<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
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Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to [section] 240.14a-11(c) or [section]
240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
AMTROL Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: $218,935,415(a)
5) Total fee paid: $43,787.08
(a) Based on 7,444,220 shares of Common Stock outstanding at $28.25 per
share for a total share price of $210,299,215 plus 679,223 options
outstanding for a total option price of $8,636,200, as set forth in
Sections 2.01 and 2.03 of the Merger Agreement.
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[AMTROL LOGO]
October 9, 1996
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders (the
"Special Meeting") of AMTROL Inc. ("AMTROL" or the "Company") to be held at The
Westin Hotel, Providence, One West Exchange Street, Providence, Rhode Island
02903 on November 12, 1996 at 10:00 a.m.
At this meeting, you will be asked to consider and vote upon the following
items: (i) the adoption of an amendment to the Amended and Restated Articles of
Incorporation of the Company dated as of June 30, 1992 and last amended on March
23, 1993 (the "Articles") amending Article Sixth, Section D regarding approval
of business combinations, to exclude the Merger (as defined below) from the
definition of "business combination" contained in such Articles (the
"Amendment"); and (ii) the approval of a Merger Agreement by and among AMTROL,
A.I. Holdings, Inc. ("Holdings") and A.I. Acquisition, Inc. ("Acquisition"),
dated as of August 28, 1996 (the "Merger Agreement"), which provides for the
merger of AMTROL with Acquisition, a wholly-owned subsidiary of Holdings, a
Delaware corporation organized by Cypress Merchant Banking Partners L.P. and
Cypress Offshore Partners L.P. (the "Merger"). The closing of the Merger is
expected to occur in the fourth quarter of 1996, pending satisfaction of certain
closing conditions. Under the Merger Agreement, each outstanding share of common
stock of the Company, par value $.01 per share ("AMTROL Common Stock") will be
converted into the right to receive $28.25 in cash, without interest thereon, as
described in the enclosed Proxy Statement. Adoption of the Amendment requires an
affirmative vote of the holders of at least 75% of the outstanding shares of
AMTROL Common Stock. If the Amendment to the Articles is adopted, approval of
the Merger Agreement and the Merger will require the affirmative vote of the
holders of a majority of the outstanding shares of AMTROL Common Stock. If the
Amendment is not adopted, approval of the Merger Agreement and the Merger will
require the affirmative vote of the holders of at least 75% of the outstanding
shares of AMTROL Common Stock (excluding shares deemed beneficially owned by
"Related Persons" as defined in Article Sixth of the Articles).
The official Notice of Special Meeting, Proxy Statement and Proxy are
included herein. The Proxy Statement describes more fully the matters to be
voted on at the Special Meeting, including a description of the Amendment and
the Merger Agreement, the conditions which must be satisfied to consummate the
Merger, the effects of the Merger on AMTROL shareholders and certain other
information about the entities involved in the Merger.
The Board of Directors of AMTROL has unanimously adopted and approved the
Amendment and the Merger Agreement and recommends that you vote FOR adoption of
the Amendment and FOR approval of the Merger Agreement and the transactions
contemplated therein. Regardless of whether you plan to attend the Special
Meeting, please sign and date the enclosed proxy and return it in the envelope
provided in order that your shares may be represented at the Special Meeting. If
you decide to attend the Special Meeting, you may revoke your proxy and vote
your shares in person. I encourage you to read the Proxy Statement thoroughly.
Very truly yours,
/s/ Kenneth L. Kirk
-------------------------
Kenneth L. Kirk
Chairman of the Board
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[AMTROL LOGO]
1400 DIVISION ROAD
WEST WARWICK, RHODE ISLAND 02893
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:00 A.M. ON NOVEMBER 12, 1996
To the Shareholders of AMTROL Inc.:
NOTICE IS HEREBY GIVEN that the special meeting of shareholders ("Special
Meeting") of AMTROL Inc. ("AMTROL") will be held at The Westin Hotel,
Providence, One West Exchange Street, Providence, Rhode Island 02903 at 10:00
a.m., local time, on November 12, 1996, for the following purposes:
1. AMENDMENT TO ARTICLES OF INCORPORATION. To consider and vote upon
a proposal to adopt an Amendment to the Amended and Restated Articles of
Incorporation of the Company (the "Articles") which would amend Article
Sixth, Section D of the Articles (the "Amendment"), in contemplation of the
Merger, to exclude the Merger described below in Proposal No. 2 from the
definition of "business combination" in order that the Merger need only be
approved by holders of a majority of the outstanding AMTROL Common Stock. A
copy of the Amendment is set forth in Annex A to the accompanying Proxy
Statement and is hereby incorporated by reference herein.
2. THE MERGER. To consider and vote upon a proposal to approve the
Merger Agreement, dated as of August 28, 1996 (the "Merger Agreement"), by
and among AMTROL, A.I. Holdings, Inc. ("Holdings") and A.I. Acquisition,
Inc. ("Acquisition") pursuant to which, among other matters, Acquisition
will merge with and into AMTROL (the "Merger") and each share of AMTROL
Common Stock, par value $.01 per share, will be converted into the right to
receive $28.25 in cash, without interest thereon, all as more fully
described in the accompanying Proxy Statement. A copy of the Merger
Agreement is set forth in Annex B to the accompanying Proxy Statement and
is hereby incorporated by reference herein.
3. OTHER BUSINESS. To transact such other business as may properly
come before the Special Meeting or any adjournments or postponements
thereof.
Only shareholders of record at the close of business on October 4,
1996, are entitled to receive notice of and to vote at the Special Meeting
or any adjournments or postponements thereof. Adoption of Proposal No. 1,
Amendment to the Articles, requires the affirmative vote of holders of 75%
of the outstanding AMTROL Common Stock. If Proposal No. 1 is adopted,
approval of the Merger Agreement and the transactions contemplated therein
will require the affirmative vote of the holders of a majority of the
outstanding shares of AMTROL Common Stock. If Proposal No. 1 is not
adopted, approval of the Merger Agreement and the Merger will require the
affirmative vote of holders of 75% of the outstanding AMTROL Common Stock
(excluding shares deemed beneficially owned by "Related Persons" as defined
in the Articles).
THE BOARD OF DIRECTORS OF AMTROL UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" ADOPTION OF PROPOSAL NO. 1 AND "FOR" APPROVAL OF PROPOSAL NO. 2 ABOVE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Margaret D. Farrell
-----------------------------------
Margaret D. Farrell
Secretary
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[AMTROL LOGO]
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 12, 1996
This Proxy Statement is being furnished to holders of common stock, $.01
par value ("AMTROL Common Stock"), of AMTROL Inc., a Rhode Island corporation
("AMTROL" or the "Company"), in connection with the solicitation of proxies by
the AMTROL Board of Directors for use at the special meeting of shareholders to
be held at 10:00 a.m., local time, on November 12, 1996, at The Westin Hotel,
Providence, One West Exchange Street, Providence, Rhode Island 02903, and at any
adjournments or postponements thereof (the "Special Meeting"). The purpose of
the Special Meeting is to consider and vote upon: (i) a proposal to adopt an
Amendment to AMTROL's Articles of Incorporation (the "Articles") amending
Article Sixth, Section D to exclude the Merger (as defined below) from the
definition of "business combination" (the "Amendment"), which would allow the
Merger to be approved by the holders of a majority of the outstanding shares of
AMTROL Common Stock; and (ii) a proposal to approve a Merger Agreement, dated as
of August 28, 1996 (the "Merger Agreement"), by and among AMTROL, A.I. Holdings,
Inc. ("Holdings") and A.I. Acquisition, Inc. ("Acquisition") which provides for,
among other things, the merger of Acquisition, a wholly-owned subsidiary of
Holdings, with and into AMTROL (the "Merger"), with the surviving corporation of
the Merger becoming a wholly-owned subsidiary of Holdings (the "Surviving
Corporation"). See "SUMMARY", "AMENDMENT TO ARTICLES OF INCORPORATION", "THE
MERGER", "DESCRIPTION OF THE MERGER AGREEMENT" and Annexes A and B to this Proxy
Statement.
Upon consummation of the Merger, each outstanding share of AMTROL Common
Stock shall cease to be outstanding and shall be converted into and exchanged
for the right to receive $28.25 in cash, without interest thereon, and the
shareholders of AMTROL will not have any equity interest in the Surviving
Corporation.
The Board of Directors, after careful consideration, has unanimously
approved the Merger Agreement and determined that the Merger is fair to, and in
the best interests of, the shareholders of AMTROL, and recommends that you vote
FOR approval of both of the foregoing proposals. For a discussion of the factors
considered by the Board of Directors in reaching such determination, see "THE
MERGER -- Approval by the Board of Directors".
This Proxy Statement is first being mailed or otherwise delivered to AMTROL
shareholders entitled to vote at the Special Meeting on or about October 9,
1996.
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................................... 3
General Information................................................................... 11
Amendment to Articles of Incorporation................................................ 13
The Merger............................................................................ 14
Description of the Merger Agreement................................................... 26
No Dissenters' Rights................................................................. 32
Financing of the Merger............................................................... 32
Acquisition and Holdings.............................................................. 32
Security Ownership of Directors, Officers and Principal Shareholders.................. 33
Incorporation of Certain Documents by Reference....................................... 35
Accountants........................................................................... 35
Other Matters......................................................................... 35
ANNEXES:
ANNEX A -- Amendment to Articles of Incorporation................................ A-1
ANNEX B -- Merger Agreement, dated as of August 28, 1996 by and among AMTROL,
Holdings and Acquisition........................................................ B-1
ANNEX C -- Opinion of Smith Barney Inc........................................... C-1
</TABLE>
2
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Certain capitalized terms used in this Summary are defined
elsewhere in this Proxy Statement. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained in this
Proxy Statement and in the Annexes hereto. Shareholders are urged to carefully
read this Proxy Statement, including the Annexes hereto, in its entirety.
PARTIES TO THE MERGER
AMTROL Inc. AMTROL is a leading North American producer and marketer of
flow and expansion control technology used in water systems and heating,
ventilation and air conditioning products. The Company's major products are
pressure regulating tanks used in water well and hydronic heating applications.
AMTROL also manufactures returnable and non-returnable containers for
refrigerant gases. Products are marketed under the Well-X-Trol[Registered
Trademark], Extrol[Registered Trademark], Therm-X-Trol[Registered Trademark]
and Champion[Registered Trademark] brand names.
For the year ended December 31, 1995, and for the six months ended June 29,
1996, AMTROL reported total revenues of $172.5 million and $89.4 million,
respectively, and net income of $9.1 million and $5.7 million, respectively. As
of June 29, 1996, AMTROL had total consolidated assets of $98.2 million and
consolidated shareholders' equity of $70.0 million.
AMTROL's principal executive offices are located at 1400 Division Road,
West Warwick, Rhode Island 02893 (Telephone (401) 884-6300). For additional
information regarding AMTROL and its business, see "-- Selected Financial
Information" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
A.I. Holdings, Inc. Holdings is a newly organized Delaware corporation,
the sole stockholders of which are Cypress Merchant Banking Partners L.P. and
Cypress Offshore Partners L.P. (collectively, the "Cypress Fund"). The principal
executive offices of Holdings are located at 65 East 55th Street, 19th Floor,
New York, NY 10022, c/o The Cypress Group L.L.C. For additional information
regarding Holdings, see "ACQUISITION AND HOLDINGS".
A.I. Acquisition, Inc. Acquisition is a newly organized Rhode Island
corporation and wholly-owned subsidiary of Holdings. The principal executive
offices of Acquisition are located at 65 East 55th Street, 19th Floor, New York,
NY 10022, c/o The Cypress Group L.L.C. For additional information regarding
Acquisition, see "ACQUISITION AND HOLDINGS".
THE SPECIAL MEETING
The Special Meeting will be held at 10:00 a.m. local time on November 12,
1996 at The Westin Hotel, Providence, One West Exchange Street, Providence,
Rhode Island 02903. At the Special Meeting, AMTROL shareholders will consider
and vote upon: (i) adoption of the Amendment to AMTROL's Articles which would
amend Article Sixth, Section D to exclude the Merger from the definition of
"business combination" contained in such Articles, in contemplation of the
Merger; (ii) approval of the Merger Agreement and the consummation of the
transactions contemplated therein; and (iii) transact such other business as may
properly come before the Special Meeting. AMTROL's Board of Directors has fixed
the close of business on October 4, 1996 as the record date for determining the
AMTROL shareholders entitled to receive notice of and vote at the Special
Meeting (the "Record Date"). As of the Record Date, there were 7,444,220 shares
of AMTROL Common Stock issued and outstanding and entitled to vote at the
Special Meeting. For additional information regarding the Special Meeting, the
Record Date and votes required for adoption of the Amendment and approval of the
Merger Agreement and the Merger, see "GENERAL INFORMATION".
Adoption of the Amendment to the Articles requires the affirmative vote of
the holders of 75% of the outstanding shares of AMTROL Common Stock entitled to
vote at the Special Meeting. Approval of the Merger Agreement and the
transactions contemplated therein, if the Amendment to the Articles is adopted,
requires the affirmative vote of the holders of a majority of the outstanding
shares of AMTROL Common Stock entitled to vote at the Special Meeting. If the
Amendment to the Articles is not adopted, approval of the
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Merger Agreement and the transactions contemplated therein will require the
affirmative vote of the holders of 75% of the outstanding shares of AMTROL
Common Stock (excluding shares deemed beneficially owned by Related Persons as
defined in the Articles). As of the Record Date, the current directors and
executive officers of AMTROL owned of record approximately 7.8%, and
beneficially owned approximately 38.6%, of the outstanding shares of the
Company. See "SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL
SHAREHOLDERS". In addition, shareholders holding of record 2,812,875 shares
(approximately 37.8%) of the outstanding AMTROL Common Stock (including members
of executive management) have entered into a Voting Agreement pursuant to which
they have agreed to vote as recommended by the AMTROL Board of Directors with
regard to the Merger Agreement and the Merger. A copy of the Voting Agreement is
attached to this Proxy Statement as Exhibit A to the Merger Agreement, Annex B.
See "-- Voting Agreement", "GENERAL INFORMATION -- Votes Required" and "THE
MERGER -- Voting Agreement."
AMENDMENT TO ARTICLES
The Articles are proposed to be amended in order that Section D of Article
Sixth ("Section D") specifically exclude the Merger Agreement and the Merger
from the definition of a "business combination" contained in such Articles. The
effect of the Amendment to Section D, excluding the Merger Agreement and the
Merger from the definition of "business combination", is that, pursuant to Rhode
Island law, the Merger need only be approved by a majority of all of the issued
and outstanding shares of AMTROL Common Stock rather than by the holders of at
least 75% of the outstanding shares of AMTROL Common Stock, excluding shares
deemed beneficially owned by Related Persons (as that term is defined in the
Articles).
The Articles provide that the affirmative vote of the holders of at least
75% of outstanding AMTROL Common Stock is required to adopt the Amendment to the
Articles. If this proposal receives the requisite number of votes, the Special
Meeting will be recessed in order that the Amendment to the Articles may be
filed with the Secretary of State of Rhode Island. Immediately thereafter, the
Special Meeting will be reconvened in order to consider and vote upon Proposal
No. 2, approval of the Merger Agreement and the Merger. A copy of the Amendment
is attached to this Proxy Statement as Annex A. See "AMENDMENT TO ARTICLES OF
INCORPORATION".
THE MERGER
General. Pursuant to and subject to the terms and conditions of the Merger
Agreement, AMTROL will merge (the "Merger") with Acquisition, with AMTROL
continuing as the surviving corporation (the "Surviving Corporation"), and each
outstanding share of AMTROL Common Stock (excluding shares held by AMTROL or any
of its subsidiaries) will be canceled and converted into the right to receive
$28.25 per share in cash, without interest thereon (the "Per Share Amount").
Each share of the common stock of Acquisition, $.01 par value per share
("Acquisition Common Stock") shall be converted into and exchanged for one duly
and validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation. The effective time of the Merger is the date and time of
the filing of the Articles of Merger with the Secretary of State of the State of
Rhode Island (the "Effective Time"), which is scheduled to occur as soon as
practicable after the satisfaction of certain closing conditions. As a result of
the Merger, the Surviving Corporation will be a wholly-owned subsidiary of
Holdings, and Holdings will hold all the outstanding voting securities of the
Surviving Corporation. A copy of the Merger Agreement is attached to this Proxy
Statement as Annex B. See "DESCRIPTION OF THE MERGER AGREEMENT".
Payment for Shares; No Further Ownership of AMTROL Common Stock. As of the
Effective Time, Holdings will deposit, or will cause to be deposited, with
Bankers Trust Company (the "Paying Agent"), for the benefit of the holders of
shares of AMTROL Common Stock, for payment in accordance with the Merger
Agreement, through the Paying Agent, cash in an amount equal to the Per Share
Amount multiplied by the number of shares of AMTROL Common Stock outstanding
immediately prior to the Effective Time (such cash being hereinafter referred to
as the "Payment Fund"). The Paying Agent shall, pursuant to irrevocable
instructions, deliver the cash contemplated to be paid out of the Payment Fund.
Promptly after the Effective Time, the Paying Agent shall mail to each record
holder, as of the Effective Time, of a certificate that
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immediately prior to the Effective Time evidenced outstanding shares of AMTROL
Common Stock (the "Certificates"), a form letter of transmittal and instructions
for use in effecting the surrender of the Certificates for payment therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal duly executed and any other required documents, the holder of
such Certificate will be entitled to receive in exchange therefor the Per Share
Amount, and such Certificate shall forthwith be canceled. Until surrendered to
the Paying Agent in accordance with the provisions of the Merger Agreement, each
Certificate will represent for all purposes only the right to receive the Per
Share Amount without any interest thereon.
SHARE CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY CARD. IF THE
MERGER IS CONSUMMATED, SHAREHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR
EXCHANGING THEIR SHARES OF AMTROL COMMON STOCK FOR CASH.
Payment for Options; No Rights to Receive AMTROL Common Stock. AMTROL will
take all action necessary to (a) terminate the AMTROL 1992 Stock Plan, as
amended, to the date of the Merger Agreement (the "1992 Stock Plan") and the
Non-Employee Director Compensation Plan (the "Director Plan"), effective as of
the day of the Effective Time immediately prior to the Effective Time, (b)
provide that each outstanding option to purchase shares of AMTROL Common Stock
granted under the 1992 Stock Plan and the Director Plan (an "Option") will
become fully vested, whether or not previously vested, immediately prior to the
Effective Time and (c) provide that, except as otherwise agreed with the Option
holder, with respect to any such Option that is outstanding immediately prior to
the Effective Time, such Option will be canceled as of the day of the Effective
Time immediately prior to the Effective Time and the holder will be entitled to
receive from the Surviving Corporation, immediately after the Effective Time, an
amount in cash in cancellation of such Option equal to the excess, if any, of
the Per Share Amount over the per share exercise price of such Option,
multiplied by the number of shares of AMTROL Common Stock to which the Option
remains unexercised. Any such payment will be subject to all applicable Federal,
state and local tax withholding requirements.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of AMTROL believes that the Merger is in the best
interests of the Company and its shareholders. Therefore, it is in the Company's
best interest that the Articles be amended to allow for approval of the Merger
Agreement by an affirmative vote of the holders of a majority of the outstanding
AMTROL Common Stock rather than by an affirmative vote of the holders of 75% of
the outstanding AMTROL Common Stock excluding shares deemed beneficially owned
by a Related Person as defined in the Articles. The Board unanimously recommends
that the AMTROL shareholders vote FOR adoption of the Amendment to the Company's
Articles.
The AMTROL Board has unanimously approved the Merger Agreement, and
believes that the Merger is fair to, and in the best interests of, the Company
and its shareholders. The Board unanimously recommends that the AMTROL
shareholders vote FOR approval of the Merger Agreement and the consummation of
the transactions contemplated therein. For a description of certain factors
considered by the Board in evaluating the Merger, see "THE MERGER -- Background
of the Transaction" and "-- Approval by The Board of Directors".
OPINION OF AMTROL'S FINANCIAL ADVISOR
Smith Barney Inc. ("Smith Barney") has acted as financial advisor to AMTROL
in connection with the Merger and delivered an oral opinion to the Board of
Directors of AMTROL on August 28, 1996 (subsequently confirmed by delivery of a
written opinion dated such date) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the Per
Share Amount was fair, from a financial point of view, to the holders of AMTROL
Common Stock. The full text of the written opinion of Smith Barney dated August
28, 1996, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex C to this Proxy
Statement and should be read carefully in its entirety. Smith Barney's opinion
is directed only to the fairness of the Per Share Amount from
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a financial point of view, does not address any other aspect of the Merger or
related transactions and does not constitute a recommendation to any shareholder
as to how such shareholder should vote at the Special Meeting. See "THE MERGER
- -- Opinion of AMTROL's Financial Advisor".
NO SOLICITATION; FIDUCIARY DUTIES
Pursuant to the Merger Agreement, AMTROL has agreed that it will not
initiate, solicit or encourage, or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as defined in the Merger
Agreement), or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of its officers, directors,
employees or representatives to take any such action. AMTROL is obligated to
promptly notify Holdings of all relevant terms of any such inquiries and
proposals it or any such officer, director or representative receives relating
to any of such matters. Nothing contained in the Merger Agreement prohibits the
Board from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
proposal to acquire AMTROL pursuant to a merger, consolidation, share exchange,
business combination or other similar transaction, if, and only to the extent
that the Board, after consultation with independent legal counsel, determines in
good faith that such action is required for the Board to comply with its
fiduciary duties to shareholders imposed by Rhode Island law.
INTERESTS OF MANAGEMENT IN THE MERGER
The directors and executive officers of the Company have interests in the
Merger in addition to their interests as shareholders generally. A portion of
the Options held by certain executive officers may be converted into rights to
acquire common stock of Holdings. Officers and directors who hold Options to
purchase AMTROL Common Stock which are not so converted will receive a cash
payment equal to the difference between $28.25 and the applicable Option
exercise price. In addition, Stephen J. Carlotti, Vice Chairman of the Board,
will receive a fee of approximately $530,397 (based on the number of shares of
AMTROL Common Stock outstanding on October 4, 1996), pursuant to his Consulting
Agreement with the Company. Other executive officers have special separation
agreements that may require the Company or its successor-in-interest to make
payments to such officers if their employment is terminated within 12 months of
the Merger. Directors and officers have certain continuing rights to
indemnification and insurance by the Surviving Corporation. See "THE MERGER --
Interests of Officers and Directors in the Merger" and "DESCRIPTION OF THE
MERGER AGREEMENT -- Indemnification and Insurance".
CONDITIONS TO CONSUMMATION
Consummation of the Merger is subject to various conditions, including
among other matters: (i) approval of the Merger Agreement and the transactions
contemplated therein by the requisite vote of AMTROL shareholders; (ii) receipt
of all governmental and other consents and approvals necessary to permit
consummation of the Merger, including expiration or termination of the statutory
waiting period under the Hart-Scott-Rodino Antitrust Improvements Acts of 1976
(the "HSR Act"); (iii) non-occurrence of (a) a decline of at least 20% in the
Dow Jones Average of Industrial Stocks measured from the date of the Merger
Agreement to the last reported date immediately preceding the day of the
Effective Time, or (b) an increase of at least 200 basis points in the yield to
maturity of the 10 year U.S. Treasury Security based on Treasury Market Data
provided by Cantor Fitzgerald, measured from the date of the Merger Agreement to
the date immediately preceding the day of the Effective Time (the "Market Out
Condition"); and (iv) satisfaction of certain customary conditions. The
foregoing are the material conditions to the consummation of the Merger. See
"DESCRIPTION OF THE MERGER AGREEMENT -- Conditions to Consummation" and "--
Amendment, Waiver and Termination".
REGULATORY APPROVALS
The consummation of the Merger is subject to the expiration or termination
of the statutory waiting period under the HSR Act. The Company filed
notification and report forms under the HSR Act with the
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Antitrust Division of the Department of Justice (the "Antitrust Division") on
September 25, 1996. See "THE MERGER -- Regulatory Approvals".
TERMINATION
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual consent of the Boards of Directors of
AMTROL and Holdings. In addition, the Merger Agreement may be terminated, and
the Merger abandoned, prior to the Effective Time by either AMTROL or Holdings
if: (i) the other party materially breaches any representation, warranty,
covenant or other agreement contained in the Merger Agreement and does not cure
such breach within thirty (30) days after receipt of notice thereof; (ii) there
shall be any order that is final and non-appealable preventing the consummation
of the Merger, except if the party relying on such order has not complied with
its obligations under the Merger Agreement; (iii) the AMTROL shareholders fail
to approve the Merger Agreement and the transactions contemplated thereby at the
Special Meeting; or (iv) the Merger has not been consummated by February 28,
1997, except if the party seeking to terminate the Merger Agreement shall be in
breach thereof.
In addition, Holdings may unilaterally terminate the Merger Agreement in
the event that: (i) the Board of Directors of AMTROL withdraws, modifies or
changes its recommendation of the Merger Agreement or the Merger in a manner
adverse to Holdings or Acquisition or shall have resolved to do any of the
foregoing; or (ii) the AMTROL Board of Directors shall have recommended to the
AMTROL shareholders any Competing Transaction (as defined in the Merger
Agreement) or resolved to do so; or (iii) AMTROL shall have exercised a right
specified in the Merger Agreement with respect to any Competing Transaction and
shall, directly or through agents or representatives, continue discussions with
any third party concerning such Competing Transaction for more than 20 business
days after the date of receipt of such Competing Transaction; or (iv) a
Competing Transaction that is publicly disclosed shall have been commenced,
publicly proposed or communicated to AMTROL which contains a proposal as to
price (without regard to the specificity of such price proposal) as to which
AMTROL is legally required to respond under Rule 14e-2 promulgated under the
Exchange Act and AMTROL shall not have rejected such proposal within 20 business
days of its receipt or the date its existence first becomes publicly disclosed,
if sooner. The Merger Agreement may be unilaterally terminated by AMTROL, if the
AMTROL Board of Directors shall have recommended to the AMTROL shareholders any
Competing Transaction or resolved to do so; provided that any termination of the
Merger Agreement by AMTROL shall not be effective until the close of business on
the second full business day after notice thereof to Holdings. (The events
described in this paragraph which would provide for the unilateral termination
of the Merger Agreement by AMTROL or Holdings are hereinafter referred to as
"Termination Events.") See "DESCRIPTION OF THE MERGER AGREEMENT -- Amendment,
Waiver and Termination".
EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreement except as
described below.
If terminated due to a Termination Event and within 12 months after such
termination AMTROL consummates a Competing Transaction, AMTROL is obligated to
pay Holdings (or its designee) a fee of $6.5 million. If terminated due to
failure of the AMTROL shareholders to approve the Merger Agreement and (a) prior
to the Special Meeting either (1) any person or "group" other than Holdings or
any of its affiliates (collectively, "Acquiring Persons") has become the
beneficial owner of more than 20% of the outstanding shares of AMTROL Common
Stock or (2) any Acquiring Person has made, or proposed, communicated or
disclosed publicly (which includes being known by shareholders owning of record
or beneficially in the aggregate 5% or more of the outstanding shares of AMTROL
Common Stock) a bona fide intention to make a proposal for a Competing
Transaction or has made such a proposal, and (b) within 12 months after such
termination, any Acquiring Person (whether or not the same Acquiring Person
referred to in clause (a) above) consummates any Competing Transaction in which
the value of the consideration paid for AMTROL's equity securities, including
amounts paid to holders of options (the "Aggregate Competing Consideration"),
- --------------------------------------------------------------------------------
7
<PAGE> 11
- -------------------------------------------------------------------------------
exceeds the aggregate amount of the Merger Consideration payable pursuant to the
Merger Agreement to holders of AMTROL Common Stock (the "Aggregate Merger
Consideration"), then AMTROL is obligated to pay Holdings (or its designee) a
fee equal to the lesser of (x) the amount by which the Aggregate Competing
Consideration exceeds the Aggregate Merger Consideration or (y) $6.5 million.
(The fee payable to Holdings described in this paragraph is referred hereinafter
as the "Break-up Fee.")
In addition, AMTROL has agreed to reimburse Holdings (or its designee) and
its affiliates for all reasonable out-of-pocket costs, fees and disbursements of
counsel and the expenses of litigation, incurred in connection with collecting
the Break-up Fee.
Notwithstanding any other provision hereof, in the event AMTROL obtains any
environmental reports referred to in the Merger Agreement and the Merger
Agreement is terminated for any reason, Holdings has agreed to reimburse AMTROL
for the consultant's fees and expenses incurred in connection with the
preparation of such environmental reports. See "DESCRIPTION OF THE MERGER
AGREEMENT -- Expenses and Fees".
NO DISSENTERS' RIGHTS
Under Rhode Island law AMTROL shareholders have no right to dissent to the
Merger. See "NO DISSENTERS' RIGHTS".
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of cash for shares of AMTROL Common Stock in the Merger will be
a taxable transaction for Federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign or other tax laws. See "THE
MERGER -- Federal Income Tax Consequences of the Merger".
VOTING AGREEMENT
AMTROL, The Chester H. Kirk Trust (the "Trust"), Kenneth L. Kirk, David
Beretta and Hanns H. Winkhaus have entered into a Voting Agreement dated as of
August 28, 1996 (the "Voting Agreement"). The Voting Agreement provides that the
Trust, Kenneth L. Kirk, David Beretta and Hanns H. Winkhaus (collectively, the
"Shareholders") will vote their shares of AMTROL Common Stock as recommended by
the AMTROL Board of Directors with regard to the Merger Agreement and the
transactions contemplated therein as well as any Competing Transaction or other
action which is intended to or could reasonably be expected to have a material
effect on the transactions contemplated by the Merger Agreement. The
Shareholders have also agreed not to, directly or indirectly, solicit or respond
to any inquiry or proposal by any person or entity that could reasonably be
expected to lead to a Competing Transaction. The Voting Agreement will terminate
upon the earlier of: (i) the Effective Time; or (ii) February 28, 1997. As of
the Record Date, the Shareholders owned of record 2,812,875 shares of AMTROL
Common Stock, or 37.8% of the total outstanding shares of AMTROL Common Stock. A
copy of the Voting Agreement is attached hereto as Exhibit A to Annex B, the
Merger Agreement. See "THE MERGER -- Voting Agreement".
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8
<PAGE> 12
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MARKET PRICE AND DIVIDENDS
<TABLE>
AMTROL Common Stock is traded on The Nasdaq Stock Market's National Market
("Nasdaq National Market") under the symbol "AMTL." The following table sets
forth the high and low prices per share of AMTROL Common Stock on the Nasdaq
National Market with respect to each quarterly period since January 1, 1994.
AMTROL has paid a quarterly cash dividend of $.05 per share since the third
quarter of 1992 and paid a special dividend of $.70 per share in May 1996.
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1994
Quarter ended April 2, 1994................... 22 1/2 15 3/4
Quarter ended July 2, 1994.................... 20 15 1/4
Quarter ended October 1, 1994................. 18 3/4 15 1/2
Quarter ended December 31, 1994............... 18 1/4 15 1/2
FISCAL 1995
Quarter ended April 1, 1995................... 17 3/4 14 3/4
Quarter ended July 1, 1995................... 20 5/16 15 3/4
Quarter ended September 30, 1995.............. 19 3/8 15 3/4
Quarter ended December 31, 1995............... 18 14 1/2
FISCAL 1996
Quarter ended March 30, 1996.................. 18 1/2 14 1/4
Quarter ended June 29, 1996................... 24 1/4 16 1/2
Quarter ended September 28, 1996.............. 27 3/4 19 1/2
Quarter ended December 31, 1996
(through October 3, 1996)................... 27 3/4 27 1/2
</TABLE>
On August 28, 1996, the last trading day prior to the public announcement
that Holdings and AMTROL had executed the Merger Agreement, the high sale price
per share of AMTROL Common Stock as reported on the Nasdaq National Market was
$24 and the low sale price was $20 1/4.
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9
<PAGE> 13
- -------------------------------------------------------------------------------
SELECTED FINANCIAL INFORMATION
<TABLE>
The following table presents selected consolidated financial data of AMTROL
as of and for the six months ended June 29, 1996 and for the fiscal years ended
December 31, 1991, 1992, 1993, 1994 and 1995.
<CAPTION>
PERIOD
ENDED YEAR YEAR YEAR YEAR YEAR
JUNE 29, ENDED ENDED ENDED ENDED ENDED
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net revenue.................. $89,416 $172,454 $173,472 $164,295 $148,462 $134,421
Operating income............. 8,949 14,383 19,886 19,016 16,210 12,462
Income before extraordinary
item and income taxes...... 9,218 14,766 19,954 18,324 13,282 9,436
Extraordinary item net of
tax........................ -- -- -- (911) -- (522)
Net income................... 5,669 9,085 12,271 10,264 8,192 5,505
PER SHARE DATA
Book value per share......... 9.41 9.45 8.54 7.10 3.10 1.79
Cash dividends per share..... .80 .20 .20 .20 .05 --
Income per share before
extraordinary item......... .75 1.20 1.61 1.56 1.49 1.10
Income per share............. .75 1.20 1.61 1.43 1.49 1.00
BALANCE SHEET DATA (AT PERIOD END)
Total assets................. 98,202 93,909 91,634 82,612 74,499 71,930
Long-term debt, excluding
current maturities......... -- -- 2,381 3,333(A) 29,676 32,774
Other long-term
liabilities................ 5,409 5,514 6,430 7,098 7,134 9,057
Shareholders' equity......... 70,004 70,206 64,174 53,017(A) 16,656 9,172
- ---------------
<FN>
(A) In 1993, the Company completed an Initial Public Offering of its stock and
used the proceeds to reduce its indebtedness.
</TABLE>
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10
<PAGE> 14
GENERAL INFORMATION
THE SPECIAL MEETING
This Proxy Statement is being furnished to the holders of AMTROL Common
Stock in connection with the solicitation of proxies by the Board of Directors
of AMTROL from holders of the outstanding shares of AMTROL Common Stock for use
at the Special Meeting of AMTROL shareholders to be held at 10:00 a.m. on
November 12, 1996 at The Westin Hotel, Providence, One West Exchange Street,
Providence, Rhode Island 02903 and any adjournments and postponements thereof
(the "Special Meeting") to consider and vote upon proposals to adopt the
Amendment to AMTROL's Articles and approve the Merger Agreement and the
transactions contemplated therein. The Merger Agreement provides for a
transaction whereby Acquisition, a wholly-owned subsidiary of Holdings, will
merge with and into AMTROL, with AMTROL as the Surviving Corporation becoming a
wholly-owned subsidiary of Holdings. At the Effective Time, each share of issued
and outstanding AMTROL Common Stock (excluding shares held by AMTROL or any of
its subsidiaries) shall cease to be outstanding and shall be converted into the
right to receive $28.25 per share in cash, without interest thereon (the "Per
Share Amount").
RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
The AMTROL Board of Directors has fixed the close of business on October 4,
1996, as the record date for determining the AMTROL shareholders entitled to
receive notice of and to vote at the Special Meeting (the "Record Date"). Only
holders of record of AMTROL Common Stock as of the Record Date are entitled to
notice of and to vote at the Special Meeting. As of the Record Date, there were
7,444,220 shares of AMTROL Common Stock issued and outstanding and held by 216
holders of record. Holders of AMTROL Common Stock are entitled to one vote on
each matter considered and voted on at the Special Meeting for each share of
AMTROL Common Stock held of record at the close of business on the Record Date.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of AMTROL Common Stock at the Special Meeting
is necessary to constitute a quorum of the holders of AMTROL Common Stock at the
Special Meeting. Abstentions and broker non-votes will be counted as shares
present for purposes of determining the presence of a quorum. Broker non-votes
will not be counted as votes cast for purposes of determining whether a proposal
has received sufficient votes for approval; however, because the proposals to
adopt the Amendment and approve the Merger Agreement require the affirmative
vote of a specified percentage of the outstanding shares of AMTROL Common Stock,
broker non-votes will have the effect of a vote against the Amendment and/or the
Merger Agreement. For purposes of determining whether a proposal has received
sufficient votes for approval, abstentions will be counted as votes cast and, as
a result, abstentions will have the effect of a vote against the Amendment
and/or the Merger.
Proxies in the form enclosed are being solicited by the AMTROL Board of
Directors. Shares of AMTROL Common Stock represented by properly executed
proxies, if such proxies are received in time and are not revoked, will be voted
in accordance with the instructions indicated on the proxies. If no instructions
are indicated, such proxies will be voted FOR adoption of the Amendment to the
Articles and FOR approval of the Merger Agreement and consummation of the
transactions contemplated therein, and, as determined by a majority of the
members of the AMTROL Board of Directors, as to any other matter that may
properly come before the Special Meeting. Any holder of AMTROL Common Stock who
returns a signed proxy but fails to provide instructions as to the manner in
which such holder's shares are to be voted will be deemed to have voted FOR
adoption of the Amendment to the Articles and FOR approval of the Merger
Agreement and consummation of the transactions contemplated therein.
An AMTROL shareholder who has given a proxy may revoke it at any time prior
to its exercise at the Special Meeting or prior to the receipt by AMTROL of
proxies voting in favor of adoption of the Amendment to the Articles and
approval of the Merger Agreement and the transactions contemplated therein by
all shareholders, by (i) giving written notice of revocation to the Secretary of
AMTROL, (ii) properly submitting to AMTROL a duly executed proxy bearing a later
date, or (iii) voting in person at the Special Meeting. All written notices of
revocation and other communications with respect to revocation of proxies should
be addressed to AMTROL as follows: AMTROL Inc., 1400 Division Road, West
Warwick, Rhode Island 02893,
11
<PAGE> 15
Attention: Corporate Secretary. A proxy appointment will not be revoked by death
or supervening incapacity of the shareholder executing the proxy unless, before
the shares are voted, notice of such death or incapacity is filed with AMTROL's
Corporate Secretary or other person responsible for tabulating votes on behalf
of AMTROL.
The expense of soliciting proxies for the Special Meeting will be borne by
AMTROL. In addition to the solicitation of shareholders of record by mail,
telephone or personal contact, AMTROL will be contacting brokers, dealers, banks
or voting trustees or their nominees who can be identified as record holders of
AMTROL Common Stock. Such holders, after inquiry by AMTROL, will provide
information concerning the quantity of proxy and other materials needed to
supply such materials to beneficial owners, and AMTROL will reimburse them for
the expense of mailing the proxy materials to such persons.
AMTROL has retained D.F. King & Co., Inc. ("D.F. King") to assist in the
solicitation of proxies. Pursuant to AMTROL's agreement with D.F. King. D.F.
King will provide various proxy advisory and solicitation services for AMTROL in
connection with the Special Meeting at a cost of approximately $5,000, plus
reasonable out-of-pocket expenses. Any questions or requests for assistance
regarding AMTROL's proxies and related materials may be directed to D.F. King by
telephone (toll free) at (800) 735-3428.
VOTES REQUIRED
Adoption of the Amendment to the Articles requires the affirmative vote of
the holders of 75% of the outstanding shares of AMTROL Common Stock entitled to
vote thereon at the Special Meeting. Both broker non-votes and abstentions will
have the effect of a vote against adoption of the Amendment to the Articles.
Shareholders, including certain members of senior management of AMTROL, who hold
of record 2,812,875 shares, or approximately 37.8% of the outstanding shares of
AMTROL Common Stock, have agreed to vote all of such shares in favor of the
adoption of the Amendment to the Articles. See "THE MERGER - Voting Agreement".
Approval of the Merger Agreement and the transactions contemplated therein
requires the presence of a quorum and the affirmative vote of the holders of a
majority of the outstanding shares of AMTROL Common Stock entitled to vote
thereon at the Special Meeting, contingent upon the adoption of the Amendment to
the Articles. If the proposal to adopt the Amendment to the Articles does not
receive the requisite number of votes, approval of the Merger Agreement and the
transactions contemplated therein will require the affirmative vote of the
holders of at least 75% of the outstanding shares of AMTROL Common Stock
entitled to vote thereon (excluding shares deemed beneficially owned by a
"Related Person" as defined in the Articles.) See "AMENDMENT TO ARTICLES OF
INCORPORATION". Both broker non-votes and abstentions will have the effect of a
vote against the Merger Agreement. Shareholders, including certain members of
senior management of AMTROL, who hold of record 2,812,875 shares, or
approximately 37.8% of the outstanding shares of AMTROL Common Stock, have
agreed to vote all of such shares in favor of the approval of the Merger
Agreement and the transactions contemplated therein. See "THE MERGER -- Voting
Agreement".
12
<PAGE> 16
AMENDMENT TO ARTICLES OF INCORPORATION
DESCRIPTION OF AMENDMENT
The Articles are proposed to be amended in order that Section D of Article
Sixth ("Section D") specifically excludes the Merger Agreement and the Merger
from the definition of a "business combination" contained in such Articles. As
it presently reads, in order to obtain approval of a "business combination",
Section D requires the affirmative vote of the holders of at least 75% of the
outstanding shares of AMTROL Common Stock entitled to vote thereon, excluding
shares deemed beneficially owned by Related Persons. For purposes of Section D,
a "business combination" is defined to include a merger or consolidation which
constitutes a substantial part of the assets of AMTROL, other than a merger or
consolidation which results in the voting securities of AMTROL outstanding
immediately prior thereto continuing to represent more than 50% of the combined
voting power of the voting securities of AMTROL or such surviving entity
outstanding immediately after such merger or consolidation, and would include
the Merger. Section D defines a Related Person as any beneficial holder of 5% or
more of the outstanding shares of AMTROL Common Stock, other than a person who
beneficially owned in excess of 5% of the outstanding shares of AMTROL Common
Stock as of March 1, 1993 or acquired the shares of AMTROL Common Stock from
such person by gift, inheritance or in a transaction where no consideration was
exchanged.
REASONS FOR AND EFFECT OF AMENDMENT
Certain shareholders who acquired their shares after March 1, 1993
beneficially own over 5% of the outstanding shares of AMTROL Common Stock,
thereby placing them within the definition of Related Person and excluding their
shares from the calculation to determine if the requisite vote for the approval
of the Merger Agreement and the Merger has been obtained. The effect of their
exclusion is to make the number and relative percentage of votes required to
approve the Merger Agreement higher than the vote required to adopt the
Amendment to the Articles, since the votes of such Related Persons are not
excluded in determining the number of shares or the percentage of votes required
to adopt an amendment to Article Sixth of the Articles. The effect of the
Amendment to exclude the Merger Agreement and the Merger from the definition of
"business combination" is that, pursuant to Rhode Island law, the Merger
Agreement need only be approved by a majority of all of the issued and
outstanding shares of AMTROL Common Stock. The Board believes that the Merger is
in the best interests of AMTROL and its shareholders, and the adoption of the
Amendment to the Articles will reduce the vote required to approve the Merger
Agreement and the Merger and thereby facilitate approval of the Merger Agreement
and the Merger.
VOTE REQUIRED
The adoption of the Amendment to the Articles requires the affirmative vote
of the holders of at least 75% of the outstanding shares of AMTROL Common Stock.
If the Amendment to the Articles is adopted, the Special Meeting will be
recessed briefly in order that the Amendment may be filed with the Secretary of
State of the State of Rhode Island. At that point, the Special Meeting will be
reconvened in order that the vote may be taken to approve the Merger Agreement
and the Merger by a majority of all of the outstanding shares of AMTROL Common
Stock. If the Amendment to the Articles is not adopted, the Merger Agreement and
the transactions contemplated therein must be approved by the holders of at
least 75% of the outstanding shares of AMTROL Common Stock, excluding shares
deemed beneficially owned by Related Persons.
RECOMMENDATION OF THE BOARD
FOR THE REASONS DESCRIBED ABOVE, THE AMTROL BOARD HAS UNANIMOUSLY ADOPTED
THE AMENDMENT TO THE ARTICLES AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
ADOPTION OF THE AMENDMENT TO THE ARTICLES.
13
<PAGE> 17
THE MERGER
SUMMARY OF THE TRANSACTION
The Merger Agreement was approved by the Board of Directors of the Company
(the "Board") on August 28, 1996. If the other conditions to consummating the
Merger are satisfied, AMTROL will be acquired by Holdings for approximately
$218.9 million as described below. The purchase of AMTROL by Holdings will be
effected through an all-cash merger of Acquisition into AMTROL.
The purchase price of approximately $218.9 million represents a price of
$28.25 per share of AMTROL Common Stock (the "Per Share Amount"), based upon
7,444,220 shares and Options to purchase 679,223 shares issued and outstanding
on October 4, 1996. After consummation of the Merger, the current shareholders
of the Company will cease to be shareholders of AMTROL.
BACKGROUND OF THE TRANSACTION
On December 1, 1995, the Company announced that David Beretta, AMTROL's
Vice Chairman and President, had indicated his intention to retire as President,
effective May 31, 1996, and that a special committee of the Board had been
formed to identify Mr. Beretta's successor. At meetings held on December 15,
1995 and January 15, 1996, the Board discussed various strategic alternatives
and on January 15, 1996 authorized the Executive Committee to negotiate the
terms and conditions of an engagement letter with investment bankers selected by
the Executive Committee, subject to the approval of the Board, to assist AMTROL
in exploring such strategic alternatives. During January and early February
1996, AMTROL was approached informally by several parties interested in a
possible acquisition of the Company, including an oral proposal to acquire the
Company for $23.00 per share.
On February 15, 1996, Chester H. Kirk, founder, Chairman of the Board and
Chief Executive Officer, died unexpectedly. On February 21, 1996, the Board
elected Kenneth L. Kirk, a director and brother of Chester H. Kirk, as Chairman
of the Board and Stephen J. Carlotti, managing partner of Hinckley, Allen &
Snyder, the Company's legal counsel, as a director to fill the vacancy created
by Chester H. Kirk's death. Mr. Carlotti was also elected as Vice Chairman of
the Board and appointed as a member of the Executive Committee. Also at its
February 21 meeting, the Board authorized the Executive Committee to meet with
interested parties to discuss any unsolicited proposals, as well as with
representatives of Smith Barney Inc. ("Smith Barney") to discuss possible
strategic alternatives.
On March 11, 1996, the Board received the report of the Executive Committee
and authorized management to retain investment bankers to assist the Company in
exploring strategic alternatives to enhance shareholder value. On March 15,
1996, AMTROL engaged Smith Barney and HSBC Securities, Inc. ("HSBC") as its
financial advisors to assist the Board in connection therewith.
On April 24, 1996, AMTROL issued a press release announcing a special
dividend of $0.70 per share and that it had retained Smith Barney and HSBC as
its financial advisors to assist the Company in exploring strategic
alternatives, including a possible business combination, the sale of all or a
portion of the Company, potential acquisitions or other similar transactions.
Thereafter, with the assistance of its financial and legal advisors, the
Board determined that offers for the acquisition of AMTROL should be solicited
and authorized Smith Barney and HSBC to begin contacting potential acquirors for
the Company. During May, approximately 178 interested parties were contacted,
and 75 interested parties entered into confidentiality agreements with AMTROL in
order to receive confidential information regarding the Company to assist each
such party in making a preliminary proposal for AMTROL.
On or prior to June 10, 1996, 23 preliminary proposals were received for
the entire equity interest in AMTROL. Of these 23 bidders, 12 were invited to
conduct preliminary due diligence with respect to AMTROL and attend a management
presentation during June in anticipation of submitting revised preliminary
proposals on July 15, 1996, and 11 of these bidders participated in this
process.
On July 15, 1996, of the 11 bidders who performed preliminary due diligence
and attended management presentations, eight submitted revised preliminary
proposals to acquire the Company (ranging in value from
14
<PAGE> 18
approximately $21.60 per share to $27.00 per share). Of these eight bidders,
four were invited to conduct additional due diligence with respect to AMTROL and
to make final proposals on August 20, 1996.
On August 20, 1996, each of the four bidders who performed due diligence on
AMTROL submitted definitive proposals to acquire the Company, ranging in value
from approximately $200.7 million ($25.75 per share) for 97.1% of the equity
interest in the Company in a leveraged recapitalization to $218.9 million
($28.25 per share) for the entire equity interest in the Company. In this round
of bidding, Holdings, an affiliate of The Cypress Group L.L.C. ("Cypress")
submitted an offer of $28.25 per share in cash.
From August 23 through August 26, 1996, AMTROL and its financial and legal
advisors continued discussions with the four bidders and their financial and
legal advisors in order to clarify the terms and conditions of the various
proposals. On August 27 and 28, AMTROL and its financial and legal advisors
negotiated the terms of the Merger Agreement with Cypress providing for the
acquisition of AMTROL by Holdings for $28.25 per share in cash. The Company also
negotiated the terms of the Voting Agreement with the Trust and certain other
shareholders of AMTROL.
On August 28, 1996, the Board met to consider the Cypress offer. At such
meeting, AMTROL's legal counsel reviewed with the Board the terms and conditions
of the proposed Merger Agreement and the Board's fiduciary obligations in
connection with the proposed Merger. Smith Barney then rendered to the Board an
oral opinion (subsequently confirmed in writing) to the effect that, as of such
date and based upon and subject to certain matters stated in such opinion, the
Per Share Amount to be received in the Merger by the holders of AMTROL Common
Stock was fair, from a financial point of view, to such holders, and reviewed
with the Board certain financial analyses performed by Smith Barney in
connection with such opinion. See "-- Opinion of AMTROL's Financial Advisor".
After discussion, the Board unanimously determined that the Merger was fair to,
and in the best interests of, the Company and the holders of AMTROL Common
Stock, approved the Merger Agreement and recommended that the holders of
outstanding shares of AMTROL Common Stock approve the Merger Agreement.
The Merger Agreement was executed later the same day and a joint press
release was issued the next morning announcing the Merger Agreement.
APPROVAL BY THE BOARD OF DIRECTORS
The Board has unanimously determined that the Merger is fair to, and in the
best interests of, AMTROL and the holders of outstanding shares of AMTROL Common
Stock, approved the Merger Agreement and recommended that the holders of the
outstanding shares of AMTROL Common Stock approve the Merger Agreement and the
Merger.
In reaching its determination, the Board consulted with the Company's
management, as well as its financial and legal advisors, and considered a number
of factors, including, without limitation, the following:
(a) Cypress' proposal was the result of a five-month public auction
process conducted with the assistance of AMTROL's legal and financial
advisors in which approximately 178 potential acquirors were contacted, 75
of such parties executed confidentiality agreements, 23 of such parties
submitted preliminary acquisition proposals, eight of such parties
submitted revised preliminary acquisition proposals, and four of such
parties submitted definitive acquisition proposals;
(b) Cypress' proposal reflected the highest level of consideration per
share of AMTROL Common Stock received from any potential acquiror;
(c) AMTROL's business, assets, liabilities, management, strategic
objectives, competitive position and prospects, as well as its financial
condition, results of operations and cash flows, both on a historical and
prospective basis;
(d) current and historical market prices for AMTROL Common Stock and
the relationship thereto of the price per share of AMTROL Common Stock
payable in the Merger; see "SUMMARY - Market Price and Dividends";
15
<PAGE> 19
(e) the financial analyses of Smith Barney presented to the Board on
August 28, 1996 and Smith Barney's oral opinion to the effect that, as of
such date and based upon and subject to certain matters stated in such
opinion, the Per Share Amount to be received in the Merger by the holders
of AMTROL Common Stock was fair, from a financial point of view, to such
holders; see "-- Opinion of AMTROL's Financial Advisor";
(f) the analysis and recommendation of the Merger by AMTROL's
management;
(g) the review of other strategic alternatives including potential
acquisitions and continuing as an independent public company; based upon
its review of other strategic alternatives, as well as the terms of the
Merger, the Board did not believe that pursuing another strategic
alternative could reasonably be expected to provide AMTROL's shareholders
with a higher level of shareholder value than that reflected in the Cypress
proposal;
(h) the strength of Cypress' financing commitments and the limited
nature of the Market Out Condition;
(i) the fact that the Trust and certain other shareholders of the
Company (owning in the aggregate 37.8% of the outstanding shares of AMTROL
Common Stock) were prepared to enter into the Voting Agreement with AMTROL
and to execute on that date written consents approving the Merger Agreement
pursuant to the Voting Agreement;
(j) the terms and conditions of the Merger Agreement, including the
parties' representations, warranties and agreements, and the conditions to
their respective obligations to close the Merger set forth in the Merger
Agreement (including, in particular, the limited conditions to Holdings'
obligation to close the Merger), which the Board deemed to be generally
favorable to AMTROL when compared with other transactions of a similar
nature;
(k) the terms of the Merger Agreement that (a) permit the Board to
enter into negotiations with a third party that made an unsolicited bona
fide proposal to acquire AMTROL if the Board determined in good faith that
such action was required for the Board to comply with its fiduciary duties
to shareholders imposed by Rhode Island law, (b) permit AMTROL to
unilaterally terminate the Merger Agreement if the Board recommended any
other business combination involving AMTROL, (c) require AMTROL to pay
Holdings a termination fee of $6.5 million in the event that the Merger
Agreement was so terminated and a Competing Transaction was consummated
within 12 months thereafter, and (d) contain no other provision that would
materially impede the Board from considering and pursuing a better
unsolicited offer to acquire AMTROL that might be made by a third party;
and
(l) the terms of the Voting Agreement between the Trust and certain
other shareholders which obligated these shareholders to vote in accordance
with the Board's recommendation and the absence of any "lockup" agreement
with Cypress which would materially impede the Board from considering and
pursuing a better unsolicited offer that might be made by a third party.
