SPINNAKER INDUSTRIES, INC.
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
_______________________
NOTICE OF ACTION BY WRITTEN CONSENT
_______________________
July __, 1996
To the stockholders of SPINNAKER INDUSTRIES, INC.:
The Board of Directors of Spinnaker Industries, Inc., a
Delaware corporation (the "Corporation"), and Lynch Manufacturing
Corporation ("Lynch"), a stockholder of record as of the Record
Date (as defined below) owning a majority of the stock of the
Corporation, wish to advise all holders of all of the issued and
outstanding shares of the Corporation's common stock, of action
to be taken pursuant to the written consent of Lynch. The action
to be taken by Lynch is as follows (the "Proposal"):
1. To amend the Amended Certificate of Incorporation to
(a) authorize a new class of common stock of the
Corporation designated as Common Stock and
(b) establish the relative rights, powers and
limitations of the Common Stock and Class A Common
Stock.
The Proposal has been approved and adopted by the Board of
Directors of the Corporation. The record date for the
determination of stockholders of the Corporation entitled to
receive this Notice of Action by Written Consent and the
accompanying Information Statement and the determination of the
number of shares of common stock necessary to approve the
Proposal has been fixed as of the close of business on July __,
1996 (the "Record Date"). As provided in the Corporation's
Certificate of Incorporation, each share of common stock entitles
its holder to one vote on any matter that properly comes before
the stockholders of the Corporation and requires a vote of the
stockholders. The affirmative vote or written consent of the
holders of a majority of the outstanding shares of common stock
is necessary to approve the Proposal. As discussed herein, Lynch
owns approximately 73.5% of the issued and outstanding common
stock as of the Record Date. Lynch will deliver a written
consent that will approve and adopt the Proposal. No other class
of voting security of the Corporation is issued or outstanding.
Pursuant to Section 228(d) of the General Corporation Law of the
State of Delaware, you are being provided with notice of the
approval of the Proposal by written consent of the holder of a
majority of the Corporation's common stock. Pursuant to the
Securities Exchange Act of 1934, as amended, along with this
Notice, you are being furnished with an Information Statement
relating to the Proposal.
NO STOCKHOLDER'S MEETING WILL BE HELD TO VOTE ON OR DISCUSS THE
PROPOSAL. ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUIRED NOT TO SEND US A PROXY.
By Order of the Board of
Directors,
Robert A. Hurwich
Secretary
SPINNAKER INDUSTRIES, INC.
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
_______________________
INFORMATION STATEMENT
_______________________
This Information Statement is furnished by the Board of
Directors of Spinnaker Industries, Inc., a Delaware corporation
(the "Corporation"), to holders of all of the issued and
outstanding shares of the Corporation's common stock for the
purpose of describing action to be taken by the holder of a
majority of the issued and outstanding shares of the
Corporation's common stock with respect to the Proposal set forth
on the accompanying Notice of Action of Written Consent.
This Information Statement and the Notice of Action by
Written Consent are first being mailed to stockholders of the
Corporation on approximately July __, 1996.
Only stockholders of record at the close of business on July
__, 1996 (the "Record Date"), are entitled to receive this
Information Statement and Notice of Action by Written Consent.
As of the close of business on such date, there were issued and
outstanding 3,075,600 shares of common stock of the Corporation
of which approximately 73.5% are owned by Lynch Manufacturing
Corporation ("Lynch"). No other class of voting security of the
Corporation is issued and outstanding.
The Corporation's Certificate of Incorporation and the
General Corporation Law of the State of Delaware ("DGCL") each
require an affirmative vote or written consent of the holders of
a majority of the outstanding shares to approve the Proposal.
Since Lynch owns approximately 73.5% of the issued and
outstanding shares on the Record Date, it has the voting power to
approve the Proposal. Lynch has advised the Board of Directors
that it intends to execute a written consent approving the
Proposal. Accordingly, Lynch will be able to cause the adoption
of the Proposal without the receipt of consents from the
remaining stockholders of the Corporation.
