Exhibit 6
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INTERNATIONAL COMFORT PRODUCTS CORPORATION
DIRECTORS' CIRCULAR
RELATING TO THE OFFER BY TITAN ACQUISITIONS, LTD.,
A SUBSIDIARY OF UNITED TECHNOLOGIES CORPORATION,
TO PURCHASE ALL OF THE
ORDINARY SHARES OF
INTERNATIONAL COMFORT PRODUCTS CORPORATION
RECOMMENDATION
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THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF ORDINARY SHARES
ACCEPT THE OFFER.
June 30, 1999
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INTERNATIONAL COMFORT PRODUCTS CORPORATION
DIRECTORS' CIRCULAR
This Directors' Circular is issued by the Board of Directors (the "Board")
of International Comfort Products Corporation (the "Company" or "ICP") in
connection with the offer (the "Offer") made June 30, 1999 by Titan
Acquisitions, Ltd. (the "Offeror"), a direct wholly-owned subsidiary of United
Technologies Corporation ("UTC"), to purchase for cash all of the outstanding
ordinary shares of the Company (including ordinary shares of the Company
issuable upon exercise of outstanding stock options) (collectively the
"Shares") upon the terms and conditions set forth in the Offer and
accompanying circular (the "Offering Circular") of the Offeror dated June 30,
1999. The Offering Circular indicates that the Offer price is U.S. $11.75 per
Share (the "Offer Price").
The terms and conditions of the Offer, the method of acceptance of the Offer
and other information relating to the Offer, the Company, UTC and the Offeror
are set out in the Offer and the Offering Circular, the Letter of Transmittal
and the Notice of Guaranteed Delivery which accompany the Offer.
All dollar amounts in this Directors' Circular are expressed in United
States dollars, unless otherwise indicated. As at June 29, 1999, the noon
buying rate in New York City for cable transfers in Canadian dollars was U.S.
$1.00 = C$1.4760.
RECOMMENDATION OF THE BOARD
The Board has considered the Offer and reviewed it with Credit Suisse First
Boston Corporation, its financial advisor ("CSFB"). The Board is of the view
that the Offer is fair to the shareholders of the Company.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER.
Reasons for Recommendation of the Board
After considering the Offer and other matters it considered relevant, the
Board unanimously resolved to recommend that holders of the Shares accept the
Offer.
In arriving at that conclusion, the Board relied upon and considered, among
other things, the following:
. the familiarity of the Board with the Company's business, financial
condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates,
based in part upon presentations by the Company's management;
. the Offer Price represents a premium of $3.20 or approximately 37.4%
over the average closing price of the Shares reported on the American
Stock Exchange for the three calendar month period ended June 23, 1999,
the last trading day prior to the public announcement of the Offer on
June 24, 1999. In focussing on the premium over the average Share price
during the three months prior to the date of the public announcement of
the Offer, the Board acknowledged the significant increase in the
Company's stock price during the month prior to the public announcement
of the Offer;
. the fact that Ravine Partners, Ltd. ("Ravine Partners") and Ontario
Teachers' Pension Plan Board ("Ontario Teachers") have agreed with the
Offeror to tender an aggregate of 38.76% of the outstanding Shares (on
an undiluted basis) under the Offer;
. that the Offer is for all of the Shares;
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. the opinion dated June 23, 1999, of CSFB described below (a copy of
which is attached hereto as Appendix "A") that, as of such date and
based upon and subject to the matters set forth therein, the
consideration to be received by the shareholders of the Company under
the Offer and in the Second Stage Transaction (as defined in the Pre-
Acquisition Agreement) was fair to such shareholders from a financial
point of view;
. information regarding the financial, operating and stock price history
of the Company in comparison to selected comparable companies, including
certain of the Company's competitors;
. consideration of other possible acquirors of the Company;
. that the Pre-Acquisition Agreement described under "Agreements with
United Technologies Corporation and the Offeror" is structured to permit
the Company, upon determination of the Board that such action would
further the best interests of the shareholders of the Company, to
respond to any written unsolicited Superior Take-over Proposal (as
hereinafter defined) and to furnish information to and to negotiate with
the party making such Superior Take-over Proposal, provided that the
acceptance or recommendation of any such Superior Take-over Proposal may
entitle the Offeror to a termination fee;
. the terms and conditions of the Pre-Acquisition Agreement, including
that ICP or the Offeror could, under certain circumstances, be entitled
to a termination fee; and
. that the Offer is not subject to a financing condition.
The foregoing discussion of the 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 Offer,
the Board did not find it practicable to, and did not quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determinations and recommendation. In addition, individual
members of the Board may have given different weight to different factors.
Shareholders should nevertheless consider the Offer carefully and come to
their own decision as to acceptance or rejection of the Offer. Shareholders
who are in doubt as to how to respond to the Offer should consult their
investment dealer, stockbroker, chartered accountant, lawyer or other
professional advisor.
BACKGROUND TO THE OFFER
As part of its responsibilities, the Board considers and reviews from time
to time strategic alternatives available to the Company. In light of the
interest of Ravine Partners and Ontario Teachers in possibly selling some or
all of their respective holdings of Shares and the interest of the President
and Chief Executive Officer in possibly being part of a group which might make
an offer for the Company, the Board established on January 20, 1999 a
committee of directors (the "Special Committee") to consider strategic
alternatives available to the Company.
The members of the Special Committee are Messrs. Xxxxxxx X. Xxxx, Q.C.,
Xxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx. Each of these
directors is an independent member of the Board, is independent of Ravine
Partners and Ontario Teachers and is independent of UTC and the Offeror. The
Special Committee has met frequently on a formal and an informal basis
(primarily by conference telephone) during the past six months amongst
themselves and together with, among others, management, CSFB, Ravine Partners,
Ontario Teachers and legal counsel to each of the Company and CSFB.
On January 26 and 28, 1999, members of the Special Committee met separately
with representatives of three nationally recognized investment banking firms
and received from each of them a presentation on their respective credentials
to assist the Special Committee and the Board and to act as financial advisor
in connection with the Company's review of strategic alternatives. Following
these presentations, the Special Committee unanimously
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recommended, and the Board unanimously authorized and approved on February 3,
1999, the appointment of CSFB as financial advisor to the Company. CSFB was
retained and an engagement letter between the Company and CSFB was negotiated
and executed.
Following its due diligence review of the Company, CSFB discussed initially
with the Special Committee, and subsequently with the Board on March 9, 1999,
its views on the Company, potential industry and financial buyers and
recommendations with respect to the strategic review process. After discussion
with CSFB, the Board authorized the Special Committee and CSFB to pursue a
confidential selective sale process in order to determine whether there was
any third party interest in an acquisition of the Company.
CSFB initially approached more than 40 potential industry and financial
buyers, including UTC, in order to solicit preliminary indications of interest
in an acquisition of the Company. The Company received preliminary indications
of interest from more than 20 parties, including UTC. Confidentiality and
standstill agreements were forwarded to these parties and such agreements were
negotiated and entered into by the Company with these parties, including UTC.
A confidential information memorandum relating to the Company and its
businesses, which had been prepared by CSFB in conjunction with senior
management of the Company, was delivered to the parties, including UTC, who
had signed a confidentiality agreement. Further indications of interest in a
potential acquisition of the Company were received from interested parties,
including UTC, on April 23, 1999. Following discussions with CSFB about the
respective levels of interest from these parties, the Special Committee
directed CSFB to continue to deal with a select group of these parties,
including UTC. Each of these parties, including UTC, was invited to conduct
due diligence with respect to the Company and to attend a confidential
management presentation focussing on the Company and its businesses.
During the week of May 24, 1999, at the request of the Special Committee,
CSFB forwarded to each of the final round bidders, including UTC, a formal
request that any offer to acquire all of the Shares be made in writing by June
15, 1999. Accompanying the bid request was a form of pre-acquisition agreement
which each party was asked to review and indicate any necessary changes
thereon for purposes of that party's offer. Each of the final round bidders,
including UTC, responded to CSFB's request with an acquisition proposal,
together with a marked-up copy of the pre-acquisition agreement or a
memorandum setting out their principal concerns with the agreement. At a
meeting held on June 16, 1999, the respective terms and conditions of the
final round offers were reviewed with the Special Committee by CSFB and legal
counsel for CSFB and the Company. The Special Committee was also advised that
a key term of the UTC offer was that Ravine Partners and Ontario Teachers
enter into agreements with the Offeror under which they would agree to tender,
and grant an option to transfer their Shares, to the Offeror (the "Shareholder
Agreements"). As well, the Special Committee received a report on the course
of discussions which had taken place earlier on June 16, 1999 relating to the
UTC offer and its terms and conditions at a meeting involving representatives
of UTC, its legal counsel, CSFB, a member of the Special Committee and legal
counsel for CSFB and the Company. Following questions by, and discussions
among, members of the Special Committee, CSFB was instructed to contact each
of the final round bidders to discuss certain aspects of their proposals.
