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SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
ACME-CLEVELAND CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: Not
Applicable
(2) Aggregate number of securities to which transaction applies: Not
Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Not
Applicable
(4) Proposed maximum aggregate value of transaction: Not Applicable
(5) Total fee paid: Not Applicable
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: Not Applicable
(2) Form, Schedule or Registration Statement No.: Not Applicable
(3) Filing Party: Not Applicable
(4) Date Filed: Not Applicable
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This Amendment No. 5 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 filed on March 20, 1996 and subsequently amended (as
amended to date, the "Schedule 14D-9") by Acme-Cleveland Corporation (the
"Company") in connection with a tender offer (the "Offer") made by WEC
Acquisition Corporation ("WEC"), a Delaware corporation and wholly owned
subsidiary of Danaher Corporation, a Delaware corporation ("Danaher"), to
purchase all outstanding Common Shares and all outstanding Series A Preferred
Shares of the Company upon the terms and subject to the conditions set forth in
the Offer to Purchase for Cash, dated March 7, 1996, as amended and
supplemented, and in the related Letter of Transmittal, as amended and
supplemented, as set forth in this Amendment No. 5. Each of the defined terms
used in this Amendment No. 5 has the meaning given to it in the Schedule 14D-9.
References to Shares include the associated preferred share purchase rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
Item 2 of the Schedule 14D-9 is amended and supplemented by adding at the
end thereof the following:
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 31, 1996 (the "Merger Agreement"), by and among the Company, Danaher,
and WEC. The Merger Agreement provides that, subject to the terms and conditions
of the Merger Agreement, as soon as practicable following the expiration of the
Offer, WEC will be merged into the Company (the "Merger"), and each
then-outstanding Share not owned by Danaher, WEC, or any other direct or
indirect subsidiary of Danaher (other than Shares held in the treasury of the
Company and Shares held by dissenting shareholders who perfect their dissenter's
rights, if any, under Ohio law), will be cancelled and retired and be converted
into the right to receive in cash an amount per Share, without interest, equal
to $30.00. A copy of the Merger Agreement is filed as Exhibit 2 hereto and is
incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND.
The first sentence of Item 3(b) of the Schedule 14D-9 is amended and
restated to read as follows: "Certain contracts, agreements, arrangements, and
understandings and actual and potential conflicts of interest between the
Company and its affiliates and certain of its executive officers, directors, and
affiliates are described on page 6 and in pages 11 through 15 of the Company's
Proxy Statement dated December 15, 1995 for its 1996 Annual Meeting of
Shareholders held on January 25, 1996 (the "1996 Proxy Statement")."
Item 3(b) of the Schedule 14D-9 is further amended and supplemented by
adding at the end thereof the following:
At the May 30 Board meeting, the Board authorized the payment of bonuses on
a proportional basis for fiscal year 1996 to officers and corporate office bonus
rated employees of the Company up to an aggregate of $500,000. On May 31st, it
was determined that proportional bonuses would be paid initially in an aggregate
amount of $300,000 to certain officers and corporate office bonus rated
employees. The following executive officers of the Company received these
proportional bonuses in an aggregate amount of $234,000: David L. Swift, Earl J.
Bellisario, Ronald C. Drabik, Kenneth B. Neighbors, Diane O. McDaniel, and Donna
M. Flammang.
At the May 31 Board meeting, the Board exercised its discretion to
accelerate the date on which outstanding options become exercisable under the
Acme-Cleveland Corporation 1985 Employees Stock Option and Stock Appreciation
Rights Plan to the date of the execution of the Merger Agreement. As a result of
this acceleration and the execution of the Merger Agreement, an aggregate of
15,500 options held by the following executive officers of the Company became
exercisable: David L. Swift, Earl J. Bellisario, Diane O. McDaniel, Donna M.
Flammang, and James Helton. In addition, the Board determined at this same
meeting to accelerate the payment of all amounts in the accounts under the
Company's Deferred Compensation Plan to a date no later than sixty days
following the execution of the Merger Agreement. As a result of this
determination by the Board and the execution of the Merger Agreement, the
payment of deferred compensation in the aggregate amount of $296,545.91 was
accelerated for the following executive officers of the Company: Mr. Swift, Mr.
Helton, and Mr. Bellisario. At the May 31 Board meeting, the Board also
exercised its discretion to cause certain restrictions on Common Shares which
were the subject of Restriction
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Agreements dated December 7, 1994 to lapse on the date of the execution of the
Merger Agreement. As a result of this action by the Board and the execution of
the Merger Agreement, restrictions lapsed on 18,583 shares held by the following
executive offficers of the Company: Mr. Swift, Mr. Bellisario, Ms. McDaniel, and
Ms. Flammang.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. The summary is
qualified in its entirety by reference to the Merger Agreement, which is
incorporated herein by reference.
The Offer. Pursuant to the terms of the Merger Agreement, WEC has agreed
to, and Danaher has agreed to cause WEC to, amend the Offer (and to amend its
Tender Offer Statement on Schedule 14D-1 to reflect such amendment) (i) to
reflect the increase in the Offer Price to $30.00; (ii) to modify the conditions
of the Offer to conform to the conditions of the Offer provided for in the
Merger Agreement (the "Offer Conditions"), and (iii) to extend the Offer until
at least 5:00 p.m. on the date of the 831 Shareholders Meeting. At the Company's
request, WEC will, and Danaher will cause WEC to, extend the Offer from time to
time for up to an aggregate of an additional ten business days following the
date of the 831 Shareholders Meeting if, prior to 5:00 p.m. on the date of such
meeting, there are not validly tendered and not properly withdrawn that number
of Shares which, when aggregated with the Shares currently owned by Danaher and
any of its affiliates, would represent at least a majority of the Shares then
outstanding on a fully diluted basis. Danaher has agreed to effect the amendment
to the Offer described in the first sentence of this paragraph no later than
five business days after the public announcement of the execution of the Merger
Agreement. WEC has also agreed that it will not, and Danaher agrees that it will
cause WEC not to, (i) decrease the Offer Price, (ii) change the form of
consideration payable in the Offer, (iii) change the Offer Conditions, (iv)
impose additional conditions to its obligation to consummate the Offer and to
accept for payment and purchase Shares tendered in the Offer, or (v) change any
other terms of the Offer in a manner adverse to the holders of Shares.
Notwithstanding the foregoing, WEC may extend the expiration date of the Offer
to the extent required by law or if the Offer Conditions are not satisfied. As
further described below, the obligation of WEC to accept for payment and pay for
Shares tendered pursuant to the Offer will be subject only to the Offer
Conditions, all of which may be waived by WEC in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company has represented
that the Board has (i) resolved to recommend that the Company's shareholders
accept the Offer and tender their Shares pursuant to the Offer and (ii) received
an opinion from Goldman, Sachs that the $30.00 in cash to be received by the
holders of shares in the Offer and the Merger, taken as a unitary transaction,
is fair to such holders. The Company also agrees to not withdraw, modify, or
amend its recommendation included herein that the Company's shareholders accept
the Offer and tender their Shares pursuant to the Offer, unless (i) such
recommendation would not be consistent with the fiduciary duties of the Board
under applicable law, as advised by counsel, or (ii) the Merger Agreement is
terminated in accordance with its terms.
The Offer Conditions. Notwithstanding any other term of the Offer or the
Merger Agreement, WEC's obligations to accept for payment or, subject to any
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission"), to pay for any Shares not theretofore accepted for payment or
paid for pursuant to the Offer are subject to the Offer Conditions.
Specifically, WEC is not obligated to accept for payment or, subject to any
applicable rules and regulations of the Commission, to pay for any Shares not
theretofore accepted for payment or paid for pursuant to the Offer if there are
not validly tendered and not properly withdrawn prior to the expiration of the
Offer such number of Shares which, when aggregated with the Shares currently
owned by Danaher and any of its affiliates, would represent at least a majority
of the Shares then outstanding on a fully diluted basis. Furthermore, WEC will
not be obligated to accept for payment or, subject to any applicable rules and
regulations of the Commission, to pay for any Shares not theretofore accepted
for payment or paid for pursuant to the Offer if at any time on or after the
date of the Merger Agreement and at or before the time that the particular
Shares are accepted for payment (whether or not any other Shares have
theretofore been accepted for payment or paid for pursuant to the Offer) any of
the following conditions exist:
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(a) any provision of applicable domestic law or regulation or any judgment,
injunction, order, or decree of a court or governmental agency or authority of
competent jurisdiction is in effect that (i) makes the Offer or the Merger
illegal or otherwise, directly or indirectly, prohibits, materially restrains,
or makes materially more costly the making of the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of some or all of
the Shares by WEC or Danaher or materially delays the Merger, (ii) prohibits or
materially limits the ownership or operation by the Company or any of its
subsidiaries that owns a material portion of the business and assets of the
Company and its subsidiaries, taken as a whole, or by Danaher, WEC, or any
subsidiaries of Danaher of all or a material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or Danaher and its
subsidiaries, taken as a whole, as a result of the Offer, the Merger, or the
other transactions contemplated by the Merger Agreement, or (iii) imposes
limitations on the ability of WEC, Danaher, or any subsidiaries of Danaher
effectively to acquire, hold, or exercise full rights of ownership of the
Shares, including but not limited to, the right to vote any Shares acquired or
owned by WEC, Danaher, or any subsidiaries of Danaher on all matters properly
presented to the shareholders of the Company, including but not limited to, the
approval of the Merger and adoption of the Merger Agreement and the right to
vote any shares of capital stock of any subsidiaries of the Company (other than
immaterial subsidiaries); provided, however, that each of the Company, Danaher,
and WEC agrees to use all reasonable efforts, including appeals to higher
courts, to have any such judgment, injunction, order, or decree lifted;
(b) any consents, authorizations, orders, and approvals of, or filings or
registrations with, any regulatory body required in connection with the
execution, delivery, and performance of the Merger Agreement have not been
obtained or made, except (i) for certain certificates of merger required to be
filed in connection with the Merger as contemplated by the Merger Agreement and
the filing, of any other documents required to be filed after the purchase of
the Shares pursuant to the Offer and (ii) where the failure to obtain or make
any such consent, authorization, order, approval, filing, or registration is not
likely to have, individually or in the aggregate, a material adverse effect on
the financial condition, results of operations, or business of the Company and
its subsidiaries, taken as a whole, excluding any event or condition resulting
from the Merger Agreement or the transactions contemplated by it (a "Company
Material Adverse Effect"), or a material adverse effect on the financial
condition, results of operations, or business of Danaher and its subsidiaries,
taken as a whole (a "Danaher Material Adverse Effect") and would not render the
Offer or the Merger illegal or provide a reasonable basis to conclude that the
parties to the Merger Agreement or their affiliates or any of their respective
directors or officers will be subject to the risk of criminal liability;
(c) any required action by or in respect of, or filing with, any
governmental body, agency, official, or authority, or any action, consent,
approval, or waiver required to be obtained from any party to any material
contracts (a "Third Party Consent") has not been obtained, except where the
failure to obtain any Third Party Consent is not likely to have, individually or
in the aggregate, a Company Material Adverse Effect;
(d) the Company has failed to perform the obligations to be performed by it
under the Merger Agreement at or prior to such time or any representations and
warranties of the Company contained in the Merger Agreement are not true at such
time as if made at and as of such time (unless made as of a specified date, in
which case such representation or warranty will be true as of such date), except
to the extent that the failure to perform such obligations and the untruth of
such representations and warranties is not likely to have, individually or in
the aggregate, a Company Material Adverse Effect, and Danaher has received a
certificate of an executive officer and the chief financial officer of the
Company to the effect of the foregoing;
(e) the acquisition of Shares by WEC pursuant to the Offer has not been
authorized by the Company's shareholders as required by Section 1701.831 of the
Ohio Revised Code;
(f) the Merger Agreement has been terminated in accordance with its terms;
and
(g) the Company has not obtained the consents of each holder of an option
to purchase Common Shares or of a Common Share granted under the Performance
Plan (as defined below) in respect of the cancellation of such option or Common
Share.
Any of the Offer Conditions may be waived by WEC in whole or in part at any
time and from time and time in the sole discretion of WEC. The failure of WEC at
any time to exercise any of the foregoing rights will
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not be deemed a waiver of any such right and no single or partial exercise of
any such right will preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
The 831 Shareholders Meeting. In the Merger Agreement, the Company has
agreed to reconvene the 831 Shareholders Meeting at the earliest possible date,
and the Company will not postpone or adjourn the 831 Shareholders Meeting
(except as a result of the absence of a quorum) without Danaher's consent,
unless Danaher requests such postponement or adjournment. The methods for
identifying "interested shares" as defined in Section 1701.01(CC) of the Ohio
Revised Code and for determining whether the related quorum requirement is met
at the 831 Shareholders Meeting will be as set forth in the Merger Agreement.
Pursuant to the terms of the Merger Agreement, the Board will recommend that the
Company's shareholders approve the proposed "control share acquisition" at the
831 Shareholders Meeting, unless such recommendation would not be consistent
with the Board's fiduciary duties under applicable law, as advised by counsel,
or the Merger Agreement is terminated in accordance with its terms.
Board Designees. The Merger Agreement provides that, promptly following
the purchase by WEC pursuant to the Offer of that number of Shares which, when
aggregated with the Shares owned by Danaher and any of its affiliates,
represents at least a majority of the Shares then outstanding on a fully diluted
basis and subject to the Company's obligations under Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "'34 Act"), and Rule 14f-1
thereunder, WEC will be permitted to designate members of the Board such that
WEC will have a number of representatives on the Board equal to the product,
rounded up to the next whole number, of (i) the total number of directors of the
Company multiplied by (ii) the percentage that the number of Shares then
beneficially owned by WEC or its affiliates bears to the number of Shares
outstanding at the time of such purchase. The Company has agreed to increase the
size of the Board, or use its reasonable efforts to secure the resignation of
directors, or both, as may be necessary to permit WEC's designees to be elected
or appointed to the Board. Notwithstanding the foregoing, prior to the Effective
Time (as defined herein), the Board will always have at least two members who
are not officers, designees, shareholders, or affiliates of WEC (the
"Independent Directors"). All of the Independent Directors will be individuals
who are currently directors of the Company, except to the extent that such
individuals do not wish to continue as directors or voluntarily resign. The
Company has further agreed to take all actions required pursuant to Section
14(f) of the '34 Act and Rule 14f-1 thereunder in connection with the election
or appointment of WEC's designees to the Board. Furthermore, following the
election or appointment of WEC's designees to the Board, any of the following
will require the concurrence of a majority of the Independent Directors, unless
no individuals who are currently directors of the Company wish to continue as
directors or all such individuals voluntarily resign: (i) any amendment to the
Merger Agreement; (ii) the termination of the Merger Agreement by the Company;
(iii) any extension by the Company of the time for the performance of the
obligations of WEC or Danaher under the Merger Agreement; (iv) any
recommendation to shareholders or any modification or withdrawal of any such
recommendation; or (v) any waiver of any of the Company's rights under the
Agreement.
Disposition of Ohio Litigation. Pursuant to the terms of the Merger
Agreement, WEC and Danaher also have agreed, as promptly as possible but in no
event later than five business days after the public announcement of the
execution of the Merger Agreement, to move to withdraw, without prejudice, their
complaint in the case entitled Danaher Corporation, et al., v. Acme-Cleveland
Corporation, et al., Case No. C2 96-0247, pending in the United State District
Court for the Southern District of Ohio, Eastern Division. The Company has
agreed to move to withdraw, without prejudice, its counterclaims in that case.
The Merger. The Merger Agreement provides that, at the Effective Time, WEC
will be merged with and into the Company in accordance with applicable law. The
Company will be the surviving corporation (the "Surviving Corporation") in the
Merger. As soon as practicable after satisfaction or waiver of all conditions to
the Merger set forth in the Merger Agreement, the parties will cause certain
certificates of merger to be filed in accordance with applicable state law. Upon
filing of both of such certificates, the Merger will become effective (the
"Effective Time").
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Until amended in accordance with applicable law, the articles of
incorporation and regulations of the Company in effect at the Effective Time
will be the articles of incorporation and regulations of the Surviving
Corporation after the consummation of the Merger. Until successors are duly
elected or appointed and qualified, from and after the Effective Time, the
officers and directors of WEC at the Effective Time will be the officers and
directors of the Surviving Corporation after the consummation of the Merger. The
failure to retain the officers of the Company as officers of the Surviving
Corporation will qualify as Good Reason to terminate for purposes of the
Severance Pay Agreements between the Company and certain executive officers of
the Company or of a subsidiary of the Company and the Employment Agreement
between the Company and Mr. Swift, entitling such persons to receive lump sum
payments under such contracts upon such termination.
By virtue of the Merger, at the Effective Time, (i) each then issued and
outstanding Common Share of WEC will be converted into one Common Share of the
Surviving Corporation, (ii) each then issued and outstanding Share, except for
Shares held by the Company as treasury shares or owned by Danaher or any
subsidiary of Danaher (which Shares will be immediately canceled and no payment
will be made with respect thereto) will be converted into the right to receive,
without interest, an amount in cash equal to $30.00 (the "Merger
Consideration"). From and after the Effective Time, all Shares will be canceled
and retired and cease to exist and each holder of a certificate representing any
Shares immediately prior to the Effective Time will thereafter cease to have any
rights with respect to such Shares, except the right to receive the Merger
Consideration or the right, if any, to receive payment from the Surviving
Corporation of the "fair cash value" of such Shares as determined in accordance
with Section 1701.85 of the Ohio Revised Code.
Stock Options and Performance Shares. At the earlier of the purchase of
Shares pursuant to the Offer and the Effective Time, subject to obtaining the
consent of the holder thereof, each outstanding option to purchase Common
Shares, whether or not exercisable, granted under an employee stock option or
incentive plan of the Company will be cancelled and converted into the right to
receive, without interest, an amount in cash equal to the product of (i) the
number of Common Shares subject to the option and (ii) the excess of (a) the
Merger Consideration over (b) the exercise price per share of the option.
At the earlier of the purchase of Shares pursuant to the Offer and the
Effective Time, subject to obtaining the consent of the holder thereof, each
Common Share to which an employee of the Company is entitled under the
Acme-Cleveland Corporation Performance and Equity Incentive Plan (the
"Performance Plan") will be cancelled and will be converted into the right to
receive, without interest, an amount in cash equal to the Merger Consideration.
Representations and Warranties of the Company. In the Merger Agreement,
the Company has made customary representations and warranties to WEC and
Danaher, including, but not limited to, representations and warranties relating
to the following: the organization and qualifications of the Company and its
subsidiaries; the authority of the Company to enter into and perform its
obligations under the Merger Agreement and carry out the related transactions;
required consents and approvals; the capitalization of the Company and its
subsidiaries; filings made by the Company with the Commission; the Company's
consolidated financial statements; the absence of certain changes or
developments since September 30, 1995, including, without limitation, any
changes or developments since that date which would result in a Company Material
Adverse Effect; litigation; employee benefit matters; taxes; intellectual
property rights; environmental matters; state takeover statutes; and documents
supplied, filed, or distributed by the Company relating to the Offer.
Representations and Warranties of Danaher and WEC. Danaher and WEC have
also made customary representations and warranties in the Merger Agreement,
including, without limitation, representations and warranties relating to the
following: the organization of Danaher and WEC; the authority of each of Danaher
and WEC to enter into and perform its obligations under the Merger Agreement and
carry out the related transactions; required consents and approvals; filings
made by Danaher with the Commission; Danaher's consolidated financial
statements; litigation; availability of sufficient funds to consummate the
Offer; and documents supplied, filed, or distributed by Danaher or WEC relating
to the Offer.
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Covenants of the Company. In the Merger Agreement, the Company has agreed
that, except as contemplated or permitted by the Merger Agreement or
specifically disclosed in the schedules thereto, or as otherwise approved in
writing by Danaher, from the date of the Merger Agreement until the Effective
Time, the Company and its subsidiaries will conduct their businesses in the
ordinary course consistent with past practice. The Merger Agreement provides
that from the date of the Merger Agreement until the Effective Time (i) the
Company will not adopt or propose any change or amendment in its articles of
incorporation or regulations; (ii) the Company will not, and will not permit any
of its subsidiaries to, merge, consolidate, or enter into a share exchange with
any other individual, corporation, partnership, association, trust, or other
entity or organization (including a government or political subdivision or any
agency or instrumentality thereof) (a "Person"), sell, lease, license, mortgage,
pledge, or otherwise dispose of any material assets, except (a) in the ordinary
course consistent with past practice or (b) transfers between the Company or its
wholly owned subsidiaries; (iii) the Company will not declare, set aside, or pay
any dividends or make any distributions on the Shares, other than normal
quarterly dividends at the rates in effect on the date of the Merger Agreement;
(iv) the Company will not, and will not permit any of its subsidiaries to, (a)
issue, deliver, sell, encumber, or authorize or propose the issuance, delivery,
sale, or encumbrance of, any capital stock or other securities of the Company or
any capital stock or other securities of its subsidiaries ("Company Subsidiary
Securities"), other than the issuance of Common Shares upon the exercise of
outstanding options to purchase Common Shares granted prior to the date hereof
or upon conversion of the Series A Preferred Shares, (b) split, combine, or
reclassify any Shares or Company Subsidiary Securities, (c) repurchase, redeem,
or otherwise acquire any capital stock or other securities of the Company or any
Company Subsidiary Securities, or (d) amend the terms of any outstanding
securities; (v) the Company will not make any commitment or enter into any
contract or agreement that is likely to be, individually or in the aggregate,
material to the Company and its subsidiaries taken as a whole except in the
ordinary course of business consistent with past practice; (vi) except to the
extent required by law, by existing contract, or by policy currently in effect,
the Company and its Subsidiaries will not increase in any manner the
compensation or fringe benefits of any of its directors or officers, pay any
pension or retirement allowance to any directors or officers, or become a party
to, amend, or commit itself to any pension, retirement, profit-sharing, welfare-
benefit plan, or employment agreement with or for the benefit of any director or
officer, other than the payment of bonuses not exceeding, in the aggregate,
$200,000 to officers of the Company in the ordinary course of business
consistent with past practices; (vii) the Company will not, and will not permit
any of its subsidiaries to, make any tax election or settle or compromise any
material federal, state, local, or foreign tax liability; (viii) the Company
will not take, and will not permit any of its subsidiaries to take, any action
that would make any representation or warranty of the Company contained in the
Merger Agreement inaccurate in any material respect at, or as of, any time prior
to the Effective Time or that would cause any closing condition under the Merger
Agreement not to be satisfied, except as may be required by law; and (ix) the
Company will not agree to do any of the foregoing.
In the Merger Agreement, the Company has further agreed that, from the date
of the Merger Agreement until its termination, it and its subsidiaries will not,
and will use all reasonable efforts to cause their officers, directors,
employees, and agents not to, directly or indirectly, (i) take any action to
solicit or initiate any good faith offer or proposal for a merger or other
business combination involving the Company, the acquisition of the entire equity
interest in the Company, or the acquisition of all or substantially all of the
assets of the Company (a "Company Acquisition Proposal"), other than the
transactions contemplated by the Merger Agreement or (ii) engage in negotiations
or enter into agreements with any Person with respect to a Company Acquisition
Proposal, disclose any nonpublic information relating to the Company or any of
its subsidiaries, or afford access to the properties, books, or records of the
Company or any of its subsidiaries, to any Person; provided, however, that the
Company may engage in negotiations with or disclose such non-public information,
or provide such access to, any Person who has made an unsolicited Company
Acquisition Proposal if the Board, after consultation with outside counsel to
the Company, determines that its fiduciary duties under applicable law require
such actions. In such event, the Company will notify Danaher that it has
received a Company Acquisition Proposal and advise Danaher of the material terms
and conditions thereof.