No stockholders' meeting will be held to vote on or discuss
the Proposal as permitted by the Corporation's By-laws and the
DGCL.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
APPROVAL OF AMENDMENT TO THE CORPORATION'S
AMENDED CERTIFICATE OF INCORPORATION
Description of Amendment and Distribution
The Board of Directors has approved the proposal (the
"Proposal") to amend (the "Amendment") Article Fourth of the
Corporation's Amended Certificate of Incorporation to
(a) authorize a new class of common stock of the Corporation to
be designated as "Common Stock" (the "Common Stock") consisting
of 15,000,000 shares having no par value; and (b) fix and
establish the relative rights, powers and limitations of the
Corporation's Common Stock and Class A Common Stock. The
currently outstanding shares of common stock are to be designated
as "Class A Common Stock". The full text of Article Fourth, as
proposed to be amended, is set forth as Exhibit A to this
Information Statement. As more fully described below, the
purpose of the Proposal is to (1) provide the Corporation with
the flexibility to issue shares for financing, acquisition and
compensation purposes without proportionately diluting the voting
interests of any stockholders; and (2) enable stockholders of the
Corporation to sell portions of their equity interest in the
Corporation without proportionately reducing their voting
interests in the Corporation.
The Proposal is expected to be adopted and it is expected
that the Board of Directors will file the Certificate of
Amendment to the Amended Certificate of Incorporation of the
Corporation with the Secretary of State of Delaware amending the
Amended Certificate of Incorporation in accordance with the
Amendment. The Amendment will be effective immediately upon
acceptance of filing by the Secretary of State of the State of
Delaware. Upon such filing, every issued and outstanding share
of common stock of the Corporation shall become and be deemed to
be, and shall automatically convert into one share of Class A
Common Stock and the Board of Directors would then be free to
cause the issuance of the Common Stock without any further action
on the part of the stockholders. Although the Board of Directors
presently intends to file the Certificate of Amendment if the
Amendment is approved by the stockholders, the Board of Directors
reserves the right to abandon the Proposal and not file such
Certificate of Amendment even if the Amendment is approved by the
stockholders.
Further, it is expected that the Board of Directors will
declare a dividend on the Class A Common Stock of the Corporation
payable in Common Stock on the basis of one share of Common Stock
for each share of Class A Common Stock outstanding. The
Distribution will be essentially a two-for-one stock split. The
record date for such distribution (the "Distribution") (such
record date being the "Distribution Record Date") is expected to
be established promptly after the Amendment is approved and
adopted and the Distribution will be made as soon thereafter as
is practicable. Stockholder approval of the Distribution is not
required by Delaware law and is not being solicited by this
Information Statement. Although the Board of Directors presently
intends to make the Distribution, the Board of Directors reserves
the right not to make the Distribution even if the Amendment is
approved and adopted and the Certificate of Amendment is filed
with the Secretary of State of the State of Delaware.
Description of the Common Stock
Under the Proposal, a new class of common stock to be
designates as Common stock will be created. Upon filing of the
Certificate of the Amendment with the Secretary of the State of
Delaware, every issued and outstanding share of common stock of
the Corporation shall become and be deemed to be, and shall
automatically convert into, one share of Class A Common Stock.
The rights, powers and limitations of the Common Stock and the
Class A Common Stock are set forth in full in Article Fourth of
the Corporation's Amended Certificate of Incorporation, as
proposed to be amended. The full text of Article Fourth as
proposed to be amended is set forth as Exhibit A to this
Information Statement and is incorporated herein by reference.
The following summary should be read in conjunction with, and is
qualified in its entirety by reference to, such Exhibit A. The
table set forth below summarizes certain of the relative rights,
powers and preferences and limitations of the Common Stock and
Class A Common Stock as proposed:
Class A
Common Common
Stock Stock
Voting rights (per share)... 1 11/10
Same as
Class A
Pro rata Common
share of Stock
Cash dividend rights (per dividends except that
share)...................... as the Board
determined of
by Directors
Board of may declare
Directors greater
cash
dividends
Transferability ............ Freely Freely
transferable* transferable*
Preemptive, subscription
and redemption rights ...... None None
Pro rata
share of
assets Same as
remaining Class A
Liquidation rights ......... after Common
payment of Stock
all
liabilities
__________________________
* Certain Federal and state securities laws restrictions apply
to directors, officers, other affiliates and persons holding
"restricted" stock.