Following discussions between UTC and CSFB on June 17, 1999 and June 18,
1999 concerning UTC's proposal, the Special Committee instructed CSFB and
legal counsel for the Company to meet with representatives of UTC and its
legal advisors to negotiate the final terms of the pre-acquisition agreement,
(which the parties agreed would provide for the making of an offer for all of
the Shares by the Offeror at a price of $11.75 per Share). Such negotiations
commenced on June 21, 1999 and were intensively conducted through June 21, 22
and 23, 1999. During this period, the status and subject matter of
negotiations were discussed with the Chairman of the Special Committee, and
UTC independently negotiated the terms of the Shareholder Agreements with
Ravine Partners and Ontario Teachers.
The Special Committee met at noon on June 23, 1999 and received a further
report from CSFB on the final round offers to acquire the Shares of the
Company. CSFB reviewed various aspects of each of the offers with the Special
Committee, including CSFB's assessment of the overall value of each offer, the
conditions and terms of the respective offers (including financing), break-fee
arrangements and other factors. CSFB also confirmed its
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ability to provide the Board with a fairness opinion with respect to the UTC
offer. The Special Committee was also updated by legal counsel on the status
of negotiations on the pre-acquisition agreement. Following these
presentations and discussions and after deliberations, the Special Committee
concluded unanimously that the UTC offer of $11.75 cash per Share was an offer
which the Board of Directors could approve and recommend for acceptance by the
holders of Shares.
The Board of Directors met at 2:00 p.m. on June 23, 1999. Eleven of the
twelve directors attended and participated in person or telephonically at this
meeting. At the outset of the meeting, the Board received a report from the
Chairman of the Special Committee. The report provided the Board with an
update on the confidential selective sale process concluding with the Special
Committee's view on the final round offers made for the Company and its
recommendation that the UTC offer was an offer which the Board could approve
and recommend for acceptance by the holders of Shares. CSFB provided the Board
with its review of the final round offers, their respective terms and
conditions and their assessment of the relative values contemplated by the
offers. Legal counsel briefed the Board on the fiduciary duties of directors
and other matters of Canadian corporate law and on certain regulatory matters.
As well, counsel reviewed with the Board the terms and conditions of the
proposed pre-acquisition agreement with UTC, including the (i) terms of the
offer; (ii) offer conditions; (iii) no solicitation limitation; (iv) fiduciary
duty exception for a Superior Take-over Proposal; (v) events of termination;
(vi) mutual termination fees; (vii) covenants, representations and warranties
of the Company, the Offeror and UTC; (viii) conduct of ICP's business during
the offer period; and (ix) other key terms and provisions. CSFB then completed
its review of the fairness of the UTC offer from a financial point of view.
CSFB delivered an oral opinion to the Board, which was subsequently confirmed
in writing, that, as of June 23, 1999 and based upon and subject to the
matters reviewed with the Board, the consideration to be received by the
shareholders of the Company in the Offer and in the Second Stage Transaction
was fair to the shareholders from a financial point of view. A copy of the
CSFB opinion is attached hereto as Appendix "A".
After these presentations on the UTC offer and after deliberation with
respect thereto, the Board of Directors unanimously (i) determined that the
UTC offer is fair to holders of Shares and is in the best interests of ICP;
(ii) approved the UTC offer; (iii) authorized and approved the execution and
delivery of the Pre-Acquisition Agreement; (iv) resolved to recommend
acceptance of the UTC offer by holders of Shares; and (v) determined to elect,
to the extent permitted by law, not to be subject to certain forms of anti-
takeover laws and regulations.
After the close of trading on June 23, 1999, the Company, UTC and the
Offeror executed the Pre-Acquisition Agreement. Also on June 23, 1999, Ravine
Partners and Ontario Teachers entered into their respective Shareholder
Agreements with the Offeror.
Early on June 24, 1999, the Company and UTC issued a press release
announcing the execution of the Pre-Acquisition Agreement and the Shareholder
Agreements. On June 30, 1999, the Offer was commenced.
AGREEMENTS WITH UNITED TECHNOLOGIES CORPORATION
AND THE OFFEROR
The Pre-Acquisition Agreement
On June 23, 1999, UTC, the Offeror and the Company entered into the Pre-
Acquisition Agreement pursuant to which UTC and the Offeror agreed to make the
Offer. The following is a summary of certain material provisions of the Pre-
Acquisition Agreement.
The Offer. The Pre-Acquisition Agreement provides for the commencement of
the Offer as promptly as practicable, but in no event later than five (5)
business days after the date of the public announcement of the execution of
the Pre-Acquisition Agreement.
The Pre-Acquisition Agreement provides that the obligation of the Offeror
to, and of UTC to cause the Offeror to, consummate the Offer and accept for
payment, and pay for, any Shares tendered and not withdrawn
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pursuant to the Offer is subject only to the conditions set forth below under
"--Certain Conditions of the Offer" (the "Offer Conditions") (any of which may
be waived in whole or in part by the Offeror in its sole discretion). The
Offeror expressly reserved in the Pre-Acquisition Agreement the right, subject
to applicable Securities Laws, to modify the terms of the Offer, except that,
without the express written consent of the Company, the Offeror shall not (i)
reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price,
(iii) add to or modify the Offer Conditions, (iv) except as provided in the
next paragraph, change the expiration date of the Offer, (v) change the form
of consideration payable in the Offer or (vi) amend, alter, add or waive any
term of the Offer in any manner that is, in the opinion of the Company,
adverse to the holders of the Shares.
The Pre-Acquisition Agreement provides that, notwithstanding the foregoing,
(A) if on any scheduled expiration date of the Offer, all of the Offer
Conditions have not been satisfied or waived, the Offeror shall, unless in the
reasonable judgment of UTC all of the Offer Conditions cannot be satisfied or
waived on or prior to December 15, 1999, from time to time, extend the Offer
for such period of time as is necessary to satisfy or fulfill such conditions,
(B) Offeror may extend the Offer for any period required by any rule,
regulation, interpretation or position of any appropriate securities
commissions or similar regulatory authorities in Canada and each of the
provinces and territories thereof and in the United States and each of the
states thereof (the "Securities Authorities") applicable to the Offer, or to
permit the Company to cure any misrepresentation, breach or non-performance
during the time period referred to in the proviso to clause (d) of the Offer
Conditions (See "--Certain Conditions to the Offer" below), and (C) Offeror
may extend the Offer for up to ten (10) business days (but not beyond December
15, 1999) if there has been validly tendered (and not properly withdrawn)
prior to the expiration of the Offer such number of Shares that would
constitute at least 80%, but less than 90%, of the issued and outstanding
Shares as of the date of determination. The Pre-Acquisition Agreement provides
that subject only to the Offer Conditions, the Offeror shall, and UTC shall
cause the Offeror to, pay, as soon as practicable after the expiration of the
Offer, for all Shares validly tendered (and not properly withdrawn) that
Offeror becomes obligated to accept pursuant to the Offer.
Directors. The Pre-Acquisition Agreement provides that promptly upon the
purchase by the Offeror of outstanding Shares pursuant to the Offer, and from
time to time thereafter, UTC shall be entitled to designate such number of
directors (rounded up to the next whole number) on the Board as will give UTC,
subject to compliance with Section 14(f) of the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act"), representation equal to
the product of the total number of directors on the Board (giving effect to
the directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by UTC or any affiliate
of UTC following such purchase bears to the total number of Shares then
outstanding, and the Company shall, at such time, take all actions necessary
to cause UTC's designees to be so appointed (including increasing the size of
the Board or securing the resignation of incumbent directors, or both). The
Pre-Acquisition Agreement provides that the Company shall take all actions
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and shall include in its Schedule 14D-9 required by the United
States Securities and Exchange Commission (the "Commission") such information
with respect to the Company and its officers and directors as is required
under Section 14(f) and Rule 14f-1 to fulfill such obligations (provided,
however, that UTC shall supply to the Company and be solely responsible for
any information with respect to UTC and its nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f-1).
Following the appointment of UTC's designees prior to consummation of the
Second Stage Transaction, any amendment of the Pre-Acquisition Agreement or of
the Company's Certificate and Articles of Continuation or By-laws (the
"Governing Documents"), any termination of the Pre-Acquisition Agreement by
the Company, any extension by the Company of the time for performance of any
obligation or other act of UTC under the Pre-Acquisition Agreement, or any
waiver thereof, any waiver of any condition to the obligations of the Company
or any of the Company's rights under the Pre-Acquisition Agreement or other
action by the Company shall require the concurrence of a majority of the
directors of the Company then in office who were not designated by UTC, which
action shall be deemed to constitute the action of the full Board even if such
majority does not constitute a majority of all directors then in office.
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Stock Options. The Pre-Acquisition Agreement provides that the Company shall
cause the vesting of option entitlements under the International Comfort
Products Corporation Employee Stock Option Plan and the International Comfort
Products Corporation 1998 Employee Stock Option Plan (the "Stock Option
Plans") to accelerate prior to or concurrent with the expiration of the Offer,
such that all outstanding options to purchase Shares (a "Company Option") are
exercisable prior to or concurrent with the expiration of the Offer. At the
time that the Offeror shall have acquired ownership of and paid for Shares
pursuant to the Offer (the "Effective Time"), each holder of a then
outstanding Company Option shall, in settlement thereof, be entitled to
receive from the Company, and shall be paid in full satisfaction for each
Share subject to such Company Option an amount (subject to any applicable
withholding tax) in cash equal to the product of (i) the excess of the Offer
Price over the per share exercise or purchase price of such Company Option and
(ii) the number of Shares subject to such Company Option. Upon receipt of such
consideration, each such Company Option shall be cancelled. The surrender of a
Company Option to the Company in exchange for such consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Company Option. The Stock Option Plans shall terminate as of
the Effective Time and any and all rights under any provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary
thereof shall be cancelled by the Company as of the Effective Time.
