1
Exhibit 3
May 6, 1999
To the Persons Identified
on the Signature Page Hereto
c/o Instron Corporation
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of May 6, 1999, among Kirtland Capital
Partners III L.P., an Ohio limited partnership ("KCP"), ISN Acquisition
Corporation, a Massachusetts corporation ("MergerCo"), and Instron Corporation,
a Massachusetts corporation (the "Company"). Capitalized terms used and not
defined herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. CONCERNING ROLLOVER. This letter agreement (this
"Agreement") memorializes our mutual understanding and agreement relating to the
willingness of certain members of management of the Company identified on the
signature page hereto and certain of their affiliates (collectively, the
"Management Stockholders") to maintain an equity ownership position in the
Company following the completion of the Merger. To this end, the Management
Stockholders hereby (i) agree that, from and after the date hereof and upon the
request of the Company or KCP, they will take such actions as may be reasonably
necessary to exchange the shares of Common Stock owned by them as reflected on
Exhibit A attached hereto for shares of Series B Stock as reflected on Exhibit A
attached hereto pursuant to customary documentation reasonably acceptable to
KCP, the Company and the Management Stockholders, (ii) consent to the conversion
at the Effective Time of all such shares of Series B Stock into a like number of
shares of Surviving Corporation Common Stock pursuant to customary documentation
reasonably acceptable to KCP, the Company and the Management Stockholders, and
(iii) consent to the conversion at the Effective Time of all Options identified
on Exhibit A attached hereto into the number of options identified on Exhibit A
attached hereto with the exercise price indicated thereon (such converted
options being hereinafter referred to as the "Rollover Options"). It is the
intention of the parties hereto that the rollover of stock and options described
above be structured on a tax-free basis, and the parties agree to use their
respective reasonable best efforts to attempt to give effect to such intentions.
Simultaneously with the execution and delivery hereof, KCP is entering into a
letter agreement with certain other stockholders (the "Other Stockholders") of
the Company providing for their continued participation in the equity ownership
of the Company as set forth therein (the "Other Stockholder Letter"). A fully
executed copy of the Other Stockholder Letter is being delivered to you
simultaneously herewith. KCP hereby agrees that, subject to the satisfaction of
the conditions set forth in the Merger Agreement and at the
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Effective Time: (i) it will and will cause its affiliates to provide all of the
equity capital necessary to consummate the Transactions other than the equity
capital (a) that will be provided by the Management Stockholders as described
above and (b) that will be provided by the Other Stockholders pursuant to the
Other Stockholder Letter as in effect on the date hereof, (ii) it will and will
cause its affiliates to provide such equity capital by means of the issuance to
KCP and its affiliates of shares of Surviving Corporation Common Stock, and
(iii) the purchase price for each such share purchased by KCP and its affiliates
shall be $110 payable solely in cash.
2. CERTAIN AGREEMENTS. At the Effective Time, each of the
Management Stockholders and KCP will execute and deliver (and KCP will cause
each of its affiliates who are shareholders of the Company to execute and
deliver) the Stockholders Agreement in the form attached hereto as Exhibit B
(the "Stockholders Agreement"). At the Effective Time, each of the Management
Stockholders will execute and deliver a non-competition agreement in the form
attached hereto as Exhibit C. At the Effective Time, each of the Management
Stockholders (other than Xxxxx X. XxXxxxxxx) will execute and deliver and KCP
will cause the Company to execute and deliver an amendment to their respective
Executive Severance Agreements in the form attached hereto as Exhibit D. At the
Effective Time, Xx. XxXxxxxxx will execute and deliver and KCP will cause the
Company to execute and deliver the Deferred Compensation Agreement in the form
attached hereto as Exhibit E. At the Effective Time, each of Messrs. McConnell,
Andersen, Barrett, Burr, Xxxxxxx and Xxxxxxxxxxx will execute and deliver and
KCP will cause the Company to execute and deliver an amendment to their
respective Restricted Stock Award Agreements in the form attached hereto as
Exhibit F. At the Effective Time each of the Management Stockholders, the Other
Stockholders and KCP will execute and deliver (and KCP will cause (i) each of
its affiliates who are shareholders of the Company to execute and deliver and
(ii) the Company to execute and deliver) a registration rights agreement, in
customary form, providing "piggyback" registration rights for the Management
Stockholders, subject to the approval of the underwriters participating in any
particular underwritten equity offering. Notwithstanding the foregoing
provisions of this Section 2, the Xxxxxxxx Xxxx Trust - 1965 and Xxxx Xxxxxxxxx
Moulding will only enter into the Stockholders Agreement.
3. CONCERNING OPTIONS AND RESTRICTED STOCK. At the Effective
Time, KCP shall cause the Company to (i) adopt the Instron Corporation 1999
Stock Option Plan in the form attached hereto as Exhibit G (the "Plan"), (ii)
authorize up to 10% of the aggregate number of shares of Surviving Corporation
Common Stock outstanding on a fully diluted basis immediately following the
Effective Time (excluding any and all warrants issued to any Lender at the
Effective Time but including the Rollover Options and all options issued or
issuable under the Plan at the Effective Time) to be available for issuance
thereunder in accordance with the terms thereof, and (iii) issue options to
purchase shares of Surviving Corporation Common Stock (collectively, the "New
Options") equal to 40% of the number determined pursuant to clause (ii) hereof
to the persons and in the amounts specified on Exhibit H attached hereto, with
each such New Option to have an exercise price of $110 per share and to vest at
the rate of 20% per year or upon a Change of Control (as defined in the Plan).