The Company has further agreed that, if required by the provisions of the
Ohio Revised Code in order to consummate the Merger, it will take all action
necessary in accordance with such law and with the Company's
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articles of incorporation and regulations to convene a meeting of its
shareholders to approve the Merger and adopt the Merger Agreement (the "Merger
Meeting"). The Board will recommend that the Company's shareholders approve the
Merger and adopt the Merger Agreement, and will cause the Company to use all
reasonable efforts to solicit from the shareholders proxies to vote therefor,
unless (i) such recommendation would not be consistent with the fiduciary duties
of the Board under applicable law, as advised by counsel or (ii) the Merger
Agreement is terminated in accordance with its terms. If required by law for the
consummation of the Merger, the Company will prepare and file with the
Commission preliminary proxy materials relating to the approval of the Merger
and the adoption of the Merger Agreement by the Company's shareholders, will
provide Danaher with any and all comments thereon by the Commission's staff,
will use all reasonable efforts to discuss with Danaher any proposed changes to
such preliminary proxy materials prior to responding to any comments thereon by
the Commission's staff, and will file with the Commission revised preliminary
proxy materials, if appropriate, and definitive proxy materials in a timely
manner as required by the rules and regulations of the Commission. Except as
otherwise provided in the preceding sentence, the proxy material relating to the
Merger Meeting will include the recommendation of the Board.
Covenants of Danaher and WEC. In the Merger Agreement, Danaher and WEC
have agreed, from and after the Effective Time, to indemnify, defend, and hold
harmless the present and former directors, officers, and employees of the
Company and its subsidiaries against all losses, claims, damages, and liability
in respect of acts or omissions by them at or prior to the Effective Time.
Danaher will not take any action to terminate or amend the Company's current
directors' and officers' liability insurance in respect of acts or omissions
occurring at or prior to the Effective Time for at least six years after the
Effective Time.
Pursuant to the Merger Agreement, Danaher and WEC have agreed, jointly and
severally, that they will not, and will cause the Surviving Corporation not to,
contest the validity of (i) any employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is (a) subject to any provision of ERISA and (b) is maintained,
administered, or contributed to by the Company or any affiliate and covers any
employee or former employee of the Company or any affiliate or under which the
Company or any affiliate has any liability (the "Company Employee Plans") or
(ii) any employment, severance, welfare, or other similar contract, arrangement,
or policy, or any plan or arrangement (written or oral) providing for
compensation, benefit, bonus, profit-sharing, stock option, or other stock
related rights or other forms of incentive or deferred compensation that (a) is
not a Company Employee Plan, (b) is entered into, maintained, or contributed to,
as the case may be, by the Company or any of its affiliates, and (c) covers any
employee or former employee or director or former director of the Company or any
of its affiliates (the "Company Benefit Arrangements"), and which Company
Benefit Arrangements are identified in the Merger Agreement, consist of
immaterial arrangements with one or more employees or groups of employees, or
have been disclosed in any report, schedule, registration statement, or other
document required to be filed with the Commission and so filed prior to the date
of the Merger Agreement. Furthermore, Danaher and WEC will, and will cause the
Surviving Corporation to, provide the benefits and perform the obligations of
the Company and its subsidiaries to present or former officers and employees of
the Company or its subsidiaries arising on or before the Effective Time under
the Company Employee Plans and the Company Benefit Arrangements identified
above. In the Merger Agreement, Danaher and WEC also jointly and severally agree
to reimburse, and to cause the Surviving Corporation to reimburse, such present
or former officers and certain employees for the costs, including reasonable
attorneys' fees, of any litigation initiated by, or initiated or threatened
against, any of them in connection with the enforcement of their rights set
forth in the immediately preceding two sentences; provided, however, that no
such reimbursement will be provided (and any such reimbursement previously made
will be refunded) with respect to any claim made by such present or former
officer or employee if the court determines that the claim was not made in good
faith. With respect to benefits arising after the Effective Time, Danaher and
WEC have stated in the Merger Agreement their intention that Danaher will
continue to provide to the former employees of the Company and its subsidiaries
who remain as employees of the Surviving Corporation and its subsidiaries after
the Effective Time each of the benefits which they now receive from the Company
and its subsidiaries at least through December 31, 1996, including benefits
under the Company Employee Plans and the Company Benefit Arrangements, but
excluding any equity-based compensation or benefits. Danaher and WEC will
continue to
8
<PAGE> 9
provide to such employees, however, for at least one year after the Effective
Time, the same severance benefits as are now provided to them by the Company.
Pursuant to the Merger Agreement, Danaher has agreed to vote, or cause to
be voted, all Shares beneficially owned by it in favor of the Merger and WEC has
agreed to consummate the Merger pursuant to the "short form" merger provisions
of the Ohio Revised Code if applicable.
Covenants of the Company, Danaher, and WEC. Pursuant to the Merger
Agreement, the Company, Danaher, and WEC have agreed that, if any "fair price",
"moratorium", or "control share acquisition" statute or other similar statute or
regulation becomes applicable to the transactions contemplated by the Merger
Agreement, they will each, along with their respective boards of directors, use
all reasonable efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated by the Merger Agreement may be
consummated as promptly as practicable on the terms contemplated thereby and
otherwise act to minimize the effects of such statute or regulation on the
transactions contemplated by the Merger Agreement.
Conditions to the Merger. The obligations of the Company, Danaher and WEC
to consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) if required by
applicable law, the Merger has been approved, and the Merger Agreement has been
adopted, by the requisite vote of the Company's shareholders; and (ii) no
provision of any applicable domestic law or regulation, and no judgment,
injunction, order, or decree of a court or governmental agency or authority of
competent jurisdiction is in effect that has the effect of making the Offer or
the Merger illegal or otherwise restrains or prohibits the purchase of Shares
pursuant to the Offer or the consummation of the Merger (provided, however, that
each party agrees to use all reasonable efforts, including appeals to higher
courts, to have any such judgment, injunction, order, or decree lifted). The
obligations of Danaher and WEC to consummate the Merger are subject to
satisfaction or waiver of the Offer Conditions and to compliance by the Company
with its obligations set forth in the Merger Agreement related to the election
or appointment of WEC's designees to the Board.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding any prior
approval of the Merger and adoption of the Merger Agreement by the Company's
shareholders, (i) by the mutual written consent of the Company, Danaher, and
WEC; (ii) by either the Company or Danaher if the Merger has not been
consummated by November 30, 1996, provided that such right of termination will
not be available to any party that, at the time of termination, is in material
breach of its obligations under the Merger Agreement; (iii) by either the
Company or Danaher if any applicable domestic law, rule, or regulation makes
consummation of the Merger illegal or if any judgment, injunction, order, or
decree of a court or governmental agency or authority of competent jurisdiction
restrains or prohibits the consummation of the Merger, and such judgment,
injunction, order, or decree has become final and nonappealable; (iv) by either
the Company or Danaher if the requisite vote of the Company's shareholders
approving the Merger and adopting the Merger Agreement has not been obtained at
the meeting of the shareholders called for that purpose, as contemplated by the
Merger Agreement; (v) by either the Company or Danaher if the Offer terminates
without the purchase of Shares thereunder; (vi) prior to the purchase of Shares
by WEC pursuant to the Offer, by Danaher if the Board does not publicly
recommend in the Schedule 14D-9 or in the proxy material relating to the 831
Shareholders Meeting or the Merger Meeting that the Company's shareholders
accept the Offer and tender their Shares pursuant to the Offer and approve the
Merger and adopt the Merger Agreement, or if the Board withdraws, modifies, or
changes such recommendation in any manner adverse to Danaher; or (vii) by the
Company if the Company receives an unsolicited Company Acquisition Proposal that
the Board determines in good faith, after consultation with its legal and
financial advisors, is likely to lead to a merger, acquisition, consolidation,
or similar transaction that is more favorable to the shareholders of the Company
than the Merger, provided the Company has given Danaher at least five business
days notice of the material terms of the Company Acquisition Proposal and has
paid the Termination Fee (as defined below).
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<PAGE> 10
In the event of any such termination of the Merger Agreement and
abandonment of the Merger, no party to the Merger Agreement (or any of its
directors or officers) will have any liability or further obligation to any
other party to the Merger Agreement except (i) as provided in the Merger
Agreement with respect to certain fees and expenses, (ii) for obligations
contained in the Merger Agreement with respect to payment of fees and expenses
and arising out of the applicability of the Confidentiality Agreement between
the Company and Danaher, dated April 17, 1996, to information provided pursuant
to the Merger Agreement, which will survive termination of the Merger Agreement
and abandonment of the Merger, and (iii) for liability for any breach of the
Merger Agreement which will survive such termination.
Fees and Expenses. The Merger Agreement provides that, except as set forth
below, all costs and expenses incurred in connection with the Merger Agreement
will be paid by the party incurring the costs and expenses; provided, however,
the Company and Danaher will each pay one-half of all printing, filing, and
mailing costs for the proxy statement and all filing fees for filings required
by the Commission or the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and other regulatory filings.
Pursuant to the Merger Agreement, if (i) the Merger Agreement is terminated
by the Company because the Company receives an unsolicited Company Acquisition
Proposal that the Board determines in good faith, after consultation with its
legal and financial advisors, is likely to lead to a merger, acquisition,
consolidation, or similar transaction that is more favorable to the shareholders
of the Company than the Merger, (ii) any Person publicly makes a Company
Acquisition Proposal and thereafter the Merger Agreement is terminated because
the Merger has not been consummated by November 30, 1996 or the Company's
shareholders have failed to approve the Merger and adopt the Merger Agreement,
or (iii) any Person publicly makes a Company Acquisition Proposal and thereafter
the Merger Agreement is terminated by Danaher because the Board did not publicly
recommend in the Schedule 14D-9 or in the proxy material relating to the 831
Shareholders Meeting or the Merger Meeting that the Company's shareholders
accept the Offer and tender their Shares and approve the Merger and adopt the
Merger Agreement, or the Board has withdrawn, modified, or changed such
recommendation in any manner adverse to Danaher, then the Company has agreed to
reimburse Danaher and WEC for all of their reasonable documented out-of-pocket
expenses and fees other than litigation expenses (subject to a maximum
reimbursement obligation of $1,500,000) actually incurred by Danaher in
connection with the transactions contemplated by the Merger Agreement prior to
the termination of the Merger Agreement, including, without limitation, all fees
and expenses of counsel, financial advisors, accountants, and environmental and
other experts and consultants to Danaher and WEC ("Transaction Costs"). If (i)
the Merger Agreement is terminated by the Company as set forth in clause (i) of
the immediately preceding sentence, (ii) any Person publicly makes a Company
Acquisition Proposal, thereafter the Merger Agreement is terminated as set forth
in clause (ii) of the immediately preceding sentence, and within 12 months after
termination, the Company accepts or consummates any Company Acquisition
Proposal, or (iii) any Person publicly makes a Company Acquisition Proposal and
thereafter the Merger Agreement is terminated as set forth in clause (iii) of
the immediately preceding sentence, then, in addition to reimbursing Danaher and
WEC for their Transaction Costs, the Company has agreed to pay to Danaher a fee
of $6,000,000 (the "Termination Fee").
In the Merger Agreement, Danaher and WEC have agreed that if Danaher
receives a Termination Fee, neither Danaher, WEC, nor any of their affiliates
will assert or pursue in any manner, directly or indirectly, any claim or cause
of action (i) against any person submitting a Company Acquisition Proposal or
(ii) against the Company or any of its directors, officers, employees, agents,
or representatives based in whole or in part upon its or their receipt,
consideration, recommendation, or approval of the Company Acquisition Proposal,
including the Company's exercise of its right to terminate the Merger Agreement.
Waiver and Amendment. Subject to applicable law, any provision of the
Merger Agreement may be amended or waived if such amendment or waiver is in
writing and signed, in the case of an amendment, by each of the parties to the
Merger Agreement, and, in the case of a waiver, by the party against whom the
waiver is to be effective.
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<PAGE> 11
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4(a) of the Schedule 14D-9 is hereby amended to include, at the end of
the subsection captioned "Background," the following:
Following the March 20, 1996, meeting of the Board, and consistent with the
directive of the Board, the Company's management initiated a process for
exploring strategic alternatives to optimize shareholder value, including
identifying potential purchasers and facilitating their review of the Company.
In addition, the Company and the State of Ohio commenced their defense of the
litigation initiated by Danaher and WEC. A hearing on plaintiffs' request for an
injunction took place on April 9, 10, and 11, 1996, and was scheduled to resume
on April 18, 1996.
On April 17, 1996, the Company and Danaher entered into agreements
providing for (1) the receipt by Danaher of non-public information about the
Company, (2) the postponement of the 831 Shareholders Meeting until after June
30, 1996, and the resolution of issues regarding eligibility for voting at the
Special Meeting, and (3) the suspension of the litigation initiated by Danaher
until after June 30, 1996.
The agreements between the Company and Danaher were designed to permit
Danaher to participate in the Company's process on substantially the same basis
as other potential purchasers of the Company, some of whom had theretofore
received non-public information about the Company, interviewed management, and
visited facilities of the Company.
In consideration for being permitted to participate in the process and
being able to receive non-public information regarding the Company, Danaher
agreed that, prior to June 30, 1996, unless the Company requested it to do so in
writing, Danaher would not alter any of the material terms of its Offer (other
than to terminate the Offer or to extend the term of the Offer) or commence a
new tender offer or exchange offer for Shares of the Company. Other potential
purchasers also signed agreements that precluded them from proposing to acquire
the Company for a specified period of time unless the Company requested them to
do so in writing. The Company has stated that one of the purposes of these
agreements was to enable the Company to have sufficient time to evaluate all of
its strategic alternatives to the Offer, while allowing potential purchasers to
have an ample opportunity to review and evaluate the information about the
Company during the period.
On April 24, 1996, Danaher and its representatives visited the Company's
headquarters offices and received the non-public information about the Company
that had been made available to other potential purchasers and interviewed the
Company's management. During the following week, representatives of Danaher
visited facilities of the Company.
During the same and subsequent periods, the Company continued to
communicate with other potential purchasers of the Company. As of May 30, 1996,
the Company and its representatives had communicated with over 75 companies that
had been identified as potential purchasers, of whom approximately two-thirds
reviewed information regarding the Company. Approximately 25 potential
purchasers either entered into confidentiality agreements or were considering
confidentiality agreements as of May 30, 1996. As of that date, however, none of
the potential purchasers had presented a proposal to the Company for the
purchase of the Company.
On May 23, 1996, the Board reviewed in detail the status of the process of
exploring strategic alternatives to the Offer and held discussions with the
Company's financial advisors and legal counsel. Based on these discussions, the
Board determined to continue the Company's process. At that point in time,
Danaher had made no proposal to increase the price of its Offer.
On May 24, 1996, the Board received a letter from Danaher stating that it
was prepared to offer to acquire the Company at a price of $29 per outstanding
Share. A copy of the letter is incorporated herein by reference to Exhibit 1 to
the Schedule 14D-9/A (Amendment No. 3) filed by the Company on May 31, 1996.
According to the letter, Danaher's proposal would expire at 9:00 a.m., New York
time, on May 28, 1996, if the Company did not accept it by that time. Danaher
also stated that, if the Company did not accept the proposal, Danaher would seek
to call a special meeting of the Company's shareholders for the purpose of
replacing the
11
<PAGE> 12
Company's Board of Directors and, if its nominees were elected, seek to
consummate the acquisition of the Company pursuant to its $27 per Share Offer.
The Company, after engaging in discussions with Danaher regarding price and
value, advised Danaher that its proposal was neither persuasive nor compelling
and that the Company would continue actively to explore its alternatives.
Subsequently, on May 28, 1996, Danaher informed Acme-Cleveland that it was
prepared to increase its Offer to $30 per Share (the "Increased Offer Price").
During the next three days, the Company's Chairman, financial advisors, and
legal counsel negotiated the principal terms of the Merger Agreement with
representatives of Danaher. The principal issues in these negotiations involved
the Company's insistence that there be no contingencies or uncertainties that
might be likely to prevent the consummation of the proposed transactions and
that the Company be permitted, after payment of the Termination Fee, to
terminate any agreement with Danaher in the event that it receives an
unsolicited written proposal with respect to the acquisition of the Company from
a third party that the Board of Directors determines, in good faith, is likely
to lead to a transaction that is more favorable to the shareholders of the
Company than the acquisition by Danaher. The Company also required contractual
assurance that all outstanding agreements of the Company be honored, including
those pertaining to employee benefit arrangements.
Late in the afternoon on May 29, 1996, and during the early evening on May
30, 1996, the Board met to review the status of the discussions with Danaher and
held further discussions with the Company's financial advisors with respect to
the status of the process and the terms of the proposal by Danaher.
The Board met again on May 31, 1996, to consider the proposal from Danaher
and the negotiated terms of the Merger Agreement. The Board received an oral
presentation from Goldman Sachs, who advised the Board that, in its opinion, as
of such date the $30 in cash to be received by the holders of Shares in the
Offer and the Merger, taken as a unitary transaction, is fair to such holders.
The Board also received a report from the Company's legal counsel with respect
to the terms of the proposed definitive agreement.
After lengthy review and consideration, the Board determined that
acceptance of the Offer at the Increased Offer Price would be in the best
interests of the Company and its shareholders. The Board then acted to amend the
Company's Rights Agreement to provide that it would not apply to the
transactions proposed by Danaher, took certain procedural actions with respect
to the 831 Shareholders Meeting and applicable Ohio statutes, and approved the
Merger Agreement with Danaher and the transactions contemplated thereby.
Item 4(a) of the Schedule 14D-9 is hereby amended to include, at the end of
the subsection captioned "Recommendation," the following:
At the May 31, 1996 meeting, the Board unanimously determined that the
Offer at the Increased Offer Price was fair to, and in the best interests of,
the Company and its shareholders. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDED
THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AT THE INCREASED OFFER PRICE
AND TENDER THEIR SHARES PURSUANT TO THE OFFER AT THE INCREASED OFFER PRICE.
Item 4(b) of the Schedule 14D-9 is amended and supplemented by adding at
the end thereof the following:
In reaching its conclusions and the recommendation described above at its
May 31, 1996 meeting, the Board considered a number of factors, including,
without limitation, the following:
(i) The terms and conditions of the Offer, including the Increased
Offer Price.
(ii) The Board's familiarity with the Company's businesses, assets,
financial condition, and future prospects.
(iii) The strategic direction of the Company and the merits and risks
of that strategic direction and the nature of the industries in which the
Company operates.
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<PAGE> 13
(iv) The strategic alternatives available to the Company, taking into
consideration, among other things, the results of the process undertaken at
the Board's direction by the management of the Company, with the assistance
of Goldman Sachs, the Company's financial advisor, to explore strategic
alternatives to optimize shareholder value that involved, among other
things, contacting entities that the Company and Goldman Sachs reasonably
believed would be interested in entering into a business combination
transaction with the Company and providing certain entities with
information and access to the Company's officials and representatives and
inviting proposals.
(v) The fact that the process of exploring strategic alternatives to
optimize shareholder value undertaken by the Company at the direction of
the Board had, to that point, not resulted in any competing proposals for
the acquisition of the Company and that, under the terms of the Merger
Agreement, the Company would have the right, subject to the Company's
obligation under the Merger Agreement to pay Transaction Costs and the
Termination Fee as provided therein, to (a) engage in negotiations with,
disclose non-public information to, and provide access to its properties,
books, and records to any person who has made a Company Acquisition
Proposal if the Board, after consultation with outside counsel to the
Company, determines that its fiduciary duties require such actions and (b)
terminate the Merger Agreement with Danaher if the Company receives an
unsolicited written proposal with respect to a Company Acquisition Proposal
that the Board determines in good faith, after consultation with its legal
and financial advisors, is likely to lead to an acquisition transaction
that is more favorable to shareholders of the Company than the Merger.
(vi) The views of the Company's management as to the Company's
financial condition and current conditions in the industries in which the
Company's businesses operate and the Company's prospects for future growth
and profitability.
(vii) The oral opinion of Goldman Sachs that based upon certain
considerations and assumptions, as of May 31, 1996, the $30 per share in
cash to be received by shareholders in the Offer and the Merger, taken as a
unitary transaction, is fair to such holders. Goldman Sachs subsequently
confirmed its oral opinion by delivery of its written opinion dated June 5,
1996. The full text of Goldman Sachs' written opinion, dated June 5, 1996,
delivered to the Board which sets forth the assumptions made, procedures
followed, matters considered, and limits of its review, is filed as Exhibit
4 to this Schedule 14D-9 and is incorporated herein by reference. THE TEXT
OF SUCH OPINION SHOULD BE READ IN CONJUNCTION WITH THIS STATEMENT.
In reaching its recommendation, no specific weightings were given by the
Board to any of the foregoing factors, although the Increased Offer Price and
the matters set forth in subparagraphs (iv) and (v) above were significant
factors in reaching its conclusions. Such a determination of specific weightings
would, in the Board's view, be impracticable. In addition, individual members of
the Board may have given various weightings to different factors.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
Item 6(a) of the Schedule 14D-9 is amended and supplemented by adding at
the end thereof the following:
To the best of the Company's knowledge, no transactions in the Shares have
been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company, other than the
exercise by David L. Swift, Chairman of the Board, President and Chief Executive
Officer and a director of the Company, on March 25, 1996, of a previously
granted option for 13,000 Common Shares at an exercise price of $14.125 per
Common Share and the exercise by Jon Slaybaugh, President of Namco Controls
Corporation, on May 10, 1996 of previously granted options for 2,000, 2,000 and
1,500 Common Shares at exercise prices of $9.750, $5.000 and $6.875 per Common
Share, respectively, and the forfeiture by Mr. Slaybaugh of 2,500 performance
shares previously awarded under the Performance Plan.
Item 6(b) of the Schedule 14D-9 is amended and supplemented by adding at
the end thereof the following:
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<PAGE> 14
To the best of the Company's knowledge, all of the executive officers,
directors, affiliates and subsidiaries of the Company currently intend to
tender, pursuant to the Offer at the Increased Offer Price, all Shares
beneficially owned by them, except for those Shares, if any, held by such
persons which, if tendered, would cause such persons to incur liabilities under
the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended. The foregoing does not include any Shares over which, or with respect
to which, any such person acts in a fiduciary or representative capacity or is
subject to the instructions of a third party with respect to such tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Item 7(a) of the Schedule 14D-9 is hereby amended and supplemented by
adding at the end thereof the following:
The Company has terminated all existing activities, discussions, or
negotiations with third parties with respect to any proposed Company Acquisition
Proposal. Except for the proposed transactions with Danaher and WEC discussed
herein, the Company is not currently engaged in any negotiation in response to
the Offer which relates to or would result in (i) an extraordinary transaction,
such as a merger or reorganization, involving the Company of any of its
subsidiaries, (ii) a purchase, sale, or transfer of a material amount of assets
by the Company or any of its subsidiaries, (iii) a tender offer for or other
acquisition of securities by or of the Company, or (iv) any material change in
the present capitalization or dividend policy of the Company.
Item 7(b) of the Schedule 14D-9 is hereby amended and supplemented by
adding at the end thereof the following:
Except as set forth in Items 3(b), 4(a), 4(b), and 7(a) herein, there are
no transactions, Board resolutions, agreements in principle, or signed contracts
in response to the Offer which relate to or would result in any of the matters
referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Item 8 of the Schedule 14D-9 is hereby amended and supplemented by adding
at the end thereof the following:
Rights Agreement. On May 31, 1996, the Rights Agreement was amended to provide
that the approval, execution, delivery, and performance of the Merger Agreement
and the consummation of the transactions contemplated by it, including the
Offer, will not cause Danaher, WEC, or any of their affiliates or associates to
become an "Acquiring Person" or otherwise cause a "Shares Acquisition Date" or
"Triggering Event" to occur. The Rights Agreement was also amended to provide
that the Rights will expire upon the consummation of the Offer and acceptance
for payment of the Shares tendered pursuant to the Offer.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(1) Letter to Shareholders of the Company dated June 5, 1996*
(2) The Merger Agreement
(3) Letter from Danaher to the Company's Board of Directors dated May 24,
1996 (incorporated by reference to Exhibit 1 to Schedule 14D-9/A (Amendment No.
3) filed by the Company on May 31, 1996).
(4) Opinion of Goldman, Sachs & Co, dated June 5, 1996*
(5) Page 6 of the 1996 Proxy Statement.