Employment Agreements and Termination. In the Pre-Acquisition Agreement, the
Offeror agreed, and after the Effective Time agreed to cause the Company and
any successor to the Company to agree, to honour and comply with the terms of
any existing executive termination and severance agreements, plans or policies
of the Company and its subsidiaries. In addition, if UTC, the Offeror or the
Company choose to terminate, whether constructively or actually, the
employment of any employees (other than for cause) of the Company or any of
its subsidiaries within one year of the completion of the Offer, notice and
severance shall be provided to such employees in accordance with the Company's
existing severance practices.
Representations and Warranties. The Pre-Acquisition Agreement contains
various customary representations and warranties of one or all of the parties
thereto, including representations by the Company with respect to the
following: (i) corporate organization, qualification and authority to do
business, (ii) corporate authority, (iii) absence of conflicts under the
Company's governing documents or material contracts and absence of
governmental or legal restrictions, (iv) authorized and outstanding capital,
(v) absence of material adverse change, (vi) absence of material undisclosed
liabilities, (vii) absence of brokerage fees, (viii) conduct of business, (ix)
absence of material misstatements in filings made with Securities Authorities,
(x) United States registration, (xi) ownership of subsidiaries, (xii) absence
of material litigation, (xiii) insurance, (xiv) absence of undisclosed
material environmental liabilities, (xv) Company benefit plans, (xvi) tax
matters, (xvii) "Year 2000" compliance, (xviii) absence of material defaults
or violations of law, and (xvix) the Company's borrowing capacity under
certain debt instruments applicable to the Company; and representations and
warranties of UTC and the Offeror with respect to the following: (i)
organization, qualification and authority to do business, (ii) corporate
authority, (iii) absence of conflicts under the Company's governing documents
or material contracts and absence of governmental or legal restrictions, (iv)
availability of funds to pay for Shares tendered pursuant to the Offer or
acquired in any Second Stage Transaction, and (v) absence of certain
litigation. None of the representations and warranties of the parties shall
survive the Effective Time or, in the case of the Company, shall survive the
acceptance of, and payment for, any Shares by the Offeror pursuant to the
Offer.
Conduct of Business. Under the Pre-Acquisition Agreement, the Company has
covenanted and agreed that, during the period from the date of the Pre-
Acquisition Agreement until the termination of the Pre-Acquisition Agreement,
except as otherwise contemplated by the Pre-Acquisition Agreement or to the
extent that the Offeror shall otherwise consent in writing:
(a) the business of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action
except in, the usual and ordinary course of business and consistent
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with past practice, and the Company shall use all commercially reasonable
efforts to maintain and preserve its and its subsidiaries' business
organization, assets, employees and advantageous business relationships;
(b) the Company shall not directly or indirectly do or permit to occur
any of the following: (i) amend the Company's governing documents; (ii)
declare, set aside or pay any dividend or other distribution or payment
(whether in cash, Shares or property) in respect of its share capital;
(iii) issue, grant, sell or pledge or agree to issue, grant, sell or pledge
any Shares of the Company or its subsidiaries, or securities convertible
into or exchangeable or exercisable for, or otherwise evidencing a right to
acquire, Shares of the Company or its subsidiaries, other than Shares
issuable pursuant to the terms of Company Options outstanding on the date
of the Pre-Acquisition Agreement; (iv) redeem, purchase or otherwise
acquire any of its outstanding Shares or other securities; (v) split,
combine or reclassify any of its Shares; (vi) adopt a plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or reorganization of the Company or any of its subsidiaries;
or (vii) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing, except as permitted
above;
(c) other than pursuant to commitments entered into prior to the date of
the Pre-Acquisition Agreement, neither the Company nor any of its
subsidiaries shall directly or indirectly: (i) sell, pledge, dispose of or
encumber any assets except in the ordinary course of business; (ii) acquire
(by merger, amalgamation, consolidation or acquisition of shares or assets)
any corporation, partnership or other business organization or division
thereof, or, except for investments in securities made in the ordinary
course of business, make any investment either by purchase of shares or
securities, contributions of capital (other than to subsidiaries), property
transfer, or, except in the ordinary course of business, purchase of any
property or assets of any other individual or entity; (iii) incur any
indebtedness for borrowed money or any other material liability or
obligation or issue any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for, the obligations of
any other individual or entity, or make any loans or advances, except in
the ordinary course of business; (iv) except for the Officer Obligations
(defined in the Pre-Acquisition Agreement as existing written obligations
or liabilities of the Company or any of its subsidiaries to pay any amount
to its officers, directors or employees, other than for salary, bonuses
under their existing bonus arrangements and directors' fees in the ordinary
course and, without limiting the generality of the foregoing, shall include
the obligations of the Company or any of its subsidiaries to officers or
employees (1) for severance or termination payments on the change of
control of the Company pursuant to any executive involuntary severance and
termination agreements in the case of officers and pursuant to the
Company's severance policy in the case of employees, and (2) for retention
bonus payments pursuant to any retention bonus program), pay, discharge or
satisfy any material claims, liabilities or obligations other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against
in its financial statements or incurred in the ordinary course of business
consistent with past practice; (v) authorize, recommend or propose any
release or relinquishment of any material contract right other than in the
ordinary course of business consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change
in any material respect any existing material license, lease, contract,
production sharing agreement, government land concession or other document,
other than in the ordinary course of business consistent with past
practice; (vii) enter into any interest rate swaps, currency swaps or any
other rate fixing agreement for a financial transaction or enter into any
call arrangement of any sort or any forward sale agreement for commodities,
other than in the ordinary course of business consistent with past
practice; (viii) authorize or propose any of the foregoing, or enter into
or modify any contract, agreement, commitment or arrangement to do any of
the foregoing; or (ix) make any capital expenditures other than in
accordance with the 1999 capital expenditure budget previously disclosed in
writing to UTC;
(d) neither the Company nor any of its subsidiaries shall create any new
Officer Obligations and, except for payment of the existing Officer
Obligations, neither the Company nor any of its subsidiaries shall grant to
any officer or director an increase in compensation in any form, grant any
general salary increase other than in accordance with the requirements of
any existing collective bargaining or union contracts, grant to any other
employee any increase in compensation in any form other than routine
increases in the
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ordinary course of business consistent with past practices, make any loan
to any officer or director, or take any action with respect to the grant of
any severance or termination pay arising from the Offer or a change of
control of the Company or the entering into of any employment agreement
with, any senior officer or director, or with respect to any increase of
benefits payable under its current severance or termination pay policies;
(e) neither the Company nor any of its subsidiaries shall adopt or amend
or make any contribution to any bonus, profit sharing, option, pension,
retirement, deferred compensation, insurance, incentive compensation, other
compensation or other similar plan, agreement, trust, fund or arrangements
for the benefit of employees, except as is necessary to comply with the law
or as required by existing provisions of any such plans, programs,
arrangements or agreements; and
(f) the Company shall use its reasonable efforts to cause its current
insurance (or re-insurance) policies not be cancelled or terminated or any
of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies underwritten by
insurance and re-insurance companies of nationally recognized standing
providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums
are in full force and effect.
Shareholders Meeting for Second Stage Transaction; Information Circular. The
Pre-Acquisition Agreement provides that if any Second Stage Transaction
requires the approval of the Company's shareholders (the "Company Shareholder
Approval"), the Company will, as soon as practicable and in accordance with
the Securities Laws, other applicable Canadian laws, the Governing Documents
and the requirements of The Toronto Stock Exchange and the American Stock
Exchange or any other regulatory authority having jurisdiction, duly call,
give notice of, convene and hold a meeting of its shareholders (the
"Shareholders Meeting") to consider and vote upon the Second Stage
Transaction.
The Pre-Acquisition Agreement provides that if a Shareholders Meeting is
required, the Company will mail to its shareholders an Information Circular
(which shall include such proxy or other required informational statement or
circular, as the case may be, and all related materials at the time required
to be mailed to the Company's shareholders and all amendments or supplements
thereto, if any) with respect to the Shareholders Meeting.
No Solicitation; Directors' Recommendation. Pursuant to the Pre-Acquisition
Agreement, the Company has agreed to immediately cease and cause to be
terminated all existing discussions and negotiations, if any, with any parties
conducted before the date of the Pre-Acquisition Agreement with respect to any
Take-over Proposal (as defined below) and, without limitation, shall promptly,
following the execution of the Pre-Acquisition Agreement, request the return
of all confidential information provided by the Company to all parties who
have had such discussions or negotiations or who have entered into
confidentiality agreements with the Company pertaining to the sale of the
Company or a substantial portion of its assets.