All New Options issued under the Plan shall be issued in accordance with the
terms of the Plan and the terms of the Incentive Stock Option Agreement or
Nonqualified Stock
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Option Agreement attached hereto as Exhibit I-1 and I-2 respectively. All New
Options will be "incentive stock options" to the extent permitted by law. All
Rollover Options shall be governed by the terms of the Instron Corporation 1992
Stock Incentive Plan as amended at the Effective Time as set forth on Exhibit J
attached hereto (such plan as amended being hereinafter referred to as the "1992
Plan") and the agreements governing such options except that, at the Effective
Time, all such agreements shall be amended as set forth on Exhibits K-1 and K-2
attached hereto. Shares of Common Stock that are subject to restrictions on
transfer as reflected on Exhibit A attached hereto shall, from and after the
Effective Time, be governed by the 1992 Plan and the Restricted Stock Award
Agreements, as amended in the manner contemplated hereby.
4. CERTAIN REPRESENTATIONS BY THE MANAGEMENT STOCKHOLDERS.
Each Management Stockholder hereby represents and warrants as follows, severally
as to such Management Stockholder only:
(a) Such Management Stockholder has the legal
capacity, power and authority to enter into and perform all of its respective
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Management Stockholder will not violate any other
agreement to which such Management Stockholder is a party. This Agreement has
been duly and validly executed and delivered by such Management Stockholder and
constitutes a valid and binding agreement of such Management Stockholder,
enforceable against such Management Stockholder in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws and principles of equity affecting
creditors rights and remedies generally. There is no beneficiary or holder of a
voting trust certificate or other interest in any trust of which such Management
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Management Stockholder of
the transactions contemplated hereby, other than where any such consent has been
obtained.
(b)(i) Except for any filings under federal and state
securities laws and the filings referred to in Article VII of the Merger
Agreement, no filing with, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution of this Agreement by such
Management Stockholder and the consummation by such Management Stockholder of
the transactions contemplated hereby and (ii) none of the execution and delivery
of this Agreement by such Management Stockholder, the consummation by such
Management Stockholder of the transactions contemplated hereby or compliance by
such Management Stockholder with any of the provisions hereof (A) results in a
violation or breach of, or constitutes (with or without notice or lapse of time
or both) a default (or gives rise to any third party right of termination,
cancellation, material modification or acceleration) under, any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Management Stockholder is a
party or by which such Management Stockholder or any of its respective
properties or assets may be bound, of (B) violates any order, writ, injunction,
decree,
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judgment, statute, rule or regulation applicable to such Management Stockholder
or any of its respective properties or assets.
(c) Such Management Stockholder understands and
acknowledges that KCP is entering into, and causing MergerCo to enter into, the
Merger Agreement in reliance upon the execution and delivery of this Agreement
by such Management Stockholder.
(d) Except for the Xxxxxxxx Xxxx Trust - 1965, such
Management Stockholder is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act of 1933. KCP acknowledges that
the obligations of the Xxxxxxxx Xxxx Trust - 1965 under Section 1 hereof shall
be subject to such trust's receipt, review and satisfaction with a private
placement memorandum or other documentation necessary to satisfy Regulation D
promulgated under the Securities Act of 1933.
5. CERTAIN REPRESENTATIONS BY KCP. KCP hereby represents and
warrants to the Management Stockholders as follows:
(a) KCP has the power and authority to enter into and
perform all of its obligations under this Agreement. The execution, delivery and
performance of this Agreement by KCP will not violate any other agreement to
which it is a party. This Agreement has been duly and validly executed and
delivered by KCP and constitutes a valid and binding agreement of KCP,
enforceable against KCP in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws and principles of equity affecting creditors rights and
remedies generally.
(b) (i) Except for any filings under federal and
state securities laws and the filings referred to in Article VII of the Merger
Agreement, no filing with, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution of this Agreement by KCP
and the consummation by KCP of the transactions contemplated hereby and (ii)
none of the execution and delivery of this Agreement by KCP, the consummation by
KCP of the transactions contemplated hereby or compliance by KCP with any of the
provisions hereof (A) conflicts with or results in any breach of any
organizational documents applicable to KCP, (B) results in a violation or breach
of, or constitutes (with or without notice of lapse of time or both) a default
(or give rise to any third party right of termination, cancellation, material
modification or acceleration) under, any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which KCP is a party or by which KCP or any of its
properties or assets may be bound, or (C) violates any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to KCP or any of its
properties or assets.
(c) KCP understands and acknowledges that the
Management Stockholders are entering into this Agreement in reliance upon the
execution and delivery of the Merger Agreement by KCP.