(6) Information Statement Pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder*
*included in copies mailed to shareholders
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment No. 5 is true, complete
and correct.
ACME-CLEVELAND CORPORATION
By: /s/ DAVID L. SWIFT
--------------------------------------
David L. Swift, Chairman of the Board,
President and Chief Executive Officer
Dated: June 5, 1996
15
<PAGE> 1
EXHIBIT 1
ACME-CLEVELAND CORPORATION LOGO
June 5, 1996
Dear Shareholder:
I am pleased to inform you that Acme-Cleveland Corporation
("Acme-Cleveland") has entered into an Agreement and Plan of Merger with Danaher
Corporation ("Danaher") and WEC Acquisition Corp. ("WEC"), a wholly owned
subsidiary of Danaher Corporation, pursuant to which WEC will purchase all of
the issued and outstanding shares of Acme-Cleveland and the related stock
purchase rights not already owned by Danaher for $30 per share in cash.
The transaction will be completed through an amendment of Danaher's
outstanding tender offer to increase the offer price to $30 and to extend the
expiration of the tender offer until July 2, 1996, followed by a merger of WEC
into Acme-Cleveland in which any shares not acquired by Danaher in the tender
offer will be exchanged for the same cash price per share paid in the tender
offer. The amended tender offer remains subject to certain conditions, including
the acquisition of a majority of Acme-Cleveland shares on a fully diluted basis,
including shares owned by Danaher, pursuant to the tender offer, the acquisition
of shares pursuant to the offer being approved by Acme-Cleveland's shareholders
under the Ohio Control Share Acquisition Act, and certain other conditions.
Acme-Cleveland has set July 2, 1996 as the date on which the previously
adjourned meeting of Acme-Cleveland's shareholders to vote upon the "control
share acquisition" will be reconvened and has set June 13, 1996 as the new
record date for such meeting.
The Board of Directors believes that the increase in the offer from $27 to
$30 per share, combined with the negotiated terms of the Merger Agreement,
provide significant improvements over the original offer made by Danaher. As a
result of these considerations and a number of other factors more fully
described in the attached Amendment No. 5 to Acme-Cleveland Corporation's
Schedule 14D-9, the Board of Directors unanimously approved the Agreement and
Plan of Merger, the amended offer, and the merger on May 31, 1996. We urge you
to consider carefully the attached material in making your decision with respect
to tendering your shares.
I personally, along with the rest of the Board of Directors, thank you for
your support during this process. The Board of Directors believes that the
Agreement and Plan of Merger and the terms of the amended offer and the merger
are fair to and in the best interests of Acme-Cleveland's shareholders and
recommends that the shareholders accept the Danaher offer at the increased offer
price and tender their shares pursuant to such offer.
Sincerely,
DAVID L. SWIFT SIGNATURE
David L. Swift
Chairman, President and
Chief Executive Officer
<PAGE> 1
Exhibit 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF
MAY 31, 1996
AMONG
ACME-CLEVELAND CORPORATION,
DANAHER CORPORATION,
AND
WEC ACQUISITION CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
THE TENDER OFFER AND MERGER......................... 1
SECTION 1.01. 831 Meeting; Tender Offer......................... 1
SECTION 1.02. The Merger........................................ 4
SECTION 1.03. Conversion of Shares.............................. 5
SECTION 1.04. Surrender and Payment............................. 5
SECTION 1.05. Company Options................................... 7
SECTION 1.06. Company Performance Plan.......................... 7
ARTICLE II
THE SURVIVING CORPORATION; THE PARENT DIRECTORS............ 8
SECTION 2.01. Articles of Incorporation......................... 8
SECTION 2.02. Regulations....................................... 8
SECTION 2.03. Directors and Officers............................ 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ 8
SECTION 3.01. Corporate Existence and Power..................... 8
SECTION 3.02. Corporate Authorization........................... 9
SECTION 3.03. Governmental Authorization........................ 9
SECTION 3.04. Non-Contravention................................. 9
SECTION 3.05. Capitalization.................................... 10
SECTION 3.06. Subsidiaries...................................... 11
SECTION 3.07. Company SEC Reports............................... 12
SECTION 3.08. Financial Statements; No Undisclosed
Liabilities....................................... 13
SECTION 3.09. Absence of Certain Changes........................ 13
SECTION 3.10. Litigation........................................ 14
SECTION 3.11. ERISA............................................. 14
SECTION 3.12. Taxes............................................. 17
SECTION 3.13. Intellectual Property Rights...................... 18
SECTION 3.14. Environmental Protection.......................... 19
SECTION 3.15. Finders and Investment Bankers.................... 20
SECTION 3.16. Vote Required..................................... 20
SECTION 3.17. Company Rights Agreement.......................... 21
SECTION 3.18. Takeover Statutes................................. 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND MERGER SUB........................ 22
SECTION 4.01. Corporate Existence and Power..................... 22
</TABLE>
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<TABLE>
<S> <C>
SECTION 4.02. Corporate Authorization........................... 22
SECTION 4.03. Governmental Authorization........................ 23
SECTION 4.04. Non-Contravention................................. 23
SECTION 4.05. Reports........................................... 24
SECTION 4.06. Financial Statements; No Undisclosed
Liabilities....................................... 24
SECTION 4.07. Litigation........................................ 25
SECTION 4.08. Vote Required..................................... 25
SECTION 4.09. Availability of Funds............................. 25
ARTICLE V
COVENANTS OF THE COMPANY........................ 26
SECTION 5.01. Conduct of the Company............................ 26
SECTION 5.02. Access to Information............................. 27
SECTION 5.03. Other Offers...................................... 28
SECTION 5.04. Notices of Certain Events......................... 28
SECTION 5.05. Merger Meeting; Proxy Statement................... 29
ARTICLE VI
COVENANTS OF THE PARENT AND MERGER SUB................... 30
SECTION 6.01. Director, Officer, and Employee Liability......... 30
SECTION 6.02. Employee Benefits................................. 30
ARTICLE VII
COVENANTS OF THE PARENT, MERGER SUB, AND THE COMPANY.......... 31
SECTION 7.01. Reasonable Efforts................................ 31
SECTION 7.02. Certain Filings and Consents...................... 31
SECTION 7.03. Public Announcements.............................. 32
SECTION 7.04. State Takeover Laws............................... 32
ARTICLE VIII
CONDITIONS TO THE MERGER........................... 32
SECTION 8.01. Conditions to the Obligations of Each
Party............................................. 32
SECTION 8.02. Conditions to the Obligations of the
Parent and Merger Sub............................. 33
ARTICLE IX
TERMINATION................................ 33
SECTION 9.01. Termination....................................... 33
SECTION 9.02. Effect of Termination............................. 34
ARTICLE X
MISCELLANEOUS.............................. 34
</TABLE>
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<TABLE>
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SECTION 10.01. Notices........................................... 34
SECTION 10.02. Survival.......................................... 35
SECTION 10.03. Amendments; No Waivers............................ 35
SECTION 10.04. Fees and Expenses................................. 36
SECTION 10.05. Successors and Assigns............................ 37
SECTION 10.06. Governing Law..................................... 37
SECTION 10.07. Counterparts; Effectiveness....................... 37
SECTION 10.08. Entire Agreement.................................. 37
SECTION 10.09. Headings.......................................... 38
SECTION 10.10. Severability...................................... 38
SECTION 10.11. Specific Performance.............................. 38
INDEX OF DEFINED TERMS ..................................................... 40
LIST OF SCHEDULES ..................................................... 41
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May
31, 1996 (this "Agreement"), is made by and between ACME-CLEVELAND CORPORATION,
an Ohio corporation (the "Company"), DANAHER CORPORATION, a Delaware corporation
(the "Parent"), and WEC ACQUISITION CORPORATION, a Delaware corporation and
wholly owned subsidiary of the Parent ("Merger Sub").
In consideration of the respective representations,
warranties, and agreements set forth herein, the parties agree as follows:
ARTICLE I
THE TENDER OFFER AND MERGER
SECTION 1.01. 831 Meeting; Tender Offer
(a) The Company will reconvene the Special Meeting
of Shareholders of the Company (the "831 Meeting") called for the purpose of
considering and acting upon a proposed "control share acquisition" of the
Company by Merger Sub, which was originally scheduled to be held on April 25,
1996, at the earliest practicable date. The methods for identifying "interested
shares," as defined in Section 1701.01(CC)(2) of the Ohio General Corporation
Law ("Ohio Law"), and for determining whether the related quorum requirement is
met at the 831 Meeting will be substantially as set forth in Schedule 1.01(a)
(831 Meeting Procedures). The Company will not postpone or adjourn (other than
for the absence of a quorum) the 831 Meeting without the consent of the Parent,
unless the Parent so requests. The Company's Board of Directors will recommend
that the Company's shareholders approve the proposed "control share acquisition"
at the 831 Meeting, unless (i) such recommendation would not be consistent with
the fiduciary duties of the Board of Directors under applicable law, as advised
by counsel, or (ii) this Agreement is terminated in accordance with Article IX.
(b) As promptly as practicable, but in no event
later than five business days after the public announcement of the execution of
this Agreement, Merger Sub will, and the Parent will cause Merger Sub to, amend
and supplement its existing tender offer (as amended, the "Offer") to provide
that (i) the price to be paid thereunder for each outstanding Common Share, $1
par value per share, of the Company, including the associated Company Right (as
defined in Section 3.05) (together with the Company Right, a "Company Common
Share"), and each Series A Convertible Preferred Share, without par value, of
the Company (a "Company A Preferred Share"; the Company
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Common Shares and the Company A Preferred Shares are collectively referred to as
"Company Shares") will be $30.00, (ii) the obligations of Merger Sub and the
Parent to consummate the Offer and to accept for payment and purchase the
Company Shares tendered in the Offer will be subject only to the conditions set
forth in Schedule 1.01(b) (Offer Conditions) (the "Offer Conditions"), and (iii)
the expiration date of the Offer will be extended until at least 5:00 p.m. on
the date of the 831 Meeting. At the Company's request, Merger Sub will, and the
Parent will cause Merger Sub to, extend the expiration date of the Offer from
time to time for up to an aggregate of an additional ten business days following
the date of the 831 Meeting if the condition set forth in clause (1) of the
first paragraph of the Offer Conditions is not fulfilled prior to 5:00 p.m. on
the date of the 831 Meeting. Merger Sub will not, and the Parent will cause
Merger Sub not to, decrease the price payable in the Offer, change the form of
consideration payable in the Offer, change the Offer Conditions, impose
additional conditions to its obligation to consummate the Offer and to accept
for payment and purchase Company Shares tendered in the Offer, or change any
other terms of the Offer in a manner adverse to the holders of the Company
Shares, except that Merger Sub may extend the expiration date of the Offer to
the extent required by applicable law or if the Offer Conditions are not
satisfied.
(c) As soon as practicable, but in no event later
than five business days after the public announcement of the execution of this
Agreement, Merger Sub and the Parent will file with the Securities and Exchange
Commission (the "SEC") an amendment to its Tender Offer Statement on Schedule
14D-1 (together with all supplements or amendments thereto, and including all
exhibits, the "Offer Documents") that reflects the amendment to the Offer
contemplated by Section 1.01(b). Merger Sub and the Parent will give the Company
and its counsel a reasonable opportunity to review the Offer Documents prior to
their being filed with the SEC or disseminated to the Company's shareholders.
Merger Sub and the Parent will, promptly after receipt, furnish the Company and
its counsel in writing with any comments that Merger Sub, the Parent, or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents.
(d) As promptly as practicable, but in no event
later than five business days after the public announcement of the execution of
this Agreement, Merger Sub and the Parent will move to withdraw their complaint
in the case entitled Danaher Corporation, et al., v. Acme-Cleveland Corporation,
et al., Case No. C2 96-0247, pending in the United State District Court for the
Southern District of Ohio, Eastern Division, and the Company will move to
withdraw its counterclaims in that case, in each case without prejudice.
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(e) As promptly as practicable, but in no event
later than the date on which the amendment to the Offer Documents referred to in
Section 1.01(c) is filed with the SEC, the Company will amend its Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 ("Schedule 14D-9") to
include a recommendation by the Company's Board of Directors that the Company's
shareholders accept the Offer and tender their Company Shares pursuant to the
Offer. The Company's Board of Directors has resolved to recommend that the
Company's shareholders accept the Offer and tender their Company Shares pursuant
to the Offer and has received an opinion from Goldman, Sachs & Co., Inc.
("Goldman Sachs") that the Offer and the Merger, taken as a unitary transaction,
are fair. The Company's Board of Directors will not withdraw, modify, or amend
its recommendation, unless (i) such recommendation would not be consistent with
the fiduciary duties of the Board of Directors under applicable law, as advised
by counsel, or (ii) this Agreement is terminated in accordance with Article IX.
(f) If requested by the Parent or Merger Sub, the
Company will, promptly following the purchase by Merger Sub pursuant to the
Offer of that number of Company Shares which, when aggregated with the Company
Shares then owned by the Parent and any of its affiliates, represents at least a
majority of the Company Shares then outstanding on a fully diluted basis, take
all actions necessary to cause persons designated by Merger Sub to become
directors of the Company so that the total number of directors so designated
equals the product, rounded up to the next whole number, of (i) the total number
of directors of the Company multiplied by (ii) the percentage that the number of
Company Shares then beneficially owned by Merger Sub or its affiliates bears to
the number of Company Shares outstanding at the time of such purchase. In
furtherance thereof, the Company will increase the size of its Board of
Directors, or use reasonable efforts to secure the resignation of directors, or
both as is necessary to permit that number of Merger Sub's designees to be
elected to the Company's Board of Directors; provided that, prior to the
Effective Time, the Company's Board of Directors will always have at least two
members who are not officers, designees, shareholders, or affiliates of Merger
Sub ("Independent Directors"). All of the Independent Directors will be
individuals who are currently directors of the Company, except to the extent
that such individuals do not wish to continue as directors or voluntarily
resign. The Company's obligations to appoint designees to its Board of Directors
will be subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder. The Company
will promptly take all actions required pursuant to Section 14(f) and Rule 14f-1
in order to fulfill its obligations under this Section 1.01 and will include in
the Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 1.01.
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(g) Following the election or appointment of Merger
Sub's designees pursuant to Section 1.01(f), any amendment to this Agreement,
any termination of this Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligations of Merger Sub or the
Parent under this Agreement, any recommendation to shareholders or any
modification or withdrawal of any such recommendation, or any waiver of any of
the Company's rights under this Agreement will require the concurrence of a
majority of the Independent Directors, unless no individuals who are currently
directors of the Company wish to continue as directors or voluntarily resign.
(h) The parties will cooperate with each other,
including by furnishing any necessary information and making any filings
required by applicable law, to ensure that the matters contemplated by this
Section 1.01 are consummated as promptly as practicable.
SECTION 1.02. The Merger.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.02(b)),
Merger Sub will be merged with and into the Company in accordance with (i) Ohio
Law and (ii) the General Corporation Law of the State of Delaware ("Delaware
Law"). As a result of this merger (the "Merger"), the separate existence of
Merger Sub will cease and the Company will be the surviving corporation (the
"Surviving Corporation").
(b) As soon as practicable after satisfaction or, to
the extent permitted hereunder, waiver of all conditions to the Merger set forth
in Article VIII, the parties will cause (i) a certificate of merger in such form
as is required by, and executed in accordance with, Ohio Law to be duly filed
with the Secretary of State of the State of Ohio and (ii) a certificate of
merger in such form as is required by, and executed in accordance with, Delaware
Law to be duly filed with the Secretary of State of the State of Delaware. The
Merger will become effective when both certificates of merger are so filed (the
"Effective Time").
(c) From and after the Effective Time, the Merger
will have the effects specified in Ohio Law and Delaware Law.
(d) The closing of the Merger (the "Closing") will
take place (i) at the offices of Thompson Hine & Flory P.L.L, 3900 Society
Center, 127 Public Square, Cleveland, Ohio 44114-1216, at 10:00 a.m. on the
first business day following the date on which the last to be fulfilled or
waived of the conditions set forth in Article VIII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver
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<PAGE> 9
of those conditions at the Closing) have been satisfied or waived in accordance
with this Agreement or (ii) at such other place and time as the parties may
agree.
SECTION 1.03. Conversion of Shares.
At the Effective Time:
(a) Each Common Share of Merger Sub (a "Merger Sub
Common Share") issued and outstanding immediately prior to the Effective Time
will be converted into one Common Share of the Surviving Corporation.
(b) Each Company Share issued and outstanding
immediately prior to the Effective Time will, except as otherwise provided in
Section 1.03(c), be converted, by virtue of the Merger and without any action on
the part of the holder thereof, into the right to receive, without interest, an
amount in cash equal to $30.00 (the "Merger Consideration"). From and after the
Effective Time, all Company Shares, by virtue of the Merger and without any
action on the part of the holders thereof, will be canceled and retired and
cease to exist, and each holder of a certificate representing any Company Shares
immediately prior to the Effective Time (a "Share Certificate") will thereafter
cease to have any rights with respect to such Company Shares, except the right
to receive the Merger Consideration therefor upon the surrender of the Share
Certificate in accordance with Section 1.04 or the right, if any, to receive
payment from the Surviving Corporation of the "fair cash value" of such Company
Shares as determined in accordance with Section 1701.85 of the Ohio Law.
(c) Each outstanding Company Share held by the
Company as a treasury share or owned by the Parent or any Subsidiary of the
Parent immediately prior to the Effective Time will be canceled, and no payment
will be made with respect thereto.
SECTION 1.04. Surrender and Payment.
(a) Prior to the Effective Time, the Parent will
appoint an agent reasonably acceptable to the Company (the "Exchange Agent") for
the purpose of exchanging Share Certificates. The Parent will make available to
the Exchange Agent funds in amounts and at the times necessary for the payment
of the Merger Consideration in accordance with this Section 1.03 (such cash is
referred to as the "Exchange Fund").
(b) Promptly after the Effective Time, the Parent
will send, or will cause the Exchange Agent to send, to each holder of a Share
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<PAGE> 10
Certificate a letter of transmittal and instructions for use in surrendering the
Share Certificates for payment in accordance with this Section 1.04. Provision
also will be made for holders of Share Certificates to procure a letter of
transmittal and instructions and deliver such letter of transmittal, together
with their Share Certificates, in person immediately after the Effective Time.
(c) After the Effective Time, Share Certificates
will represent the right, upon surrender thereof to the Exchange Agent, together
with a duly executed and properly completed letter of transmittal relating
thereto, to receive (i) cash in the amount to which such holder is entitled
under Section 1.03 after giving effect to any required tax withholding or (ii)
payment from the Surviving Corporation of the "fair cash value" of such Company
Shares as determined under Section 1701.85 of the Ohio Law, subject to the
conditions set forth therein. No interest will be paid or will accrue on such
amount. Share Certificates so surrendered will be canceled. The Company will not
settle any claim pursuant to Section 1701.85 without the consent of the Parent.
(d) If any cash is to be paid to a Person other than
the registered holder of the Shares Certificates surrendered in exchange
therefor, it will be a condition to such payment that the Share Certificates so
surrendered be properly endorsed or otherwise in proper form for transfer and
that the Person requesting such payment pay to the Exchange Agent any transfer
or other taxes required as a result of such issuance or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. For purposes of this Agreement, "Person" means an individual, a
corporation, a partnership, an association, a trust, or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(e) At and after the Effective Time, the stock
transfer books of the Company will be closed, and there will be no further
registration of transfers of Company Shares outstanding prior to the Effective
Time. If, at or after the Effective Time, Share Certificates are presented to
the Surviving Corporation, they will be canceled and exchanged in accordance
with this Article I.
(f) The Parent will attempt to contact (using
shareholder lists available to it) and provide the items to which reference is
made in paragraph (b) of this Section 1.04 to, all holders of Company Shares
entitled to receive the Merger Consideration. Any cash in the Exchange Fund that
remain unclaimed by the holders of Company Shares six months after the Effective
Time will be returned to the Parent, upon demand, and any such holder who has
not surrendered his Company Shares in accordance with this
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Section 1.04 prior to that time will thereafter look only to the Parent, as a
general creditor thereof, to pay the Merger Consideration to which such holder
is entitled pursuant to Section 1.03. Notwithstanding the foregoing, the Parent
will not be liable to any holder of Company Shares for any amount paid to a
public official pursuant to applicable abandoned property, escheat, or similar
laws.
(g) If any Share Certificate is lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Share Certificate to be lost, stolen, or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Parent may direct as indemnity against any claim that may be made
against it with respect to such Share Certificate, the Exchange Agent will pay
the cash payable in respect of such Share Certificate pursuant to this
Agreement.
SECTION 1.05. Company Options.
At the earlier of the purchase of Company Shares
pursuant to the Offer and the Effective Time, subject to obtaining the consent
of the holder thereof, each outstanding option (a "Company Option") to purchase
Company Common Shares, whether or not exercisable, granted under employee stock
option or incentive plans of the Company (the "Company Option Plans") will be
cancelled, and in consideration of such cancellation, will be converted into the
right to receive, without interest, an amount in cash equal to the product of
(i) the number of Company Common Shares subject to the Company Option and (ii)
the excess of (A) the Merger Consideration over (B) the exercise price per share
of the option. The Company will use reasonable efforts to obtain, prior to the
earlier of the purchase of Company Shares pursuant to the Offer and the
Effective Time, the written consent of each holder of a Company Option in
respect of such cancellation.
SECTION 1.06. Company Performance Plan.
At the earlier of the purchase of Company Shares
pursuant to the Offer and the Effective Time, subject to obtaining the consent
of the holder thereof, each Company Common Share to which an employee of the
Company is entitled under the Acme-Cleveland Corporation Performance and Equity
Incentive Plan (the "Company Performance Plan") will be cancelled, and in
consideration of such cancellation, will be converted into the right to receive,
without interest, an amount in cash equal to the Merger Consideration. The
Company will use reasonable efforts to obtain, prior to the earlier of the
purchase of Company Shares pursuant to the Offer and the Effective Time, the
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written consent of each holder of a Company Common Share granted under the
Company Performance Plan in respect of such cancellation.
ARTICLE II
THE SURVIVING CORPORATION; THE PARENT DIRECTORS
SECTION 2.01. Articles of Incorporation.
The articles of incorporation of the Company in
effect at the Effective Time will be the articles of incorporation of the
Surviving Corporation after the consummation of the Merger until amended in
accordance with applicable law.
SECTION 2.02. Regulations.
The regulations of the Company in effect at the
Effective Time will be the regulations of the Surviving Corporation after the
consummation of the Merger until amended in accordance with applicable law.
SECTION 2.03. Directors and Officers.
From and after the Effective Time, until successors
are duly elected or appointed and qualified in accordance with applicable law,
the directors and officers of Merger Sub at the Effective Time will be the
directors and officers of the Surviving Corporation after the consummation of
the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent
that:
SECTION 3.01. Corporate Existence and Power.
The Company is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of Ohio and
has all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as now conducted, except where the
failure to do so is not likely to have, individually or in the aggregate, a
material adverse effect on the financial condition, results of operations, or
business of the Company and its Subsidiaries (as defined in Section 3.06(a))
taken as a whole (a "Company Material Adverse Effect"). The term "Company
Material
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Adverse Effect" will not, however, include any event or change resulting from
this Agreement or the transactions contemplated by it. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified is not likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
SECTION 3.02. Corporate Authorization.
The execution, delivery, and performance by the
Company of this Agreement and the consummation by the Company of the Merger and
the other transactions contemplated by this Agreement are within the Company's
corporate power and authority and, except for any required approval by the
Company's shareholders in connection with the consummation of the the Offer or
the Merger, have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution, and delivery hereof by
the Parent and Merger Sub, constitutes a legal, valid, and binding agreement of
the Company.
SECTION 3.03. Governmental Authorization.