Voting. On matters brought before the stockholders of the
Corporation, each holder of Class A Common Stock will continue to
be entitled to one vote for each share of Class A Common Stock
held. Each holder of Common Stock shall be entitled to one-tenth
(1/10) vote for each share of Common Stock held. Except as may
be otherwise required by law, the holders of Common Stock and
Class A Common Stock shall vote together as a single class on all
matters, subject to any voting rights which may be granted in the
future to holders of any other class of series of stock.
Dividends. Holders of Common Stock and Class A Common Stock
will be entitled to receive ratably all such dividends, payable
in cash or otherwise, as may be declared by the Board of
Directors out of assets or funds legally available therefor
except that in the case of cash dividends, (i) if, at any time
until August 31, 2001, a cash dividend is paid on the Common
Stock, a cash dividend must also be paid on the Class A Common
Stock in an amount per share of Class A Common Stock that is not
greater than 100%, nor less than 66 and 2/3%, of the amount of
the cash dividend paid on each share of Common Stock or (ii) if,
at any time until August 31, 2001, a cash dividend is paid on the
Class A Common Stock, a cash dividend must also be paid on the
Common Stock in an amount that is not greater than 150%, nor less
than 100%, of the amount of the cash dividend paid on each share
of the Class A Common Stock, such that a cash dividend may not be
paid on either the Common Stock or the Class A Common Stock
unless a cash dividend is also paid on the other as aforesaid.
If at any time after August 31, 2001, a cash dividend is paid on
the (i) Common Stock an equal amount to such dividend shall be
paid on the Class A Common Stock and (ii) the Class A Common
Stock, an amount equal to such dividend shall be paid on Class A
Common Stock.
In the case of dividends or other distributions payable in
Common Stock of the Corporation, holders of Common Stock may
receive the same or different class of Common Stock than the
holders of Class A Common Stock and holder of Class A Common
Stock may receive the same or a different class of Common Stock
than the holders of Common Stock.
The declaration and payment of cash dividends is solely
within the discretion of the Board of Directors. The Corporation
has not paid any cash dividend in the recent past and does not
anticipate paying a cash dividend in the foreseeable future. The
Corporation split the common stock of the Corporation on a three-
for-two basis in each of December 1994 and December 1995 by
issuing one-half of a new share of common stock for each
outstanding share.
Liquidation Rights. Holders of Common Stock and Class A
Common Stock will be equal and have the same rights with respect
to distributions in connection with a partial or complete
liquidation of the Corporation.
Transferability. The Common Stock and Class A Common Stock
will be freely transferable, and except for federal and state
securities law restrictions on directors, officers and other
affiliates of the Corporation and on persons holding "restricted"
stock. Corporation stockholders will not be restricted in their
ability to sell or transfer shares of the Common Stock or Class A
Common Stock. The Corporation is filing an application with
NASDAQ to list the Common Stock for trading on the NASDAQ
SmallCap Market where the common stock of the Corporation trades.
Mergers and Consolidations. Each holder of Common Stock and
Class A Common Stock will be entitled to receive the same per
share consideration in a merger or consolidation of the
Corporation (whether or not the Corporation is the surviving
corporation), except that any securities issued in respect of the
Common Stock may have different or lesser voting rights than
securities issued in respect of the Class A Common Stock.
Preemptive, Subscription and Redemption Rights. Neither the
Common Stock nor the Class A Common Stock will carry any
preemptive subscription and redemptions rights enabling a holder
to subscribe for or receive shares of any class of stock of the
Corporation or any other securities convertible into shares of
any class of stock of the Corporation.
Reasons for the Proposal
The Board believes that a capital structure including Common
Stock will offer a number of potential benefits to the
Corporation and its stockholders. These benefits are described
below.
Financing Flexibility. Implementation of the Proposal would
provide the Corporation with increased flexibility in the future
to issue equity securities in connection with acquisitions and
existing and future employee benefit and incentive plans, and to
raise equity capital and to issue convertible debt as a means to
finance future growth, without proportionately diluting the
voting power of the Corporations's existing stockholders
(including Lynch, a wholly-owned subsidiary of Lynch Corporation,
which owns approximately 73.5% of the outstanding common stock of
the Corporation). The listing of the Common Stock on the NASDAQ
SmallCap Market may create a trading market, the existence of
which could be an important factor in assessing the value of such
stock in connection with any such acquisition, financing or
benefit or incentive plan. The Corporation has not heretofore
generally issued Class A Common Stock to finance its operations
or acquisitions except as part of the refinancing of certain
seller financing provided by Alco Standard Corporation related to
the acquisition by the Corporation of Central Products Company in
October 1995. Except for a recently adopted stock option plan
for directors of the Corporation who are not officers of the
Corporation or Lynch, the Corporation has not generally used
stock option or stock grants in recent years as a means of
retaining or compensating employees.