The Pre-Acquisition Agreement provides that neither the Company nor any of
its subsidiaries, nor any of their respective directors, officers, employees,
agents, financial advisors, counsel or other representatives shall, directly
or indirectly, (i) solicit, initiate or encourage, or enter into any
agreements or understandings with respect to, any Take-over Proposal (as
defined below) (other than from UTC and its subsidiaries and their respective
directors, officers, employees, agents, financial advisors, counsel or other
representatives) or (ii) provide any confidential information to any person or
entity (other than UTC and its affiliates) or (iii) participate in any
discussions or negotiations relating to any such Take-over Proposal.
Notwithstanding the foregoing, if a party that has proposed a Take-over
Proposal (as defined below) that the Board determines is reasonably likely to
lead to a Superior Take-over Proposal has requested confidential information,
the Board, subject to its fiduciary obligations and entering into a suitable
confidentiality agreement with such party, may provide to such party the same
information as has been provided to UTC and may consider and negotiate a
Superior Take-over Proposal. Neither the Company nor the Board, however, may
approve, make a recommendation to the Company's shareholders or enter into an
agreement with respect to a Superior Take-over Proposal unless the Pre-
Acquisition
8
Agreement has been previously terminated. The Company also is prohibited from
waiving the "standstill" provisions applicable to any confidentiality
agreement to which it is a party (except with respect to UTC).
For purposes of the Pre-Acquisition Agreement, "Take-over Proposal" means,
in respect of the Company or its subsidiaries or their assets, any proposal or
offer regarding any take-over bid, merger, consolidation, amalgamation,
arrangement, sale of a material amount of assets, sale of treasury shares
(other than pursuant to options under the Stock Option Plans) or other
business combination or similar transaction. "Superior Take-over Proposal"
means any written unsolicited Take-over Proposal (i) which, in the opinion of
the Board, after consulting with and receipt of advice from its independent
financial advisor, is more favorable to the Company's shareholders from a
financial point of view than the Offer (including, and after considering, any
adjustment to the terms and conditions proposed by UTC and Offeror in response
to such Take-over Proposal), and (if such Take-over Proposal includes cash as
consideration) that sufficient financing commitments have been obtained with
respect to such Take-over Proposal that it reasonably expects a transaction
pursuant to such proposal could be consummated and that such transaction is
reasonably capable of being consummated without material delay taking into
account all legal, accounting, regulatory and other aspects of such Take-over
Proposal; and (ii) with respect to which UTC has received a copy of such Take-
over Proposal as executed by the party making the proposal, at least 48 hours
prior to acceptance or recommendation of such proposal by the Board.
Pursuant to the Pre-Acquisition Agreement, the Board has agreed, subject to
its fiduciary obligations and certain other conditions set forth below, to
recommend acceptance of the Offer by the Company's shareholders, provided that
the Offer is not amended except in accordance with the terms of the Pre-
Acquisition Agreement. On the date the Offer Documents are filed with the
appropriate Securities Authorities, the Company has agreed to file a
directors' circular with respect to the Offer which shall comply in all
material respects with the requirements of applicable Securities Laws and
which shall contain the recommendation of acceptance of the Offer, as well as
notification of the intention of the directors of the Company to tender their
Shares pursuant to the Offer, and shall mail the directors' circular to the
Company's shareholders. The Company agreed to provide UTC with any comments
the Company or its counsel may receive from the Securities Authorities with
respect to such directors' circular promptly after the receipt of such
comments.
The Pre-Acquisition Agreement provides that, in the event that a Superior
Take-over Proposal is offered or made to the Company's shareholders or to the
Company prior to the expiration of the Offer, the Board may withdraw, modify
or change any recommendation regarding the Offer if the Board, acting in good
faith, after consulting outside counsel, determines that the directors are
required to do so in order to discharge properly their fiduciary duties under
applicable law.
Regulatory Filings. In the Pre-Acquisition Agreement, the parties have
agreed to (i) promptly take all actions necessary to make the filings required
of UTC, the Offeror, the Company or any of their affiliates under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR"), and the
Competition Act (Canada), as amended, and any other similar statutes in other
jurisdictions, (ii) comply at the earliest practicable date with any request
for additional information or documentary material received by any of the
parties and their affiliates from the U.S. Department of Justice pursuant to
HSR or from the Canadian Competition Bureau pursuant to the Competition Act
(Canada), as amended, or any other governmental authority, as the case may be,
(iii) consult and cooperate in connection with any investigation or other
inquiry concerning the transactions contemplated by the Pre-Acquisition
Agreement commenced by the U.S. Federal Trade Commission (the "FTC") or the
Antitrust Division of the U.S. Department of Justice (the "Antitrust
Division") or state attorneys general or by the Canadian Competition Bureau,
as the case may be, (iv) as promptly as practicable, make any necessary
filings under the Investment Canada Act, as amended or any other governmental
authority; (v) as promptly as possible, prepare and file any filings required
under Securities Laws, the rules of The Toronto Stock Exchange and the
American Stock Exchange, or any other applicable law relating to the
transactions contemplated by the Pre-Acquisition Agreement.
Pursuant to the Pre-Acquisition Agreement, the parties have agreed to
promptly inform the other parties of any material communication received by
such party from the FTC, the Antitrust Division, the Canadian
9
Competition Bureau or any other governmental authority regarding any of the
transactions contemplated by the Pre-Acquisition Agreement. In addition, UTC
and the Offeror have agreed to advise the Company promptly of any
understandings, undertakings or agreements which such parties propose to make
or enter into with the FTC, the Antitrust Division, the Canadian Competition
Bureau or any other governmental authority in connection with the transactions
contemplated by the Pre-Acquisition Agreement.
Debt Obligations. In the Pre-Acquisition Agreement, the Company has agreed
to use reasonable efforts to cooperate and assist UTC in obtaining consents to
modifications and in purchasing certain of the Company's outstanding debt
obligations, including the conduct of (or provision of assistance to UTC in
conducting) a consent solicitation and tender offer for the outstanding debt
securities of the Company or its subsidiaries on terms satisfactory to UTC;
provided that (i) the Company shall not be required to purchase any debt
obligations or pay any fees in connection with such efforts prior to
consummation of any Second Stage Transaction, unless funds therefor are
provided by UTC on terms satisfactory to the Company and (ii) UTC shall pay or
reimburse the Company for all reasonable expenses in connection therewith. The
Company also represented that, as of the date of the Pre-Acquisition
Agreement, the Company was able to incur at least $1.00 of additional
Indebtedness under certain of its existing debt instruments. The Company is
advised that UTC or its affiliates intend to make a tender offer/consent
solicitation for certain of the Company's outstanding debt obligations that
will be contingent upon consummation of the transactions contemplated by the
Pre-Acquisition Agreement.
Compensation; Benefit Plans. Pursuant to the Pre-Acquisition Agreement,
except as otherwise agreed with a relevant employee, UTC and the Offeror
agree, and after the Effective Time will cause the Company and any successor
thereto to agree to maintain until December 31, 1999 salaries and all benefit
plans and compensation programs currently available to employees of the
Company or any of its subsidiaries, including without limitation members of
management of the Company or any of its subsidiaries, or to make available
until December 31, 1999 alternative benefit plans and compensation programs
which are comparable in the aggregate to those currently available to such
employees. For these purposes, "benefit plans" means all arrangements,
agreements, programs or policies, whether funded or unfunded, relating to
employees to which the Company or any of its subsidiaries is a party or by
which it is bound and under which the Company or any of its subsidiaries have
any liability or contingent liability and relating to: (i) retirement savings
or pensions, including any defined benefit pension plan, defined contribution
plan, group registered retirement savings plan, thrift and saving plan or
supplemental pension or retirement plan; (ii) employee welfare benefits, as
defined for purposes of Section 3(1) of the Employee Retirement Income
Security Act of 1974 (United States), as amended, including hospitalization,
health, disability, life or severance pay benefits; and (iii) profit sharing,
bonus, stock incentive, stock purchase and other incentive plans or programs.
Indemnification. The Pre-Acquisition Agreement provides that if UTC acquires
the Shares under the Offer, UTC shall cause the Company to fulfill its
obligations pursuant to indemnities provided or available to past and present
officers and directors of the Company pursuant to the provisions of the
Company's governing documents, the Canada Business Corporations Act, as
amended (the "Canada BCA"), and the written indemnity agreements entered into
between the Company and its officers and directors.