The execution, delivery, and performance by the
Company of this Agreement and the consummation by the Company of the Merger and
the other transactions contemplated by this Agreement do not require any
consent, approval, authorization, or permit of, other action by, or filing with,
any governmental body, agency, official, or authority other than (i) as set
forth on Schedule 3.03 (Company Governmental Authorization), (ii) the filing of
appropriate certificates of merger in accordance with Ohio Law and Delaware Law,
(iii) compliance with applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the Exchange Act, and (iv) approval
by the Company's shareholders of the purchase of Company Shares by Merger Sub
pursuant to the Offer in accordance with Section 1701.831 of the Ohio Law,
except where the failure of any such action to be taken or filing to be made is
not likely to have, individually or in the aggregate, a Company Material Adverse
Effect or prevent or materially delay consummation of the Offer or the Merger.
SECTION 3.04. Non-Contravention.
The execution, delivery, and performance by the
Company of this Agreement, the purchase of Company Shares by Merger Sub pursuant
to the Offer, and the consummation by the Company of the Merger and the
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other transactions contemplated by this Agreement do not and will not (i)
contravene or conflict with the Articles of Incorporation or Regulations of the
Company, (ii) assuming compliance with the matters referred to in Section 3.03,
contravene, conflict with, or constitute a violation of any provision of any
law, rule, regulation, judgment, injunction, order, or decree binding upon or
applicable to the Company or any of its Subsidiaries, (iii) constitute a
default, give rise to a right of termination, cancellation, or acceleration of
any right or obligation of the Company or any of its Subsidiaries, or give rise
to a loss of any benefit to which the Company or any of its Subsidiaries is
entitled, under any provision of any agreement or other instrument binding upon
the Company or any of its Subsidiaries or under any license, franchise, permit,
or other similar authorization held by the Company or any of its Subsidiaries,
or (iv) result in the creation or imposition of any Lien on any asset of the
Company or any of its Subsidiaries, except as set forth in Schedule 3.04
(Company Liens Created) and except for any occurrences or results referred to
in clauses (ii), (iii), and (iv) that are not likely to have, individually or
in the aggregate, a material adverse effect on the financial condition, results
of operations, or business of the Company and its Subsidiaries taken as a whole
or prevent or delay consummation of the Offer or the Merger. For purposes of
this Agreement, "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, encumbrance, or other right or interest of
another to or in, or adverse claim of any kind in respect of, such asset.
SECTION 3.05. Capitalization.
(a) The Company has 10,936,285 authorized shares,
consisting of 10,000,000 Company Common Shares and 936,285 Serial Preferred
Shares without par value of the Company. The authorized classes and series of
Serial Preferred Shares without par value of the Company consist of 161,374
Company A Preferred Shares and 100,000 Series B Preferred Shares of the Company
("Company B Preferred Shares"). As of May 30, 1996, (i) 6,430,078 Company Common
Shares were issued and outstanding, (ii) 369,800 Company Common Shares were
reserved for future issuance upon exercise of outstanding Company Options
granted pursuant to the Company Option Plans, (iii) 91,672 Company Common Shares
were reserved for issuance under outstanding grants, or available for future
grants, under the Company Performance Plan, (iv) 161,374 Company Common Shares
were reserved for issuance upon conversion of the Company A Preferred Shares,
and (v) 100,000 Company B Preferred Shares were reserved for issuance upon
exercise of the rights (the "Company Rights" or, individually, a "Company
Right") distributed in connection with the Rights Agreement, dated as of March
11, 1996, between the Company and Society National Bank, as Rights Agent, as
amended by the First Amendment to Rights Agreement, dated as of March 20, 1996
(as amended, the "Company Rights Agreement"). As of May 30, 1996, 161,374
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<PAGE> 15
Company A Preferred Shares were issued and outstanding, and no Company B
Preferred Shares were issued and outstanding. Except as described in this
Section 3.05 or in Schedule 3.05 (Company Capitalization), as of the date of
this Agreement, no shares of capital stock of the Company are reserved for
issuance for any other purpose. Each of the issued and outstanding Company
Shares is duly authorized, validly issued, and fully paid and nonassessable and
has not been issued in violation of (nor are any of the authorized Company
Shares subject to) any preemptive or similar rights created by statute, the
Articles of Incorporation, or the Regulations of the Company or any agreement to
which the Company is a party or is bound. Other than the Company A Preferred
Shares, the Company has no outstanding bonds, notes, or other obligations the
holders of which have the right to vote with the Company's shareholders on any
matter.
(b) Except as set forth in paragraph (a) of this
Section 3.05 or as set forth on Schedule 3.05, there are no options, warrants,
or other rights (including registration rights and conversion rights),
agreements, arrangements, or commitments to which the Company is a party
relating to the issued or unissued capital stock of the Company or obligating
the Company to grant, issue, or sell any shares of the capital stock of the
Company or other security of the Company. Except as set forth in Schedule 3.05,
there are no obligations, contingent or otherwise, of the Company to repurchase,
redeem, or otherwise acquire any Company Shares, other capital stock of the
Company, or capital stock or other equity interests of any Subsidiary of the
Company.
(c) Schedule 3.05 lists, as of the date indicated,
(i) the number of Company Options outstanding and the exercise price of each
outstanding Company Option and (ii) the number of Company Common Shares that
employees of the Company are entitled to receive under the Company Performance
Plan.
SECTION 3.06. Subsidiaries.
(a) Each Subsidiary of the Company is a corporation
duly incorporated, validly existing, and in good standing under the laws of
jurisdiction of its incorporation or is a partnership duly constituted under its
governing law, has all requisite corporate or partnership power and authority to
own, lease, and operate its properties and to carry on its business
substantially as now conducted, and is duly qualified to do business as a
foreign corporation or partnership and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified is not likely to have, individually or in the aggregate, a Company
Material Adverse Effect. For purposes of this Agreement, "Subsidiary" of any
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Person means (i) any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are, directly
or indirectly, owned by such Person, and (ii) any partnership of which such
Person is a general partner.
(b) Except as set forth on Schedule 3.06 (Company
Subsidiaries), each Subsidiary of the Company is wholly owned by the Company,
directly or indirectly, free and clear of any Lien and free and clear of any
other limitation or restriction (including any restriction on the right to vote,
sell, or otherwise dispose of such capital stock or other ownership interests).
Except as set forth on Schedule 3.06, there are no outstanding (i) securities of
the Company or any of its Subsidiaries convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
such Subsidiary of the Company or (ii) options or other rights to acquire from
the Company or any of its Subsidiaries, and no other obligation of the Company
or any of its Subsidiaries to issue, any capital stock, voting securities, or
other ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities, or ownership interests in, any such
Subsidiary of the Company (the items in clauses (i) and (ii), including capital
stock, are collectively referred to as the "Company Subsidiary Securities").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem, or otherwise acquire any outstanding Company Subsidiary
Securities.
SECTION 3.07. Company SEC Reports.
Since September 30, 1992, the Company has filed all
forms, reports, statements, and other documents required to be filed with the
SEC, including without limitation (i) all Annual Reports on Form 10-K, (ii) all
Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to meetings
of shareholders (whether annual or special), (iv) all Current Reports on Form 8-
K, (v) all Solicitation/Recommendation Statements on Schedule 14D-9, and (vi)
all other reports, schedules, registration statements, or other documents
required to be filed with the SEC (collectively, the "Company SEC Reports"),
except where the failure to file any such forms, reports, statements, or other
documents is not likely to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company SEC Reports (x) were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and (y) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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SECTION 3.08. Financial Statements; No Undisclosed Liabilities.
The audited consolidated financial statements and
unaudited consolidated interim financial statements (including the related notes
and schedules) of the Company and its consolidated Subsidiaries included or
incorporated by reference in the Company SEC Reports (the "Company Financial
Statements") were prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended,
subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments, none of which is likely to have, individually or in the
aggregate, a Company Material Adverse Effect. Neither the Company nor its
Subsidiaries has any liabilities, whether or not accrued, contingent or
otherwise, that are likely to have, individually or in the aggregate, a Company
Material Adverse Effect other than liabilities disclosed in the Schedules hereto
or in the Company SEC Reports or for which the Company has made adequate
reserves as reflected in the Company Financial Statements.
SECTION 3.09. Absence of Certain Changes.
Except as contemplated hereby or as described in any
Company SEC Report filed prior to the date hereof or as disclosed in Schedule
3.09 (Certain Company Changes) to this Agreement, since September 30, 1995, (a)
the Company and its Subsidiaries have conducted their business in all material
respects in the ordinary course consistent with past practices, (b) there has
not been any change or development, or combination of changes or developments,
that have had or are likely to have, individually or in the aggregate, a Company
Material Adverse Effect, (c) there has not been any declaration, setting aside,
or payment of any dividend or other distribution with respect to any shares of
capital stock of the Company other than the Company Rights and quarterly
dividends on the Company Shares at the rates in effect on the date of this
Agreement, or any repurchase, redemption, or other acquisition by the Company or
any of its Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of its
Subsidiaries, (d) there has not been any amendment of any term of any
outstanding security of the Company or any of its Subsidiaries other than with
respect to the Company Rights, (e) there has not been any incurrence,
assumption, or guarantee by the Company or any of its Subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices, (f) there has not
been any creation or assumption by the Company or any of its Subsidiaries of any
Lien on any material asset (including the sale, pledge, or assignment of
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receivables) other than in the ordinary course of business consistent with past
practices, and (g) there has not been any change in any method of accounting or
accounting practice by the Company or any of its Subsidiaries, except for any
such change required by reason of a concurrent change in generally accepted
accounting principles or to conform a Subsidiary's accounting policies and
practices to those of the Company. Furthermore, except pursuant to contractual
obligations disclosed in any Company SEC Report filed prior to the date hereof,
as disclosed in Schedule 3.11, or pursuant to immaterial arrangements with one
or more employees or groups of employees, there has not been any (i) grant of
any severance or termination pay to any director or executive officer of the
Company or any of its Subsidiaries, (ii) entering into of any employment,
deferred compensation, or other similar agreement (or any amendment to any such
existing agreement) with any director or executive officer of the Company or any
of its Subsidiaries, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements with any director
or executive officer of the Company or any of its Subsidiaries, or (iv) increase
in compensation, bonus, or other benefits payable to directors or executive
officers of the Company or any of its Subsidiaries.
SECTION 3.10. Litigation.
Except as disclosed in Schedule 3.10 (Company
Litigation), there are no actions, suits, investigations, or proceedings pending
or, to the knowledge of the Company, threatened against the Company, any of its
Subsidiaries, or any of their respective properties before any court or
arbitrator or any governmental body, agency, official, or authority that are
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
SECTION 3.11. ERISA.
(a) As used in this Section 3.11 and in Section
6.08, each of the following terms has the indicated meaning:
(i) "Affiliate" of any Person means any other Person
that, together with such Person, would be treated as a single employer
under Section 414 of the Code.
(ii) "Company Employee Plans" means each "employee
benefit plan," as defined in Section 3(3) of ERISA that (A) is subject
to any provision of ERISA and (B) is maintained, administered, or
contributed to by the Company or any affiliate and covers any employee
or former employee of the Company or any affiliate or under which the
Company or any affiliate has any liability.
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(iii) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(iv) "Company Benefit Arrangement" means each
employment, severance, welfare, or other similar contract,
arrangement, or policy and each plan or arrangement (written or oral)
providing for compensation, benefit, bonus, profit-sharing, stock
option, or other stock related rights or other forms of incentive or
deferred compensation, that (A) is not a Company Employee Plan, (B) is
entered into, maintained, or contributed to, as the case may be, by
the Company or any of its affiliates, and (C) covers any employee or
former employee or director or former director of the Company or any
of its affiliates.
(b) The Company has heretofore made available to the
Parent, and agrees that it will as soon as practicable after the date of this
Agreement furnish the Parent upon the Parent's request with, copies of all
Company Employee Plans (and, if applicable, related trust agreements) and all
amendments thereto and the most recent Forms 5500 required to be filed with
respect thereto, IRS determination letters, and actuarial reports, in each case
to the extent applicable.
(c) Schedule 3.11 (Company Employee Plans)
identifies each Company Employee Plan that constitutes a "defined benefit plan"
as defined in Section 3(35) of ERISA. Except as set forth on Schedule 3.11, no
Company Employee Plan constitutes a "multiemployer plan," as defined in Section
3(37) of ERISA, and no Company Employee Plan is maintained in connection with
any trust described in Section 501(c)(9) of the Code. Except as set forth on
Schedule 3.11, no Company Employee Plan provides retiree medical or life
insurance benefits or is subject to Title IV of ERISA. Neither the Company nor
any of its affiliates has incurred any liability under Title IV of ERISA,
including, without limitation, arising in connection with the termination of, or
complete or partial withdrawal from, any plan currently or previously covered by
Title IV of ERISA that is likely to have, individually or in the aggregate, a
Company Material Adverse Effect, and the Pension Benefit Guarantee Corporation
has not instituted proceedings to terminate any such plan nor do any conditions
exist that present a material risk of such occurrence. Nothing done or omitted
to be done, and no transaction or holding of any asset under or in connection
with any Company Employee Plan, has or will make the Company or any of its
Subsidiaries or any officer or director of the Company or any of its
Subsidiaries subject to any liability under Title I of ERISA or liable for any
tax pursuant to Section 4975 of the Code that is likely to have, individually or
in the aggregate, a Company Material Adverse Effect. With respect to each
Company Employee Plan subject to Title IV of ERISA, the
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Company has furnished the Parent with the most recent actuarial report showing
the present value of accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes with respect to such plan. No Company
Employee Plan or any trust established thereunder has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal year
of each such plan ended prior to the date hereof; and all contributions required
to be made with respect thereto (whether pursuant to the terms of any ERISA Plan
or otherwise) on or prior to the date hereof have been timely made. No Company
Employee Plan is a multiemployer plan.
(d) Except to the extent it is not likely to have,
individually or in the aggregate, a Company Material Adverse Effect, (i) each
Company Employee Plan that is intended to be qualified under Section 401(a) of
the Code is so qualified and has been so qualified during the period from its
adoption to date, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code, and (ii) each Company Employee Plan has
been maintained in compliance with its terms and with the requirements of all
applicable statutes, orders, final rules, and final regulations.
(e) Schedule 3.11 lists each Company Benefit
Arrangement currently in effect (other than any immaterial arrangement with one
or more employees or groups of employees or disclosed in any Company SEC Report
filed prior to the date hereof) provided to any director, executive officer, or
employee of the Company or any former director, executive officer, or employee
of the Company and sets forth each Company Benefit Arrangement (other than any
immaterial arrangement with one or more employees or groups of employees or
disclosed in any Company SEC Report filed prior to the date hereof) with respect
to which benefits will be accelerated or paid as a result of the transactions
contemplated by this Agreement. Copies of all written Company Benefit
Arrangements (other than any immaterial arrangement with one or more employees
or groups of employees) and all amendments thereto have heretofore been made
available to the Parent, and will promptly be furnished to the Parent upon the
Parent's request after the date of this Agreement. Except to the extent that it
is not likely to have, individually or in the aggregate, a Company Material
Adverse Effect, each Company Benefit Arrangement has been maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules, and regulations that are applicable to such Company
Benefit Arrangement.
(f) Except for three employees whose compensation
arrangements are disclosed on Schedule 3.11, the Company does not anticipate
that any amounts payable under the Company Employee Plans and the
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Company Benefit Arrangements will fail to be deductible for federal income tax
purposes by virtue of section 280G of the Code. There are no pending,
threatened, or anticipated claims by or on behalf of any Company Employee Plan
or Company Benefit Arrangement, by any employee or beneficiary covered under any
such plan or arrangement, or otherwise involving any such plan or arrangement,
that are likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.12. Taxes.
Except for matters that are not likely to have,
individually or in the aggregate, a Company Material Adverse Effect, (a) the
Company and its Subsidiaries have timely filed all Tax Returns required to be
filed by them with any taxing authority with respect to Taxes for all periods
heretofore ended, taking into account any extension of time to file granted to
or obtained on behalf of the Company and its Subsidiaries, (b) all Taxes
required to be paid prior to the Effective Time have been duly and timely paid
or will be duly and timely paid by the Effective Time, (c) as of the date
hereof, no deficiency for any amount of Tax has been asserted or assessed by a
taxing authority against the Company or any of its Subsidiaries, except for
amounts for which the Company has made an adequate reserve as reflected in the
Company Financial Statements, (d) all liability for Taxes of the Company or any
of its Subsidiaries that are or will become due or payable with respect to
periods covered by the Company Financial Statements have been paid or adequately
reserved for on the Company Financial Statements to the extent required by
generally accepted accounting principles, (e) the Company and its Subsidiaries
are not liable for any Taxes arising out of membership or participation in any
consolidated, affiliated, combined, or unitary group in which it or any of its
Subsidiaries was at any time a member, (f) there are no liens for Taxes upon the
assets of the Company or of any of its Subsidiaries other than for Taxes not yet
due and payable, (g) the applicable statute of limitations with respect to the
assessment of Taxes of the Company and its Subsidiaries have expired through
their taxable years September 30, 1990, and there are no outstanding waivers or
comparable consents extending the statute of limitations with respect to any
Taxes or Tax Returns of the Company or any of its Subsidiaries, (h) there are no
audits, claims, actions, suits, proceedings, or investigations now pending or
threatened against or with respect to the Company or any of its Subsidiaries in
respect of any Taxes, (i) neither the Company nor any of its Subsidiaries are
parties to any agreement providing for the allocation or sharing of Taxes except
for intercompany agreements between the Company and one or more of its
Subsidiaries and certain agreements providing for the disposition of The
Cleveland Twist Drill Company and The National Acme Company, and (j) there has
been no change in the method of accounting utilized by the Company or
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any of its Subsidiaries that would require an adjustment to taxable income under
section 481 of the Code.
For purposes of this Agreement, "Code" means the
Internal Revenue Code of 1986, as amended; "Taxes" or "Tax" means all federal,
state, local, and foreign taxes, levies, and other assessments, including
without limitation, all income, excise, property, sales, use, value added,
transfer, franchise, profits, withholding, payroll, social security, or other
taxes including any interest, additions to tax, and penalties applicable
thereto; and "Tax Return" means any return, declaration, statement, report,
schedule, information return, and other document (including any related or
supporting information) with respect to Taxes.
SECTION 3.13. Intellectual Property Rights.
(a) Schedule 3.13 (Company Intellectual Property
Rights) lists each of the following items that are likely to be, individually or
in the aggregate, material to the business of the Company and its Subsidiaries:
(i) patents and applications therefor, registrations of trademarks (including
service marks) and applications therefor, and registrations of copyrights and
applications therefor that are owned by the Company or any of its Subsidiaries,
(ii) unexpired licenses relating to the Company Intellectual Property Rights (as
defined in paragraph (d) of this Section 3.13) that have been granted to or by
the Company or any of its Subsidiaries, and (iii) other agreements relating to
Intellectual Property Rights.
(b) To the Company's knowledge, the Company and its
Subsidiaries collectively own and have the right to use, and to license others
to use, all of the Company Intellectual Property Rights that are, individually
or in the aggregate, material to the conduct of the business of the Company and
its Subsidiaries. To the Company's knowledge, such ownership and right to use,
and to license others to use, are free and clear of all Liens, security
interests, claims, and rights to use of third parties that are likely to be,
individually or in the aggregate, material to the business of the Company and
its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries
has knowledge of any alleged or claimed infringement by any product or process
manufactured, used, sold, or under development by or for the Company or its
Subsidiaries that, if proven, is likely to have a Company Material Adverse
Effect.
(d) As used in this Agreement, the term
"Intellectual Property Rights" includes patents, patent applications,
trademarks, trademark
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applications, trade names, service marks, service mark applications, copyrights,
copyright applications, publication rights, and proprietary computer programs,
other computer software (including source codes and object codes), inventions,
know how, trade secrets, technology, processes, and formulae. The term "Company
Intellectual Property Rights" means all Intellectual Property Rights that are
used in the conduct of the business of the Company and its Subsidiaries.
SECTION 3.14. Environmental Protection.
(a) As used in this Agreement, each of the following
terms have the indicated meaning:
(i) "Company Real Property" means the real property
now owned or leased by the Company or any of its Subsidiaries.
(ii) "Environmental Law" means federal, state,
local, or foreign laws, statutes, rules, regulations, and ordinances
relating to the protection of the environment.
(iii) "Hazardous Material" means any hazardous,
toxic, or dangerous substance defined as such in (or for purposes of)
the Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), or any other Environmental Law.
(b) Except as set forth on Schedule 3.14 (Company
Environmental Matters) or as is not likely to have, individually or in the
aggregate, a Company Material Adverse Effect:
(i) The Company and each of its Subsidiaries is and
has been in compliance with all applicable Environmental Laws.
(ii) The Company has not treated, stored, or
disposed of any Hazardous Material on Company Real Property in
violation of any applicable Environmental Laws.
(iii) Neither the Company nor any of its
Subsidiaries has received any written notices, demand letters, or
written requests for information from any governmental body, agency,
official, or authority or third party indicating that the
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Company or any of its Subsidiaries is in violation of, or liable to any
person under, any Environmental Law.
(iv) There are no actions, suits, investigations, or
proceedings pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries or involving any of the
Company Real Property before any court or arbitrator or any
governmental body, agency, official, or authority relating to any
violation, or alleged violation, of any Environmental Law.
(v) There are no underground storage tanks on any
Company Real Property.
(vi) The Company and its Subsidiaries have all
permits required by applicable Environmental Laws and are in
substantial compliance with the provisions of all such permits.
(vii) Neither the Company nor any of its
Subsidiaries has any obligation to any third party with to any property
sold or transferred to such third party relating to Environmental Laws
or the matters set forth in clauses (i) through (vi) above.
(c) Neither the Company nor any of its Subsidiaries
has received written notice that any part of the Company Real Property has been
or is listed as a site containing Hazardous Material requiring remediation under
CERCLA or any other Environmental Law.
SECTION 3.15. Finders and Investment Bankers.
Except for Goldman Sachs, whose fees will be paid by
the Company, there is no investment banker, broker, finder, or other
intermediary that has been retained by or is authorized to act on behalf of the
Company or any of its Subsidiaries who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
SECTION 3.16. Vote Required.
The only vote of the holders of any class or series
of capital stock of the Company necessary to approve the Merger is the
affirmative vote of the holders of a majority of the outstanding Company Shares.
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SECTION 3.17. Company Rights Agreement.
To the Company's Knowledge, (a) none of the Parent
nor any of its Affiliates or Associates is an "Acquiring Person" (as defined in
the Company Rights Agreement) and (b) there has not been a "Shares Acquisition
Date" or "Triggering Event" (as defined in the Company Rights Agreement) under
the Company Rights Agreement. The Company has amended the Company Rights
Agreement to provide that (i) the execution, delivery, and performance of this
Agreement, the purchase of Company Shares pursuant to the Offer, and the
consummation of the Merger and other transactions contemplated by this Agreement
will not (A) cause the Parent or any of its Affiliates or Associates to become
an "Acquiring Person" (as defined in the Company Rights Agreement) or (B)
otherwise cause a "Shares Acquisition Date" or "Triggering Event" (as defined in
the Company Rights Agreement) to occur and (ii) upon purchase of Company Shares
pursuant to the Offer, the Rights (as defined in the Company Rights Agreement)
will no longer be exercisable, and the former holders of the Rights will not
have any claims or rights thereunder. The Company has filed with the SEC and
made available to the Parent a true and correct copy of the Company Rights
Agreement, as amended through the date hereof.
SECTION 3.18. Takeover Statutes.
The Board of Directors of the Company have approved
the acquisition of Company Shares by Merger Sub pursuant to the Offer and the
Merger for purposes of Chapter 1704 of the Ohio Revised Code. No "fair price,"
"moratorium," "control share acquisition," or other similar antitakeover statute
or provision enacted under Ohio law applicable to the Company (including,
without limitation, Section 1701.831 of the Ohio Law and Chapter 1704 of the
Ohio Revised Code) is applicable to the Merger or the other transactions
contemplated hereby.
SECTION 3.19. Information Supplied.
