanding
Letters of Credit, payable quarterly in arrears. In
addition, a fronting fee will be payable to the Issuer
for its own account in an amount and on the dates set
forth in the Fee Letter with the Issuer.
Optional Prepayments: Outstanding Loans are voluntarily payable without
penalty; provided, however, that LIBO rate breakage
costs, if any, shall be for the account of the Borrower.
5
<PAGE> 11
Mandatory Customary for the type of transaction proposed and others
Prepayments: to be reasonably specified by the Managing Agents,
including, without limitation, the following:
1. 100% of the net proceeds of asset sales, with certain
exceptions to be agreed upon.
2. 100% of the net proceeds of debt issuances.
3. 75% of the net proceeds of equity issuances of the
Borrower and II Acquisition (other than the equity
issuances described in the Conditions Precedent to
Initial Extensions of Credit, below).
4. An annual excess cash flow sweep to be negotiated.
Mandatory prepayments shall (except as set forth in
the item titled "Affirmative Covenants", below) be
applied to the Term Loans in the inverse order of the
remaining amortization payments, and then to the
repayment of the outstanding principal amount under,
and a reduction in, the Revolving Facility Commitment
Amount.
Commitment Fee: Commencing on the Closing Date, a non-refundable fee (the
"Commitment Fee" in an amount determined by the grid
below will accrue on the daily average unused portion of
the Revolving Facility commitments (whether or not then
available), payable quarterly in arrears and on the final
maturity of the Revolving Facility (whether by stated
maturity or otherwise). The Commitment Fee shall be
determined by the Borrower's Leverage Ratio as follows:
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<PAGE> 12
-----------------------------
Leverage Commitment
Ratio Fee
-----------------------------
<3.50:1.00 25.0 bp
-----------------------------
>=3.50:1.00 and 37.5 bp
<4.50:1.00
-----------------------------
>=4.50:1.00 50.0 bp
-----------------------------
Security: The Credit Facilities will be secured by a (i)
first-priority perfected lien on all the capital stock of
the Borrower acquired by II Acquisition in the tender
offer (the, "Tender Offer") to be commenced by II
Acquisition, and in each of the Borrower's direct and
indirect subsidiaries, (ii) all property and assets
(tangible and intangible) of the Borrower and each of its
direct and indirect domestic subsidiaries, whenever
acquired and wherever located and (iii) a first priority
pledge of all notes evidencing intercompany indebtedness
owing to the Borrower or its domestic subsidiaries;
provided, however, that no more than 65% of the equity
interests of non-U.S. subsidiaries will be required to be
pledged as security in the event that a pledge of a
greater percentage would result in material increased tax
or similar liabilities for the Borrower and its
subsidiaries on a consolidated basis.
Guarantees: To be delivered by each Guarantor provided, however, that
non-U.S. subsidiaries shall only be required to deliver
guarantees to the extent it would not result in material
increased tax or similar liabilities for the Borrower and
its subsidiaries on a consolidated basis.
Conditions Precedent Customary for the type of transaction proposed and others
to Initial Extensions to be reasonably specified by the Managing Agents,
of Credit: including, without limitation, the following:
1. Execution and delivery of satisfactory credit,
security, guarantee and other related documentation
embodying the structure, terms and conditions
contained herein.
7
<PAGE> 13
2. Review and satisfaction with (i) the final structure
of the Transaction, (ii) the sources and uses of
proceeds used to consummate the Transaction and (iii)
the terms and provisions of all documents, agreements
and contracts related to the Transaction, including
the Tender Offer.
3. No material adverse change in the financial
condition, operations, assets, business, properties
or prospects of the Borrower or the Borrower and its
subsidiaries (taken as a whole) since December 31,
1996.
4. Receipt of closing certificates, resolutions,
solvency certificates, reliance letters (including a
reliance letter for any "fairness opinion" delivered
in connection with asset sales), opinions of counsel,
etc. customary for the type of transaction proposed
and in each case satisfactory in form and substance
to the Managing Agents.
5. The Lenders and the Managing Agents shall have
received all fees and expenses required to be paid on
or before the Closing Date.
6. All governmental and third party approvals necessary
or advisable in connection with the Transaction, the
Tender Offer, the financing contemplated hereby and
the continuing operations of the Borrower and its
subsidiaries shall have been obtained and be in full
force and effect, and all applicable waiting periods
shall have expired without any action being taken or
threatened by any competent authority which would
restrain, prevent or otherwise impose adverse
conditions on the Transaction, the Tender Offer or
the financing thereof.
8
<PAGE> 14
7. II Acquisition shall have acquired in the Tender
Offer the higher of (i) 80% of the shares of the
Borrower outstanding on July 24, 1997, free and clear
of any liens, or (ii) a sufficient number of shares
of the Borrower, free and clear of any liens, to
control Imo's board of directors.
8. The Lenders shall have received first priority
perfected liens and guarantees, as set forth above
under the captions "Security" and "Guarantees",
respectively, in each case to the satisfaction of the
Administrative Agent.
9. The Borrower and its subsidiaries shall not have any
indebtedness in respect of borrowed money other than
(i) the Credit Facilities, (ii) the Senior
Subordinated Notes, and (iii) existing foreign
subsidiary indebtedness which is not to exceed
$45,000,000 (and the Borrower's foreign subsidiaries
shall continue to have access to $45,000,000 of
credit, through either credit lines with local
lenders in the amount of approximately $45,000,000,
the Borrower 's ability to make Foreign Loans (with
the proceeds of Revolving Loans), or a combination of
both).
10. The Administrative Agent shall be satisfied that the
capital stock and assets of the Borrower and its
subsidiaries shall be free and clear of all liens
(other than in favor of the Lenders, existing liens
and other customary liens, in each case approved by
the Managing Agents).
9
<PAGE> 15
11. Evidence reasonably satisfactory to the Managing
Agents that II Acquisition is obligated to purchase
preferred stock of the Borrower (which will have
terms satisfactory to the Managing Agents) in an
amount of $156,550,000 to redeem all Senior
Subordinated Notes that can potentially be put to the
Borrower as a result of the change in control caused
by the Tender Offer and that II Acquisition is
committed to purchase preferred stock of the Borrower
(which shall have terms satisfactory to the Managing
Agents) in an amount of not less than $40,000,000
(which can include up to $10,000,000 of debt under
the Unsecured Line (as defined below) converted into
preferred stock of the Borrower (the "Initial Capital
Contribution") within 60 days following the Closing
Date if the Initial Sale (as defined below) has not
been consummated on the terms described below.
12. Delivery of a certificate from the Trustee under the
Senior Subordinated Notes that the Credit Facilities
are the Specified Senior Indebtedness (as defined in
the Senior Subordinated Notes) and as to such other
items as reasonably requested by the Administrative
Agent.
13. Evidence satisfactory to the Administrative Agent
that the Borrower has a committed unsecured line of
credit (the "Unsecured Line") in an amount of
$10,000,000 on terms and conditions reasonably
satisfactory to the Managing Agents, which shall
provide for a conversion of all outstanding debt
thereunder into preferred equity of the Borrower
(with terms satisfactory to the Managing Agents)
within sixty days following the Closing Date if the
Initial Sale has not been consummated on the terms
described below.
10
<PAGE> 16
Additional Conditions The making of each Loan and the issuance of each Letter
Precedent: of Credit will be conditioned upon (i) all
representations in the Credit Documentation being true
and correct in all material respects and (ii) there being
no event of default or condition which, with the giving
of notice or passage of time (or both), would constitute
an event of default.
Representations Customary for the type of transaction proposed and others
and Warranties: to be reasonably specified by the Managing Agents.
Affirmative Customary for the type of transaction proposed and others
Covenants: to be reasonably specified by the Managing Agents,
including (without limitation) (a) the sale of assets
within 60 days following the Closing Date (referred to as
the "Initial Sale") resulting in net cash proceeds of no
less than $85 million which shall be applied (i) as a
prepayment of the Loans in an amount of not less than $81
million (to be applied first, to prepay all outstanding
Revolving Loans (without a reduction in the Revolving
Loan Commitment Amount), and then to a prepayment of the
Term Loans) and (ii) to repay agreed upon subsidiary
indebtedness and (b) a covenant from II Acquisition to
(i) purchase preferred stock of the Borrower in an amount
sufficient to pay for all Senior Subordinated Notes on
the date of any redemption of such Senior Subordinated
Notes resulting from the change in control caused by the
Tender Offer and (ii) to make the Initial Capital
Contribution to the Borrower, in each case as described
above.
Negative Covenants: Customary for the type of transaction proposed and others
to be reasonably specified by the Managing Agents,
including, without limitation, as follows:
1. Restricting the incurrence of additional debt, sale
leasebacks and contingent liabilities.
2. Restricting the making of dividends or similar
distributions (including direct or indirect
redemptions of capital stock).
3. Restricting the incurrence or sufferance of liens or
other encumbrances.
11
<PAGE> 17
4. Restricting the sale of assets or similar transfers,
other than in the ordinary course of business.
5. Restricting the making of investments or acquisitions
(in a single transaction or in a series of related
transactions).
6. Restricting mergers, consolidations and similar
combinations.
7. Restrictions on transactions with affiliates.
8. Limitation on capital expenditures.
9. Other than any Sub Debt Refunding, restricting the
refinancing, defeasance, repurchase or prepayment of
subordinated debt.
Financial Covenants: Customary for the type of transaction proposed and others
to be reasonably specified by the Managing Agents,
including, without limitation, the financial covenants
set forth below, with the definitions and applicable
levels and ratios to be negotiated (all accounting terms
to be interpreted, and all accounting determinations and
computations to be made, in accordance with generally
accepted accounting principles):
1. Maintenance of a minimum absolute level of EBITDA.
2. Maintenance of a maximum ratio of total debt to
EBITDA.
3. Maintenance of a minimum ratio of EBITDA to interest
expense.
4. Maintenance of a minimum fixed charge ratio.
12
<PAGE> 18
Events of Default: Customary for the type of transaction proposed and others
to be reasonably specified by the Managing Agents,
including, without limitation, a cross-default to other
indebtedness of the Borrower and its subsidiaries or any
Guarantor, an automatic acceleration to any acceleration
of the Senior Subordinated Notes, and a change of control
(to be defined) of the Borrower and II Acquisition.
Miscellaneous: Customary provisions to be included, together with others
to be reasonably specified by the Managing Agents,
including, without limitation, the following:
1. Customary indemnity and capital adequacy provisions,
including but not limited to compensation in respect
of taxes (including gross-up provisions for
withholding taxes) and decreased profitability
resulting from U.S. or foreign capital adequacy
requirements, guidelines or policies or their
interpretation or application, and any other
customary yield and increased costs protection deemed
necessary by the Lenders to provide customary
protection.
2. The Lenders will be permitted to assign and
participate Loans, notes and commitments. Any
assignments would be by novation and, if to any
person or entity other than another Lender or an
affiliate of a Lender, would require the
Administrative Agent's and the Borrower's (and, in
the case of assignments by Revolving Loan Lenders,
the Issuer's) consent, not to be unreasonably
withheld or delayed. Participations shall be without
restrictions and participants will have the same
benefits as the Lenders with regard to costs, capital
adequacy, etc., and provision of information on the
Borrower; provided, that the right of participants to
vote on amendments, waivers, etc. will be limited to
certain, customary issues such as, without
limitation, extension of the final scheduled maturity
date of the Loans participated in by such
participant.
13
<PAGE> 19
3. Indemnification of the Managing Agents, each of the
Lenders and each of their respective affiliates,
directors, officers, agents and employees
(collectively, the "Indemnified Parties") from and
against any losses, claims, damages, liabilities or
other expenses, as set forth in Annex II hereto.
4. The Borrower shall pay all of the Managing Agent's
fees and out-of-pocket expenses, as set forth in
Annex II hereto.
5. Amendments and waivers of the Credit Documentation
will require the approval of Lenders holding 51% or
more of the Loans and commitments, except that the
consent of all the Lenders shall be required with
respect to certain customary issues.
6. Waiver of jury trial.
7. New York governing law; consent to New York
jurisdiction.
Counsel to the Mayer, Brown & Platt.
Managing Agents:
This Term Sheet is intended as an outline only and does not purport to summarize
all the conditions, covenants, representations, warranties and other provisions
which would be contained in the definitive Credit Documentation. Scotiabank's
and NBNA's commitments will be subject to negotiation and execution of
definitive Credit Documentation in form and substance satisfactory to Scotiabank
and NBNA, their legal counsel and the Lenders.
14
<PAGE> 20
ANNEX II
INDEMNIFICATION PROVISIONS
Unless otherwise defined, terms used herein shall have the meanings
assigned thereto in the commitment letter (the "Commitment Letter") and term
sheet (the "Term Sheet") to which this Annex II is attached.
Constellation Capital Partners LLC and II Acquisition Corp. (each an
"Indemnitor") shall jointly and severally pay all of the Managing Agents' fees,
costs and out-of-pocket expenses (including all out-of-pocket costs and expenses
arising in connection with the syndication of the Credit Facilities and any due
diligence investigation performed by the Managing Agents, and the fees and
expenses of Mayer, Brown & Platt, special counsel to the Administrative Agent
and any local or foreign counsel retained by the Administrative Agent) arising
in connection with the negotiation, preparation, execution, delivery and
administration of the Commitment Letter, the Term Sheet, the Fee Letters and the
definitive Credit Documentation, and each Indemnitor shall be obligated to pay
such fees, costs and expenses whether or not definitive Credit Documentation is
executed or delivered or the Transaction is consummated.
In addition, each Indemnitor hereby jointly and severally
indemnifies and holds harmless all Indemnified Parties (as defined below) from
and against all Liabilities (as defined below). "Indemnified Party" shall mean
the Managing Agents, each of the Lenders, each affiliate of any of the foregoing
and the respective directors, officers, agents and employees of each of the
foregoing, and each other person controlling any of the foregoing within the
meaning of either Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended. "Liabilities"
shall mean any and all losses, claims, damages, liabilities or other costs or
expenses to which an Indemnified Party may become subject which arise out of or
relate to or result from any transaction, action or proceeding to or connected
with the transaction described in the Commitment Letter, Fee Letters or Term
Sheet, other than those Liabilities arising from an Indemnified Party's gross
negligence or wilful misconduct. In addition to the foregoing, each Indemnitor
jointly and severally agrees to reimburse each Indemnified Party for all legal
or other expenses incurred in connection with investigating, defending or
participating in any action or other proceeding relating to any Liabilities
(whether or not such Indemnified Party is a party to any such action or
proceeding).
<PAGE> 1
Exhibit (b)(5)
STOCK SUBSCRIPTION AGREEMENT, dated as of July 23, 1997, between
Colfax Capital Corporation ("Colfax") and II Acquisition Corp., a
Delaware corporation (the "Corporation").
Colfax hereby subscribes for and offers to purchase, and the
Corporation hereby accepts such offer and agrees to issue to Colfax, up to 2,000
shares (or such lesser number of shares as may be specified by the Corporation)
of its Preferred Stock, par value $.01 per share, having the terms stated in
Exhibit A, in consideration of the payment by Colfax to it of cash in the amount
of $100,000 per share, or up to a total of $200,000,000, on or before the Issue
Date (as set forth in Exhibit A).
The Corporation represents and warrants that it will take all steps
necessary to provide for such Preferred Stock and will file a certificate of
designation fixing the terms of such Preferred Stock in accordance with the
terms attached as Exhibit A, on or before the Issue Date.
This Stock Subscription Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
This Stock Subscription Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware without
regard to principles of conflict of law.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Subscription Agreement to be duly executed as of the date hereof.
Colfax Capital Corporation
By: /s/ MICHAEL G. RYAN
------------------------------
Name: Michael G. Ryan
Title: President
II Acquisition Corp.
By: /s/ JOSEPH O. BUNTING, III
------------------------------
Name: Joseph O. Bunting, III
Title: Vice President and Treasurer
<PAGE> 3
Terms of Preferred Stock
Issuer II Acquisition Corp.
Par Value $.01 per share
Liquidation Preference $100,000 per share
Issue Amount Up to $200,000,000 in liquidation preference
Issue Date When called by the Corporation.
Mandatory
Redemption December 31, 2001
Dividends 7% per annum, cumulative; payable only when
declared
Placement Fee 1% of the face amount of Shares purchased, payable
to Colfax upon issuance of the Shares and payment
of Colfax therefor
<PAGE> 1
Exhibit (c)(1)
================================================================
SHARE PURCHASE AGREEMENT
between
II ACQUISITION CORP.
and
IMO INDUSTRIES INC.
Dated as of July 25, 1997
================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.........................................................1
SECTION 1.02 Termination of Existing Offer.....................................2
SECTION 1.03 Company Action....................................................3
SECTION 1.04 Stock Options.....................................................5
ARTICLE II
[RESERVED].................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification; Subsidiaries......................5
SECTION 3.02 Certificate of Incorporation and Bylaws...........................6
SECTION 3.03 Capitalization....................................................6
SECTION 3.04 Authority Relative to this Agreement..............................7
SECTION 3.05 No Conflict; Required Filings and Consents........................7
SECTION 3.06 Compliance........................................................8
SECTION 3.07 SEC Filings; Financial Statements.................................8
SECTION 3.08 Absence of Certain Changes or Events.............................10
SECTION 3.09 Absence of Litigation............................................10
SECTION 3.10 Employee Benefit Plans...........................................11
SECTION 3.11 Labor Matters....................................................13
SECTION 3.12 Offer Documents; Schedule 14D-9..................................14
SECTION 3.13 Tangible Property; Real Property and Leases......................14
SECTION 3.14 Trademarks, Patents and Copyrights...............................15
SECTION 3.15 Taxes............................................................15
SECTION 3.16 Environmental Matters............................................17
SECTION 3.17 Material Contracts...............................................18
SECTION 3.18 Insurance; Workers' Compensation.................................18
SECTION 3.19 Certain Payments; Absence of Certain Business Practices..........19
SECTION 3.20 Licenses and Permits.............................................19
<PAGE> 3
SECTION 3.21 Letters of Credit, Surety Bonds, Guarantees......................20
SECTION 3.22 Brokers..........................................................20
SECTION 3.23 Rights Agreement.................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
SECTION 4.01 Corporate Organization...........................................20
SECTION 4.02 Authority Relative to This Agreement.............................20
SECTION 4.03 No Conflict; Required Filings and Consents.......................21
SECTION 4.04 Financing........................................................21
SECTION 4.05 Offer Documents..................................................22
ARTICLE V
CONDUCT OF BUSINESS PENDING CONSUMMATION OF THE OFFER
SECTION 5.01 Conduct of Business by the Company Pending the Consummation of
the Offer.......................................................22
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 [Reserved].......................................................25
SECTION 6.02 [Reserved].......................................................25
SECTION 6.03 Company Board Representation; Section 14(f)......................25
SECTION 6.04 Access to Information; Confidentiality...........................26
SECTION 6.05 No Solicitation of Transactions..................................27
SECTION 6.06 Employee Benefits Matters; Employment Agreements.................27
SECTION 6.07 Directors' and Officers' Indemnification and Insurance...........27
SECTION 6.08 Notification of Certain Matters..................................29
SECTION 6.09 Further Action; Reasonable Efforts...............................29
SECTION 6.10 Public Announcements.............................................30
SECTION 6.11 Confidentiality Agreement........................................30
<PAGE> 4
ARTICLE VII
[RESERVED]
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination......................................................31
SECTION 8.02 Effect of Termination............................................32
SECTION 8.03 Fees and Expenses................................................32
SECTION 8.04 Amendment........................................................34
SECTION 8.05 Waiver...........................................................34
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and Agreements.......35
SECTION 9.02 Notices..........................................................35
SECTION 9.03 Certain Definitions..............................................36
SECTION 9.04 Severability.....................................................37
SECTION 9.05 Entire Agreement, Assignment.....................................37
SECTION 9.06 Parties in Interest..............................................38
SECTION 9.07 Specific Performance.............................................38
SECTION 9.08 Governing Law....................................................38
SECTION 9.09 Headings.........................................................38
SECTION 9.10 Counterparts.....................................................38
<PAGE> 5
GLOSSARY OF DEFINED TERMS
Location of
Definitions
-----------
affiliate........................................................... ss. 9.03(a)
Agreement........................................................... Preamble
beneficial owner.................................................... ss. 9.03(b)
Blue Sky Laws....................................................... ss. 3.05(b)
Board............................................................... Recitals
business day........................................................ ss. 9.03(c)
Code................................................................ ss. 3.10(b)
Company............................................................. Preamble
Confidentiality Agreement........................................... ss. 6.04(b)
Constituent Documents............................................... ss. 3.02
Consummation Date................................................... ss. 6.07(a)
control............................................................. ss. 9.03(d)
controlled by....................................................... ss. 9.03(d)
Credit Agreement.................................................... ss. 4.04(b)
Credit Suisse First Boston.......................................... ss. 1.03(a)
Disclosure Schedule................................................. ss. 3.01
Environmental Law................................................... ss. 3.16(a)
ERISA............................................................... ss. 3.10(a)
ERISA Affiliate..................................................... ss. 3.10(c)
ERISA Plan.......................................................... ss. 3.10(b)
Exchange Act........................................................ ss. 1.03(b)
Expenses............................................................ ss. 8.03(c)
Fee................................................................. ss. 8.03(a)
GAAP................................................................ ss. 3.07(b)
Hazardous Substances................................................ ss. 3.16(a)
HSR Act............................................................. ss. 3.05(b)
Indemnified Parties................................................. ss. 6.07(b)
Inapplicable Option................................................. ss. 1.04
Information Statement............................................... ss. 3.12
IRS................................................................. ss. 3.10(a)
Material Adverse Effect............................................. ss. 3.01
Material Contracts.................................................. ss. 3.17
<PAGE> 6
Material Subsidiaries............................................... ss. 3.01
Minimum Condition................................................... ss. 1.01(a)
Multiemployer Plan.................................................. ss. 3.10(b)
1996 Balance Sheet.................................................. ss. 3.07(c)
Offer............................................................... Recitals
Offer Documents..................................................... ss. 1.01(b)
Offer to Purchase................................................... ss. 1.01(b)
Option Spread Amount................................................ ss.1.04
Pension Plan........................................................ ss. 3.10(b)
Per Share Amount.................................................... Recitals
person.............................................................. ss. 9.03(e)
Plans............................................................... ss. 3.10(a)
Purchaser........................................................... Preamble
Purchaser's Election Date........................................... ss. 5.01
Rights.............................................................. ss. 1.03(a)
Rights Agreement.................................................... ss. 1.03(a)
Schedule 14D-1...................................................... ss. 1.01(b)
Schedule 14D-9...................................................... ss. 1.03(b)
SEC................................................................. ss. 1.01(a)
SEC Reports......................................................... ss. 3.07(a)
Securities Act...................................................... ss. 3.07(a)
Shares.............................................................. Recitals
Stock Option Plans.................................................. ss. 3.03
Subsidiary.......................................................... ss. 3.01
subsidiary.......................................................... ss. 9.03(f)
Tax or Taxes........................................................ ss. 3.15(n)
Third Party......................................................... ss. 8.03(f)
Third Party Acquisition............................................. ss. 8.03(f)
Transactions........................................................ ss. 3.04
UDI................................................................. ss. 1.02
UDI Agreement....................................................... ss. 1.02
<PAGE> 7
SHARE PURCHASE AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), between II ACQUISITION CORP., a Delaware corporation ("Purchaser")
and IMO INDUSTRIES INC., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Purchaser and the Company have
each determined that it is in the best interests of their respective
stockholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that
Purchaser shall make a cash tender offer (the "Offer") to acquire all the issued
and outstanding shares of common stock, par value U.S. $1.00 per share, of the
Company (the "Shares"), together with the associated Rights (as hereinafter
defined), for $7.05 per Share (such amount, or any greater amount per Share paid
pursuant to the Offer, being hereinafter referred to as the "Per Share Amount")
net to the seller in cash, subject to withholding of taxes, if applicable, upon
the terms and subject to the conditions of this Agreement and the Offer;
WHEREAS, the Board of Directors of the Company (the "Board"),
including all the disinterested directors on the Board, has unanimously approved
the making of the Offer and resolved and agreed to recommend that holders of
Shares tender their Shares pursuant to the Offer;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events or
circumstances set forth in Annex A hereto shall have occurred or be existing,
Purchaser agrees to commence the Offer as promptly as reasonably practicable
after the date hereof, but in no event later than five business days after the
first public announcement of the execution hereof. The obligation of Purchaser
to accept for payment and pay for Shares tendered pursuant to the Offer shall be
subject to the condition (the "Minimum
<PAGE> 8
Condition") that the number of Shares validly tendered and not withdrawn prior
to the expiration of the Offer, combined with any Shares already owned by
Purchaser or any of its affiliates, constitute more than 80% of the outstanding
Shares at the expiration of the Offer and also shall be subject to the
satisfaction of the other conditions set forth in Annex A. Purchaser expressly
reserves the right to waive any such condition, to increase the price per Share
payable in the Offer, and to make any other changes in the terms and conditions
of the Offer; provided, however, that Purchaser agrees that no change may be
made without the consent of the Company which decreases the price per Share
payable in the Offer, which changes the form of consideration to be paid in the
Offer, which reduces the maximum number of Shares to be purchased in the Offer,
which extends the expiration date of the Offer (except that Purchaser may extend
the expiration date of the Offer (a) as required to comply with any rule,
regulation or interpretation of the Securities and Exchange Commission (the
"SEC") or (b) for one or more times each for an aggregate period of up to 15
days (and not to exceed 60 days from the date of commencement) for any reason
other than those specified in the immediately preceding clause (a)) or which
imposes conditions to the Offer in addition to those set forth in Annex A
hereto. The Per Share Amount shall, subject to applicable withholding of taxes,
be net to the seller in cash, upon the terms and subject to the conditions of
the Offer. Subject to the terms and conditions of the Offer (including, without
limitation, the Minimum Condition), Purchaser agrees to pay, as promptly as
practicable after expiration of the Offer, for all Shares validly tendered and
not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Purchaser will file with the SEC a Tender Offer Statement on Schedule
14D-1 (together with all amendments and supplements thereto, the "Schedule
14D-1") with respect to the Offer, which shall have been provided to the Company
and to which the Company shall not have reasonably objected. The Schedule 14D-1
will contain or will incorporate by reference an offer to purchase (the "Offer
to Purchase") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Purchaser and the Company
agree to correct promptly any information provided by any of them for use in the
Offer Documents which shall have become false or misleading, and Purchaser
further agrees to take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
SECTION 1.02 Termination of Existing Offer. The Company has given or
is simultaneously herewith giving notice to United Dominion Industries Limited
2
<PAGE> 9
("UDI") of the termination of the Agreement and Plan of Merger, dated as of June
26, 1997, among UDI, UD Delaware Corp. and the Company (the "UDI Agreement") and
has effected payment to UDI of the $8 million fee contemplated by Section
8.03(a) of the UDI Agreement and the deposit in escrow of $2 million for payment
to UDI in reimbursement of "Expenses" (as defined in the UDI Agreement) by
Purchaser having deposited such sums in an account with a recognized commercial
or investment bank and providing irrevocable instructions for transmission of
such funds to UDI upon its request and, in the case of the funds for
reimbursement of Expenses, submission of evidence of the incurrence thereof.
Upon the happening of the foregoing, the termination of the UDI Agreement shall
have become effective. The Board of Directors of the Company has unanimously
withdrawn its recommendation of the UDI Agreement and the transactions
contemplated thereby and recommend that the Company's stockholders not tender
their Shares pursuant to the tender offer commenced by UDI pursuant to the UDI
Agreement. Within two business days of the date hereof, the Company shall amend
its existing Schedule 14D-9, filed with the SEC in response to the UDI tender
offer, to reflect the recommendations of the Company's Board of Directors
described above, and shall file such amendment with the SEC and distribute it to
the Company's stockholders.
SECTION 1.03 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that (i) the Board, at a meeting duly
called and held on July 25, 1997, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby, including the Offer, are
fair to and in the best interests of the stockholders of the Company, (B)
approved and adopted this Agreement and the transactions contemplated hereby,
and such approval constitutes approval of the foregoing for purposes of Section
203 of Delaware Law, (C) taken all action to avoid the occurrence of a
"Distribution Date" or a "Triggering Event" (each as defined in the Rights
Agreement dated as of April 30, 1997, between the Company and First Chicago
Trust Company of New York, as Rights Agent (the "Rights Agreement")) with
respect to the purchase of Shares pursuant to the Offer, with respect to the
rights to purchase shares of Series B Junior Participating Preferred Stock, par
value $1.00 (the "Rights") issued pursuant to the Rights Agreement, (D)
recommended that the stockholders of the Company accept the Offer and approve
and adopt this Agreement and the transactions contemplated hereby and (E)
approved, for purposes of Article X of the Company's Certificate of
Incorporation, a Business Combination (as defined therein) between Purchaser (or
any affiliate of Purchaser) and the Company, whereby each Share (other than
dissenting Shares and Shares owned by Purchaser or its affiliates) outstanding
at the time of such Business Combination would be cancelled and the holder
thereof would be entitled to receive an amount in cash equal to, (I) if such
Business Combination occurs within one year of the date hereof, not less than
the Per Share Amount, or (II) if such Business Combination occurs after one year
from the date hereof, an amount that is not
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less than the Per Share Amount and that, in the opinion of a nationally
recognized investment bank addressed to the Board, is fair from a financial
point of view to such holders, and (ii) Credit Suisse First Boston Corporation
("Credit Suisse First Boston") has delivered to the Board a written opinion to
the effect that, as of the date of such opinion, the consideration to be
received by the holders of Shares (other than Purchaser and its affiliates)
pursuant to the Offer is fair to such holders of Shares from a financial point
of view. Subject only to the fiduciary duties of the Board under applicable law
as advised by the Company's counsel, the Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board described in
the immediately preceding sentence. The Company represents to Purchaser that the
Company has been advised by each of its directors and executive officers that
they intend either to tender or cause to be tendered all Shares beneficially
owned by them to Purchaser pursuant to the Offer.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company agrees that it will file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing, subject
only to the fiduciary duties of the Board under applicable law as advised by the
Company's counsel, the recommendation of the Board described in Section 1.03(a)
and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other applicable federal securities laws. The Company and
Purchaser agree to correct promptly any information provided by any of them for
use in the Schedule 14D-9 which shall have become false or misleading, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws.
(c) The Company agrees to promptly furnish Purchaser with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company agrees to furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Purchaser or its agents may reasonably request.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer, Purchaser and its affiliates shall hold in confidence
the information contained in such labels, listings and files, shall use such
information only in connection with the Offer and, if this Agreement shall be
terminated in
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accordance with Section 8.01, shall deliver to the Company all copies of such
information then in their possession.
SECTION 1.04 Stock Options. All stock options granted under the
Stock Option Plans (as hereinafter defined) shall, at the Consummation Date (as
hereinafter defined), to the extent permitted by the applicable Stock Option
Plan and stock option agreement (if any), be cancelled, and the holder thereof
shall be entitled to receive from the Company (or from Purchaser if payment by
the Company would not be permitted under the Credit Agreement or the Indenture
dated as of April 15, 1996, between the Company and IBJ Schroder Bank & Trust
Company, as Trustee), on the Consummation Date after the purchase of Shares
pursuant to the Offer or as soon as practicable thereafter, in consideration for
the cancellation of such option, an amount in cash (subject to any applicable
withholding tax) equal to the product of (a) the number of Shares previously
subject to such option and (b) the excess, if any, of the Per Share Amount over
the exercise price per Share previously subject to such option (the "Option
Spread Amount"). To the extent the cancellation of any options described above
is not permitted by the Stock Option Plan or stock option agreement applicable
to such options (the "Inapplicable Options"), Purchaser agrees to pay to the
holders of such Inapplicable Options an amount in cash equal to the applicable
Option Spread Amount upon surrender of such Inapplicable Options by such
holders. Payment therefor shall be made at such time as payment is made in
respect of the Shares purchased in the Offer.
ARTICLE II
[RESERVED]
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that:
SECTION 3.01 Organization and Qualification; Subsidiaries. Each of
the Company and each subsidiary of the Company (a "Subsidiary") is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite power and authority and
all necessary governmental
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approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below). The Company and each Subsidiary is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company or any
Subsidiary, the term "Material Adverse Effect" means any effect that is or is
reasonably likely to be materially adverse to the business, operations,
financial condition, assets or liabilities (including, without limitation,
contingent liabilities) of the Company and the Subsidiaries taken as a whole. A
true and complete list of all the Subsidiaries, together with the jurisdiction
of incorporation of each Subsidiary and the percentage of the outstanding
capital stock of each Subsidiary owned by the Company and each other Subsidiary,
is set forth in Section 3.01 of the Disclosure Schedule, which has been
delivered prior to the date of this Agreement by the Company to Purchaser (the
"Disclosure Schedule"). Except as disclosed in such Section 3.01, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity. The term "Material
Subsidiaries" means the Subsidiaries identified as Material Subsidiaries in
Section 3.01 of the Disclosure Schedule. The Subsidiaries that are not Material
Subsidiaries are not, individually and in the aggregate, material to the
business, operations or financial condition of the Company and all of the
Subsidiaries taken as a whole and do not, individually and in the aggregate,
have any material assets or liabilities (including contingent liabilities) when
considered in relation to the Company and all of the Subsidiaries taken as a
whole.
SECTION 3.02 Certificate of Incorporation and Bylaws. The Company
has heretofore furnished or made available to Purchaser a complete and correct
copy of the Certificate of Incorporation and the Bylaws or equivalent
organizational documents, each as amended to date (the "Constituent Documents"),
of the Company and each Material Subsidiary. The Constituent Documents of the
Company and its Material Subsidiaries are in full force and effect. Neither the
Company nor any Material Subsidiary is in violation of any provision of its
Constituent Documents.
SECTION 3.03 Capitalization. The authorized capital stock of the
Company consists of 5,000,000 shares of preferred stock (none of which is issued
and outstanding) and 25,000,000 Shares. As of July 23, 1997, (i) 17,126,609
Shares are
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issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) no Shares are held by the Subsidiaries, and (iii) 2,882,657
Shares are reserved for issuance pursuant to grants or awards under the
Company's Amended and Restated Equity Incentive Plan for Key Employees, the
Company's Amended and Restated 1988 Equity Incentive Plan for Outside Directors
or the Company's 1995 Equity Incentive Plan for Outside Directors (collectively,
the "Stock Option Plans"). Except as set forth in this Section 3.03 or Section
3.03 of the Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character obligating the Company
or any Material Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Material Subsidiary. Section 3.03
of the Disclosure Schedule sets forth a list, as of the date hereof, of the
names of each person holding options under the Stock Option Plans, and the
number of shares purchasable under, the exercise price of such options and date
such options were granted. All Shares subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.03 of the Disclosure Schedule,
there are no outstanding contractual obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital
stock of any Subsidiary or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary or any
other person. Each outstanding share of capital stock of each Material
Subsidiary is duly authorized, validly issued, fully paid and nonassessable,
and, except as set forth in Section 3.03 of the Disclosure Schedule, each such
share owned by the Company or another Subsidiary is owned free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever.
SECTION 3.04 Authority Relative to this Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby (the "Transactions"). The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Transactions.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Purchaser,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
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SECTION 3.05 No Conflict; Required Filings and Consents. (a) Except
as set forth in Section 3.05(a) of the Disclosure Schedule, the execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the Constituent
Documents of the Company or any Material Subsidiary, (ii) assuming that required
filings under the HSR Act (as hereinafter defined) are made by the appropriate
parties, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound or affected or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance of any nature on any property or asset
of the Company or any Material Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Material Subsidiary is a
party or by which the Company or any Material Subsidiary or any property or
asset of the Company or any Material Subsidiary is bound or affected, except, in
cases of (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Except as set forth in Section 3.05(b) of the Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws and the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
Act"), and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the Offer, or otherwise prevent the Company from performing its
obligations under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.06 Compliance. Except as set forth in Section 3.06 of the
Disclosure Schedule, neither the Company nor any Subsidiary is in default or
violation of (i) any law, rule, regulation, order, judgment or decree applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or subject or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any
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Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound or affected, except for any
such defaults or violations that would not, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.07 SEC Filings; Financial Statements. (a) The Company has
filed all forms, reports and documents required to be filed by it with the SEC
since December 31, 1994, and has heretofore delivered or made available to
Purchaser, in the form filed with the SEC, (i) its Annual Reports on Form 10-K
for the fiscal years ended December 31, 1994, 1995 and 1996, respectively, (ii)
its Quarterly Report on Form 10-Q for the period ended March 31, 1997, (iii) all
proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since December 31, 1994 and (iv) all other forms,
reports and other registration statements (other than Quarterly Reports on Form
10-Q not referred to in clause (ii) above) filed by the Company with the SEC
since December 31, 1994 (the forms, reports and other documents referred to in
clauses (i), (ii), (iii) and (iv) above being referred to herein, collectively,
as the "SEC Reports"). The SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder and (ii) did not, at the time they were filed (or at the
effective date thereof with respect to registration statements under the
Securities Act), contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No Subsidiary is required to file any form,
report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the SEC Reports was prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis ("GAAP") throughout the periods indicated (except as may
be indicated in the notes thereto) and each fairly presents the consolidated
financial position, results of operations and changes in stockholders equity and
cash flows of the Company and the consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments which
were not and are not expected, individually or in the aggregate, to have a
Material Adverse Effect).
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Subsidiaries as at December
31, 1996 including the notes thereto (the "1996 Balance Sheet"), in Section 3.07
of the Disclosure Schedule or in
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any SEC Report filed by the Company after December 31, 1996, neither the Company
nor any Subsidiary has any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in accordance
with GAAP, except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since December 31, 1996.
(d) The Company has heretofore furnished or made available to
Purchaser complete and correct copies of all amendments and modifications (if
any) that have not been filed by the Company with the SEC to all agreements,
documents and other instruments that previously had been filed by the Company
with the SEC and are currently in effect.
SECTION 3.08 Absence of Certain Changes or Events. Since December
31, 1996, except as set forth in Section 3.08 of the Disclosure Schedule or as
contemplated by this Agreement or disclosed in any SEC Report filed since
December 31, 1996 and prior to the date of this Agreement, the Company and the
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since December 31, 1996, there has
not been (i) any change in the business, operations, properties, financial
condition, assets or liabilities (including, without limitation, contingent
liabilities) of the Company or any Subsidiary having, individually or in the
aggregate, a Material Adverse Effect, (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to any property or asset of
the Company or any Subsidiary having, individually or in the aggregate, a
Material Adverse Effect, (iii) any material change by the Company in its
accounting methods, principles or practices, (iv) any material revaluation by
the Company of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable), (v) any
failure by the Company to revalue any asset in accordance with GAAP, (vi) any
entry by the Company or any Subsidiary into any commitment or transaction
material to the Company and the Subsidiaries taken as a whole, (vii) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities, (viii) any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company or any Subsidiary, except in the ordinary course of business
consistent with past practice, or (ix) any entering into, renewal, modification
or extension
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of, any contract, arrangement or agreement with any other party having,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.09 Absence of Litigation. Except as set forth in Section
3.09 of the Disclosure Schedule or as disclosed in the SEC Reports filed prior
to the date of this Agreement, (a) as of the date hereof, there is no claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, which (i)
individually or in the aggregate, would have a Material Adverse Effect or (ii)
seeks to, or is reasonably likely to, delay or prevent the consummation of the
Offer and (b) as of the date hereof, neither the Company nor any Subsidiary nor
any property or asset of the Company or any Subsidiary is subject to any order,
writ, judgment, injunction, decree, determination or award having, individually
or in the aggregate, a Material Adverse Effect.
SECTION 3.10 Employee Benefit Plans. (a) Section 3.10(a) of the
Disclosure Schedule contains a true and complete list of (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement or severance plans, programs
or policies, and all employment, termination or severance contracts to which the
Company or any Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, officer or director of the Company or any Subsidiary
(collectively, the "Plans") and (ii) each employee benefit plan for which the
Company or any Subsidiary could incur liability under Section 4069 of ERISA in
the event such plan were terminated, or under Section 4212(c) of ERISA, or in
respect of which the Company or any Subsidiary remains secondarily liable under
Section 4204 of ERISA. Except as set forth in Section 3.10(a) of the Disclosure
Schedule, no Plan is a "defined benefit plan" within the meaning of Section
3(35) of ERISA and no Plan is subject to Part IV of ERISA. The Company has
previously furnished or made available to Purchaser a true and complete copy of
each Plan and a true and complete copy of each material document prepared in
connection with each Plan, including, without limitation, to the extent
applicable (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared financial statement in connection with each such Plan. Except
as set forth in Section 3.10(a) of the Disclosure
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Schedule, neither the Company nor any Subsidiary has made a general written
announcement or entered into an agreement (i) to create or adopt a new benefit
plan or (ii) except in the ordinary course of business consistent with past
practice or as required by applicable law, to amend any Plan.
(b) All Plans subject to Parts 2, 3 and 4 of Subtitle A, Title I of
ERISA, other than "multiemployer plans" ("Multiemployer Plans"), within the
meaning of Section 3(37) of ERISA (the "ERISA Plans"), are in compliance with
ERISA, except for such non-compliance which would not have, individually or in
the aggregate, a Material Adverse Effect. Except as set forth in Section 3.10 of
the Disclosure Schedule, each ERISA Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") has received a favorable determination letter from
the IRS, and there are no circumstances likely to result in revocation of any
such favorable determination letter which would have, individually or in the
aggregate, a Material Adverse Effect. There is no litigation pending or, to the
knowledge of the Company, threatened relating to the ERISA Plans which would
have, individually or in the aggregate, a Material Adverse Effect. Neither the
Company nor any of the Subsidiaries has engaged in a transaction with respect to
any ERISA Plan that, assuming the taxable period of such transaction expired as
of the date thereof, insofar as may be reasonably foreseen, is likely to subject
the Company or any of the Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in an amount which would
have, individually or in the aggregate, a Material Adverse Effect.
(c) Neither the Company nor any of the Subsidiaries has any
outstanding liability under Subtitle C or D of Title IV of ERISA with respect to
any ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither the Company nor any of the Subsidiaries presently
contributes to a Multiemployer Plan, nor has it contributed to a Multiemployer
Plan within the past five calendar years. No notice of a "reportable event",
within the meaning of Section 4043 of ERISA for which the 30 day reporting
requirement has not been waived, has been required to be filed for any Pension
Plan within the 12-month period ending on the date hereof.
(d) All contributions required to be made under the terms of any
ERISA Plan have been timely made, except for such failures which, individually
or in the aggregate, would not have a Material Adverse Effect. No Pension Plan
has an
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"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither the Company nor any of
the Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(e) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
present value of all accrued "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions and methods contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Plan.
(f) Except as set forth in Section 3.10(f) of the Disclosure
Schedule, neither the Company nor any of the Subsidiaries has any obligation for
retiree health and life benefits under any ERISA Plan.
(g) Except as set forth in Section 3.10(g) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment of severance or unemployment compensation becoming due to any director
or any employee of the Company or any of the Subsidiaries under any Plan or
otherwise from the Company or any of the Subsidiaries, (ii) increase any
benefits otherwise payable under any Plan, or (iii) result in any acceleration
of the time of payment or vesting of any such benefit.
(h) Except as disclosed in Section 3.10(h) of the Disclosure
Schedule, the Company and the Material Subsidiaries do not have any unfunded
liabilities under pension, retirement or other employee benefit plans, programs
or arrangements maintained outside the United States by the Company or any of
the Material Subsidiaries for the employees thereof, the payment of which by the
Company or such Material Subsidiary, individually or in the aggregate, would
have a Material Adverse Effect.
SECTION 3.11 Labor Matters. Except as set forth in Section 3.11(a)
of the Disclosure Schedule and except for those matters that, individually or in
the aggregate, would not have a Material Adverse Effect, (i) there are no
controversies pending or, to the knowledge of the Company, threatened between
the Company or any Subsidiary and any of their respective employees; (ii)
neither the Company nor any Subsidiary has breached or otherwise failed to
comply with any provision of any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary
and there are no grievances outstanding against the Company or any
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Subsidiary under any such agreement or contract; (iii) there are no unfair labor
practice complaints pending against the Company or any Subsidiary before the
National Labor Relations Board or any current union representation questions
involving employees of the Company or any Subsidiary; and (iv) there is no
strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company,
threat thereof, by or with respect to any employees of the Company or any
Subsidiary. Section 3.11(b) of the Disclosure Schedule sets forth each
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any domestic Subsidiary and any other
material collective bargaining agreement or labor contract applicable to persons
employed by any foreign Subsidiary. To the knowledge of the Company, there are
no activities or proceedings of any labor union to organize any employees of the
Company or any Subsidiary.
SECTION 3.12 Offer Documents; Schedule 14D-9. None of the Schedule
14D-9, the information supplied by the Company for inclusion in the Offer
Documents or the information to be filed by the Company in connection with the
Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") shall, at the respective times the Schedule 14D-9, the
Offer Documents, the Information Statement or any amendments or supplements
thereto are filed with the SEC or are first published, sent or given to
stockholders of the Company, as the case may be, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Purchaser or any of its representatives which is
contained in any of the foregoing documents or the Offer Documents. The Schedule
14D-9 and the Information Statement shall comply in all material respects as to
form with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.13 Tangible Property; Real Property and Leases. (a) The
Company and the Subsidiaries have sufficient title to all their tangible
properties and assets to conduct their respective businesses as currently
conducted or as contemplated to be conducted, with only such exceptions as,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) No parcel of real property owned or leased by the Company is
subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the knowledge of the Company, has any such
condemnation, expropriation or taking been proposed.
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(c) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party
requiring rental payments in excess of U.S. $100,000 during the period of the
lease and all amendments and modifications thereto are in full force and effect
and have not been modified or amended, and there exists no default under any
such lease by the Company or any Subsidiary, nor any event which with notice or
lapse of time or both would constitute a default thereunder by the Company or
any Subsidiary, except as, individually or in the aggregate, would not have a
Material Adverse Effect or as set forth in Section 3.13 of the Disclosure
Schedule.
SECTION 3.14 Trademarks, Patents and Copyrights. Except as set forth
in Section 3.14(a) of the Disclosure Schedule, the Company and the Subsidiaries
own or possess adequate licenses or other valid rights to use all patents,
patent rights, trademarks, trademark rights, trade names, trade dress, trade
name rights, copyrights, servicemarks, trade secrets, applications for
trademarks and for servicemarks, mask works, know-how and other proprietary
rights and information used or held for use in connection with the business of
the Company and the Subsidiaries as conducted since December 31, 1996, as
currently conducted or as contemplated to be conducted, and the Company is
unaware of any assertion or claim challenging the validity of any of the
foregoing which, individually or in the aggregate, would have a Material Adverse
Effect. Section 3.14(b) of the Disclosure Schedule lists each material patent
owned by the Company or any Subsidiary and specifies the number and date of each
such patent. Section 3.14(c) of the Disclosure Schedule lists each agreement
pursuant to which a material patent is licensed to the Company or any Material
Subsidiary as licensee for use in the business of the Company and the
Subsidiaries as currently conducted. The conduct of the business of the Company
and the Subsidiaries as conducted since December 31, 1996, as currently
conducted and as contemplated to be conducted did not, does not and will not
conflict in any way with any patent, patent right, license, trademark, trademark
right, trade dress, trade name, trade name right, service mark, mask work or
copyright of any third party except for conflicts that, individually or in the
aggregate, would not have a Material Adverse Effect.
SECTION 3.15 Taxes. Except as set forth in Section 3.15 of the
Disclosure Schedule or as otherwise previously disclosed to Purchaser:
(a) The Company and the Subsidiaries, and each affiliated group
(within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code")) or combined or unitary group of which the Company or any
Subsidiary is or has been a member, has timely filed all federal income Tax
Returns (as defined below), and all other material Tax Returns required to be
filed by them. All such Tax Returns are true and correct in all material
respects. Except to the extent adequately reserved for in
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accordance with GAAP, all material Taxes (as defined below) due and payable by
the Company and the Subsidiaries have been timely paid. The most recent
consolidated financial statements contained in the SEC Reports reflect an
adequate reserve in accordance with GAAP for all Taxes payable by the Company
and its Subsidiaries for all taxable periods and portions thereof through the
date of such financial statements.
(b) No material deficiencies for any Taxes have been proposed,
asserted or assessed against the Company or any of the Subsidiaries that have
not been fully paid or adequately provided for in the appropriate financial
statements of the Company and its Subsidiaries, no waivers of the time to assess
any Taxes are outstanding, and no power of attorney granted by the Company or
any Subsidiary with respect to any Taxes is currently in force. No material
issues relating to Taxes have been raised in writing (or, in the case of the
presently pending Federal income tax audit of the Company and the Subsidiaries,
verbally to the knowledge of the Company's Vice President of Taxes) by any
governmental authority during any presently pending audit or examination.
(c) There are no material liens or encumbrances for Taxes on any of
the assets of the Company or the Subsidiaries (other than for current taxes not
yet due and payable).
(d) The Company and the Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes.
(e) None of the Company or the Subsidiaries has filed a consent
under Section 341(f) of the Code.
(f) None of the Company or the Subsidiaries is a party to any
agreement that could obligate it to make any payments that would not be
deductible by reason of Section 280G of the Code.
(g) Neither the Company nor, since the date of its acquisition by
the Company, any Material Subsidiary is a party to any tax allocation, tax
sharing agreement, any closing agreement or similar agreement relating to Taxes
with any taxing authority of the Company.
(h) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any federal income or material state, local or foreign Taxes or Tax
Returns of the Company or any of the
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Subsidiaries and neither the Company nor any of the Subsidiaries has received a
written notice of any pending audit or proceeding.
(i) Neither the Company nor, since the date of its acquisition by
the Company, any Material Subsidiary has agreed to or is required to make any
material adjustment under Section 481(a) of the Code.
(j) To the knowledge of the Company, no property owned by the
Company or any Subsidiary (i) is property required to be treated as being owned
by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986; or (ii) constitutes "tax exempt use
property" within the meaning of Section 168(h)(1) of the Code.
(k) The Company has not been (and will not be) a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the 5-year period ending on the consummation of the Offer.
(l) To the knowledge of the Company, neither the Company nor any
Subsidiary has participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code.
(m) The Company estimates that, to its knowledge, the fair market
value of the assets of the Company and the Subsidiaries, in the aggregate, is
more than the aggregate adjusted basis of such assets, determined as of the date
of this Agreement.
(n) For the purpose of this Agreement, (A) the terms "Tax" or
"Taxes" shall mean all taxes, fees, duties, tariffs, levies, imposts, or other
charges of any kind (together with any interest, penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto),
including, without limitation, taxes or other charges on or with respect to
income, franchise, gross receipts, property, sales, use, profits, capital stock,
payroll, employment, social security, workers compensation, unemployment
compensation or net worth, taxes or charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added or gains taxes; license
registration and documentation fees; and customs duties, tariffs and similar
charges of any kind whatsoever, and (B) the term "Tax Return" shall mean any
report, return, document, declaration or any other information or filing
required to be supplied to any taxing authority with respect to Taxes.
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SECTION 3.16 Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) those substances defined as hazardous in or regulated as
hazardous under the following federal statutes and their state counterparts, as
each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation, and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Clean Air Act; (B) any asbestos or
asbestos-containing material, petroleum and petroleum products, including crude
oil and any fractions thereof, natural gas, natural gas liquids, synthetic gas,
polychlorinated biphenyls or radon; or (C) any substance with respect to which a
federal, state or local environmental agency requires environmental
investigation, monitoring, reporting or remediation; and (ii) "Environmental
Law" means any applicable federal, state or local law relating to (A) releases
or threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (B) the manufacture, handling, transport, use, treatment, storage or
disposal of Hazardous Substances or materials containing Hazardous Substances;
or (C) otherwise relating to pollution of the environment.
(b) Except as described in Section 3.16 of the Disclosure Schedule:
(i) the Company and each Subsidiary is in compliance with all applicable
Environmental Laws, except for noncompliances that individually or in the
aggregate would not have a Material Adverse Effect; (ii) the Company and each
Subsidiary have obtained all permits, licenses and other material governmental
authorizations required under applicable Environmental Laws, and are in
compliance with the terms and conditions thereof, except for failures to obtain
or noncompliance that individually or in the aggregate would not have a Material
Adverse Effect; (iii) neither the Company nor any of its Subsidiaries has
received written notice of, or, to the knowledge of the Company, is the subject
of, any action, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or noncompliance with any
Environmental Law that individually or in the aggregate would have a Material
Adverse Effect; and (iv) there is no environmental condition on any of the
properties currently or, to the knowledge of the Company, formerly owned or
leased by the Company or any Subsidiary that individually or in the aggregate
would have a Material Adverse Effect.
SECTION 3.17 Material Contracts. The SEC Reports reflect each
contract or agreement to which the Company or any of the Material Subsidiaries
is a party not made in the ordinary course of business which is material to the
Company and its Subsidiaries, taken as a whole, and that is to be performed in
whole or part after the date hereof (a "Material Contract"). No condition or
state of facts exists that, with notice or the
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passage of time, or both, would constitute a material default by the Company or
any Material Subsidiary or to the knowledge of the Company, any third party
under such Material Contracts. The Company or the applicable Material Subsidiary
has duly complied in all material respects with the provision of each Material
Contract to which it is a party.
SECTION 3.18 Insurance; Workers' Compensation. (a) Section 3.18 of
the Disclosure Schedule sets forth a true, complete and accurate list of each
currently effective material insurance policy issued in favor of the Company and
each Material Subsidiary, setting forth the identity of the respective insurance
carriers and a description of the policy. All premiums due and payable in
respect of such policies have been paid, such policies are in full force and
effect and free from any right granted by the Company of termination on the part
of the insurance carriers, except as provided in the respective policies.
Schedule 3.18 of the Disclosure Schedule sets forth a description, indicating
dates and nature of claims, of the workers' compensation experience as of March
31, 1997 of the Company and each domestic Material Subsidiary since December 31,
1994, or since the dates of their respective acquisition if later than December
31, 1994 in the case of the Material Subsidiaries.
(b) Neither the Company nor any Material Subsidiary has received any
notice of cancellation with respect to any of its insurance policies, and,
within the three years preceding the date hereof, neither the Company nor any
Material Subsidiary has been refused any insurance coverage sought or applied
for, in each case where such cancellation or refusal, individually or in the
aggregate, would have a Material Adverse Effect.
SECTION 3.19 Certain Payments; Absence of Certain Business
Practices. To the knowledge of the Company, except as set forth in Section 3.19
of the Disclosure Schedule, no employee or agent of the Company or any
Subsidiary, nor any other person acting on behalf of Company or any Subsidiary,
has within the past five years violated the Foreign Corrupt Practices Act or
made or caused to be made any payments to government officials in violation of
the laws of the United States or any other jurisdiction and, as of the date
hereof, neither the IRS nor any other federal, state, local or foreign
government agency or entity has notified the Company or any Subsidiary of any
pending or threatened investigation of any payment made by or on behalf of the
Company or any Subsidiary of, or alleged to be of, the type described in the
immediately preceding sentence.
SECTION 3.20 Licenses and Permits. The Company and each Material
Subsidiary have obtained all governmental licenses and permits necessary to
conduct
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their respective businesses in accordance with past practice, except for
failures that, individually or in the aggregate, would not have a Material
Adverse Effect. Such licenses and permits are valid and in full force and
effect, and no such licenses or permits will be terminated or materially
impaired or become terminable as a result of the Transactions, except for those
that, individually or in the aggregate, would not have a Material Adverse
Effect.
SECTION 3.21 Letters of Credit, Surety Bonds, Guarantees. Section
3.21 of the Disclosure Schedule lists, as of the date hereof, all letters of
credit, performance or payment bonds, guaranty arrangements and surety bonds of
any nature involving amounts in excess of $100,000 relating to the Company or
any Subsidiary.
SECTION 3.22 Brokers. No broker, finder or investment banker (other
than Credit Suisse First Boston) is entitled to any brokerage, finder's or other
fee or commission in connection with the Transactions based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Purchaser a complete and correct copy of all agreements between the Company and
Credit Suisse First Boston pursuant to which such firm would be entitled to any
payment relating to the Transactions.
SECTION 3.23 Rights Agreement. As a result of the Board's withdrawal
of its recommendation of the UDI Agreement and the transactions contemplated
thereby pursuant to Section 1.02, any acquisition of Shares (through the tender
offer commenced by UDI pursuant to the UDI Agreement or otherwise) that results
in UDI becoming an "Acquiring Person" (as defined in the Rights Agreement) shall
constitute a "Triggering Event" under the Rights and the Rights Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser hereby represents and warrants to the Company that:
SECTION 4.01 Corporate Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to
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have such power, authority and governmental approvals would not, individually or
in the aggregate, have a material adverse effect on the business, operations,
financial condition, assets or liabilities (including, without limitation,
contingent liabilities) of Purchaser.
SECTION 4.02 Authority Relative to This Agreement. Purchaser has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by Purchaser and the consummation by
Purchaser of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Purchaser are necessary to authorize this Agreement or to consummate the
Transactions. This Agreement has been duly and validly executed and delivered by
Purchaser and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.
SECTION 4.03 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Purchaser do not, and the
performance of this Agreement by Purchaser will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of Purchaser, (ii) assuming
that required filings under the HSR Act are made by the appropriate parties,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Purchaser or by which any property or asset of Purchaser is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Purchaser pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Purchaser is a party or by which Purchaser or any property
or asset of Purchaser is bound or affected, except, in cases of (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would not, individually or in the aggregate, have a material adverse
effect on the business, operations, financial condition, assets or liabilities
(including, without limitation, contingent liabilities) of Purchaser.
(b) The execution and delivery of this Agreement by Purchaser do
not, and the performance of this Agreement by Purchaser will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and
state takeover laws and the HSR Act and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make
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such filings or notifications, would not prevent or delay consummation of the
Offer, or otherwise prevent Purchaser from performing its obligations under this
Agreement.
SECTION 4.04 Financing. (a) Purchaser has sufficient funds to permit
Purchaser to acquire all the outstanding Shares in the Offer, written evidence
of which has been provided to the Company. Such funds will remain in Purchaser,
available to be used to consummate the Offer, for so long as the Offer remains
outstanding and has not been terminated in accordance with the terms hereof or
of the Offer.
(b) Purchaser has received bank commitment letters and has entered
into a preferred stock subscription agreement with an affiliate relating to the
provision of sufficient funds (a) to satisfy the Company's obligations under
Section 4.10 of the Indenture dated as of April 15, 1996, between the Company
and IBJ Schroder Bank & Trust Company, as Trustee, arising as a result of the
consummation of the Offer, and (b) to refinance the Credit Agreement, dated as
of April 29, 1996 (the "Credit Agreement"), among the Company, Varo Inc., Warren
Pumps Inc., the lenders from time to time party thereto, the issuing banks from
time to time party thereto and Citicorp USA, Inc., as Agent, as amended. In each
case, such funds will be provided to the Company substantially on the terms set
forth in the commitment letters and subscription agreement that have been
provided to the Company.
SECTION 4.05 Offer Documents. The Offer Documents will not, at the
time such documents are filed with the SEC or are first published, sent or given
to stockholders of the Company, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. The information supplied by Purchaser
for inclusion in the Schedule 14D-9 or the Information Statement will not, on
the date such document (or any amendment or supplement thereto) is first mailed
to stockholders of the Company and with respect to the Information Statement, at
the time Shares are accepted for payment in the Offer, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not false or misleading. Notwithstanding the foregoing,
Purchaser makes no representation or warranty with respect to any information
supplied by the Company or any of its representatives which is contained in any
of the foregoing documents or the Offer Documents. The Offer Documents shall
comply in all material respects as to form with the requirements of the Exchange
Act and the rules and regulations thereunder.
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ARTICLE V
CONDUCT OF BUSINESS PENDING CONSUMMATION OF THE OFFER
SECTION 5.01 Conduct of Business by the Company Pending the
Consummation of the Offer. The Company covenants and agrees that, between the
date of this Agreement and the election or appointment of Purchaser's designees
to the Board pursuant to Section 6.03 upon the purchase by Purchaser of any
Shares pursuant to the Offer (the "Purchaser's Election Date"), unless Purchaser
shall otherwise agree in writing, the businesses of the Company and the
Subsidiaries shall be conducted only in, and the Company and the Subsidiaries
shall not take any action except in, the ordinary course of business consistent
with past practice and the Company shall use all reasonable efforts to preserve
substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement or by Section 5.01 of the Disclosure Schedule, the Company agrees
that neither the Company nor any Subsidiary shall, between the date of this
Agreement and the Purchaser's Election Date, directly or indirectly do, or
propose to do, any of the following without the prior written consent of
Purchaser:
(a) amend or otherwise change its Constituent Documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of capital stock of any class of the Company or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Subsidiary
(except for the issuance of a maximum of 2,000,000 Shares issuable pursuant to
employee stock options outstanding on the date hereof and including up to 1,250
restricted Shares per quarter issuable to outside directors in accordance with
past practice pursuant to the Stock Option Plans) or (ii) any assets of the
Company or any Subsidiary, except for sales in the ordinary course of business
and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock,
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except for such declarations, set asides dividends and other distributions made
by any Subsidiary to the Company;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or any material amount of assets other than in the ordinary
course of business consistent with past practice; (ii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or endorse,
pledge in respect of or otherwise as an accommodation become responsible for the
obligations of any person, or make any loans or advances, except in the ordinary
course of business consistent with past practice; (iii) enter into any contract
or agreement, other than any contract or agreement entered into in the ordinary
course of business consistent with past practice and which requires payments by
the Company or the Subsidiaries in an aggregate amount of less than U.S.
$250,000; (iv) terminate, cancel or request any material change in, or agree to
any material change in, any Material Contract, except in the ordinary course of
business consistent with past practice; or (v) authorize any single capital
expenditure (excluding software development activity) which is in excess of U.S.
$500,000 or capital expenditures which are, in the aggregate, in excess of U.S.
$2,500,000 for the Company and the Subsidiaries taken as a whole;
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practices in
salaries or wages of employees of the Company or any Subsidiary who are not
officers of the Company, or grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director, officer or other
employee of the Company or any Subsidiary (other than in connection with hiring
and terminating employees in the ordinary course of the Company's business), or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination or severance plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
officer or employee or circulate to any employee any details of any proposal to
adopt or amend any such plan;
(g) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable);
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(h) make any material tax election or settle or compromise any
material federal, state, local or foreign income tax liability;
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice, of liabilities reflected or reserved against in
the Balance Sheet included in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997 or subsequently incurred in the ordinary course
of business consistent with past practice; or
(j) settle or comprise any pending or threatened suit, action or
claim that is material or which relates to any of the Transactions; or
(k) announce an intention, enter into any formal or informal
agreement, or otherwise make a commitment, to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 [Reserved]
SECTION 6.02 [Reserved]
SECTION 6.03 Company Board Representation; Section 14(f). (a)
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board as
shall give Purchaser representation on the Board equal to the product of the
total number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Purchaser or any affiliate of Purchaser
at such time bears to the total number of Shares then outstanding, and the
Company shall, at such time, promptly take all actions necessary to cause
Purchaser's designees to be elected as directors of the Company, including
increasing the size of the Board or securing the resignations of incumbent
directors or both. At such times, the Company shall use all reasonable efforts
to cause persons designated by Purchaser to constitute the same percentage as
persons designated by Purchaser shall constitute of the Board with respect to
(i) each committee of the Board (some of whom may be required to be independent
as required by applicable law or requirements of the New York Stock
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Exchange), (ii) each board of directors of each Subsidiary and (iii) each
committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, until the time Purchaser acquires
a majority of the then outstanding Shares on a fully diluted basis, the Company
shall use all reasonable efforts to ensure that all the members of the Board and
each committee of the Board and such boards and committees of the Subsidiaries
as of the date hereof who are not employees of the Company shall remain members
of the Board and of such boards and committees.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include the
Information Statement containing such information with respect to the Company
and its officers and directors as is required under Section 14(f) and Rule 14f-1
as an annex to the Schedule 14D-9 to fulfill such obligations. Purchaser shall
supply to the Company and be solely responsible for any information with respect
to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of designees of Purchaser
pursuant to this Section 6.03, any amendment of this Agreement or the
Constituent Documents of the Company, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Purchaser or waiver of any of the Company's
rights hereunder shall require the concurrence of a majority of the directors of
the Company then in office who neither were designated by Purchaser nor are
employees of the Company or if no such directors are then in office, no such
amendment, termination, extension or waiver shall be effected which is
materially adverse to the holders of Shares (other than Purchaser and its
affiliates).
SECTION 6.04 Access to Information; Confidentiality. (a) From the
date hereof to the consummation of the Offer, the Company shall, and shall cause
the Subsidiaries to, afford the officers, employees and agents of Purchaser and
persons providing or committing to provide Purchaser or its affiliates with
financing for the Transactions complete access at all reasonable times to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of the Company and each Subsidiary, and shall furnish
Purchaser and persons providing or committing to provide Purchaser or its
affiliates with financing for the Transactions with all financial, operating and
other data and information as Purchaser, through its officers, employees or
agents, may reasonably request.
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(b) Purchaser agrees that all information obtained by Purchaser or
its affiliates pursuant to this Section 6.04 shall be kept confidential, by
Purchaser and by any other party which is to be afforded access pursuant to
Section 6.04(a), in accordance with the confidentiality agreement, dated May 19,
1997 (the "Confidentiality Agreement"), between Constellation Capital Partners
LLC and the Company.
SECTION 6.05 No Solicitation of Transactions. Neither the Company
nor any Subsidiary shall, directly or indirectly, through any officer, director,
agent or otherwise, solicit, initiate or encourage the submission of any
proposal or offer from any person relating to any acquisition or purchase of all
or any material portion of the assets of, or any equity interest in, the Company
or any Material Subsidiary or any business combination with the Company or any
Material Subsidiary or participate in any negotiations regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any of the foregoing and the Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Notwithstanding the foregoing or any other provision hereof, nothing
shall prohibit the Board from furnishing information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
(from the date of this Agreement) proposal in writing by such person to acquire
the Company pursuant to a merger, consolidation, share exchange, business
combination or other similar transaction or to acquire all or substantially all
of the assets of the Company or any of its Subsidiaries, if, and only to the
extent that, (i) the Board, after consultation with independent legal counsel
(which may include its regularly engaged independent legal counsel), determines
in good faith that such action is required for the Board to comply with its
fiduciary duties to stockholders imposed by Delaware Law and (ii) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person the Company uses its reasonable efforts to obtain from such
person an executed confidentiality agreement on terms no less favorable to the
Company than those contained in the Confidentiality Agreement. The Company shall
notify Purchaser promptly if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made, and shall inform
Purchaser of the terms and conditions of any such proposal or offer or the
details of any such inquiry or contact. The Company agrees not to release any
third party from, or waive any provision of, any confidentiality or, subject to
the fiduciary duties of the Board, standstill agreement to which the Company is
or may become a party.
SECTION 6.06 Employee Benefits Matters; Employment Agreements. Annex
B hereto sets forth certain agreements among the parties hereto with respect to
the Plans and other employee benefits matters.
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SECTION 6.07 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation and Bylaws of the Company shall, for a
period of six years from the date of acceptance for payment by Purchaser of
Shares pursuant to the Offer (the "Consummation Date"), contain provisions no
less favorable with respect to indemnification than are currently set forth in
Article XIII of the Bylaws of the Company, which provisions shall not be
amended, repealed or otherwise modified for such period in any manner that would
affect adversely the rights thereunder of individuals who at any time from and
after the date of this Agreement and to and including the Consummation Date were
directors, officers, employees, fiduciaries or agents of the Company in respect
of acts or omissions occurring at or prior to the Consummation Date (including,
without limitation, the matters contemplated by this Agreement), unless such
modification shall be required by law. From and after the Purchaser's Election
Date, the Company shall not amend, repeal or otherwise modify the
indemnification and advancement of expenses provisions of Article XIII of the
Bylaws of the Company or the indemnification or advancement of expenses
provisions in the Constituent Documents of any of the Subsidiaries in any manner
that would adversely affect the rights thereunder of individuals who at any time
from and after the date of this Agreement and to and including the Consummation
Date were directors, officers, employees, fiduciaries or agents of the Company
or any of the Subsidiaries in respect of acts or omissions occurring at or prior
to the Consummation Date (including, without limitation, the matters
contemplated by this Agreement), unless such modification is required by law.
(b) The Company shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless each present and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary
(collectively, the "Indemnified Parties") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Consummation Date), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any act or omission in their capacity as an
officer, director, employee, fiduciary or agent, whether occurring before or
after the Consummation Date, for a period of six years after the date hereof
(and shall pay any expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent permitted
under Delaware Law, and, with respect to Indemnified Parties who are or were
directors or officers of the Company, upon receipt from the Indemnified Party to
whom expenses are advanced of any undertaking to repay such advances required
under Delaware Law). In the event of any such claim, action, suit, proceeding or
investigation, (i) the Company shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company and Purchaser promptly after statements therefor are
received (subject to the provision of an
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<PAGE> 35
undertaking as set forth in the prior sentence, if applicable) and (ii) the
Company and Purchaser shall cooperate in the defense of any such matter;
provided, however, that neither the Company nor Purchaser (i) shall be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld); or (ii) shall be obligated pursuant to this Section
6.07(b) to pay the fees and expenses of more than one counsel for all
Indemnified Parties in any single action except to the extent that two or more
of such Indemnified Parties shall have conflicting interests in the outcome of
such action; and provided further that, in the event that any claim for
indemnification is asserted or made within such six-year period, all rights to
indemnification in respect of such claim shall continue until the disposition of
such claim.
(c) The Company shall maintain in effect for a period of six years
after the Consummation Date insurance coverage, if available, equivalent to that
provided by the directors' and officers' liability insurance policies currently
maintained by the Company with respect to matters occurring on or prior to the
Consummation Date; provided, however, that the Company may substitute therefor
policies of at least the same coverage containing terms and conditions which are
not materially less favorable; and provided further that, in no event shall the
Company be required to expend pursuant to this Section 6.07(c) more than an
amount per year equal to 250% of current annual premiums paid by the Company for
such insurance (which annual premiums the Company represents to be approximately
$300,000).
(d) In the event the Company, Purchaser or any of their respective
successors or assigns (i) consolidates with or merges into any other person
(including a merger or consolidation of the Company with or into Purchaser) and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or
Purchaser, as the case may be, shall assume the obligations set forth in this
Section 6.07.
SECTION 6.08 Notification of Certain Matters. The Company shall give
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which causes any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect and (ii) any
failure of the Company or Purchaser, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.08 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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SECTION 6.09 Further Action; Reasonable Efforts. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use all
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using all reasonable efforts to
obtain all licenses, permits (including, without limitation, environmental
permits), consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and the
Subsidiaries as are necessary for the consummation of the Transactions and to
fulfill the conditions to the Offer (provided that neither Purchaser, its
stockholders nor its affiliates shall be required to dispose of any material
portion of its assets to obtain any such consents, approvals, authorizations,
qualifications or orders), and (iii) except as contemplated by this Agreement,
use all reasonable efforts not to take any action, or enter into any
transaction, which would cause any of its representations or warranties
contained in this Agreement to be untrue or result in a breach of any covenant
made by it in this Agreement. In case at any time after the Consummation Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of Purchaser and the Company shall
use all reasonable efforts to take all such action.
SECTION 6.10 Public Announcements. Purchaser and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any Transaction and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or foreign securities exchange to which Purchaser
or the Company is a party.
SECTION 6.11 Confidentiality Agreement. Assuming the Minimum
Condition has been satisfied, the Confidentiality Agreement shall be deemed to
have terminated on the Consummation Date without further action by the parties
thereto.
ARTICLE VII
[RESERVED]
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Offer may be abandoned at any time prior to the Consummation Date,
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated hereby by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Purchaser and the Company prior to Purchaser's Election Date; or
(b) By Purchaser or the Company if (i) the Consummation Date shall
not have occurred on or before December 31, 1997; provided, however, that the
right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Consummation
Date to occur on or before such date or (ii) any court of competent jurisdiction
in the United States or other governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer and such order, decree, ruling or other action shall have
become final and nonappealable; or
(c) By Purchaser if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A, as
applicable, Purchaser shall have (A) failed to commence the Offer within five
business days following the date of public announcement of the execution of this
Agreement, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to pay for Shares pursuant to the Offer within
90 days following the commencement thereof; unless such action or inaction under
(A), (B) or (C) shall have been caused by or resulted from the failure of
Purchaser to perform in any material respect any material covenant or agreement
applicable to it contained in this Agreement or the material breach by Purchaser
of any material representation or warranty applicable to it contained in this
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the
Board or any committee thereof shall have withdrawn or modified in a manner
adverse to Purchaser its approval or recommendation of the Offer or this
Agreement or shall have recommended another merger, consolidation, business
combination with, or acquisition of, the Company or its assets or another tender
offer or exchange offer for Shares, or shall have resolved to do any of the
foregoing; or
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(d) By the Company, upon approval of the Board if (i) Purchaser
shall have (A) failed to commence the Offer within five business days following
the date of public announcement of the execution of this Agreement, (B)
terminated the Offer without having accepted any Shares for payment thereunder
or (C) failed to pay for Shares pursuant to the Offer within 90 days following
the commencement thereof; unless such action or inaction under (A), (B) or (C)
shall have been caused by or resulted from the failure of the Company to perform
in any material respect any material covenant or agreement of it contained in
this Agreement or the material breach by the Company of any material
representation or warranty of it contained in this Agreement or (ii) prior to
the purchase of Shares pursuant to the Offer, the Board shall have withdrawn or
modified in a manner adverse to Purchaser its approval or recommendation of the
Offer or this Agreement in order to approve the execution by the Company of a
definitive agreement providing for the acquisition of the Company or any of its
assets by a sale, merger or other business combination or in order to approve a
tender offer or exchange offer for Shares by a third party, in either case, as
the Board determines in good faith that such action is required for the Board to
comply with its fiduciary duties to stockholders, after consultation with its
independent legal counsel and financial advisers, and is on terms more favorable
to the Company's stockholders than the Offer; provided, however, that (x) the
Company shall have given notice to Purchaser advising Purchaser that the Company
has received a proposal for such a transaction from a third party, specifying
the material terms and conditions (including the identity of the third party)
and that the Company intends to terminate this Agreement in accordance with this
Section 8.01(d) and either (q) Purchaser shall not have revised the terms of its
offer to acquire the Company within two business days from the date on which
such notice is deemed to have been given to Purchaser or (r) if the Expiration
Date of the Offer would otherwise occur within the period in which the Company
is prohibited by this proviso from terminating this Agreement, the Purchaser
shall not have extended the Expiration Date of the Offer until 12 hours after
the end of such two business day period, and given the Company timely notice of
such extension or (s) if within such two business day period Purchaser shall
have revised such terms, the Board of the Company, after receiving advice from
the Company's financial adviser, shall have determined in good faith that the
third party's proposal
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is superior to Purchaser's revised terms and (y) such termination under this
clause (ii) shall not be effective until the Company has made payment to
Purchaser of the Fee (as hereinafter defined) required to be paid pursuant to
Section 8.03(a)(iv) and has deposited with a mutually acceptable escrow agent
$12.0 million for reimbursement of Expenses (as hereinafter defined).
SECTION 8.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except as set forth in Sections 8.03 and 9.01, and nothing herein shall relieve
any party from liability for any breach hereof.
SECTION 8.03 Fees and Expenses. (a) In the event that
(i) any person (including, without limitation, the Company or any
affiliate thereof), other than Purchaser or any affiliate of Purchaser, shall
have become the beneficial owner of more than 20% of the then outstanding
Shares, this Agreement shall have been terminated pursuant to Section 8.01
(other than pursuant to Section 8.01(c)(ii) or 8.01(d)(ii)) and within 12 months
of such termination a Third Party Acquisition (as defined hereinafter) shall
occur; or
(ii) any person shall have commenced, publicly proposed or
communicated to the Company a proposal that is publicly disclosed for a tender
or exchange offer for 25% or more of the then outstanding Shares (or which,
assuming the maximum amount of securities that could be purchased, would result
in any person beneficially owning 25% or more of the then outstanding Shares) or
otherwise for the direct or indirect acquisition of the Company or all or
substantially all of its assets for per Share consideration having a value
greater than the Per Share Amount and (w) the Offer shall have remained open for
at least 20 business days, (x) the Minimum Condition shall not have been
satisfied, (y) this Agreement shall have been terminated pursuant to Section
8.01 (and other than pursuant to Section 8.01(c)(ii) or 8.01(d)(ii)) and (z)
within 12 months of such termination a Third Party Acquisition shall occur; or
(iii) if the Minimum Condition shall not have been satisfied on or prior to the
date that is 60 days from the date of commencement of the Offer, Purchaser
desires to extend the Offer beyond such 60 day period but the Company declines
to consent to such extension pursuant to Section 1.01, this Agreement is
terminated pursuant to Section 8.01 (and other than pursuant to Section
8.01(c)(ii) or 8.01(d)(ii)) and within 12 months of such termination a Third
Party Acquisition shall occur; or
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(iv) this Agreement is terminated pursuant to Section 8.01(c)(ii) or
8.01(d)(ii)
then, in any such event, provided that Purchaser is not in material breach of
its obligations under this Agreement, the Company shall pay Purchaser promptly
(but in no event later than one business day after (a) the consummation of the
Third Party Acquisition, with respect to the events described in clauses (i),
(ii) or (iii), or (b) such termination with respect to clause (iv)) a fee of $8
million (the "Fee"), which amount shall be payable in immediately available
funds, plus all Expenses.
(b) Provided that Purchaser is not in material breach of its
obligations under this Agreement and Purchaser is not entitled to the Fee
pursuant to Section 8.03(a), if (i) this Agreement is terminated pursuant to
Section 8.01(c) due to the occurrence of the condition set forth in paragraph
(g) of Annex A or (ii) this Agreement is terminated pursuant to Section 8.01(c)
because of the occurrence of the condition set forth in paragraph (f) of Annex
A, then, in either case (i) or (ii), the Company shall promptly reimburse
Purchaser for all Expenses.
(c) "Expenses" means the sum of (i) all reasonable out-of-pocket
expenses and fees up to $2 million in the aggregate (including, without
limitation, reasonable fees and expenses payable to all banks, investment
banking firms, other financial institutions and other persons and their
respective agents and counsel for arranging, committing to provide or providing
any financing for the Offer or structuring the Offer and all reasonable fees of
counsel, accountants, experts and consultants to Purchaser and its affiliates,
and all printing and advertising expenses) actually incurred by Purchaser or its
affiliates or on their behalf in connection with the Offer, including, without
limitation, the financing thereof, and actually incurred by banks, investment
banking firms, other financial institutions and other persons and assumed by
Purchaser and its affiliates in connection with the negotiation, preparation,
execution and performance of this Agreement, the structuring and financing of
the Offer and any financing commitments or agreements relating thereto and (ii)
all amounts paid by Purchaser to UDI or its affiliates on behalf of the Company
in connection with the termination of the UDI Agreement.
(d) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(e) In the event that the Company shall fail to pay the Fee or any
Expenses when due, the term "Expenses" shall be deemed to include the reasonable
costs and expenses actually incurred by Purchaser (including, without
limitation, reasonable fees
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and expenses of counsel) in connection with the collection under and enforcement
of this Section 8.03, together with interest on such unpaid Fee and Expenses,
commencing on the date that the Fee or such Expenses became due, at a per annum
rate equal to the rate of interest publicly announced by Morgan Guaranty Trust
Company of New York, from time to time, in the City of New York, as such bank's
prime rate plus 1%.
(f) "Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger, consolidation or
other business combination transaction by any person other than Purchaser or any
of its affiliates (a "Third Party"); (ii) the acquisition by any Third Party of
all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole; (iii) the acquisition by a Third Party of 50% or more of the
outstanding Shares whether by tender offer, exchange offer or otherwise; (iv)
the adoption by the Company of a plan of liquidation or the declaration or
payment of an extraordinary dividend; or (v) the repurchase by the Company or
any of its Subsidiaries of 50% or more of the outstanding Shares.
SECTION 8.04 Amendment. Subject to the limitations set forth in
Section 6.03(c), this Agreement may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Consummation Date. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.05 Waiver. Subject to the limitations set forth in Section
6.03(c), at any time prior to the Consummation Date, any party hereto may (i)
extend the time for the performance of any obligation or other act of any other
party hereto, (ii) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement or condition contained herein. Any such extension
or waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Consummation Date or upon the termination of this
Agreement pursuant to Section 8.01, as the case may be, except that the
agreements set forth in Article IX and
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Section 6.07 shall survive the Consummation Date indefinitely and those set
forth in Sections 6.04(b), 8.03 and Article IX shall survive termination
indefinitely.
SECTION 9.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 9.02):
if to Purchaser:
II Acquisition Corp.
1250 24th Street, N.W.
Suite 800
Washington, D.C. 20037
Telecopy No.: 202-828-0865
Attn: Michael G. Ryan
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy No.: 212-909-6836
Attn: Meredith M. Brown, Esq.
if to the Company:
Imo Industries Inc.
1009 Lenox Drive
Lawrenceville, New Jersey 08648-0550
Telecopy No.: 609-896-7633
Attn: Thomas J. Bird, Esq.
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with a copy to:
Weil, Gotshal and Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopy No.: 212-310-8007
Attn: Ronald F. Daitz, Esq.
SECTION 9.03 Certain Definitions. For purposes of this Agreement,
the term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "beneficial owner" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) that such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) that such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) that are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Shares;
(c) "business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
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(e) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(f) "subsidiary" or "subsidiaries" of any person means an affiliate
controlled by such person, directly or indirectly, through one or more
intermediaries.
SECTION 9.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05 Entire Agreement, Assignment. This Agreement and the
undertaking dated the date hereof from Mitchell P. Rales and Steven M. Rales
addressed to the Company constitute the entire agreement among the parties with
respect to the subject matter hereof and supersedes, except as set forth in
Section 6.04(b), all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned by operation of law or otherwise, except
that Purchaser may assign all or any of its rights and obligations hereunder to
any entity that is directly or indirectly wholly owned by Mitchell P. Rales and
Steven M. Rales provided that no such assignment shall relieve the assigning
party of its obligations hereunder if such assignee does not perform such
obligations.
SECTION 9.06 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.07 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not
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performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
SECTION 9.09 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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<PAGE> 46
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
II ACQUISITION CORP.
By: /s/ PHILIP W. KNISELY
---------------------------------------
Name: Philip W. Knisely
Title: President and Chief Executive Officer
IMO INDUSTRIES INC.
By: /s/ W. M. BROWN
---------------------------------------
Name: W. M. Brown
Title: Chief Financial Officer
<PAGE> 47
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall
not be required to accept for payment or pay for any Shares tendered pursuant to
the Offer, and may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for Shares tendered, if (i) the Minimum Condition
shall not have been satisfied, (ii) any applicable waiting period under the HSR
Act shall not have expired or been terminated prior to the expiration of the
Offer or (iii) at any time on or after the date of this Agreement, and prior to
the acceptance for payment of Shares, any of the following conditions shall
exist:
(a) there shall have been instituted or be pending any action or
proceeding brought by any governmental, administrative or regulatory authority
or agency, domestic or foreign, before any court or governmental, administrative
or regulatory authority or agency, domestic or foreign, (i) challenging or
seeking to make illegal, materially delay or otherwise directly or indirectly
restrain or prohibit or make materially more costly the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Purchaser pursuant to
the Offer, or seeking to obtain material damages in connection with the Offer;
(ii) seeking to prohibit or limit materially the ownership or operation by the
Company, Purchaser or any of Purchaser's affiliates of all or any material
portion of its or their business or to compel the Company, Purchaser or any of
Purchaser's affiliates to dispose of or hold separate all or any material
portion of its or their business, in each case as a result of the Offer; (iii)
seeking to impose or confirm limitations on the ability of the Purchaser to
exercise effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by Purchaser pursuant to the
Offer, or otherwise on all matters properly presented to the Company's
stockholders, including, without limitation, the approval and adoption of this
Agreement and the transactions contemplated hereby; or (iv) seeking to require
divestiture by Purchaser of any Shares; provided that Purchaser shall have used
all reasonable efforts to cause any such action or proceeding described in this
paragraph (a) to be dismissed or withdrawn;
(b) there shall have been issued any injunction, order or decree by
any court or governmental, administrative or regulatory authority or agency,
domestic or foreign, resulting from any action or proceeding brought by any
person other than any governmental, administrative or regulatory authority or
agency, domestic or foreign, that (i) restrains or prohibits the making of the
Offer; (ii) prohibits or limits ownership or operation by the Company, Purchaser
or any of Purchaser's affiliates of all or any material portion of its business
or assets or compels the Company, Purchaser or any of
A-1
<PAGE> 48
Purchaser's affiliates to dispose of or hold separate all or any material
portion of its business or assets, in each case as a result of the Offer; (iii)
imposes limitations on the ability of Purchaser to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Purchaser pursuant to the Offer, or otherwise on all
matters properly presented to the Company's stockholders or (iv) requires
divestiture by Purchaser of any Shares; provided that Purchaser shall have used
all reasonable efforts to cause any such injunction, order or decree described
in this paragraph (b) to be vacated or lifted;
(c) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) Purchaser, the Company or any
subsidiary or affiliate of Purchaser or the Company or (ii) the Offer, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, in the case of both (i) and
(ii) other than the routine application of the waiting period provisions of the
HSR Act to the Offer, that results in any of the consequences referred to in
clauses (i) through (iv) of paragraph (b) above; provided that Purchaser shall
have used all reasonable efforts to cause any such action, order or injunction
described in this paragraph (c) to be vacated or lifted;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the New York
Stock Exchange, (ii) any decline, measured from the date hereof, in the Standard
& Poor's 500 Index by an amount in excess of 30%, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iv) any limitation (whether or not mandatory) by any government
or governmental, administrative or regulatory authority or agency, domestic or
foreign, on the extension of credit by banks or other lending institutions, (v)
a commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States or (vii) in the case
of any of the foregoing existing on the date hereof, a material acceleration or
worsening thereof;
(e) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
20% or more of the then outstanding Shares has been acquired by any person,
other than Purchaser or (ii) (A) the Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Purchaser the approval or
recommendation of the Offer or the Agreement or approved or recommended any
takeover proposal or any other
A-2
<PAGE> 49
acquisition of Shares other than the Offer or (B) the Board or any committee
thereof shall have resolved to do any of the foregoing;
(f) (i) any representation or warranty of the Company in the
Agreement shall not be true and correct; or
(ii) there shall have occurred, since the date of the Agreement, a
change in the business, operations, financial condition, assets or liabilities
of the Company or any Subsidiary with the effect that such failure of any such
representation or warranty to be true and correct or such change, when taken
together with all other such failures of such representations and warranties to
be true and correct (both favorable and adverse) and all other such changes
(both favorable and adverse), in the aggregate would have, a Material Adverse
Effect; provided, however that, for the purpose of the foregoing condition, in
determining whether any such representation or warranty is true or correct, any
qualification as to materiality or Material Adverse Effect contained in any such
representation and warranty shall be deemed not to apply;
(g) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied with
by it under the Agreement;
(h) the Agreement shall have been terminated in accordance with its
terms; or
(i) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment for
Shares thereunder; which, in the sole judgment of Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by
Purchaser or any of its affiliates) giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and
may be asserted by Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by Purchaser in whole or in part at any time and
from time to time in their sole discretion. The failure by Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-3
<PAGE> 50
ANNEX B
For a period of one year from the Consummation Date, Purchaser
shall, or shall cause the Company to, maintain the Plans (other than the Stock
Option Plans) which the Company maintains for the benefit of, or which are open
to, a majority of the employees of the Company on the terms in effect on the
date hereof, or such other plans, arrangements or programs as will provide
employees with benefits that in the aggregate are substantially equivalent to,
and no less favorable than, those provided under the Plans (other than the Stock
Option Plans) as in effect on the date hereof. In addition, in the event of a
merger or consolidation between Purchaser or any affiliate of Purchaser and the
Company, Purchaser shall, or shall cause the surviving corporation of such
merger or consolidation to, assume and agree to perform those Change of Control
Agreements listed in Schedule 6.06 of the Disclosure Schedule in the same manner
and to the same extent that the Company is required to perform such agreements.
<PAGE> 1
Exhibit (c)(2)
[Credit Suisse First Boston Corporation Letterhead]
May 19, 1997
John A. Young
Vice President
Constellation Capital Partners LLC
9211 Forest Hill Avenue
Suite 109
Richmond, VA 23235
Dear Mr. Young:
You have requested information regarding Imo Industries Inc. (the "Company",
"us" or "we") in connection with your consideration of a possible negotiated
transaction with the Company (a "Possible Transaction"). In consideration of our
furnishing you with the Evaluation Materials (as defined below) you agree as
follows:
CONFIDENTIALITY OF EVALUATION MATERIALS
You and your representatives (as defined herein) will treat confidentially any
information (whether written or oral) that either we or our financial advisor,
Credit Suisse First Boston Corporation ("CSFB"), or our other representatives
furnish to you in connection with a Possible Transaction involving the Company,
together with analyses, compilations, studies or other documents prepared by
you, or by your representatives which contain or otherwise reflect such
information or your review at, or interest in, the Company (collectively, the
"Evaluation Materials"). You recognize and acknowledge the competitive value of
the Evaluation Materials and the damage that could result to the Company if the
Evaluation Materials were used or disclosed except as authorized by this
Agreement.
<PAGE> 2
Page 2
The term "Evaluation Materials" includes information furnished to you orally or
in writing (whatever the form or storage medium) or gathered by inspection, and
regardless of whether such information is specifically identified as
"confidential". The term "Evaluation Materials" does not include information
which (i) is or becomes generally available to the public other than as a result
of a disclosure by you or your representatives, (ii) was or becomes available to
you or your representatives an a non-confidential basis from a source other
than the Company or representatives, provided that such source is not prohibited
from disclosing such information to you by a contractual, legal or fiduciary
obligation to the Company or its representatives, or (iii) is independently
developed by you.
Use of Evaluation Materials
- ---------------------------
You and your representatives will not use any of the Evaluation Materials in any
way that is detrimental to the Company or for any purpose other than the
exclusive purpose of evaluating a Possible Transaction. You and your
representatives will keep the Evaluation Materials completely confidential and
will not disclose the Evaluation Materials, in any manner, in whole or in part,
provided, however, that (i) any such information may only be disclosed to those
of your directors, officers, employees, agents, representatives (including
attorneys, accountants and financial advisors), lenders and other sources of
financing (collectively, "your representatives") who need to know such
information for the purpose of evaluating a Possible Transaction between you and
the Company (it being understood that your representatives shall be informed by
you of the confidential nature of such information and shall be directed by you,
and shall each expressly agree, to treat such information confidentially in
accordance with this Agreement) and (ii) any other disclosure of such
information may only be made if the Company consents in writing prior to any
such disclosure. Without limiting the generality of the foregoing, in the event
that a Possible Transaction is not consummated neither you nor your
representatives shall use
<PAGE> 3
Page 3
any of the Evaluation Materials for any purpose. You will be responsible for any
breach of this Agreement by your representatives.
In the event that you or any of your representatives receive a request or are
required (by deposition, interrogatory. request for documents, subpoena, civil
investigative demand or similar process) to disclose all or any part of the
Evaluation Materials, you or your representatives, as the case may be, agree to
(i) immediately notify the Company of the existence, terms and circumstances
surrounding such a request, (ii) consult with the Company on the advisability of
taking legally available steps to resist or narrow such request and (iii) assist
the Company in seeking a protective order or other appropriate remedy. In the
event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions hereof, (i) you or your
representatives, as the case may be, may disclose to any tribunal only that
portion of the Evaluation Materials which you are advised by counsel is legally
required to be disclosed, and shall exercise your best efforts to obtain
assurance that confidential treatment will be accorded such Evaluation Materials
and (ii) you shall not be liable for such disclosure unless disclosure to any
such tribunal was caused by or resulted from a previous disclosure by you or
your representatives not permitted by this Agreement
Non-Disclosure
- --------------
The disclosure of your possible interest in negotiating a transaction with the
Company could have a material adverse effect on the Company's business if for
any reason an agreement is not consummated. Accordingly, unless required by
applicable law, you agree that prior to the closing of a Possible Transaction,
without the prior written consent of the Company, you will not, and you will
direct your representatives not to, disclose to any person either the fact that
you have entered into this Agreement, that Evaluation Materials have been made
available or that
<PAGE> 4
Page 4
discussions or negotiations are taking place concerning a Possible Transaction
between you and the Company or any of the terms, conditions or other facts with
respect to any such Possible Transaction, including the status thereof. The term
"person" as used in this letter shall be broadly interpreted to include, without
limitation, any corporation, the Company, governmental agency or body, stock
exchange, partnership, association or individual.
Return of Documents
- -------------------
Upon the Company's request, you shall promptly deliver to the Company or destroy
all written Evaluation Materials and any other written materials without
retaining, in whole or in part, any copies, extracts or other reproductions
(whatever the form or storage medium) of such materials, and shall certify the
destruction of such materials in writing to the Company. Notwithstanding the
return or destruction of the Evaluation Materials, you and your representatives
will continue to be bound by your obligations pursuant to this Agreement.
No Unauthorized Contact or Solicitation
- ---------------------------------------
During the course of your evaluation, you agree that all inquiries and other
communications are to be made directly to CSFB or employees or representatives
of the Company specified by CSFB.
Without the Company's prior written consent, you will not for a period of one
year from the date of this Agreement directly solicit for employment any person
who is now employed by the Company (or whose activities are dedicated to the
Company) in an executive or management level position or to whom you are
introduced in the course of your evaluation of a possible transaction.
<PAGE> 5
Page 5
Standstill
- ----------
You agree that until one year from the date of this Agreement, you will not
without the prior approval of the Board of Directors of the Company (i) acquire
or make any proposal to acquire any securities or property of the Company, (ii)
propose to enter into any merger or business combination involving the Company
or purchase a material portion of the assets of the Company, (iii) make or
participate in any solicitation of proxies to vote, or seek to advise or
influence any person with respect to the voting of any securities of the
Company, (iv) form, join or participate in a "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any
voting securities of the Company, (v) otherwise act or seek to control or
influence the management, Board of Directors or policies of the Company, (vi)
disclose any intention, plan or arrangement inconsistent with the foregoing or
(vii) take any action which might require the Company to make a public
announcement regarding the possibility of a business combination or merger.
Except as provided above, you also agree during such period not to request the
Company (or its directors, officers, employees, agents or representatives) to
amend or waive any provision of this paragraph.
No Representation or Warranty
- -----------------------------
Although the Company and CSFB have endeavored to include in the Evaluation
Materials information known to them which they believe to be relevant for the
purpose of your investigation, you acknowledge and agree that none of the
Company, CSFB or any of the Company's other representatives or agents is making
any representation or warranty, expressed or implied, as to the accuracy or
completeness of the Evaluation Materials, and none of the Company, CSFB or any
of the Company's other representatives or agents, nor any of their respective
officers, directors, employees, representatives, stockholders, owners,
affiliates, advisors or agents, will have any liability to you or any other
<PAGE> 6
Page 6
person resulting from the use of Evaluation Materials by you or any of your
representatives. Only those representations or warranties that are made in a
definitive agreement relating to the Company ("Sale Agreement") when, as, and if
it is executed, and subject to such limitations and restrictions as may be
specified in such Sale Agreement, will have any legal effect.
You also acknowledge and agree that no contract or agreement providing for a
Possible Transaction shall be deemed to exist between you and the Company unless
and until a Sale Agreement has been executed and delivered by you and each of
the other parties thereto, and you hereby waive, in advance, any claims
(including, without limitation, breach of contract) in connection with a
Possible Transaction unless and until a Sale Agreement has been executed and
delivered by you and each of the other parties thereto. You also agree that
unless and until a Sale Agreement between the Company and you with respect to a
Possible Transaction has been executed and delivered by you and each of the
other parties thereto, there shall not be any legal obligation of any kind
whatsoever with respect to any such transaction by virtue of this agreement or
any other written or oral expression with respect to such transaction except, in
the case of this Agreement, for the matters specifically agreed to herein. For
purposes of this Agreement, the term "Sale Agreement" does not include an
executed letter of intent or any other preliminary written agreement, nor does
it include any oral acceptance of an offer or bid by you.
You further understand and agree that (i) the Company and CSFB shall be free to
conduct the process regarding a transaction involving the Company as they in
their sole discretion shall determine (including, without limitation,
negotiating with any other interested parties and entering into a Sale Agreement
without prior notice to you or to any other person), (ii) any procedures
relating to such sale may be changed at any time without notice to you or any
other person and (iii) you shall not have any claims whatsoever against the
Company. CSFB or any of their respective
<PAGE> 7
Page 7
directors, officers, employees, stockholders, owners, affiliates, agents or
representatives arising out of or relating to a transaction involving the
Company (other than those as against the parties to a Sale Agreement with you in
accordance with the terms thereof).
LEGAL REMEDY
You understand and agree that the Company would be irreparably injured and that
money damages would not be a sufficient remedy for any breach of this Agreement
by you or your representatives and that the Company will be entitled to specific
performance and injunctive relief as remedies for any such breach. Such remedies
shall not be deemed to be the exclusive remedies for a breach of this Agreement
by you or your representatives but shall be in addition to all other remedies
available at law or equity.
OTHER
This Agreement constitutes the entire agreement between the parties hereto
regarding the subject matter hereof. This Agreement may be changed only by a
written agreement signed by the parties hereto or their authorized
representatives.
You hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts at the State of New York and the United States of
America located in the State of New York for any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby (and you agree not to commence any action, suit or proceeding relating
thereto except in such courts), and further agree that service of any process,
summons, notice or document by U.S. registered mail to your address set forth
above shall be effective service of process for any action, suit or proceeding
brought against you in any such court. You hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
<PAGE> 8
Page 8
hereby, in the courts of the State of New York or the United States of America
located in the State of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege under this Agreement shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise of any right, power or privilege hereunder.
This Agreement shall be governed and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law principles
thereof.
If you are in agreement with the foregoing, please sign and return one copy of
this letter, it being understood that all counterpart copies will constitute but
one agreement with respect to the subject matter of this letter.
Very truly yours,
IMO INDUSTRIES INC.
By Credit Suisse First Boston Corporation, solely as
Company's representative
By: /s/ JONATHAN ROUNER
--------------------------
Name: Jonathan Rouner
Title: Director
Accepted and agreed to as of the date hereof:
CONSTELLATION CAPITAL PARTNERS LLC
By:/s/ JOHN A. YOUNG
--------------------------
Name: John A. Young
Title: Vice President
<PAGE> 1
EXHIBIT C(3)
II ACQUISITION CORP.
9211 FOREST HILL AVENUE, SUITE 109
RICHMOND, VA 23235
July 30, 1997
Danaher Corporation
1250 24th Street, NW
Suite 800
Washington, D.C. 20037
Dear Sirs:
This letter sets forth the intention of the parties with respect to the
purchase by Danaher Corporation ("Buyer") of substantially all the assets
principally related to, or used, held for use or intended to be used in
connection with, the operations of the Instrumentation Division (the "Division")
of Imo Industries Inc. ("Seller") (including without limitation, its
manufacturing operations and its owned real property) and the assumption by
Buyer of certain liabilities related to the Division, which will occur as soon
as practicable after the Consummation Date (as defined in the Share Purchase
Agreement between Seller and II Acquisition Corp. ("Acquisition") dated July 25,
1997).
1. PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES. Subject to paragraph
3, Buyer agrees to purchase from Seller, and Acquisition will cause Seller to
sell to Buyer, substantially all of the Seller's right, title and interest in
the properties, assets and rights of the Seller principally relating to, or
used, held for use, or intended to be used in connection with, the operation of
the Division other than certain specifically excluded assets (the "Assets").
Buyer also agrees to assume certain liabilities, obligations and commitments
arising exclusively out of the operation or conduct of the Division (the
"Liabilities").
2. PURCHASE PRICE. The purchase price for the Assets shall be $85 million,
payable to Seller in cash, plus the assumption of the Liabilities.
3. DEFINITIVE ASSET PURCHASE AGREEMENT. As promptly as practicable after
the Consummation Date Buyer and Seller shall execute a definitive Asset Purchase
Agreement, and any ancillary agreements required under the terms of
<PAGE> 2
the Asset Purchase Agreement or otherwise deemed necessary or advisable by the
parties.
4. CONDITIONS TO CLOSING. Closing under the Asset Purchase Agreement will
be subject to certain closing conditions including (a) approval by the
respective Boards of Directors of Seller and Buyer; (b) receipt by the Seller's
Board of Directors of a fairness opinion from a nationally recognized investment
bank in regard to the sale of the Division; and (c) the expiration or
termination of any applicable antitrust waiting periods.
5. CONDUCT OF BUSINESS OF DIVISION. Acquisition will use its reasonable
efforts to cause Seller to conduct the business of the Division in the ordinary
course, substantially in the manner conducted in the past.
6. EXPENSES. Each of the parties hereto will pay its own expenses incident
to this agreement, the Asset Purchase Agreement and the transactions
contemplated hereby and thereby (whether or not such transactions are
consummated), including without limitation counsel fees and any brokers and
investment banking fees.
7. CONFIDENTIALITY. Subject to the requirements of any applicable law,
pending consummation of the transactions contemplated hereby and by the Asset
Purchase Agreement, each of the parties hereto (and its affiliates) will keep in
strict confidence, and will instruct, and use its best efforts to cause, its
advisors and representatives to keep in strict confidence, all nonpublic
information and documents obtained from any other party hereto for the purposes
of furthering the transactions contemplated hereby, unless such information is
disclosed with the prior written approval of the party to which it relates. In
the event of termination of this agreement for any reason (other than the
execution and delivery of the definitive Asset Purchase Agreement), the parties
shall promptly return or destroy all nonpublic documents obtained from any other
party or any of its affiliates, advisors or representatives any copies made of
such documents.
8. INTEREST TO PROCEED; NO BINDING COMMITMENT. This letter of intent
reflects the intentions of the parties hereto to proceed with the transactions
on the terms and under the working arrangements outlined herein. Except as
stated below, it is not intended to act as a binding agreement with respect to
the transactions, and no such agreement shall exist unless and until the parties
hereto execute and deliver a definitive Asset Purchase Agreement as contemplated
herein. Notwithstanding the foregoing, the signatories hereto intend to be bound
by the provisions of paragraphs 6 and 7 herein.
<PAGE> 3
Please confirm that the foregoing correctly reflects the intentions of
Buyer by signing two copies of this letter in the space provided below and
returning one copy to us.
Very truly yours,
II ACQUISITION CORP.
By: /s/ JOSEPH O. BUNTING, III
-----------------------------------
Joseph O. Bunting, III
Vice President
DANAHER CORPORATION
By: /s/ DANIEL L. COMAS
----------------------------------
Daniel L. Comas
Vice President
