1
EXHIBIT (c)(2)
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 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.
1
2
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 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
2
3
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, 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.
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.
3
4
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 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,
4
5
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 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.
5
6
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
Accepted and Agreed this day of
May, 1999:
/s/ XXXXX X. XXXXXXXXX
------------------------------
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: /s/ XXXXXXXX X. XXXX
------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Beneficiary
/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
6
7
EXHIBIT A
SURVIVING
COMMON STOCK CORPORATION OPTIONS
TO BE SERIES B COMMON TO BE ROLLOVER
MANAGEMENT STOCKHOLDER ROLLED OVER(1) STOCK STOCK ROLLED OVER OPTIONS(2)
---------------------- -------------- -------- ----------- ----------- ----------
X. XxXxxxxxx............. 97,923 19,585 19,585 0 0
X. Xxxxxx................ 0 0 0 15,000 3,000
X. Xxxxxxxx.............. 1,335 267 267 16,500 3,300
X. Xxxxxxx............... 2,289 458 458 0 0
X. Xxxx.................. 1,645 329 329 40,000 8,000
The Xxxxxxxx X. Xxxx
Trust-1965............. 20,000 4,000 4,000 0 0
X. Xxxxxxxxxxx........... 5,310 1,062 1,062 0 0
X. Xxxxxxx............... 2,761 552 552 10,000 2,000
X. Xxxxxxxx.............. 11,400 2,280 2,280 0 0
L. Moulding(3)........... 13,547 2,709 2,709 43,500 8,700
X. Xxxxx................. 9,000 1,800 1,800 0 0
---------------
(1) Includes an aggregate of 25,340 restricted shares (X. XxXxxxxxx, 12,000; X.
Xxxxxxxx, 1,335; X. Xxxxxxx, 2,289; X. Xxxx, 1,645; X. Xxxxxxxxxxx, 5,310;
and X. Xxxxxxx, 2,761.
(2) All Rollover Options will be exercisable at 5 times the exercise price under
the surrendered option.
(3) Common Stock held jointly with wife, Xxxx Xxxxxxxxx.