None of the information supplied or to be supplied
in writing by the Company for inclusion in the Offer Documents will, at the
respective times the Offer Documents or any amendments or supplements thereto
are filed with the SEC, contains or will contain an untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Schedule 14D-9, at
the times the Schedule 14D-9 or any amendments thereto are filed with the SEC,
did not and will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements
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therein, in light of the circumstances under which they were made, not
misleading; except that, the foregoing does not apply to the extent that any
such untrue statement of a material fact or omission to state a material fact
was or is made by the Company in reliance upon and in conformity with written
information furnished to the Company by Merger Sub or the Parent specifically
for use in the Schedule 14D-9. No proxy solicitation materials distributed by
the Company to its shareholders or filed with the SEC in connection with the 831
Meeting or the Merger Meeting, including any amendments or supplements thereto
(collectively, the "Proxy Material"), will, at the times the Proxy Material is
mailed to the Company's shareholders, contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or, at the time of the meeting of
shareholders to which the Proxy Material relates or at the Effective Time, omit
to state any material fact necessary to correct any statement that has become
false or misleading in any earlier communication with respect to the
solicitation of any proxy for such meeting; except that, the foregoing does not
apply to the extent that any such untrue statement of a material fact or
omission to state a material fact was made by the Company in reliance upon and
in conformity with written information furnished to the Company by Merger Sub or
the Parent specifically for use in the Proxy Material.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND MERGER SUB
The Parent and Merger Sub jointly and severally
represent and warrant to the Company that:
SECTION 4.01. Corporate Existence and Power.
The Parent and Merger Sub are corporations duly
incorporated, validly existing, and in good standing under the laws of the State
of Delaware.
SECTION 4.02. Corporate Authorization.
The execution, delivery, and performance by the
Parent and Merger Sub of this Agreement, the purchase by Merger Sub of Company
Shares pursuant to the Offer, and the consummation of the Merger and the other
transactions contemplated hereby by the Parent and Merger Sub are within the
their corporate power and authority and have been duly authorized by all
necessary corporate action on the part of the Parent and Merger Sub.
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This Agreement has been duly executed and delivered by the Parent and, assuming
the due authorization, execution, and delivery thereof by the Company,
constitutes a legal, valid, and binding agreement of the Parent and Merger Sub.
SECTION 4.03. Governmental Authorization.
The execution, delivery, and performance by the
Parent and Merger Sub of this Agreement, the purchase of Company Shares by
Merger Sub pursuant to the Offer, and the consummation of the Merger and the
other transactions contemplated hereby by the Parent and Merger Sub do not
require any consent, approval, authorization, or permit of, other action by, or
filing with, any governmental body, agency, official, or authority other than
(i) as set forth on Schedule 4.03 (Parent Governmental Authorizations), (ii) the
filing of appropriate merger documents in accordance with Ohio Law and Delaware
Law, (iii) compliance with applicable requirements of the HSR Act and the
Exchange Act, and (iv) approval by the Company's shareholders of the purchase of
Company Shares by Merger Sub pursuant to the Offer in accordance with Section
1701.831 of the Ohio Law, except where the failure of any such action to be
taken or filing to be made is not likely to have, individually or in the
aggregate, a material adverse effect on the financial condition, results of
operations, or business of the Parent and its Subsidiaries taken as a whole (a
"Parent Material Adverse Effect") or prevent or delay consummation of the Offer
or the Merger.
SECTION 4.04. Non-Contravention.
The execution, delivery, and performance by the
Parent and Merger Sub of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby by the Parent and Merger Sub do not
and will not (i) contravene or conflict with the charter or by-laws of the
Parent or Merger Sub, (ii) assuming compliance with the matters referred to in
Section 4.03, contravene, conflict with, or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order, or decree
binding upon or applicable to the Parent or any of its Subsidiaries, (iii)
constitute a default, give rise to a right of termination, cancellation, or
acceleration of any right or obligation of the Parent or any of its
Subsidiaries, or give rise to a loss of any benefit to which the Parent or any
of its Subsidiaries is entitled, under any provision of any agreement or other
instrument binding upon the Parent or any of its Subsidiaries or any license,
franchise, permit, or other similar authorization held by the Parent or any of
its Subsidiaries, or (iv) result in the creation or imposition of any Lien on
any asset of the Parent or any of its Subsidiaries, except for any occurrences
or results referred to in clauses (ii), (iii), and (iv) that are not likely to
have, individually or in the aggregate, a Parent
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Material Adverse Effect or prevent or delay consummation of the Offer or the
Merger.
SECTION 4.05. Reports.
Since December 31, 1992, the Parent has filed all
forms, reports, statements, and other documents required to be filed with the
SEC, including without limitation (1) all Annual Reports on Form 10-K, (2) all
Quarterly Reports on Form 10-Q, (3) all proxy statements relating to meetings of
shareholders (whether annual or special), (4) all Current Reports on Form 8- K,
(5) all Solicitation/Recommendation Statements on Schedule 14D-9, and (6) all
other reports, schedules, registration statements, or other documents required
to be filed with the SEC (collectively, the "Parent SEC Reports"), except where
the failure to file any such forms, reports, statements, or other documents is
not likely to have, individually or in the aggregate, a Parent Material Adverse
Effect. The Parent SEC Reports (x) were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (y) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 4.06. Financial Statements; No Undisclosed Liabilities.
The audited consolidated financial statements and
unaudited consolidated interim financial statements (including the related notes
and schedules) of the Parent and its consolidated Subsidiaries included or
incorporated by reference in the Parent SEC Reports (the "Parent Financial
Statements") were prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), and fairly present the consolidated financial position of the
Parent and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended,
subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments, none of which is, individually or in the aggregate, likely
to have an the Parent Material Adverse Effect. Neither the Parent nor its
Subsidiaries has any liabilities, whether or not accrued, contingent or
otherwise, that individually or in the aggregate, are likely to have an the
Parent Material Adverse Effect other than liabilities disclosed in the Schedules
hereto or in the Parent SEC Reports or for which the Parent has made adequate
reserves as reflected in the Parent Financial Statements.
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SECTION 4.07. Litigation.
There are no actions, suits, investigations, or
proceedings pending or, to any of its Subsidiaries before any court or
arbitrator or any governmental body, agency, official, or authority that seek to
restrain or prohibit the consummation of the Offer or the Merger.
SECTION 4.08. Vote Required.
No vote of the holders of any class or series of
capital stock of the Parent is necessary to approve the purchase of Company
Shares pursuant to the Offer or the Merger. The Merger has been approved by the
affirmative vote of the holder of all of the outstanding Merger Sub Common
Shares.
SECTION 4.09. Availability of Funds.
The Parent and Merger Sub have available to them
sufficient funds to enable them to consummate the transactions contemplated by
this Agreement.
SECTION 4.10. Information Supplied.
None of the information supplied or to be supplied
in writing by the Parent or Merger Sub for inclusion in the Schedule 14D-9 or
the Proxy Material will, at the time the Schedule 14D-9 or any amendments or
supplements thereto are filed with the SEC or the Proxy Material is mailed to
the Company's shareholders, contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or, in the case of the Proxy Material, at the time of the
meeting of shareholders to which the Proxy Material relates or at the Effective
Time, omit to state any material fact necessary to correct any statement that
has become false or misleading in any earlier communication with respect to the
solicitation of any proxy for such meeting. None of the Offer Documents, at the
times filed with the SEC or on the date first published, sent, or given to the
Company's shareholders, contain or will contain an untrue statement of a
material fact or omit or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; except that, the
foregoing does not apply to the extent that any such untrue statement of a
material fact or omission to state a material fact was or is made by the Parent
or Merger Sub in reliance upon and in conformity with written
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information furnished to the Parent or Merger Sub or the Company specifically
for use in the Schedule 14D-9.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. Conduct of the Company.
Except as contemplated or permitted by this
Agreement or as disclosed on Schedule 5.01 (Company Conduct), or as otherwise
approved in writing by the Parent, from the date hereof until the Effective
Time, the Company and its Subsidiaries will conduct their businesses in the
ordinary course consistent with past practice. Subject to the foregoing
exceptions, from the date hereof until the Effective Time:
(a) the Company will not adopt or propose any change
or amendment in its Articles of Incorporation or Regulations;
(b) the Company will not, and will not permit any of
its Subsidiaries to, merge, consolidate, or enter into a share exchange with any
other Person, acquire any material stock or any material amount of assets of any
other Person, sell, lease, license, mortgage, pledge, or otherwise dispose of
any material assets, except (i) in the ordinary course consistent with past
practice or (ii) transfers between the Company or its wholly owned Subsidiaries;
(c) the Company will not declare, set aside, or pay
any dividends or make any distributions on the Company Shares, other than normal
quarterly dividends at the rates in effect on the date of this Agreement;
(d) the Company will not, and will not permit any of
its Subsidiaries to, (i) issue, deliver, sell, encumber, or authorize or propose
the issuance, delivery, sale, or encumbrance of, any capital stock or other
securities of the Company or any Company Subsidiary Securities, other than the
issuance of Company Common Shares upon the exercise of Company Options granted
prior to the date hereof or upon conversion of the Company Preferred Shares,
(ii) split, combine, or reclassify any Company Shares or Company Subsidiary
Securities, (iii) repurchase, redeem, or otherwise acquire any capital stock or
other securities of the Company or any Company Subsidiary Securities, or (iv)
amend the terms of any outstanding securities;
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(e) the Company will not make any commitment or
enter into any contract or agreement that is likely to be, individually or in
the aggregate, material to the Company and its Subsidiaries taken as a whole
except in the ordinary course of business consistent with past practice;
(f) except to the extent required by law, by
existing contract, or by policy currently in effect, the Company and its
Subsidiaries will not increase in any manner the compensation or fringe benefits
of any of its directors or officers, pay any pension or retirement allowance to
any directors or officers, or become a party to, amend, or commit itself to any
pension, retirement, profit-sharing, welfare benefit plan, or employment
agreement with or for the benefit or any director or officer, other than the
payment of bonuses not execcding, in the aggregate, $200,000 to officers of the
Company in the ordinary course of business consistent with past practices;
(g) the Company will not, and will not permit any of
its Subsidiaries to, make any Tax election or settle or compromise any material
federal, state, local, or foreign Tax liability;
(h) the Company will not take, and will not permit
any of its Subsidiaries to take, any action that would make any representation
or warranty of the Company contained herein inaccurate in any material respect
at, or as of, any time prior to the Effective Time or that would cause any
closing condition hereunder not to be satisfied, except as may be required by
law; and
(i) the Company will not agree to do any of the
foregoing.
SECTION 5.02. Access to Information.
From the date hereof until the Effective Time, the
Company will, upon reasonable notice, give the Parent, its counsel, financial
advisors, auditors, and other authorized representatives reasonable access
during regular business hours to the offices, properties, books, and records of
the Company and its Subsidiaries, and will furnish to the Parent, its counsel,
financial advisors, auditors, and other authorized representatives such
financial and operating data and other information as such Persons may
reasonably request, for the purpose of evaluating changes in the financial
condition, results of operations, or business of the Company and its
Subsidiaries after the date of this Agreement and will instruct the Company's
employees, counsel, and financial advisors to cooperate with the Parent in its
evaluation. All information provided to, or obtained by, the Parent or Merger
Sub in connection with the transactions contemplated hereby will be "Evaluation
Material" for purposes of
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the confidentiality agreement, dated April 17, 1996, between the Parent and
the Company.
SECTION 5.03. Other Offers.
From the date hereof until the termination of this
Agreement, the Company and its Subsidiaries will not, and will use all
reasonable efforts to cause their officers, directors, employees, and agents not
to, directly or indirectly, (i) take any action to solicit or initiate any
Company Acquisition Proposal (as defined below) or (ii) engage in negotiations
or enter into agreements with any Person with respect to a Company Acquisition
Proposal, disclose any nonpublic information relating to the Company or any of
its Subsidiaries, or afford access to the properties, books, or records of the
Company or any of its Subsidiaries, to any Person, except that the Company may
engage in negotiations with, or disclose such non-public information, or provide
such access to, any Person who has made an unsolicited Company Acquisition
Proposal if the Board of Directors of the Company, after consultation with
outside counsel to the Company, determines that its fiduciary duties under
applicable law require such actions. In such event, the Company will notify the
Parent that the Company's Board of Directors has received a Company Acquisition
Proposal and advise the Parent of the material terms and conditions thereof. For
purposes of this Agreement, "Company Acquisition Proposal" means any good faith
offer or proposal for a merger or other business combination involving the
Company, the acquisition of the entire equity interest in the Company, or the
acquisition of all or substantially all of the assets of the Company, other than
the transactions contemplated by this Agreement.
SECTION 5.04. Notices of Certain Events.
The Company will promptly notify the Parent of:
(i) any notice or other communication from any
Person alleging that the consent of any third party is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations, or
proceedings commenced or, to the knowledge of the Company, threatened against,
relating to, or involving or otherwise affecting the Company or any of its
Subsidiaries that, if pending on the date of this Agreement, would have been
28
<PAGE> 33
required to have been disclosed pursuant to Section 3.10 or that relate to the
consummation of the transactions contemplated by this Agreement; and
(iv) any notice of, or other communication relating
to, a default, or an event that with notice or lapse of time or both would
become a default, under any material agreement that is received by the Company
or any of its Subsidiaries subsequent to the date of this Agreement.
SECTION 5.05. Merger Meeting; Proxy Statement.
(a) The Merger will be consummated as soon as
practicable (and in no event later than four months after) the purchase of
Company Shares pursuant to the Offer. If Merger Sub is able to do so under Ohio
law, it will consummate the Merger pursuant to the "short form" merger
provisions of Ohio Law. The Parent will vote, or cause to be voted, all Company
Shares beneficially owned by it in favor of the Merger. If required by Ohio Law
in order to consummate the Merger, as soon as practicable following the purchase
of Company Shares pursuant to the Offer, the Company will take all action
necessary in accordance with Ohio Law and with the Company's Articles of
Incorporation and Regulations to convene a meeting of its shareholders to
approve the Merger and adopt this Merger Agreement (the "Merger Meeting"). The
Company's Board of Directors will recommend that the Company's shareholders
approve the Merger and adopt this Agreement, and will cause the Company to use
all reasonable efforts to solicit from the shareholders proxies to vote
therefor, unless (i) such recommendation would not be consistent with the
fiduciary duties of the Board of Directors under applicable law, as advised by
counsel, or (ii) this Agreement is terminated in accordance with Article IX.
(b) The Company will, if required by law for the
consummation of the Merger, prepare and file with the SEC preliminary proxy
materials relating to the approval of the Merger and the adoption of this
Agreement by the Company's shareholders, will provide the Parent with any and
all comments thereon by the SEC's staff, will use all reasonable efforts to
discuss with the Parent any proposed changes to such preliminary proxy materials
prior to responding to any comments thereon by the SEC's staff, and will file
with the SEC revised preliminary proxy materials, if appropriate, and definitive
proxy materials in a timely manner as required by the rules and regulations of
the SEC. Subject to the last sentence of Section 5.05(a), the Proxy Material
relating to the Merger Meeting will include the recommendation of the Company's
Board of Directors.
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ARTICLE VI
COVENANTS OF THE PARENT AND MERGER SUB
The Parent and Merger Sub agree that:
SECTION 6.01. Director, Officer, and Employee Liability.
From and after the Effective Time, the Parent and
Merger Sub will indemnify, defend, and hold harmless the present and former
directors, officers, and employees of the Company and its Subsidiaries against
all losses, claims, damages, and liability in respect of acts or omissions by
them at or prior to the Effective Time. For at least six years after the
Effective Time, the Parent will not take any action or terminate or amend the
Company's current directors' and officers' liability insurance in respect of
acts or omissions occurring at or prior to the Effective Time. The Parent and
Merger Sub will be obligated pursuant to this Section 6.01 to pay for only one
firm of counsel for all indemnified parties in each matter that is the subject
of indemnification hereunder, unless the use of one counsel for such indemnified
parties would present such counsel with a conflict of interest, in which case
the Parent and Merger Sub need only pay for separate counsel to the extent
necessary to resolve such conflict.
SECTION 6.02. Employee Benefits.
(a) With respect to benefits arising after the
Effective Time, it is the intention of the Parent and Merger Sub that the Parent
will continue to provide to the former employees of the Company and its
Subsidiaries who remain as employees of the Surviving Corporation and its
Subsidiaries after the Effective Time each of the benefits they are now
receiving from the Company and its Subsidiaries, including benefits under the
Company Employee Plans and the Company Benefit Arrangements but excluding any
equity-based compensation or benefits, at least through December 31, 1996. In
any event, the Parent and Merger Sub will continue to provide to such employees,
for at least one year after the Effective Time, the same severance benefits as
are now provided to them by the Company.
(b) With respect to benefits arising on or before
the Effective Time, the Parent and Merger Sub acknowledge that they have been
given an opportunity to review all of the Company Employee Plans and Company
Benefit Arrangements and that they are aware of the cost of providing the
benefits and performing the obligations of the Company and its Subsidiaries
thereunder. The Parent and Merger Sub jointly and severally agree that they will
not, and will cause the Surviving Corporation not to, contest the validity of
any of the Company Employee Plans or the Company Benefit
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Arrangements that are identified or described on Schedule 3.11, that consist of
immaterial arrangements with one or more employees or groups of employees, or
that have been disclosed in any Company SEC Report filed prior to the date
hereof, and that, except as provided in Section 6.02(a) above, they will, and
will cause the Surviving Corporation to, provide the benefits and perform the
obligations of the Company and its Subsidiaries to present or former officers
and employees arising on or before the Effective Time under the Company Employee
Plans and such Company Benefit Arrangements. The Parent and Merger Sub also
jointly and severally agree to reimburse, and will cause the Surviving
Corporation to reimburse, such persons who are listed on Schedule 3.11 for the
costs (including reasonable attorneys' fees) of any litigation initiated by, or
initiated or threatened against, any of them in connection with the enforcement
of their rights under this Section 6.02(b), except that no such reimbursement
will be paid (and any such reimbursement previously made will be refunded) with
respect to any particular claim made by a present or former officer or employee
if the court determines that the claim was not made in good faith.
ARTICLE VII
COVENANTS OF THE PARENT, MERGER SUB, AND THE COMPANY
The Parent, Merger Sub, and the Company agree that:
SECTION 7.01. Reasonable Efforts.
Subject to the terms and conditions of this
Agreement, each party will use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement as promptly as practicable.
SECTION 7.02. Certain Filings and Consents.
The Company and the Parent will cooperate with one
another (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official, or authority is required, or any
actions, consents, approvals, or waivers are required to be obtained from
parties to any material contracts ("Third Party Consents"), in connection with
the consummation of the transactions contemplated by this Agreement and (b) in
attempting to take all such actions, to obtain all such consents, approvals, and
waivers, and to make all such filings. The Company and the Parent will each
promptly file Notification and Report Forms under the HSR Act and will use all
reasonable efforts to respond as promptly as practicable to all requests
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for additional information or documentation received from the Antitrust Division
of the United States Department of Justice or the Federal Trade Commission.
SECTION 7.03. Public Announcements.
The Parent and the Company will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with the NYSE,
will not issue any such press release or make any such public statement prior to
such consultation.
SECTION 7.04. State Takeover Laws.
If any "fair price," "moratorium," or "control share
acquisition" statute or other similar statute or regulation becomes applicable
to the transactions contemplated by this Agreement, the Company, the Parent, and
Merger Sub and their respective Boards of Directors will use all reasonable
efforts to grant such approvals and take such actions as are necessary so that
the transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise act to minimize
the effects of such statute or regulation on the transactions contemplated
hereby.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party.
The obligations of the Company, the Parent, and
Merger Sub to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) if required by applicable law, the Merger has
been approved, and this Agreement has been adopted, by the requisite vote of the
Company's shareholders; and
(b) no provision of any applicable domestic law or
regulation, and no judgment, injunction, order, or decree of a court or
governmental agency or authority of competent jurisdiction, that has the effect
of making the Offer or the Merger illegal or otherwise restrains or prohibits
the purchase of Company Shares pursuant to the Offer or the consummation of the
Merger is in effect (each party agreeing to use all reasonable efforts,
including
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appeals to higher courts, to have any such judgment, injunction, order, or
decree lifted).
SECTION 8.02. Conditions to the Obligations of the
Parent and Merger Sub.
The obligations of the Parent and Merger Sub to
consummate the Merger are subject to the satisfaction or waiver of the Offer
Conditions and to compliance by the Company with its obligations under Section
1.01(f).
ARTICLE IX
TERMINATION
SECTION 9.01. Termination.
This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of Merger and adoption of this Agreement by the Company's
shareholders):
(a) by mutual written consent of the Company, the
Parent, and Merger Sub;
(b) by either the Company or the Parent if the
Merger has not been consummated by November 30, 1996, provided that the right to
terminate this Agreement under this clause (b) will not be available to any
party that, at the time of termination, is in material breach of any of its
obligations under this Agreement;
(c) by either the Company or the Parent if any
applicable domestic law, rule, or regulation makes consummation of the Merger
illegal or if any judgment, injunction, order, or decree of a court or
governmental agency or authority of competent jurisdiction restrains or
prohibits the consummation of the Merger, and such judgment, injunction, order,
or decree has become final and nonappealable;
(d) by either the Company or the Parent if the
shareholder approvals referred to in Section 8.01(a) have not been obtained at
the Merger Meeting;
(e) by either the Company or the Parent if the Offer
terminates without the purchase of Company Shares thereunder;
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(f) prior to the purchase of Company Shares by
Merger Sub pursuant to the Offer, by the Parent if the Board of Directors of the
Company does not publicly recommend in the Schedule 14D-9 or in the Proxy
Material relating to the 831 Meeting or the Merger Meeting that the Company's
shareholders accept the Offer and tender their Company Shares pursuant to the
Offer and approve the Merger and adopt the Merger Agreement, or if the Board of
Directors of the Company withdraws, modifies, or changes such recommendation in
any manner adverse to the Parent; or
(g) by the Company if the Company receives an
unsolicited Company Acquisition Proposal that the Board of Directors of the
Company determines in good faith, after consultation with its legal and
financial advisors, is likely to lead to a merger, acquisition, consolidation,
or similar transaction that is more favorable to the shareholders of the Company
than the transactions contemplated by this Agreement; provided that, the Company
has provided the Parent with at least five business days notice of the material
terms of such Company Acquisition Proposal and has paid the Termination Fee (as
defined in Section 10.04(b)) to the Parent.
SECTION 9.02. Effect of Termination.
If this Agreement is terminated and the Merger is
abandoned pursuant to Section 9.01, no party (or any of its directors or
officers) will have any liability or further obligation to any other party
except (a) as provided in Section 10.04, (b) that the agreements contained in
Section 10.04 and in the last sentence of Section 5.02 will survive the
termination hereof, and (c) that nothing herein will relieve any party from
liability for any breach of its obligations under this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices.
All notices, requests, and other communications to
any party hereunder will be in writing (including telecopy) and will be given,
if to the Parent or Merger Sub, to:
Danaher Corporation
1250 24th Street, N.W., Suite 800
Washington, D.C. 20037
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Attention: President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, N.Y. 10022
Attention: Morris J. Kramer, Esq.
if to the Company, to:
Acme-Cleveland Corporation
30100 Chagrin Boulevard, Suite 100
Pepper Pike, OH 44124-5705
Attention: David L. Swift,
President and Chief Executive Offier
with a copy to:
Thompson Hine & Flory P.L.L.
3900 Key Tower
127 Public Square
Cleveland, OH 44114-1216
Attention: Donald H. Messinger, Esq.
or to such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties. Each such notice, request, or
other communication will be effective upon receipt.
SECTION 10.02. Survival.
None of the representations and warranties,
agreements, and other provisions contained in this Agreement or in any
certificate or other writing delivered pursuant to this Agreement, other than
Sections 6.01 and 6.02 and Article I, will survive the Effective Time.
SECTION 10.03. Amendments; No Waivers.
(a) Subject to the applicable provisions of Ohio Law
and Delaware Law, any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in
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writing and signed, in the case of an amendment, by the Company, the Parent, and
Merger Sub or, in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising
any right, power, or privilege hereunder will operate as a waiver thereof, nor
will any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
SECTION 10.04. Fees and Expenses.
(a) Subject to paragraph (b) of this Section, all
costs and expenses incurred in connection with this Agreement will be paid by
the party incurring the costs and expenses, except that the Parent and the
Company will each pay one-half of all printing, filing, and mailing costs for
the Proxy Statement and all SEC, HSR Act, and other regulatory filing fees.
(b) If (i) this Agreement is terminated by the
Company pursuant to Section 9.01(g), (ii) any Person publicly makes a Company
Acquisition Proposal and thereafter this Agreement is terminated pursuant to
Section 9.01(b) or 9.01(d) because the Company's shareholders fail to approve
the Merger and adopt this Agreement, or (iii) any Person publicly makes a
Company Acquisition Proposal and thereafter this Agreement is terminated
pursuant to Section 9.01(f), then the Company will reimburse the Parent and
Merger Sub for all of their reasonable documented out-of-pocket expenses and
fees other than any expenses incurred in connection with the preparation for,
prosecution of, or defense of litigation (subject to a maximum reimbursement
obligation of $1,500,000) actually incurred by the Parent in connection with the
transactions contemplated by this Agreement prior to the termination of this
Agreement, including, without limitation, all fees and expenses of counsel,
financial advisors, accountants, and environmental and other experts and
consultants to the Parent and Merger Sub ("Transaction Costs").
Notwithstanding the preceding paragraph, if (i) this
Agreement is terminated by the Company pursuant to Section 9.01(g), (ii) any
Person publicly makes a Company Acquisition Proposal, thereafter this Agreement
is terminated pursuant to Section 9.01(b) or 9.01(d) because the Company's
shareholders fail to approve the Merger and adopt this Agreement, and within 12
months after termination the Company accepts or consummates any Company
Acquisition Proposal, or (iii) any Person publicly makes a Company Acquisition
Proposal and thereafter this Agreement is terminated pursuant to Section
9.01(f), then, in addition to reimbursing the Parent and Merger Sub for their
Transaction Costs, the Company will pay to the Parent a fee of $6,000,000
("Termination Fee"). The Termination Fee will be payable
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by delivery of immediately available funds at the time of termination, in the
case of termination under clause (i) or (iii) of the preceding sentence, or
immediately prior to the earlier of the acceptance or the consummation of the
Company Acquisition Proposal, in the case of termination under clause (ii).
(c) If the Parent receives a Termination Fee,
neither the Parent, Merger Sub, nor any of their affiliates will assert or
pursue in any manner, directly or indirectly, whether arising in tort, contract,
or otherwise, any claim or cause of action (i) against any person submitting a
Company Acquisition or (ii) against the Company or any of its directors,
officers, employees, agents, or representatives based in whole or in part upon
its or their receipt, consideration, recommendation, or approval of an
Alternative Transaction, including the Company's exercise of its right of
termination this Agreement under Section 9.
SECTION 10.05. Successors and Assigns.
The provisions of this Agreement will be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, provided that no party may assign, delegate, or otherwise transfer any
of its rights or obligations under this Agreement without the consent of the
other parties.
SECTION 10.06. Governing Law.
This Agreement will be construed in accordance with
and governed by the law of the State of Ohio without regard to principles of
conflict of laws.
SECTION 10.07. Counterparts; Effectiveness.
This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement will
become effective when each party has received counterparts hereof signed by all
of the other parties.
SECTION 10.08. Entire Agreement.
This Agreement and the confidentiality agreement,
dated April 17, 1996, between the Parent and the Company constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, both written and oral, among the parties with
respect to the subject matter of this Agreement. No representation, warranty,
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or inducement not set forth herein has been made or relied upon by any party.
Neither this Agreement nor any provision hereof is intended to confer upon any
Person other than the parties any rights or remedies, except that the provisions
of Article I are intended for the benefit of the Company's shareholders and
holders of Company Options, and the provisions of Sections 6.01 and 6.02 are
intended for the benefit of present and former directors, officers, and
employees of the Company.
SECTION 10.09. Headings.
The headings contained in this Agreement are for
reference purposes only and will not in any way affect the meaning or
interpretation of this Agreement.
SECTION 10.10. Severability.
If any term or other provision of this Agreement is
invalid, illegal, or unenforceable, all other provisions of this Agreement will
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected.
SECTION 10.11. Specific Performance.
The parties agree that irreparable damage would
occur if any of the provisions of this Agreement are not performed in accordance
with the terms hereof and that the parties will be entitled to specific
performance of the terms hereof in addition to any other remedies at law or in
equity.
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IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
DANAHER CORPORATION
By: /s/ Patrick W. Allender
-------------------------
Name: Patrick W. Allender
Title: Senior Vice President
Chief Financial
Officer and
Secretary
WEC ACQUISITION CORPORATION
By: /s/ Patrick W. Allender
-------------------------
Name: Patrick W. Allender
Title: Vice President and
Treasurer
ACME-CLEVELAND CORPORATION
By: /s/ David L. Swift
-------------------------
Name: David L. Swift
Title: Chairman, President
and Chief Executive
Officer
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INDEX OF DEFINED TERMS
Page No.
--------
831 Meeting .............................................................. 1
Affiliate ................................................................ 14
Agreement ................................................................ 1
CERCLA ................................................................... 19
Closing .................................................................. 4
Company .................................................................. 1
Company A Preferred Share................................................. 1
Company Acquisition Proposal.............................................. 28
Company B Preferred Shares................................................ 10
Company Benefit Arrangement............................................... 15
Company Common Share...................................................... 1
Company Employee Plans.................................................... 14
Company Financial Statements.............................................. 13
Company Intellectual Property Rights...................................... 19
Company Material Adverse Effect........................................... 8
Company Option ........................................................... 7
Company Option Plans...................................................... 7
Company Performance Plan.................................................. 7
Company Real Property..................................................... 19
Company Rights ........................................................... 10
Company Rights Agreement.................................................. 10
Company SEC Reports....................................................... 12
Company Shares ........................................................... 2
Company Subsidiary Securities............................................. 12
Delaware Law ............................................................ 4
Effective Time ........................................................... 4
Environmental Law ........................................................ 19
ERISA ................................................................... 15
Exchange Act ............................................................. 3
Exchange Agent ........................................................... 5
Exchange Fund ........................................................... 5
Goldman Sachs ........................................................... 3
Hazardous Material ....................................................... 19
HSR Act ................................................................. 9
Independent Directors..................................................... 3
Intellectual Property Rights.............................................. 18
Lien .................................................................... 10
Merger ................................................................... 4
Merger Consideration...................................................... 5
Merger Meeting .......................................................... 29
Merger Sub ............................................................... 1
40
<PAGE> 45
Merger Sub Common Share .................................................. 5
Offer .................................................................... 1
Offer Conditions ......................................................... 2
Offer Documents .......................................................... 2
Ohio Law ................................................................ 1
Parent ................................................................... 1
Parent Financial Statements............................................... 24
Parent Material Adverse Effect............................................ 23
Parent SEC Reports ....................................................... 24
Person ................................................................... 6
Proxy Material ........................................................... 22
Schedule 14D-9 ........................................................... 3
SEC ...................................................................... 2
Share Certificate ........................................................ 5
Subsidiary ............................................................... 11
Surviving Corporation..................................................... 4
Termination Fee .......................................................... 36
Third Party Consents...................................................... 31
Transaction Costs ........................................................ 36
41
<PAGE> 46
LIST OF SCHEDULES
Schedule Designation
- -------- -----------
1.01(a) 831 Meeting Procedures
1.01(b) Offer Conditions
3.03 Company Governmental Authorization
3.04 Company Liens Created
3.05 Company Capitalization
3.06 Company Subsidiaries
3.09 Certain Company Changes
3.10 Company Litigation
3.11 Company Employee Plans
3.13 Company Intellectual Property Rights
3.14 Company Environmental Matters
4.03 Parent Governmental Authorizations
5.01 Company Conduct
42
<PAGE> 47
SCHEDULE 1.01(a)
831 MEETING PROCEDURES
1. CT Corporation Systems, Inc. shall be appointed to serve as
the sole Inspector of Elections (the "Inspector of Elections") for the
831 Meeting, subject to Section 1701.50 and other applicable
provisions of the Ohio General Corporation Law (the "OGCL") and the
further provisions of this Schedule 1.01(a).
2. The Inspector of Elections shall determine the presence of a quorum in
accordance with the provisions of Section 1701.831(E)(1) of the OGCL
for purposes of each of the two votes of shareholders required by the
provision.
3. For purposes of determining the presence of a quorum for the second
vote required by Section 1701.831(E)(1), and determining which shares
are entitled to participate in that second vote, the Inspector of
Elections shall exclude as "interested shares" the following:
a. All shares beneficially owned by Danaher, as shown by the
last Schedule 14D-1 filed by Danaher with the SEC prior to
the 831 Meeting;
b. Shares beneficially owned by officers of Acme-Cleveland, as
shown in the proxy statement relating to the 831 Meeting;
c. Any additional shares known by the Inspector to Elections to
have been acquired by Danaher or any officer of
Acme-Cleveland after the date of the last Schedule 14D-1
filed by Danaher with the SEC or the date of the proxy
statement relating to the 831 meeting, as the case may be.
d. For purposes of the definition of "interested shares" set
forth in Section 1701.01(CC)(2) of the OGCL, any shares
acquired, directly or indirectly, by any person from the
holder or holders thereof and any other person acting in
concert with such holder or holders, for aggregate
consideration in excess of $250,000 during the period
beginning on March 7, 1996 and ending on the date of the 831
Meeting and not sold by such holder or holders prior to the
date of the 831 Meeting of Shareholders, to the extent that
any such
43
<PAGE> 48
"interested shares" are (i) identified by the holder or
holders thereof to the Inspector of Elections or (ii) are
otherwise determined by the Inspector of Elections to
represent "interested shares" on the basis of the record
list.
4. The proxy cards used by Acme-Cleveland and Danaher will not contain
any certification or otherwise solicit information regarding whether
the shares represented by the proxy are "interested shares."
44
<PAGE> 49
SCHEDULE 1.01(b)
OFFER CONDITIONS
Merger Sub will not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to Merger Sub's
obligation to pay for or return tendered shares after the termination or
withdrawal of the Offer), to pay for any Company Shares not theretofore accepted
for payment or paid for pursuant to the Offer, if (1) there are not validly
tendered and not properly withdrawn prior to the expiration of the Offer that
number of Company Shares which, when aggregated with the Company Shares then
owned by the Parent and any of its affiliates, represents at least a majority of
the Company Shares then outstanding on a fully diluted basis or (2) at any time
on or after the date of the Merger Agreement and at or before the time that the
particular Company Shares are accepted for payment (whether or not any other
Company Shares have theretofore been accepted for payment or paid for pursuant
to the Offer) any of the following conditions exist:
(a) any provision of any applicable domestic law or
regulation, or any judgment, injunction, order, or decree of a court or
governmental agency or authority of competent jurisdiction, is in effect that
(i) makes the Offer or the Merger illegal or otherwise, directly or indirectly,
prohibits, materially restrains, or makes materially more costly the making of
the Offer, the acceptance for payment of, payment for, or ownership, directly or
indirectly, of some or all of the Company Shares by Merger Sub or the Parent or
materially delays the Merger; (ii) prohibits or materially limits the ownership
or operation by the Company or any of its Subsidiaries that owns a material
portion of the business and assets of the Company and its Subsidiaries, taken as
a whole, or by the Parent, Merger Sub, or any Subsidiaries of the Parent or all
or a material portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a
whole, as a result of the Offer, the Merger, or the other transactions
contemplated by the Merger Agreement, or (iii) imposes limitations on the
ability of Merger Sub, the Parent, or any of Subsidiaries of the Parent
effectively to acquire, hold, or exercise full rights of ownership of the
Company Shares, including but not limited to the right to vote any Company
Shares acquired or owned by Merger Sub, the Parent, or any Subsidiaries of the
Parent on all matters properly presented to the shareholders of the Company,
including but not limited to the approval of the Merger Agreement and adoption
of the Merger and the right to vote any shares of capital stock of any
Subsidiaries of the Company (other than immaterial Subsidiaries) (each party
agreeing to use all reasonable efforts, including appeals to higher courts, to
have any such judgment, injunction, order, or decree lifted);
45
<PAGE> 50
(b) any consents, authorizations, orders, and
approvals of, or filings or registrations with, any governmental commission,
board, or other regulatory body required in connection with the execution,
delivery, and performance of the Merger Agreement has not been obtained or made,
except (i) for the filings in connection with the Merger contemplated by Section
1.01(b) of the Merger Agreement and for the filing of any other documents
required to be filed after the purchase of Company Shares pursuant to the Offer
and (ii) where the failure to obtain or make any such consent, authorization,
order, approval, filing, or registration is not likely to have, individually or
in the aggregate, a Company Material Adverse Effect or a Parent Material Adverse
Effect and would not render the Offer or the Merger illegal or provide a
reasonable basis to conclude that the parties or their affiliates or any of
their respective directors or officers will be subject to the risk of criminal
liability;
(c) any Third Party Consents have not been obtained
except where the failure to obtain any Third Party Consents is not likely to
have, individually or in the aggregate, a Company Material Adverse Effect;
(d) the Company has failed to perform performed the
obligations to be performed by it under the Merger Agreement at or prior to such
time or any representations and warranties of the Company contained in the
Merger Agreement are not true at such time as if made at and as of such time
(unless the representation or warranty is made as of a specified date, in which
case such representation or warranty will be true as of such date), except to
the extent that the failure to perform such obligations and the untruth of such
representations and warranties is not likely to have, individually or in the
aggregate, a Company Material Adverse Affect, and the Parent has received a
certificate signed by an executive officer and by the chief financial officer of
the Company to the foregoing effect;
(e) the acquisition of Company Shares by Merger Sub
pursuant to the Offer has not been approved by the Company's shareholders as
required by Section 1701.831 of the Ohio Law;
(f) the Merger Agreement has been terminated in
accordance with its terms; and
(g) the Company has not obtained the consents
referred to in Sections 1.05 and 1.06 of the Merger Agreement.
46
<PAGE> 1
Goldman, Sachs & Co. 85 Broad Street New York, New York 10004
Tel: 212-902-1000
GOLDMAN
SACHS
PERSONAL AND CONFIDENTIAL
June 5, 1996
Board of Directors
Acme-Cleveland Corporation
30100 Chagrin Boulevard, Suite 100
Pepper Pike, OH 44124-5705
Gentlemen:
You have requested our opinion as to the fairness to the holders, other than
Danaher Corporation ("Buyer"), WEC Acquisition Corporation ("WEC") and any other
subsidiaries of Buyer, of the outstanding shares of Common Stock, par value
$1.00 per share (the "Common Stock"), and the Series A Convertible Preferred
Shares, no par value (the "Preferred Stock" and together with the Common Stock,
the "Shares") of Acme-Cleveland Corporation (the "Company") of the $30.00 per
Share in cash proposed to be paid by WEC in the Tender Offer and the Merger
(each as defined below) pursuant to the Agreement and Plan of Merger dated as of
May 31, 1996 amoung Buyer, WEC, a wholly-owned subsidiary of Buyer, and the
Company (the "Agreement"). The Agreement provides for a tender offer for all of
the Shares (the "Tender Offer") pursuant to which WEC will pay $30.00 per Share
in cash for each Share accepted. The Agreement further provides that following
completion of the Tender Offer, WEC will be merged into the Company (the
"Merger") and each outstanding Share (other than Shares already owned by Buyer,
WEC or any other subsidiaries of Buyer) will be converted into the right to
receive $30.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Buyer's Offer to Purchase, dated March 7, 1996, and the amendments
thereto; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended September 30, 1995; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. In addition, we have reviewed the reported price and trading
activity for the Common Stock, compared certain financial and stock market
information for the Company with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations and performed such other studies and
analyses as we considered appropriate.
New York | London | Tokyo | Boston | Chicago | Dallas | Frankfurt |
George Town | Hong Kong | Houston | Los Angeles | Memphis
Miami | Milan | Montreal | Osaka | Paris | Philadelphia |
San Francisco | Singapore | Sydney | Toronto | Vancouver | Zurich
<PAGE> 2
Acme-Cleveland Corporation
June 5, 1996
Page Two
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and we have not been furnished with any such evaluation or
appraisal.
Based upon the foregoing and such other matters as we consider relevant, it is
our opinion that as of the date hereof the $30.00 in cash to be received by the
holders, other than Buyer, WEC and any other subsidiaries of Buyer, of Shares in
the Tender Offer and the Merger, taken as a unitary transaction, is fair to such
holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
GOLDMAN, SACHS & CO.
<PAGE> 1
Exhibit 5
establishes selection criteria for directors of the Corporation, considers
the qualifications of prospective directors of the Corporation and, as
vacancies occur, recommends nominees to the Board of Directors for
appropriate action. The Committee will consider qualified nominees whose
resumes are forwarded by shareholders to the Secretary of the Corporation,
30100 Chagrin Boulevard, Suite 100, Pepper Pike, Ohio 44124-5705. This
Committee met six times during the fiscal year ended September 30, 1995.
(2) The Audit Committee is responsible for recommending to the Board of
Directors the appointment of independent auditors for the fiscal year,
reviewing with the independent auditors the scope of their proposed and
completed audits, and reviewing with the Corporation's financial management
and its independent and internal auditors other matters relating to audits
and to the adequacy of the Corporation's system of internal accounting
controls. This Committee met twice during the fiscal year ended September
30, 1995.
COMPENSATION OF DIRECTORS
During the fiscal year ended September 30, 1995, there were eight meetings
of the Corporation's Board of Directors. Each Director attended at least 75% of
the meetings held by the Board of Directors and the committees of the Board of
Directors on which he served. The Corporation compensates Directors, other than
officers who are Directors, for their services by payment of an annual retainer
of $13,000 and a fee of $850 for each Board or committee meeting attended.
Committee chairmen who are not employees are paid an additional annual retainer
of $4,000. In 1994, the Corporation adopted its Non-Employee Directors'
Degerred Equity Compensation Plan, pursuant to which each non-employee director
may elect to defer all or a portion of his retainer in the form of Common
Shares of the Corporation. As compensation for consulting and advisory services
to the Corporation, Stephen M. DuBrul, Jr. receives a retainer of $1,000 per
month plus additional amounts agreed upon in advance for special projects. A
total of $12,000 was paid for these services during the fiscal year ended
September 30, 1995.
PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Corporation's Common Shares with the cumulative total shareholder return on
the common equity of the companies in the New York Stock Exchange Composite
Index and a peer group of companies which are a part of Standard Industrial
Code (SIC) 3669, communications equipment, not elsewhere classified (the "Peer
Group"). The Corporation believes that this code best represents the
communication and electronic characteristics of its major products. The Peer
Group consists of the following companies: Acme-Cleveland Corporation, Alcatel
Alsthom Compagnie Generale d'Electricite, American Sensors Inc., Amtech
Corporation, Ancor Communications, Inc., BI, Incorporated, Checkpoint Systems,
Inc., Code-Alarm, Inc., Destron Fearing Corporation, Detection Systems, Inc.,
Digital Link Corporation, Firetector Inc., General Signal Corporation, Harmon
Industries, Inc., Image Sensing Systems Inc., International Electronics, Inc.,
ITI Technologies, Inc., La Barge Inc., LoJack Corporation, NAPCO Security
Systems, Inc., NETCOM On-Line Communication Services, Inc., Nexus
Telecommunication Systems Ltd. (Israel), Numerex Corp., Pittway Corporation,
Premisys Communications, Inc., Response USA, Inc., Sensormatic Electronics
Corporation, Union Switch & Signal Inc., Vicon Industries, Inc., and WinStar
Communications, Inc.
The graph also reflects the cumulative total shareholder return on the
Corporation's Common Shares over this same period, as compared with the
performance of the peer group index used in the Corporation's 1995 Proxy
Statement, which was comprised of the public companies in SIC 354,
metalworking machinery and equipment.
6
<PAGE> 1
EXHIBIT 6
ACME-CLEVELAND CORPORATION
30100 CHAGRIN BOULEVARD
PEPPER PIKE, OHIO 44124
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY
This Information Statement, which is being mailed on or about June 5, 1996
to the holders of record of Common Shares and Series A Convertible Preferred
Shares (together, the "Shares"), of the Company is being furnished in connection
with the designation by WEC Acquisition Corporation ("WEC"), a wholly owned
subsidiary of Danaher Corporation, a Delaware corporation ("Danaher"), of
persons (the "Danaher Designees") to the Board of Directors of the Company (the
"Board"). Such designation is to be made pursuant to an Agreement and Plan of
Merger, dated as of May 31, 1996 (the "Merger Agreement"), by and among the
Company, Danaher and WEC. As provided in the Merger Agreement, WEC has amended
its tender offer (the "Offer") to increase the offer price to $30.00 per share
and to extend the Offer until at least 5:00 p.m. on July 2, 1996. The obligation
of WEC to accept for payment and pay for Shares tendered pursuant to the Offer
is subject to certain conditions, including, without limitation, the condition
that the number of Shares being validly tendered and not withdrawn prior to the
expiration of the Offer will represent when aggregated with the Shares currently
owned by Danaher and its affiliates at least a majority of all outstanding
Shares on a fully diluted basis. The Merger Agreement provides that, at the
effective time (the "Effective Time") of the related merger transaction (the
"Merger"), WEC will be merged with and into the Company, and the Company will be
the surviving corporation in the Merger (the "Surviving Corporation"). By virtue
of the Merger, at the Effective Time (i) each then-outstanding Share not owned
by Danaher, WEC, or any other affiliate of Danaher (other than Shares held in
the treasury of the Company and Shares held by dissenting shareholders who
perfect their dissenter's rights, if any, under Ohio law) will be cancelled and
retired and be converted into the right to receive in cash an amount per Share
without interest equal to $30.00.
The Merger Agreement provides that, promptly following the purchase by WEC
pursuant to the Offer of that number of Shares which, when aggregated with the
Shares owned by Danaher and any of its affiliates, represents at least a
majority of the Shares then outstanding on a fully diluted basis and subject to
the Company's obligations under Section 14(f) of the Securities Exchange Act of
1934, as amended (the "34 Act") and Rule 14f-1 thereunder, WEC will be permitted
to designate members of the Board such that WEC will have a number of
representatives on the Board equal to the product, rounded up to the next whole
number, of (i) the total number of directors of the Company multiplied by (ii)
the percentage that the number of Shares then beneficially owned by WEC or its
affiliates bears to the number of Shares outstanding at the time of such
purchase. The Company has agreed to increase the size of the Board, or use its
reasonable efforts to secure the resignation of directors, or both, as may be
necessary to permit the Danaher Designees to be elected or appointed to the
Board. Notwithstanding the foregoing, prior to the Effective Time, the Board
will always have at least two members who are not officers, designees,
shareholders, or affiliates of WEC (the "Independent Directors"). All of the
Independent Directors will be individuals who are currently directors of the
Company, except to the extent that such individuals do not wish to continue as
directors or voluntarily resign. The Company has further agreed to take all
actions required pursuant to Section 14(f) of the '34 Act and Rule 14f-1
thereunder in connection with the election or appointment of the Danaher
Designees to the Board. Furthermore, following the election or appointment of
the Danaher Designees to the Board, any of the following will require the
concurrence of a majority of the Independent Directors, unless no individuals
who are currently directors of the Company wish to continue as directors or all
such individuals voluntarily resign:
1
<PAGE> 2
(i) any amendment to the Merger Agreement; (ii) the termination of the Merger
Agreement by the Company; (iii) any extension by the Company of the time for the
performance of the obligations of WEC or Danaher under the Merger Agreement;
(iv) any recommendation to shareholders or any modification or withdrawal of any
such recommendation; or (v) any waiver of any of the Company's rights under the
Agreement.
Pursuant to the terms of the Merger Agreement, WEC and Danaher also have
agreed, as promptly as possible but in no event later than five business days
after the public announcement of the execution of the Merger Agreement, to move
to withdraw, without prejudice, their complaint in the case entitled Danaher
Corporation, et al., v. Acme-Cleveland Corporation, et al., Case No. C2 96-0247,
pending in the United States District Court for the Southern District of Ohio,
Eastern Division. The Company has agreed to move to withdraw, without prejudice,
its counterclaims in that case.