The Corporation has no present plans to issue additional
equity securities or convertible securities in any financing
transaction after the implementation of the Proposal. If the
Corporation issues any shares for such purposes, however, it is
more likely that the shares issued would be Common Stock.
Although the Class A Common Stock may trade at a premium with
respect to the Common Stock, as discussed below, the Amendment
expressly permits the Board to issue and sell shares of Common
Stock even if the consideration which could be obtained by
issuing or selling Class A Common Stock would be greater. See
"Certain Effects of the Proposal - Effect on Market Price."
Stockholder Flexibility. Under the Proposal, stockholders
desiring to maintain their relative voting positions will be able
to do so even if they decide to sell or to otherwise dispose of a
significant portion of their equity interest in the Corporation
(by disposing of Common Stock and holding Class A Common Stock).
The Proposal thus gives all stockholders increased flexibility to
dispose of a portion of their equity interest in the Corporation
without necessarily affecting their relative voting power.
Stockholders who are interested in maintaining their
relative voting power in the Corporation might be less reluctant
to sell part of their holdings if the sales of shares would not
result in a decrease in their relative voting power. Sales by
these stockholders could result in an increase in trading of
shares of the Corporation, thereby increasing liquidity,
particularly with respect to Common Stock. Implementation of the
Proposal would double the number of outstanding shares of the
Corporation's common stock. Furthermore, the issuance of the
Common Stock would allow any stockholder to increase his voting
power without increasing the stockholder's equity investment by
selling Common Stock and buying Class A Common Stock with the
proceeds.
Continuity. The Proposal would facilitate Lynch's continued
ownership of a substantial portion of the Corporation's voting
securities even if Lynch should find it desirable to sell or
dispose of a significant block of stock for corporate purposes,
and thereby enable the Corporation to continue to be managed
based on long-term objectives, which the Corporation's Board of
Directors considers to be a benefit to the Corporation and its
stockholders.
Certain Effects of the Proposal
Effect on Relative Ownership Interest and Voting Power.
Because the Distribution is to be made to all stockholders in
proportion to the number of shares of Class A Common Stock owned
on the Distribution Record Date by each stockholder, the relative
ownership interest and voting power of each holder of a share of
Class A Common Stock will be the same immediately after the
Distribution as it was immediately prior thereto. Under the
Proposal, stockholders who sell shares of Class A Common Stock
after the Distribution will lose a greater amount of voting
control in proportion to equity than they would have prior to the
Distribution. Conversely, stockholders who sell shares of Common
Stock after the Distribution will retain a greater amount of
voting control in proportion to equity. Stockholders desiring to
maintain a long-term investment in the Corporation will be free
to hold the Class A Common Stock and retain the benefits of the
voting power attached to such class of common stock.
Effect on Market Price. The market price of the Common
Stock and Class A Common Stock after the Distribution will
depend, as before the implementation of the Proposal, on many
factors including, among others, the future performance of the
Corporation, general market conditions and conditions relating to
corporations in industries similar to that of the Corporation.
Accordingly, the Corporation cannot predict the prices at which
the Common Stock and the Class A Common Stock will trade
following the adoption of the Amendment and the Distribution just
as the Corporation could not predict the price at which the
Class A Common Stock would trade absent the Amendment and the
Distribution. It is expected, however, that the market price of
the Class A Common Stock will reflect the effect of a two-for-one
stock split. Absent other factors, the Common Stock and Class A
Common Stock are therefore expected to initially trade at less
than the price of the common stock of the Corporation prior to
implementation of the Proposal. On July __, 1996 the closing
price of the common stock of the Corporation on the NASDAQ
SmallCap Market was $ ____ per share.
No assurance can be given that the Common Stock and Class A
Common Stock will trade at the same price or within a narrow
range of prices and it is possible that the Class A Common Stock
could trade at a premium compared to the Common Stock. Should a
premium on the Class A Common Stock develop, subsequent issuances
of the Common Stock could have a dilutive effect on all
stockholders. See "Dilutive Effect; Effect on Book Value and
Earnings Per Share."