The foregoing discussion of information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the terms of
the Merger, the Board did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weight to the specific factors considered
in reaching its determination. In addition, individual members of the Board may
have given different weight to different factors.
RECOMMENDATION OF THE BOARD
THE BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS
OF, THE COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREIN.
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<PAGE> 20
OPINION OF AMTROL'S FINANCIAL ADVISOR
Smith Barney was retained by AMTROL to act as its financial advisor in
connection with the Merger. In connection with such engagement, AMTROL requested
that Smith Barney evaluate the fairness, from a financial point of view, to the
holders of AMTROL Common Stock of the consideration to be received by such
holders in the Merger. On August 28, 1996, at a meeting of the Board of
Directors of AMTROL held to evaluate the proposed Merger, Smith Barney delivered
an oral opinion (subsequently confirmed by delivery of a written opinion dated
August 28, 1996) to the Board of Directors of AMTROL to the effect that, as of
the date of such opinion and based upon and subject to certain matters stated
therein, the Per Share Amount was fair, from a financial point of view, to the
holders of AMTROL Common Stock.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of AMTROL and certain senior officers and other
representatives of Holdings concerning the business, operations and prospects of
AMTROL. Smith Barney examined certain publicly available business and financial
information relating to AMTROL as well as certain financial forecasts and other
data for AMTROL which were provided to or otherwise discussed with Smith Barney
by the management of AMTROL. Smith Barney reviewed the financial terms of the
Merger as set forth in the Merger Agreement in relation to, among other things:
current and historical market prices and trading volumes of AMTROL Common Stock;
historical and projected earnings and operating data of AMTROL; and the
capitalization and financial condition of AMTROL. Smith Barney also considered,
to the extent publicly available, the financial terms of certain other similar
transactions recently effected which Smith Barney considered relevant in
evaluating the Merger and analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose operations Smith Barney considered relevant in evaluating those of AMTROL.
In addition to the foregoing, Smith Barney conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as Smith Barney deemed appropriate in arriving at its opinion. Smith Barney
noted that its opinion was necessarily based upon information available, and
financial, stock market and other conditions and circumstances existing and
disclosed, to Smith Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data furnished to or otherwise reviewed by or
discussed with Smith Barney, the management of AMTROL advised Smith Barney that
such forecasts and other information and data were reasonably prepared
reflecting the best currently available estimates and judgments of the
management of AMTROL as to the future financial performance of AMTROL. Smith
Barney did not make and was not provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of AMTROL nor
did Smith Barney make any physical inspection of the properties or assets of
AMTROL. In connection with its engagement, Smith Barney was requested to
approach, and held discussions with, certain third parties to solicit
indications of interest in a possible acquisition of AMTROL. Although Smith
Barney evaluated the Per Share Amount from a financial point of view, Smith
Barney was not asked to and did not recommend the specific consideration payable
in the Merger, which was determined through negotiation between AMTROL and
Holdings. No other limitations were imposed by AMTROL on Smith Barney with
respect to the investigations made or procedures followed by Smith Barney in
rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED AUGUST 28, 1996,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX C AND IS INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF AMTROL COMMON STOCK ARE URGED TO READ THIS OPINION
CAREFULLY IN ITS ENTIRETY. SMITH BARNEY'S OPINION IS DIRECTED ONLY TO THE
FAIRNESS OF THE PER SHARE AMOUNT FROM A FINANCIAL POINT OF VIEW, DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER OR RELATED TRANSACTIONS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
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<PAGE> 21
In preparing its opinion, Smith Barney performed a variety of financial and
comparative analyses, including those described below. The summary of such
analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion. In its analyses, Smith Barney made
numerous assumptions with respect to AMTROL, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of AMTROL. The estimates contained in such analyses
and the valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Smith Barney's
opinion and analyses were only one of many factors considered by the Board of
Directors of AMTROL in its evaluation of the Merger and should not be viewed as
determinative of the views of AMTROL's Board of Directors or management with
respect to the Per Share Amount or the proposed Merger.
Selected Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
AMTROL and ten selected publicly traded companies in the flow control and
building products industries, consisting of (i) five flow control companies:
BW/IP, Inc., The Duriron Company, Inc., Goulds Pumps, Inc., IDEX Corporation and
Watts Industries, Inc. (the "Flow Control Companies"); and (ii) five building
products companies: American Standard Companies, Inc., Armstrong World
Industries, Inc., Falcon Building Products, Inc., Masco Corporation and The
Stanley Works (the "Building Products Companies" and, together with the Flow
Control Companies, the "Selected Companies"). Smith Barney compared market
values as multiples of, among other things, latest 12 months net income and
estimated calendar 1996 net income, and adjusted market values (equity market
value, plus total debt and the book value of preferred stock, less cash and cash
equivalents) as multiples of latest 12 months revenue, earnings before interest,
taxes, depreciation and amortization ("EBITDA") and earnings before interest and
taxes ("EBIT"). Smith Barney also compared the debt to capitalization ratios,
profit margins, historical revenue growth and projected earnings per share
("EPS") growth of AMTROL and the Selected Companies. Net income projections for
the Selected Companies were based on estimates of selected investment banking
firms and net income projections for AMTROL were based on internal estimates of
the management of AMTROL. All multiples were based on closing stock prices as of
August 26, 1996. Applying multiples for the Flow Control Companies of latest 12
months net income and estimated calendar 1996 net income of 14.5x to 15.5x and
10.0x to 14.0x, respectively, and latest 12 months revenues, EBITDA and EBIT of
0.8x to 1.2x, 7.0x to 8.5x and 10.0x to 11.0x, respectively, to corresponding
financial data for AMTROL resulted in a median equity reference range for AMTROL
of approximately $20.80 to $24.92 per share. Applying selected multiples for the
Building Products Companies of latest 12 months net income and estimated
calendar 1996 net income of 15.0x to 17.0x and 13.0x to 15.0x, respectively, and
latest 12 months revenue, EBITDA and EBIT of 0.8x to 1.2x, 6.0x to 7.0x and 9.0x
to 10.0x, respectively, to corresponding financial data for AMTROL resulted in a
median equity reference range for AMTROL of approximately $20.63 to $25.67 per
share.
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed the purchase prices and implied
transaction multiples paid or proposed to be paid in 15 selected transactions in
the flow control and building products industries, consisting of
(acquiror/target): Precision Castparts Corporation/NEWFLO Corporation,
Greenfield Industries Inc./Rule Industries Inc., Pentair Inc./Fleck Controls
Inc., Foster Wheeler Corporation/Alstrom Pyropower, United States Filter
Corporation/Polymetrics, Inc., FMC Corporation/Moorco International, United
States Filter Corporation/Arrowhead Industrial Water, Inc., Siebe plc/Triconex
Corporation, Goulds Pumps Inc./Pumpenfabrik Ernst Vogel AG, Elsag Bailey Process
Automation N.V./Fischer & Porter Company, Crane Co./Mark
18
<PAGE> 22
Controls Corporation, Jason Incorporated/Deltak Corporation, Crane Co./Burks
Pumps Inc., and United Dominion Industries Ltd./The Marley Company (the
"Selected Transactions"). Smith Barney compared, among other things, the
transaction values of such transactions as multiples of latest 12 months
revenue, EBITDA and EBIT. All multiples for the Selected Transactions were based
on information available at the time of announcement of the transaction.
Applying selected multiples for the Selected Transactions of latest 12 months
revenue, EBITDA and EBIT of 1.0x to 1.3x, 7.8x to 8.5x and 11.4x to 11.6x,
respectively, to corresponding financial data for AMTROL resulted in a median
equity reference range for AMTROL of approximately $23.03 to $26.10 per share.
No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to AMTROL or the Merger. Accordingly, an analysis of the results of
the foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the Selected Companies, Selected Transactions or the
business segment, company or transaction to which they are being compared.
Discounted Cash Flow Analysis. Smith Barney performed a discounted cash
flow analysis of the projected free cash flow of AMTROL for the fiscal years
1997 through 2000, based on internal estimates of the management of AMTROL. The
stand-alone discounted cash flow analysis of AMTROL was determined by (i) adding
(x) the present value of projected free cash flows over the four-year period
from 1997 to 2000 and (y) the present value of AMTROL's terminal value in year
2000 and (ii) subtracting the current net debt of AMTROL. The range of terminal
values for AMTROL at the end of the four-year period was calculated by applying
terminal value multiples ranging from 6.0x to 7.5x (with particular focus on
multiples of 6.5x to 7.0x) to AMTROL's projected 2000 EBITDA, representing
AMTROL's estimated value beyond the year 2000. The cash flows and terminal
values of AMTROL were discounted to present value using discount rates ranging
from 14.0% to 16.0%. Utilizing such discount rates and terminal values of 6.5x
to 7.0x, this analysis resulted in an equity reference range for AMTROL of
approximately $24.94 to $28.31 per share.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) indications of interest
received from third parties other than Holdings; (ii) AMTROL's historical and
projected financial results; (iii) the history of trading prices and volume for
AMTROL Common Stock and the relationship between movements of such Common Stock,
movements of the common stock of the Selected Companies and movements in the S&P
500 Index; and (iv) the premiums implied by the Per Share Amount based on the
closing price of AMTROL Common Stock on April 23, 1996 of $16.50 per share (the
date immediately preceding the date on which AMTROL publicly announced that it
was evaluating strategic alternatives) and based on the bid and ask prices of
AMTROL Common Stock on August 26, 1996 of $20.25 and $24.00, respectively, which
indicated premiums as of such dates of 71.2%, 39.5% and 17.7%, respectively.
Pursuant to the terms of Smith Barney's engagement, AMTROL has agreed to
pay Smith Barney for its services in connection with the Merger an aggregate
financial advisory fee equal to a percentage of the total consideration
(including liabilities assumed) payable in connection with the Merger. It is
currently estimated that such financial advisory fee will be approximately $2.5
million. AMTROL has also agreed to reimburse Smith Barney for reasonable
out-of-pocket expenses incurred by Smith Barney in performing its services,
including the reasonable fees and expenses of its legal counsel, and to
indemnify Smith Barney and related persons against certain liabilities,
including liabilities under the federal securities laws, arising out of Smith
Barney's engagement.
Smith Barney has advised AMTROL that, in the ordinary course of business,
Smith Barney and its affiliates may actively trade or hold the securities of
AMTROL for their own account or for the account of customers and, accordingly,
may at any time hold a long or short position in such securities. Smith Barney
was the co-managing underwriter in AMTROL's initial public offering and has
provided other investment banking services to AMTROL unrelated to the proposed
Merger, for which services Smith Barney has received customary compensation. In
addition, Smith Barney and its affiliates (including Travelers Group Inc. and
its affiliates) may maintain relationships with AMTROL and affiliates of
Holdings.
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<PAGE> 23
Smith Barney is a nationally recognized investment banking firm and was
selected by AMTROL based on Smith Barney's experience, expertise and familiarity
with AMTROL and its business. Smith Barney regularly engages in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes.
PAYMENT FOR SHARES OF AMTROL COMMON STOCK
Payment for Shares; No Further Ownership of AMTROL Common Stock. As a
result of the Merger, holders of certificates formerly evidencing shares of
AMTROL Common Stock will cease to have any equity interest in AMTROL. After
consummation of the Merger, all certificates formerly evidencing shares of
AMTROL Common Stock (excluding shares held in the treasury of AMTROL or owned by
any direct or indirect subsidiary of AMTROL, which will be canceled and retired
without any conversion thereof and without any payment with respect thereto)
will be canceled and converted into the right only to receive a cash payment of
$28.25 per share, without interest thereon. No interest will be paid or accrued
on the cash payable upon the surrender of such certificates. As of the Effective
Time, Holdings will deposit, or will cause to be deposited, with Bankers Trust
Company (the "Paying Agent"), for the benefit of the holders of shares of AMTROL
Common Stock, for payment in accordance with the Merger Agreement, through the
Paying Agent, cash in an amount equal to the Per Share Amount multiplied by the
number of shares of AMTROL Common Stock outstanding immediately prior to the
Effective Time (such cash being hereinafter referred to as the "Payment Fund").
The Paying Agent will, pursuant to irrevocable instructions, deliver the cash
contemplated to be paid pursuant to the Merger Agreement out of the Payment
Fund. The Payment Fund will not be used for any other purpose. Promptly after
the Effective Time, the Paying Agent will mail to each record holder, as of the
Effective Time, of an outstanding certificate that immediately prior to the
Effective Time evidenced outstanding shares of AMTROL Common Stock (a
"Certificate") a form letter of transmittal and instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon surrender
to the Paying Agent of a Certificate, together with such letter of transmittal
duly executed, and any other required documents, the holder of such Certificate
will be entitled to receive in exchange therefor the Per Share Amount, and such
Certificate will forthwith be canceled. No interest will be paid or accrued on
the cash payable upon the surrender of the Certificates. Until surrendered to
the Paying Agent in accordance with the provisions of the Merger Agreement, each
Certificate will represent for all purposes only the right to receive the
consideration set forth in the Merger Agreement, without any interest thereon.
All cash paid upon conversion of the shares of AMTROL Common Stock in accordance
with the terms of the Merger Agreement shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of AMTROL Common Stock.
DETAILED INSTRUCTIONS ABOUT THE SURRENDER OF CERTIFICATES, TOGETHER WITH A
LETTER OF TRANSMITTAL, WILL BE FORWARDED TO FORMER HOLDERS OF SHARES OF AMTROL
COMMON STOCK BY THE PAYING AGENT PROMPTLY FOLLOWING THE EFFECTIVE TIME OF THE
MERGER. HOLDERS OF SHARES OF AMTROL COMMON STOCK SHOULD NOT SUBMIT THEIR
CERTIFICATES TO THE PAYING AGENT UNTIL THEY HAVE RECEIVED SUCH MATERIALS.
PAYMENT FOR SHARES OF AMTROL COMMON STOCK WILL BE MADE TO FORMER HOLDERS OF
SHARES AS PROMPTLY AS PRACTICABLE FOLLOWING RECEIPT BY THE PAYING AGENT OF THEIR
CERTIFICATES AND OTHER REQUIRED DOCUMENTS.
Termination of Payment Fund. Any portion of the Payment Fund that remains
undistributed to the holders of AMTROL Common Stock for 180 days after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any holders of AMTROL Common Stock that have not theretofore complied with the
Merger Agreement shall thereafter look only to the Surviving Corporation and
only as general creditors thereof for payment of their claim for cash to which
they are entitled. Neither Holdings nor the Surviving Corporation shall be
liable to any holder of shares of AMTROL Common Stock for any cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
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<PAGE> 24
Investment of Payment Fund. The Paying Agent shall invest the Payment
Fund, as directed by the Surviving Corporation, on a daily basis. The Paying
Agent shall invest funds in the Payment Fund only in certain permitted
investments. Any interest or other income earned on the investment of funds in
the Payment Fund shall be for the account of and payable to the Surviving
Corporation. The Surviving Corporation shall replace any monies lost through any
investment made pursuant to the Merger Agreement.
Payment for Options; No Rights to Receive AMTROL Common Stock. The Company
will take all action necessary to (a) terminate AMTROL's 1992 Stock Plan and the
Director Plan, effective as of the day of the Effective Time immediately prior
to the Effective Time, (b) provide that each outstanding stock option to
purchase shares of AMTROL Common Stock granted under the 1992 Stock Plan and the
Director Plan (an "Option") will become fully vested, whether or not previously
vested, immediately prior to the Effective Time, and (c) provide that, except as
otherwise agreed with the Option holder, with respect to any such Option that is
outstanding immediately prior to the Effective Time, such Option will be
canceled as of the day of the Effective Time immediately prior to the Effective
Time and the holder shall be entitled to receive from the Surviving Corporation,
immediately after the Effective Time, an amount in cash in cancellation of such
Option equal to the excess, if any, of the Per Share Amount over the per share
exercise price of such Option, multiplied by the number of shares of AMTROL
Common Stock to which the Option remains unexercised. Any such payment will be
subject to all applicable Federal, state and local tax withholding requirements.
EFFECTIVE TIME
If the Merger Agreement is adopted by the requisite vote of AMTROL
shareholders, all required governmental and other consents and approvals are
obtained, and the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (as permitted), the Merger
will be consummated and will become effective on the date and at the time that
the Articles of Merger reflecting the Merger become effective with the Secretary
of State of the State of Rhode Island (the "Effective Time"). Unless Holdings
agrees otherwise, the Effective Time shall not occur prior to November 15, 1996.
Either Holdings or AMTROL may terminate the Merger Agreement should the Merger
not be consummated by February 28, 1997. See "DESCRIPTION OF THE MERGER
AGREEMENT -- Amendment, Waiver and Termination".
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of cash for shares of AMTROL Common Stock in the Merger will be
a taxable transaction for Federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign or other tax laws. Generally,
a shareholder will recognize gain or loss for such purposes equal to the
difference between the cash received in connection with the Merger and such
shareholder's tax basis for the shares of AMTROL Common Stock such shareholder
owned immediately prior to the Effective Time. For Federal income tax purposes,
such gain or loss will be a capital gain or loss if the shares of AMTROL Common
Stock are a capital asset in the hands of the shareholder, and a long-term
capital gain or loss if the shareholder's holding period is more than one year
as of the Effective Time. There are limitations on the deductibility of capital
losses.
The summary of tax consequences set forth above is for general information
only. The tax treatment of each shareholder will depend in part upon his or her
particular situation. Actual tax consequences not described herein may be
applicable to particular classes of taxpayers, such as financial institutions,
broker-dealers, persons who are not citizens or residents of the United States,
shareholders who acquired the shares of AMTROL Common Stock through the exercise
of an employee stock option or otherwise as compensation, and persons who
received payments in respect of options to acquire shares of AMTROL Common
Stock. ALL SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL AND FOREIGN LAWS.
NO SOLICITATION; FIDUCIARY DUTIES
Pursuant to the Merger Agreement AMTROL has agreed that, except as
consented to in writing by Holdings, it will not initiate, solicit or encourage
(including by way of furnishing information or assistance), or
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<PAGE> 25
take any other action to facilitate, any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Competing
Transaction (as defined in Section 5.02(n) of the Merger Agreement), or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its officers, directors, employees or
representatives to take any such action, and will promptly notify Holdings of
all relevant terms of any such inquiries and proposals received by AMTROL or any
such officer, director or representative, relating to any of such matters. If
such inquiry or proposal is in writing, AMTROL is obligated to deliver to
Holdings a copy of such inquiry or proposal (which need not disclose the
identity of the person making such inquiry or proposal). The Merger Agreement
does not prohibit the Board from furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
bona fide proposal to acquire AMTROL pursuant to a merger, consolidation, share
exchange, business combination or other similar transaction, if, and only to the
extent that, (a) the Board, after consultation with independent legal counsel,
determines in good faith that such action is required for the Board to comply
with its fiduciary duties to shareholders imposed by Rhode Island law, (b) prior
to furnishing such information to, or entering into discussions or negotiations
with, such person or entity, AMTROL provides prior written notice (including the
terms and conditions of any proposal) to Holdings to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity, (c) prior to furnishing such information to such person
or entity, AMTROL receives from such person or entity an executed
confidentiality agreement with terms no less favorable to AMTROL than those
contained in the confidentiality agreement between AMTROL and Holdings, and (d)
AMTROL keeps Holdings informed, on a current basis, of the status of any such
discussions or negotiations. Nothing contained in the Merger Agreement prohibits
the Board from complying with Rule 14e-2 promulgated under the Exchange Act with
regard to a Competing Transaction.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
The directors (including David Beretta, who died on September 16, 1996) and
officers of AMTROL owned of record an aggregate of 650,487 shares (8.7% of the
outstanding shares) of AMTROL Common Stock as of the Record Date, and Options to
acquire an aggregate of 402,334 shares (59.2% of the outstanding Options) of
AMTROL Common Stock as of such date.
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<TABLE>
Other than as described herein, no director or executive officer of AMTROL,
and no associate of any such person, has any substantial interest, direct or
indirect, in the Merger, other than an interest arising from the ownership of
AMTROL Common Stock. A portion of the Options held by certain executive officers
may be converted into rights to acquire common stock of Holdings. With respect
to Options which are not so converted, the directors and officers will receive a
cash payment of the difference between $28.25 and the applicable Option exercise
price for outstanding Options. The table below identifies such directors and
officers, the number of Options owned and the cash payments to be received by
each in respect of such ownership (assuming no Options are converted to rights
to acquire common stock of Holdings):
<CAPTION>
NUMBER OF CASH FOR
NAME TITLE OPTIONS OPTIONS
---- ----- -------- --------
<S> <C> <C> <C>
David Beretta*................................. Director 75,000 $871,875
Kenneth L. Kirk................................ Director 46,000 548,563
Stephen J. Carlotti............................ Director 12,000 159,000
Herbert H. Jacobi.............................. Director 5,798 54,610
Albert W. Ondis................................ Director 6,000 56,500
Lorne R. Waxlax................................ Director 4,499 42,087
Hanns H. Winkhaus.............................. Director 4,989 46,935
Edward J. Cooney............................... Senior Vice 65,448 938,642
President and Chief
Financial Officer
Samuel L. Daniels.............................. Vice President -- 46,100 593,370
Water Systems
Brooks R. Herrick.............................. Vice President -- 17,000 200,875
Finance and
Corporate Controller
Gerald J. Leary................................ Vice President -- 45,000 575,000
Plumbing and Heating
Clifford A. Peterson........................... Executive Vice 25,000 316,250
President and Chief
Operating Officer
David P. Whittingham........................... Senior Vice 49,500 634,225
President -- Containers
<FN>
* Mr. Beretta died on September 16, 1996 and any amounts paid with respect to
the Options will be paid to his estate.
</TABLE>
Severance and Consulting Agreements. AMTROL entered into special
termination agreements dated as of April 11, 1996 (the "Special Termination
Agreements") with 11 executives (including Messrs. Cooney, Daniels, Herrick,
Leary, Peterson and Whittingham) in order to secure the continued employment of
those executives with AMTROL. The Special Termination Agreements were approved
by the Board and the Compensation Committee of the Board. The Special
Termination Agreements provide that if a "terminating event" occurs within one
year after a "change in control" (as defined in the Special Termination
Agreements), AMTROL will pay to each executive an amount equal to the
executive's annual base salary in effect immediately prior to the change in
control plus the executive's average bonus for the two fiscal years prior to the
change in control. The Merger would constitute a "change of control". A
"terminating event" is defined as termination of the executive's employment by
AMTROL for any reason other than death, disability, retirement or for cause, or
the resignation of the executive subsequent to a significant reduction in the
executive's responsibilities, authorities, functions or duties exercised prior
to the change in control, a decrease in the executive's salary (other than
across-the-board reductions) from that payable in prior to the change in control
or a substantial relocation of the executive by AMTROL following a change in
control.
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<PAGE> 27
In addition, Mr. Carlotti is entitled to receive at the Effective Time
approximately $530,397 (based on the total number of shares of AMTROL Common
Stock outstanding on October 4, 1996) pursuant to a Consulting Agreement with
AMTROL dated as of June 20, 1996 (the "Consulting Agreement"), pursuant to which
Mr. Carlotti was retained to lead and supervise the activities associated with
the Company's engagement of Smith Barney and HSBC and to assist with day-to-day
management. The Consulting Agreement provides that Mr. Carlotti is to receive an
amount in cash equal to 0.5375% of the amount by which the aggregate amount of
consideration paid to holders of AMTROL Common Stock pursuant to the Merger
exceeds $111,620,730. Mr. Carlotti is a partner of the law firm of Hinckley,
Allen & Snyder ("Hinckley Allen"), legal counsel to AMTROL. Pursuant to Hinckley
Allen's partnership agreement, any amounts paid to Mr. Carlotti under the
Consulting Agreement or with respect to the Options referenced above, will be
paid to Hinckley Allen.
Indemnification and Insurance. Directors and officers have certain
continuing rights to indemnification and insurance described under "DESCRIPTION
OF THE MERGER AGREEMENT -- Indemnification and Insurance".
ACCOUNTING TREATMENT OF TRANSACTION
The Merger will be accounted for as a "purchase" for accounting and
financial reporting purposes. Accordingly, a determination of the fair value of
the Company's assets and liabilities will be made in order to allocate the
purchase price to the assets acquired and the liabilities assumed.
REGULATORY APPROVALS
Antitrust. The transactions contemplated by the Merger Agreement are
subject to the consent of, filings and registrations with, and notifications to
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and the Federal Trade Commission (the "FTC") pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Under the HSR
Act and the rules promulgated thereunder by the FTC, the Merger may not be
consummated until notifications have been given and certain information has been
furnished to the FTC and the Antitrust Division and the applicable waiting
period has expired or been terminated. AMTROL filed notification and report
forms under the HSR Act with the FTC on September 25, 1996. At any time before
or after the Effective Time, and notwithstanding that the waiting period under
the HSR Act has expired, any state could take such action under the antitrust
laws as it deems necessary or desirable in the public interest. Such action
could include seeking to enjoin the consummation of the Merger. Private parties
may also seek to take legal action under the antitrust laws under certain
circumstances.