Pursuant to the Pre-Acquisition Agreement, the Offeror has agreed to use
reasonable efforts to secure directors' and officers' liability insurance
coverage for the Company's current and former directors and officers on a six
year "trailing" or "runoff" basis from and after the Effective Time. If a
"trailing" policy is not available, then the Offeror has agreed that for the
entire period from the Effective Time until six years after the Effective
Time, the Offeror will use reasonable efforts to cause the Company or any
successor thereto to maintain the Company's current directors' and officers'
insurance policy or an equivalent policy, subject in either case to terms and
conditions no less advantageous to the directors and officers of the Company
than those contained in the policy in effect on the date of the Pre-
Acquisition Agreement, for all present and former directors and officers of
the Company, covering claims made prior to or within six years after the
Effective Time. The Offeror, however, shall not be required to pay an annual
premium in excess of 200% of the aggregate annual amounts currently paid by
the Company to maintain the existing policies (the "Insurance Amount") and, if
equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of such amount,
10
Offeror shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
Termination. The Pre-Acquisition Agreement may be terminated upon written
notice at any time prior to the completion of the transactions contemplated
thereby:
(a) by mutual written consent of UTC and the Company;
(b) by either UTC or the Company (provided that the terminating party is
not then in breach, in any material respect, of any covenant or other
agreement contained in the Pre-Acquisition Agreement and no representation
or warranty of such terminating party contained in the Pre-Acquisition
Agreement that is qualified as to materiality shall be untrue or incorrect,
and no representation or warranty of such terminating party contained in
the Pre-Acquisition Agreement that is not so qualified shall be untrue or
incorrect in any material respect, at any time before the Effective Time,
in each case, as if made at and as of such time (or, to the extent such
representation or warranty speaks as of a specific date, no such
representation or warranty was so untrue or incorrect as of such date)), if
there shall have been a breach, in any material respect, of any covenant or
other agreement contained in the Pre-Acquisition Agreement on the part of
the other party or if any representation or warranty of such other party
contained in the Pre-Acquisition Agreement that is qualified as to
materiality shall not be true and correct, or any representation or
warranty of such other party contained in the Pre-Acquisition Agreement
that is not so qualified shall not be true and correct in all material
respects, at any time before the Effective Time, in each case as if made at
and as of such time (or, to the extent such representation or warranty
speaks as of a specific date, such representation or warranty was not so
true and correct as of such date), which breach or misrepresentation is not
cured within 10 days following written notice to such other party, or such
breach, by its nature or timing cannot be cured prior to the expiration of
the Offer;
(c) by the Company, following receipt of, and in order to accept or
recommend, a Superior Take-over Proposal if, after consulting with outside
counsel, the Board has determined that such action is required in order to
discharge properly the directors' fiduciary duties under applicable law;
(d) by UTC, if (i) the Board or any committee thereof modifies or amends
in any manner adverse to UTC or Offeror, or withdraws, its authorization,
approval or recommendation of the Offer or the Pre-Acquisition Agreement or
shall have resolved to do any of the foregoing or (ii) the Company or any
of its subsidiaries (or the Board or any committee thereof) shall have
approved, recommended, authorized, proposed or filed a document with any
Securities Authority not opposing, or publicly announced its intention to
enter into any Take-over Proposal (other than with UTC, Offeror or any of
their affiliates), or shall have resolved to do any of the foregoing;
(e) by either UTC or the Company, if the Offer terminates or expires at
the Expiry Time, without the Offeror taking up and paying for any Shares on
account of the failure of any of the Offer Conditions which has not been
waived by Offeror, unless the absence of such occurrence shall be due to
the failure of the party seeking to terminate the Pre-Acquisition Agreement
to perform its requisite obligations hereunder; or
(f) by either UTC or the Company, if the date that Offeror first takes up
and acquires Shares pursuant to the Offer (the "Take-up Date") has not
occurred on or prior to December 15, 1999.
In the event of a termination of the Pre-Acquisition Agreement by either the
Company or UTC as provided under "--Termination", the Pre-Acquisition
Agreement shall forthwith have no further force or effect and there shall be
no obligation on the part of UTC, the Offeror or the Company thereunder,
except (A) UTC shall be obligated to reimburse the Company for certain
expenses that it may have incurred in connection with repurchasing debt
obligations of the Company, (B) if the Pre-Acquisition Agreement is terminated
pursuant to subsections (c) or (d) described under "--Termination" above, the
Company is required to pay UTC $15 million either concurrently (in the case of
a termination under subsection (c)) or within two business days after the
termination (in the case of a termination under (d)), and (C) if the Pre-
Acquisition Agreement is terminated pursuant to subsections (e) or (f)
described under "--Termination" above, principally as a result of the failure
to obtain
11
antitrust approvals contemplated under clause (b) of the Offer Conditions (See
"--Certain Conditions of the Offer" below), UTC shall pay the Company $10
million unless the Company has breached certain covenants in the Pre-
Acquisition Agreement.
In addition, the Pre-Acquisition Agreement provides that if a Take-over
Proposal is announced publicly while the Offer is open for acceptance and the
minimum acceptance condition contemplated under clause (a) of the Offer
Conditions is not satisfied at the expiration of the Offer (other than
principally as a result of a failure to obtain antitrust approvals), then,
within two business days after such expiration, the Company shall pay UTC a
fee in the amount of $15 million. In the event a Take-over Proposal is
announced publicly and made after the expiration of the Offer but prior to
March 31, 2000, then, if Offeror did not take up and pay for any Shares under
the Offer, and the Company was not entitled to any payment from UTC because of
a failure to obtain antitrust approvals, the Company, within two business days
after such Take-over Proposal is made, shall pay to UTC a fee in the amount of
$15 million.
Extension; Waiver. The Pre-Acquisition Agreement provides that UTC and the
Offeror, on the one hand, and the Company, on the other hand, may (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive compliance with any of the other's agreements or the
fulfillment of any conditions to its own obligations contained in the Pre-
Acquisition Agreement, or (iii) waive inaccuracies in any of the other's
representations and warranties contained in the Pre-Acquisition Agreement or
in any document delivered pursuant thereto; provided, however, that any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Amendment. The Pre-Acquisition Agreement provides that it may be amended by
mutual agreement between the parties thereto, by an instrument in writing
signed by the appropriate officers on behalf of each of the parties thereto.
Certain Conditions of the Offer. Notwithstanding any other term of the
Offer, the obligation of the Offeror to, and of UTC to cause the Offeror to,
commence the Offer, conduct and consummate the Offer and accept for payment
or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to the Offeror's
obligation to pay for or return tendered Shares after the termination or
withdrawal of the Offer), to pay for, any Shares tendered (and not properly
withdrawn) pursuant to the Offer shall be subject only to the following Offer
Conditions:
(a) at the expiration of the Offer, the number of Shares that shall have
been validly deposited under the Offer (and not properly withdrawn),
together with any Shares held by or on behalf of UTC, or any of its
subsidiaries, shall constitute at least 71.0% of the outstanding Shares
(calculated on a diluted basis);
(b) all material requisite governmental and regulatory approvals and
consents (including, without limitation, those of any stock exchanges or
Securities Authorities) required in UTC's reasonable judgment to make
lawful the purchase by, or the sale to, the Offeror, of the Shares (whether
under the Offer, a compulsory acquisition or Second Stage Transaction)
shall have been obtained and all applicable statutory or regulatory waiting
periods during the pendency of which the purchase by, or the sale to,
Offeror of the Shares would be illegal shall have expired or been
terminated without the imposition of any conditions that, individually or
in the aggregate, have or are reasonably likely to have the consequences
referred to in clauses (i) through (iii) of paragraph (c) below; without
limiting the foregoing: (i) the applicable waiting periods under HSR and
the Competition Act with respect to the Offer shall have expired or been
terminated; (ii) the Offer shall have been approved or deemed to be
approved or exempted pursuant to the Investment Canada Act; and (iii) all
other consents and approvals without which in UTC's reasonable judgment the
purchase by, or the sale to, Offeror of the Shares (whether under the
Offer, a compulsory acquisition or Second Stage Transaction) would be
illegal have been obtained;
(c) no statute, rule, regulation, executive or other order shall have
been enacted, issued, promulgated or enforced by any governmental authority
and no preliminary or permanent injunction, temporary restraining order or
other legal restraint or prohibition shall have been threatened or issued
by (and no
12
action, proceeding or counterclaim shall be pending or threatened by or
before) a court or other governmental authority (i) preventing or
rendering, or seeking to prevent or render, illegal the making of the
Offer, the acceptance for payment of, the payment for, or ownership,
directly or indirectly, of some or all of the Shares by Offeror or the
completion of a compulsory acquisition or Second Stage Transaction,
(ii) imposing or confirming, or seeking to impose or confirm, limitations
on the ability of UTC or Offeror, directly or indirectly, effectively to
acquire or hold or to exercise full rights of ownership of the Shares or
otherwise control the Company, in a manner that, in the reasonable judgment
of UTC, would reasonably be expected, in the aggregate, to materially
impair the overall benefits to be realized by UTC from consummation of the
Offer and the other transactions contemplated by the Pre-Acquisition
Agreement, or (iii) requiring, or seeking to require, divestiture by
Offeror, directly or indirectly, of any Shares or requiring Offeror, UTC,
the Company or any of their respective subsidiaries or affiliates to
dispose of or hold separate all or any portion of their respective
businesses, assets or properties or imposing any limitations on the ability
of any of such entities to conduct their respective businesses or own such
assets, properties or the Shares or on the ability of UTC or Offeror to
conduct the business of the Company and its subsidiaries and own the assets
and properties of the Company and its subsidiaries, in each case under this
clause (iii) in a manner that, in the reasonable judgment of UTC, would
reasonably be expected, in the aggregate, to materially impair the overall
benefits to be realized by UTC from consummation of the Offer and the other
transactions contemplated by the Pre-Acquisition Agreement;
(d) (i) the Company shall not have breached, or failed to comply with, in
any material respect, any of its covenants or other obligations under the
Pre-Acquisition Agreement, and (ii) each of the representations and
warranties of the Company contained in the Pre-Acquisition Agreement that
is qualified as to materiality shall be true and correct and any such
representation or warranty that is not so qualified shall be true and
correct, in all material respects, as of the date of the Pre-Acquisition
Agreement and as of the expiration of the Offer as if made on and as of the
expiration of the Offer (except to the extent such representations and
warranties speak as of a specific date, which shall be so true and correct
as of such date); provided that in either case the Company has been given
notice of and ten (10) business days to cure any such misrepresentation,
breach or non-performance or such misrepresentation, breach or non-
performance by its timing or nature cannot be cured before such tenth
business day;
(e) at any time after the date of the Pre-Acquisition Agreement, there
shall not have occurred any event, occurrence, development or state of
circumstances that has had any effect on the business, operations, results
of operations or financial condition of the Company or any of its
subsidiaries that, individually or in the aggregate, is materially adverse
to the business of the Company and its subsidiaries considered as a whole,
other than any such effect (i) which arises out of a matter that has been
publicly disclosed prior to the date of the Pre-Acquisition Agreement or
otherwise disclosed to UTC in the disclosure schedule to the Pre-
Acquisition Agreement, (ii) resulting from conditions affecting the
residential and light commercial air conditioning and heating product
industries in Canada and the United States, (iii) resulting from general
economic, financial, currency exchange, securities or commodity market
conditions in Canada, the United States or elsewhere or (iv) resulting
solely from the public announcement of the transactions contemplated by the
Pre-Acquisition Agreement;
(f) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or major financial occurrence
of national or international consequence or any law, regulation, action,
governmental regulation, inquiry or other occurrence of any nature
whatsoever which, in the reasonable judgment of UTC, materially adversely
affects or involves, the general economic, financial, currency exchange,
securities or commodity market operations in Canada or the United States;
(g) neither the Company nor any of its subsidiaries (or the Board or any
committee thereof) shall have approved, recommended, authorized, proposed,
filed a document with any Securities Authorities not opposing, or publicly
announced its intention to enter into, any Take-over Proposal (other than
with Offeror or any of its affiliates) and shall not have resolved to do
any of the foregoing;
(h) the Pre-Acquisition Agreement shall not have been terminated pursuant
to its terms; and
13
(i) the Board or any committee thereof shall not have modified or amended
in any manner adverse to UTC or Offeror, and shall not have withdrawn, its
authorization, approval or recommendation of the Offer or this Agreement
and shall not have resolved to do any of the foregoing.