The Amendment expressly permits the Board to declare
dividends on the Common Stock in an amount greater than on the
Class A Common Stock.
Dilutive Effect; Effect on Book Value and Earnings Per
Share. As noted above, the primary purpose of creating the
Common Stock is to provide the Corporation with an alternative
equity financing vehicle which does not proportionately dilute
the voting rights of the existing stockholders. The Distribution
which would be made ratably to each holder of Class A Common
Stock will not proportionately dilute the voting and other
economic interest of the holders of the Class A Common Stock.
However, if the Class A Common Stock were to trade at a premium
to the Common Stock, subsequent issuances of Common Stock instead
of Class A Common Stock in connection with an acquisition or
other transaction could have a greater dilutive effect on
stockholders because such a transaction would require more shares
to deliver the same aggregate value.
As with any issuance of equity securities, a subsequent
issuance of Common Stock or Class A Common Stock may cause
dilution of the economic interests that each outstanding share
represents. Because the Common Stock is entitled to share
equally with the Class A Common Stock with respect to all
economic benefits (subject to the authority of the Board to
declare a dividend on the Common Stock in an amount greater than
any dividend on the Class A Common Stock), issuance of Common
Stock will have a dilutive effect on the economic interest of
each outstanding share of Class A Common Stock and Common Stock
just as subsequent issuances of the existing Class A Common Stock
would have on currently outstanding Class A Common Stock.
Although the interest of each stockholder in the total
equity of the Corporation will remain unchanged as a result of
the Distribution, the issuance of the Common Stock pursuant to
the Distribution will cause the book value and earnings per share
of the Corporation to be adjusted to reflect the increased number
of shares outstanding. Although implemented in the form of a
dividend, for accounting purposes the Distribution will have the
same effect as a two-for-one stock split.
Since the market price of the Class A Common Stock
immediately subsequent to the Distribution is expected to be
significantly lower than the price of the common stock of the
Corporation immediately prior to the Distribution, it will be
possible to acquire more Class A Common Stock for a given amount
of consideration after the Distribution. Therefore, the Proposal
would permit stockholders to increase their relative voting
control at a lower cost.
Trading Market. Subsequent to the Distribution, there will
be issued and outstanding approximately 3,075,600 and 3,075,600
shares of Common Stock and Class A Common Stock, respectively.
In order to minimize dilution of the voting power of the existing
stockholders, the Corporation may be more likely to issue
additional Common Stock than Class A Common Stock in the future
to raise equity, finance acquisitions or fund employee benefit
plans. Any such issuance of additional Common Stock by the
Corporation or sales of Common Stock by stockholders may serve to
further increase market activity in the Common Stock relative to
the Class A Common Stock.
Federal Income Tax Consequences. For federal income tax
purposes, (i) the proposed distribution of the Common Stock will
not be taxable to a stockholder; (ii) the adjusted basis of the
shares of Class A Common Stock held by a stockholder on the
Distribution Record Date will be apportioned between the shares
of Class A Common Stock and the shares of Common Stock received
in the Distribution in proportion to the fair market value of the
shares of each class of stock on the date that the Distribution
is distributed; and (iii) a stockholder's holding period for the
shares of Common Stock received in the Distribution will include
such stockholder's holding period for the shares of Class A
Common Stock with respect to which the shares of Common Stock
were received. Stockholders are urged to consult their tax
advisors with reference to their own specific tax situation.
Securities Act of 1933. The issuance of the Common Stock as
a stock dividend will not involve a "sale" of a security under
the Securities Act of 1933, as amended (the "Securities Act").
Consequently, the Corporation is not required to register and
will not register under the Securities Act the issuance of Common
Stock. Since there will be no sale of the Common Stock,
stockholders will not be deemed to have purchased such shares
separately from the Class A Common Stock under the Securities Act
and Rule 144 thereunder. Shares of Common Stock received in the
distribution, other than any such shares received by affiliates
of the Corporation within the meaning of the Securities Act, may
be offered for sale and sold in the same manner as the Class A
Common Stock without registration under the Securities Act.