Based on available information, AMTROL believes that the Merger can be
effected in compliance with Federal and state antitrust laws. However, there can
be no assurance that a challenge to the consummation of the Merger on antitrust
grounds will not be made or that, if such a challenge were made, AMTROL would
prevail or would not be required to accept certain adverse conditions in order
to consummate the Merger.
MANAGEMENT OF AMTROL'S BUSINESS AFTER THE MERGER
Under the Merger Agreement, AMTROL will merge with Acquisition at the
Effective Time. Although AMTROL will continue as the Surviving Corporation, it
will be a wholly-owned subsidiary of Holdings as of the Effective Time. The
directors of Acquisition immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation after the Merger, each to hold
office in accordance with the Articles and By-laws of the Surviving Corporation,
and the officers of Acquisition immediately prior to the Effective Time will be
the initial officers of the Surviving Corporation after the Merger, in each case
until their respective successors are duly elected or appointed and qualified.
VOTING AGREEMENT
AMTROL, The Chester H. Kirk Trust (the "Trust"), Kenneth L. Kirk, David
Beretta and Hanns H. Winkhaus have entered into a Voting Agreement dated as of
August 28, 1996 (the "Voting Agreement"). The Voting Agreement provides that the
Trust, Kenneth L. Kirk, David Beretta and Hanns H. Winkhaus
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(collectively, the "Shareholders") will vote their shares of AMTROL Common Stock
as recommended by the AMTROL Board of Directors with regard to the Merger
Agreement and the transactions contemplated therein as well as any Competing
Transaction or other action which is intended to or could reasonably be expected
to have a material effect on the transactions contemplated by the Merger
Agreement. The Voting Agreement also provides that the Shareholders will not be
obligated to vote their shares of AMTROL Common Stock in favor of any proposal
that would modify the provisions of Section D of Article Sixth of the Articles
except to the extent necessary to exclude from the definition of "business
combination" the Merger Agreement and the Merger. The Shareholders have also
agreed not to, directly or indirectly, solicit or respond to any inquiry or
proposal by any person or entity that could reasonably be expected to lead to a
Competing Transaction. The Voting Agreement further provides that the
Shareholders shall not, subject to certain exceptions, sell or transfer their
shares of AMTROL Common Stock, grant any proxies or enter into any other voting
agreements or arrangements with respect to their shares of AMTROL Common Stock.
Mr. Beretta died on September 16, 1996, and his estate has agreed to be bound by
the Voting Agreement. The Voting Agreement will terminate upon the earlier of:
(i) the Effective Time; or (ii) February 28, 1997. As of the Record Date, the
Shareholders owned of record 2,812,875 shares of AMTROL Common Stock, or 37.8%
of the total outstanding shares of AMTROL Common Stock. A copy of the Voting
Agreement is attached hereto as Exhibit A to Annex B, the Merger Agreement.
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DESCRIPTION OF THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
conformed copy of which is attached to this Proxy Statement as Annex B. Such
summary is qualified in its entirety by reference to the Merger Agreement.
GENERAL
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, and in accordance with Rhode Island law, at the Effective
Time, Acquisition will be merged with and into AMTROL. As a result of the
Merger, the separate corporate existence of Acquisition will cease and AMTROL
will continue as the Surviving Corporation and will become a direct,
wholly-owned subsidiary of Holdings. Upon consummation of the Merger, each
issued and then outstanding share of AMTROL Common Stock (other than any shares
held in the treasury of the Company, or owned by any direct or indirect
subsidiary of the Company) will be canceled and converted into the right to
receive the Per Share Amount.
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Acquisition issued and outstanding immediately prior to the
Effective Time will be converted into and exchanged for one duly and validly
issued, fully paid and non-assessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
TREATMENT OF STOCK OPTIONS
See "THE MERGER -- Payment for Shares of AMTROL Common Stock -- Payment for
Options; No Rights to Receive AMTROL Common Stock".
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Articles of Incorporation and
By-Laws of the Surviving Corporation will contain the provisions with respect to
indemnification set forth in the Articles of Incorporation and By-Laws of AMTROL
on the date of the Merger Agreement, which provisions and the provisions with
respect to indemnification in the governing instruments of each of AMTROL's
subsidiaries on such date will not be amended, repealed or otherwise modified
for a period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of persons who at any time prior to the
Effective Time were identified as prospective indemnitees under the Articles of
Incorporation or By-laws of AMTROL or such subsidiaries in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), unless such
modification is required by law, provided that nothing in the Merger Agreement
shall prohibit the Surviving Corporation from reincorporating in another
jurisdiction, by way of merger or otherwise, so long as its Articles of
Incorporation and By-Laws provide for indemnification of equal or greater scope.
The Merger Agreement also contains customary provisions for the selection of
counsel, defense and settlement of claims.
The Merger Agreement further provides that the Surviving Corporation will
maintain in effect for not less than 5 years after the Effective Time (except to
the extent not generally available in the market) AMTROL's current directors'
and officers' liability and fiduciary liability insurance policies (or policies
providing substantially the same coverage) with respect to matters occurring
prior to the Effective Time; provided, however, that (a) the Surviving
Corporation is not required to pay an annual premium for such insurance in
excess of 200% of the last annual premium paid prior to the date of the Merger
Agreement, but in such case must purchase as much coverage as possible for such
amount and (b) such policy may in the sole discretion of the Surviving
Corporation be one or more "tail" policies for all or any portion of the full
five year period.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of AMTROL,
Holdings and Acquisition relating to, among other things (a) due organization
and qualification and authority to enter into and perform their respective
obligations under the Merger Agreement, (b) due authorization, execution,
delivery, performance, enforceability and binding effect of the Merger
Agreement, (c) the noncontravention of certain
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instruments or of any law resulting from the execution and performance of the
Merger Agreement, absent the need for any governmental or third party filings,
consents or approvals, (d) matters relating to brokers, fees and other expenses,
and (e) required AMTROL, Holdings and Acquisition votes. In addition, AMTROL has
made certain representations and warranties concerning the following matters:
(a) capital structure, (b) documents filed with the Securities and Exchange
Commission (the "SEC"), financial statements and undisclosed liabilities, (c)
material contracts, (d) properties, (e) permits, (f) intellectual property, (g)
taxes, (h) compliance with laws, (i) absence of material adverse changes since
December 31, 1995, (j) litigation, (k) employee benefits plans, (l) insurance,
(m) environmental matters, (n) opinion of Smith Barney and (o) affiliate
transactions.
In addition, Holdings has made certain representations and warranties
concerning financing of the transactions contemplated under the Merger
Agreement.
OTHER FURTHER ACTIONS
The Merger Agreement provides that AMTROL and Holdings will each use their
reasonable efforts to (a) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable law or otherwise to consummate and make effective the transactions
contemplated by the Merger Agreement, (b) obtain any consents or approvals with
respect to the Merger the absence of which would result in a material adverse
effect on AMTROL, (c) make all necessary filings, and thereafter make any other
required submissions, with respect to the Merger Agreement and the Merger
required under (i) the Exchange Act and the rules and regulations thereunder,
and any other applicable Federal or state securities laws, (ii) the HSR Act, and
(iii) any other applicable law and shall cooperate with each other in connection
with the foregoing. Pursuant to the Merger Agreement, AMTROL and Holdings have
agreed to furnish all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable law
(including all information required to be included in this Proxy Statement) in
connection with the transactions contemplated thereby. AMTROL and Holdings have
each agreed to cooperate and use their reasonable efforts to contest and resist
any action, including legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") that is
in effect and that restricts, prevents or prohibits the consummation of the
Merger or any other transactions contemplated by the Merger Agreement,
including, without limitation, by pursuing any necessary administrative or
judicial appeal or legislative action.
Pursuant to the Merger Agreement AMTROL has agreed to provide, and to cause
its subsidiaries and its and their respective officers and employees to provide,
upon reasonable advance notice, all reasonable cooperation in connection with
the arrangement of any financing to be consummated contemporaneous with or at or
after the Effective Time in respect of the transactions contemplated by the
Merger Agreement and to request opinions of its legal counsel and "comfort
letters" of its accountants reasonably required in connection with such
financing. At the request of Holdings, AMTROL has agreed to call for prepayment
or redemption, or to prepay, redeem and/or renegotiate, as the case may be, any
existing indebtedness, provided that such prepayment or redemption shall only be
made contemporaneously with or after the Effective Time.
At the written request of Holdings, AMTROL has agreed to obtain Phase I
Environmental Site Assessments for certain properties owned by AMTROL (the
"Environmental Reports"), to provide, within 45 days of such request, copies of
any Environmental Reports to Holdings and any of Acquisition's and Holdings'
lenders and to legal counsel for such lenders, together with authorization for
such lender to rely upon such Environmental Reports as if the same had been
prepared for such lender, and to authorize AMTROL consultants to respond to
inquiries from, and discuss their findings with, such lender and its
representatives, provided that AMTROL's legal counsel is advised of, and invited
to participate in, any such inquiries or discussions.
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CONDITIONS TO CONSUMMATION
Under the Merger Agreement, the respective obligations of each party to
effect the Merger are subject to the satisfaction, at or prior to the Effective
Time, of the following conditions: (a) the applicable waiting period under the
HSR Act shall have expired or been terminated; (b) no governmental entity or
Federal or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
that then remains in effect and that has the effect of making the Merger illegal
or otherwise prohibiting consummation of the Merger; and (c) the holders of
either (i) at least a majority of the outstanding shares of AMTROL Common Stock
entitled to vote thereon shall have approved the Merger Agreement and the
transactions contemplated therein in accordance with the Amendment to the
Articles excluding the Merger Agreement and the Merger from the definition of
"business combination" as that term is defined in the Articles or (ii) if the
Amendment to the Articles is not approved, at least 75% of the outstanding
shares of AMTROL Common Stock entitled to vote thereon (excluding shares deemed
beneficially owned by a Related Person as such term is defined in the Articles)
shall have approved the Merger Agreement and the Merger in accordance with Rhode
Island law and the rules and regulations of the National Association of
Securities Dealers Automatic Quotations Systems ("NASDAQ").
The obligation of Holdings to effect the Merger is also subject to the
following conditions: (a) each of the representations and warranties of AMTROL
contained in the Merger Agreement (i) in the case of any thereof that are
expressly qualified by any materiality qualification, shall be true and correct,
subject to such materiality qualification, and (ii) in the case of all other
representations and warranties, shall be true and correct in all material
respects, in each case as of the Effective Time as though made on and as of the
Effective Time, and except that those representations and warranties that
address matters only as of a particular date shall remain true and correct,
subject to such materiality qualifications or in all material respects, as the
case may be, as of such date and Holdings shall have received a certificate of
the Chief Financial Officer of AMTROL to such effect; (b) AMTROL shall have
performed or complied in all material respects with all agreements and covenants
required by the Merger Agreement to be performed or complied with by it on or
prior to the Effective Time, and Holdings shall have received a certificate of
the Chief Financial Officer of AMTROL to that effect; (c) all consents,
approvals and authorizations, the failure to obtain which, individually or in
the aggregate, could reasonably be expected to have a material adverse effect,
and all consents, approvals and authorizations; (d) the Market Out Condition
shall not have occurred; and (e) Holdings shall have received an unqualified
opinion of Hinckley Allen that the Merger Agreement and the Merger have been
duly and validly approved by the shareholders of AMTROL in accordance with Rhode
Island law and AMTROL's Articles.
The obligation of AMTROL to effect the Merger is also subject to the
following conditions: (a) each of the representations and warranties of
Acquisition and Holdings contained in the Merger Agreement (i) in the case of
any thereof that are expressly qualified by any materiality qualification, shall
be true and correct, subject to such materiality qualification, and (ii) in the
case of all other representations and warranties, shall be true and correct in
all material respects, in each case as of the Effective Time as though made on
and as of the Effective Time, and except that those representations and
warranties that address matters only as of a particular date shall remain true
and correct, subject to such materiality qualifications or in all material
respects, as the case may be, as of such date, and AMTROL shall have received a
certificate of the Chief Financial Officer of Holdings to such effect; and (b)
Holdings shall have performed or complied in all material respects with all
agreements and covenants required by the Merger Agreement to be performed or
complied with by it on or prior to the Effective Time and AMTROL shall have
received a certificate of the Chief Financial Officer of Holdings to that
effect.
CERTAIN OBLIGATIONS
The Merger Agreement provides that Holdings will cause the Surviving
Corporation and its subsidiaries to honor in accordance with their terms all
employment, severance, termination, consulting and retirement agreements and
certain other compensation arrangements between AMTROL and any current or former
director, officer or employee thereof (including but not limited to the Special
Termination Agreements), and
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to cause the Surviving Corporation to discharge, at the Effective Time, any
obligations arising thereunder by reason of the Merger.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
Pursuant to the Merger Agreement, AMTROL has agreed that, prior to the
Effective Time, unless otherwise expressly contemplated by the Merger Agreement
or consented to in writing by Holdings, AMTROL will and will cause its
subsidiaries to (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its reasonable efforts to preserve
substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective officers and key employees and
maintain its relationships with its respective significant customers and
suppliers; (c) use its reasonable efforts to maintain and keep its properties
and assets in as good repair and condition as at present, ordinary wear and tear
excepted; and (d) use its reasonable efforts to keep in full force and effect
insurance comparable in amount and scope of coverage to that currently
maintained. The Merger Agreement provides, however, that in the event AMTROL
deems it necessary to take certain actions that would otherwise be prohibited as
described above, AMTROL will consult with Holdings, which shall consider in good
faith AMTROL's request to take such action and not unreasonably withhold or
delay its consent for such action.
The Merger Agreement provides that, unless Holdings consents to such
action, AMTROL will not, and will not permit any of its subsidiaries to: (a)
subject to certain exceptions, increase the periodic compensation or fringe
benefit of, grant any severance or termination pay to, or enter into or amend
any employment, consulting or severance agreement or arrangement with, any
director, officer or employee or adopt or amend any employee benefit plan or
arrangement, except as may be required by applicable law; (b) declare or pay any
dividend on, or make any other distribution in respect of, its capital stock
(other than regular quarterly dividends not to exceed $.05 per share consistent
with past practice); (c) redeem, repurchase or otherwise reacquire any shares of
its or any of its subsidiaries' capital stock or any securities convertible into
or exchangeable for any such capital stock (except in connection with the
exercise of existing Options), effect any liquidation, dissolution, merger,
consolidation, restructuring, reorganization or recapitalization of
AMTROL or split, combine or reclassify, or issue any other securities in respect
of, its capital stock; (d) issue, award, grant or sell any shares of its capital
stock, any securities convertible into or exercisable or exchangeable for, or
any rights to acquire, any such shares (except upon the exercise of existing
Options) or amend or otherwise modify the terms of any such rights to make such
terms more favorable to the holders thereof; (e) acquire any business or any
business organization or division thereof, or any assets of any other person
(other than in the ordinary course of business and consistent with past
practice) which are material, individually or in the aggregate, to AMTROL and
its subsidiaries, or make or commit to make any capital expenditures other than
in the ordinary course of business consistent with past practice and with
AMTROL's 1996 Capital Plan; (f) sell, lease, mortgage, transfer or otherwise
dispose of any of its or its subsidiaries' assets except for the grant of
purchase money security interests and sales in the ordinary course of business
and consistent with past practice or required by existing agreements disclosed
to Holdings; (g) propose or adopt any amendments to the Articles or By-Laws
(other than the Amendment to Articles referenced herein); (h) except as required
by law or generally accepted accounting principles, change any of its methods of
accounting or methods of reporting income or deductions for Federal income tax
purposes, make or rescind any tax election, or settle or compromise any claim,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes (except where the amount of such settlements, individually or
in the aggregate, does not exceed $500,000); (i) incur any obligation for
borrowed money other than purchase money indebtedness (except in the ordinary
course of business under existing loan agreements), prepay any of its long-term
debt, guarantee any obligation or indebtedness of another person, or enter into
any "keep well" agreement to maintain the financial condition of another person;
(j) subject to certain exceptions, settle or compromise any litigation; (k) pay,
discharge or satisfy any claims, liabilities or obligations, except in the
ordinary course of business consistent with past practice or in accordance with
their existing terms, or waive, release, grant, or transfer any rights of
material value or modify or change in any material respect any material
contract, other than in the ordinary course of business consistent with past
practice; (l) effectuate a "plant closing" or "mass layoff" without notifying
Holdings in advance and complying with the applicable legal requirements; or (m)
agree to do any of the foregoing.
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ACCESS AND INFORMATION
The Merger Agreement further provides that, subject to confidentiality
agreements to which AMTROL or any of its subsidiaries is a party, AMTROL will,
and will cause its subsidiaries to (a) afford to Holdings and its officers,
directors, employees, accountants, consultants, legal counsel, agents, lenders
(including representatives of any lenders) and other representatives
(collectively, the "Holdings Representatives") full access at reasonable times
upon reasonable prior notice to the officers, employees, agents, properties,
offices and other facilities of AMTROL and its subsidiaries and to the books and
records thereof and (b) furnish promptly to Holdings and the Holdings
Representatives such information concerning the business, properties, contracts,
records and personnel of AMTROL and its subsidiaries (including, without
limitation, financial, operating and other data and information) as may be
reasonably requested, from time to time, by Holdings.
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, AMTROL, Holdings and Acquisition, by action
taken by or on behalf of their respective Boards of Directors, may amend the
Merger Agreement by written agreement at any time prior to the Effective Time.
At any time prior to the Effective Time, AMTROL, Holdings or Acquisition
may extend the time for performance of any of the obligations or other acts of
the other party, waive any inaccuracies in the representations and warranties of
the other party contained in the Merger Agreement or waive compliance by the
other party with any of the agreements or conditions contained in the Merger
Agreement.
The Merger Agreement provides that it may be terminated at any time prior
to the Effective Time: (a) by mutual consent of Holdings and AMTROL; (b) by
Holdings, upon a material breach of any representation, warranty, covenant or
agreement on the part of AMTROL set forth in the Merger Agreement, or if any
representation or warranty of AMTROL shall have become untrue in any material
respect, in either case such that the conditions to the Merger Agreement
described above would not be satisfied (a "Terminating AMTROL Breach"), provided
that, if such Terminating AMTROL Breach is not willful and is curable by AMTROL
through the exercise of its reasonable efforts and for so long as AMTROL
continues to exercise such reasonable efforts, Holdings may not terminate the
Merger Agreement until AMTROL has been given 30 days to cure such breach after
receipt of notice thereof; (c) by AMTROL, upon a material breach of any
representation, warranty, covenant or agreement on the part of Holdings set
forth in the Merger Agreement, or if any representation or warranty of Holdings
shall have become untrue in any material respect, in either case such that the
conditions to the Merger Agreement described above would not be satisfied (a
"Terminating Holdings Breach"), provided that, if such Terminating Holdings
Breach is curable by Holdings through the exercise of its reasonable efforts and
for so long as Holdings continues to exercise such reasonable efforts, AMTROL
may not terminate the Merger Agreement until Holdings has been given 30 days to
cure such breach after receipt of notice thereof; (d) by either Holdings or
AMTROL, if there shall be any Order that is final and non-appealable preventing
the consummation of the Merger, except if the party relying on such Order has
not complied with its obligations under the Merger Agreement to take all action
to secure the required governmental approvals and resist all Orders that
interfere with the consummation of the Merger Agreement; (e) by Holdings or
AMTROL, if the Merger shall not have been consummated before February 28, 1997,
except if the party seeking to terminate the Merger Agreement shall be in breach
thereof; (f) by Holdings or AMTROL, if the approval of the Merger Agreement and
the Merger by the shareholders of AMTROL is not obtained at the Special Meeting.
In addition, Holdings may unilaterally terminate the Merger Agreement (a)
if (1) the Board withdraws, modifies or changes its recommendation of the Merger
Agreement or the Merger in a manner adverse to Holdings or Acquisition or shall
have resolved to do any of the foregoing, or (2) the Board shall have
recommended to the shareholders of AMTROL any Competing Transaction or resolved
to do so; or (b) if (1) AMTROL shall have exercised a right specified in the
Merger Agreement with respect to any Competing Transaction and shall, directly
or through agents or representatives, continue discussions with any third party
concerning such Competing Transaction for more than 20 business days after the
date of receipt of such Competing Transaction; or (2)(A) a Competing Transaction
that is publicly disclosed shall have been
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commenced, publicly proposed or communicated to AMTROL which contains a proposal
as to price (without regard to the specificity of such price proposal) as to
which AMTROL is legally required to respond under Rule 14e-2 promulgated under
the Exchange Act, and (B) AMTROL shall not have rejected such proposal within 20
business days of its receipt or the date its existence first becomes publicly
disclosed, if sooner. The Merger Agreement may be unilaterally terminated by
AMTROL, if the Board, pursuant to the exercise of its fiduciary duties, shall
have recommended to the shareholders of AMTROL any Competing Transaction or
resolved to do so pursuant to the Merger Agreement (provided that any such
termination of the Merger Agreement will not be effective until the close of
business on the second full business day after notice thereof to Holdings). The
events described in this paragraph that would provide for unilateral termination
of the Merger Agreement by AMTROL or Holdings are hereinafter referred to as
"Termination Events".
EXPENSES AND FEES
The Merger Agreement provides that all expenses incurred by the parties
thereto shall be borne solely by the party that has incurred such expenses
except as described below.
If the Merger Agreement shall have been terminated due to a Termination
Event (see, "Amendment, Waiver and Termination") and within twelve (12) months
after such termination a Competing Transaction shall have been consummated,
AMTROL is obligated to pay Holdings (or its designee) within one business day of
the later of the consummation of such a Competing Transaction or such
termination a fee of $6.5 million in cash. In addition, if the Merger Agreement
is terminated because approval of the Merger Agreement is not obtained by the
requisite vote of AMTROL's shareholders at the Special Meeting and (a) prior to
the Special Meeting either (1) any Person (including AMTROL or any of its
subsidiaries or affiliates) or "group" (as referred to in Section 13(d)(3) of
the Exchange Act) other than Holdings or any of its affiliates (collectively,
"Acquiring Persons") has become the beneficial owner of more than 20% of the
outstanding shares of AMTROL Common Stock (other than with respect to persons
beneficially owning more than 20% as of the date of the Merger Agreement, in
which case, if such person acquires beneficial ownership of any additional
shares comprising an aggregate of more than 1% of the outstanding shares of
AMTROL Common Stock); or (2) any Acquiring Person has made, or proposed,
communicated or disclosed publicly (which includes being known by AMTROL
shareholders owning of record or beneficially in the aggregate 5% or more of the
outstanding shares of AMTROL Common Stock) a bona fide intention to make a
proposal for a Competing Transaction or has made such a proposal, and (b) within
12 months after such termination, any Acquiring Person (whether or not the same
Acquiring Person referred to in clause (a)) has consummated any Competing
Transaction in which the Transaction Value (as hereinafter defined) of such
Competing Transaction (the "Aggregate Competing Consideration"), exceeds the
aggregate amount of the Merger Consideration payable under the Merger Agreement
to holders of the AMTROL Common Stock (the "Aggregate Merger Consideration"),
then AMTROL shall within one business day after the later of the date of such
termination or the consummation of such a Competing Transaction, pay Holdings
(or its designee) a fee in cash equal to the lesser of (x) the amount by which
the Aggregate Competing Consideration exceeds the Aggregate Merger Consideration
or (y) $6.5 million. "Transaction Value" shall mean (i) in the case of the sale,
exchange or purchase of AMTROL's equity securities, the total consideration paid
for such securities (including amounts paid to holders of options, warrants and
convertible securities), and (ii) in the case of a sale or disposition by AMTROL
of assets, the total consideration paid for such assets, plus the net value of
any current assets not sold by AMTROL. If the consideration in connection with
the Competing Transaction may be increased by payments related to future events
("Contingent Payments"), the portion of the fee due to Holdings relating to such
Contingent Payments will be calculated and payable if and when such Contingent
Payments are made. Only one fee in the maximum aggregate of $6.5 million shall
be payable to Holdings pursuant to the Merger Agreement.
In addition, in the event a fee described in the immediately preceding
paragraph is or becomes payable, AMTROL has agreed promptly, but in no event
later than two business days following written notice thereof, together with
related bills or receipts, to reimburse Holdings (or its designee) and its
affiliates for all reasonable out-of-pocket costs, fees and disbursements of
counsel and the expenses of litigation, incurred in
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connection with collecting such fee, as a result of any breach by AMTROL of its
obligations under the relevant sections of the Merger Agreement.
Notwithstanding any other provision of the Merger Agreement, in the event
AMTROL obtains the Environmental Reports referred to under "-- Other Further
Actions" and the Merger Agreement is terminated for any reason, Holdings has
agreed promptly, but in no event later than two business days following written
notice thereof, together with related bills or receipts, to reimburse AMTROL for
the fees and expenses incurred in connection with the preparation of the
Environmental Reports.
NO DISSENTERS' RIGHTS
Under Section 7-1.1-73 of Rhode Island law, there is no right to dissent to
a merger for the holders of shares of a company which are registered on a
national securities exchange or included as National Market Securities in the
NASDAQ System. Because AMTROL shares trade on the NASDAQ National Market, AMTROL
shareholders have no right to dissent to the Merger.
FINANCING OF THE MERGER
Acquisition is expected to issue debt securities in either the public or
private markets and enter into a syndicated senior secured term loan facility
for an aggregate of approximately $160 million of gross proceeds in order to
finance the conversion into cash of the shares of AMTROL Common Stock currently
outstanding pursuant to the Merger. Acquisition also expects to enter into a $15
million senior secured revolving credit facility to provide for working capital
requirements. The Cypress Fund (as defined below) also expects to make an equity
contribution of approximately $68.6 million to Holdings which expects to
contribute those funds to Acquisition.
ACQUISITION AND HOLDINGS
Acquisition, a Rhode Island corporation and a wholly-owned subsidiary of
Holdings, was organized in connection with the Merger and has not carried on any
activities to date other than those incident to its formation and the
transactions contemplated by the Merger Agreement. Holdings is a Delaware
corporation newly organized by Cypress Merchant Banking Partners L.P. and
Cypress Offshore Partners L.P. (collectively, the "Cypress Fund"). Holdings'
principal asset is its ownership of 100% of the common stock of Acquisition. The
Cypress Fund is a $1.05 billion private equity fund which invests in privately
negotiated transactions, targeting established operating businesses and
investing with management to foster continued growth.
32
<PAGE> 36
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS
<TABLE>
The following table sets forth certain information with respect to the
beneficial ownership of AMTROL Common Stock as of October 4, 1996 by each of
AMTROL's directors, executive officers, the Trust, all current directors and
executive officers of AMTROL as a group and (except as otherwise indicated) as
of December 31, 1995 by each other person believed to be a beneficial owner of
more than 5% of the outstanding AMTROL Common Stock.
<CAPTION>
AMOUNT AND NATURE
DIRECTORS, OFFICERS OF BENEFICIAL PERCENT
AND 5% SHAREHOLDERS OWNERSHIP(a) OF CLASS
------------------- ----------------- --------
<S> <C> <C>
Kenneth L. Kirk(b)............................................. 443,325 5.9%
Stephen J. Carlotti (c)........................................ 4,000 *
Herbert H. Jacobi(c)........................................... 24,029 *
Albert W. Ondis(c)............................................. 5,489 *
Lorne R. Waxlax(c)............................................. 5,730 *
Hanns H. Winkhaus(d)........................................... 2,323,776 31.2
Edward J. Cooney(e)............................................ 62,864 *
Samuel L. Daniels(e)........................................... 12,350 *
Brooks R. Herrick(e)........................................... 6,000 *
Gerald J. Leary(e)............................................. 11,350 *
Clifford A. Peterson(e)........................................ 2,500 *
David P. Whittingham(e)........................................ 27,500 *
The Chester H. Kirk Trust(f)................................... 2,220,804 29.8
T. Rowe Price Associates, Inc.(g).............................. 761,500 10.2
Neuberger & Berman, L.P.(h).................................... 551,000 7.4
All current directors and executive officers as a group (12
persons)(i).................................................. 2,924,913 38.6
- ---------------
<FN>
* Less than 1%
(a) Except as otherwise noted, each person or entity named in the table has sole
voting and investment power with respect to all shares of Common Stock
listed as owned by such person or entity. All information with respect to
beneficial ownership has been furnished by the respective directors,
officers and 5% owners. Except as set forth above, management knows of no
person who, as of October 4, 1996, owned beneficially more than 5% of the
Company's outstanding AMTROL Common Stock. Includes, where applicable,
shares issuable upon exercise of stock options granted under the AMTROL Inc.
1983 Incentive Stock Option Plan, the 1992 Stock Plan or the Director Plan,
which options are presently or will be exercisable within 60 days without
regard to the Merger.
(b) Includes 19,250 shares of Common Stock issuable upon exercise of options
granted to Mr. K. Kirk, which are presently or will become exercisable
within 60 days. The address of Mr. K. Kirk is c/o AMTROL Inc., 1400 Division
Road, West Warwick, RI 02893.
(c) Includes 4,000, 3,285, 3,333 and 2,730 shares of Common Stock issuable upon
exercise of options granted to Messrs. Carlotti, Jacobi, Ondis and Waxlax,
respectively, which are presently or will become exercisable within 60 days.
(d) Includes 2,220,804 shares of Common Stock held by the Trust, of which Dr.
Winkhaus is a co-trustee and has shared voting and dispositive power and
3,022 shares of Common Stock issuable upon exercise of options granted under
the Director Plan which are presently or will become exercisable within 60
days. Dr. Winkhaus' address is 248 Sybel Strasse, Dusseldorf, Germany 40479.
(e) Includes 37,448, 12,350, 4,500, 11,250, 2,500 and 22,000 shares of Common
Stock issuable upon exercise of options granted to Messrs. Cooney, Daniels,
Herrick, Leary, Peterson and Whittingham, respectively, which are presently
or will become exercisable within 60 days.
</TABLE>
33
<PAGE> 37
(f) Heidi H. Kirk (the widow of Chester H. Kirk), Dr. Hanns H. Winkhaus and
Fleet National Bank (a national banking association with its principal
business office at 111 Westminster Street, Providence, Rhode Island 02903)
are co-trustees of the Trust with shared voting and dispositive power and
are deemed the beneficial owners of the shares held by the Trust. Mrs. Kirk,
whose address is 275 Stony Lane, North Kingstown, Rhode Island 02852 serves
as Co-Executrix of the Estate of Chester H. Kirk and in that capacity is
deemed to beneficially own 130,000 shares of Common Stock issuable upon
exercise of presently exercisable options granted to Mr. Kirk. The address
of the Trust is c/o Margaret D. Farrell, Esq., 1500 Fleet Center,
Providence, Rhode Island 02903.
(g) According to a Schedule 13G filed with the SEC on March 8, 1996, T. Rowe
Price Associates, Inc. ("Price Associates"), a registered investment
advisor, with its principal business office at 100 East Pratt Street,
Baltimore, Maryland 21202 has sole voting power with respect to 24,000
shares and sole dispositive power with respect to 761,500 shares. These
securities are owned by various individual and institutional investors,
including T. Rowe Price Small Cap Value Fund, Inc., a registered investment
company, with sole voting power with respect to 488,900 shares (representing
6.5% of the shares outstanding). Price Associates serves as investment
advisor with power to direct investments and/or sole power to vote the
securities owned by these investors. For purposes of the reporting
requirements of the Exchange Act, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(h) According to a Schedule 13G filed with the SEC, Neuberger & Berman, L.P., a
registered broker-dealer and registered investment advisor with its
principal business office at 605 Third Avenue, New York, New York 10158, has
sole voting power with respect to 327,800 shares, shared voting power with
respect to 110,000 shares and shared dispositive power with respect to
551,000 shares held for the account of various Neuberger & Berman Funds and
unrelated clients. Neuberger & Berman, L.P. disclaims any economic interest
in the shares.
(i) Includes 125,668 shares of Common Stock issuable upon exercise of options
which are presently or will become exercisable within 60 days.
34
<PAGE> 38
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by AMTROL under the Exchange Act
with the SEC are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(2) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 30, 1996.
(3) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 29, 1996.
(4) The Company's Current Report on Form 8-K dated September 5, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed documents
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement. The Company will provide, without charge, to each person to
whom a copy of this Proxy Statement has been delivered, on the written or oral
request of such person and by first class mail or other equally prompt means
within one business day of receipt of such request, a copy of any or all of the
documents referred to above that have been or may be incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference herein). Requests for such copies should
be made at least five business days prior to the Special Meeting and should be
directed to: AMTROL Inc., 1400 Division Road, West Warwick, Rhode Island 02893;
(401) 884-6300.
ACCOUNTANTS
The accounting firm of Arthur Andersen LLP provides various services to the
Company and its subsidiaries in addition to audit services. Representatives of
Arthur Andersen LLP will be present at the Special Meeting, will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions from shareholders.
OTHER MATTERS
As of the date of this Proxy Statement, AMTROL's Board of Directors knows
of no other matters that will be presented for consideration at the Special
Meeting other than as described in this Proxy Statement. However, if any other
matter shall come before the Special Meeting or any adjournments or
postponements thereof and shall be voted upon, the proxy will be deemed to
confer authority to the individuals named as authorized therein to vote the
shares represented by such proxy as to any such matters that fall within the
purposes set forth in the Notice of Special Meeting as determined by a majority
of AMTROL's Board of Directors.
BY ORDER OF THE BOARD OF DIRECTORS,
Margaret D. Farrell
Secretary
October 9, 1996
35
<PAGE> 39
ANNEX A
AMENDMENT TO ARTICLES OF INCORPORATION
Section D of Article SIXTH of the Amended and Restated Articles of
Incorporation of AMTROL Inc. is proposed to be amended in its entirety to read
as follows (new language is reflected in italics):
D. APPROVAL OF BUSINESS COMBINATIONS.
(i) In addition to any vote required under the Rhode Island Business
Corporation Act, the affirmative vote of the holders of at least 75% of the
outstanding shares of Common Stock entitled to vote thereon (not including
shares deemed beneficially owned by a Related Person (as hereinafter defined)
shall be required in order to authorize and/or approve a Business Combination
(as hereinafter defined). Such affirmative vote shall be required
notwithstanding any other provision of these Articles, any provision of law, or
any agreement with any regulatory agency or national securities exchange which
might otherwise permit a lesser vote or no vote.
(ii) For the purposes of this Section D of Article SIXTH, the following
definitions apply:
(a) The term "Related Person" shall mean and include (1) any "person"
as such term is used in Section 13(d) and Section 14(d) of the Securities
Exchange Act of 1934, as in effect on the date of the filing of these
Articles of Amendment (the "1934 Act") (other than the Corporation, any
trustees or other fiduciary holding securities under an employee benefit
plan of the Corporation, or any corporation owned, directly or indirectly,
by the shareholders of the Corporation in the same proportions as their
ownership of shares of Common Stock of the Corporation), which, together
with its "affiliates" (as that term is defined in Rule 12b-2 of the General
Rules and Regulations under the 1934 Act, as in effect on the date of
filing of this Amendment to the Articles or as subsequently amended,
including any successor regulation (the "1934 Act Regulations")
"beneficially owns" (as that term is defined in Rule 13d-3 of the 1934 Act
Regulations) in the aggregate 5% or more of the outstanding shares of the
Common Stock of the Corporation; and (2) any "affiliate" (as that term is
defined in Rule 12b-2 of the 1934 Act Regulations) of any such person;
provided that the term "Related Person" shall not include any person who
(x) beneficially owned shares of Common Stock in excess of the five percent
(5%) limitation set forth herein as of March 1, 1993 or (y) acquired the
shares from a person described in (x) above by gift, inheritance or in a
transaction in which no consideration was exchanged. Without limitation,
any shares of the Common Stock of the Corporation which any Related Person
has the right to acquire pursuant to any agreement, or upon exercise or
conversion rights, warrants or options, or otherwise, shall be deemed
"beneficially owned" by such Related Person.
(b) The term "Business Combination" as used in this Section D of
Article SIXTH shall mean any of the following:
(1) any merger or consolidation of the Corporation or a
subsidiary of the Corporation which constitutes a Substantial Part (as
hereinafter defined) of the assets of the Corporation with another
corporation, other than (i) a merger or consolidation which would result in
the voting securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after such
merger of consolidation and (ii) a merger of the Corporation with A.I.
Acquisition, Inc. as described more fully in a Merger Agreement dated as of
August 28, 1996 by and among the Corporation, A.I. Holdings, Inc. and A.I.
Acquisition, Inc. (the "Merger Agreement");
(2) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of all or any Substantial Part of the assets of the
Corporation (including without limitation any voting securities of a
subsidiary);
A-1
<PAGE> 40
(3) any reclassification of the Common Stock of the Corporation,
or any recapitalization involving the Common Stock of the Corporation,
other than a recapitalization of the Corporation in which no Related Person
acquires more than 20% of the combined voting power of the Corporation's
then outstanding securities;
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation; and
(5) any agreement, contract or other arrangement providing for
any of the transactions described in this subparagraph (ii) of Section D of
Article SIXTH, other than the Merger Agreement.
(c) The term "Substantial Part" shall mean more than 50% of the total
assets of the Corporation, as of the end of its most recent year ending
prior to the time the determination is made.
(iii) Notwithstanding anything contained in the Articles of Incorporation
to the contrary, the affirmative vote of the holders of at least 75% of the
voting power of the Common Stock shall be required to amend or repeal, or adopt
any provision inconsistent with, any provision of this Section D of Article
SIXTH.
A-2
<PAGE> 41
ANNEX B
MERGER AGREEMENT
BETWEEN
AMTROL INC.,
A.I. HOLDINGS, INC.
AND
A.I. ACQUISITION, INC.
<PAGE> 42
MERGER AGREEMENT
MERGER AGREEMENT dated as of August 28, 1996 (the "Agreement"), among A.I.
Holdings, Inc., a Delaware corporation ("Parent"), A.I. Acquisition, Inc., a
Rhode Island corporation ("Parent Sub"), and a wholly owned subsidiary of
Parent, and AMTROL Inc., a Rhode Island corporation (the "Company").
WHEREAS, Parent Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the Business Corporation Act of the State of
Rhode Island ("Rhode Island Law"), will merge with and into the Company (the
"Merger"); and
WHEREAS, the Board of Directors of the Company has (i) determined that the
Merger is fair to, and in the best interests of, the holders of Common Stock (as
hereinafter defined) and (ii) approved this Agreement and the transactions
contemplated hereby and recommended approval of this Agreement by the
stockholders of the Company; and
WHEREAS, the Board of Directors of Parent has determined that the Merger is
in the best interests of Parent and its stockholders and has approved this
Agreement and the transactions contemplated hereby;
WHEREAS, Parent and Parent Sub are unwilling to enter into this Agreement
unless, contemporaneously with the execution and delivery of this Agreement,
certain beneficial and record stockholders of the Company enter into the Voting
Agreement in the form of Exhibit A hereto (the "Voting Agreement") providing for
certain actions relating to the transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Rhode Island Law, at the
Effective Time (as hereinafter defined), Parent Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Parent Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). The name of the
Surviving Corporation shall be Amtrol Inc.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing a
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Rhode Island, in such form as required by, and executed in accordance
with the relevant provisions of, Rhode Island Law (the date and time of the
filing of the Articles of Merger or the time specified therein being the
"Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Rhode Island
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of Parent Sub and the Company shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Parent Sub and the Company shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. Articles of Incorporation; By-Laws. At the Effective Time,
the Articles of Incorporation and By-Laws of Parent Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and By-Laws, respectively, of the Surviving Corporation.
SECTION 1.05. Directors and Officers. The directors of Parent Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Parent Sub
B-1
<PAGE> 43
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
SECTION 1.06. Closing. (a) The closing (the "Closing") of the Merger will
take place at the offices of Simpson, Thacher & Bartlett, 425 Lexington Avenue,
New York, NY 10017 at 10:00 a.m., local time, on a date to be mutually agreed
upon by Parent and the Company, which date shall be no later than the fifth
business day following the date upon which the last to occur of the conditions
set forth in Article VII is fulfilled or duly waived provided that, unless
Parent shall have otherwise agreed in writing, such date shall not be prior to
November 15, 1996, and, provided further, that if the Company Stockholders'
Meeting (as hereinafter defined) is held after November 10, 1996, then, unless
Parent shall have otherwise agreed in writing, such date shall not be prior to
December 15, 1996.
(b) Subject to the satisfaction or waiver of each of the conditions set
forth in Article VII, at the Closing, (i) the closing certificates and other
documents required by Article VII shall be delivered, and (ii) the appropriate
officers of the Company shall execute and acknowledge the Articles of Merger.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Parent Sub, the
Company or the holders of any of the following securities:
(a) Subject to the other provisions of this Section 2.01, each share
of Common Stock, par value $.01 per share ("Common Stock"), issued and
outstanding immediately prior to the Effective Time (excluding any shares
described in Section 2.01(b)) shall be converted into the right to receive
$28.25 in cash, without interest (the "Per Share Amount"). All such shares
of Common Stock shall cease to be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate
previously evidencing any such shares shall thereafter represent only the
right to receive the Per Share Amount as described below. The holders of
certificates previously evidencing such shares of Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Common Stock, except as otherwise provided herein
or by law. Each such certificate previously evidencing shares of Common
Stock shall be exchanged for the Per Share Amount multiplied by the number
of shares previously evidenced by the canceled certificate upon the
surrender of such certificate in accordance with the provisions of Section
2.02, without interest;
(b) Each share of Common Stock held in the treasury of the Company and
each share of Common Stock owned by any direct or indirect subsidiary of
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto; and
(c) Each share of common stock, par value $.01 per share, of Parent
Sub ("Parent Sub Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
SECTION 2.02. Payment. (a) Paying Agent. As of the Effective Time,
Parent shall deposit, or shall cause to be deposited, with a bank theretofore
designated by Parent (the "Paying Agent"), for the benefit of the holders of
shares of Common Stock, for payment in accordance with this Article II, through
the Paying Agent, cash in an amount equal to the Per Share Amount multiplied by
the number of shares of Common Stock outstanding immediately prior to the
Effective Time, (such cash being hereinafter referred to as the "Payment Fund").
The Paying Agent shall, pursuant to irrevocable instructions, deliver the cash
contemplated to be paid pursuant to Section 2.01(a) out of the Payment Fund. The
Payment Fund shall not be used for any other purpose.
(b) Payment Procedures. Promptly after the Effective Time, the Paying
Agent shall mail to each record holder, as of the Effective Time, of an
outstanding certificate that immediately prior to the Effective
B-2
<PAGE> 44
Time evidenced outstanding shares of Common Stock (the "Certificates") a form
letter of transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal duly executed, and any
other required documents, the holder of such Certificate shall be entitled to
receive in exchange therefor the consideration set forth in Section 2.01(a) (the
"Merger Consideration"), and such Certificate shall forthwith be canceled. No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates. Until surrendered in accordance with the provisions of this
Section 2.02, each Certificate shall represent for all purposes only the right
to receive the consideration set forth in Section 2.01(a), without any interest
thereon.
(c) No Further Rights in Common Stock. All cash paid upon conversion of
the shares of Common Stock in accordance with the terms of this Article II,
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such shares of Common Stock.
(d) Termination of Payment Fund. Any portion of the Payment Fund that
remains undistributed to the holders of Common Stock for 180 days after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any holders of Common Stock that have not theretofore complied with this Article
II shall thereafter look only to the Surviving Corporation and only as general
creditors thereof for payment of their claim for cash to which they are
entitled.
(e) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of shares of Common Stock for any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Investment of Payment Fund. The Paying Agent shall invest the Payment
Fund, as directed by the Surviving Corporation, on a daily basis. The Paying
Agent shall invest funds in the Payment Fund only in Permitted Investments (as
herein defined). Any interest or other income earned on the investment of funds
in the Payment Fund shall be for the account of and payable to the Surviving
Corporation. The Surviving Corporation shall replace any monies lost through any
investment made pursuant to this Section 2.02(f). For purposes of this Section
2.02(f), "Permitted Investments" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit, eurodollar time deposits and
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits with any commercial bank, depository institution or trust company
incorporated or doing business under the laws of the United States of America,
any state thereof or the District of Columbia, provided that such commercial
bank, depository institution or trust company has, at the time of the
investment, (A) capital and surplus in excess of $250 million and (b)
outstanding short-term debt securities which are rated at least A-1 by Standard
& Poor's Rating Group Division of McGraw Hill Incorporated or at least P-1 by
Moody's Investor Services, Inc., or carry an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease
publishing ratings of investments, (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in
clauses (i) and (ii) above entered into with any financial institution meeting
the qualifications specified in clause (ii) above, (iv) commercial paper having
a rating in the highest rating categories from Standard & Poor's Rating Group
Division of McGraw Hill Incorporated or Moody's Investor Services, Inc. or carry
an equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments and in each case
maturing within six months after the date of acquisition and (v) money market
mutual or similar funds having assets in excess of $250 million.
SECTION 2.03. Options. The Company shall take all action necessary to (i)
terminate the Company's 1992 Stock Incentive Plan, as amended to the date of
this Agreement (the "1992 Stock Plan") and the Non-Employee Director
Compensation Plan (the "Director Plan"), effective as of the day of the
Effective Time immediately prior to the Effective Time, (ii) provide that each
outstanding stock option to purchase shares of Common Stock granted under the
1992 Stock Plan and the Director Plan (an "Option") shall become fully vested,
whether or not previously vested, immediately prior to the Effective Time and
(iii) provide that, with respect to any such Option that is outstanding
immediately prior to the Effective Time, such Option shall be canceled as of the
day of the Effective Time immediately prior to the Effective Time and the
B-3
<PAGE> 45
holder shall be entitled to receive from the Surviving Corporation, immediately
after the Effective Time, an amount in cash in cancellation of such Option equal
to the excess, if any, of the Per Share Amount over the per share exercise price
of such Option, multiplied by the number of shares of Common Stock to which the
Option remains unexercised. Any such payment shall be subject to all applicable
Federal, state and local tax withholding requirements.
SECTION 2.04. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Common Stock thereafter on the records of
the Company. On or after the Effective Time, any certificates for shares of
Common Stock presented to the Paying Agent, the Surviving Corporation or Parent
for any reason shall be converted into the Merger Consideration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule (as qualified by the
introduction thereto) delivered by the Company to Parent concurrent with the
execution of this Agreement (the "Company Disclosure Schedule"), the Company
hereby represents and warrants to Parent and Parent Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries. (a) The
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of the business conducted by it or the ownership or leasing
of its properties makes such qualification necessary, other than where the
failure to be so duly qualified and in good standing would not have a Company
Material Adverse Effect (as hereinafter defined). The term "Company Material
Adverse Effect" as used in this Agreement means any change or effect that,
individually or when taken together with all other such changes or effects,
would be materially adverse to the financial condition, business, operations,
earnings or prospects of the Company and its subsidiaries, taken as a whole.
(b) Section 3.01 of the Company Disclosure Schedule sets forth, a complete
and correct list of all the Company's directly or indirectly owned subsidiaries,
together with (i) the jurisdiction of incorporation of each subsidiary and the
percentage of each subsidiary's outstanding capital stock owned by each holder
of such stock, and (ii) as of the date of this Agreement, indication of whether
each such subsidiary is a "Significant Subsidiary" (as hereinafter defined).
SECTION 3.02. Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent complete and accurate copies of the Articles of
Incorporation and the By-Laws, in each case as amended or restated to the date
of this Agreement, of the Company and each of its subsidiaries.
SECTION 3.03. Capitalization. (a) The authorized capital stock of the
Company consists of (i) 15,000,000 shares of Common Stock; and (ii) 5,000,000
shares of Preferred Stock, $.01 par value. As of the date of this Agreement, (i)
7,444,220 shares of Common Stock (none of which is subject to any preemptive
rights whether created by statute, the Company's Articles of Incorporation or
By-Laws or any agreement to which the Company is a party or is bound or
otherwise) and no shares of Preferred Stock are issued and outstanding, (ii)
214,200 shares of Common Stock are held in the treasury of the Company; (iii)
679,223 shares of Common Stock are reserved for issuance pursuant to outstanding
Options granted pursuant to the 1992 Stock Plan and the Director Plan, (iv) no
shares of Common Stock are issued and outstanding as "Restricted Shares" under
the 1992 Stock Plan, and (v) no "Limited Rights" are issued and outstanding
under the 1992 Stock Plan. Each of the outstanding shares of capital stock of
the Company and each of its subsidiaries is duly authorized and validly issued,
fully paid and nonassessable, and such shares owned by the Company or another
subsidiary of the Company are owned free and clear of all liens, claims,
encumbrances, security interests or other charges ("Encumbrances"). None of the
shares of Common Stock are subject to any rights to dissent or rights of
appraisal.
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(b) Except (i) as set forth above in the second sentence of Section 3.03(a)
or (ii) as a result of the exercise of Options outstanding as of the date of
this Agreement, there are outstanding (a) no shares of capital stock or voting
securities of the Company, (b) no securities of the Company or any of its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company or any of its subsidiaries, and (c) except as
set forth in Section 3.03 of the Company Disclosure Schedule, no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any of its
subsidiaries is a party relating to the issued or unissued capital stock or
voting securities of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, issue or sell any shares of the
capital stock or voting securities of the Company or any of its subsidiaries, by
sale or otherwise. There are no obligations, contingent or otherwise, of the
Company or any of its subsidiaries to (i) repurchase, redeem or otherwise
reacquire any shares of Common Stock or the capital stock of any subsidiary of
the Company; or (ii) (other than advances to subsidiaries in the ordinary course
of business or in accordance with the 1996 Capital Plan) provide material funds
to, or make any material investment in (in the form of a loan, capital
contribution or otherwise), or (except as set forth in Section 3.03 of the
Company Disclosure Schedule) provide any guarantee with respect to the
obligations of, any subsidiary of the Company or any other person. None of the
Company or any of its subsidiaries directly or indirectly owns, or has agreed to
purchase or otherwise acquire, the capital stock of, or any interest convertible
into or exchangeable or exercisable for, the capital stock of any corporation,
partnership, joint venture or other business association or entity. Except for
any agreements, arrangements or commitments between the Company and any of its
subsidiaries or between such subsidiaries and bonus plans set forth on the
Company Disclosure Schedule, there are no material agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled to receive any payment based on the revenues or
earnings, or calculated in accordance therewith, of the Company or any of its
subsidiaries. There are no voting trusts, proxies or other material agreements
or understandings to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound with respect to the
voting of any shares of capital stock of the Company or any of its subsidiaries.
As of the date hereof, the only arrangement providing for indebtedness of the
Company or any of its subsidiaries for borrowed money is the Amended and
Restated Loan Agreement, dated as of March 26, 1996, between Fleet National Bank
and the Company. As of the date hereof, the Company and its subsidiaries have no
outstanding indebtedness, and, at the Effective Time, the Company and its
subsidiaries will have no outstanding indebtedness and will have terminated such
loan agreement. Section 3.03(b) of the Company Disclosure Schedule sets forth
the record and, to the best knowledge of the Company, beneficial ownership of
Common Stock with respect to the signatories to the Voting Agreement.
(c) The Company has made available to Parent complete and accurate copies
of the 1992 Stock Plan and the Director Plan and the forms of agreements related
to Options awarded pursuant to the 1992 Stock Plan and the Director Plan,
including all amendments thereto.
SECTION 3.04. Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by the Company. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly 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 contemplated hereby. This Agreement
has been validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Parent Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by the availability of equitable
remedies.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) 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 Articles of Incorporation or By-Laws of the Company or any of its
subsidiaries, (ii) conflict with or violate any Federal, state, local or foreign
law, statute, ordinance, rule, regulation, permit,
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order, judgment or decree (collectively, "Laws") applicable to the Company or
any of its subsidiaries or by which any of their respective properties is bound,
or (iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration (other than option agreements
and borrowings disclosed in Section 3.8(h) of the Company Disclosure Schedule)
or cancellation of, or require payment under, or result in the creation of any
Encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, or trigger any right of first refusal under, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
any of their respective properties is bound, except, in the case of clauses (ii)
and (iii), for any thereof that would not have a Company Material Adverse
Effect. The Board of Directors of the Company has taken all actions necessary
under Rhode Island Law, including approving the transactions contemplated by
this Agreement, to ensure that Section 7-5.2-4 of the Rhode Island Business
Combination Act does not, or will not, apply to the transactions contemplated by
this Agreement. To the best of the Company's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Voting Agreement or any of the transactions
contemplated by this Agreement or the Voting Agreement.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require the Company
to obtain any consent, approval, authorization or permit of, or to make any
filing with or notification to, any governmental or regulatory authority,
domestic or foreign ("Governmental Entity"), except (i) the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (ii) the filing
and recordation of the Articles of Merger as required by Rhode Island Law; and
(iii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent the Company
from performing its obligations under this Agreement and would not have a
Company Material Adverse Effect.
SECTION 3.06. Reports; Financial Statements. (a) Since December 31, 1995,
(i) the Company has filed all forms, reports, statements, schedules and other
documents required to be filed with (A) the Securities and Exchange Commission
(the "SEC"), including, without limitation, (I) all Annual Reports on Form 10-K,
(II) all Quarterly Reports on Form 10-Q, (III) all Current Reports on Form 8-K,
(IV) all other forms, reports, statements, schedules and other documents
required to be filed, and (V) all amendments and supplements to all such forms,
reports, statements, schedules and other documents (collectively, the "Company
SEC Reports"); and (B) any other applicable state securities authorities, and
(ii) the Company and its respective subsidiaries have filed all forms, reports,
statements, schedules and other documents required to be filed with any other
applicable Federal or state regulatory authorities, except where the failure to
file any such forms, reports, statements, schedules or other documents would not
have a Company Material Adverse Effect (all such forms, reports, statements,
schedules and other documents in clauses (i) and (ii) of this Section 3.06(a)
being referred to herein, collectively, as the "Company Reports"). The Company
Reports, including all Company Reports filed after the date hereof and prior to
the Effective Time, (i) were or will be prepared in all material respects in
accordance with the requirements of applicable Law (including, with respect to
the Company SEC Reports, the Securities Act of 1933, as amended (the "Securities
Act"), the Exchange Act, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports), and (ii) did not at the time they were
filed, or will not at the time they are filed, 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 therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that, to the extent that the foregoing relates to facts or omissions regarding
persons other than the Company and its affiliates, such representation and
warranty is being made to the Company's knowledge.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports filed prior to
the Effective Time (i) have been or will be prepared in accordance with the
published rules and regulations of the SEC and generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
(A) to the extent required by changes in
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generally accepted accounting principles and (B) with respect to Company SEC
Reports filed prior to the date hereof, as may be indicated in the notes
thereto) and (ii) fairly present or will fairly present the consolidated
financial position of the Company and its subsidiaries, as the case may be, as
of the respective dates thereof and the consolidated results of operations and
cash flows for the periods indicated, except that (x) any unaudited interim
financial statements were or will be subject to normal and recurring year-end
adjustments and (y) any pro forma financial information contained in such
consolidated financial statements is not necessarily indicative of the
consolidated financial position of the Company and its subsidiaries, as the case
may be, as of the respective dates thereof and the consolidated results of
operations and cash flows for the periods indicated.
SECTION 3.07. Undisclosed Liabilities. None of the Company or any of its
subsidiaries has any liability or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that is required to be reflected on the
financial statements (or the notes thereto) of the Company in accordance with
generally accepted accounting principles, other than liabilities which would not
have a Company Material Adverse Effect or liabilities (a) reflected or reserved
against in the consolidated balance sheets included in the Company's Form 10-Q
for the quarter ended March 31, 1996, and Form 10-K for the year ended December
31, 1995 (the "Balance Sheets") (or in the notes thereto), (b) with respect to
matters disclosed in the Company Disclosure Schedule (consistent with the
qualifications set forth in the introduction thereto), (c) under this Agreement
or any agreement entered into in connection herewith, or in accordance with
Section 5.02 hereof, (d) with respect to matters addressed in Sections 3.12,
3.16 and 3.18 (which shall be governed solely by the terms of such Sections),
and (e) incurred or arising in the ordinary course of business of the Company or
such subsidiary since March 31, 1996, which would not have a Company Material
Adverse Effect.
SECTION 3.08. Material Contracts. Section 3.08 of the Company Disclosure
Schedule sets forth a complete and accurate list, as of the date of this
Agreement, of all (a) written employment, severance, termination, consulting (to
the extent any thereof involve annual payments of at least $25,000 or are not
terminable on less than 366 days' notice without material penalty) and
retirement agreements to which the Company or any of its subsidiaries is a
party, (b) written collective bargaining agreements to which the Company or any
of its subsidiaries is a party, (c) written agreements that require aggregate
future payments by or to the Company or any of its subsidiaries of more than
$100,000 that are not terminable by the Company or any of its subsidiaries on
less than 90 days' notice without material penalty (other than purchase orders
entered into in the ordinary course of business), (d) written agreements
containing covenants limiting the freedom of the Company or any of its
subsidiaries to compete with any person or the freedom of any other person to
compete with the Company or any of its subsidiaries in any line of business or
in any area or territory, (e) license agreements involving annual payments or
receipts in excess of $250,000, (f) indentures, mortgages and notes or other
debt instruments evidencing indebtedness (other than purchase money
indebtedness), (g) material agreements of the Company or any of its subsidiaries
with any shareholder, officer or director of the Company, (h) agreements of the
Company involving payments in excess of $100,000 containing any provisions with
respect to a "change in control" of the Company, (i) agreements under which the
Company or any of its subsidiaries has advanced or loaned any amount in excess
of $25,000 to any of its directors, officers or employees (all of which amounts
the Company will have caused to be repaid prior to the Effective Time) and (j)
leases involving annual payments in excess of $50,000 (collectively, the
"Material Contracts"). Except as would not have a Company Material Adverse
Effect, (a) the Company and its subsidiaries are not in default under any of the
Material Contracts, and (b) to the Company's knowledge, the other parties
thereto are not in default and the Material Contracts are valid and binding
obligations of the other parties thereto, in accordance with their terms.
SECTION 3.09. Permits. Each of the Company and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
(collectively, the "Company Permits"), that are necessary to own, lease and
operate the properties of the Company and its subsidiaries and to carry on their
business as they or it are or is owned, leased, operated or carried on as of the
date of this Agreement, except, in each case, where the failure to possess such
Company Permits would not have a Company Material Adverse Effect. The Company
Permits are in full
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force and effect and there is no action, proceeding or investigation pending or,
to the knowledge of the Company, threatened regarding suspension or cancellation
of any of the Company Permits, except, in each case, where the failure to
possess, or the suspension or cancellation of, such Company Permits would not
have a Company Material Adverse Effect.
SECTION 3.10. Properties. Except as set forth in Section 3.10 of the
Company Disclosure Schedule, each of the Company and its subsidiaries has good,
valid and, in the case of real property, marketable fee simple, title to, or a
valid leasehold interest in, all the material assets and properties that are
reflected on the Balance Sheets (except for assets and properties sold, consumed
or otherwise disposed of by them in the ordinary course of business consistent
with past practice since the dates thereof), and such assets and properties are
free and clear of all Encumbrances, except for (a) liens for taxes and
assessments not yet due and payable or for taxes the validity of which is being
contested in good faith, (b) Encumbrances to secure indebtedness reflected on
the Balance Sheets or indebtedness (including purchase money indebtedness)
incurred in the ordinary course of business and consistent with past practice
after the date thereof, (c) mechanic's, materialmen's and similar Encumbrances
that have arisen in the ordinary course of business and (d) minor imperfections
of title and Encumbrances the existence of which would not have a Company
Material Adverse Effect. All the material buildings, structures, equipment and
other tangible assets of the Company and its subsidiaries (whether owned or
leased) are in normal operating condition (normal wear and tear excepted) and
are fit for use in the ordinary course of business as such business of the
Company is being conducted as of the date of this Agreement.
SECTION 3.11. Intellectual Property. Section 3.11 of the Company
Disclosure Schedule sets forth a complete and accurate list and a brief
description of all patents, patent applications, trademarks, trade names,
service marks and other intellectual property (the "Intellectual Property")
owned, used or licensed by or to the Company and pertaining to the business of
the Company as it is being conducted as of the date of this Agreement, which is
all the Intellectual Property necessary to conduct the business of the Company
as it is being conducted as of the date of this Agreement, except for
Intellectual Property, the lack of which would not have a Company Material
Adverse Effect. Except as would not have a Company Material Adverse Effect, to
the Company's knowledge, (i) there are no infringements on any such Intellectual
Property and (ii) the rights of the Company in or to such Intellectual Property
do not conflict with or infringe on the rights of any other person, and the
Company has not received any claim or notice from any person to such effect.
SECTION 3.12. Taxes. (a) Except for such matters as would not have a
Company Material Adverse Effect, (i) the Company and its subsidiaries have
timely filed or will timely file all returns and reports required to be filed
prior to the Effective Time by them with any taxing authority with respect to
Taxes (as hereinafter defined) for any period ending on or before the Effective
Time, (ii) all Taxes that are due prior to the Effective Time have been paid or
will be paid, and adequate reserves have been established in accordance with
GAAP and consistent with past practice for Taxes that are not due prior to the
Effective Time, (iii) as of the date of this Agreement, no deficiency for any
material amount of Tax has been asserted or assessed by a taxing authority
against the Company or its subsidiaries, (iv) there are no liens with respect to
Taxes on or pending against the Company, its subsidiaries or any of their
properties other than liens for Taxes not yet due, (v) no issue has been raised
in any examination, investigation, audit, suit, action claim or proceeding
relating to Taxes which, by application of similar principles to any past or
present period, would result in a material deficiency for Taxes, (vi) no taxing
authority has proposed any adjustment pursuant to Section 481 of the Code, (vii)
no consent under Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), has been filed with respect to the Company or any of its
subsidiaries, (viii) neither the Company nor any of its subsidiaries is a party
to any arrangement to which section 280G of the Code applies, (ix) neither the
Company nor any of its subsidiaries was a member of a group which joined in the
filing of a consolidated, combined or unitary Tax Return, other than a group
consisting only of the Company and its subsidiaries, (x) neither the Company nor
any of its subsidiaries is a party to an agreement that obligates it to make any
payment computed by reference to the Taxes, taxable income or taxable loss of
any other person, and (xi) Amtrol Export Sales, Inc. has met all the
requirements for eligibility and made a valid election to be treated as a
foreign sales corporation within the meaning of Section 992 of the Code. As of
the date of this Agreement, there are no pending or, to the best
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of the Company's knowledge, threatened tax audits, investigations or claims for
or relating to any liability in respect to Taxes, except as would not have a
Company Material Adverse Effect.
(b) Parent acknowledges that the representations and warranties contained
in this Section 3.12 are the only representations and warranties being made by
the Company with respect to the subject matter of this Section 3.12, no other
representation or warranty by the Company contained in this Agreement shall
apply to any such matters and no other representation or warranty, express or
implied, is being made with respect thereto by the Company.
SECTION 3.13. Compliance. None of the Company or any of its subsidiaries
is in default or violation of (a) any Law applicable to the Company or any of
its subsidiaries or by which any of their respective properties is bound, (b)
any of the Company Permits, or (c) any note, bond, mortgage, indenture,
contract, agreement, lease, license, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties are bound or affected, except for any
such defaults or violations that would not have a Company Material Adverse
Effect. None of the Company or any of its subsidiaries has received from any
Governmental Entity any written notification with respect to possible defaults
or violations of Laws by the Company or any of its subsidiaries or revocation or
modification of any Company Permit, except, in each case, for written notices
relating to possible defaults or violations or revocation or modification that
would not have a Company Material Adverse Effect or have been resolved.
SECTION 3.14. Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, or as
specifically contemplated by this Agreement or as set forth on the Company
Disclosure Schedule (consistent with the qualifications set forth in the
introduction thereto), or as would not have a Company Material Adverse Effect,
since December 31, 1995, the Company and its subsidiaries have conducted their
respective businesses only in the ordinary course and in a manner consistent
with past practice and there has not been: (a) any damage, destruction or loss
(not covered by insurance) with respect to any assets of the Company or any of
its subsidiaries or any other change, event or occurrence; (b) any change by the
Company or its subsidiaries in their accounting methods, principles or
practices; (c) except for dividends by a subsidiary of the Company to the
Company or another subsidiary of the Company or repurchases of shares of Common
Stock from terminated employees pursuant to the 1992 Stock Plan, any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of Common Stock or the shares of stock of any subsidiary of
the Company or any redemption, repurchase or other reacquisition of any of the
Company's equity securities or any of the equity securities of any subsidiary of
the Company; (d) any increase in the benefits under, or the establishment or
amendment 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
increase in the compensation payable or to become payable to directors, officers
or employees of the Company or its subsidiaries, except for (i) increases in
base salaries or wages payable or to become payable in the ordinary course of
business and consistent with past practice, or (ii) the automatic grant of
Options to directors under the Director Plan; (e) a Company Material Adverse
Effect; or (f) any revaluation by the Company or any of its subsidiaries of any
material assets, including but not limited to, writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business.
SECTION 3.15. Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company, investigation of
any kind, at law or in equity (including actions or proceedings seeking
injunctive relief), pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries or any properties or rights of
the Company or any of its subsidiaries (except for claims, actions, suits,
litigations, proceedings, arbitrations or investigations that would not have a
Company Material Adverse Effect). Neither the Company nor any of its
subsidiaries is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other
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orders, except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement and except for matters that would not have a Company Material
Adverse Effect.
SECTION 3.16. Employee Benefit Plans; Labor Matters. (a) Section 3.16(a)
of the Company Disclosure Schedule sets forth a complete and accurate list of
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
employment agreements, personnel policies or fringe benefit plans, policies,
programs and arrangements, stock bonus, deferred compensation, pension,
severance, bonus, vacation, travel, incentive, and health, disability and other
welfare plans), maintained or contributed to by the Company or any of its
subsidiaries, or with respect to which the Company or any of its subsidiaries
could incur liability under Section 4069, 4212(c) or 4204 of ERISA, whether oral
or written, under which any employee or former employee of, or consultant to,
the Company has any present or future right to benefits or under which the
Company has any present or future liability (the "Company Benefit Plans").
(b) None of the Company or any of its subsidiaries contributes to, has any
material obligation to contribute to or otherwise has any material liability or
potential material liability with respect to (i) any "multiemployer plan" (as
such term is defined in Section 3(37) of ERISA), (ii) any plan of the type
described in Section 4063 and 4064 of ERISA or (iii) any plan that provides
health, life insurance, accident or other "welfare-type" benefits to current or
future retirees or current or future former employees, their spouses or
dependents, other than in accordance with Section 4980B of the Code, or
applicable state benefit continuation law. None of the Company or any of its
subsidiaries has any liability or, to the knowledge of the Company, potential
liability with respect to any employee benefit plan subject to Title IV of ERISA
or Section 412 of the Code that is currently or was formerly maintained by any
other current or former member of the controlled group of corporations, trades
or businesses (within the meaning of Sections 414(b), (c), (m) and (o) of the
Code) of which the Company or any of its subsidiaries is or was a member that
would have a Company Material Adverse Effect.
(c) Each Company Benefit Plan has been maintained, funded and administered
in compliance in all material respects with its terms and applicable Law,
including, without limitation, ERISA and the Code. For each Company Benefit Plan
with respect to which a Form 5500 has been filed, no material change has
occurred with respect to matters covered by the most recent Form 5500 since the
date thereof. No Company Benefit Plan provides for an increase in benefits on or
after the Effective Time and each Company Benefit Plan may be amended or
terminated without obligation or liability (other than those obligation and
liabilities for which specific assets have been set aside in a trust or other
funding vehicle or reserved for on the Balance Sheets). None of the Company or
any of its subsidiaries has engaged in any prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Company Benefit Plan that has resulted or could reasonably be expected to result
in any material liability to the Company or any of its subsidiaries. No Company
Benefit Plan that is subject to the funding requirements of Section 412 of the
Code or Section 302 of ERISA has incurred any "accumulated funding deficiency"
as such term is defined in such sections of ERISA and the Code, whether or not
waived. No material liability to the Pension Benefit Guaranty Corporation
("PBGC") (except for payment of premiums in the ordinary course) has been or is
reasonably expected to be incurred with respect to any Company Benefit Plan that
is subject to Title IV of ERISA; no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such Company Benefit
Plan; and the PBGC has not commenced or threatened the termination of any such
Company Benefit Plan. None of the assets of the Company or any of its
subsidiaries is the subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code; and none of the Company or any of its subsidiaries
has been required to post any security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Code.
(d) Each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code, and each trust (if any) forming a part thereof, has
received a favorable determination letter from the Internal Revenue Service as
to the qualification under the Code of such Company Benefit Plan and the
tax-exempt status of such related trust, and, to the knowledge of the Company,
nothing has occurred, whether by action or failure to act, which would cause the
loss of such qualification.
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(e) With respect to each Company Benefit Plan that is subject to the
funding requirements of Section 412 of the Code and Section 302 of ERISA, all
material required contributions for all periods ending prior to or as of the
Effective Time (including periods from the first day of the then-current plan
year to the Effective Time) have been or will be made or properly accrued.
(f) With respect to each Company Benefit Plan, the Company has made
available to Parent, complete and accurate copies, to the extent applicable, of
(i) all documents embodying or governing such Company Benefit Plan and any
funding medium for the Company Benefit Plan, (ii) the two most recent annual
reports (Form 5500 series) filed with the Internal Revenue Service (with
attachments), (iii) the two most recent actuarial reports, (iv) the two most
recent financial statements, (v) the most recent IRS determination or approval
letter with respect to such Company Benefit Plan under Section 401(a) or
501(c)(9) of the Code (and pending requests or applications for determinations
or approvals) and (vi) any summary plan description for any Company Benefit
Plans.
(g) The Company and each of its subsidiaries are in compliance with all
applicable Laws relating to the employment of personnel and labor, except where
a failure to be in compliance would not have a Company Material Adverse Effect.
(h) Except for such exceptions as do not have a Material Adverse Effect, or
as disclosed in Section 3.16(h) of the Company Disclosure Schedule, (i) there
are no controversies pending or, to the knowledge of the Company, threatened
between the Company or any of its subsidiaries and any of their respective
employees and the Company will promptly notify Parent in writing of any pending
or threatened material claims arising between the date hereof and the Effective
Time; (ii) none of the Company or any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any of its subsidiaries, nor, to the
knowledge of the Company, are there any activities or proceedings of any labor
union to organize any such employees; (iii) there are no grievances outstanding
against the Company or any of its subsidiaries under any such agreement or
contract nor, to the Company's knowledge, is there any reasonable basis for such
grievance; (iv) there are no unfair labor practice complaints pending against
the Company or any of its subsidiaries before the National Labor Relations Board
or any current union representation questions involving employees of the Company
or any of its subsidiaries; (v) neither the Company nor any of its subsidiaries
is a party to, or otherwise bound by, any consent decree with, or citation by,
any Governmental Entity relating to employees or employment practices; (vi) the
Company has paid in full to all employees of the Company and its subsidiaries
all wages, salaries, commissions, bonuses, benefits and other compensation due
to such employees or otherwise arising under any policy, practice, agreement,
plan, program, statute or other law; (vii) the Company and its subsidiaries have
not received any request for certification of bargaining units or any other
request for collective bargaining units or any other request for collective
bargaining and is not subject to any other union organizing activities; and
(viii) since December 31, 1993, there has not been any "plant closing" or "mass
layoff" (in each case, as defined in WARN), 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 of its subsidiaries.
(i) Parent acknowledges that the representations and warranties contained
in this Section 3.16 are the only representations and warranties being made by
the Company with respect to the subject matter of this Section 3.16, no other
representation or warranty by the Company contained in this Agreement shall
apply to any such matters and no other representation or warranty, express or
implied, is being made with respect thereto by the Company.
SECTION 3.17. Insurance. All material insurance policies (the "Insurance
Policies") with respect to the property, assets, operations and business of the
Company and its subsidiaries are in full force and effect. There are no pending
material claims against the Insurance Policies by the Company or any of its
subsidiaries as to which the insurers have denied material liability.
SECTION 3.18. Environmental Matters. (a) Except as would not have a
Company Material Adverse Effect or as disclosed in Section 3.18 of the Company
Disclosure Schedule, (i) the Company is in compliance with all applicable
Federal, state, local and foreign laws and regulations relating to pollution and
the discharge of materials into the environment ("Environmental Laws"), (ii) the
Company holds all the
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permits, licenses and approvals of governmental authorities and agencies
necessary for the current use, occupancy or operation of its assets and business
under Environmental Laws ("Environmental Permits"), and (iii) the Company is in
compliance with all its Environmental Permits, and (iv) to the knowledge of the
Company, there are no conditions that are reasonably expected to give rise to
liability of the Company under any Environmental Law.
(b) Except as disclosed in Section 3.18 of the Company Disclosure Schedule,
the Company has not received any written request for information, or been
notified that it is a potentially responsible party, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any similar state, local or foreign law with respect to any real
property owned or leased by it.
(c) Except as disclosed in Section 3.18 of the Company Disclosure Schedule,
the Company has not entered into or agreed to any consent decree or order and is
not subject to any judgment, decree or judicial order relating to compliance
with or the cleanup of regulated substances under any applicable Environmental
Law.
(d) Except as disclosed in Section 3.18 of the Company Disclosure Schedule,
none of the real property owned or leased by the Company is listed or, to the
knowledge of the Company, proposed for listing on the "National Priorities List"
under CERCLA, or on the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the United States Environmental
Protection Agency, as updated through the date of this Agreement, or any similar
state list of sites requiring investigation or cleanup.
(e) Parent acknowledges that the representations and warranties contained
in this Section 3.18 are the only representations and warranties being made by
the Company with respect to the subject matter of this Section 3.18, no other
representation or warranty by the Company contained in this Agreement shall
apply to any such matters and no other representation or warranty, express or
implied, is being made with respect thereto by the Company.
SECTION 3.19. Brokers and Fees. Other than Smith Barney Inc. and HSBC
Securities, Inc., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has previously delivered to Parent true
and complete copies of the engagement letters, and any other written or oral
agreements with Smith Barney Inc. and HSBC Securities, Inc. The aggregate amount
of fees (exclusive of any fees or expenses incurred by the Company in connection
with the Financing as defined in Section 4.07 hereof) payable by the Company
with respect to the transactions contemplated hereby does not exceed $4.5
million.
SECTION 3.20. Required Company Vote. The affirmative vote of the holders
of 75% of the outstanding shares of Common Stock entitled to vote thereon (not
including shares deemed beneficially owned by a Related Person (as such term is
defined in Section D of Article Sixth of the Company's Articles of
Incorporation)) is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement and the Merger. The
Board of Directors of the Company (at a meeting duly called and held) has
unanimously (i) approved this Agreement and the Voting Agreement, (ii)
determined that the transactions contemplated hereby and thereby are fair to and
in the best interests of the Company's stockholders, (iii) resolved to recommend
this Agreement, the Merger and the other transactions contemplated hereby to
such stockholders for approval and (iv) directed that this Agreement be
submitted to the Company's stockholders. The Company hereby agrees to the
inclusion in the Proxy Statement of the recommendations of the Company's Board
of Directors described in this Section 3.20.
SECTION 3.21. Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion of Smith Barney Inc., dated the date of this
Agreement, to the effect that, as of such date, the Per Share Amount to be
received in the Merger by the holders of the Common Stock is fair, from a
financial point of view, to such holders.
SECTION 3.22. Affiliate Transactions. Except as disclosed in the Company
Disclosure Schedule (consistent with the qualifications set forth in the
introduction thereto), there are no contracts, agreements or
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arrangements between the Company or any of its subsidiaries, on the one hand,
and any affiliate of the Company, on the other hand.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Except as set forth in the disclosure schedule (as qualified by the
introduction thereto) delivered by Parent and Parent Sub to the Company
concurrent with the execution of this Agreement (the "Parent Disclosure
Schedule"), Parent and Parent Sub hereby jointly and severally represent and
warrant to the Company that:
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of
Parent and Parent Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. The term
"Parent Material Adverse Effect" as used in this Agreement means any change or
effect that, individually or when taken together with all such other changes or
effects, would be materially adverse to the financial condition, business,
operations, earnings or prospects of Parent and its subsidiaries, taken as a
whole.
SECTION 4.02. Certificate of Incorporation and By-Laws. Parent has
heretofore furnished to the Company a complete and accurate copy of the
Certificate or Articles of Incorporation and the By-Laws, as amended or restated
to the date of this Agreement, of each of Parent and Parent Sub.
SECTION 4.03. Authority. (a) Parent has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by Parent. The execution and delivery of this Agreement and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been validly executed
and delivered by Parent and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and by
the availability of equitable remedies.
(b) Parent Sub has all requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby to be consummated by Parent Sub.
The execution and delivery of this Agreement by Parent Sub and the consummation
by Parent Sub of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceedings on the part
of Parent Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been validly executed and
delivered by Parent Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
Parent Sub, enforceable against Parent Sub in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and by
the availability of equitable remedies. Parent, as the sole stockholder of
Parent Sub, has duly approved and adopted this Agreement in accordance with
applicable Law.
SECTION 4.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Parent Sub do not, and
the performance of this Agreement by Parent and Parent Sub will not, (i)
conflict with or violate the Certificate or Articles of Incorporation or By-Laws
of Parent, Parent Sub or any of Parent's subsidiaries, (ii) conflict with or
violate any Laws applicable to Parent, Parent Sub or any of Parent's
subsidiaries or by which any of their respective properties is bound, or (iii)
result in any breach of or constitute a default (or an event that 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 require
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payment under, or result in the creation of any Encumbrance on any of the
properties or assets of Parent, Parent Sub or any of Parent's subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent,
Parent Sub or any of Parent's subsidiaries is a party or by which Parent, Parent
Sub or any of Parent's subsidiaries or any of their respective properties is
bound, except, in the cases of clauses (i) and (ii), for any thereof that would
not have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Parent Sub
do not, and the performance of this Agreement by Parent and Parent Sub will not,
require Parent or Parent Sub to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any Governmental
Entity, except (i) for applicable requirements, if any, of state blue sky or
takeover laws, the Exchange Act and the HSR Act and the filing and recordation
of the Articles of Merger as required by Rhode Island Law and filings in
connection with the financing of the Merger and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent Parent or Parent Sub from performing its
obligations under this Agreement and would not have a Parent Material Adverse
Effect.