The terms of the Merger Agreement, a summary of the events leading up to
the Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase dated
March 7, 1996, as amended and supplemented (the "Offer to Purchase"), the
related Letter of Transmittal (as supplemented), and the
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company, as
amended from time to time (the "Schedule 14D9"), copies of which have been
mailed to holders of the Shares. Certain other documents (including the Merger
Agreement) were filed with the Securities and Exchange Commission (the "SEC") as
exhibits to the Tender Offer Statement on Schedule 14D-1, as amended from time
to time (the "Schedule 14D-1"), of WEC and as exhibits to the Schedule 14D-9.
The exhibits to the Schedule 14D-1 and the Schedule 14D-9 may be examined at and
copies thereof may be obtained from the SEC (except that the exhibits thereto
cannot be obtained from the regional offices of the SEC). The discussion of any
such document included herein is qualified in its entirety by reference to the
text of such document.
NO ACTION IS REQUIRED BY HOLDERS OF THE SHARES IN CONNECTION WITH THE
ELECTION OF DANAHER DESIGNEES TO THE BOARD. SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED REQUIRES THE MAILING TO HOLDERS OF THE SHARES
OF THE INFORMATION SET FORTH IN THIS INFORMATION STATEMENT PRIOR TO A CHANGE IN
A MAJORITY OF THE COMPANY'S DIRECTORS.
The information contained in this Information Statement concerning Danaher,
WEC, and the Danaher Designees has been furnished to the Company by such
persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The principal executive offices of Danaher and
WEC are located at 1250 24th Street, N.W., Washington, D.C. 20037.
COMPANY VOTING STOCK
The outstanding voting securities of the Company as of May 30, 1996
consisted of 6,591,452 Shares, of which 6,430,078 are Common Shares and 161,374
are Series A Convertible Preferred Shares. Each Share that is outstanding as of
the close of business on any applicable record date for any matter to be acted
upon by shareholders is entitled to one vote on such matter.
2
<PAGE> 3
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 30, 1996, information furnished
to the Company with respect to persons known by the Company to be the beneficial
owners of more than 5% of any class of the Company's voting securities:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- -------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
SERIES A CONVERTIBLE PREFERRED SHARES
Marylou P. Hillyer, as Executrix under the Will of
Curtis Hillyer.......................................... 161,374(1) 100%
COMMON SHARES, $1 PAR VALUE PER SHARE
Mark Dickstein, Dickstein Partners, Inc.................. 405,000(2) 6.3%
and certain affiliates c/o Dickstein Partners Inc.,
9 West 57th Street, New York, New York 10019
</TABLE>
- ---------------
(1) Marylou P. Hillyer, as Executrix under the Will of Curtis Hillyer, had sole
voting and investment power with respect to all of the Company's Preferred
Shares, which are convertible into a total of 161,374 Common Shares, or
2.46% of the Common Shares outstanding following conversion. Mrs. Hillyer's
address is 74 Stewart Road, Short Hills, New Jersey 07078.
(2) The source of this information is a Schedule 13D/A filed on June 5, 1996 by
Mark Dickstein, Dickstein Partners, Inc. ("Dickstein Inc."), Dickstein
Partners, L.P. ("Dickstein Partners"), Dickstein International Limited
("Dickstein International"), Dickstein Focus Fund L.P. ("Dickstein Focus"),
and Dickstein & Co., L.P. ("Dickstein & Co."), reporting shared voting power
and shared dispositive power with respect to the aggregate number of Common
Shares set forth above. According to the Schedule 13D/A, (i) Mark Dickstein
is the president and sole director of Dickstein Inc., a Delaware
corporation; (ii) Dickstein Inc. is the general partner of Dickstein
Partners, which is a Delaware limited partnership, and the advisor to
Dickstein International, which is a limited-liability open-end investment
fund incorporated as an international business company in the Territory of
the British Virgin Islands; and (iii) Dickstein Partners is the general
partner of Dickstein & Co., which is a Delaware limited partnership, and of
Dickstein Focus, which is a Delaware limited partnership.
3
<PAGE> 4
The following table sets forth, as of May 30, 1996, information furnished
to the Company with respect to the beneficial ownership by the Company's Chief
Executive Officer, each of the Company's four other most highly compensated
executive officers, each Director, each Danaher Designee, and all Directors and
executive officers as a group, of the Company's Common Shares. No Director,
Danaher Designee, or executive officer owns any Preferred Shares.
<TABLE>
<CAPTION>
DIRECTOR, DESIGNEE, NUMBER OF COMMON SHARES
NAMED EXECUTIVE OFFICER OR GROUP BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------------------------------------------- ----------------
<S> <C> <C>
Theodore M. Alfred................................ 11,100 0.17 %
Stephen M. DuBrul, Jr............................. 5,000 0.08 %
Hugh B. Jacks..................................... 3,756 0.06 %
Gerald C. McDonough............................... 4,884 0.07 %
Donald R. Melville................................ 4,500 0.07 %
Terry S. Parker................................... 1,000 0.02 %
Paul J. Powers.................................... 3,637 0.06 %
David L. Swift(1)................................. 311,609 4.73 %
Robert M. Taylor.................................. 5,312 0.08 %
Karl E. Ware...................................... 5,865 0.09 %
Earl J. Bellisario(2)............................. 57,468 0.87 %
Mark H. Hoffman(3)................................ 4,087 0.06 %
Jon Slaybaugh(4).................................. 7,255 0.11 %
James E. Helton(5)................................ 10,761 0.16 %
Steven M. Rales(6)................................ --0-- --0--
Mitchell P. Rales(6).............................. --0-- --0--
George M. Sherman(6).............................. --0-- --0--
19 present Directors and executive officers
including
those listed above(7)........................... 463,306 7.03 %
</TABLE>
- ---------------
(1) Includes 233,000 Common Shares subject to options that are exercisable
within 60 days of the date hereof and 40,000 Common Shares available within
60 days of the date hereof under the Corporation's Performance and Equity
Incentive Plan (the "Performance Plan").
(2) Includes 38,000 Common Shares subject to options that are exercisable within
60 days of the date hereof and 11,000 Common Shares available within 60 days
of the date hereof under the Performance Plan.
(3) Includes 2,000 Common Shares subject to options that are exercisable within
60 days of the date hereof and 2,000 Common Shares available within 60 days
of the date hereof under the Performance Plan.
(4) Mr. Slaybaugh resigned as an officer of the Corporation on May 17, 1996.
(5) Includes 8,000 Common Shares subject to options that are exercisable within
60 days of the date hereof and 2,500 Common Shares available within 60 days
of the date hereof under the Performance Plan.
(6) Dahaner Corporation owns, as of the date hereof, 305,000 Common Shares.
(7) Includes 354,800 Common Shares subject to options that are exercisable
within 60 days of the date hereof and 68,000 Common Shares available within
60 days of the date hereof under the Performance Plan.
Beneficial ownership of each of the Common Shares listed in the foregoing
table is comprised of either sole voting power and sole investment power, or
voting power and investment power that is shared with the spouse of the
Director, Danaher Designee, or executive officer. The table includes Common
Shares subject to options which are exercisable within 60 days held by all
Directors and executive officers as a group, Common Share equivalents held as of
May 30, 1996 in the Acme-Cleveland Corporation and Subsidiaries Retirement
Savings Plan for the benefit of officers, and Common Shares held for the benefit
of certain Directors who participate in the Non-Employee Directors' Deferred
Equity Compensation Plan. The table does not include Common Share equivalents
credited to the deferred compensation account of any executive officer. By
action of the Board of Directors of the Company taken on May 31, 1996, the
exercisability of all then outstanding stock options was accelerated to that
date. Accordingly information with respect to options exercisable within 60 days
from the date of the Information Statement includes all outstanding options held
by an individual officer and by all officers and directors as a group. Under the
terms of the Merger Agreement, at the earlier of the time of the purchase of
Shares of the Company pursuant to the Offer or the effective time of the Merger,
subject to obtaining the consent of each holder thereof, each then outstanding
option to purchase Shares will be cancelled and converted into the right to
receive, without interest, an amount in cash equal to the excess of $30.00 per
Share over the exercise price per Share of the option.
4
<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
DANAHER DESIGNEES
It is currently anticipated that Danaher will designate the persons it
would be entitled to designate as directors of the Company from the individuals
listed below.
The table below presents certain information concerning these individuals
(with additional information being set forth below):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -----------------------------------------------------
<S> <C> <C>
Steven M. Rales(1)............ 44 Chairman of the Board of Danaher.
Mitchell P. Rales(1).......... 39 Chairman of the Executive Committee of Danaher.
George M. Sherman(1).......... 54 President, Chief Executive Officer and a Director of
Danaher.
All of the above-referenced persons are citizens of the United States.
</TABLE>
- ---------------
(1) Principal place of business is 1250 24th Street N.W., Washington, D.C.
20037.
Steven M. Rales is Chairman of the Board of Danaher, a position he has held
since 1984. He was Chief Executive Officer of Danaher until February 1990.
He has been a General Partner of Equity Group Holdings, a general
partnership located in Washington, D.C., with interests in manufacturing
companies, media operations, and publicly traded securities, since 1979.
Mitchell P. Rales is Chairman of the Executive Committee of Danaher. He has
held such position since February 1990. He has been a General Partner of
Equity Group Holdings, a general partnership located in Washington, D.C.,
with interests in manufacturing companies, media operations, and publicly
traded securities, since 1979.
George M. Sherman is President, Chief Executive Officer and a Director of
Danaher. He has held such positions since February, 1990. Mr. Sherman is a
Director of the Campbell Soup Company.
COMPANY DIRECTORS
The information below sets forth as of the most recent practicable date for
each current Director of the Company such Director's name, business experience
during the past five years, other directorships held, age, and the year such
Director first became a director of the Company.
<TABLE>
<CAPTION>
NAME OF DIRECTOR INFORMATION ABOUT DIRECTOR
- ------------------------------ -----------------------------------------------------------
<S> <C>
Theodore M. Alfred Mr. Alfred, age 70, has been a Director of the Company
since 1981, a member of the Management Evaluation and
Compensation Committee from 1981 through 1987, and from
January 1989 to the present, a member of the Executive
Committee since 1982, and a member of the Audit Committee
since 1984. He has served as Professor Emeritus and Dean
Emeritus since July 1994, Weatherhead School of Management,
Case Western Reserve University, and was Professor of
Management Policy from 1984 to 1994, Professor and Dean
from 1972 to 1984, and Professor since 1967, Weatherhead
School of Management, Case Western Reserve University. Dr.
Alfred is a Director of Keithley Instruments, Inc.
Principal Occupation: Professor Emeritus and Dean Emeritus,
Weatherhead School of Management, Case Western Reserve
University.
Member of Executive Committee, of Management Evaluation and
Compensation Committee, and of Audit Committee.
Director since 1981.
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
NAME OF DIRECTOR INFORMATION ABOUT DIRECTOR
- ------------------------------ -----------------------------------------------------------
<S> <C>
Stephen M. DuBrul, Jr. Mr. DuBrul, age 66, has been a Director of the Corporation
since 1978 and was a Director from 1969 to 1975; he has
been a member of the Management Evaluation and Compensation
Committee since 1979 and a member of the Audit Committee
since 1980. He has been a business consultant and private
banker since 1977, and was President and Chairman of the
Export-Import Bank of the United States, which facilitates
and aids in the financing of exports, form 1975 to 1977. He
was a General Partner of Lazard Freres & Company, an
investment banking firm, prior to 1975.
Principal Occupation: Business Consultant and Private
Banker.
Member of Management Evaluation and Compensation Committee
and of Audit Committee.
Director since 1978 and from 1969 to 1975.
Hugh B. Jacks Mr. Jacks, age 61, has been a Director of the Company and a
member of the Management Evaluation and Compensation
Committee since January 1992. He was President and Chief
Executive Officer of BellSouth Services, Inc., a
telecommunication company, from 1983 until December 1991,
when he retired. He also served as interim President and
Chief Executive Officer of Provident Life & Accident
Insurance Company during October and November 1993. Mr.
Jacks is currently a management consultant. He is a
Director of Provident Life & Accident Insurance Company.
Principal Occupation: Retired President and Chief Executive
Officer of BellSouth Services, Inc. and Management
Consultant.
Member of Management Evaluation and Compensation Committee.
Director since January 1992.
Gerald C. McDonough Mr. McDonough, age 67, has been a Director of the Company
since July 1987, a member of the Executive Committee since
January 1988, and a member of the Management Evaluation and
Compensation Committee and of the Audit Committee since
January 1989. He was Chairman of the Board and Chief
Executive Officer of Leaseway Transportation Corporation, a
major specialized transportation and distribution service
company, from 1982 until July 1988, when he retired, and
was Executive Vice President and Chief Administrative
Officer of Leaseway Transportation Corporation form 1979
until 1982. He is a Director of York International
Corporation, Commercial Intertech Corp., Associated Estates
Realty Corporation, and Brush-Wellman Corporation, a
Trustee of the Fidelity Funds.
Principal Occupation: Retired Chairman of the Board and
Chief Executive Officer, Leaseway Transportation
Corporation.
Member of Executive Committee, of Management Evaluation and
Compensation Committee, and of Audit Committee.
Director since July 1987.
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
NAME OF DIRECTOR INFORMATION ABOUT DIRECTOR
- ------------------------------ -----------------------------------------------------------
<S> <C>
Incorporated.Principal Occupation: Retired Chairman of the
Board and Chief Executive Officer of Norton Company
Member of Management Evaluation and Compensation Committee
Director since November 1987
Terry S. Parker Terry S. Parker, age 50, has been a Director of the Company
and a member of the Management Evaluation and Compensation
Committee since September 8, 1995. He has been President
and Chief Operating Officer of CellStar Corporation, an
integrated wholesaler and retailer of wireless products,
since March 1995 and was Senior Vice President of GTE
Corporation and President of GTE Personal Communication
Services, telecommunication companies, from August 1993 to
March 1995, and President of GTE Telecommunications
Products and Services, a telecommunication company, from
August 1990 to August 1993. Mr. Parker is a Director of
HighwayMaster Communications, Inc. and CellStar
Corporation.
Principal Occupation: President and Chief Operating Officer
of Cellstar Corporation
Member of Management Evaluation and Compensation Committee
Director since September 1995
Paul J. Powers Mr. Powers, age 60, has been a Director of the Company
since September 1990, a member of the Executive Committee,
of the Management Evaluation and Compensation Committee,
and of the Audit Committee since January 1991. He has been
Chairman of the Board, President, and Chief Executive
Officer of Commercial Intertech Corp., a diversified
manufacturer of metal products, hydraulics, and fluid
purification equipment since 1987, and was President and
Chief Operating Officer of Commercial Intertech Corp. from
1984 to 1987. In addition to being a Director of Commercial
Intertech Corp., he is also a Director of Ohio Edison
Company, Twin Disc Incorporated, and Global Marine Inc.
Principal Occupation: Chairman of the Board, President, and
Chief Executive Officer of Commercial Intertech Corp.
Member of Executive Committee, of Management Evaluation and
Compensation Committee, and of Audit Committee.
Director since September 1990.
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
NAME OF DIRECTOR INFORMATION ABOUT DIRECTOR
- ------------------------------ -----------------------------------------------------------
<S> <C>
Incorporated.Principal Occupation: Chairman of the Board,
President, and Chief Executive Officer of the Company.
Member of Executive Committee.
Director since April 1987.
Robert M. Taylor Mr. Taylor, age 53, has been a Director of the Company and
a member of the Management Evaluation and Compensation
Committee since 1982. He has been Chairman of the Board and
Chief Executive Officer of The Mariner Group, Inc.,
developers and managers of commercial properties in
southwest Florida, since 1979 and was President and Chief
Executive Officer of The Meriner Group, Inc. prior to 1979.
Mr. Taylor has also been the Chairman of the Board and
Chief Executive Officer of South Seas Resorts Company, a
resort ownership and management company, since January
1994. He is a Director of Sprint/United Telephone of
Florida
Principal Occupation: Chairman of the Board of Chief
Executive Officer of The Meriner Group, Inc. and South Seas
Resorts Company
Member of Management Evaluation and Compensation Committee
Director since 1982
Karl E. Ware Mr. Ware, age 69, has been a Director of the Company since
November 1988 and a member of the Executive Committee, of
the Management Evaluation and Compensation Committee, and
of the Audit Committee since January 1989. He has been
Chairman of the Board and Chief Executive Officer of Ware
Industries, Inc., a manufacturer of specialty metal wire
forms and steel components since 1986, Vice Chairman and
Chief Administrative Officer of White Consolidated
Industries, Inc. from 1984 to 1986, Senior Executive Vice
President and Chief Operating Officer of White Consolidated
Industries, Inc. from 1976 to 1984, and Executive Vice
President of White Consolidated Industries, Inc. from 1969
to 1975. He is a Director of Lesco, Inc. Lubrizol
Corporation, and Pioneer-Standard Electronics, Inc.
Principal Occupation: Chairman of the Board and Chief
Executive Officer of Ware Industries, Inc.
Member of Executive Committee, of Management Evaluation and
Compensation Committee, and of Audit Committee
Director since November 1988
</TABLE>
8
<PAGE> 9
THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors presently has ten members and held eight meetings
during the fiscal year ended September 30, 1995. To assist in the performance of
its duties, the Board has established two standing committees: Audit and
Management Evaluation and Compensation. Each Director attended at least 75% of
the meetings held by the Board of Directors and the committees of the Board of
Directors on which he served during the last completed fiscal year.
Audit Committee. The Audit Committee is responsible for recommending to
the Board of Directors the appointment of independent auditors for the fiscal
year, reviewing with the independent auditors the scope of their proposed and
completed audits, and reviewing with the Company's financial management and its
independent and internal auditors other matters relating to audits and to the
adequacy of the Company's system of internal accounting controls. This Committee
met twice during the fiscal year ended September 30, 1995.
Management Evaluation and Compensation Committee. The Management
Evaluation and Compensation Committee is responsible for evaluating the
performance of the Company's management, fixing or determining the method of
fixing the compensation of the Company's salaried employees, administering the
Company's stock option and stock appreciation rights plan and performance and
equity incentive plan, and reviewing significant amendments to the employee
pension and benefit plans of the Company and its subsidiaries. The Committee
also establishes selection criteria for directors of the Company, considers the
qualifications of prospective directors of the Company and, as vacancies occur,
recommends nominees to the Board of Directors for appropriate action. This
Committee met six times during the fiscal year ended September 30, 1995.
Director Compensation
The Company compensates Directors, other than officers who are Directors,
for their services by payment of an annual retainer of $13,000 and a fee of $850
for each Board or committee meeting attended. Committee chairmen who are not
employees are paid an additional annual retainer of $4,000. In 1994, the Company
adopted its Non-Employee Directors' Deferred Equity Compensation Plan, pursuant
to which each non-employee director may elect to defer all or a portion of his
retainer in the form of Common Shares of the Company. As compensation for
consulting and advisory services to the Company, Stephen M. DuBrul, Jr. receives
a retainer of $1,000 per month plus additional amounts agreed upon in advance
for special projects. A total of $12,000 was paid for these services during the
fiscal year ended September 30, 1995.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION AND BUSINESS EXPERIENCE
- ----------------------- --- -----------------------------------------------------------
<S> <C> <C>
David L. Swift 59 Chairman, President, and Chief Executive Officer 1993 to
present; President and Chief Executive Officer 1987 to
1993.
Earl J. Bellisario 46 Senior Vice President and Chief Financial Officer 1992 to
present; Vice President, Controller 1988 to 1992.
Kenneth B. Neighbors 49 Vice President, Corporate Development since November 1995;
elected officer January 25, 1996; Senior Product Mgr.,
ATM/DATA ADC Telecommunications, Inc., a telecommunications
company, 1992 to 1995 Senior Strategic Marketing Manager,
ADC Telecommunications, Inc., 1990 to 1992.
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
NAME AGE POSITION AND BUSINESS EXPERIENCE
- ----------------------- --- -----------------------------------------------------------
<S> <C> <C>
Ronald C. Drabik 49 Vice President and Treasurer since September 28, 1995;
President and Chief Executive Officer of Met-Coil Systems
Corporation, a manufacturer of machine tools, June 1, 1994
to September 27, 1995; Senior Vice President and Chief
Financial Officer (CFO) of Met-Coil Systems Corporation
January 1993 to May 1994; Vice President and CFO of RB&W
Corporation, a manufacturer of industrial fasteners, May
1989 to January 1993.
Diane O. McDaniel 45 Vice President, Human Resources 1990 to present; Director
Human Resources 1989 to 1990.
Donna M. Flammang 44 Vice President, Secretary 1990 to present; Secretary and
Corporate Counsel 1987 to 1990.
Alan G. Hutcheson 52 President, Communications Technology Corporation 1994 to
present; Vice President and General Manager, Transmission
Division, ADC Telecommunications, Inc. 1991 to 1994; Vice
President, Fiber Optics, ADC Telecommunications, Inc. 1991;
Vice President, Transmission Sales & Marketing, Telecom
Division, Fujitsu America, Inc. 1987 to 1991.
Mark H. Hoffman 46 President, TxPort, Inc. 1991 to present; Vice President of
Engineering, Phoenix Microsystems, Inc. 1986 to 1991.
James E. Helton 51 President, M&M Precision Systems Corporation 1991 to
present; President, M&M Precision Systems Division 1989 to
1991.
</TABLE>
The executive officers listed above held the positions listed above during
the past five years.
Terms of office are for one year. There are no family relationships between
any of the executive officers of Acme-Cleveland.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Exchange Act and the regulations thereunder require
the Company's executive officers and directors and beneficial owners of more
than ten percent (10%) of the Company's Shares to file initial reports of
ownership and reports of changes of ownership of the Company's Shares with the
SEC. Executive officers and directors and beneficial owners of more than ten
percent (10%) of the Company's Shares are required to furnish the Company with
copies of all Section 16(a) forms that they file. Based solely upon a review of
these filings and amendments thereto during and with respect to the Company's
most recent fiscal year and written representations from certain of the
Company's directors and executive officers that no other reports were required,
the Company believes that all filing requirements applicable to the foregoing
persons were met during and with respect to 1995.
PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Company's Common Shares with the cumulative total shareholder return on the
common equity of the companies in the New York Stock Exchange Composite Index
and a peer group of companies which are a part of Standard Industrial Code (SIC)
3669, communications equipment, not elsewhere classified (the "Peer Group"). The
Company believes that this code best represents the communication and electronic
characteristics of its major products. The Peer Group consists of the following
companies: Acme-Cleveland Corporation, Alcatel Alsthom Compagnie Generale
d'Electricite, American Sensors Inc., Amtech Corporation, Ancor Communications,
Inc., BI, Incorporated, Checkpoint Systems, Inc., Code-Alarm, Inc., Destron
Fearing Corporation, Detection Systems, Inc., Digital Link Corporation,
Firetector Inc., General Signal Corporation, Harmon Industries, Inc., Image
Sensing Systems Inc., International Electronics, Inc., ITI Technologies, Inc.,
La Barge Inc., LoJack
10
<PAGE> 11
Corporation, NAPCO Security Systems, Inc., NETCOM On-Line Communication
Services, Inc., Nexus Telecommunication Systems Ltd. (Israel), Numerex Corp.,
Pittway Corporation, Premisys Communications, Inc., Response USA, Inc.,
Sensormatic Electronics Corporation, Union Switch & Signal Inc., Vicon
Industries, Inc., and WinStar Communications, Inc.
The graph also reflects the cumulative total shareholder return on the
Company's Common Shares over this same period, as compared with the performance
of the peer group index used in the Company's 1995 Proxy Statement, which was
comprised of the public companies in SIC 354, metalworking machinery and
equipment.
CUMULATIVE TOTAL RETURN COMPARISON
ACME-CLEVELAND CORPORATION VS.
NYSE COMPOSITE INDEX, PEER GROUP INDEX, AND SIC 354 INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ACME-CLEVE- SID CODE 3669 NYSE COM- SIC CODE 354
(FISCAL YEAR COVERED) LAND CORP. INDEX POSITE INDEX
<S> <C> <C> <C> <C>
1990 100.00 100.00 100.00 100.00
1991 121.76 145.88 130.48 138.87
1992 138.55 169.96 141.83 143.29
1993 203.90 195.45 163.97 188.87
1994 312.35 154.91 171.81 200.81
1995 612.51 146.25 207.35 263.69
</TABLE>
The graph assumes a $100 investment on September 30, 1990 in each of the
Acme-Cleveland Corporation Common Shares, the New York Stock Exchange Composite
Index, the Peer Group, and the SIC 354 peer group index, and further assumes the
reinvestment of all dividends. The performance shown is not necessarily
indicative of future performance.
11
<PAGE> 12
REPORT OF THE MANAGEMENT EVALUATION AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Management Evaluation and Compensation Committee of the Board of
Directors (the "Committee") is composed entirely of independent outside
directors. The Committee is responsible for setting and administering the
policies which govern both annual and long-term compensation and stock ownership
programs for executives of Acme-Cleveland Corporation. In the discharge of this
responsibility, the Committee, as it deems appropriate, utilizes national
independent consulting firms to advise and counsel it with respect to such
compensation matters.
The Committee annually evaluates Acme-Cleveland's corporate performance,
actual compensation, and stock ownership programs as compared to the
performances and programs of companies of comparable industry and size.
COMPENSATION PHILOSOPHY
The Acme-Cleveland Corporation management compensation program is based on
beliefs and guiding principles designed to align compensation with shareholder
interests, business strategy, corporate values, and management initiatives. The
Corporation's management compensation program is intended to accomplish the
following:
- Reward executives for short-term, as well as longer-term, strategic
results and enhancement of shareholder value.
- Integrate compensation plans with both the Corporation's annual and
longer-term strategic planning and measurement processes.
- Support a pay-for-performance environment that offers base salary
and incentive compensation opportunities at competitive levels.
- Attract and retain key executives critical to the long-term success
of the Corporation.
BASE COMPENSATION
Salary range levels for executive officers are formally established in
accordance with accepted compensation principles, which consider job size,
scope, accountability, technical knowledge, and potential impact on the
Corporation's operations. The base salaries of executive officers are targeted
at the median level for comparable positions in companies of similar size and
industry and are based on industry and national compensation survey data
collected by well-known compensation consulting firms.
The Committee establishes base salaries for the Corporation's executive
officers by review of recommendations submitted by the Chief Executive Officer
and the Corporation's senior Human Resources executive. When determining changes
to the base salary levels of this group, the Committee considers the
Corporation's performance, as well as an assessment prepared by the Chief
Executive Officer, of each individual's past performance, growth, and
effectiveness in the performance of their duties.
ANNUAL INCENTIVE PLAN
The annual incentive plan is designed to provide incentive for the
accomplishment of short-term goals and the achievement of planned annual
operating results. Annual bonus awards are based on the achievement of
pre-established individual, operating unit, and corporate performance standards.
Prior to the beginning of each year, the Chief Executive Officer
establishes, subject to Committee approval, performance standards against which
corporate, as well as operating unit performance, will be measured. Corporate
and operating unit performance measurements for fiscal year 1995 were
profitability, bookings, and return on working capital employed. Individual
performance is measured against objectives that are established and agreed upon
at the beginning of each fiscal year by the executive and his superior and
approved by the Chief Executive Officer and the senior Human Resources
executive. Utilizing information
12
<PAGE> 13
from industry and national compensation surveys, participants have competitive
incentive award targets ranging from 25% to 35% of salary grade midpoint. At the
end of the fiscal year, the Committee reviews the performance of the Corporation
and its various operating units against the relevant established standards,
after making appropriate adjustments for any unusual items. Target awards for
individuals are adjusted upward or downward to reflect the actual results of the
Corporation and/or operating unit, as well as the executive's performance
against individual performance objectives. The Chief Executive Officer submits
to the Committee recommendations regarding appropriate awards for each executive
officer, which the Committee considers when determining and making awards under
the annual incentive plans.
LONG-TERM INCENTIVE PLANS
The Corporation has two long-term incentive plans: one for the corporate
officers and heads of operating units, and the second for key operating unit
personnel. The purpose of both plans is to align the interests of key employees
with those of the shareholders and provide incentive for the achievement of
longer term objectives.
The plan for corporate officers and heads of operating units is an equity
based long-term incentive plan (the "Stock Plan"). The Stock Plan provides for
grants of stock options (non-qualified or incentive stock options), restricted
stock, stock appreciation rights, cash awards, or other stock or
performance-based incentives.
The present value of stock option grants, which are targeted at competitive
levels, are determined using the Black-Scholes Option Pricing Model. The
Black-Scholes Option Pricing Model is a mathematical formula widely used to
value options traded on the stock exchanges considering a number of factors,
including the stock volatility, dividend rate, term of option, and interest
rates, to estimate the present value of the option. Other grants under the Stock
Plan are also targeted at competitive levels and are determined by applying a
multiplier to the midpoint of the base salary range for participating
executives. Appropriate multipliers are provided by a well-known national
compensation consulting firm.
The plan for key operating unit employees is a non-equity based long-term
incentive plan (the "Non-stock Plan") designed to reward such employees who
contribute to the long-term growth and performance of their operating unit. The
present value of the Non-stock Plan awards, which are also targeted at
competitive levels, are based on the unit's net earnings growth over a five-year
period.
CEO COMPENSATION
Mr. Swift's base salary was increased 3.5% over his previous salary to
$300,000, effective October 1, 1994, and he was awarded an annual incentive
bonus of $200,000 and a special bonus award of $200,000 for a total compensation
of $700,000 for fiscal year 1995. As indicated in the prior discussion related
to base salaries, Mr. Swift's base salary is determined on the basis of the
Committee's assessment of his individual performance and is a reflection of his
performance against predetermined financial and strategic objectives. In
addition, the Committee reviewed the results of competitive compensation survey
data, which indicated that Mr. Swift's base salary trailed the median base
salary for chief executive officer positions in companies of similar size and
industry.
Under the provisions of the Annual Incentive Awards Plan, the target annual
incentive bonus for the Chief Executive Officer position is 50% of salary grade
midpoint. The Corporation's performance against the predetermined financial
standards of profitability, bookings, and return on working capital employed
exceeded planned levels. Further, the Committee believes that Mr. Swift and
senior management are taking steps to strengthen the Corporation's outlook for
the future and to achieve long-term profitable growth. Therefore, the Committee
approved an annual incentive bonus for Mr. Swift in the amount stated above.
In recognition of the significant increase in shareholders' equity and
total return to shareholders realized during the prior fiscal year, Mr. Swift
was awarded a special bonus. Sixty percent of such award was paid in the form of
common stock (with a two year restriction on sale or transfer) and the remainder
in cash.
Mr. Swift received a grant of 20,000 performance shares during fiscal year
1995. Mr. Swift's performance shares will vest three years from the date of
grant and will be considered earned upon the achievement of
13
<PAGE> 14
predetermined earnings per share growth and return on shareholders' equity
targets established by the Committee for the period of 1995 -- 1997.
SUMMARY
The Committee is responsible for reviewing, monitoring, and approving all
compensation decisions affecting Acme-Cleveland Corporation executive officers.
By conducting its decision-making within the framework of a multi-plan, total
compensation perspective, the Committee endeavors to have the entire
remuneration paid to executive officers consistent with Acme-Cleveland
Corporation's interest in providing market competitive compensation
opportunities, reflective of its pay-for-performance philosophy, and supportive
of its strategic plans and objectives. The Committee will continue to actively
monitor the effectiveness of Acme-Cleveland Corporation's management
compensation programs and assess the appropriateness of executive pay levels to
assure prudent use of Acme-Cleveland resources.
The Management Evaluation and Compensation Committee:
<TABLE>
<S> <C>
S. M. DuBrul, Jr. (Chairman) T. S. Parker
T. M. Alfred P. J. Powers
H. B. Jacks R. M. Taylor
G. C. McDonough K. E. Ware
D. R. Melville
</TABLE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation paid by the Company during its last three fiscal years to its
Chairman of the Board and Chief Executive Officer and each of the four most
highly compensated executive officers of the Company (the "Named Executive
Officers"), whose aggregate direct remuneration exceeded $100,000 during the
fiscal year ended September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION
-------------------------------------------- AWARDS PAYOUTS
OTHER ------- --------- ALL
ANNUAL LONG-TERM OTHER
NAME AND COMPEN- STOCK INCENTIVE COMPENSA-
PRINCIPAL SATION OPTIONS PAYOUTS(4) SATION(5)
POSITION YEAR SALARY($) BONUS($) ($) (#) ($) ($)
- ----------------------- ---- --------- -------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
D.L. Swift 1995 $ 300,000 $200,000 $200,000(2) 0 N/A $120,060
Chairman, 1994 290,000 180,000 0 N/A
President, and CEO 1993 277,000 200,000 0 N/A
E.J. Bellisario 1995 155,000 75,000 100,000(2) 0 N/A 16,923
Senior Vice President 1994 145,600 70,000 0 N/A
& CFO 1993 142,400 75,000 0 N/A
M.H. Hoffman 1995(1) 136,410 50,000 0 0 0 4,092
President, TxPort, Inc.
J. Slaybaugh* 1995 125,000 55,000 31,400(3) 0 37,420 13,166
President, Namco 1994 117,200 55,000 0 36,500
Controls Corporation 1993 112,600 55,000 0 43,130
J.E. Helton 1995 119,500 60,000 15,290(3) 0 16,450 14,332
President, M&M 1994 113,560 55,000 0 12,550
Precision Systems 1993 110,600 45,000 0 23,400
Corporation
</TABLE>
- ---------------
* Mr. Slaybaugh terminated his employment with the Company as of May 17, 1996.
(1) Mr. Hoffman commenced employment with the Company in November 1994.
(2) Other annual compensation for Messrs. Swift and Bellisario includes a
special bonus award of $200,000 and $100,000, respectively. Sixty percent of
such award was paid in the form of Common Stock, 10,324 and 5,162 shares,
respectively, at a value of $11.623 per share and the remainder in cash.
There is a two year restriction on the sale or transfer of such shares.
14
<PAGE> 15
(3) Other annual compensation for Messrs. Slaybaugh and Helton includes the
value of annual gain on phantom appreciation rights granted under the
Phantom Stock Appreciation Rights Plan for Operating Unit Employees that was
vested during the fiscal year, but not yet paid.
(4) Value of gain on phantom appreciation rights granted under the Phantom Stock
Appreciation Rights Plan for Operating Unit Employees that was realized or
deferred during the fiscal year.
(5) Other compensation for Messrs. Swift, Bellisario, Hoffman, Slaybaugh, and
Helton includes company paid portion of insurance premiums on extraordinary
term life insurance in the amount of $1,210, $1,373, $0, $970, and $0,
respectively, allocations to Supplemental Executive Retirement Plan in the
amount of $111,800, $8,500, $0, $5,900, and $8,200, respectively, company
matching contribution to the Retirement Savings Plan in the amount of
$4,500, $4,500, $4,092, $3,746, and $3,582, respectively, and a pension
benefit accrual in the amount of $2,550, $2,550, $0, $2,550, and $2,550,
respectively.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES. The following table provides information regarding the number of
options exercised during the last fiscal year and the number and fiscal year-end
value of unexercised options for the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED VALUE OPTIONS/SARS AT FY-END AT FY-END ($)
ON REALIZED ----------------------------- -----------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D.L. Swift.......... 10,000 $116,250 208,500 7,500 $ 3,858,313 $ 149,063
E.J. Bellisario..... 14,200 229,400 24,250 3,750 499,219 74,531
M.H. Hoffman........ 0 0 0 0 0 0
J. Slaybaugh........ 0 0 5,500 500 107,313 9,938
J.E. Helton......... 0 0 5,500 500 107,313 9,938
</TABLE>
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR. The following
table sets forth information regarding each award made to a Named Executive
Officer during the fiscal year ended September 30, 1995, under any long term
incentive plan.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PERFORMANCE PAYOUTS UNDER
NUMBER OF OR OTHER NON-STOCK
SHARES, PERIOD PRICE-BASED PLANS(2)
UNITS UNTIL ---------------------
OR OTHER MATURATION THRESHOLD TARGET
NAME RIGHTS OR PAYOUT ($) ($)
- ------------------------------------------------ --------- ----------- --------- -------
<S> <C> <C> <C> <C>
D.L. Swift...................................... 20,000 1997 N/A N/A
E.J. Bellisario................................. 6,000 1997 N/A N/A
M.H. Hoffman.................................... 2,000 1997 N/A N/A
1999(3) $34,200 $95,000
J. Slaybaugh.................................... 1,500 1997 N/A N/A
1999(3) 15,090 38,000
J.E. Helton..................................... 1,500 1997 N/A N/A
1999(3) 10,931 27,850
</TABLE>
- ---------------
(1) Performance shares granted under the Acme-Cleveland Corporation Performance
and Equity Incentive Plan.
(2) Payouts under the Phantom Stock Appreciation Rights Plan for Operating Unit
Employees may appreciate or depreciate over the cumulative five year
performance period based on the operating unit's actual gain or loss in net
earnings. A threshold level of 75% of an operating unit's three year
cumulative
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<PAGE> 16
planned net earnings must be achieved before any appreciation in the base
value of a phantom share shall be realized. Estimated future payout target
assumes the operating unit achieves planned net earnings growth (excluding
gains or losses from the sale of capital assets) over a five-year period.
There is no maximum value of estimated target payouts in order to encourage
an increase in the net earnings of the operating unit to the greatest
extent possible over the cumulative five-year performance period.
(3) Messrs. Hoffman, Slaybaugh, and Helton also received phantom appreciation
rights granted under the Phantom Stock Appreciation Rights Plan for
Operating Unit Employees.
RETIREMENT PLAN. The Company has a retirement plan for all officers and
salaried employees of the Company, except for those persons employed by certain
of the Company's subsidiaries. The plan provides for an annual benefit accrual
of 1.70% of an employee's compensation for that year. Certain minimum benefits
may apply, and benefits payable under other pension plans of the Company and its
subsidiaries may be offset against benefits payable under the retirement plan.
In addition to benefits payable upon retirement after reaching normal retirement
age, the retirement plan provides benefits on early retirement and certain
surviving spouse and death benefits. Besides benefits payable under the present
retirement plan, there are also pension benefits being provided to certain
officers and salaried employees of the Company through an insurance annuity
contract representing benefit accruals as of September 30, 1986, under a prior
retirement plan. Compensation for accruals for periods beginning October 1, 1989
through September 30, 1994 is limited to $200,000 per year, subject to indexed
increases. Beginning October 1, 1994, the cap on earnings recognized for pension
purposes has been decreased to $150,000, also subject to indexed increases for
future years.
The table below sets forth the total projected retirement plan benefits
payable at age 65 for the Named Executive Officers:
<TABLE>
<CAPTION>
PROJECTED AGE 65
ANNUAL RETIREMENT
NAME OF INDIVIDUAL PLAN BENEFIT
----------------------------------- -----------------
<S> <C>
David L. Swift..................... $58,400
Earl J. Bellisario................. 75,400
Mark H. Hoffman.................... -0-*
Jon Slaybaugh...................... 52,400
James E. Helton.................... 43,300
</TABLE>
- ---------------
*Mr. Hoffman is not a participant in the retirement plan.
The benefits shown in the table include projected accruals under the
present retirement plan formula, plus the September 30, 1986 accrual, which will
be provided through an insurance annuity contract. Accruals under the present
retirement plan have been projected to age 65 assuming that the cash
compensation set forth in the summary compensation table would remain unchanged
for each individual, with no projected change in the current compensation limits
described above.
The amounts shown in the table represent the annual benefit payable to an
employee for life with payments in the same amount continuing to the employee's
beneficiary for the balance of the five-year period, if any, following
commencement of payments to the employee. Straight life annuity payments are not
available under the plan.
The benefits payable shown in the table have been determined without regard
to the maximum benefit limitations imposed by the Internal Revenue Code. The
plan has been written to automatically recognize changes in these limitations as
they occur. The Internal Revenue Code also imposes limitations applicable to
employees who participate in more than one plan, but these limitations must be
determined on an individual basis and are not reflected in the table.
The years of benefit service credited to date under the present salaried
retirement plan for each of the Named Executive Officers who participate in the
plan are: 9.0 years for David L. Swift, 9.0 years for Earl J. Bellisario, 9.0
years for Jon Slaybaugh, and 9.0 years for James E. Helton.
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<PAGE> 17
SUPPLEMENTAL PENSION PLAN FOR CERTAIN KEY EXECUTIVES. Effective October 1,
1990, the Company established a supplemental pension plan for certain officers
and key executives of the Company over the age of 45 who are approved by the
Management Evaluation and Compensation Committee of the Board of Directors.
Under the plan, a participant is entitled to receive a retirement benefit equal
to 50% of his average compensation (salary plus bonus, whether or not deferred)
for the last three complete fiscal years as a full-time employee of the Company,
reduced by any pension benefits received under any other retirement plan
financed by the Company or any prior employer and any amounts received as his
primary social security benefit. Besides benefits payable upon retirement, the
plan also provides certain surviving spouse benefits and acceleration of benefit
payments upon a change in control of the Company as defined in the plan. A
participant's right to benefits under the plan will not become vested until he
has attained the age of 55 and has ten years of service with the Company. On
March 11, 1996 the Board approved an amendment to the plan to provide for full
vesting of supplemental pension benefits for those participants who have
completed five years of service in the event of a "Change of Control," as
defined in the plan. On March 19th, the Board also updated and amended the
actuarial assumptions under the plan and added a change of control provision
that is consistent with the other programs of the Company.
EMPLOYMENT AGREEMENT WITH MR. SWIFT. David L. Swift, Chairman of the
Board, President, and Chief Executive Officer of the Company, entered into an
employment agreement with the Company effective July 26, 1989. The agreement was
for an initial term of three years and provides for a base salary of not less
than $250,000 per year and an annual bonus in an amount that is determined by
the Management Evaluation and Compensation Committee, based upon its assessment
of his performance. The term of the agreement can be extended for additional one
year periods, but in no event will the term be extended beyond September 30,
2001.
Under a supplemental pension plan established for Mr. Swift, Mr. Swift is
entitled to receive a retirement benefit equal to 50% of the annual average of
his compensation (salary plus bonus, whether or not deferred) for the last three
complete fiscal years as a full-time employee of the Company, reduced by any
pension benefits received under any other retirement plan financed by the
Company or any prior employer, and any amounts received by Mr. Swift on or after
the date he attains age 62 as his primary social security benefit. Upon Mr.
Swift's voluntary termination or termination for cause, no further remuneration
payments would be due him except retirement benefits and amounts that he may
have had credited to his deferred compensation account.
Pursuant to his employment agreement, upon termination of Mr. Swift's
employment, other than voluntary termination by Mr. Swift or termination for
disability or for cause by the Company, Mr. Swift will be entitled to receive an
amount equal to his base salary at the highest monthly rate paid to him prior to
termination plus an amount equal to the rate, on a monthly basis, of his most
recent bonus under the Company's annual incentive plan for a period of 36 months
or, if shorter, for the remainder of the contract term. A "change in control" of
the Company, as a result of which Mr. Swift determines in good faith that he
cannot continue to fulfill the responsibilities for which he is employed, may be
treated as a termination by the Company. A "change in control" for this purpose
is defined as (a) the acquisition by any person of beneficial ownership of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities; (b) individuals who were Directors
of the Company at the beginning of the period, cease for any reason to
constitute a majority of the Board during any period of 24 consecutive months;
(c) two or more individuals whose election is opposed by a majority of the Board
are elected as Directors of the Company; (d) the Company merges with, into, or
consolidates with another corporation resulting in less than 55% of the then
outstanding voting securities of the surviving corporation representing shares
issued in exchange for voting securities of the Company outstanding immediately
prior to such merger or consolidation; (e) a sale, lease, exchange, or other
transfer of all or substantially all the assets of the Company; or (f) the
shareholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company.
On March 19, 1996, the Board updated and modified the employment agreement
with Mr. Swift to provide (among other things) for a lump sum payment of
severance benefits thereunder and for Company
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<PAGE> 18
obligations thereunder to be unconditional. The Board also updated and modified
Mr. Swift's supplemental pension plan and amended Mr. Swift's employment
agreement to add a change of control provision that is consistent with the other
programs of the Company.
SEVERANCE PAY AGREEMENT WITH CERTAIN KEY EXECUTIVES. Effective as of July
1, 1994, the Company entered into severance pay agreements with certain key
executives, which provide for certain payments, as defined in the agreement, if,
within three years after a change in control occurs, the executive's employment
with the Company is terminated (a) by the executive for good reason or (b) by
the Company other than for cause or as a result of the executive's disability or
death. Such payments consist of all accrued but unpaid base salary, all accrued
but unpaid incentive compensation, if any, and a cash payment equal to the value
of the executive's accrued but unused vacation, in addition to a lump sum cash
amount equal to the sum of: (i) three times the executive's annual base salary,
plus (ii) one times the executive's average annual incentive compensation except
that if there are fewer than thirty-six whole months remaining from the
termination date to the executive's normal retirement date, that portion of the
lump sum cash payment otherwise provided for in (i) above shall be reduced to an
amount equal to (x) 1/36th of the portion otherwise provided for in (i) above,
multiplied by (y) the number of months in the period starting on the termination
date and ending on the executive's normal retirement date.
A "change in control" for this purpose is defined as (a) the acquisition by
any person of beneficial ownership of securities of the Company representing 20%
or more of the Common Shares then outstanding; the announcement by any person of
an intention to commence a tender offer or exchange offer, the consummation of
which would result in the person becoming the beneficial owner of 20% or more of
the Common Shares then outstanding; or any person being declared an "adverse
person" (a person whose interests are adverse to those of the Company) by the
Board of Directors; (b) at any time during any period of 24 consecutive months,
individuals who were directors at the beginning of the 24-month period no longer
constitute a majority of the members of the Board of Directors, unless the
election or the nomination for election by the Company's shareholders, of each
director who was not a director at the beginning of the period is approved by at
least a majority of the directors (i) who are in office at the time of the
election or nomination and (ii) were directors at the beginning of the period;
(c) a record date is established for determining shareholders entitled to vote
upon (i) a merger or consolidation of the Company with another corporation in
which the Company is not the surviving or continuing corporation or in which all
or part of the outstanding Common Shares are to be converted into or exchanged
for cash, securities, or other property, (ii) a sale or other disposition of all
or substantially all of the assets of the Company, or (iii) the dissolution of
the Company; (d) any person who proposes to make a "control share acquisition"
of the Company, within the meaning of Section 1701.01 (Z) of the Ohio General
Corporation Law, submits or is required to submit an acquiring person statement
to the Company. On March 20, 1996, the Board authorized amendments to the
Severance Pay Agreements to remove the "excess parachute payment" limit and to
provide for a "gross up" for any relating excise tax and authorized the payment
of an additional $500,000 to the new revocable trust discussed below.
OTHER AGREEMENTS. The Board also authorized the creation of a new
revocable trust and a new irrevocable trust to secure future payments under
supplemental pension plans and severance and employment agreements for certain
current and former executives, consistent with the Board's prior policy that
employee benefits be secured and authorized the payment by the Company of
approximately $10.9 million to the new revocable trust, which provides for the
payment of the funds to the Company's preexisting irrevocable trust and to the
new irrevocable trust upon the occurrence of a change in control. Copies of the
documentation implementing these actions are attached as Exhibits (c)(4) to
(c)(11).
On March 19, 1996, the Board authorized indemnification agreements for
officers and directors of the Company.
There are no contracts, agreements, arrangements and understandings, and
actual and potential conflicts of interest between the Company and its
affiliates, on the one hand, and WEC or Danaher and their respective executive
officers, directors, and affiliates, on the other, except for the provisions of
the Merger Agreement discussed above.
18