Affiliates of the Corporation will continue to be subject to the
restrictions specified in Rule 144 under the Securities Act, with
each class of common stock considered separately.
NASDAQ Criteria. The common stock of the Corporation
currently trades on the NASDAQ SmallCap Market and application is
being made to trade the Common Stock on the NASDAQ SmallCap
Market as well. The Proposal is intended to comply with the
rules and requirements of NASDAQ, including the prohibition on
the listing on the NASDAQ SmallCap Market of equity securities of
an issuer if that issuer issues stock or takes other corporate
actions that have a "disenfranchising" effect on existing
stockholders. The Corporation has discussed the Proposal with
NASDAQ and has been advised informally that the issuance of the
Common Stock pursuant to the terms of the Distribution would not
violate NASDAQ rules. The Corporation presently anticipates,
therefore, that both the Class A Common Stock and Common Stock
will be traded on the NASDAQ SmallCap Market.
Increase in Authorized Stock. The Amendment would not
increase the number of shares of Class A Common Stock which could
be issued. Of the 10,000,000 shares of Class A Common Stock
authorized, there are issued and outstanding 3,075,600 shares of
Class A Common Stock. The Amendment would, however, authorize
15,000,000 shares of Common Stock of which approximately
3,075,600 shares of Common Stock would be issued in connection
with the Distribution. The remaining 11,924,400 shares of Common
Stock could be issued by the Corporation from time to time
without further stockholder approval. The Board of Directors
believes it is desirable to have the additional shares of Common
Stock available for possible future financing and acquisition
transactions, and other general corporate purposes. The Board of
Directors also believes that having such additional authorized
shares available for issuance in the future will give the
Corporation greater flexibility and may allow such shares to be
issued without the expense and delay of a special stockholder's
meeting. The Corporation does not presently have any agreement,
understanding, arrangement or plans that would result in the
issuance of any of the additional shares of Common Stock to be
authorized, except pursuant to the Distribution. Unissued shares
of Common Stock could be issued in circumstances that would serve
to preserve control, of the Corporation's then existing
management.
Certain Potential Disadvantages of the Proposal
While the Board of Directors has determined that
implementation of the Proposal is in the best interest of the
Corporation and its stockholders, the Board recognizes that
implementation of the Proposal may result in certain
disadvantages, including the following.
Anti-Takeover Effect. Under the present circumstances Lynch
has the ability to approve or disapprove any acquisition of the
Corporation in a transaction involving a merger, consolidation or
sale of assets because of the voting power of the shares held by
it even though all of such shares have been pledged by Lynch to
secure certain indebtedness of the Corporation. Virtually all
corporate acquisitions take one of these three forms except
acquisitions in the form of a tender offer to buy shares from the
stockholders directly, a transaction that would not be likely in
the case of the Corporation because, unless Lynch tenders its
shares, the acquiror could not obtain voting control through a
tender offer. The Amendment and Distribution will not change the
fact that Lynch has sufficient voting power to disapprove a
merger, consolidation or sale of assets of the Corporation, nor
will the Proposal immediately give Lynch any relatively greater
voting control. However, by allowing the Corporation to issue a
substantial number of Common Shares and enabling the holders
thereof to dispose of a significant portion of their investment
in the Corporation without proportionately affecting their voting
power, the Amendment and the Distribution may make the
Corporation a less attractive target for a takeover bid than it
otherwise may have been, or render more difficult or discourage a
merger proposal, an unfriendly tender offer, a proxy contest or
the removal of incumbent directors or management, even if such
actions were favored by the stockholders of the Corporation other
than Lynch. The above is particularly more pertinent in light of
the voting agreement entered into by and between Lynch and Boyle,
Fleming, George & Co., Inc. ("BFI"), the beneficial owner of
approximately 20% (including shares issuable upon exercise of
warrants) of common stock of the Corporation, under which BFI
nominates one director and Lynch nominates the rest of the Board.
Although the Board of Directors considers it to be in the
best interest of the stockholders to put the Corporation in a
position where it can issue equity securities without making
itself more vulnerable to hostile takeovers, the impeding of
hostile takeovers could mean that stockholders will lose a chance
to sell their shares at a premium over the prevailing market
prices since hostile takeovers frequently involve the purchase of
stock directly from stockholders at a premium price. While the
Board believes that this may be true, it also believes that the
advantages of the Amendment and the Distribution significantly
outweigh this disadvantage. See "Reasons for the Proposal."