SECTION 4.05. Ownership of Parent Sub; No Prior Activities. Parent Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement. As of the date of this Agreement and the Effective Time,
except for obligations or liabilities incurred in connection with its
incorporation or organization or the transactions contemplated by this Agreement
or the financing thereof and except for this Agreement and any other agreements
or arrangements contemplated by this Agreement or related to the financing of
the transactions contemplated hereby, Parent Sub has not and will not have
incurred, directly or indirectly, through any subsidiary, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
SECTION 4.06. Vote Required. No vote of the holders of any class or
series of capital stock of Parent is necessary to approve any of the
transactions contemplated hereby. The affirmative vote of the holders of a
majority of the outstanding shares of common stock of Parent Sub is the only
vote of the holders of any class or series of Parent Sub capital stock necessary
to approve any of the transactions contemplated hereby.
SECTION 4.07. Financing. (a) Parent or Parent Sub has received and
furnished copies to the Company of commitment letters (the "Commitment Letter"),
copies of which are included in Section 4.07 of the Parent Disclosure Schedule,
to provide to Parent (or to Parent Sub or another subsidiary of Parent), subject
to the terms and conditions thereof, the amount of the financing set forth in
the Commitment Letter. The commitments are referred to herein as the "Financing
Commitment", and the financing to be provided thereunder is referred to herein
as the "Financing". The aggregate proceeds of the Financing (along with cash
held by Parent and its subsidiaries and cash held by or available to the Company
and its subsidiaries) will be in an amount sufficient to (i) consummate the
Merger (and make all the payments contemplated by Article II, (ii) pay all
related fees and expenses, and (iii) provide adequate working capital for the
operation of the Company as of the Effective Time.
(b) Parent acknowledges that the financing structure to be employed by
Parent and Parent Sub in connection with the Financing for the transactions
contemplated hereby has been and will continue to be devised by Parent and that
the Company makes no representation or warranty with respect to such financing
structure. As of the date of this Agreement, Parent knows of no facts or
circumstance that are reasonably likely to result in any of the conditions set
forth in the Financing Commitment (or reasonably likely to be set forth in the
definitive documentation therefor) not being satisfied.
SECTION 4.8. Brokers. No unaffiliated broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Parent Sub.
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ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
the Company will and will cause its subsidiaries to (a) operate its business in
the usual and ordinary course consistent with past practices; (b) use its
reasonable efforts to preserve substantially intact its business organization,
maintain its rights and franchises, retain the services of its respective
officers and key employees and maintain its relationships with its respective
significant customers and suppliers; (c) use its reasonable efforts to maintain
and keep its properties and assets in as good repair and condition as at
present, ordinary wear and tear excepted; and (d) use its reasonable efforts to
keep in full force and effect insurance comparable in amount and scope of
coverage to that currently maintained; provided, however, that in the event the
Company deems it necessary to take certain actions that would otherwise be
proscribed by clauses (a)-(d) of this Section 5.01, the Company shall consult
with Parent and Parent shall consider in good faith the Company's request to
take such action and not unreasonably withhold, condition or delay its consent
for such action.
SECTION 5.02. Negative Covenants of the Company. Except as expressly
contemplated by this Agreement and except as set forth in Section 5.02 of the
Company Disclosure Schedule, or otherwise consented to in writing by Parent,
from the date hereof until the Effective Time, the Company will not do, and will
not permit any of its subsidiaries to do, any of the following:
(a) (i) increase the periodic compensation or fringe benefit of any
director or officer or employee of the Company or any of its subsidiaries,
except for increases in salary, wages or bonuses payable or to become
payable non-officer employees in the ordinary course of business and
consistent with past practice; (ii) grant any severance or termination pay
(other than pursuant to existing severance arrangements or policies as in
effect on the date of this Agreement and disclosed in Section 5.02(a) of
the Company Disclosure Schedule and "stay" bonuses, to be coordinated with
Parent, which do not exceed $200,000 in the aggregate) to, or enter into or
amend any employment, consulting or severance agreement or arrangement
with, any director, officer or employee of the Company or any of its
subsidiaries involving an annual payment of more than $60,000 and not
terminable on less than 90 days' notice without penalty (other than
employment, severance or similar agreements entered into with the consent
of Parent, which consent shall not be unreasonably withheld, conditioned or
delayed); or (iii) adopt or amend any employee benefit plan or arrangement,
except as may be required by applicable Law or pursuant to any collective
bargaining agreement between the Company or any of its subsidiaries and
their respective employees;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock of the Company (other than
regular quarterly dividends not to exceed $.05 per share consistent with
past practice);
(c) (i) redeem, repurchase or otherwise reacquire any shares of its or
any of its subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its subsidiaries'
capital stock (other than any such acquisition directly from any wholly
owned subsidiary of the Company in exchange for capital contributions or
loans to such subsidiary, (except in connection with the exercise of
outstanding Options referred to in Section 3.03 in accordance with their
terms); (ii) effect any liquidation, dissolution, merger, consolidation,
restructuring, reorganization or recapitalization of the Company; or (iii)
split, combine or reclassify any of the Company's capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of, or in substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
Encumbrances) of, any shares of any class of its or its subsidiaries'
capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire, any such
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shares (except for the issuance of up to 679,223 shares of Common Stock
upon the exercise of Options outstanding as of the date hereof) or (ii)
amend or otherwise modify the terms of any such rights, warrants or options
the effect of which shall be to make such terms more favorable to the
holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person (other than the purchase of
assets in the ordinary course of business and consistent with past
practice) in the case of asset purchases which are material, individually
or in the aggregate, to the Company and its subsidiaries, taken as a whole,
or make or commit to make any capital expenditures other than capital
expenditures in the ordinary course of business consistent with past
practice and with the Company's 1996 Capital Plan;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its assets or any assets of any of its
subsidiaries except for the grant of purchase money security interests and
sales in the ordinary course of business and consistent with past practice
or required by binding agreements set forth in the Company Disclosure
Schedule;
(g) propose or adopt any amendments to its Articles of Incorporation
or its By-Laws (other than an amendment to the Company's Articles of
Incorporation to delete Section D of Article Sixth thereof or to amend such
Section D so as to be inapplicable to the approval of this Agreement or the
Merger by the Company's stockholders);
(h) (A) change any of its methods of accounting in effect at March 31,
1996, or (B) make or rescind any express or deemed election relating to
Taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes (except where the amount of such settlements or controversies,
individually or in the aggregate, does not exceed $500,000), or change any
of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ending December 31, 1994, except, in the case
of clause (A) or clause (B), as may be required by Law or generally
accepted accounting principles;
(i) incur any obligation for borrowed money other than purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business under
existing loan agreements or prepay, before the scheduled maturity thereof,
any of its long-term debt, or guarantee any obligation or indebtedness of
another person (other than a wholly-owned subsidiary of the Company), enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect on any of the foregoing;
(j) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or compromises
of litigation arising in the ordinary course of business where the amount
paid (after giving effect to insurance proceeds actually received) in
settlement or compromise does not exceed $50,000, provided that the
aggregate amount paid in connection with the settlement or compromise of
all such litigation matters shall not exceed $250,000;
(k) pay, discharge or satisfy any claims liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
except for the payment, discharge or satisfaction, (x) of liabilities or
obligations in the ordinary course of business consistent with past
practice or in accordance with their terms as in effect on the date hereof
or (y) claims settled or compromised to the extent permitted by Section
5.02(j), or waive, release, grant, or transfer any rights of material value
or modify or change in any material respect any Material Contract, other
than in the ordinary course of business consistent with past practice;
(l) effectuate a "plant closing" or "mass layoff", as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988
("WARN"), affecting in whole or in part any site of
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employment, facility, operating unit or employee of the Company or any
subsidiary, without notifying Parent in advance and without complying with
the notice requirements and other provisions of WARN;
(m) agree in writing or otherwise to do any of the foregoing; or
(n) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Competing Transaction (as hereinafter defined),
or negotiate with any person or entity in furtherance of such inquiries or
to obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any of its subsidiaries or any representative
retained by the Company or any of the Company's subsidiaries to take any
such action, and the Company shall promptly notify Parent of all relevant
terms of any such inquiries and proposals received by the Company or any of
its subsidiaries, or by any such officer, director or representative,
relating to any of such matters and if such inquiry or proposal is in
writing, the Company shall deliver or cause to be delivered to Parent a
copy of such inquiry or proposal (which need not disclose the identity of
the person making such inquiry or proposal); provided, however, nothing
contained in this subsection (n) shall prohibit the Board of Directors of
the Company from (i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited bona fide proposal to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of
the Company, after consultation with independent legal counsel, determines
in good faith that such action is required for the Board of Directors of
the Company to comply with its fiduciary duties to stockholders imposed by
Rhode Island Law, (B) prior to furnishing such information to, or entering
into discussions or negotiations with, such person or entity, the Company
provides prior written notice (including the terms and conditions of any
proposal) to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity, (C)
prior to furnishing such information to such person or entity, the Company
receives from such person or entity an executed confidentiality agreement
with terms no less favorable to the Company than those contained in the
Confidentiality Agreement (as hereinafter defined), and (D) the Company
keeps Parent informed, on a current basis, of the status of any such
discussions or negotiations; or (ii) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a Competing Transaction. For purposes
of this Agreement, "Competing Transaction" shall mean any of the following
involving the Company or any of its subsidiaries: (a) any merger,
consolidation, share exchange, business combination, recapitalization,
reorganization, liquidation, dissolution or other similar transaction
(other than the transactions contemplated by this Agreement); (b) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 25% or
more of the assets of the Company and its subsidiaries, taken as a whole,
in a single transaction or series of transactions; (c) any tender offer or
exchange offer for 25% or more of the outstanding shares of capital stock
of the Company; (d) any person shall have acquired, after the date hereof,
beneficial ownership or the right to acquire beneficial ownership of, or
any "group" (as such term is defined under Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder) shall have been
formed that beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of capital stock
of the Company; or (e) any public announcement of a proposal, plan or
intention to do any of the foregoing. The Company will immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing. Without limiting the generality of the foregoing, it is
understood that any violation of the restrictions set forth in the first
sentence of this paragraph (n) by any officer, director, employee, counsel,
representative, auditor, financial or other advisor or other agent of the
Company or any subsidiary acting on behalf of the Company shall be deemed
to be a breach of this paragraph (n) by the Company.
SECTION 5.03. Access and Information. Subject to confidentiality
agreements to which the Company or any of its subsidiaries is a party, the
Company shall, and shall cause its subsidiaries to (i) afford to Parent and its
officers, directors, employees, accountants, consultants, legal counsel, agents,
lenders (including representatives of any lenders) and other representatives
(collectively, the "Parent Representatives") full
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access at reasonable times upon reasonable prior notice to the officers,
employees, agents, advisors, properties, offices and other facilities of the
Company and its subsidiaries and to the books and records thereof and (ii)
furnish promptly to Parent and the Parent Representatives such information
concerning the business, properties, contracts, records and personnel of the
Company and its subsidiaries (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by Parent.
SECTION 5.04. Confidentiality. The parties hereto will comply or will
cause their respective affiliates to comply with all their respective
obligations under the Confidentiality Agreement between the Company and Parent
(the "Confidentiality Agreement"). The Company agrees to not use, and to keep
confidential, any information provided to it by Parent or its subsidiaries (and
cause its employees, lenders and advisors to do the same) to the same extent and
under the same covenants as provided in the Confidentiality Agreement with
respect to Parent's treatment of the Company's confidential information.
SECTION 5.05. Certain Obligations. Parent will cause the Surviving
Corporation and its subsidiaries to honor in accordance with their terms all
employment, severance, termination, consulting and retirement agreements and
other compensation arrangements disclosed in Section 5.05 of the Company
Disclosure Schedule between the Company and any current or former director,
officer or employee thereof, and to cause the Surviving Corporation to
discharge, at the Effective Time, any obligations arising thereunder by reason
of the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholder Approval. The Company shall, promptly after the
date of this Agreement and in consultation with Parent, take all action
necessary in accordance with Rhode Island Law and its Articles of Incorporation
and By-Laws to convene a meeting of the Company's stockholders (the "Company
Stockholders Meeting"), to approve this Agreement and the Merger. The Company
shall use its reasonable best efforts to solicit from stockholders of the
Company proxies in favor of the approval of this Agreement and the Merger
(including, without limitation, hiring a proxy solicitor).
SECTION 6.02. Proxy Statement. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the SEC a
proxy statement in connection with the matters to be considered at the Company
Stockholders Meeting (the "Company Proxy Statement"). The Company shall use its
reasonable best efforts to cause the Company Proxy Statement to be "cleared" by
the SEC for mailing to the stockholders of the Company as promptly as
practicable and shall mail the Company Proxy Statement to its stockholders as
promptly as practicable thereafter. Parent shall furnish all information
concerning it and the holders of its capital stock as the Company may reasonably
request in connection with such actions. The Company Proxy Statement shall
include the recommendation of the Company's Board of Directors in favor of
approval of this Agreement and the Merger and the opinion referred to in Section
3.21.
(b) The information supplied by Parent in writing specifically for
inclusion in the Company Proxy Statement shall not, at the date the Company
Proxy Statement (or any supplement thereto) is first mailed to stockholders, and
at the time of the Company Stockholders Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior to
the Company Stockholders Meeting any event or circumstance relating to Parent or
any of its affiliates, or its or their respective officers or directors, should
be discovered by Parent that should be set forth in a supplement to the Company
Proxy Statement, Parent shall promptly inform the Company.
(c) All information contained in the Company Proxy Statement (other than
information provided by Parent for inclusion therein) shall not, at the date the
Company Proxy Statement (or any supplement thereto) is first mailed to
stockholders, and at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not
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misleading. If at any time prior to the Company Stockholders Meeting any event
or circumstance relating to the Company or any of its affiliates, or to its or
their respective officers or directors, should be discovered by the Company that
should be set forth in a supplement to the Company Proxy Statement, the Company
shall promptly inform Parent. All documents that the Company is responsible for
filing with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder. All
filings with the SEC and any amendment thereto, and all mailings to the
Company's stockholders in connection with the Merger, including the Proxy
Statement, shall be subject to the prior review and comment of Parent and, in
the case of information regarding the Parent and the Financing, the prior
review, comment, and approval of Parent, which shall not be unreasonably
withheld or delayed. Parent agrees to review and comment on all such materials
promptly.
SECTION 6.03. Other Appropriate Action; Consents; Filings. (a) The
Company and Parent shall each use their reasonable efforts to (i) take, or cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement, (ii) obtain
any consents or approvals with respect to the Merger the absence of which would
result in a Company Material Adverse Effect (it being understood that obtaining
any thereof that are referred to in Section 7.01(a) shall be a condition to
Parent's obligation to consummate the Merger), make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
and the Merger required under (A) the Exchange Act and the rules and regulations
thereunder, and any other applicable federal or state securities laws, (B) the
HSR Act, and (C) any other applicable Law; provided that Parent and the Company
shall cooperate with each other in connection with the foregoing, including
providing copies of all such documents filed in connection with such filings to
the nonfiling party and its advisors prior to filing and, if requested, to
accept all reasonable additions, deletions or changes suggested in connection
therewith. The Company and Parent shall furnish all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable Law (including all information required to be included in the
Company Proxy Statement) in connection with the transactions contemplated by
this Agreement.
(b) Each of the Company and Parent agree to cooperate and use their
reasonable best efforts to contest and resist any action, including legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "Order") that is in effect and that restricts,
prevents or prohibits the consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limitation, by pursuing any
necessary administrative or judicial appeal or legislative action.
(c) The Company agrees to provide, and will cause its subsidiaries and its
and their respective officers and employees to provide, upon reasonable advance
notice, all reasonable cooperation in connection with the arrangement of any
financing to be consummated contemporaneous with or at or after the Effective
Time in respect of the transactions contemplated by this Agreement, including
without limitation, the preparation of offering memoranda, private placement
memoranda or other similar documents, participation in meetings, due diligence
sessions and road shows (consistent with such individuals' responsibilities for
the ongoing operations of the Company), the execution and delivery, with
effectiveness conditioned upon consummation of the Merger, of any pledge and
security documents, other definitive financing documents, or other requested
certificates, or documents as reasonably may be requested by Parent. In
addition, in connection with the obtaining of any such financing, the Company
agrees to request opinions of the Company's legal counsel and "comfort letters"
of the Company's accountants reasonably required in connection with such
Financing and at the request of Parent, to call for prepayment or redemption, or
to prepay, redeem and/or renegotiate, as the case may be, any then existing
indebtedness of the Company; provided that no such prepayment or redemption
shall themselves actually be made unless contemporaneously with or after the
Effective Time.
(d) At the written request of Parent, the Company agrees to obtain Phase I
Environmental Site Assessments prepared by GaiaTech Inc. (the "Consultants") for
the properties owned by the Company which are listed in Section 6.03 of the
Company Disclosure Schedule (the "Environmental Reports"), to provide, within 45
days of such request, copies of any Environmental Reports to Parent and any of
the Parent's and
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Parent's Sub's lenders and to legal counsel for such lenders, together with a
letter from the Consultants which authorizes such lender to rely upon such
Environmental Reports as if the same had been prepared for such lender, and to
authorize the Consultants to respond to inquiries from such lender (including
representatives of such lender) and discuss with them the nature of the
Consultants' findings both during the Consultants' investigation of the
properties and preparation of the Environmental Reports and following delivery
of the final Environmental Reports, provided that such lenders advise legal
counsel of the Company of any such inquiries or discussions and invites such
legal counsel to participate in any such discussions.
SECTION 6.04. Public Announcements. Unless otherwise required by
applicable Law or stock exchange or NASDAQ requirements, Parent and the Company
shall consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement prior to such consultation. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 6.05. Indemnification. (a) The Articles of Incorporation and
By-Laws of the Surviving Corporation shall contain the provisions with respect
to indemnification set forth in the Articles of Incorporation and By-Laws of the
Company on the date of this Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of persons
who at any time prior to the Effective Time were identified as prospective
indemnitees under the Articles of Incorporation or By-laws of the Company in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by Law; provided that, nothing
in this Agreement shall prohibit the Surviving Corporation from reincorporating
in another jurisdiction (by way of merger or otherwise) so long as its articles
of incorporation and by-laws provide for indemnification of equal or greater
scope.
The Surviving Corporation will not permit the provisions with respect to
indemnification set forth in the Articles of Incorporation and By-laws of any of
the Company's subsidiaries on the date of this Agreement to be amended, repealed
or otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of persons who at any
time prior to the Effective Time were identified as prospective indemnitees
under any such Articles of Incorporation or By-laws in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by Law.
(b) The Company represents and warrants that, as of the date of this
Agreement, there is no claim, action, proceeding or investigation (a "Claim")
pending or, or to its knowledge, threatened which could cause any prospective
indemnitees referred to in Section 6.05(a) ("Indemnified Parties") to be
indemnified pursuant to the Articles of Incorporation or Bylaws of the Company
(or the Surviving Corporation) or its subsidiaries.
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain the
Company's regularly engaged independent legal counsel as of the date of this
Agreement, or other independent legal counsel satisfactory to them provided that
such other counsel shall be reasonably acceptable to the Surviving Corporation,
(ii) the Surviving Corporation shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor are
received and (iii) the Surviving Corporation will use its reasonable efforts to
assist in the defense of any such matter, provided that the Surviving
Corporation shall not be liable for any settlement of any Claim effected without
its prior written consent, which consent shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 6.05, upon
learning of any such Claim, shall notify the Surviving Corporation (although the
failure so to notify the Surviving Corporation shall not relieve the Surviving
Corporation from any liability which the Surviving Corporation may have under
this Section 6.05, except to the extent such failure prejudices the Surviving
Corporation), and shall deliver to the Surviving Corporation
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the undertaking contemplated by Section 7.1-1.1-4.1(f) of Rhode Island Law. The
Indemnified Parties as a group may retain one law firm to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more of such Indemnified Parties, in which event, an additional
counsel as may be required may be retained by such Indemnified Parties.
(d) The Surviving Corporation shall maintain in effect for not less than
five years after the Effective Time (except to the extent not generally
available in the market) the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by the Company
with respect to matters occurring prior to the Effective Time; provided,
however, that (i) the Surviving Corporation may substitute therefor policies of
substantially the same coverage containing terms and conditions that are
substantially the same for the Indemnified Parties to the extent reasonably
available, (ii) the Surviving Corporation shall not be required to pay an annual
premium for such insurance in excess of 200% of the last annual premium paid
prior to the date of this Agreement, but in such case shall purchase as much
coverage as possible for such amount and (iii) such policy may in the sole
discretion of the Surviving Corporation be one or more "tail" policies for all
or any portion of the full five year period. The amount of the last annual
premium for such policies in set forth in Section 6.05 of the Company Disclosure
Schedule.
(e) This Section 6.05 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Parent and Parent Sub and the
Surviving Corporation and their respective successors and assigns.
SECTION 6.06. Obligations of Parent Sub. Parent shall take all action
necessary to cause Parent Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 6.07. Investigation. Parent acknowledges and agrees that it (a)
has made its own inquiry and investigation into, and based thereon has formed an
independent judgment concerning, the Company, (b) has been furnished with or
given adequate access to such information about the Company as it has requested,
and (c) it will not assert any claim against any of the Company's officers,
directors, employees, agents, stockholders, affiliates, advisors or other
representatives, or hold any of such persons liable, for any inaccuracies,
misstatements or omissions with respect to information furnished by the Company
or such persons concerning the Company. Parent acknowledges and agrees that none
of the Company's stockholders, officers, directors, employees, agents,
affiliates, advisors or other representatives have made, or are making, any
representations or warranties with respect to the Company, this Agreement, or
any of the transactions contemplated hereby.
SECTION 6.08. Voting Agreement. The Company agrees not to take any
action, and shall direct its directors, officers, employees, agents and
representatives (including its legal counsel) not to take any action which would
permit or facilitate a transfer of record ownership of shares of Common Stock
held by the stockholder parties to the Voting Agreement in violation of the
provisions thereof.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under This
Agreement. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by applicable Law:
(a) Antitrust. The applicable waiting period under the HSR Act shall
have expired or been terminated.
(b) Litigation, etc. No Governmental Entity or Federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
that then remains in
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effect and that has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) Stockholder Approval. The holders of a majority of the
outstanding shares of Common Stock shall have approved this Agreement in
accordance with Rhode Island Law and the rules and regulations of NASDAQ,
and either (i) the holders of at least 75% of the outstanding shares of
Common Stock entitled to vote thereon (not including shares deemed
beneficially owned by a Related Person (as such term is defined in Section
D of Article Sixth of the Company's Articles of Incorporation)) shall have
authorized or approved the transaction contemplated by this Agreement in
accordance with Section D of Article Sixth of the Company's Articles of
Incorporation or (ii) the holders of at least 75% of the outstanding shares
of Common Stock entitled to vote thereon shall have approved an amendment
to the Company's Articles of Incorporation which makes Section D of Article
Sixth thereof inapplicable to the approval by the Company's stockholders of
this Agreement and the Merger and subsequent to the filing of such
amendment to the Articles of Incorporation, the holders of a majority of
the outstanding shares of Common Stock shall have approved this Agreement
in accordance with Rhode Island Law.
SECTION 7.02. Additional Conditions to Obligation of Parent. The
obligation of Parent to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement (i) in the case of
any thereof that are expressly qualified by any materiality qualification,
shall be true and correct, subject to such materiality qualification, and
(ii) in the case of all other representations and warranties, shall be true
and correct in all material respects, in each case as of the Effective Time
as though made on and as of the Effective Time, and except that those
representations and warranties that address matters only as of a particular
date shall remain true and correct, subject to such materiality
qualifications or in all material respects, as the case may be, as of such
date. Parent shall have received a certificate of the Chief Financial
Officer of the Company to such effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. Parent shall have received a certificate of
the Chief Financial Officer of the Company to that effect.
(c) Consents and Approvals. All consents, approvals and
authorizations, the failure to obtain which, individually or in the
aggregate, could reasonably be expected to have a Company Material Adverse
Effect, and all consents, approvals and authorizations.
(d) No Material Adverse Change in Markets. There shall not have
occurred (i) a decline of at least 20% in the Dow Jones Average of
Industrial Stocks measured from the date of this Agreement to the last
reported date immediately preceding the day of the Effective Time, or (ii)
an increase of at least 200 basis points in the yield-to-maturity of the 10
year U.S. Treasury Security based on Treasury Market Data provided by
Cantor Fitzgerald, measured from the date of this Agreement to the last
date immediately preceding the day of the Effective Time.
(e) Legal Opinion. Parent shall have received an unqualified opinion
of Hinckley, Allen & Snyder, counsel to the Company, dated as of the
Closing, that the Agreement and the Merger have been duly and validly
approved by the stockholders of the Company in accordance with Rhode Island
Law and the Company's Articles of Incorporation.
SECTION 7.03. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Parent Sub contained in this Agreement (i) in the
case of any thereof that are expressly qualified by any materiality
qualification, shall be true and correct, subject to such materiality
qualification, and (ii) in the case of all other representations and
warranties, shall be true and correct in all material respects, in each
case as of the Effective Time as though made on and as of the Effective
Time, and except that those
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representations and warranties that address matters only as of a particular
date shall remain true and correct, subject to such materiality
qualifications or in all material respects, as the case may be, as of such
date. The Company shall have received a certificate of the Chief Financial
Officer of Parent to such effect.
(b) Agreements and Covenants. Parent shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the Chief
Financial Officer of Parent to that effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case such that the
conditions set forth in Section 7.02(a) or Section 7.02(b) would not be
satisfied (a "Terminating Company Breach"), provided that, if such
Terminating Company Breach is not willful and is curable by the Company
through the exercise of its reasonable efforts and for so long as the
Company continues to exercise such reasonable efforts, Parent may not
terminate this Agreement under this Section 8.01(b), until the Company has
been given 30 days to cure such breach after receipt of notice thereof;
(c) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue in any material respect, in either case such that the conditions set
forth in Section 7.03(a) or Section 7.03(b) would not be satisfied (a
"Terminating Parent Breach"), provided that, if such Terminating Parent
Breach is not willful and is curable by Parent through the exercise of its
reasonable efforts and for so long as Parent continues to exercise such
reasonable efforts, the Company may not terminate this Agreement under this
Section 8.01(c), until Parent has been given 30 days to cure such breach
after receipt of notice thereof;
(d) by either Parent or the Company, if there shall be any Order that
is final and nonappealable preventing the consummation of the Merger,
except if the party relying on such Order has not complied with its
obligations under Section 6.03;
(e) by Parent or the Company, if the Merger shall not have been
consummated before February 28, 1997, except if the party seeking to
terminate the Agreement shall be in breach hereof;
(f) by Parent or the Company, if the approval of this Agreement and
the Merger by the stockholders of the Company shall fail to receive the
requisite vote by the stockholders of the Company at the Company
Stockholders Meeting;
(g) by Parent, if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or Parent Sub or shall have resolved to do any of
the foregoing or (ii) the Company fails to include such recommendation in
the Company Proxy Statement, or (iii) the Board of Directors of the Company
shall have recommended to the stockholders of the Company any Competing
Transaction or resolved to do so;
(h) by Parent, if (i) the Company shall have exercised a right
specified in the first proviso to subsection 5.02(n) with respect to any
Competing Transaction and shall, directly or through agents or
representatives, continue discussions with any third party concerning such
Competing Transaction for more than 20 business days after the date of
receipt of such Competing Transaction; or (ii) (1) a
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Competing Transaction that is publicly disclosed shall have been commenced,
publicly proposed or communicated to the Company which contains a proposal
as to price (without regard to the specificity of such price proposal) as
to which the Company is legally required to respond under Rule 14e-2
promulgated under the Exchange Act and (2) the Company shall not have
rejected such proposal within 20 business days of its receipt or the date
its existence first becomes publicly disclosed, if sooner; or
(i) by the Company, if the Board of Directors of the Company shall
have recommended to the stockholders of the Company any Competing
Transaction or resolved to do so pursuant to Section 5.02(n); provided that
any termination of this Agreement by the Company pursuant to this Section
8.01(i) shall not be effective until the close of business on the second
full business day after notice thereof to Parent.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 8.02. Effect of Termination. Except as provided in Section 8.05
or Section 9.01, in the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of Parent, Parent Sub or the Company or any of their
respective officers or directors to the other and all rights and obligations of
any party hereto shall cease, except that nothing herein shall relieve any party
for any breach of this Agreement.
SECTION 8.03. Amendment. 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 Effective Time. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
SECTION 8.05. Expenses. (a) Except as otherwise expressly provided
herein, all expenses incurred by the parties hereto shall be borne solely by the
party that has incurred such expenses.
(b) If this Agreement shall have been terminated pursuant to Section
8.01(g), 8.01(h) or 8.01(i) and not later than the date which is twelve
(12) months after such termination a Competing Transaction shall have been
consummated, the Company shall pay Parent (or its designee) within one
business day of the later of the consummation of such a Competing
Transaction or such termination, a fee of $6.5 million in cash in same day
funds.
(c) (i) If this Agreement shall have been terminated pursuant to
Section 8.01(f) and (ii) either of the following shall have occurred prior
to the Company Stockholders Meeting held to approve the Merger: (A) any
Person (including the Company or any of its subsidiaries or affiliates) or
"group" (as referred to in Section 13(d)(3) of the Exchange Act) other than
Parent or any of its affiliates (collectively, "Acquiring Persons") shall
have become the beneficial owner of more than 20% of the outstanding shares
of Common Stock (other than with respect to Persons beneficially owning
more than 20% as of the date hereof, in which case, if such Person acquires
beneficial ownership of any additional shares comprising an aggregate of
more than 1% of the outstanding shares of Common Stock); or (B) any
Acquiring Person (other than Parent or any of its affiliates) shall have
made, or proposed, communicated or disclosed in a manner which is or
otherwise becomes public (including being known by stockholders of the
Company owning of record or beneficially in the aggregate 5% or more of the
outstanding shares of Common Stock) a bona fide intention to make a
proposal for a Competing Transaction or shall make such a proposal, and
(iii) not later than the date which is 12 months after the date this
Agreement is terminated, any Acquiring Person (whether or not such
Acquiring Person is the
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same Acquiring Person referred to in clause (ii)) has consummated any
Competing Transaction in which the Transaction Value (as hereinafter
defined) of such Competing Transaction (the "Aggregate Competing
Consideration") is greater than the aggregate amount of the Merger
Consideration payable hereunder to holders of the Common Stock (the
"Aggregate Merger Consideration"), then the Company shall within one
business day after the later of the date of such termination or an event
specified in clause (iii) shall have occurred (and, if applicable, within
one business day after the date or dates of any Contingent Payments), pay
Parent (or its designee) a fee in cash equal to the lesser of (x) the
amount by which the Aggregate Competing Consideration exceeds the Aggregate
Merger Consideration or (y) $6.5 million, which amount shall be payable in
same day funds. For the purposes of this Section 8.05(c), "Transaction
Value" shall mean (i) in the case of the sale, exchange or purchase of the
Company's equity securities, the total consideration paid for such
securities (including amounts paid to holders of options, warrants and
convertible securities), and (ii) in the case of a sale or disposition by
the Company of assets, the total consideration paid for such assets, plus
the net value of any current assets not sold by the Company. Transaction
Value shall include amounts paid in cash, notes, securities or other
property. If the consideration in connection with the Competing Transaction
may be increased by payments related to future events ("Contingent
Payments"), the portion of the fee due to Parent relating to such
Contingent Payments will be calculated and payable if and when such
Contingent Payments are made. For purposes of computing any fees payable to
Parent hereunder, non-cash consideration shall be valued as follows: (x)
publicly traded securities shall be valued at the average of their closing
prices (as reported in the Eastern Edition of The Wall Street Journal) for
the five trading days prior to the closing of the Competing Transaction and
(y) any other non-cash consideration shall be valued at the fair market
value thereof as determined in good faith by the Company and its financial
advisor. Only one fee in the maximum aggregate of $6.5 million shall be
payable pursuant to this Section 8.05.
(d) In addition to the other provisions of this Section 8.05, in the
event a fee is or becomes payable pursuant to Section 8.05(b) or (c)
hereof, the Company agrees promptly, but in no event later than two
business days following written notice thereof, together with related bills
or receipts, to reimburse Parent (or its designee) and its affiliates for
all reasonable out-of-pocket costs, fees and disbursements of counsel and
the expenses of litigation, incurred in connection with collecting such
fee, as a result of any breach by the Company of its obligations under this
Section 8.05.
(e) Notwithstanding any other provision hereof, in the event the
Company obtains the Environmental Reports referred to in Section 6.03(d)
and this Agreement is terminated for any reason, Parent agrees promptly,
but in no even later than two business days following written notice
thereof, together with related bills or receipts, to reimburse the Company
for the fees and expenses of the Consultants incurred by the Company in
connection with the preparation of the Environmental Reports.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and
Agreements. (a) Except as set forth in Section 9.01(b), the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this Agreement
(and in any certificate delivered in connection with the Closing) shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles
I and II and Sections 5.05, 6.05, 6.06 and 6.07 shall survive the Effective
Time and those set forth in Sections 5.04, 6.07, 8.02, 8.05 and Article IX
hereof shall survive termination.
SECTION 9.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or
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transmitted, and shall be effective upon receipt, if delivered personally,
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission to the telecopier number specified below:
(a) If to Parent or Parent Sub:
c/o The Cypress Group L.L.C.
65 East 55th Street, 9th Floor
New York, NY 10022
Attn: David P. Spalding
Telecopier: (212) 705-0199
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David Sorkin, Esq.
Telecopier: (212) 455-2502
(b) If to the Company:
AMTROL Inc.
1400 Division Road
West Warwick, RI 02893
Attention: Stephen J. Carlotti
Vice Chairman
Telecopier: (401) 884-7816
with copies to:
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
Attention: Margaret D. Farrell, Esq.
Telecopier: (401) 277-9600
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in
the City of New York are authorized or obligated to be closed;
(c) "control" (including the terms "controlled", "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 or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise;
(d) "knowledge" or "known" means, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
(f) "Significant Subsidiary" or "Significant Subsidiaries" means any
subsidiary of the Company that would constitute a Significant Subsidiary of
such party within the meaning of Rule 1-02 of Regulation S-X of the SEC;
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<PAGE> 68
(g) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture or other legal entity of which the Company,
Parent, the Surviving Corporation or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity; and
(h) "Tax" or "Taxes" shall mean any and all taxes, charges, fees,
levies, payable to any federal, state, local or foreign taxing authority or
agency, including, without limitation, (i) income, franchise, profits,
gross receipts, minimum, alternative minimum, estimated, ad valorem, value
added, sales, use, real or personal property, payroll, withholding,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, and transfer and gains
taxes, (ii) customs duties, imposts, charges, levies or other similar
assessments of any kind, and (iii) interest, penalties and additions to tax
imposed with respect thereto.
SECTION 9.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. 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 contemplated hereby 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 an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.06. Entire Agreement. This Agreement (together with the
Exhibits hereto), and the Confidentiality Agreement constitute the entire
agreement of the parties and supersede all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 9.08. 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 (other than the provisions of Sections 6.05 and
6.07), 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.
SECTION 9.09. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.10. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Rhode Island, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law, and each party hereto hereby submits
to the exclusive jurisdiction of the Rhode Island courts sitting in chancery for
the resolution of all disputes under this Agreement.
SECTION 9.11. 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> 69
IN WITNESS WHEREOF, Parent, Parent Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
A.I. HOLDINGS, INC.
By: /s/ DAVID P. SPALDING
---------------------------------
Name: David P. Spalding
-------------------------------
Title: President
------------------------------
A.I. ACQUISITION, INC.
By: /s/ DAVID P. SPALDING
---------------------------------
Name: David P. Spalding
-------------------------------
Title: President
------------------------------
AMTROL Inc.
By: /s/ KENNETH L. KIRK
--------------------------------
Name: Kenneth L. Kirk
------------------------------
Title: Chairman
-----------------------------
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<PAGE> 70
EXHIBIT A TO
MERGER AGREEMENT
VOTING AGREEMENT
This Agreement dated as of August 28, 1996 is by and between Amtrol Inc.
(the "Company"), a Rhode Island corporation, and the other parties signatory
hereto (each a "Stockholder").
RECITALS
The Company's Board of Directors (the "Board") determined in 1995 that it
was in the best interest of the Company and its stockholders to explore
strategic options, including a possible sale of the Company.
To assist in this process, the Company retained investment bankers and
other advisors and conducted an extensive and lengthy process of soliciting and
evaluating proposals from numerous parties. This process has now resulted in the
Company obtaining from a small number of qualified bidders (the "Bidders")
specific proposals to acquire the Company, copies of which have been provided by
the Company to the Stockholders.
Following further negotiations, the Company expects to enter into a
definitive agreement (the "Merger Agreement") with the Bidder determined by the
Board, in the exercise of the fiduciary duty of the Board to the Company's
stockholders, following consultation with the Board's financial and other
advisors, to have made the proposal which is in the best interest of the Company
and its stockholders.
In response to requests from Bidders, the Company has requested the
Stockholders to enter into this Agreement. The Company has informed the
Stockholders that, without this Agreement, one or more of such Bidders will
refuse to enter into a Merger Agreement. In this regard, the Company believes
that the existence of this Agreement will increase the consideration which all
stockholders of the Company will receive under the Merger Agreement.
The Stockholders have considered the Company's request in light of the
process engaged in by the Company to date in seeking such proposals, the
Company's belief that by entering into this Agreement the Stockholders may
increase both the willingness of the Bidders to proceed and the amount of
consideration ultimately to be paid, and, in particular, where applicable, such
Stockholder's own fiduciary obligations, and are willing to agree with the
Company as follows. Each Stockholder acknowledges that such Stockholder is
entering into this Agreement in part for the benefit of the Bidder with whom the
Company reaches a Merger Agreement.
AGREEMENT
The parties therefore agree as follows:
1. Stockholder Representations. Each Stockholder (severally and not
jointly) represents and warrants to the Company as follows:
a. Stockholder is the record holder of the number of shares of the
Company's Common Stock set forth opposite Stockholder's name on Exhibit
A attached hereto (the "Existing Shares," and together with any shares
of the Company's Common Stock acquired by Stockholder after the date
hereof and prior to the termination hereof, whether upon exercise of
options, conversion of convertible securities, purchase, exchange or
otherwise, the "Shares").
b. On the date hereof, the Existing Shares constitute all of the
shares of the Company's Common Stock owned of record by Stockholder.
c. Stockholder has sole voting power with respect to the matters
set forth in Section 2 hereof with respect to all of such Stockholder's
Existing Shares and sole power to dispose of all such Existing Shares.
d. Stockholder has the legal capacity, power and authority to enter
into and perform all of Stockholder's obligations under this Agreement.
The execution, delivery and performance of this
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<PAGE> 71
Agreement by Stockholder will not violate any other agreement to which
Stockholder is a party or by which Stockholder is bound. In the case of
any Stockholder which is a trust, there is no beneficiary of such trust
and no holder of any voting trust certificate or similar instrument in
such trust whose consent is required for the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
2. Agreement To Vote. Each Stockholder agrees to vote all of such
Stockholder's Existing Shares and any other Shares which Stockholder has
the power to vote in regard to any and all of the following matters as
recommended by the Board:
a. The Merger Agreement itself and all transactions contemplated
thereby; and
b. Any Competing Transaction (as such term is defined in the form
of Merger Agreement) or other action which is intended to or could
reasonably be expected to have a material effect on the transactions
contemplated by the Merger Agreement;
Provided, however, that no Stockholder shall be obligated to vote in favor of
any proposal that would modify the provisions of Section D of Article Sixth of
the Company's Articles of Incorporation except to the extent necessary to make
such provisions inapplicable to the approval by the Company's stockholders of
the Merger Agreement (as approved by such Stockholder pursuant to Section 6
hereof) and the Merger as defined therein. No Stockholder shall enter into any
agreement or understanding with any person or entity to vote or give
instructions in any manner inconsistent with the provisions of this section.
3. No Solicitation. No Stockholder shall, directly or indirectly
(including through advisors or other intermediaries), solicit (including by
way of furnishing information) or respond to any inquiry or proposal by any
person or entity with respect to the Company that constitutes or could
reasonably be expected to lead to a Competing Transaction. If any
Stockholder receives any such inquiry or proposal, then such Stockholder
shall promptly inform the Company of the terms and conditions, if any, of
such inquiry or proposal and the identity of the person making it. Each
Stockholder will immediately cease and cause to be terminated all existing
activities, discussions or negotiations (if any) with any party conducted
heretofore with respect to any of the foregoing.
4. Restriction on Transfer. No Stockholder shall, directly or
indirectly:
a. Except pursuant to the terms of this Agreement, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose
of, enforce or permit the execution of the provisions of any redemption
agreement with the Company or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for
sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of such Stockholder's Shares or any interest
therein, except pursuant to any such transfer in which the transferee
becomes a signatory to this Agreement and any Shares transferred to such
transferee continue to be bound by the provisions hereof (without
limiting the generality of the foregoing, no Stockholder shall (i)
exercise any right which such Stockholder may have to demand or request
that the Company file a Registration Statement under the Securities Act
of 1933 covering the sale of any Shares or (ii) if such Stockholder is a
trust, take any action to terminate, close or liquidate such trust
unless all Shares affected by such action remain subject in all respects
to the terms of this Agreement);
b. Grant any proxies (except for any proxy solicited by the Board)
or powers of attorney, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any Shares; or
c. Take any action which would make any representation or warranty
of such Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling such Stockholder from performing such
Stockholder's obligations under this Agreement.
Notwithstanding any other provision of this section, the Trustees of The Chester
H. Kirk 1984 Trust Agreement shall be permitted to pledge its Shares as
collateral for any loan from a bona fide financial institution which such
Trustees may deem necessary or desirable in connection with the payment of (i)
any and all state or federal estate taxes occasioned by the death of Chester H.
Kirk, (ii) pecuniary legacies under
B-30
<PAGE> 72
the Last Will and Testament of Chester H. Kirk or (iii) pecuniary distributions
under the Chester H. Kirk 1984 Trust Agreement, the amount of such loan not to
exceed $10 million prior to January 31, 1997 or $20 million thereafter, and the
terms of such loan to provide that the Trust may continue to vote all pledged
Shares so long as the Trust is not in default under the loan documents.
5. Termination. This Agreement shall terminate on the earliest to
occur of the following:
a. The failure by the Company to reach a definitive Merger
Agreement with one of the Bidders on or before September 15, 1996;
b. The Effective Time of any such Merger Agreement (as defined
therein); or
c. February 28, 1997.
6. Condition to Stockholders' Obligations. The obligations of each
Stockholder hereunder are conditioned on such Stockholder's written
approval, prior to execution and delivery by the Company, of the final form
of Merger Agreement and the consideration payable thereunder, it being
understood and agreed that, among other provisions, such Agreement will
contain appropriate "fiduciary-out" provisions in favor of the Board.
7. Miscellaneous.
a. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings (if any), both written and
oral, between the parties with respect to the subject matter hereof, and
shall not be assigned by operation of law or otherwise.
b. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto, provided that the Company may
add to the list of Stockholders any stockholder of the Company who
agrees to be bound by the terms of this Agreement without the agreement
of any other party hereto, and thereafter such added stockholder shall
be treated as a "Stockholder" for all purposes of this Agreement.
c. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to
have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified, postage pre-paid,
return receipt requested) or by any courier service, such as Federal
Express providing proof of delivery. All communications hereunder shall
be delivered to the respective parties at the following addresses:
AMTROL INC.
1400 Division Road
West Warwick, Rhode Island 02893
with a copy to:
HINCKLEY, ALLEN & SNYDER
c/o Margaret Farrell, Esq.
1500 Fleet Center
Providence, Rhode Island 02903
THE CHESTER H. KIRK 1984 TRUST AGREEMENT
c/o Heidi Kirk
275 Stony Lane
North Kingstown, Rhode Island 02852
B-31
<PAGE> 73
with copies to:
FLEET NATIONAL BANK
c/o Terence J. Breiding, Senior Vice President
Manager Estate and Trust Services
Mail Stop RI MO 124
100 Westminster Street
Providence, Rhode Island 02903-2305
and
ROPES & GRAY
c/o Martin Hall, Esq.
One International Place
Boston, Massachusetts 02110
DAVID BERETTA
11 Walcot Avenue
Jamestown, Rhode Island 02835
KENNETH L. KIRK
1400 Division Road
West Warwick, Rhode Island 02893
DR. HANNS H. WINKHAUS
Sybelstrasse 24B
40239 Dusseldorf
Germany
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of Rhode Island, regardless of the laws which
might otherwise govern under the applicable conflicts of laws principles
thereof.
e. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall
constitute one and the same Agreement.
f. The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
g. In the event of a stock dividend or distribution, or any change
in the Company's Common Stock by reason of a stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall be deemed to refer to and include the Shares as well as
all such stock dividends and distributions in any Shares or for which
any or all of the Shares may be changed or exchanged.
h. The obligations of each Stockholder hereunder are several and
not joint and no Stockholder shall have any liability hereunder to the
Company for the failure of any other Stockholder to perform his or its
obligations hereunder. While, for the sake of convenience, this
Agreement has been entered into by more than one Stockholder, this
Agreement shall be treated for all purposes as a separate agreement
between each Stockholder and the Company and not as an agreement among
the Stockholders, and no Stockholder shall have any rights hereunder to
cause any other Stockholder to take any action required hereunder.
i. Each Stockholder acknowledges that each Stockholder is entering
into this Agreement for the benefit of the Bidder with whom the Company
reaches a Merger Agreement and that such Bidder shall be a third party
beneficiary for purposes of monetary damages with respect to any breach
hereof by such Stockholder.
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<PAGE> 74
IN WITNESS WHEREOF, the Company and each Stockholder have caused this
Agreement to be duly executed as of the day and year first set forth above.
AMTROL INC.
By: /s/ KENNETH L. KIRK
-----------------------------
NAME: KENNETH L. KIRK
TITLE: CHAIRMAN
THE CHESTER H. KIRK 1984 TRUST
AGREEMENT
By: /s/ HEIDI H. KIRK
-----------------------------
NAME: HEIDI H. KIRK
TITLE: CO-TRUSTEE
By: /s/ HANNS H. WINKHAUS
-----------------------------
NAME: HANNS H. WINKHAUS
TITLE: CO-TRUSTEE
By: Fleet National Bank
Title: Co-Trustee
By: /s/ TERENCE J. BREIDING
-----------------------------
NAME: TERENCE J. BREIDING
TITLE: SENIOR VICE PRESIDENT
/s/ KENNETH L. KIRK
-----------------------------
KENNETH L. KIRK
/s/ DAVID BERETTA
-----------------------------
DAVID BERETTA
/s/ HANNS H. WINKHAUS
-----------------------------
HANNS H. WINKHAUS
B-33
<PAGE> 75
EXHIBIT A TO
VOTING AGREEMENT
<TABLE>
STOCKHOLDERS
<CAPTION>
NUMBER OF SHARES
OF WHICH THE
STOCKHOLDER IS
NAME THE RECORD HOLDER
----- -----------------
<S> <C>
The Chester H. Kirk 1984 Trust Agreement.................... 2,220,804
Kenneth L. Kirk............................................. 424,075
David Beretta............................................... 68,046
Hanns H. Winkhaus........................................... 99,950
</TABLE>
B-34
<PAGE> 76
ANNEX C
August 28, 1996
The Board of Directors
AMTROL Inc.
1400 Division Road
West Warwick, Rhode Island 02898
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the common stock of AMTROL Inc. ("AMTROL") of the
consideration to be received by such holders pursuant to the terms and subject
to the conditions set forth in the Merger Agreement dated as of August 28, 1996
(the "Merger Agreement"), by and among A.I. Holdings, Inc. ("A.I. Holdings"),
A.I. Acquisition, Inc., a wholly owned subsidiary of A.I. Holdings ("Sub"), and
AMTROL. As more fully described in the Merger Agreement, (i) Sub will be merged
with and into AMTROL (the "Merger") and (ii) each outstanding share of the
common stock, par value $0.01 per share, of AMTROL (the "AMTROL Common Stock")
will be converted into the right to receive $28.25 in cash, without interest
(the "Per Share Amount").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of AMTROL and with certain senior officers and other
representatives of A.I. Holdings concerning the business, operations and
prospects of AMTROL. We examined certain publicly available business and
financial information relating to AMTROL as well as certain financial forecasts
and other data for AMTROL which were provided to or otherwise discussed with us
by the management of AMTROL. We reviewed the financial terms of the Merger as
set forth in the Merger Agreement in relation to, among other things: current
and historical market prices and trading volumes of AMTROL Common Stock;
historical and projected earnings and operating data of AMTROL; and the
capitalization and financial condition of AMTROL. We also considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of AMTROL. In addition to the foregoing,
we conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed appropriate in arriving at
our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data furnished to or otherwise reviewed by or discussed with us, we have
been advised by the management of AMTROL that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of AMTROL as to
the future financial performance of AMTROL. We have not made or been provided
with an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of AMTROL nor have we made any physical inspection of
the properties or assets of AMTROL. In connection with our engagement, we were
requested to approach, and we held discussions with, certain third parties to
solicit indications of interest in a possible acquisition of AMTROL. Our opinion
is necessarily based upon information available to us, and financial, stock
market and other conditions and circumstances existing and disclosed to us, as
of the date hereof.
Smith Barney has been engaged to render financial advisory services to
AMTROL in connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
We will also receive a fee upon delivery of this opinion. In the ordinary course
of business, we and our affiliates may actively trade or hold the securities of
AMTROL for our own account or for the account of our customers and, accordingly,
may at any time hold a long or short position in such
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<PAGE> 77
securities. Smith Barney has in the past provided financial advisory and
investment banking services to AMTROL unrelated to the proposed Merger, and has
received compensation for such services. In addition, we and our affiliates
(including Travelers Group Inc. and its affiliates) may maintain business
relationships with AMTROL and affiliates of A.I. Holdings.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of AMTROL in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger. Our opinion may not be published or otherwise used or referred
to, nor shall any public reference to Smith Barney be made, without our prior
written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Per Share Amount is fair,
from a financial point of view, to the holders of AMTROL Common Stock.
Very truly yours,
SMITH BARNEY INC.
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<PAGE> 78
AMTROL INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD NOVEMBER 12, 1996
The undersigned hereby authorizes and appoints Kenneth L. Kirk, Stephen J.
Carlotti and Albert W. Ondis, and each of them, as proxies with full power of
substitution in each, to vote all shares of Common Stock, par value $.01 per
share, of AMTROL Inc. (the "Company") held of record on October 4, 1996 by the
undersigned at the Special Meeting of Shareholders to be held at 10:00 a.m.,
local time, on November 12, 1996, at The Westin Hotel, Providence, One West
Exchange Street, Providence, Rhode Island 02903, and at any adjournments or
postponements thereof, on all matters that may properly come before said
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (I) AS DIRECTED BELOW, OR,
IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND
FOR PROPOSAL 2 AND (II) IN ACCORDANCE WITH THE JUDGMENT OF THE PROXIES UPON
OTHER MATTERS THAT MAY PROPERLY COME BEFORE SAID MEETING OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
THE DIRECTORS RECOMMEND A VOTE FOR EACH PROPOSAL.
PROPOSAL 1 -- Adoption of the Amendment to the Company's Articles of
Incorporation.
/ / FOR adoption of Amendment / / AGAINST adoption of Amendment / / ABSTAIN
to Articles of to Articles of Incorporation
Incorporation
PROPOSAL 2 -- Approval of the Merger Agreement dated August 28, 1996 by and
among the Company, A.I. Holdings, Inc. and A.I. Acquisition, Inc. and the Merger
contemplated therein.
/ / FOR / / AGAINST / / ABSTAIN
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
THIS PROXY MUST BE SIGNED Dated: ......................., 1996
EXACTLY AS THE NAME OF THE
SHAREHOLDER(S) APPEARS ON
THIS CARD.
Executors, administrators, Signature: .........................
trustees, etc. should give
full title as such. If the
signatory is a corporation,
please sign full corporate
name by duly authorized
officer. Signature: .........................
(if held jointly)