The Shareholder Agreements
On June 23, 1999 and concurrently with the execution of the Pre-Acquisition
Agreement, the Offeror entered into Shareholder Agreements with each of Ravine
Partners and Ontario Teachers. Xxxxxxx X. Xxxxxx, the Chairman of the Board,
is the general partner of Ravine Partners and Xxx X. Xxxxxxx, a director of
the Company, is an employee of Ontario Teachers.
Pursuant to the Shareholder Agreements, Ravine Partners has agreed to
validly tender and not withdraw 7,889,870 Shares (representing approximately
19.34% of the outstanding Shares on an undiluted basis) and Ontario Teachers
has agreed to validly tender and not withdraw 7,919,638 Shares (representing
approximately 19.42% of the outstanding Shares on an undiluted basis), unless
(in the case of Ontario Teachers only) a Superior Take-over Proposal is made.
In addition, Ravine Partners has granted the Offeror an option to purchase its
Shares at a price of $11.75 per Share (or any greater amount per Share paid in
the Offer). Such option is exercisable in certain circumstances following
termination of the Pre-Acquisition Agreement.
The option to acquire Ravine Partners' Shares is exercisable if (a) the Pre-
Acquisition Agreement is terminated (i) by the Company because the Company has
received a Superior Take-over Proposal and the Board has determined that its
fiduciary duties require it to terminate the Pre-Acquisition Agreement, or
(ii) by UTC because (A) the Board or any committee thereof has modified in any
manner adverse to UTC or the Offeror or withdrawn its approval or
recommendation of the Offer or (B) the Company has publicly announced its
intention to enter into a business combination with any person other than UTC
or the Offeror or taken other public actions not opposing any Take-over
Proposal (other than with UTC or the Offeror); (b) a Take-over Proposal with
respect to the Company is announced by a person other than UTC or the Offeror
while the Offer is open and the minimum acceptance condition contemplated
under subsection (a) described under "--Certain Conditions of the Offer" is
not satisfied (other than principally as a result of a failure to obtain
antitrust approvals); or (c) a Take-over Proposal with respect to the Company
is announced by a person other than UTC or the Offeror after the Offer has
closed but prior to March 31, 2000 and the Offeror did not consummate the
Offer (other than principally as a result of a failure to obtain antitrust
approvals).
If the Offeror acquires Ravine Partners' Shares by exercising its option and
then sells such Shares to a buyer in connection with any Take-over Proposal
within 12 months of the Closing, Ravine Partners is entitled to receive 75% of
the excess of the aggregate proceeds received by the Offeror in such sale over
the aggregate price the Offeror paid in exercising the option for those
Shares.
The Shareholder Agreements also contain covenants by Ravine Partners and
Ontario Teachers not to take any action to solicit, initiate or encourage
inquiries, proposals or offers from, or provide information to any other
person relating to the direct or indirect acquisition or disposition of any
securities of the Company or its subsidiaries. Each of Ravine Partners and
Ontario Teachers further covenants not to cooperate or participate in any
amalgamation, merger or other business combination of the Company or its
subsidiaries and not to dispose of any of their Shares, except in accordance
with the applicable Shareholder Agreement.
The Shareholder Agreements further contain a covenant by Ravine Partners and
Ontario Teachers to use all reasonable efforts to cause their associates who
serve directors of the Company to resign as the Offeror requests after the
Offeror acquires the Shares under the Offer. Currently, two Board members, one
of whom is the Chairman of the Board, are designees of Ravine Partners and
Ontario Teachers.
In the case of the Shareholder Agreement with Ravine Partners, if the option
is not exercised then from and after the date when the option ceases to be
exercisable, the Shareholder Agreement terminates. Ontario Teachers may
terminate its Shareholder Agreement at the earlier of (i) a third party's
making a bona fide offer that
14
constitutes a Superior Take-over Proposal; (ii) termination of the Pre-
Acquisition Agreement; and (iii) December 15, 1999.
BOARD OF DIRECTORS OF THE COMPANY
The members of the Board of ICP are Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxx, Q.C.,
W. Xxxxxxx Xxxxx, The Honourable Xxxxxxx X. Xxxxx, P.C., C.C., Q.C., Xxxx X.
Xxxxxx, O.C., Xxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx X.
Xxxxxx, Xxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx.
15
OWNERSHIP OF SHARES OF THE COMPANY BY DIRECTORS AND SENIOR OFFICERS
The following table sets forth the number and percentage of Shares
(excluding stock options) owned, or over which control or direction is
exercised, by each director and senior officer of the Company and by each
associate thereof. The number of Shares (excluding those issuable upon the
exercise of outstanding stock options) owned by the following directors and
senior officers of the Company aggregates 16,531,528, representing
approximately 40.53% of the outstanding Shares on an undiluted basis. Other
than an aggregate 270,000 Shares held by the International Comfort Products
Corporation (USA) Retirement Plan for Hourly Employees and the International
Comfort Products Corporation (USA) Retirement Plan for Salaried Employees, no
securities of the Company are owned, directly or indirectly, or controlled by
any person acting jointly or in concert with the Company.
Number and Percentage of
Shares Owned or Over Which
Directors Position with the Company Control or Direction is Exercised
--------- ------------------------- --------------------------------------
Xxxxxxx X. Xxxxxxx...... Director 3,389 Less than 1%
Xxxxxxx X. Xxxx, Q.C.... Director 2,723 Less than 1%
W. Xxxxxxx Xxxxx........ President, Chief Executive 32,075 Less than 1%
Officer and Director
The Honourable Xxxxxxx
X. Xxxxx, P.C., C.C.,
Q.C.................... Director 2,337 Less than 1%
Xxxx X. Xxxxxx, O.C..... Director 5,171 Less than 1%
Xxx X. Xxxxxxx.......... Director 7,919,638(1) 19.42%
Xxxxxx X. Xxxxxxxx...... Director 18,183 Less than 1%
Xxxxxx X. Xxxxxxx....... Director 9,800 Less than 1%
Xxxxx X. Xxxxxx......... Director 3,585 Less than 1%
Xxxxx X. Xxxxxx......... Director 21,568(2) Less than 1%
Xxxxxxx X. Xxxxxx....... Chairman of the Board 8,304,111(3) 20.36%
Xxxxxxx X. Xxxxxx....... Director 11,634 Less than 1%
Senior Officers
---------------
Xxxxx X. Xxxx........... Senior Vice President, General 28,192 Less than 1%
Counsel and Secretary
Xxxxxxx X. Xxxxxxx...... Senior Vice President, Chief 13,671 Less than 1%
Financial Officer and Treasurer
Xxxxxxx X. Xxxxx........ Senior Vice President, Canadian 10,000 Less than 1%
Distributions and Operations
Xxxxxxx X. Xxxxxxx...... Senior Vice President, Business 27,819 Less than 1%
Development
Xxxxxx X. Xxxxxxxxxx.... Senior Vice President, Human 8,119 Less than 1%
Resources and Administration
Xxxxxx X. Xxxxx......... Senior Vice President, Sales 1,995 Less than 1%
and Marketing
Xxxxxxx X. Xxxxxx....... Senior Vice President, 28,884 Less than 1%
International and Aftermarket
Xxxxx X. Xxxxxxxxxx..... Vice President, Commercial 8,924 Less than 1%
Products Group
Xxxxx X. Xxxxx.......... Vice President, Corporate 8,412(4) Less than 1%
Communications
Xxxxx X. Xxxxx.......... Senior Vice President, 61,298 Less than 1%
Residential Products Group
--------
(1) Includes 7,916,638 Shares owned by Ontario Teachers, of which Xx. Xxxxxxx
is an employee. Xx. Xxxxxxx disclaims any beneficial interest in the
Shares owned by Ontario Teachers.
(2) Includes 6,125 Shares owned by Xx. Xxxxxx'x spouse.
(3) Includes 7,889,870 Shares owned by Ravine Partners, of which Xx. Xxxxxx is
the general partner.
(4) Includes 1,762 Shares owned by Xx. Xxxxx'x spouse.
16
PRINCIPAL HOLDERS OF SECURITIES OF THE COMPANY
To the knowledge of the Board, after reasonable inquiry, no person or
company beneficially owns or exercises control or direction over or holds more
than 10% of the Shares on an undiluted basis, other than as set forth below:
Number of Shares Owned
or Over Which Control
or Direction is Percentage of
Name and Address of Beneficial Owner Exercised Outstanding Shares
------------------------------------ ---------------------- ------------------
Ravine Partners, Ltd. .............. 8,304,111(1) 20.36%
0000 XxXxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Ontario Teachers' Pension Plan Board
................................... 7,919,638(2) 19.42%
0000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxx, Xxxxxxx X0X 0X0
--------
(1) Includes 414,241 Shares owned by Xxxxxxx X. Xxxxxx, the Chairman of the
Board, who is the general partner of Ravine Partners.
(2) Includes 3,000 Shares owned by Xxx X. Xxxxxxx, a director of the Company,
who is an employee of Ontario Teachers.
ACCEPTANCE OF OFFER
Ravine Partners, of which Xxxxxxx X. Xxxxxx, the Chairman of the Board, is
the general partner, has agreed to deposit the 7,889,870 Shares owned by them
under the Offer. Ontario Teachers, of which Xxx X. Xxxxxxx, a director of the
Company, is an employee, has agreed to deposit 7,919,638 Shares under the
Offer. See "Agreements with United Technologies Corporation and the Offeror".
In addition, to the knowledge of the Board, each of the directors and nine
of the eleven senior officers of ICP and their respective associates who own
Shares currently intend to deposit under the Offer all Shares owned by them,
and, to the extent that any senior officers who hold options to purchase
Shares opt to exercise such options prior to the expiry of the Offer, to the
knowledge of the Board nine of the eleven senior officers currently intend to
deposit to the Offer all Shares acquired on any such exercise. The remaining
two senior officers have not yet formed an intention with respect to the
deposit of their Shares.
TRADING IN SHARES OF THE COMPANY
During the six months preceding the date hereof, none of the Company, the
directors or senior officers of the Company or, to the knowledge of the Board,
after reasonable inquiry, any associates of the directors or senior officers
of the Company, any person or company who beneficially owns, exercises control
or direction over or holds more than 10% of the Shares (except that no
representation is made or knowledge expressed with respect to Ontario
Teachers) or any person or company acting jointly or in concert with the
Company, has traded any securities of the Company, except as noted below:
Shares Price Per
Nature of Traded Share
Name Trade Date of Trade (#) ($)
---- --------- ------------- ------ ---------
ICP.............................. bought (1) December 30, 1998 5,000 6.75
December 31, 1998 1,000 7.25
January 4, 1999 50,000 7.50
January 5, 1999 5,000 7.63
January, 6, 1999 5,000 7.63
254,100 7.00
January 7, 1999 5,000 7.35
Xxxxxxx X. Xxxxxxx............... sold June 25, 1999 8,000 11.38
--------
(1) The Shares were purchased by the Company pursuant to a stock repurchase
program commenced on September 28, 1998. Under such program, stock
repurchases are made at management's discretion through open market
purchases on the TSE and the Amex, in accordance with the rules of such
exchanges. All purchases of Shares were made on the Amex.
17
During the two years preceding the date hereof, the Company did not issue
any Shares or any securities convertible into Shares to its directors or
senior officers, except as noted below:
Grant of Options
The following options to acquire Shares were granted under the Company's
Stock Option Plans on the following dates:
Shares Under Exercise Price
Option Granted Per Share
Name Date of Grant (#) (Cdn. $)
---- --------------- -------------- --------------
Xxxxxxx X. Xxxxxxx........... April 27, 1998 25,000 15.30
Xxxxxxx X. Xxxxx............. April 27, 1998 25,000 15.30
August 11, 1998 75,000 16.00
Xxxxxx X. Xxxxx.............. April 27, 1998 25,000 15.30
Xxxxx X. Xxxxxxxxxx.......... August 11, 1998 75,000 16.00
Xxxxx X. Xxxxx............... August 11, 1998 50,000 16.00
Share Purchase Plan
The following Shares were issued under the Company's Share Ownership Savings
Plan during the period July 1, 1997 to June 30, 1999:
Number of Average Price
Shares Per Share
Name (#) ($)
---- --------- -------------
Xxxxx X. Xxxx...................................... 2,922 8.10
Xxxxxxx X. Xxxxxxx................................. 671 8.11
W. Xxxxxxx Xxxxx................................... 2,571 8.10
Xxxxxxx X. Xxxxxxx................................. 2,870 8.10
Xxxxxx X. Xxxxxxxxxx............................... 2,889 8.10
Xxxxxx X. Xxxxx.................................... 1,995 8.27
Xxxxxxx X. Xxxxxx.................................. 2,938 8.10
Xxxxx X. Xxxxxxxxxx................................ 984 8.12
Xxxxx X. Xxxxx..................................... 826 8.11
Xxxxx X. Xxxxx..................................... 2,893 8.10
Directors' Share Compensation Arrangement
The following Shares were issued under the Company's Directors' Share
Compensation Arrangement during the period July 1, 1997 to June 30, 1999:
Number of Average Price
Shares Per Share
Name (#) ($)
---- --------- --------------
Xxxxxxx X. Xxxxxxx............................ 2,889 8.13
Xxxxxxx X. Xxxx, Q.C.......................... 1,670 7.74
The Honourable Xxxxxxx X. Xxxxx, P.C., C.C.,
Q.C.......................................... 1,209 7.73
Xxxx X. Xxxxxx, O.C........................... 3,197 7.57
Xxx X. Xxxxxxx................................ 7,638(1) 8.06
Xxxxxx X. Xxxxxxxx............................ 3,183 8.35
Xxxxxx X. Xxxxxxx............................. 3,858 7.61
Xxxxx X. Xxxxxx............................... 2,209 7.83
Xxxxx X. Xxxxxx............................... 1,257 7.81
Xxxxxxx X. Xxxxxx............................. 17,854 8.29
Xxxxxxx X. Xxxxxx............................. 3,831 7.68
--------
(1) The 7,638 Shares were issued to Ontario Teachers, of which Xx. Xxxxxxx is
an employee.
18
OWNERSHIP OF SECURITIES OF UNITED TECHNOLOGIES CORPORATION
Except as described below, none of the Company, the directors or senior
officers of the Company, any associates of the directors or senior officers of
the Company or, to the knowledge of the Board, after reasonable inquiry, any
person or company beneficially owning, exercising control or direction over or
holding more than 10% of the Shares (except that no representation is made or
knowledge expressed with respect to Ontario Teachers) or any person or company
acting jointly or in concert with the Company, owns or exercises control or
direction over any securities of UTC or the Offeror.
Messrs. Clevy, Gibbs, Xxxxxx and Xxxxx, senior officers of the Company,
beneficially own approximately 3,247, 2,200, 2,498 and 1,982 shares of common
stock of UTC, respectively.
RELATIONSHIP BETWEEN UNITED TECHNOLOGIES CORPORATION
AND THE DIRECTORS AND SENIOR OFFICERS OF THE COMPANY
None of the directors or senior officers of the Company are directors or
senior officers of UTC or any subsidiary of UTC, including the Offeror. Except
as described below, there are no arrangements or agreements made or currently
proposed to be made between UTC or the Offeror and any of the directors or
senior officers of the Company, including arrangements or agreements with
respect to compensation for loss of office or as to their remaining in or
retiring from office, if the Offer is consummated.
In the Pre-Acquisition Agreement, the Offeror has agreed, and after the
Effective Time (as defined therein) agreed to cause the Company and any
successor to the Company to agree, to honour and comply with the terms of any
existing executive termination and severance agreements, plans or policies of
the Company and its subsidiaries. UTC has also agreed that if it acquires
Shares under the Offer, it will cause the Company to fulfill its obligations
pursuant to indemnities provided or available to directors of the Company
pursuant to the provisions of the Company's by-laws, the Canada Business
Corporations Act and written indemnity agreements entered into between the
Company and such directors.
UTC has offered employment to each of Messrs. Xxxxx, Xxxxxxxxxx and Xxxxx,
effective upon consummation of the Offer, on terms to be negotiated. Each of
these individuals has been offered a sign-on bonus of $100,000 and the
opportunity to convert certain severance benefits and stock awards. At this
time, no agreement has been reached with any of these individuals.
INTEREST OF DIRECTORS AND OFFICERS OF THE COMPANY IN
MATERIAL CONTRACTS OF UNITED TECHNOLOGIES CORPORATION
None of the directors or senior officers of the Company, any associates of
the directors or senior officers of the Company or, to the knowledge of the
Board, after reasonable inquiry, any person or company beneficially owning,
exercising control or direction over or holding more than 10% of the Shares,
has an interest in any material contract or transaction to which UTC or the
Offeror is a party.
AGREEMENTS BETWEEN THE COMPANY AND ITS DIRECTORS AND OFFICERS
Except as described below, there are no arrangements or agreements made or
currently proposed to be made between the Company and any of the directors or
senior officers of the Company, including arrangements or agreements with
respect to compensation for loss of office or as to their remaining in or
retiring from office, if the Offer is consummated. Except as described below,
there are no service contracts of directors and officers of the Company or any
of its affiliates with more than a 12 month period remaining.
19
The Company has entered into contracts with each of the senior officers of
the Company that provide generally for continuation of the officer's salary
and benefits for a stated number of months following a change of control (the
"Severance Period") in the event of a termination of the officer's employment
other than "for cause" or as a result of death or disability. In addition, the
officer will receive, in such event, on an annual basis, during the Severance
Period, an amount equal to the average of the officer's bonus during the three
years prior to termination. For Xx. Xxxxx, the Xxxxxxxxx Period is 36 months;
for Messrs. Cain, Clanton, Harrell, Henningsen, Xxxxx, Xxxxxx and Xxxxx, the
Xxxxxxxxx Period is 24 months; for Messrs. Xxxxx and Xxxxxxxxxx and Xx. Xxxxx,
the Xxxxxxxxx Period is 18 months. The Pre-Acquisition Agreement provides that
the Offeror shall honor and comply with the terms of any existing executive
termination agreements.
Under certain of the Company's annual and long term incentive plans, a
change in control of the Company such as will result from the consummation of
the Offer also will result in the acceleration of benefits thereunder to the
Company's senior officers.
The Company, in consultation with UTC, has also adopted an incremental bonus
plan for certain senior officers in respect of services to be provided by such
officers in connection with the transition of the Company's ownership to the
Offeror. The bonus plan will provide for bonuses to be paid by the Company
within 60 to 90 days after the consummation of the Offer and will involve
aggregate payments of approximately $1 million. With the exception of Xx.
Xxxxx, who is proposed to receive $500,000, the participants and the amounts
to be paid to the participating officers have not yet been determined;
however, the Company and UTC intend to consult with each other in respect of
the details of the plan.
MATERIAL CHANGES IN THE AFFAIRS OF THE COMPANY
To the knowledge of the directors and senior officers of the Company, after
reasonable inquiry, other than the announcement of the Offer there has been no
material change in the affairs or prospects of the Company since the date of
the publication of its last financial statements, being the interim unaudited
financial statements of the Company for the first quarter ended March 31,
1999, and there is no information contained in such financial statements which
is materially misleading because of events subsequent to their publication or
any other information which has not been generally disclosed to the public
which would reasonably be expected to affect the decision of the shareholders
to accept or reject the Offer.
On June 25, 1999, Xxxxxxx Xxxxxxxxx and Xxxx Xxxx filed a class action
lawsuit in the Chancery Court of Xxxxxxxx County, Tennessee, naming as
defendants the Company and all of the directors of the Company. The plaintiffs
seek to enjoin any actions by the Company in furtherance of the Offer or,
alternatively, to recover damages in the event the Offer and any subsequent
merger is consummated. The plaintiffs claim that the consideration to be
received by shareholders in the proposed transaction with UTC and the Offeror
is unfair and inadequate, that the Company's directors breached certain
alleged fiduciary duties to the Company's shareholders and that the Company's
directors will be unjustly enriched by the transaction. The Company believes
the claims against the Company and its directors are without merit and intends
to vigorously defend all claims made against them. The Company and UTC do not
anticipate that the suit will have any effect on their plans to proceed with
the proposed transaction.
RESPONSE OF THE COMPANY
There is no transaction, board resolution, agreement in principle or signed
contract of the Company, other than as described herein, which has occurred in
response to the Offer. No negotiations are underway in response to the Offer
which relate to or would result in (i) an extraordinary transaction such as a
merger or reorganization involving the Company or a subsidiary, (ii) the
purchase, sale or transfer of a material amount of assets by the Company or a
subsidiary, (iii) an issuer bid or other acquisition of securities by or of
the Company; or (iv) any material change in the capitalization or dividend
policy of the Company, except in each case as disclosed in the Offer.
20
STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of Canada
provides holders of the Shares with, in addition to any other rights they may
have at law, rights of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered
to the holders of the Shares. However, such rights must be exercised within
prescribed time limits. Holders of the Shares should refer to the applicable
provisions of the securities legislation of their province or territory for
particulars of those rights or consult with a lawyer.
APPROVAL OF THE DIRECTORS' CIRCULAR
The contents of this Directors' Circular have been approved, and the
delivery of this Directors' Circular has been authorized, by the Board.
21
CONSENT
To: The Board of Directors of International Comfort Products Corporation
We hereby consent to the discussion of and to all references to our Fairness
Opinion dated June 23, 1999 in the Directors' Circular of International
Comfort Products Corporation dated June 30, 1999 and we consent to the
inclusion of such Fairness Opinion as Appendix A to that Directors' Circular.
(signed) Credit Suisse First Boston
Corporation
New York, New York
June 30, 1999
22
CERTIFICATE
Dated: June 30, 1999
The foregoing contains no untrue statement of a material fact and does not
omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in light of the circumstances in
which it is made. The foregoing does not contain any misrepresentation likely
to affect the value or the market price of the securities subject to the Offer
within the meaning of the Securities Act (Quebec).
On behalf of the Board of Directors
(signed) Xxxxxxx X. Xxxxxx (signed) Xxxxxxx X. Xxxx, Q.C.
Director Director
23
[LOGO] CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue Telephone 000 000 0000
Xxx Xxxx, XX 00000-0000
APPENDIX A
June 23, 1999
Board of Directors
International Comfort Products Corporation
000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Members of the Board:
You have asked us to advise you with respect to the fairness to the
shareholders of International Comfort Products Corporation (the "Company")
from a financial point of view of the consideration to be received by such
shareholders pursuant to the terms of the Pre-acquisition Agreement (the "Pre-
acquisition Agreement") among the Company, United Technologies Corporation
(the "Acquiror") and Titan Acquisitions, Ltd., a wholly owned subsidiary of
the Acquiror ("Acquisition Subsidiary"). The Pre-acquisition Agreement
provides, among other things, for (i) the commencement by Acquisition
Subsidiary of a tender offer (the "Tender Offer") for all outstanding ordinary
shares of the Company (the "Shares") at a purchase price of $11.75 per Share
in cash and (ii) the consummation of a Second Stage Transaction (as defined in
the Pre-Acquisition Agreement) in which all remaining Shares will be acquired
for not less than $11.75 per Share in cash.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as a draft
dated June 23, 1999 of the Pre-acquisition Agreement. We have also reviewed
certain other information, including financial forecasts, provided to us by
the Company and have met with the management of the Company to discuss the
business and prospects of the Company. We have also considered certain
financial and stock market data of the Company, and we have compared that data
with similar data for other publicly held companies in businesses similar to
those of the Company and we have considered the financial terms of certain
other business combinations and other transactions which recently have been
effected. We have also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance
of the Company. In addition, we have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company, nor have we been furnished with any
such evaluations or appraisals. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. In connection with our engagement, we approached
third parties to solicit indications of interest in a possible acquisition of
the Company and held preliminary discussions with certain of these parties
prior to the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Tender Offer and the Second Stage Transaction and will
receive a fee for our services, a significant portion of which is contingent
upon the consummation of the Tender Offer. In the past, we have performed, and
may from time to time perform, investment banking services for the Company and
the Acquiror, and have received customary fees for such services. In the
ordinary course of our business, we and our affiliates may actively trade the
debt and equity securities of both the Company and the Acquiror for our own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is for the information of Board of
Directors of the Company in connection with its consideration of the Tender
Offer and the Second Stage Transaction and does not constitute a
recommendation to any shareholder of the Company as to whether or not such
shareholder should tender its Shares pursuant to the Tender Offer or vote its
Shares in favor of any Second Stage Transaction. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection
with the offering or sale of securities, nor shall this letter be used for any
other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the shareholders of the
Company in the Tender Offer and the Second Stage Transaction is fair to such
shareholders from a financial point of view.
Very truly yours,
(Signed) CREDIT SUISSE FIRST BOSTON CORPORATION
A-2