Making the Corporation less vulnerable to a hostile takeover also
means that any proposed acquisition of the Corporation would have
to be negotiated with its management, and this process could
result in receipt of an even greater premium. The Corporation is
not aware of any existing or planned effort on the part of any
party to attempt an acquisition of the Corporation. The
Corporation has no present intention of seeking any such
transaction.
Liquidity. The creation of a new class of common stock
(with the result being that there are two classes of common
stock) may adversely affect the liquidity of each class of common
stock when compared to the liquidity situation where there
existed only a single class of common stock. Furthermore, the
Proposal would allow stockholders desiring to maintain their
relative voting power while disposing of a significant portion of
their equity interest in the Corporation to do so by continuing
to hold Class A Common Stock and disposing of Common Stock. This
may adversely affect the liquidity of the Class A Common Stock as
compared to the liquidity of the common stock of the Corporation
prior to the implementation of the Proposal.
State Statutes. Some state securities statutes contain
provisions which, following the issuance of shares of Common
Stock, may restrict offerings of equity securities by the
Corporation or the secondary trading of its equity securities in
such states. Because of the availability of applicable
exemptions from such restrictions and because such restrictive
provisions would only apply to offers or sales made in a limited
number of states, the Corporation does not believe that such
provisions will materially adversely effect the aggregate amount
of equity securities which the Corporation will be able to offer,
the price obtainable for its equity securities in such offerings
or the secondary trading market for its equity securities.
Acquisition Accounting. Use of the Common Stock in an
acquisition could adversely affect the ability of the Corporation
to utilize the pooling of interests method of accounting if it
were otherwise available.
Brokerage Costs; Security for Credit. As is typical in
connection with any stock split, brokerage charges and stock
transfer taxes, if any, may be somewhat higher with respect to
purchases and sales of Common Stock after the Distribution,
assuming transactions of the same dollar amount, because of the
increased number of shares involved. The Corporation does not
expect that the adoption of the Amendment and the Distribution
will affect the ability of holders to use the Class A Common
Stock or Common Stock as security for the extension of credit by
financial institutions or securities brokers or dealers.
Investment by Institutions. The holding of lower voting
equity securities such as the Common Stock may not be permitted
by the investment policies of certain institutional investors and
therefore the Distribution may cause such stockholders to sell
their Common Stock as well as cause potential stockholders not to
purchase Common Stock after the Distribution.
Interests of Certain Persons
Lynch has an interest in the implementation of the Proposal
because, as noted above, the Proposal may enhance the ability of
Lynch to retain voting control of the Corporation even if it
disposes of a substantial portion of its shares of Common Stock.
By Order of the Board of
Directors
Robert A. Hurwich
Secretary
Dated: July __, 1996
EXHIBIT A
RESOLVED, that the Amended Certificate of Incorporation
of Spinnaker Industries, Inc. be amended by changing the Fourth
Article thereof so that, as amended, said Article shall be and
read as follows:
FOURTH: The total number of shares that the
Corporation is authorized to issue is twenty-five million
(25,000,000), which shall be common stock. Each of these shares
shall have no par value.
"1. Designation
(a). Fifteen million (15,000,000) shares of common
stock are hereby designated "Common Stock" and ten million
(10,000,000) shares of common stock are hereby designated
"Class A Common Stock".
(b). Immediately upon the filing of this Certificate of
Amendment of the Amended Certificate of Incorporation of
Spinnaker Industries, Inc. ("Certificate of Amendment") by
the Secretary of State of the State of Delaware every issued
and outstanding share of common stock of the Corporation
shall become and be deemed to be, and shall automatically
convert into, one (1) share of Class A Common Stock.
Certificates for shares of stock outstanding upon filing of
this Certificate of Amendment shall thereafter represent
only shares of Class A Common Stock.
(c). Except as otherwise expressly provided in this
Amended Certificate of Incorporation, all issued and
outstanding shares of Common Stock and Class A Common Stock
shall be identical and shall entitle the holders thereof to
the same rights and privileges.