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6. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be reasonably necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement, provided that the foregoing shall not require any party hereto to
waive or amend any of its rights under this Agreement or any of the exhibits
hereto.
7. DEBT ARRANGEMENTS. KCP acknowledges that under the proposed
terms of the Stockholders Agreement the Company's ability to repurchase equity
of the Management Stockholders will depend on the terms of the Company's debt
arrangements. KCP agrees that it will negotiate in good faith to obtain
"baskets" under these debt arrangements in form and amounts customary for
leveraged acquisition financing agreements.
8. TERMINATION. This Agreement shall terminate upon the
termination of the Merger Agreement in accordance with its terms or upon the
execution and delivery of the Stockholders Agreement.
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement (including
the Exhibits hereto) constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the
obligations hereunder shall be binding upon the successors and, subject to
Section 9(c) below, the assigns of the parties hereto, including, without
limitation, the heirs, guardians, administrators or successors of the Management
Stockholders.
(c) ASSIGNMENT. This Agreement shall not be
assigned without the prior written consent of the other parties.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement
may not be amended, changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a written agreement
executed by the parties hereto.
(e) SEVERABILITY. Whenever possible, each
provision or portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law but if any
provision or portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such
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jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(f) SPECIFIC PERFORMANCE. Each of the parties
hereto recognizes and acknowledges that a breach by it of any covenants or
agreements contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for money damages,
and therefore in the event of any such breach the aggrieved party shall be
entitled to the remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity.
(g) REMEDIES CUMULATIVE. All rights, powers
and remedies provided under this Agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not alternative or exclusive,
and the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
(h) NO WAIVER. The failure of any party hereto
to exercise any right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to insist upon
compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof, shall not
constitute a waiver of such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
(i) NO THIRD PARTY BENEFICIARIES. This
Agreement is not intended to be for the benefit of, and shall not be enforceable
by, any person or entity who or which is not a party hereto.
(j) CHOICE OF LAW/CONSENT TO JURISDICTION. All
disputes, claims or controversies arising out of this Agreement, or the
negotiation, validity or performance of this Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to its rules of conflict of laws. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the sole and
exclusive jurisdiction of the courts of the Commonwealth of Massachusetts and of
the United States District Court for the District of Massachusetts (the
"Massachusetts Courts") for any litigation arising out of or relating to this
Agreement, or the negotiation, validity or performance of this Agreement (and
agrees not to commence any litigation relating thereto except in such courts),
waives any objection to the laying of venue of any such litigation in the
Massachusetts Courts and agrees not to plead or claim in any Massachusetts Court
that such litigation brought therein has been brought in any inconvenient forum.
Each of the parties hereto agrees, (a) to the extent such party is not otherwise
subject to service of process in the Commonwealth of Massachusetts, to appoint
and maintain an agent in the Commonwealth of Massachusetts as such party's agent
for acceptance of legal process, and (b) that service of process may also be
made on such party by prepaid certified mail with a proof of mailing receipt
validated by the United States Postal Service constituting evidence of valid
service. Service made pursuant to (a) or (b) above shall have the same legal
force and effect as if served upon such
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party personally within the Commonwealth of Massachusetts. For purposes of
implementing the parties' agreement to appoint and maintain an agent for service
of process in the Commonwealth of Massachusetts, KCP does hereby appoint CT
Corporation, 0 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, as such agent.
(k) DESCRIPTIVE HEADINGS. 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.
(l) COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, but
all of which, taken together, shall constitute one and the same Agreement.
(m) NO AGREEMENT UNTIL EXECUTED. Irrespective
of negotiations among the parties or the exchanging of drafts of this Agreement,
this Agreement shall not constitute or be deemed to evidence a contract,
agreement, arrangement or understanding among the parties hereto unless and
until (i) the Board of Directors of the Company has approved, for purposes of
Chapter 110F of the Massachusetts General Laws and any applicable provision of
the Company's articles of organization, the terms of this Agreement, and (ii)
this Agreement is executed by the parties hereto.
(n) ATTORNEY'S FEES. KCP acknowledges that the
Company will be responsible for the reasonable fees and expenses of the
Management Stockholders' legal counsel in connection with the preparation and
negotiation of this Agreement and the agreements contemplated hereby up to an
aggregate of $85,000.
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If the foregoing accurately sets forth our mutual
understanding and agreement, kindly sign this Agreement in the space provided
below.
Very truly yours,
KIRTLAND CAPITAL PARTNERS III L.P.
By: Kirtland Partners Ltd., its General
Partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
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Accepted and Agreed this _____ day of May, 1999:
/s/ Xxxxx. X. XxXxxxxx
-----------------------------------
Xxxxx X. XxXxxxxxx
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxxxxx X. Xxxx
-----------------------------------
Xxxxxxxx X. Xxxx
The Xxxxxxxx X. Xxxx Trust - 1965
By:
--------------------------------
Name:
Title:
/s/ Xxxxx Xxxxxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Moulding
-----------------------------------
Xxxxxx X. Moulding
/s/ Xxxx Xxxxxxxxx Moulding
-----------------------------------
Xxxx Xxxxxxxxx Moulding
/s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