"2 Voting
"At every meeting of the stockholders, every holder of
Common Stock shall be entitled to one-tenth (1/10) vote in
person or by proxy for each share of Common Stock standing
in his name on the transfer books of the Corporation and
every holder of Class A Common Stock shall be entitled to
one (1) vote in person or by proxy for each share of Class A
Common Stock standing in his name on the transfer books of
the Corporation. Except as may be otherwise required by law
or by this Article Fourth, the holders of Common Stock and
Class A Common Stock shall vote together as a single class
on all matters, subject to any voting rights which may be
granted in the future to holders of any other class or
series of stock. The number of authorized shares of Common
Stock and Class A Common Stock may be increased or decreased
from time to time by the affirmative vote of a majority of
the stock of the Corporation entitled to vote, voting as a
single class.
"3. Dividends and Other Distributions. Subject to any other
provision of the Corporation's Amended Certificate of
Incorporation, as amended from time to time, holders of
Common Stock and Class A Common Stock shall be entitled to
receive ratably such dividends and other distributions in
cash, stock or property of the Corporation as may be
declared thereon by the Board of Directors from time to time
out of assets or funds of the Corporation legally available
therefor; provided that in the case of cash dividends, (i)
if, at any time until August 1, 2001, a cash dividend is
paid on the Common Stock, a cash dividend must also be paid
on the Class A Common Stock in an amount per share of Class
A Common Stock that is not greater than 100%, nor less than
66 2/3%, of the amount of the cash dividend paid on each
share of the Common Stock or (ii) if, at any time until
August 1, 2001, a cash dividend is paid on the Class A
Common Stock, a cash dividend must also be paid on the
Common Stock in an amount that is not greater than 150%, nor
less than 100%, of the amount of the cash dividend paid on
each share of the Class A Common Stock, such that a cash
dividend may not be paid on either the Common Stock or the
Class A Common Stock unless a cash dividend is also paid on
the other as aforesaid. If at any time after August 1,
2001, a cash dividend is paid on the (i) Common Stock an
amount equal to such dividend shall be paid on the Class A
Common Stock and (ii) the Class A Common Stock, an amount
equal to such dividend shall be paid on the Common Stock.
In the case of dividends or other distributions payable
in common stock of the Corporation, holders of Common
Stock may receive the same or a different class of
common stock than the holders of Class A Common Stock
and holder of Class A Common Stock may receive the same
or a different class of common stock than the holders
of Common Stock.
"4. Merger/Consolidations. In any merger or consolidation of
the Corporation with or into any other corporation or a
merger of any other corporation into the Corporation, the
shares of Common Stock and Class A Common Stock shall be
treated equivalently, except that any securities issued in
respect of the Common Stock may have different or lesser
voting rights than securities issued in respect of the Class
A Common Stock.
"5. Liquidation Rights. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, after payment or provision
for payment of the debts and other liabilities of the
Corporation, and subject to prior payment in full of all
amounts payable to the holders of Preferred Stock, the
remaining assets and funds of the Corporation, if any still
exist, shall be divided among and paid ratably to the
holders of Class A Common Stock and Common Stock. A merger
or consolidation of the Corporation with or into any other
corporation or a sale or conveyance of all or any part of
the assets of the Corporation (which shall not in fact
result in the liquidation of the Corporation and the
distribution of assets to stockholders) shall not be deemed
to be a voluntary or involuntary liquidation or dissolution
or winding up of the Corporation within the meaning of this
subsection.
"6. Split, Subdivision or Combination. If the Corporation shall
in any manner split, subdivide or combine the outstanding
shares of Common Stock or Class A Common Stock, the
outstanding shares of the other class of common stock shall
be proportionately split, subdivided or combined in the same
manner and on the same basis (subject to the last sentence
of Section 3 above) as the outstanding shares of the other
class of common stock have been split, subdivided or
combined.
"7. Preemptive, Subscription and Redemption Rights. The holders
of Class A Common Stock and Common Stock shall have no
preemptive, subscription or redemption rights."
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
Spinnaker Industries, Inc.
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(Name of Registrant As Specified In Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or
14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules
14c-5(g) and 0-11.
1) Title of each class of securities to which transaction
applies:
- -----------------------------------------------------------------
2) Aggregate number of securities to which transaction
applies:
- -----------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
- -----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------
5) Total fee paid:
- -----------------------------------------------------------------
[] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- -------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------
3) Filing Party:
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4) Date Filed:
