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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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LOCTITE CORPORATION
(NAME OF SUBJECT COMPANY)
LOCTITE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
0005401371
(CUSIP NUMBER OF CLASS SECURITIES)
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ROBERT W. FIONDELLA
CHAIRMAN OF THE SPECIAL COMMITTEE
OF THE BOARD OF DIRECTORS OF
LOCTITE CORPORATION
10 COLUMBUS BOULEVARD
HARTFORD, CONNECTICUT 06106
(860) 520-5000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
<TABLE>
<S> <C>
STUART Z. KATZ, ESQ. EUGENE F. MILLER, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ONE NEW YORK PLAZA LOCTITE CORPORATION
NEW YORK, NEW YORK 10004 10 COLUMBUS BOULEVARD
(212) 859-8000 HARTFORD, CONNECTICUT 06106
(860) 520-5000
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Loctite Corporation, a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is 10
Columbus Boulevard, Hartford, Connecticut 06106. The title of the class of
equity securities to which this Statement relates is the common stock, $.01 par
value per share, of the Company (the "Common Stock"), together with the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement (the "Rights Agreement") dated as of April 14, 1994 between the
Company and The First National Bank of Boston, as Rights Agent (the Common
Stock, together with the Rights, are hereinafter referred to as the "Shares").
ITEM 2. TENDER OFFER OF HENKEL.
This Schedule 14D-9 Solicitation /Recommendation Statement (the
"Statement") relates to the tender offer previously announced by HC Investments,
Inc., a Delaware corporation ("HCI") and an indirect wholly-owned subsidiary of
Henkel KGaA, a Kommanditgesellschaft auf Aktien (a partnership limited by
shares) organized under the laws of the Federal Republic of Germany, to purchase
all outstanding Shares at a price per Share of $57.75, net to the seller in
cash, without interest (the "Offer").
According to the Schedule 14D-1 Tender Offer Statement filed by HCI (the
"Henkel 14D-1 Statement"), the principal executive offices of HCI are located at
1105 North Market Street, Suite 1300, Wilmington, Delaware 19801, and the
principal executive offices of Henkel KGaA are located at Henkelstrasse 67,
D-40191 Dusseldorf, Germany.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Name and Business Address of Person Filing This Statement.
The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Arrangements with Executive Officers, Directors or Affiliates of the
Company; Arrangements with HCI, Henkel KGaA and their Respective
Executive Officers, Directors or Affiliates.
Except as set forth in this Item 3(b), there are no material contracts,
agreements, arrangements or understandings and no actual or potential conflicts
of interest between the Company or its affiliates and (i) the Company's
executive officers, directors or affiliates or (ii) HCI, Henkel KGaA and their
respective executive officers, directors or affiliates.
Special Committee
On October 30, 1996, the Board of Directors of the Company (the "Board")
established a special committee (the "Special Committee") consisting of
directors of the Company who are not designees or representatives of, or
otherwise affiliated with, Henkel KGaA and its affiliates or management of the
Company to consider the unsolicited acquisition proposal made by Henkel KGaA on
October 28, 1996 to acquire the Company (the "Henkel Proposal") and related
matters. The members of the Special Committee are Robert W. Fiondella
(Chairman), Peter C. Browning, Arthur P. Byrne, Robert E. Ix, Frederick B.
Krieble, Indra K. Nooyi, Stephen F. Page and Stephen J. Trachtenberg.
Each member of the Special Committee will receive a fee of $1,000 for each
meeting of the Special Committee in accordance with the Company's normal
director compensation policy. In addition, Mr. Fiondella will receive a fee to
be determined by the Special Committee for serving as Chairman.
Employee Benefit Matters
Certain information with respect to certain contracts, agreements,
arrangements or understandings between the Company and certain of its executive
officers, directors and affiliates is set forth in pages 6-19 of the Company's
Notice of Annual Meeting of Stockholders and Proxy Statement dated March 13,
1996 for the
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Company's 1996 Annual Meeting of Stockholders held on April 24, 1996 (the "Proxy
Statement"). Copies of the foregoing pages are attached as Exhibit 99.3 to this
Statement and are incorporated by reference.
In addition to the information set forth in the Proxy Statement, restricted
stock and options were awarded in 1996. On February 20, 1996 restricted stock
was awarded to executive officers as follows: David Freeman, 2,702 Shares;
Robert Aller, 668 Shares; Eugene Miller, 536 Shares; and Louis J. Baccei, 868
Shares. On the same date, options were awarded to executive officers with
respect to the following number of Shares underlying such options, at a price of
$52.375 per Share: David Freeman, 7,026 Shares; Robert Aller, 1,737 Shares;
Eugene Miller, 1,354 Shares; and Louis J. Baccei, 2,257 Shares.
In April of 1996, the Company hired Keith Hall as chief financial officer.
Mr. Hall's base salary for 1996 is approximately $200,000.
On November 18, 1996, the Special Committee authorized the Company to enter
into Retention Agreements (each, a "Retention Agreement") with certain
employees, including all of the Company's executive officers. The form of
Retention Agreement is attached as Exhibit 99.5 and is incorporated by
reference. The following summary of the Retention Agreements is qualified in its
entirety by reference to the form of Retention Agreement.
The Retention Agreements generally provide that, in the event that the
employee's employment is terminated "without cause" or if the employee
terminates his or her employment for "good reason," in each case within two
years following a "change in control" (which would include the consummation of
the Offer), the employee would be entitled to salary and bonus and the
continuation of health and pension benefits for three years (in the case of 12
employees, including all executive officers of the Company), two years (in the
case of an additional approximately 50 employees), and one year (in the case of
an additional approximately 90 employees). Salary and bonus amounts would be
paid in a lump sum. Benefits would be continued for the period stated (although
executives could elect a cash settlement of the value of the benefit
continuation in certain circumstances). The Retention Agreements provide for
reimbursement of legal fees incurred by the employee with respect to his or her
termination of employment or to enforce his or her rights under the Retention
Agreement following a change in control. With the exception of the Retention
Agreement with Mr. Hall, all amounts payable as a result of a change in control
would be reduced to the extent necessary so that no excise tax would be imposed
on any of the payments and the amounts payable would be fully deductible by the
Company for U.S. federal income tax purposes. In the case of Mr. Hall, such a
reduction would be applied only if it resulted in a greater after-tax benefit to
Mr. Hall.
The Retention Agreement replaces the employment agreements described on
pages 17 and 18 of the Proxy Statement for the executives party to those
agreements. If the benefit provided by the Retention Agreement for any employee
is less than the amount to which that employee is entitled under the Company's
normal severance policy or any federal, state or foreign law, the employee will
receive the greater benefit under the severance policy or applicable law. If all
employees of the Company who are parties to Retention Agreements are immediately
terminated following a change in control, an event which the Special Committee
considers to be very unlikely, the Company believes, based on certain
assumptions, that the incremental cost to the Company of the Retention
Agreements relative to the current employment agreements and the Company's
normal severance policy would be approximately $18.0 million, on an after-tax
basis. With respect to Retention Agreements to be entered into with employees
situated outside of the United States, the Retention Agreement may be modified,
as necessary, to comply with foreign law.
Also on November 18, 1996, the Special Committee approved amendments to the
Company's stock option and restricted stock plans. Under the amendments, upon a
"change in control" (which would include consummation of the Offer), all
outstanding options granted at least one year prior to the change in control
would become fully exercisable, and all restricted stock would vest and become
nonforfeitable. However, no options will become exercisable and no restricted
stock will vest and become nonforfeitable upon a change in control if the
exercisability or vesting, as the case may be, would preclude the application of
pooling-of-interests accounting treatment to a transaction for which
pooling-of-interests treatment is to be adopted by the Company and which has
been approved by the Special Committee. At the purchase price under the Offer of
$57.75 and based on certain other assumptions, the Company believes that the
value of the shares of restricted
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stock and option awards with respect to which the exercisability and vesting
would be accelerated on a change in control would be approximately $10.6
million.
Arrangements with Henkel
Initial Henkel Purchase. In 1985, Henkel Corporation, a subsidiary of
Henkel of America, Inc. and an indirect wholly-owned subsidiary of Henkel KGaA,
purchased, with the approval of the Company, approximately 25.01% of the then
outstanding Shares from certain members of the Krieble family (the "Initial
Purchase"). The Initial Purchase was effected pursuant to a Stock Purchase
Agreement, dated as of May 23, 1985, as amended October 11, 1985 (the "Initial
Purchase Agreement"). In connection with the Initial Purchase, Henkel
Corporation obtained a right of first refusal from such members of the Krieble
family with respect to additional Shares then owned by them representing
approximately 14% of the then outstanding Shares (the "Right of First Refusal").
Additionally, in connection with the Initial Purchase, Henkel of America, Inc.
and the Company entered into a standstill agreement that contained certain
restrictions on the ability of Henkel of America, Inc. and its affiliates to
purchase additional shares (the "Initial Standstill Agreement"). In January
1992, Frederick B. Krieble, one of the members of the Krieble family who was
party to the Initial Purchase Agreement and subject to the Right of First
Refusal, transferred all of his Shares to Theta II Limited ("Theta II"), a
personal holding company organized under the laws of The Turks and Caicos
Islands and wholly owned by Mr. Krieble. In connection with this transfer, Theta
II agreed to be bound by the Right of First Refusal with respect to the Shares
transferred to it.
According to the Henkel 14D-1 Statement, in 1989, Henkel Corporation
transferred all Shares held by it to HCI, a holding company established to hold
certain investments previously held by Henkel Corporation. As used herein, the
term "Henkel Group" means Henkel KGaA, Henkel Corporation and HCI, collectively.
According to the Henkel 14D-1 Statement, during the nearly 11 years since
the Initial Purchase, Henkel Corporation and, since 1989, HCI have acquired
additional Shares in a number of transactions (including purchases pursuant to
the Right of First Refusal). According to the Henkel 14D-1 Statement, (i) HCI
currently owns 11,208,224 Shares, representing approximately 35.0% of the
32,041,559 Shares outstanding as of October 31, 1996 and (ii) the Henkel
Designees (as hereinafter defined) to the Board and certain of the executive
officers and directors of Henkel KGaA beneficially own, in the aggregate, 13,160
Shares. As described below, no member of the Henkel Group may beneficially own
in excess of 35% of the outstanding Shares, subject to adjustment under certain
circumstances (the "Henkel Percentage"), without triggering the Rights, other
than pursuant to a "Permitted Offer." A Permitted Offer, which is described more
fully below, means a tender or exchange offer which is either approved by a
majority of disinterested directors or remains open for at least 60 days and
after which the offeror owns 50% as more of the outstanding Shares.
The 1994 Agreement. In April of 1994, the Company entered into a new
standstill agreement with the Henkel Group (the "1994 Agreement"). The 1994
Agreement replaced the Initial Standstill Agreement, which was scheduled to
expire in May 1995. In connection with entering into the 1994 Agreement, the
Company adopted a stockholder rights plan embodied in the Rights Agreement. The
following summary of the 1994 Agreement and the Rights Agreement is qualified by
reference to the copies of those agreements, which are included as Exhibits 99.6
and 99.7 to this Statement and incorporated by reference.
Pursuant to the 1994 Agreement, the Company is prohibited from (i) adopting
any stockholder rights plan or similar device that does not contain
substantially the same terms and conditions as those set forth in the Rights
Agreement and (ii) adopting, amending, modifying, waiving, terminating or
invalidating any provision of the Rights Agreement, any similar rights plan or
the Company's certificate of incorporation or by-laws in any way which would
adversely affect the rights of any member of the Henkel Group under the Rights
Agreement.
Under the 1994 Agreement, the Company must (subject to certain exceptions)
give the Henkel Group notice of, and a reasonable opportunity to present its
views on, (i) any proposed adoption, amendment, modification, waiver,
termination or invalidation by the Company of any provision of the Rights
Agreement, any similar rights plan, the Company's certificate of incorporation
or by-laws not otherwise prohibited by the
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provisions described in the preceding paragraph and (ii) certain proposed
issuances by the Company of additional Shares.
Under the 1994 Agreement, the Henkel Group may not, and must cause each of
their respective affiliates, as defined in Rule 12b-2 of the Exchange Act (an
"affiliate"), and any person designated by the Henkel Group to be a member of
the Board (or who is otherwise a representative on the Board of any affiliate of
any member of the Henkel Group) not to, directly or indirectly, seek to (i)
amend, modify, waive, terminate or invalidate any provision of the Rights
Agreement or similar rights plan or (ii) redeem or exchange the rights under the
Rights Agreement, in either case, unless a majority of the Outside Directors
(defined as directors who are neither employees or officers of the Company nor
designees or representatives of any member of the Henkel Group or their
respective affiliates) of the Company consents to such action. The consent of
the Outside Directors of the Company can only be obtained if there is at least
one Outside Director. Under the 1994 Agreement, the Henkel Group must (subject
to certain exceptions) give the Company notice of, and a reasonable opportunity
to present its views on, any proposed solicitation of proxies in opposition to
any proposal recommended by the Board or to remove any member of the Board.
Under the 1994 Agreement, the Board was expanded from ten to twelve
members. The Company may not expand or reduce the size of the Board without the
Henkel Group's prior written consent.
Under the 1994 Agreement, the Henkel Group is entitled to recommend three
persons to serve as members of the Board (any member of the Board recommended or
designated by the Henkel Group, a "Henkel Designee") at any time that the Henkel
Group together with its affiliates own 25% or more of the outstanding Shares;
two persons at any time that the Henkel Group together with its affiliates own
between 15% and 25% of the outstanding Shares; and one person at any time that
the Henkel Group together with its affiliates own between 10% and 15% of the
outstanding Shares. The Henkel Group is not entitled to recommend any members of
the Board at any time that the Henkel Group together with its affiliates own
less than 10% of the outstanding Shares. Each recommendation by the Henkel Group
is subject to the approval of a majority of all of the members of the Board,
which approval shall not be unreasonably withheld. The 1994 Agreement also
included the parties' understanding that approval would not be anticipated to be
withheld unless the Henkel Group recommended an executive from its adhesives
business or someone whose membership on the Board would be a violation of law;
however, the 1994 Agreement further provides that this understanding in no way
limits the directors from exercising their fiduciary duties under applicable law
in determining whether to approve a Henkel Designee. Pursuant to these
provisions, Roman Dohr, Christoph Henkel and Jochen Krautter, none of whom is a
current executive of the adhesives business of the Henkel Group, are currently
serving as members of the Board.
Under the 1994 Agreement, at least one Henkel Designee is required to be a
member of any key committee of the Board that has up to four members, and at
least two Henkel Designees are required to be members of any key committee of
the Board that has five or more members. Pursuant to these provisions, Mr. Dohr
serves as a member and Chairman, and Mr. Henkel serves as a member, of the Audit
and Finance Committee; Dr. Krautter serves as a member of the Committee on Human
Resources; and Mr. Henkel serves as a member of the Committee on Board Affairs.
Under the 1994 Agreement, the Right of First Refusal, which expires on May
23, 1998, may be exercised by the Henkel Group so long as, following such
exercise, no member of the Henkel Group triggers the Rights. According to the
Henkel 14D-1 Statement, HCI believes, based on publicly available information
concerning the holdings of the members of the Krieble family, that approximately
5.2% of the currently outstanding Shares are subject to the Right of First
Refusal. After the Henkel Group together with its affiliates has reached the
Henkel Percentage or if the Henkel Group declines to exercise its Right of First
Refusal, the 1994 Agreement provides for the assignment to the Company of the
right to exercise the Right of First Refusal on the Shares being offered. If
neither the Henkel Group nor the Company exercises the Right of First Refusal
with respect to Shares being offered in an amount equal to 3% or more of the
outstanding Shares, the Henkel Group and the Company must use their respective
reasonable best efforts to cause the Shares being offered to be distributed as
widely as practicable. Under the 1994 Agreement, given HCI's ownership of Shares
set forth in the Henkel 14D-1 Statement, the Company, rather than the Henkel
Group, currently has the Right of First
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Refusal relating to the approximately 5.2% of the currently outstanding Shares.
However, the tender of those Shares into a Permitted Offer by the Henkel Group
would not be subject to a Right of First Refusal by the Company.
The Rights Agreement
In connection with the adoption of the Rights Agreement, the Company
declared a dividend distribution of one Right for each then outstanding Share
and for each Share issued thereafter until such time as separate Rights
certificates are distributed or, in certain instances, with respect to Shares
issued after the separate Rights certificates are distributed. Initially, the
Rights are attached to the Shares and are not exercisable. The Rights separate
from the Shares and become exercisable upon the earlier of (i)(A) the first date
of public announcement that a person or group has become the beneficial owner of
10% or more of the Company's outstanding Shares (other than as a result of a
Permitted Offer) or (B) a person or group that was a "Grandfathered Stockholder"
(as defined in the Rights Agreement) no longer qualifies as such and, at that
time, the person or group is the beneficial owner of 10% or more of the
outstanding Shares or (ii) ten days following commencement of a tender or
exchange offer that would result in beneficial ownership of 10% or more of the
outstanding Shares (other than a Permitted Offer) (a person or group that
beneficially owns 10% or more of the Shares and is not a grandfathered
stockholder, an "Acquiring Person").
Under the Rights Agreement, certain stockholders are "grandfathered" and
their ownership in excess of 10% of the outstanding Shares does not trigger the
Rights. Each of Henkel Corporation and its affiliates would be a grandfathered
stockholder as long as it does not own more than the Henkel Percentage, but
would cease to be a grandfathered stockholder if and when it and its affiliates
own more than the Henkel Percentage.
Under the Rights Agreement, a person generally is not permitted to own more
than 10%, and the Henkel Group is not permitted to own more than the Henkel
Percentage, of outstanding Shares without triggering the Rights unless the
acquisition of Shares is pursuant to a Permitted Offer -- a tender or exchange
offer for all outstanding Shares which meets either of the following conditions:
(i) the offer is at a price and on terms determined by at least a majority of
Disinterested Directors (as hereinafter defined) and a majority of all of the
members of the Board to be adequate and otherwise in the best interests of the
Company; or (ii) the offer remains open for a period of at least 60 days after
the tender or exchange offer has commenced and the consummation of which results
in the offeror becoming the beneficial owner of more than 50% of the outstanding
Shares. A "Disinterested Director" means any director of the Company who is
neither an officer or employee of the Company nor any designee or representative
of any person attempting to effect a business combination or similar transaction
with the Company.
Upon separation of the Rights, each right will then entitle the holder to
buy one Share. In the event that any person becomes an Acquiring Person (other
than pursuant to a Permitted Offer), the Rights adjust and each holder of a
Right becomes entitled to purchase Shares having a value equal to two times the
exercise price of the Right. If the Company is acquired in a merger or other
business combination (other than any merger or business combination following a
Permitted Offer at the same price and for the same form of consideration paid in
the Permitted Offer) or the Company transfers 50% or more of its assets or
earning power, the Rights adjust and each holder of a Right will become entitled
to purchase stock of the acquiror having a value equal to two times the exercise
price of the Right.
The Rights will expire (i) on April 14, 2004, (ii) in connection with a
second-step merger satisfying certain criteria relating to the amount and form
of consideration involving an acquisition of the Company following a Permitted
Offer or (iii) upon redemption of the Rights by the Company.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights at a price of $.01 per Right, which redemption will be effective upon
approval of (a) a majority of the Disinterested Directors and (b) a majority of
all of the members of the Board. Additionally, following the separation of the
Rights, the then outstanding Rights may be redeemed at that redemption price (if
approved by (1) a majority of the Disinterested Directors and (2) a majority of
all of the members of the Board), if this redemption is in connection with a
merger or other business combination transaction or series of transactions
involving the Company in which all holders of
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Shares are treated alike but not involving an Acquiring Person or its affiliates
or associates, as defined in Rule 12b-2 of the Exchange Act ("associates").
Prior to the separation of the Rights, all of the provisions of the Rights
Agreement may be amended by approval of (i) a majority of the Disinterested
Directors and (ii) a majority of all of the members of the Board. After the
separation of the Rights, the provisions of the Rights Agreement may be amended
upon approval of (a) a majority of the Disinterested Directors and (b) a
majority of all of the members of the Board in order to cure any ambiguity,
defect or inconsistency, or to make changes which do not adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person). The Rights may not be redeemed, exchanged or amended unless there is at
least one Disinterested Director at the time of redemption, exchange or
amendment.
Except as described in this Statement, the Henkel Group is not restricted
or prohibited from transferring its Shares. Under the 1994 Agreement and the
Rights Agreement, the Henkel Group may transfer a portion or all of their Shares
to any person who, as a result of the transfer, would own more than 10% of the
outstanding Shares only if (i) a majority of the unaffiliated directors of the
Company in their business judgment have not determined that beneficial ownership
by that person of 10% or more of the outstanding Shares would be reasonably
likely to materially adversely affect the Company or its stockholders, (ii) that
person does not beneficially own, after giving effect to the transfer, a
percentage of the then outstanding Shares in excess of the lesser of (A) the
Henkel Percentage in effect immediately prior to the proposed transfer and (B)
the sum of 0.3% of the then outstanding Shares and the percentage of the then
outstanding shares to be transferred by the Henkel Group to that person in the
proposed transfer and (iii) that person properly executes a transferee
agreement. No transferee of any Shares from the Henkel Group will have any
rights under the 1994 Agreement.
Under the 1994 Agreement and the Rights Agreement, Shares held by
associates of the Henkel Group are not deemed to be beneficially owned by the
Henkel Group. However, if at any time the Henkel Group or the Company becomes
aware of the fact that the aggregate Shares held by the Henkel Group together
with its affiliates and associates exceeds the Henkel Percentage then in effect,
the Henkel Group must vote the excess Shares on any matter in the same
proportion as all outstanding Shares not held by the Henkel Group, its
affiliates and associates are voted. The Henkel Group must also tender the
excess Shares into any tender or exchange offer (or otherwise sell to the person
making the tender or exchange offer) that is not opposed by a majority of those
Outside Directors of the Company who are also Disinterested Directors or that is
for all outstanding Shares and is held open for a period of at least 60 days in
the same proportion as all outstanding Shares not held by the Henkel Group, its
affiliates and associates are tendered in that tender or exchange offer.
General. From time to time since the Initial Purchase, the Company and
Henkel KGaA have considered ways to expand their relationship. In 1987, Henkel
KGaA and the Company entered into a Joint Research Agreement. There have been no
recent activities under this agreement, and no significant product or know-how
has ever been developed thereunder. In 1987, Henkel KGaA also entered into a
license agreement pursuant to which it licensed certain technology to the
Company; however, the Company has not, during the past five years, utilized the
licensed technology. From January 24, 1988 through January 24, 1991, the Company
marketed in the U.S. certain consumer adhesives under Henkel KGaA's "PRITT"
trademark pursuant to a Distribution and Trademark License Agreement. Following
expiration of that agreement, the Company continued marketing these products for
a period of time but has substantially phased those products out of its product
line since mid-1994. In July 1993, in contemplation that they might, from time
to time, be interested in exchanging information to permit the evaluation of
separate ideas concerning possible business arrangements involving greater
cooperative use of their businesses, the Company and Henkel KGaA entered into a
ten-year confidentiality agreement. This agreement generally requires each party
to treat confidentially the information received from the other party under the
agreement and, except as required by law, not to disclose the exchange of any
information or the existence of evaluations undertaken thereunder. In the summer
of 1993, Guido De Keersmaecker, an Executive Vice President of Henkel KGaA
responsible for the Adhesives Division, had preliminary conversations with David
Freeman, the Chief Executive Officer of the Company, concerning the possibility
of expanding the level and nature of the business relationship existing between
Henkel KGaA and the Company. These conversations were abandoned without
substantial
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discussion of the form that any expanded relationship might take. In January
1995, Mr. De Keersmaecker again met with Mr. Freeman. At this time, preliminary
discussions were held concerning the possibility of a joint venture between
Henkel KGaA and the Company relating to products manufactured by both companies
for the automotive industry aftermarket. Mr. Freeman noted that the Company
preferred to consider the possibility of one or more regional joint ventures for
all products manufactured by both companies and sold in particular regions of
the world, especially in developing countries. Again the discussions were
abandoned promptly with no significant developments proposed or discussed. In
July 1996, Mr. De Keersmaecker and Mr. Freeman had preliminary discussions
concerning the possibility of a joint venture between the two companies and
their respective consumer products businesses. Again, the discussions did not
proceed beyond a very preliminary stage and no proposals were made by either
party relating to the structure or terms of any joint venture. Additionally, in
the ordinary course of business the Company and Henkel KGaA and its affiliates
engage in immaterial purchases and sales of products pursuant to arm's length
transactions.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Background and Recommendation.
On Friday, October 25, 1996, at the request of Dr. Hans-Dietrich Winkhaus,
the Chief Executive Officer of Henkel KGaA, Mr. David Freeman, the Chief
Executive Officer of the Company, met with Mr. Winkhaus. At the meeting Mr.
Winkhaus informed Mr. Freeman of Henkel KGaA's proposal to acquire the remaining
Shares that it does not currently own at a per share price in the area of $56,
preferably through a negotiated transaction.
On October 26, 1996, Mr. Freeman called Mr. Winkhaus and requested that
Henkel KGaA consider continuation of its position as a minority stockholder. Mr.
Winkhaus agreed to also consider this option.
On October 27, 1996, Mr. Winkhaus telephoned Mr. Freeman and advised him
that Henkel KGaA had made a decision to acquire the remaining Shares that it
does not currently own rather than continue its position as a minority
stockholder. Mr. Winkhaus expressed the desire of Henkel KGaA and HCI to engage
in direct discussions with the Board, management and advisors to work toward a
friendly, negotiated transaction. Mr. Winkhaus also advised Mr. Freeman that, if
those negotiations failed or did not proceed, Henkel KGaA and HCI might decide
to commence a tender offer for all outstanding Shares.
On October 28, 1996, Mr. Freeman received a letter from Mr. Winkhaus
requesting that Mr. Freeman forward a copy to the Board of the following letter
together with a copy of an amendment to HCI's Schedule 13D describing these
events:
Dear Member of the Board,
I am writing to be sure that you are fully apprised of Henkel's current
posture regarding its investment in Loctite. In that connection, I am
attaching a copy of a revised 13D filing Henkel is making today. As you
may know, I met with David Freeman on Friday and had discussions with
him over the weekend in which I have advised him that Henkel proposes an
acquisition of the remaining shares of Loctite it does not currently own
at a price in the area of $56.
We wish to stress our desire to engage in direct discussions with
Loctite's Board of Directors, management and advisors to work toward a
friendly, negotiated transaction. As you will see, these facts are
explicitly noted in the attached 13D filing. We wish to also point out
that we have been extremely pleased with the spirit of cooperation and
mutual good faith that has existed over the years between the Board of
Directors and management of Loctite and representatives of Henkel; we
look forward to continuing this relationship in the future, regardless
of the outcome of our proposal regarding our investment in Loctite or in
any subsequent developments.
As you may be aware, our 1994 revisions to the agreements between Henkel
and Loctite contemplated the possibility of a "Permitted Offer"-- a
tender offer for all the outstanding shares of Loctite that remains open
for at least sixty days. Such an offer would not trigger the rights
under
7
<PAGE> 9
Loctite's "poison pill". I advised David that, if negotiations fail or
do not proceed promptly, Henkel might decide to commence such an offer.
While you will appreciate that our lawyers have told us we cannot say
anything that is not disclosed publicly, you should please feel free to
contact me at any time, if you wish to discuss any of the enclosed.
With best personal regards,
/s/ Hans-Dietrich Winkhaus
Dieter
Encl.
On October 30, 1996, the Board held a special meeting at which it
established the Special Committee to review the Henkel Proposal. At that
meeting, the Special Committee retained Dillon, Read & Co. Inc. ("Dillon Read")
as its financial advisor and Fried, Frank, Harris, Shriver & Jacobson ("Fried
Frank") as its counsel. Various members of management also reviewed the 1997
operating budget and discussed key developments in the Company's business. The
Company issued a press release on October 30, 1996 announcing the establishment
of the Special Committee.
On October 31, 1996, Robert W. Fiondella, Chairman of the Special
Committee, called Mr. Winkhaus and informed him that the Special Committee had
been established and had commenced a review of the Henkel Proposal, that the
Committee would meet again to consider the Henkel Proposal on November 12, 1996,
and that, as Henkel KGaA had requested, the Special Committee's financial and
legal advisors would be available during the week of November 4 to meet with
Henkel KGaA and its advisors to obtain a better understanding of the Henkel
Proposal, but not to negotiate with Henkel KGaA.
On November 4, 1996, Mr. Guido De Keersmaecker and Lothar Steinebach, Vice
President Finance/Controlling of Henkel KGaA and Henkel KGaA's financial and
legal advisors met with the Special Committee's financial and legal advisors and
made a brief presentation regarding the Henkel Proposal. The Special Committee's
financial and legal advisors listened to the presentation, did not conduct any
negotiations or discussions with Henkel KGaA or its advisors regarding the
proposal, and confirmed that the Special Committee would meet again on November
12, 1996 to consider the Henkel Proposal.
On November 5, 1996, Mr. Winkhaus telephoned Mr. Fiondella and indicated
that Henkel KGaA and HCI would commence a tender offer on the following day to
purchase all of the Shares that it does not own.
On November 6, 1996, Henkel KGaA issued a press release and sent a letter
to the Board announcing the "commencement" of the Offer and delivered to the
Company a copy of the Henkel 14D-1 Statement.
On November 6, 1996, the Company issued a press release urging its
stockholders not to take any action with respect to the unsolicited tender offer
commenced by Henkel KGaA and HCI until the Special Committee completed its
review and announced its recommendations.
On November 8, 1996, the Special Committee held a telephonic meeting at
which it held preliminary discussions with Dillon Read and Fried Frank regarding
the Offer and the Company's strategic alternatives.
On November 11, 1996, the Special Committee met to consider the Offer and
related matters. At that meeting, the Special Committee met with Dillon Read and
Fried Frank and reviewed the terms of the Offer and the Company's strategic
alternatives. The Company's management also updated the Special Committee on the
Company's recent results and outlook.
On November 12, 1996, the Board of Directors met to declare the Company's
regular quarterly dividend. The Board also confirmed the authorization of the
Special Committee to have and exercise all authority of the Board with respect
to employee benefit matters, including employee benefit plans, arrangements and
agreements. See Item 1 for actions taken by the Special Committee pursuant to
this delegated authority.
8
<PAGE> 10
On November 12, 1996 the Special Committee met to continue its discussions
with its legal and financial advisors regarding the Offer, the Company's
strategic alternatives and certain employee benefit matters.
At the request of the Special Committee, on November 15, 1996, Henkel KGaA
provided to the Special Committee a report containing the analysis of Rothschild
Inc., Henkel KGaA's financial advisor, and advised the Special Committee that
Henkel KGaA intended to file the report with the Securities and Exchange
Commission as an exhibit to the Henkel 14D-1 Statement.
On November 18, 1996, the Special Committee held a telephonic meeting to
continue its deliberations with respect to the Offer. At this meeting, the
Special Committee considered a written opinion of Dillon Read, dated November
18, 1996, that the consideration of $57.75 in cash per Share being offered to
stockholders (other than Henkel and its affiliates) pursuant to the Offer was
inadequate to such stockholders from a financial point of view. After taking
into account the factors described below under "Reasons for the Recommendation,"
the Special Committee determined by a unanimous vote that the Offer is
inadequate and not in the best interests of the Company's stockholders.
The Special Committee determined that its objective is to maximize
stockholder value and determined to seek to sell the Company at a price that
fully reflects its value. The Special Committee has instructed the Company's
management and its advisors to respond to third-party inquiries, contact
potential buyers and take all steps to facilitate achievement of this goal.
THE SPECIAL COMMITTEE UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to stockholders communicating the Special Committee
recommendation and a form of press release announcing the recommendation are
filed as Exhibits 99.1 and 99.2, respectively, and are incorporated by
reference.
(b) Reasons for the Recommendation.
In reaching the conclusions referred to in Item 4(a), the Special Committee
considered numerous factors, including the following:
(i) the Company's business, financial condition, results of
operations, current business strategy and future prospects, including the
nature of the markets in which the Company operates, the Company's position
in those markets, and in particular, the following:
- the Company's reputation as a provider of quality products and
services and its position in its industry as a technological leader
and innovator;
- the Company's substantial investment in research and development over
the past several years and the incremental future sales and earnings
potential that may be realized from those investments;
- the Company's position in the electronic adhesives and coatings market
and the expected growth rate of that market;
- the Company's brand name recognition in the industrial, consumer and
automotive aftermarket sectors for adhesives, sealants and coatings
products;
- the Company's implementation of a new global manufacturing
infrastructure designed to further improve efficiency;
- the Company's unique ability to service global customers because of
its structure and presence in more than 40 countries;
- the benefits the Company is receiving and expects to receive from the
reorganization of its North American operations;
- the continued strength and future prospects of the Company's European
and Latin American businesses;
- the Company's focus on, and substantial investment over the last five
years in, expanding growth in the Asia/Pacific region and Central and
Eastern Europe;
9
<PAGE> 11
- the cost savings, growth impact and other benefits of various
acquisitions recently accomplished and currently under consideration
by the Company in South America, Europe and North America;
- the competence of the Company's management team.
(ii) the opinion of Dillon Read, after reviewing with the Special
Committee financial criteria used in assessing an offer, that the Offer is
inadequate from a financial point of view; (A copy of the written opinion
dated November 18, 1996 of Dillon Read delivered to the Special Committee,
which sets forth the assumptions made, procedures followed, matters
considered and limits on its review, is attached as Exhibit 99.4 to this
Statement and is incorporated by reference and is included in the copies of
this Statement being delivered to stockholders. THE FULL TEXT OF DILLON
READ'S OPINION SHOULD BE READ IN CONJUNCTION WITH THIS STATEMENT);
(iii) the significant range of potential synergistic benefits, through
revenue enhancements and cost reductions, in a combination of Henkel KGaA
and the Company, and the failure of the price of the Offer to reflect
adequately, and permit the Company's stockholders to share in, those
benefits;
(iv) preliminary communications the Company and its advisors have had
with other parties who have indicated potential interest in an
extraordinary transaction with the Company;
(v) the historical and current market prices for the Common Stock; and
(vi) advice received from outside counsel that there are international
antitrust issues relating to a combination of the Company and Henkel KGaA
that create uncertainty as to whether the conditions of the Offer will be
met and as to the timing of the completion of the Offer; and that the Offer
is conditioned on there not being threatened or instituted any action by
any domestic or foreign governmental entity or by any other person seeking
to impose any limitations upon ownership or operation by Henkel KGaA of any
portion of the business or assets of the Company.
The Special Committee did not assign relative weights to the factors. The
Special Committee based its determination and recommendation on the totality of
the information presented to and considered by it. Additionally, individual
members of the Special Committee may have had different views on the above
factors and different reasons for the Special Committee's recommendation set
forth in Item 4(a) above.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated October 29, 1996 (the "Letter
Agreement"), the Special Committee has retained Dillon Read as its financial
advisor with respect to the Offer and certain other possible transactions.
Pursuant to the Letter Agreement, the Company has agreed to pay to Dillon Read:
(a) a fee of $1,500,000 payable on the date of the Letter Agreement
(which will be deducted from any fee payable under (b) below); plus
(b) if either (x) securities representing at least 50% of the fully
diluted voting power of the Company or (y) substantially all of the assets
of the Company are acquired by Henkel KGaA or its affiliates or any other
third party (including in either case securities currently owned by such
parties) in one or a series of transactions by means of a tender offer,
private or open market purchases, merger, sale of assets, or otherwise (a
"Sale Transaction"), a fee equal to (i) 0.4% of the aggregate value
received by the Company and/or its stockholders in the Sale Transaction, up
to the Threshold Amount (as defined below), plus (ii) to the extent the
aggregate value exceeds the Threshold Amount, $350,000 multiplied by the
quotient of (1) the amount by which the aggregate value exceeds the
Threshold Amount divided by (2) the number of Shares outstanding on a fully
diluted basis at the time of consummation of the Sale Transaction. In a
Sale Transaction (i) involving a tender offer or other purchase or sale of
stock, aggregate value will be determined as if 100% of the Shares had been
acquired for the same per Share amount paid in the transaction in which 50%
of the fully diluted voting power of the Company is acquired and (ii)
involving a sale of substantially all of the assets of the Company,
aggregate value will include the fair market value of all assets of the
Company not sold, as determined by the Special Committee.
10
<PAGE> 12
"Threshold Amount" means $57.75 multiplied by the number of Shares
outstanding on a fully diluted basis at the time of consummation of the
Sale Transaction.
In the event any significant corporate transaction other than a Sale
Transaction occurs, the Company will pay Dillon Read a fee to be negotiated and
agreed upon by Dillon Read and the Special Committee. In the event that no
transaction is consummated and the threat of a change in control of the Company
is substantially reduced, the Company may pay Dillon Read such additional fee as
may be determined by the Special Committee.
Pursuant to the Letter Agreement, if in order to proceed with a significant
corporate transaction the Company is required to raise external funds, either
publicly or privately, the Company has agreed to retain Dillon Read as placement
agent or sole or co-managing underwriter.
The Company has also agreed to reimburse Dillon Read periodically for its
reasonable out-of-pocket expenses, including the fees and disbursements of its
attorneys, arising in connection with any matter referred to in the Letter
Agreement whether or not any transaction is consummated. In addition, the
Company has agreed to indemnify Dillon Read against certain liabilities,
including liabilities under federal securities laws.
The Special Committee also has retained The Abernathy MacGregor Group Inc.
as its public relations advisor in connection with the Offer. The Company will
pay The Abernathy MacGregor Group Inc. reasonable and customary fees for their
services, reimburse them for their reasonable expenses and provide customary
indemnities.
Except as described above, neither the Company nor any person acting on its
behalf has retained any other person to make solicitations or recommendations to
security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) There have been no transactions in the Shares during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, except that Mr.
Eugene F. Miller, Vice President and Secretary of the Company, exercised an
option to buy 400 Shares at $14.625 per Share on September 18, 1996 and sold 400
Shares at $45.375 per Share on September 26, 1996.
(b) To the best of the Company's knowledge, none of its executive officers,
directors (other than as described below), affiliates or subsidiaries currently
intends to tender, pursuant to the Offer, any Shares beneficially owned by them.
According to the Henkel 14D-1 Statement, the Henkel Designees to the Board,
together with certain of the executive officers and directors of Henkel KGaA,
beneficially own, in the aggregate, 13,160 Shares, including 7,300 Shares owned
by Dr. Dohr, 700 Shares owned by Dr. Krautter and 1,600 Shares owned by Mr.
Henkel. In the Henkel 14D-1 Statement, HCI states that it believes that certain
of these persons, who own an aggregate of 5,860 Shares, intend to tender their
Shares into the Offer. The Company believes these Shares include the Shares
owned by Mr. Henkel and Dr. Krautter, who have advised the Company that they
intend to tender their Shares into the Offer. Dr. Dohr has advised the Company
that he does not intend to tender his Shares in light of the potential
application of the profit recapture provisions of Section 16(b) of the Exchange
Act. The foregoing does not include any Shares over which, or with respect to
which, any executive officer, director, affiliate or subsidiary of the Company
acts in a fiduciary or representative capacity or is subject to the instructions
of a third party with respect to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) -- (b) As stated in Item 4 above, the Special Committee believes that
the Offer is inadequate and is not in the best interests of the Company's
stockholders. The Special Committee determined that its objective is to maximize
stockholder value and determined to seek to sell the Company at a price that
fully reflects its value. The Special Committee has instructed the Company's
management and its advisors to respond to third-party inquiries, contact
potential buyers and take all steps to facilitate achievement of this goal.
These efforts could lead to, and involve negotiations which may result in, (i)
an extraordinary transaction, such as a merger or reorganization involving the
Company or any of its subsidiaries, (ii) a purchase, sale or transfer of a
material amount of the assets of the Company or any of its subsidiaries, (iii) a
tender offer for, or other acquisition of securities by or of, the Company or
(iv) a material change in the present capitalization or
11
<PAGE> 13
dividend policy of the Company. The Company has had preliminary discussions with
other parties regarding their potential interest in a transaction with the
Company.
The Company expects that an exploration of those possible alternatives may
involve soliciting proposals from third parties to acquire the Company,
furnishing non-public information to certain parties upon the execution of
confidentiality agreements, responding to due diligence inquiries, assessing the
feasibility and desirability of those alternatives, and engaging in discussions
and negotiations with third parties, as appropriate.
The Special Committee has determined that disclosure with respect to the
parties to, and the possible terms of, any transactions or proposals of the type
referred to in this Item 7 might jeopardize any discussions or negotiations that
the Company may conduct. Accordingly, the Special Committee has adopted a
resolution instructing the Company's management not to disclose the possible
terms of any such transactions or proposals, or the parties thereto, unless and
until an agreement in principle has been reached or, upon the advice of counsel,
as may otherwise be required by law.
There can be no assurance that any of the foregoing will result in any
transaction. The initiation or continuation of any of the foregoing may also be
dependent upon the future actions of Henkel KGaA and HCI with respect to the
Offer. The proposal, authorization, announcement or consummation of any
transaction of the type referred to in this Item 7 could adversely affect, or
result in withdrawal of, the Offer. In that instance the Special Committee could
determine not to seek to explore further a sale or other extraordinary
transaction involving the Company.
Except as described above and under Item 4 above, the Company is not
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 or any of its subsidiaries, (ii) a purchase, sale or
transfer of a material amount of the assets of the Company or any of its
subsidiaries, (iii) a tender offer for or other acquisition of securities by or
of the Company or (iv) a material change in the present capitalization or
dividend policy of the Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Litigation
Four stockholder lawsuits have been filed against the Company, as well as
various directors and officers of the Company, in the Court of Chancery in New
Castle County, Delaware. Three of these lawsuits (civil action numbers 15283-NC,
15285-NC and 15286-NC) allege that the Company and the named directors and
officers have violated fiduciary duties owed to the Company's stockholders by
refusing to enter into negotiations with Henkel KGaA and HCI concerning the
Henkel Proposal. The fourth stockholder suit (civil action no. 15282-NC) alleges
that the Company and the named directors and officers have violated fiduciary
duties owed to the Company's stockholders by allowing Henkel KGaA and HCI to
make a bid for the Company at a price that is allegedly grossly unfair to
stockholders. The Company believes the allegations in these complaints are
lacking in merit and intends to defend against these actions.
12
<PAGE> 14
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 99.1 Letter to Stockholders of Loctite Corporation dated November 18, 1996*
Exhibit 99.2 Text of Press Release dated November 18, 1996 issued by Loctite Corporation
Exhibit 99.3 Pages 6-19 of the Notice of Annual Meeting of Stockholders and Proxy
Statement dated March 13, 1996
Exhibit 99.4 Opinion dated November 18, 1996 of Dillon, Read & Co. Inc.*
Exhibit 99.5 Form of Retention Agreement between Loctite Corporation and certain Employees
Exhibit 99.6 Rights Agreement, dated as of April 14, 1994, between Loctite Corporation and
The First National Bank of Boston, as Rights Agent
Exhibit 99.7 Agreement, dated as of April 14, 1994, among Loctite Corporation and Henkel
KGaA, Henkel Corporation and HC Investments, Inc.
Exhibit 99.8 Resolution of Special Committee of Loctite Corporation Board of Directors
Authorizing Robert W. Fiondella to Execute and File Schedule 14D-9
Solicitation/Recommendation Statement
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
13
<PAGE> 15
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ Robert W. Fiondella
------------------------------------
Robert W. Fiondella
Title: Chairman of the Special
Committee
Dated: November 18, 1996
14
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit 99.1 Letter to Stockholders of Loctite Corporation dated November 18,
1996*............................................................
Exhibit 99.2 Text of Press Release dated November 18, 1996 issued by Loctite
Corporation......................................................
Exhibit 99.3 Pages 6-19 of the Notice of Annual Meeting of Stockholders and
Proxy Statement dated March 13, 1996.............................
Exhibit 99.4 Opinion dated November 18, 1996 of Dillon, Read & Co. Inc.*......
Exhibit 99.5 Form of Retention Agreement between Loctite Corporation and
certain Employees................................................
Exhibit 99.6 Rights Agreement, dated as of April 14, 1994, between Loctite
Corporation and The First National Bank of Boston, as Rights
Agent............................................................
Exhibit 99.7 Agreement, dated as of April 14, 1994, among Loctite Corporation
and Henkel KGaA, Henkel Corporation and HC Investments, Inc......
Exhibit 99.8 Resolution of Special Committee of Loctite Corporation Board of
Directors Authorizing Robert W. Fiondella to Execute and File
Schedule 14D-9 Solicitation/Recommendation Statement.............
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
15
<PAGE> 1
LOCTITE LETTERHEAD
November 18, 1996
Dear Stockholder:
On November 6, 1996, Henkel KGaA and its wholly owned subsidiary HC
Investments, Inc. announced an unsolicited tender offer to purchase all
outstanding shares of common stock, par value $.01 per share (the "Shares"), of
Loctite Corporation (the "Company"), including the associated common stock
purchase rights, at a price per Share of $57.75 in cash (the "Offer"). After
careful consideration and extensive consultation with its independent financial
and legal advisors, the Special Committee of the Company's Board of Directors
has unanimously voted to recommend that the Company's stockholders reject as
inadequate the Offer and not tender any of their Shares pursuant to the Offer.
The Special Committee believes that the Offer does not maximize stockholder
value and, in the face of the Offer, the Special Committee has determined to
seek to sell the Company at a price that fully reflects its value. The Special
Committee has instructed the Company's management and its advisors to respond to
third-party inquiries, contact potential buyers and take all steps to facilitate
this goal.
The Special Committee determined that the Offer is inadequate and not in
the best interests of the Company's stockholders and does not fully reflect the
value of the Company. In reaching its conclusions, the Special Committee
considered numerous factors, in particular:
(i) the opinion of Dillon, Read & Co. Inc. that the consideration
offered is inadequate from a financial point of view;
(ii) the state of the Company's business and prospects; and
(iii) the failure of the Offer to reflect adequately the significant
range of potential synergistic benefits in a combination of Henkel and the
Company and to permit the Company's stockholders to share in those
benefits.
The members of the Special Committee and the executive officers of the
Company do not intend to tender into the Offer. THE SPECIAL COMMITTEE RECOMMENDS
THAT THE COMPANY'S STOCKHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES
PURSUANT TO THE OFFER.
The enclosed Schedule 14D-9 describes the Special Committee's decision to
reject the Offer and contains other important information relating to its
decision. We urge you to read it carefully.
The Special Committee and I greatly appreciate your continued support and
encouragement.
Very truly yours,
FRANDELA SIGNATURE
Robert W. Fiondella
Chairman of the Special Committee
of the Board of Directors
<PAGE> 1
Exhibit 99.2
TEXT OF NOVEMBER 18, 1996 PRESS RELEASE
Contacts: Mike Pascale/Chuck Burgess
The Abernathy/MacGregor Group
(212) 371-5999
LOCTITE SPECIAL COMMITTEE UNANIMOUSLY REJECTS HENKEL OFFER
AND RECOMMENDS STOCKHOLDERS NOT TENDER;
AUTHORIZES ADVISORS TO MAXIMIZE STOCKHOLDER VALUE
HARTFORD, Conn. (November 18, 1996) -- Loctite Corporation (NYSE: LOC)
announced today that the Special Committee of its Board of Directors has voted
unanimously to recommend that stockholders reject the unsolicited tender offer
of Henkel KGaA and not tender any of their stock pursuant to the offer.
In the face of the offer, the Special Committee has determined to seek to sell
the Company at a price that fully reflects its value. Robert W. Fiondella,
Chairman of the Special Committee, said, "Our mission is to maximize
stockholder value. We have instructed our advisors to respond to third-party
inquiries, contact potential buyers and take all steps necessary to help
achieve this goal."
In reaching its conclusion that the offer is inadequate and not in the best
interests of Loctite's stockholders, the Special Committee considered a variety
of factors, including the following:
1. the opinion of Dillon, Read & Co. Inc. that the consideration offered
is inadequate from a financial point of view;
2. the state of the Company's business and prospects; and
3. the failure of the offer to reflect adequately the significant range
of potential synergistic benefits in a combination of Henkel and the
Company and to permit the stockholders to share in those benefits.
<PAGE> 2
Loctite Corporation is a global specialty chemicals company. Its
engineered sealant, adhesives and lubricant products serve the
Industrial, Electronics, specialized Medical, Retail and Professional
Automotive Maintenance and Repair markets.
<PAGE> 1
EXHIBIT 99.3
Pages 6-19 of the Notice of Annual Meeting of Shareholders and Proxy Statement
dated as of March 13, 1996.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
Common Stock of the Company beneficially owned by each Director, and Director
nominee, and each executive officer named in the Summary Compensation Table,
individually, and by all Directors, nominees, and executive officers of the
Company as a group, as of February 29, 1996.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP (1) PERCENT OF CLASS (2)
------------- --------------------
<S> <C> <C>
Robert L. Aller ..................................... 57,714(3) -
Louis J. Baccei ..................................... 16,453(3) -
Wallace Barnes ..................................... 1,609 -
Gerardus B.E.M. Briels................................... 10,993(3) -
Peter C. Browning ..................................... 300 -
Kenneth W. Butterworth................................... 92,290(4) -
Arthur P. Byrne ..................................... 100 -
Dr. Roman Dohr ..................................... 1,200 -
Robert W. Fiondella ..................................... 300 -
David Freeman ..................................... 85,288(3) -
Christoph Henkel ..................................... 1,300 -
Robert E. Ix ......................................... 4,500(5) -
Dr. Jochen Krautter ................................... 0 -
Frederick B. Krieble .................................... 523,543(6) 1.6%
Dr. Jurgen Manchot ................................... 3,200 -
Eugene F. Miller ................................... 25,945(3) -
Indra K. Nooyi ..................................... 100 -
Stephen F. Page ................................... 800 -
Stephen J. Trachtenberg.................................. 3,000 -
All Directors, nominees and executive officers as a
group (19 individuals)................................ 828,635(3) 2.6%
</TABLE>
6
<PAGE> 2
- ----------------------------
(1) Information with respect to beneficial ownership is based upon
information furnished by Directors, Director nominees, and executive
officers or is contained in filings made with the Securities and
Exchange Commission. The listing of such securities is not necessarily
an admission of beneficial ownership by such person. Unless otherwise
indicated by footnote, each person held sole voting and investment
powers over such shares
(2) No disclosure made for less than 1%.
(3) The number of shares of Common Stock shown includes 21,100 shares as to
Mr. Aller; 12,400 shares as to Dr. Baccei; 9,500 shares as to Mr.
Briels; 40,600 shares as to Mr. Freeman; and 22,900 shares as to Mr.
Miller, subject to stock options granted by the Company which are
exercisable currently or within 60 days of February 29, 1996.
(4) Included in the amount shown are 2,290 shares held in trust for the
benefit of Mr. Butterworth's spouse.
(5) Included in the amount shown are 300 shares beneficially owned by Mr.
Ix's spouse.
(6) Included in the amount shown are 140,307 shares owned by Management II
Limited, a family investment company, as to which Mr. Krieble has shared
voting and investment powers; 342,958 shares owned by another family
investment company, as to which Mr. Krieble has sole voting and
investment powers; 17,852 shares in custodial accounts for the benefit
of Mr. Krieble's minor children, as to which Mr. Krieble has sole voting
and investment powers; and 22,426 shares owned by Mr. Krieble's spouse,
as to which 22,426 shares Mr. Krieble disclaims beneficial ownership.
BOARD OF DIRECTORS, COMMITTEE MEETINGS AND DIRECTOR COMPENSATION
The business and affairs of the Company are managed by the Board of
Directors subject to the Company's Certificate of Incorporation and By-Laws and
the laws of the State of Delaware.
Pursuant to the By-Laws, the Board of Directors elects the officers of
the Company, including the chief executive officer, who perform such duties and
possess such powers as customarily pertain to their respective offices, as are
imposed by the By-Laws, and as from time to time are prescribed by the Board of
Directors. The Board regularly reviews various aspects of the business and
affairs of the Company including budgets, results of operations, financial
matters, as well as the annual and longer term plans of the Company. The Board
also reviews and approves certain fundamental corporate matters such as changes
in capital structure, issuance of stock, dividend policy, major borrowings, and
acquisitions or divestitures.
The Directors are elected at each Annual Meeting of Stockholders.
During the fiscal year ended December 31, 1995, the Board of Directors held five
meetings.
The Board of Directors has established three committees to assist in
the discharge of its responsibilities. The functions of these committees, the
members of which are appointed annually by the Chairman of the Board of
Directors, are described below. During the fiscal year ended December 31, 1995,
the Audit and Finance Committee and the Committee on Human Resources held four
meetings each, and the Committee on Board Affairs held two meetings.
AUDIT AND FINANCE COMMITTEE - The Audit and Finance Committee currently
consists of five members as follows: Dr. Roman Dohr (Chairman), Robert W.
Fiondella, Frederick B. Krieble, Stephen F. Page, and Christoph Henkel.
7
<PAGE> 3
The Audit and Finance Committee recommends to the Board of Directors
the selection of the Company's independent accountants; reviews with its
internal auditors, independent accountants, and management the Company's
policies and procedures with respect to internal auditing, accounting, and
financial controls; reviews with the independent accountants the scope and
results of their audits, their findings and recommendations; approves the
schedule of planned professional services provided by the independent
accountants prior to the performance of such services; considers the range of
audit and nonaudit fees; reviews with the independent accountants, upon
completion of their audit, their report; makes recommendations to the Board of
Directors concerning cash or stock dividends to be declared; reviews and
recommends to the Board matters concerning capital expenditures and uses of the
Company's cash and other tangible assets, including facilities and real
property; and generally reviews and makes recommendations concerning the
financial operations of the Company to the Board of Directors.
COMMITTEE ON HUMAN RESOURCES -- The Committee on Human Resources
currently consists of five members as follows: Robert E. Ix (Chairman), Wallace
Barnes, Stephen J. Trachtenberg, Dr. Jurgen Manchot, and Peter C. Browning.
The Committee on Human Resources reviews the salary structure and
policies of the Company; reviews and approves the salaries of all officers,
operating executives, and key employees above a certain position level; annually
reviews and recommends to the Board nominees for election to the Company's Board
of Directors and confirms the election of the Company's officers; reviews,
interprets and administers such of the Company's employee incentive compensation
plans as are specifically delegated to it by the plans or by the Board and
grants bonuses, options and benefits under such plans; reviews and administers
certain aspects of the Company's retirement and thrift investment plans; and
reviews employee fringe benefits.
COMMITTEE ON BOARD AFFAIRS -- The Committee on Board Affairs currently
consists of five members as follows: Wallace Barnes (Chairman), Robert E. Ix,
Kenneth W. Butterworth, Dr. Jurgen Manchot, and David Freeman.
The Committee on Board Affairs is a standing Committee. It will meet as
and when needed to consider and make recommendations to the full Board on
matters of Board process and governance, including review of potential
candidates for new directors, director compensation, evaluation of director
performance and continued suitability for membership on the Board; and any other
similar matters put to the Committee by the full Board.
Each member of the Board of Directors attended more than 90 percent of
the aggregate of the total number of meetings of the Board of Directors and the
total number of meetings held by Committees of the Board on which he served.
Except as otherwise indicated under "Executive and Consulting Agreements," each
director who is not an officer of the Company is paid an annual retainer fee of
$20,000 for membership on the Board, an additional fee of $1,000 for each Board
meeting, and a fee of $1,000 in the event of a Committee meeting which occurs
apart from a
8
<PAGE> 4
regular Board meeting. In addition, each Committee Chairman receives an annual
retainer fee of $3,000. Officers who are Directors do not receive retainers or
meeting fees.
Each non-employee Director receives an award of 300 unrestricted shares
of Common Stock, subject to adjustment for stock splits and dividends, at the
time of election or reelection to the Board of Directors at an Annual Meeting.
Directors are not required to pay any cash or other consideration for shares so
awarded.
Effective July 1, 1990, the Company adopted a retirement plan for
outside Directors to allow the Company to attract and retain the services of
non-employee Directors with the requisite qualifications. The plan is
administered by the Committee on Human Resources, is nonqualified and provides a
cash benefit paid from the general funds of the Company.
Each member of the Board terminating service with the Board shall be
entitled under the plan to an annual benefit in an amount equal to such member's
vested percentage multiplied by 50% of compensation received by such member for
serving on the Board during such member's final year of service. The vested
percentage is zero until the completion of three years' service, when it becomes
30% and then increases in 10% increments up to 100% for ten or more years of
service. In computing years of service, each member is credited with a year of
service for each full term served as a member of the Board for which the member
is elected by the stockholders of the Company, including such terms completed
prior to the effective date of the plan.
Only non-employee Directors of the Company are eligible to receive
benefits under the plan. Consequently, employee Directors do not become eligible
until they sever employment with the Company, and do not receive any credit for
vesting purposes for service on the Board while they were employees of the
Company. Benefits paid out under the plan terminate upon the date of death of
the former Board member.
Beginning in January 1994, Mr. Butterworth was retained as a consultant
to the Company and received payments of $17,000 per month until December 31,
1995. Additionally, during the period beginning January 1, 1994 and ending upon
completion of his tenure as a director (which will occur immediately after the
Annual Meeting) Mr. Butterworth has been entitled to receive an amount equal to
two times the retainer and meeting fees paid to non-employee directors of the
Company. Although he is no longer an employee of the Company, Mr. Butterworth
does not participate in the Non-Employee Director Retirement Plan and does not
receive stock normally received by non-employee directors upon their election or
re-election to the Board.
STOCKHOLDER NOMINATIONS
While there is no formal Nominating Committee of the Board of
Directors, this function has been delegated to the Committee on Human Resources.
Under the Company's By-laws, a stockholder may nominate persons for election to
the Board of Directors at any meeting of the stockholders called for the
election of directors. The stockholder must be entitled to vote for the
9
<PAGE> 5
election of directors at the meeting and must provide timely notice in writing
to the Secretary of the Company of any nomination. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 60 nor more than 90 days prior to the
meeting. If less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, the stockholder's notice must be
received by the Company not later than the close of business on the tenth day
following the day on which notice of the date of the meeting or the public
disclosure was made. A stockholder's notice must contain (1) as to each nominee,
all information relating to the nominee that is required to be disclosed in
solicitations of proxies for election of directors under the regulations of the
Securities and Exchange Commission and (2) as to the stockholder giving the
notice, the name and address as they appear on the Company's books of the
stockholder proposing the nomination and any other stockholders known by the
stockholder to be supporting the nomination and the class and number of shares
which are beneficially owned by the stockholder. No stockholder nominations were
submitted with respect to the 1996 annual meeting in accordance with the
procedure prescribed by the Company's By-laws.
10
<PAGE> 6
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG TERM COMPENSATION
------------ ----------------------
AWARDS
----------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARD(S)(2) OPTIONS/SAR (#)(3) COMPENSATION(4)
- --------------------------- ---- ------ -------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
David Freeman, 1995 $ 428,660 $ 175,000 0 0 $ 7,500
President and Chief 1994 370,006 185,000 0 6,000 4,500
Executive Officer 1993 348,756 0 0 10,000 7,075
Robert L. Aller, 1995 227,500 73,938 0 0 7,500
Senior Vice President- 1994 217,573 91,000 0 3,500 4,500
Finance and Administration 1993 210,750 0 0 0 7,075
Eugene F. Miller, 1995 174,523 63,875 0 0 7,324
Vice President, Secretary 1994 165,785 69,600 0 3,500 4,500
and General Counsel 1993 160,269 0 0 0 6,398
Louis J. Baccei, 1995 189,427 68,950 0 0 2,638
Senior Vice President and 1994 179,969 74,400 0 4,000 1,800
President-Research, 1993 169,923 0 0 0 2,339
Development & Engineering
Gerardus B.E.M. Briels, (5) 1995 104,250 0 0 0 6,255
Vice President and President, 1994 203,591 104,250 0 5,000 4,500
North American Region 1993 190,000 0 0 0 7,075
</TABLE>
- ---------------------------------
(1) The bonus amounts are payable pursuant to the Company's Management
Incentive Compensation Plan described under the caption "Committee on
Human Resources Report on Executive Compensation." Bonuses payable
under this Plan are determined by reference to the executive's base
salary in effect at fiscal year end.
(2) As of December 31, 1995, no executive officers named in the Summary
Compensation Table held any restricted stock of the Company, except Dr.
Baccei, who holds 2,000 shares with a value as of such date of $95,000.
Dividends are paid on the restricted stock to the same extent paid on
all outstanding shares.
(3) Stock Appreciation Rights are not available under any of the Company's
incentive plans.
(4) The compensation reported represents Company contributions under the
Company's qualified Employee Thrift Investment Plan and Nonqualified
Employee Thrift Investment and Deferred Compensation Plan.
(5) Mr. Briels relinquished all executive responsibilities and active
duties with the Company on June 30, 1995 and resigned as an employee of
the Company on December 31, 1995.
11
<PAGE> 7
OPTIONS
The following table summarizes option exercises during fiscal 1995 by
the executive officers named in the Summary Compensation Table above, and the
value of the options held by such persons at December 31, 1995. Stock
Appreciation Rights are not available under any of the Company's plans. No
options were granted to the executive officers named in the Summary Compensation
Table during fiscal 1995.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND VALUE OF OPTIONS AT END OF FISCAL 1995
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT FISCAL AT FISCAL
ACQUIRED YEAR-END (#) YEAR-END ($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ --------------- ------------- ----------------
<S> <C> <C> <C> <C>
David Freeman ............. 21,000 $875,650 37,000/8,000 $478,225/50,650
Robert L. Aller ........... 8,000 331,000 20,400/2,100 265,475/9,713
Gerardus B.E.M. Briels .... 0 0 7,500/4,000 75,313/16,375
Louis J. Baccei ........... 0 0 11,600/2,400 92,400/11,100
Eugene F. Miller .......... 0 0 22,200/2,100 202,775/9,713
</TABLE>
- ---------------
(1) Value based on market value of the Company's Common Stock at date of
exercise (column 3) or end of fiscal 1995 (column 5), minus the
exercise price.
COMMITTEE ON HUMAN RESOURCES REPORT ON EXECUTIVE COMPENSATION
General Philosophy:
The Committee on Human Resources of the Board of Directors
("Committee") is composed entirely of non-employee Directors and is responsible
for considering and submitting recommendations to the Board in connection with
the Company's executive compensation policies. It is the philosophy of the
Committee to establish a total compensation program for executive officers which
is competitive to the Company's peer group and at least competitive with a
broader range of companies of comparable size and complexity in order to attract
and retain the best managerial talent. Some of the companies studied by the
Committee are included in the S&P Chemicals and Materials Index, the stock
performance of which is shown on the Performance Graph on page 15. Other
companies which the Committee considers comparable are included in the broader
S&P
12
<PAGE> 8
Chemicals Index. The Committee believes that this philosophy will reward
stockholders with superior performance and return on investment.
The Committee periodically obtains from internationally recognized
consulting firms independent compensation data which compares the total
compensation program of the Company with certain of its peer group and selected
other companies which the Committee believes are comparable to the Company.
Based on an analysis of the compensation data obtained from its consultants in
1995, the Committee has added a long term incentive compensation element to the
total compensation package for executive officers and certain other key
employees in order to offer a total compensation program which is competitive
with the Company's peer group. The long term incentive compensation program is
described below.
Executive Officer Compensation Program:
The Company's executive officer compensation program is comprised of
base salary, annual cash incentive compensation, long term incentive
compensation in the form of stock options, restricted stock grants and various
benefits, including medical and pension plans generally available to all
employees of the Company.
Base Salary:
Base salary ranges for the Company's executive officers are reviewed
periodically by the Committee following analysis of published salary trends and
data among the Company's peer industries and other comparable companies, and
following review of periodic recommendations submitted by outside compensation
consultants. Upon review of relevant performance appraisals and the general
economic climate, the Committee approved increases in base salaries for certain
executive officers during 1995.
Annual Incentive Compensation:
The Management Incentive Compensation Plan (the "Plan") is the
Company's annual incentive program for executive officers and key managers. When
viewed together with the Company's base salary program the purpose of the Plan
is to provide a balance between fixed compensation and variable results-oriented
compensation. The Plan is intended to reward superior results with overall
superior compensation. The Committee determines awards under the Plan by
comparing the Company's actual performance for each fiscal year with the
Company's annual business plan for such year, which is approved by the Board of
Directors. Key elements of each annual business plan are the Company's sales
growth and profitability and return on shareholders' equity, with particular
reference to the preceding fiscal year. Additional factors which the Committee
considers are the relationship of the year's results with the Company's most
recent long-range and strategic goals and objectives, any non-recurring charges
recognized during the year, and the general economic environment. Finally, the
Committee also considers individual
13
<PAGE> 9
factors such as the executive's achievement of approved target accomplishments,
and his or her contributions to the long-range growth and profitability
objectives of the Company.
Maximum bonuses under the Plan may not exceed a specified percentage of
the executive's salary. Executives with line responsibility qualify for a higher
percentage bonus than staff executives. The bonuses reflected in the Summary
Compensation Table for executive officers reflect the Committee's assessment of
their performance during fiscal 1995 against the criteria mentioned in the
preceding paragraph.
Other Compensation Plans:
The Company's stock option and restricted stock plans are intended to
provide long-term incentives to executive officers and key managers and to
encourage such individuals to maintain a significant long-term ownership
position in the Company's common stock. Both in the case of restricted stock and
stock options the Committee looks at the executive's total holdings before
making an award under either plan. In 1995, the Committee did not award stock
options or restricted stock to any executive officer.
Based on information supplied to the Committee by the compensation
consulting firm retained by it during 1995, the Committee recommended and the
Board adopted, a policy under which long-term incentive compensation would be
payable under these plans to the Company's executive officers and other senior
executives upon the achievement, in the case of restricted stock, of certain
predetermined long term performance goals, and subject to other restrictions
already contained in the plans.
The Company has adopted nonqualified retirement and thrift investment
plans for executive officers and other highly compensated employees whose
participation in the Company's qualified retirement and thrift investment plans
is restricted because their compensation exceeds applicable Internal Revenue
Code limitations. These plans supplement the qualified plans by providing the
participants the opportunity to obtain benefits to the same extent they are
offered to other employees under the qualified plans.
Benefits:
The Company provides medical and pension benefits to the executive
officers that are generally available to Company employees. The amount of
perquisites, as determined in accordance with the rules of the Securities and
Exchange Commission relating to executive compensation, did not exceed
reportable thresholds for fiscal 1995.
Limitation on Deductibility of Certain Compensation:
The Internal Revenue Service has adopted regulations which limit the
deductibility, for income tax purposes, of certain executive compensation in
excess of $1,000,000 in a single tax
14
<PAGE> 10
year. The Committee does not believe that this limitation will be relevant to
the Company in 1996, since a significant portion of total executive compensation
is performance related.
Chief Executive Officer Compensation:
During 1995 Mr. Freeman's base salary was increased to $460,000, which
in the Committee's judgment is appropriate given available annual incentive and
long term incentive compensation opportunities. Tying the Chief Executive
Officer's total compensation package closely to growth in shareholder value is
at the heart of the Committee's executive compensation philosophy and is
consistent with compensation data obtained from the Committee's consultants. Mr.
Freeman received a bonus of $175,000 in relation to his efforts during fiscal
1995, which the Committee determined with reference to Mr. Freeman's individual
performance, the results achieved by each of the Company's sales and marketing
regions, and the criteria discussed under Annual Incentive Compensation.
ROBERT E. IX, CHAIRMAN
WALLACE BARNES
STEPHEN J. TRACHTENBERG
DR. JURGEN MANCHOT
PETER C. BROWNING
MEMBERS OF THE COMMITTEE ON HUMAN RESOURCES
15
<PAGE> 11
COMPARATIVE STOCK PERFORMANCE
The following is a graph which compares the five year cumulative return
from investing $100 on December 31, 1990 in each of Loctite Corporation common
stock; the S&P 500 Comp-Ltd.; the S&P Chemicals; and the S&P Chemicals &
Materials Index, with dividends assumed to be reinvested when received. The S&P
Chemicals & Materials Index is an index published by Standard & Poor's
Corporation which tracks 20 companies in the S&P MidCap 400 Index that have
been categorized as chemicals and materials companies.
COMPANIES OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among Loctite, S&P 500 Comp-Ltd., S&P Chemicals
and S&P Mid-Cap Chem & Mat Indices
<TABLE>
<CAPTION>
Measurement Period Loctite Corp S&P Mid-Cap Chem & Mat S&P 500 Comp-Ltd S&P Chemicals
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 170 155 130 130
1992 158 168 140 143
1993 131 185 155 160
1994 169 196 157 185
1995 176 222 215 242
</TABLE>
* $100 Invested on 12/31/90 in stock or Index including reinvestment of
dividends for the fiscal year ending December 31.
16
<PAGE> 12
PENSION BENEFITS
The Company's non-contributory, defined benefit pension plan covers all
persons regularly employed by the Company on a salaried and hourly basis, except
certain employees covered by collective bargaining agreements.
The pension plan establishes an account for each employee when the
employee becomes an "Active Participant" in the plan (upon completion of one
year of continuous service) and credits the account with a percentage of pay for
each year worked after becoming an Active Participant. For employees with less
than 10 years of service, this annual credit equals 4% of that year's
compensation which is not in excess of 1/3 of the current social security wage
base and 6% of that year's compensation which exceeds 1/3 of the current social
security wage base. For employees with 10 or more years of service, this annual
credit equals 5% of that year's compensation which is not in excess of 1/3 of
the current social security wage base and 7% of that year's compensation which
exceeds 1/3 of the current social security wage base. Accounts are also credited
with a guaranteed rate of interest. To the extent that the pension plan benefits
of any of the executives named in the Summary Compensation Table are limited by
the provisions of Section 401(a)(17) or 415 of the Internal Revenue Code of
1986, as amended, the Company's nonqualified retirement plan supplements the
benefits under the pension plan.
The estimated annual pension benefits payable under the pension plan,
as supplemented by the nonqualified retirement plan, upon retirement at age 65,
assuming no change in salary and annual interest credits of 7.5%, for each of
the following executives are $206,765 for David Freeman, $75,955 for Robert L.
Aller, $43,579 for Louis J. Baccei, and $95,545 for Eugene F. Miller.
The Company amended its nonqualified thrift investment plan, effective
July 1, 1995, to provide a greater ability for executive officers and other
highly compensated employees to defer the receipt of compensation and to permit
Directors to defer the receipt of the cash portion of their fees. The plan
continues to require that participating employees first have elected to make the
maximum before-tax deferral of compensation under the Company's qualified thrift
investment plan, but the plan does not otherwise limit the amount of an
employee's compensation deferral.
EXECUTIVE AND CONSULTING AGREEMENTS
The Company has agreements with five of its senior executives,
including Messrs. Freeman, Aller and Miller, which provide that the executives
will be entitled to a two-year term of employment with the Company following any
"Change-in-Control" of the Company (as defined). In the event that the
executive's employment with the Company terminates for any reason other than
Cause (as defined below), voluntary resignation (including retirement), death or
permanent disability prior to the end of the two-year period following a
Change-in-Control, the executive will receive severance pay equal to the total
compensation and benefits the executive would have
17
<PAGE> 13
received if the term of employment had continued for the full two-year period.
However, portions of the severance pay will be reduced to the extent that such
severance pay would be non-deductible to the Company under Section 280G of the
Internal Revenue Code of 1986 as amended. The restrictions under Section 280G
will not apply if the present value of all payments to be received by the
executive (whether under the agreement or otherwise) does not exceed three times
the average compensation received by the executive during the five years
preceding the Change-in-Control.
Cause is defined as (a) a continued breach of the executive's duties of
employment after notice from the Company; or (b) willful misconduct by the
executive which is demonstratively and materially injurious to the Company. If
the executive's employment terminates for Cause, voluntary resignation, death or
disability, the executive receives no benefits under that agreement other than
as accrued as of the date of such termination, and must look to the Company's
normal policies for any retirement, death or disability benefits.
The agreements provide that a Change-in-Control shall have occurred if:
(a) a Person (as defined) has the power to vote 30% or more of the common stock
of the Company; (b) a Person acquires or agrees to acquire all or substantially
all of the assets or business of the Company; (c) during any two year period,
the new members of the Board of Directors elected during that period constitute
a majority of the Board unless such new members are approved by at least a
two-thirds vote of the Board members in office at the beginning of such period;
or (d) the Board of Directors determines that a Person directly or indirectly
exercises a controlling influence over the Company.
SEVERANCE ARRANGEMENT
On December 21, 1995, the Company and Mr. Gerardus B.E.M. Briels,
formerly President of the Company's North American Region, entered into an
agreement (the "Agreement") setting forth the terms of Mr. Briels' separation
from the Company. Mr. Briels had been an employee of the Company for over 30
years, and the Agreement in large measure reflects payments of benefits accrued
during his lengthy period of employment.
The Agreement acknowledges that Mr. Briels resigned from active
employment with the Company effective June 30, 1995, and provides for his
continuation on the Company's payroll as an inactive employee at an annual rate
of $208,500 for a period of two years through July 1, 1997, or such earlier date
on which he commences employment with another party or elects to leave the
company's payroll. Mr. Briels elected to leave the Company's payroll as of
December 31, 1995, and received a lump sum payment at that time that brought his
aggregate payroll payments under the Agreement to $417,000. In addition, Mr.
Briels received under the Agreement $5,614 in payment of unused vacation in
1995.
The Agreement also provides that: (i) Mr. Briels' five-year promissory
note due October 29, 1997 for the principal sum of $60,000 will be forgiven by
the Company as of June 30, 1995 (for a
18
<PAGE> 14
total benefit to Mr. Briels of $101,781, including tax equalization payments);
(ii) Mr. Briels will continue to be able to participate in the Company's
medical, dental and life insurance plans until June 30, 1997 (and thereafter as
permitted by law), unless he becomes covered under the plans of a new employer;
(iii) Mr. Briels is fully vested under the Company's qualified and nonqualified
retirement and thrift investment plans, and will receive an aggregate benefit
under such plans in the amount of $504,500 as of December 31, 1995, the date on
which he ceased to be employed by the Company, and will be entitled at his
election to receive a lump sum payment or periodic distributions, as may be
permitted by the plans or applicable law; (iv) Mr. Briels' vested stock options
shall be exercisable for a period of 90 days after the date on which he ceases
to be on inactive payroll (i.e., December 31, 1995); (v) Mr. Briels will receive
the value of any unexercisable stock options as of the date he ceases to be on
inactive payroll (which options had a value on that date of $16,375); (vi) Mr.
Briels will be provided outplacement assistance at Company expense until his
separation from the payroll, in the event he chooses to use it (resulting in a
benefit to Mr. Briels of $27,000); and (vii) Mr. Briels will be reimbursed for
various expenses, including one annual trip to Europe under the Company's "home
leave" program, the cost of obtaining tax and financial advice, and professional
fees relating to his separation from the Company (resulting in a total benefit
to Mr. Briels of $50,649). In addition, it was agreed that Mr. Briels would be
granted ownership of the Company car assigned to him (providing a benefit to Mr.
Briels of $18,900). Finally, the Agreement provides for mutual releases of
claims, waiver of noncompetition provisions, indemnification of Mr. Briels for
any payments arising from claims relating to his service with the Company, and
confidentiality to the extent permitted by law.
19
<PAGE> 1
Dillon Read Letterhead November 18, 1996
Special Committee of the Board of Directors
Loctite Corporation
Hartford Square North
Ten Columbus Boulevard
Hartford, CT 06106-5108
Gentlemen and Madam:
On November 6, 1996, HC Investments, Inc., a Delaware corporation ("HC
Investments") and an indirect wholly owned subsidiary of Henkel KGaA, a
Kommanditgesellschaft auf Aktien (a partnership limited by shares) organized
under the laws of the Federal Republic of Germany ("Henkel"), commenced a tender
offer for all outstanding shares of common stock, par value $0.01 per share (the
"Shares") of Loctite Corporation (the "Company"), including the associated
common stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement dated as of April 14, 1994 (the "Rights Agreement"), and all benefits
that may inure to holders thereof, for a purchase price of $57.75 per share,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated November 6, 1996, of HC Investments (the "Offer to Purchase") and in the
related Letter of Transmittal (collectively, the "Offer"). The Offer to Purchase
states that HC Investments presently intends, following consummation of the
Offer, to take such steps as are necessary to take control of the Company's
Board of Directors and thereafter to have the Company consummate a merger with
HC Investments or another direct or indirect subsidiary of Henkel pursuant to
which each outstanding Share not tendered into the Offer would be converted into
the right to receive an amount in cash equal to the Offer Price (such subsequent
transaction, together with the Offer, being herein referred to as the "Henkel
Acquisition Offer"). The Offer is conditioned upon, among other things, (i)
there being validly tendered and not withdrawn prior to the expiration date of
the Offer, that number of Shares that would, when aggregated with the Shares
already owned by HC Investments, represent at least a majority of all
outstanding Shares on a fully diluted basis on the date of purchase, and (ii) HC
Investments remaining satisfied that the Offer constitutes a "Permitted Offer"
under the Rights Agreement and that the Rights will not become exercisable (or
be adjusted) under consummation of, or otherwise are inapplicable to, the Henkel
Acquisition Offer.
You have requested our opinion as to whether the consideration being
offered to the holders of Shares other than Henkel and its affiliates pursuant
to the Offer is adequate, from a financial point of view, to such holders.
In arriving at our opinion, we have, among other things: (i) reviewed the
Offer to Purchase and the related Tender Offer Statement on Schedule 14D-1 and
the Transaction Statement on Schedule 13E-3 filed by HC Investments and Henkel
with the Securities and Exchange Commission (the "Commission"), (ii) reviewed
certain publicly available business and historical financial information
relating to the Company, (iii) reviewed historical price and trading data for
the Shares, (iv) reviewed certain internal financial information and other data
provided to us by the Company relating to the business and prospects of the
Company, including financial forecasts prepared by the management of the
Company, (v) held discussions with members of the senior management of the
Company, (vi) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we considered relevant, (vii) reviewed
publicly available financial and securities market data pertaining to certain
companies which we deemed to be comparable in certain respects to the Company,
(viii) responded to inquiries from companies with a potential interest in an
acquisition transaction involving the Company and (ix) conducted such other
financial studies, analyses and investigations, and considered such other
information as we deemed necessary or appropriate.
<PAGE> 2
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have, with your
permission, relied upon it being complete and accurate in all material respects.
We have not made any independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of the Company, nor have we been furnished
with any such evaluation or appraisal. With respect to the financial forecasts
provided to or discussed with us, we have assumed that such forecasts were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company. Further, our opinion is necessarily based on financial,
economic, market and other conditions existing on the date hereof.
We are acting as financial advisor to the Special Committee in connection
with the Henkel Acquisition Offer and related matters and will receive a fee
from the Company for our services. We have performed and continue to perform
investment banking services for the Company and have received customary
compensation for such services. In the ordinary course of its business, Dillon,
Read & Co. Inc. ("Dillon Read") may trade the securities of the Company and
Henkel for its own account or for the accounts of customers, and it may at any
time hold a long or short position in such securities.
It is understood that our advisory services and the opinion expressed
herein are provided for the information of the Special Committee in its
evaluation of the Offer, and our opinion is not intended to be and does not
constitute a recommendation as to whether or not any shareholder should tender
shares pursuant to the Offer. Our opinion may not be published or otherwise used
or referred to, nor shall any public reference to Dillon Read be made, without
our prior written consent, except that this opinion may be reproduced in full in
the Solicitation/Recommendation Statement on Schedule 14D-9 mailed by the
Company to its shareholders in response to the Offer.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration being offered to the holders of Shares other than
Henkel and its affiliates pursuant to the Offer is inadequate, from a financial
point of view, to such holders.
Very truly yours,
DILLON, READ & CO. INC.
<PAGE> 1
EXHIBIT 99.5
EXECUTIVE RETENTION AGREEMENT
This EXECUTIVE RETENTION AGREEMENT (this "Agreement") is made
as of the ______ day of __________, 1996 by Loctite Corporation, a Delaware
corporation having its principal office in Hartford, Connecticut, (the
"Company"), and ________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive has been and continues to be employed
by the Company in a management capacity and has made and is expected to
continue to make major contributions to the business of the Company;
WHEREAS, the Company recognizes the possibility of a Change in
Control (as hereinafter defined); and
WHEREAS, the Company desires to reinforce and encourage the
continued attention and dedication of the Company's key executives, including
the Executive, to their responsibilities on behalf of the Company without
distraction in potentially disturbing circumstances arising from the
possibility of a Change in Control and to establish certain minimum severance
benefits for such key executives in the event of a Change in Control.
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms shall have the following meanings when used in this
Agreement with initial capital letters:
(a) "Annual Compensation" shall mean the sum of (i) the
Executive's annual base salary at the highest rate in effect during the twelve
(12) months preceding the date of termination of the Executive's employment or,
if higher, during the twelve (12) months preceding the Change in Control, plus
(ii) the greatest amount of cash incentive compensation received by the
Executive with respect to any year from, and including, the third year prior to
the year in which the Change in Control occurs or, if no such cash incentive
compensation has been received by the Executive, prior to the occurrence of the
Change in Control, the Executive's target bonus for the year in which the
Change in Control occurs.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Cause" shall mean that, prior to any termination of
employment by the Executive for Good Reason, the Executive shall have (i)
committed an intentional act of fraud, embezzlement or theft in connection with
his duties or in the course of his employment with the Company; (ii) committed
intentional, wrongful damage to property of the Company; or (iii) intentionally
and wrongfully disclosed confidential information of the Company. For purposes
of this Section 1(c), no act, or failure to act, on the Executive's part shall
be deemed "intentional"
<PAGE> 2
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in the best interests
of the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by an
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in the
good faith opinion of the Board, the Executive has committed an act
constituting "Cause" as herein defined and specifying the particulars thereof
in detail. Nothing herein will limit or otherwise affect the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
finding or determination.
(d) "Change in Control" shall mean the occurrence during
the Term of the Agreement of:
(i) An acquisition (other than directly from the
Company) of any common stock of the Company ("Common Stock") or other voting
securities of the Company entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the term person is used
for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the then outstanding shares of
Common Stock or the combined voting power of the Company's then outstanding
Voting Securities (or, in the case of an acquisition by Henkel KGaA, Henkel
Corporation, HCI Investments Inc., their affiliates and/or any group (within
the meaning of Section 13(d)(3) of the Exchange Act) of which any of the
foregoing is a member (collectively, "Henkel"), thirty-six percent (36%) or
more); provided, however, in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a Non-Control Acquisition (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean an acquisition by
(i) an employee benefit plan (or a trust forming a part thereof) maintained by
(A) the Company or (B) any corporation or other Person of which a majority of
its voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (a "Subsidiary"), (ii) the Company or
its Subsidiaries, or (iii) any Person in connection with a Non-Control
Transaction (as hereinafter defined);
(ii) The Approved Directors (as hereinafter
defined) cease for any reason to constitute at least seventy percent (70%) of
the members of the Board (not including any vacancies); provided, however, if
any Approved Director ceases to be a member of the Board by reason of death,
resignation or removal, the vacancy created thereby shall not be deemed to
reduce the number of Approved Directors on the Board if such vacancy is filled
by a new director approved by a vote of at least two-thirds of the then
remaining Approved Directors within 90 days. An "Approved Director" means (i)
any member of the Board as of November 18, 1996 other than any individual
designated or nominated to be a member of the
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Board by Henkel and (ii) any director whose election or nomination for election
by the Company's shareholders was approved by a vote of at least two-thirds of
the then Approved Directors; provided, however, that no individual shall be
considered an Approved Director if such individual initially assumed office as
a result of either an actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(iii) The consummation of:
(A) A merger, consolidation or
reorganization with or into the Company or in which securities
of the Company are issued, unless such merger, consolidation
or reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger, consolidation
or reorganization with or into the Company or in which
securities of the Company are issued where:
(I) the shareholders of the Company
immediately before such merger, consolidation or
reorganization own directly or indirectly immediately
following such merger, consolidation or
reorganization at least sixty percent (60%) of the
combined voting power of the outstanding voting
securities of the corporation resulting from such
merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting
Securities immediately before such merger,
consolidation or reorganization,
(II) the Approved Directors
immediately prior to the execution of the agreement
providing for such merger, consolidation or
reorganization constitute at least seventy percent
(70%) of the members of the board of directors of the
Surviving Corporation, or of a corporation
beneficially directly or indirectly owning a majority
of the Voting Securities of the Surviving
Corporation,
(III) no Person other than (a) the
Company, (b) any Subsidiary, (c) any employee benefit
plan (or any trust forming a part thereof) that,
immediately prior to such merger, consolidation or
reorganization, was maintained by the Company, the
Surviving Corporation, or any Subsidiary, or (d) any
Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial
Ownership of twenty percent (20%) or more of the then
outstanding Voting Securities or Common Stock of the
Company, has Beneficial Ownership of twenty percent
(20%) or more of the combined voting
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power of the Surviving Corporation's then outstanding
voting securities or its common stock, and
(IV) the percentage of the combined
voting power of the Surviving Corporation's then
outstanding voting securities and the percentage of
its common stock of which Henkel has Beneficial
Ownership immediately after such merger,
consolidation or reorganization does not exceed the
percentage of the Company's Voting Securities and the
percentage of its Common Stock of which Henkel had
Beneficial Ownership immediately prior to such
merger, consolidation or reorganization;
(B) A complete liquidation or
dissolution of the Company; or
(C) The sale or other disposition of all
or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the then
outstanding Common Stock or Voting Securities as a result of the acquisition of
Common Stock or Voting Securities by the Company which, by reducing the number
of shares of Common Stock or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Persons,
provided, that if a Change in Control would occur (but for the operation of
this sentence) as a result of the acquisition of shares of Common Stock or
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
shares of Common Stock or Voting Securities which increases the percentage of
the then outstanding shares of Common Stock or Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.
(e) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(f) "Common Stock" shall mean the common stock of the
Company.
(g) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(h) "Good Reason" shall mean the occurrence, following a
Change in Control and without the Executive's express written consent, of any
of the following circumstances:
(i) the failure to elect, reelect or otherwise
maintain the Executive in any office or position, or substantially equivalent
office or position, that the Executive held immediately prior to the Change in
Control;
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(ii) a significant adverse change in nature or
scope of the Executive's authorities, powers, functions or duties attached to
any office or position that the Executive held immediately prior to the Change
in Control, with the exception for a change inherent in the Company no longer
being a publicly owned corporation;
(iii) a reduction in the Executive's base pay as in
effect immediately prior to the Change in Control, or as increased from time to
time thereafter, or a failure following a Change in Control to increase the
Executive's base pay on a percentage basis equal to the average percentage
increase in base pay of all officers of the Company during the period since the
Executive's last increase in base pay;
(iv) a failure by the Company to (A) continue in
effect (without reduction in benefit level and/or reward opportunities) any
material compensation or employee benefit plan, program or practice in which
the Executive was participating immediately prior to the Change in Control,
including, but not limited to, any of the plans listed in Appendix A hereto,
unless a substitute or replacement plan has been implemented which provides
substantially identical compensation or benefits to the Executive or (B)
provide the Executive with compensation and benefits, in the aggregate, at
lease equal (in terms of benefit levels and/or reward opportunities) to those
provided for under each compensation or employee benefit plan, program and
practice in which the Executive was participating immediately prior to the
Change in Control;
(v) the Company requiring the Executive to be
based more than twenty-five (25) miles from the Executive's principal place of
business before the Change in Control;
(vi) the liquidation, dissolution, merger,
consolidation, or reorganization of the Company or sale or transfer of
substantially all of its business and/or assets unless the obligations of this
Agreement are assumed by the successor(s); or
(vii) the Company's, or any successor's, material
breach of this Agreement; provided, however, that any event or condition
described in clauses (i), (ii), (iii), (iv) or (v) of this Section 1(h) that
occurs prior to a Change in Control but which the Executive reasonably
demonstrates (I) was at the request of a Third Party or (II) otherwise arose in
connection with, or in anticipation of, a Change in Control that has been
threatened or proposed and that actually occurs, shall constitute Good Reason
for purposes of this Agreement notwithstanding that it occurred prior to a
Change in Control.
(i) "Present Value" shall mean present value determined
using the discount rate that, at the relevant time, would be used to calculate
present value for purposes of Section 280G of the Code.
(j) "Rights Agreement" shall mean the Rights Agreement
dated as of April 14, 1994 between the Company and the First National Bank of
Boston.
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(k) "Severance Period" shall mean the period of time
commencing on the date of the occurrence of a Change in Control and continuing
for two (2) years thereafter.
(l) "Third Party" shall mean a Person (as that term is
used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of
1934) who has indicated an intention or has taken steps reasonably calculated
to effect a Change in Control.
2. Term of Agreement. This Agreement shall commence as of
November 18, 1996, and shall continue in effect until November 17, 1998 (the
"Term"); provided, however, that on November 18, 1997, and on each November 18
thereafter, the Term shall automatically be extended for one (1) additional
year unless either the Executive or the Company shall have given written notice
to the other at least ninety (90) days prior thereto that the Term shall not be
so extended; provided, further, however, that following the occurrence of a
Change in Control, the Term shall not expire prior to the expiration of the
Severance Period.
3. Termination of Employment During the Severance Period by the
Company for a Reason other than Cause or by the Executive for Good Reason;
Certain Terminations Prior to the Severance Period.
(a) If, during the Severance Period, the Company
terminates the Executive's employment for a reason other than Cause or the
Executive terminates employment on account of Good Reason:
(i) Within five (5) business days following such
termination of employment, the Company shall pay to the Executive a lump sum
equal to (i) [three (3)] [two (2)] [one (1)] times the Executive's Annual
Compensation plus (ii) the pro rata share of the Executive's bonus for the year
during which such termination occurs as provided in the following sentence.
The pro rata share of the Executive's bonus shall be equal to (i) the greatest
amount of cash incentive compensation received by the Executive with respect to
any year from, and including, the third year prior to the year in which the
Change in Control occurs or, if no such cash incentive compensation has been
received by the Executive prior to the occurrence of the Change in Control, the
Executive's target bonus for the year in which the Change in Control occurs,
multiplied by (ii) the number of days in the year of termination preceding the
date of termination divided by three hundred sixty-five (365);
(ii) For [three (3)] [two (2)] [one (1)] years
following such termination of employment, the Company shall provide or will
arrange to provide for the continuation on behalf of the Executive of all
benefits and service credit for benefits under the plans maintained by the
Company prior to the Change in Control that are "welfare plans" and "pension
plans" within the meaning of Sections 3(l) and 3(2) respectively, of ERISA,
whether or not such plans are subject to ERlSA. If benefits or service credit
for benefits under any of the foregoing plans are based on the Executive's
compensation, the Executive's Annual Compensation shall be deemed to be the
Executive's compensation for such purpose. If and to the extent that any
benefits or service credit for benefits cannot be paid or provided under a plan
providing such benefits or service credit for benefits, then the Company will
itself pay, provide, or otherwise
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<PAGE> 7
cause to be provided such benefits or service credit for benefits to the
Executive, his dependents and beneficiaries (or if the Executive so elects, the
fair cash value of equivalents of such benefits or service credit for
benefits). During the period for which benefits and service credits for
benefits are provided pursuant to this Section 3(a)(ii), the Company may amend
or replace such plans, provided that any such amendment or replacement plan
shall continue to provide to the Executive benefits and service credit for
benefits at a benefit level at least as valuable as under such plans
immediately prior to the Change in Control. The continuation of health
benefits pursuant to this Section 3(a)(ii) shall not reduce in any way the
Executive's and any dependent's or beneficiary's rights to continued health
benefits pursuant to Sections 601 through 608 of ERISA, or any equivalent state
or foreign law, for the full period provided by such laws, and such rights to
continued health benefits pursuant to such laws shall be deemed to arise at the
end of the period of health benefit continuation pursuant to this Section
3(a)(ii); and
(iii) For one (1) year following such termination
of employment, the Company, at its cost, shall provide the Executive with
executive outplacement assistance; provided that the cost to the Company for
such assistance shall not exceed fifteen (15) percent of the Executive's base
salary as in effect at the time of the Change in Control.
(b) (i) Notwithstanding anything to the contrary
contained in this Agreement, if the payments and benefits provided pursuant to
this Agreement, together with any other payments and benefits that the Company
will pay or provide to the Executive (the "Payments"), would constitute "excess
parachute payments" (as defined in Section 280G of the Code), the payment
pursuant to Section 3(a)(i) or, if so elected by the Executive prior to his
termination of employment, compensation and benefits in the order specified by
the Executive shall be reduced to the largest amount that will result in no
portion of the Payments constituting "excess parachute payments."
(ii) The determination of whether the Payments
shall be reduced as provided in Section 3(b)(i) and the amount of such
reduction shall be made, at the Company's expense, by an accounting firm
selected by the Company and reasonably acceptable to the Executive, which is
one of the six largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten (10) days of the date
of the Executive's termination of employment, if applicable, or such other time
as requested by the Company. If the Accounting Firm reaches a Determination
that no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such Payments.
Except as provided in Section 3(b)(iii), the Determination shall be binding,
final and conclusive upon the Company and the Executive absent manifest error.
(iii) It is possible, as a result of the issuance
of final regulations or rulings of the Internal Revenue Service, or final
judgment of a court of competent jurisdiction (a "Change in Law"), in each case
published or issued on a date after the time of the Determination,
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<PAGE> 8
that Payments were not made to the Executive that should have been made
("Underpayments") or that Payments were made to the Executive that should not
have been made ("Overpayments"). If a Change in Law occurs, then, at the
request of either the Company or the Executive, the Accounting Firm shall
determine the amount of any Underpayment or Overpayment. In the case of an
Underpayment, the amount of such Underpayment shall be promptly paid to the
Executive by the Company. In the case of an Overpayment, the Company and the
Executive agree that they will take such action as may be necessary to put the
Executive in the same after-tax position he would have occupied had no
Overpayment been made which, in the case of the Executive may include repaying
the amount of such Overpayment plus interest at the applicable federal rate as
determined pursuant to Section 1274(d)(1) of the Code and the filing of
relevant returns for tax refunds and, in the case of the Company, may include
indemnifying the Executive for any income or excise tax, interest or penalties
that the Executive may incur as a result of the Overpayment and/or the filing
of such returns.
(c) If the Present Value of the additional payments and
benefits provided pursuant to this Agreement is less than or equal to the
Present Value of the additional payments and benefits that the Executive shall
be entitled to receive solely as a result of his termination of employment
under any other plan, program or arrangement of the Company, including such
plans, programs or arrangements mandated by applicable federal, state or
foreign law (such other plans, programs and arrangements hereinafter referred
to as "Other Plans"), the Executive shall be entitled to no payments or
benefits under this Agreement, except for the continuation of health benefits
for the Executive and his dependents and beneficiaries pursuant to Section
3(a)(ii) hereof. If the Present Value of the additional payments and benefits
provided pursuant to this Agreement is greater than the Present Value of the
additional payments and benefits that the Executive shall be entitled to
receive as a result of his termination of employment under Other Plans, the
payment pursuant to Section 3(a)(i) hereof shall be reduced by the Present
Value of such additional payments and benefits under such Other Plans. For
purposes of the foregoing, additional payments and benefits under Other Plans
shall not include plans providing payments and benefits to which the Executive
is entitled by reason of his prior service such as, without limitation,
"pension plans" within the meaning of Section 3(2) of ERISA, whether or not
such plans are subject to ERISA, and other plans of deferred compensation but
shall include plans providing severance benefits, termination benefits and
other payments or benefits paid solely on account of the loss of employment.
If the Company and the Executive cannot agree on the reduction (if any) in, or
the Present Value of, payments and benefits for purposes of this Section 3(c),
the determination of the amount of such reduction and/or Present Value shall be
made by the Accounting Firm described in Section 3(b)(ii) hereof, and such
determination shall be conclusive and binding on the parties. The fees and
expenses of such Accounting Firm for its services in connection with the
foregoing determinations shall be paid by the Company.
(d) If the Executive's employment is terminated by the
Company without Cause prior to the date of a Change in Control and the
Executive reasonably demonstrates that such termination (i) was at the request
of a Third Party who effectuates a Change in Control or (ii) otherwise arose in
connection with, or in anticipation of, a Change in Control that has been
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threatened or proposed and actually occurs, such termination shall be deemed to
have occurred after a Change in Control, provided that a Change in Control
actually shall have occurred.
4. Termination of Employment by the Company for Cause or by the
Executive other than for Good Reason. If the employment of the Executive is
terminated (i) by the Company for Cause; (ii) by the Executive for any reason
other than Good Reason; or (iii) by reason of the Executive's death or
permanent disability, no payments shall be made to the Executive under this
Agreement, and the Company shall have no further obligations under this
Agreement. For purposes of the foregoing, "permanent disability" shall mean
the Executive's disability as defined under the Company's long-term disability
plan as in effect from time to time.
5. Legal Fees and Expenses. It is the intent of the Company that
the Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement, or defense of his rights under
this Agreement by litigation or otherwise because the cost and expense thereof
would substantially detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny, or
to recover from, the Executive the benefits provided or intended to be provided
to the Executive hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of his choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including,
without limitation, the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer,
stockholder, or other person or entity affiliated with the Company, in any
jurisdiction. Without respect to whether the Executive prevails, in whole or
in part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing.
6. No Mitigation Obligation. The Company hereby acknowledges
that it will be difficult, and may be impossible, for the Executive to find
reasonably comparable employment following termination of employment.
Accordingly, the payments and benefits that the Company will pay or provide to
the Executive pursuant to this Agreement will be liquidated damages, and the
Executive will not be required to mitigate the amount of any such payment or
benefit by seeking other employment or otherwise, nor will any profits, income,
earnings, or other benefits from any source whatsoever create any mitigation,
offset, reduction, or any other obligation of payments and benefits provided
pursuant to this Agreement.
7. Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, local or foreign taxes as the Company
is required to withhold pursuant to any law, regulation or ruling. The
Executive shall bear all expense of, and be solely responsible for, all
federal, state, local or foreign taxes due with respect to any payments or
benefits received pursuant to this Agreement.
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8. Successors and Binding Agreement.
(a) The Company will require any successor, whether
direct of indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company is required to perform it. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation and benefits from the Company in the same amount and on the
same terms as the Executive would be entitled hereunder if the Executive had
terminated employment for Good Reason, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the date on which the Executive's employment with the Company was
terminated. As used in this Agreement, "the Company" shall include any
successor to the Company's business and/or assets as aforesaid which assumes
and agrees to perform this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive dies while any amount is still payable hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee or other designee or, if
there is no such designee, to the Executive's estate.
9. Notices. For all purposes of this Agreement, all
communications, including, without limitation, notices, consents, requests, or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
two (2) business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or one (1) business
day after having been sent by a nationally recognized overnight courier
service, addressed to the Company (to the attention of the General Counsel of
the Company) at its principal executive office and to the Executive at his
principal residence, or to such other address as either party may have
furnished to the other in writing and in accordance herewith, except that
notices of changes of address will be effective only upon receipt.
10. Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Connecticut, without
giving effect to the principles of conflict of laws of such State, to the
extent not preempted by applicable federal law.
11. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
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12. Arbitration. Any dispute arising out of, or in any way
relating to, this Agreement shall be resolved by arbitration in Connecticut
through the Hartford, Connecticut office of the American Arbitration
Association in accordance with the Model Employment Arbitration Procedures of
the American Arbitration Association except to the extent such provisions are
modified as hereinafter provided. The arbitration proceeding shall be
conducted by three (3) arbitrators. The Executive and the Company shall each
designate one (1) arbitrator, each of whom shall be an attorney admitted to
practice in one or more states who has ten (10) or more years of experience in
employment matters, and the arbitrators so selected shall thereafter designate
a third arbitrator (who shall be a member of the National Academy of
Arbitrators) by mutual agreement. The arbitrators shall have no authority to
modify any provision of this Agreement or to award a remedy for a dispute
involving this Agreement other than a benefit specifically provided under or by
virtue of this Agreement. The decision of the arbitrators shall be final and
binding on the Company and the Executive.
13. Merger. This Agreement expresses in full the understanding of
the Company and the Executive with respect to compensation and benefits
following a Change in Control and the subsequent termination of the Executive's
employment, and all promises, representations, understandings and arrangements
with respect to such compensation and benefits following a Change in Control
and the subsequent termination of the Executive's employment contained in the
Employment Agreement between the Executive and the Company dated [ ] (the
"Employment Agreement") and all other agreements and promises, written or
otherwise, expressed or implied, with respect to such compensation and benefits
and such termination are wholly superseded and merged herein. Except as
otherwise specifically provided in this Agreement, nothing in this Agreement
will prevent or limit the Executive's present or future participation in any
benefit, bonus, incentive, or other plan or program provided by the Company for
which the Executive may qualify, nor will this Agreement in any manner limit or
otherwise affect such rights as the Executive may have under any such plan or
program. Amounts or benefits which are vested or which the Executive is
otherwise entitled to receive under any such plan or program of the Company at
or subsequent to the date of termination of employment shall be payable in
accordance with such plan or program, except as otherwise expressly provided in
this Agreement.
14. Waiver. Failure by either party hereto to insist upon strict
adherence to any one or more of the covenants or terms contained herein, on one
or more occasions, shall not be construed to be a waiver nor will it deprive
such party of the right to require strict compliance with the same thereafter.
15. Amendments. No amendments hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by all parties hereto.
16. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed effective as of the date first written above.
Loctite Corporation
By:
------------------------------
Its
---------------------------------
[Executive]
12
<PAGE> 1
Exhibit 99.6
--------------------------------------------------------------
LOCTITE CORPORATION
and
THE FIRST NATIONAL BANK OF BOSTON, as
Rights Agent
Rights Agreement
Dated as of April 14, 1994
--------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
Section 1. Certain Definitions........................... 1
Section 2. Appointment of Rights Agent................... 8
Section 3. Issue of Right Certificates................... 8
Section 4. Form of Right Certificate..................... 10
Section 5. Countersignature and Registration............. 11
Section 6. Transfer, Split-Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificate...................... 12
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights..................... 12
Section 8. Cancellation and Destruction of
Right Certificates............................ 15
Section 9. Reservation and Availability of
Common Shares................................. 15
Section 10. Common Shares Record Date..................... 16
Section 11. Adjustment of Purchase Price, Number
and Kind of Shares or Number of
Rights........................................ 16
Section 12. Certificate of Adjusted Purchase Price
or Number of Shares........................... 25
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.................... 25
Section 14. Fractional Rights and Fractional Shares....... 28
i
<PAGE> 3
Section 15. Rights of Action.............................. 29
Section 16. Agreement of Right Holders.................... 29
Section 17. Right Certificate Holder Not Deemed a
Stockholder................................... 30
Section 18. Concerning the Rights Agent................... 30
Section 19. Merger or Consolidation or Change of
Name of Rights Agent.......................... 31
Section 20. Duties of Rights Agent........................ 32
Section 21. Change of Rights Agent........................ 34
Section 22. Issuance of New Right Certificates............ 35
Section 23. Redemption and Termination.................... 35
Section 24. Exchange......................................38
Section 25. Notice of Certain Events...................... 38
Section 26. Notices....................................... 39
Section 27. Supplements and Amendments.................... 40
Section 28. Determination and Actions by the Board
of Directors of the Corporation, etc.......... 41
Section 29. Successors.................................... 41
Section 30. Benefits of this Agreement.................... 41
Section 31. Severability.................................. 42
Section 32. Governing Law................................. 42
Section 33. Counterparts.................................. 42
ii
<PAGE> 4
Section 34. Descriptive Headings.......................... 42
Signatures.................................... 43
Exhibit A-1 - Form of Transferee Agreement
Exhibit A-2 - Form of Transferee Executive Officer's Certificate
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Common Shares
iii
<PAGE> 5
Defined Term Cross Reference Sheet
Acquiring Person---------------------------------Section 1(a)
Act----------------------------------------------Section 1(b)
Adjustment Shares--------------------------------Section 11(a)(ii)
Adjusted Number of Shares------------------------Section 11(a)(iii)
Adjusted Purchase Price--------------------------Section 11(a)(iii)
Adverse Person-----------------------------------Section 1(c)
Affiliate----------------------------------------Section 1(d)
Agreement----------------------------------------Preface
Associate----------------------------------------Section 1(e)
Beneficial Owner---------------------------------Section 1(f)
beneficially own---------------------------------Section 1(f)
Business Day-------------------------------------Section 1(g)
capital stock equivalent-------------------------Section 11(a)(iii)
Close of business--------------------------------Section 1(h)
Common Shares------------------------------------Section 1(i)
Corporation--------------------------------------Preface
current per share market price-------------------Section 11(d)(i)
Disinterested Director---------------------------Section 1(j)
Distribution Date--------------------------------Section 1(k)
Distribution Transaction-------------------------Section 1(l)
equivalent common shares-------------------------Section 11(b)
Exchange Act-------------------------------------Section 1(d)
Exchange Ratio-----------------------------------Section 24(a)
Final Expiration Date----------------------------Section 7(a)
Grandfathered Stockholder------------------------Section 1(n)
Henkel-------------------------------------------Section 1(o)
Henkel Percentage--------------------------------Section 1(p)
Interested Stockholder---------------------------Section 1(q)
Krieble Family Group-----------------------------Section 1(n)
Permitted Offer----------------------------------Section 1(r)
Permitted Transfer-------------------------------Section 1(s)
Permitted Transferee-----------------------------Section 1(t)
Person-------------------------------------------Section 1(u)
Principal Party----------------------------------Section 13(b)
Proration Factor---------------------------------Section 11(a)(iii)
Purchase Price-----------------------------------Section 4(a)
Record Date--------------------------------------Preface
Redemption Date----------------------------------Section 7(a)
Redemption Price---------------------------------Section 23(a)(i)
iii
<PAGE> 6
Right--------------------------------------------Preface
Right Certificate--------------------------------Section 3(a)
Rights Agents------------------------------------Preface
Rights Agreement---------------------------------Section 3(c)
Section 11(a)(ii) Event--------------------------Section 1(w)
Section 13 Event---------------------------------Section 1(x)
Security.----------------------------------------Section 11(d)
Shares Acquisition Date--------------------------Section 1(y)
Subsidiary---------------------------------------Section 1(z)
Summary of Rights--------------------------------Section 3(b)
then outstanding---------------------------------Section 1(f)(iii)
Trading Day--------------------------------------Section 11(d)(i)
Transfer-----------------------------------------Section 1(aa)
Transferee Agreement-----------------------------Section 1(c)
Transferee Certificate---------------------------Section 1(c)
Transfer Percentage------------------------------Section 1(bb)
Triggering Event---------------------------------Section 1(cc)
Unaffiliated Director----------------------------Section 1(dd)
voting securities--------------------------------Section 13(a)
iv
<PAGE> 7
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of April 14, 1994 (the
"Agreement"), between Loctite Corporation, a Delaware corporation (the
"Corporation"), and The First National Bank of Boston, a national banking
association (the "Rights Agent").
The Board of Directors of the Corporation has authorized and
declared a dividend of one right (a "Right") for each Common Share (as
hereinafter defined) of the Corporation outstanding at the close of business on
April 29, 1994 (the "Record Date"), each Right representing the right to
purchase one Common Share, upon the terms and subject to the conditions herein
set forth, and has further authorized and directed the issuance of one Right
with respect to each Common Share that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Final Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to Common Shares that shall
become outstanding after the Distribution Date and prior to the earlier of the
Redemption Date and the Final Expiration Date in accordance with the provisions
of Section 22 of this Agreement.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 10% or more of the then outstanding Common Shares (other
than as a result of a Permitted Offer (as hereinafter defined)) or was such a
Beneficial Owner at any time after the date hereof, whether or not such person
continues to be the Beneficial Owner of 10% or more of the then outstanding
Common Shares. Notwithstanding the foregoing, (A) the term "Acquiring Person"
shall not include (i) the Corporation, (ii) any Subsidiary of the Corporation,
(iii) any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation, (iv) any Person or entity organized, appointed or established by
the Corporation for or pursuant to the terms of any such plan, or (v) any
Grandfathered Stockholder and (B) no Person (including, without limitation, any
Grandfathered Stockholder) shall become an "Acquiring Person" (and no
Grandfathered Stockholder shall cease to be a Grandfathered Stockholder):
(i) as a result of the acquisition of Common Shares
by the Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by such Person
together with all
<PAGE> 8
Affiliates and Associates of such Person; provided that if (1) a Person
(including, without limitation, any Grandfathered Stockholder) would become an
Acquiring Person (but for the operation of this subclause (i)) as a result of
the acquisition of Common Shares by the Corporation, and (2) after such share
acquisition by the Corporation, such Person, or an Affiliate or Associate of
such Person, becomes the Beneficial Owner of any additional Common Shares, then
such Person shall be deemed an Acquiring Person; or
(ii) if (1) within five Business Days after such
Person would otherwise have become an Acquiring Person (but for the operation of
this subclause (ii)), such Person notifies the Board of Directors that such
Person did so inadvertently, and (2) within two Business Days after such
notification, such Person divests itself of a sufficient number of Common Shares
so that such Person is the Beneficial Owner of such number of Common Shares that
such Person no longer would be an Acquiring Person.
(b) "Act" shall mean the Securities Act of 1933, as amended
and as in effect on the date of this Agreement.
(c) "Adverse Person" shall mean any Person declared to be an
Adverse Person by a majority of the Unaffiliated Directors of the Board of
Directors of the Corporation after having determined in its business judgment
that beneficial ownership by such Person of 10% or more of the outstanding
Common Shares would be reasonably likely to materially adversely affect the
Corporation or its stockholders. In the event that in reliance upon the
representations and warranties of any Person set forth in the Transferee
Agreement for such Person, the Transfer Certificate for such Person and any
other instrument or document delivered to Loctite by such Person, the
Unaffiliated Directors determined that such Person was not an Adverse Person,
the Unaffiliated Directors may at any time thereafter declare such Person to be
an Adverse Person as of the date of such declaration if the Unaffiliated
Directors should at any time determine that any representation and warranty made
by such Person in its Transferee Agreement, its Transferee Certificate or any
such other document or instrument delivered to Loctite by such Person was
incorrect at the time that it was made, and upon such declaration by the
Unaffiliated Directors, such Person shall no longer be deemed to be a Permitted
Transferee for any purpose under this Agreement (including, without limitation,
the definition of Grandfathered Stockholder).
(d) "Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended and in effect on the date of this Agreement (the
"Exchange Act").
(e) "Associate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act;
provided, however,
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<PAGE> 9
that notwithstanding anything herein to the contrary, no Person shall be deemed
an Associate of Henkel for any purpose hereof or at any time hereunder.
(f) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than an agreement by Henkel to
Transfer to a proposed Permitted Transferee those Common Shares subject to such
proposed Permitted Transfer and customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) relating to the acquisition, holding, voting (except to
the extent contemplated by the proviso to Section l(f)(ii)(B)) or disposing of
any securities of the Corporation.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, (A) Henkel shall not be deemed the Beneficial Owner
of, or to beneficially own, any Common Shares held by any member of the Krieble
Family Group as a result of the right of first refusal over such Common Shares
held by Henkel until and to the extent that Henkel has exercised its right of
first refusal and purchased such Common Shares; (B)
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<PAGE> 10
the phrase "then outstanding", when used with reference to a Person's Beneficial
Ownership of securities of the Corporation, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder; and (C) the Corporation shall not be
deemed the Beneficial Owner of, or to beneficially own, any Common Shares held
by any member of the Krieble Family Group as a result of the right of first
refusal over such Common Shares that may from time to time be held by the
Corporation and such Common Shares shall be deemed issued and outstanding for
all purposes hereunder, in each case, until and to the extent that the
Corporation has exercised its right of first refusal and purchased such Common
Shares.
(g) "Business Day" shall mean any day other than a Saturday,
Sunday or federal holiday.
(h) "Close of business" on any given date shall mean 5:00
P.M., Boston time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Boston time, on the next succeeding
Business Day.
(i) "Common Shares" when used with reference to the
Corporation shall mean the shares of Common Stock, par value $0.01 per share, of
the Corporation or, in the event of a subdivision, combination or consolidation
with respect to such shares of Common Stock, the shares of Common Stock
resulting from such subdivision, combination or consolidation. "Common Shares"
when used with reference to any Person other than the Corporation shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(j) "Disinterested Director" means any director of the Board
of Directors of the Corporation who is neither an officer or employee of the
Corporation nor any Person proposing or attempting to effect a business
combination or similar transaction with the Corporation (including, without
limitation, a merger, tender offer or exchange offer, sale of substantially all
of the Corporation's assets, or liquidation of the Corporation's assets), any
Affiliate or Associate of such Person or any other Person acting directly or
indirectly on behalf of, or as a representative of, or in concert with, any such
Person, Affiliate or Associate.
(k) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
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<PAGE> 11
(l) "Distribution Transaction" means any Transfer of Common
Shares by Henkel (i) pursuant to a public offering of those Common Shares
registered under Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), in connection with which, each of the underwriters for such
public offering certifies to the Corporation that such Common Shares were widely
distributed in connection with such public offering and that, to the best of
such underwriter's knowledge, (A) no transferee of such Common Shares in such
public offering beneficially owns, together with the Affiliates and Associates
of such transferee and after giving effect to the sale of such Common Shares in
such public offering, more than 1.0% of the then outstanding Common Shares and
(B) no more than three transferees of such Common Shares in such public offering
beneficially own, in each case together with the Affiliates and Associates of
such transferee and after giving effect to the sale of such Common Shares in
such public offering, more than 0.5% of the then outstanding Common Shares; or
(ii) pursuant to a broker's transaction made in compliance with the requirements
of Rule 144 promulgated under the Securities Act and in connection with which,
the broker who effects such broker's transaction certifies to the Corporation
that such Common Shares were widely distributed in connection with such broker's
transaction and, to the best of such broker's knowledge, (A) no transferee of
such Common Shares in such broker's transaction beneficially owns, together with
the Affiliates and Associates of such transferee and after giving effect to the
sale of such Common Shares in such broker's transaction, more than 1.0% of the
then outstanding Common Shares and (B) no more than three transferees of such
Common Shares in such broker's transaction beneficially own, in each case
together with the Affiliates and Associates of such transferee and after giving
effect to the sale of such Common Shares in such broker's transaction, more than
0.5% of the then outstanding Common Shares.
(m) "Final Expiration Date" shall have the meaning set forth
in Section 7 hereof.
(n) "Grandfathered Stockholder" shall mean (i) Henkel, (ii)
Mr. Robert H. Krieble, Ms. Nancy B. Krieble, Mr. Frederick B. Krieble, Ms.
Collette C. Krieble, Mr. James P. Fusscas, Ms. Helen K. Fusscas, Mr. Martin
Wolman, Management I, Limited and Management II, Limited, as a "group" (as such
term is defined or used under Rule 13d-5(b) of the General Rules and Regulations
under the Exchange Act) (collectively as such group, the "Krieble Family Group")
and (iii) any Permitted Transferee; provided, however, that, except as provided
in Section 1(a)(B) hereof, (A) Henkel shall cease to be a Grandfathered
Stockholder at the time after the date hereof, Henkel, together with all
Affiliates of Henkel, beneficially owns a percentage of the outstanding Common
Shares in excess of the Henkel Percentage then in effect (other than as a result
of a Permitted Offer), (B) the Krieble Family Group shall cease to be a
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<PAGE> 12
Grandfathered Stockholder at the time after the date hereof any member of the
Krieble Family Group, or an Affiliate or Associate of any such member of the
Krieble Family Group, beneficially owns any additional Common Shares (other than
as a result of a stock dividend, a stock split, a grant by the Corporation
pursuant to a directors benefit plan established by the Corporation of Common
Shares or options to purchase Common Shares (and the exercise thereof) or a
Permitted Offer), and (C) any Permitted Transferee shall cease to be a
Grandfathered Stockholder at the time such Permitted Transferee, or an Affiliate
or Associate of such Permitted Transferee, beneficially owns any additional
Common Shares (other than as a result of a stock dividend, a stock split or a
Permitted Offer).
(o) "Henkel" shall mean Henkel Corporation, a Delaware
corporation.
(p) "Henkel Percentage" shall mean 35% on the date hereof.
From and after the date hereof, the Henkel Percentage shall be subject to
adjustment, as follows: (i) in the event of any Transfer of Common Shares by
Henkel or any of its Affiliates (other than to an Affiliate of Henkel) by any
means other than a Distribution Transaction, the Henkel Percentage then in
effect shall be reduced by the Transfer Percentage in respect of such Transfer,
(ii) in the event of Transfers of Common Shares aggregating more than 10% of the
outstanding Common Shares by Henkel or any of its Affiliates by means of
Distribution Transactions, the Henkel Percentage then in effect shall be reduced
by the aggregate Transfer Percentages in respect of such Transfers aggregating
more than 10% of the outstanding Common Shares and (iii) in the event the
Corporation acquires any Common Shares, the Henkel Percentage immediately
following such acquisition shall be equal to the greater of (A) the Henkel
Percentage immediately prior to such acquisition and (B) the percentage of the
outstanding Common Shares beneficially owned by Henkel immediately following
such acquisition.
(q) "Interested Stockholder" shall mean any Acquiring Person
or any Affiliate or Associate of an Acquiring Person or any other Person in
which any such Acquiring Person, Affiliate or Associate has an interest, or any
other Person acting directly or indirectly on behalf of or in concert with any
such Acquiring Person, Affiliate or Associate.
(r) "Permitted Offer" shall mean a tender or exchange offer
for all outstanding Common Shares (A) which is at a price and on terms
determined, prior to the purchase of shares under such tender or exchange offer,
by at least (i) a majority of the Disinterested Directors and (ii) a majority of
all of the members of the Board of Directors, to be adequate (taking into
account all factors that such directors deem relevant) and otherwise in the best
interests of the Corporation, its stockholders and its other relevant
constituencies (other than the Person or any Affiliate or Associate thereof on
whose basis
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<PAGE> 13
the offer is being made) taking into account all factors that such directors may
deem relevant or (B) (i) which remains open for a period of at least 60 days
after the tender or exchange offer has commenced and (ii) the consummation of
which results in the Person on whose basis the tender or exchange offer is made
becoming the Beneficial Owner of more than 50% of the outstanding Common Shares.
(s) "Permitted Transfer" means any Transfer of Common Shares
by Henkel, by the Krieble Family Group as a whole, or by any Permitted
Transferee (i) to any Person that (A) has not been declared an Adverse Person by
the Unaffiliated Directors, (B) does not beneficially own, after giving effect
to such Transfer, (1) in the case of a Transfer from the Krieble Family Group or
any Permitted Transferee, any Common Shares other than the Common Shares
transferred by the Krieble Family Group or such Permitted Transferee, as
applicable, to such Person in such Transfer, or (2) in the case of a Transfer
from Henkel, a percentage of the then outstanding Common Shares in excess of the
lesser of (I) the Henkel Percentage in effect immediately prior to such proposed
Permitted Transfer and (II) the sum of 0.3% of the then outstanding Common
Shares and the percentage of the then outstanding Common Shares to be
transferred by Henkel to such Person in such proposed Permitted Transfer, (C) at
least 30 days prior to the consummation of such Transfer, executes and delivers
to the Corporation an agreement, substantially in the form of Exhibit A-1
attached hereto (a "Transferee Agreement") and (D) immediately prior to the
consummation of such Transfer, executes and delivers to the Corporation an
executive officer's certificate, substantially in the form of Exhibit A-2
attached hereto (a "Transferee Certificate") and (ii) that is consummated on the
"Closing Date" referred to in the Transferee Agreement for such proposed
Permitted Transfer and pursuant to the terms and conditions set forth in the
"Acquisition Agreement" referred to in such Transferee Agreement.
(t) "Permitted Transferee" means any transferee of Common
Shares pursuant to a Permitted Transfer.
(u) "Person" shall mean any individual, firm, partnership,
corporation, trust, association, joint venture or other entity, and shall
include any successor (by merger or otherwise) of such entity.
(v) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(w) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii) hereof.
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<PAGE> 14
(x) "Section 13 Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a) hereof.
(y) "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to the Exchange Act) by the
Corporation or an Acquiring Person that an Acquiring Person has become such.
(z) "Subsidiary" of any Person shall mean any corporation or
other Person of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(aa) "Transfer" shall mean any sale, assignment, transfer or
other disposition.
(bb) "Transfer Percentage" means with respect to any Transfer
of Common Shares, the percentage of the then outstanding Common Shares subject
to such Transfer.
(cc) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
(dd) "Unaffiliated Director" means, with respect to any
proposed Permitted Transfer, any director of the Board of Directors of the
Corporation who is neither a designee or representative of the proposed
transferor in respect of such Proposed Transfer, or any Affiliate or Associate
of such proposed transferor, nor an officer or employee of the Corporation.
Section 2. Appointment of Rights Agent. The Corporation hereby
appoints the Rights Agent to act as agent for the Corporation and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of Common Shares) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier
of (i) the Shares Acquisition Date or (ii) the close of business on the tenth
day (or such later date as may be determined by action of the Corporation's
Board of Directors) after the date of the commencement by any Person (other than
the Corporation, any Subsidiary of the Corporation, any employee benefit plan of
the Corporation or of any Subsidiary of the Corporation or any Person or entity
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan) of, or of the first public
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<PAGE> 15
announcement of the intention of any Person (other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of any Subsidiary of the Corporation or any Person or entity organized,
appointed or established by the Corporation for or pursuant to the terms of any
such plan) to commence (which intention to commence remains in effect for five
Business Days after such announcement), a tender or exchange offer the
consummation of which would result in any Person becoming an Acquiring Person
(including, in the case of both (i) and (ii), any such date which is after the
date of this Agreement and prior to the issuance of the Rights), the earlier of
such dates being herein referred to as the "Distribution Date", (x) the Rights
will be evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of the underlying
Common Shares (including a transfer to the Corporation); provided, however, that
if a tender offer prior to the occurrence of a Distribution Date is terminated,
then no Distribution Date shall occur as a result of such tender offer. As soon
as practicable after the Distribution Date, the Corporation will prepare and
execute, the Rights Agent will countersign, and the Corporation will send or
cause to be sent by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Corporation, a Right
Certificate, substantially in the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Common Shares,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the close of business on the Record Date, at the address of such holder shown on
the records of the Corporation. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with such Common Shares.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence
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<PAGE> 16
of this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, and the Redemption Date or the Final Expiration Date shall be
deemed also to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between Loctite Corporation
and The First National Bank of Boston, dated as of April 14, 1994 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of Loctite
Corporation. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Loctite Corporation will mail to the holder of
this certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and certain related persons, whether currently held by or on behalf
of such Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing
legend, until the Distribution Date, the Rights associated with the Common
Shares represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Corporation purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
so that the Corporation shall not be entitled to exercise any Rights associated
with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificate. (a) The Right
Certificates (and the forms of election to purchase and of assignment to be
printed on the reverse thereof) shall be substantially in the form set forth in
Exhibit B hereto and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Corporation may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Right Certificates shall entitle the holders thereof to purchase such number
of Common Shares as shall be set forth therein at the price per Common Share set
forth therein (the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of
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each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby are
null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Corporation by its Chairman of
the Board, its Chief Executive Officer, its President, any of its Vice
Presidents, or its Treasurer, either manually or by facsimile signature, shall
have affixed thereto the Corporation's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Corporation, either
manually or by facsimile signature. The Right Certificates shall be
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Corporation who shall have signed
any of the Right Certificates shall cease to be such officer of the Corporation
before countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates may nevertheless be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Corporation; and any Right Certificate may be signed on
behalf of the Corporation by any person who, at the actual date of the execution
of such Right Certificate, shall be a proper officer of the Corporation to sign
such Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated as the appropriate place for
surrender of such Right Certificate or transfer, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of
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the Right Certificates, the number of Rights evidenced on its face by each of
the Right Certificates and the certificate number and the date of each of the
Right Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate.
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
Common Shares as the Right Certificate or Right Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Right Certificate or Right Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be transferred, split up, combined or exchanged at the
office of the Rights Agent designated for such purpose. Neither the Rights Agent
nor the Corporation shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the
Corporation shall reasonably request. Thereupon the Rights Agent shall, subject
to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to
the Person entitled thereto a Right Certificate or Right Certificates, as the
case may be, as so requested. The Corporation may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
Upon receipt by the Corporation and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the
Corporation's request, reimbursement to the Corporation and the Rights Agent of
all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Corporation
will make and deliver a new Right Certificate of like tenor to the Rights Agent
for countersignature and delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or
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in part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price for the total number of Common Shares
(or other securities, as the case may be) as to which such surrendered Rights
are exercised, at or prior to the earliest of (i) the close of business on April
14, 2004 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date") or (iii) the
consummation of a transaction contemplated by Section 13(d) hereof.
(b) The Purchase Price for each Common Share pursuant to the
exercise of a Right shall initially be $175.00, shall be subject to adjustment
from time to time as provided in Sections 11 and 13(a) hereof and shall be
payable in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment of the Purchase Price for the Common
Shares (or other securities, as the case may be) to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 6 hereof by certified check,
cashier's check or money order payable to the order of the Corporation, the
Rights Agent shall thereupon promptly (i) (A) requisition from any transfer
agent of the Common Shares certificates for the number of Common Shares to be
purchased and the Corporation hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Corporation, in its sole
discretion, shall have elected to deposit the Common Shares issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of Common Shares
as are to be purchased (in which case certificates for the Common Shares
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Corporation will direct the depositary agent to comply
with such requests, (ii) when appropriate, requisition from the Corporation the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate, after receipt thereof,
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event that the Corporation is obligated to issue other
securities of the Corporation pursuant to Section 11(a) hereof, the Corporation
will make all arrangements necessary so that such other securities are available
for distribution by the Rights Agent, if and when appropriate.
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<PAGE> 20
In addition, in the case of an exercise of the Rights by a
holder pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof, or the Rights Agent shall place an appropriate notation on
the Right Certificate with respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Corporation has determined is part of a
plan, arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Corporation shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Corporation shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the
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<PAGE> 21
certificate contained in the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Corporation
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Corporation or to any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Corporation shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Corporation, or shall, at the
written request of the Corporation, destroy such canceled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Corporation.
Section 9. Reservation and Availability of Common Shares. The
Corporation covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued Common Shares, or any authorized and issued Common
Shares held in its treasury, the number of Common Shares that will be sufficient
to permit the exercise in full of all outstanding Rights and, after the
occurrence of a Section 11(a)(ii) Event, shall, to the extent reasonably
practicable, so reserve and keep available a sufficient number of Common Shares
(and/or other securities) which may be required to permit the exercise in full
of the Rights pursuant to this Agreement.
So long as the Common Shares (or other securities, as the case
may be) issuable upon the exercise of the Rights may be listed on any national
securities exchange, the Corporation shall use its best efforts to cause, from
and after such time as the Rights become exercisable, all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
The Corporation covenants and agrees that it will take all
such action as may be necessary to ensure that all Common Shares (or other
securities, as the case may be) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and non-assessable shares or securities.
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The Corporation further covenants and agrees that it will pay
when due and payable any and all U.S. federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the Right
Certificates or of any Common Shares (or other securities, as the case may be)
upon the exercise of Rights. The Corporation shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates or depositary receipts for the Common Shares (or other securities,
as the case may be) in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise, or to issue or to
deliver any certificates or depositary receipts for Common Shares (or other
securities, as the case may be) upon the exercise of any Rights, until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Corporation's reasonable satisfaction that no such tax is due.
The Corporation shall use its best efforts to (i) file, as
soon as practicable following the Shares Acquisition Date (or, if required by
law, at such earlier time following the Distribution Date as so required), a
registration statement under the Act, with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act and the rules and regulations
thereunder) until the date of the expiration of the rights provided by Section
11(a)(ii). The Corporation will also take such action as may be appropriate
under the blue sky laws of the various states.
Section 10. Common Shares Record Date. Each person in whose
name any certificate for Common Shares (or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Common Shares (or other securities, as the
case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that, if the date of such surrender and
payment is a date upon which the Common Shares (or other securities, as the case
may be) transfer books of the Corporation are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Common Shares (or
other securities, as the case may be) transfer books of the Corporation are
open.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
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covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after
the date of this Agreement (A) declare a dividend on the Common Shares payable
in Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares into a smaller number of Common Shares or (D) issue
any shares of its capital stock in a reclassification of the Common Shares
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Common Shares transfer books of the Corporation were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Corporation issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with
its Affiliates and Associates, shall become an Acquiring Person, then proper
provision shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall, for a period of 60 days after the later of
the occurrence of any such event or the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of Common
Shares as shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of Common Shares for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event, and dividing that product by (y) 50% of the then current per share market
price of the Corporation's Common Shares (determined pursuant to Section 11(d)
hereof) on the date of such first occurrence (such number of shares being
referred to as the "Adjustment Shares"); provided, however, that if the
transaction that would otherwise give rise to the foregoing adjustment is also
subject to
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<PAGE> 24
the provisions of Section 13 hereof, then only the provisions of Section 13
hereof shall apply and no adjustment shall be made pursuant to this Section
11(a)(ii).
(iii) In the event that there shall not be sufficient
treasury shares or authorized but unissued (and unreserved) Common Shares to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) and the Rights become so exercisable, notwithstanding any
other provision of this Agreement, to the extent necessary and permitted by
applicable law, each Right shall thereafter represent the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, (x) a number of (or fractions of) Common Shares (up to the
maximum number of Common Shares which may permissibly be issued) and (y) a
number of (or fractions of) other equity securities of the Corporation (or, in
the discretion of the Board of Directors of the Corporation, debt) which the
Board of Directors of the Corporation has determined to have the same aggregate
current market value (determined pursuant to Section 11(d)(i) and (ii) hereof,
to the extent applicable) as one Common Share (such number of (or fractions of)
Common Shares (or other equity securities or debt of the Corporation) being
referred to as a "capital stock equivalent"), equal in the aggregate to the
number of Adjustment Shares; provided, however, if sufficient Common Shares
and/or capital stock equivalents are unavailable, then the Corporation shall, to
the extent permitted by applicable law, take all such action as may be necessary
to authorize additional Common Shares or capital stock equivalents for issuance
upon exercise of the Rights, including the calling of a meeting of stockholders;
and provided, further, that if the Corporation is unable to cause sufficient
Common Shares and/or capital stock equivalents to be available for issuance upon
exercise in full of the Rights, then each Right shall thereafter represent the
right to receive the Adjusted Number of Shares upon exercise at the Adjusted
Purchase Price (as such terms are hereinafter defined). As used herein, the term
"Adjusted Number of Shares" shall be equal to that number of (or fractions of)
Common Shares (and/or capital stock equivalents) equal to the product of (x) the
number of Adjustment Shares and (y) a fraction, the numerator of which is the
number of Common Shares (and/or capital stock equivalents) available for
issuance upon exercise of the Rights and the denominator of which is the
aggregate number of Adjustment Shares otherwise issuable upon exercise in full
of all Rights (assuming there were a sufficient number of Common Shares
available) (such fraction being referred to as the "Proration Factor"). The
"Adjusted Purchase Price" shall mean the product of the Purchase Price and the
Proration Factor. The Board of Directors of the Corporation may, but shall not
be required to, establish procedures to allocate the right to receive Common
Shares and capital stock equivalents upon exercise of the Rights among holders
of Rights.
(b) In case the Corporation shall fix a record date for the
issuance of rights (other than the Rights), options or warrants to all holders
of Common Shares
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entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Shares (or shares having the same
rights and privileges as the Common Shares ("equivalent common shares")) or
securities convertible into Common Shares or equivalent common shares at a price
per Common Share or equivalent common share (or having a conversion price per
share, if a security convertible into Common Shares or equivalent common shares)
less than the then current per share market price of the Common Shares (as
determined pursuant to Section 11(d) hereof) on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares and/or equivalent
common shares so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current per
share market price, and the denominator of which shall be the number of Common
Shares outstanding on such record date plus the number of additional Common
Shares and/or equivalent common shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent.
Common Shares owned by or held for the account of the Corporation shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Corporation shall fix a record date for the
making of a distribution to all holders of the Common Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Common Shares) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the then current per share market price (as determined pursuant
to Section 11(d) hereof) of the Common Shares on such record date, less the fair
market value (as determined in
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good faith by the Board of Directors of the Corporation, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Common Share and the denominator of which shall be such
current per share market price of the Common Shares; provided, however, that in
no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Corporation to be issued upon exercise of one Right. Such adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares, or (B) any subdivision, combination or reclassification of such Security
and prior to the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Corporation. If on any
such date no such market maker is
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making a market in the Security, the fair value of the Security on such date as
determined in good faith by the Board of Directors of the Corporation shall be
used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder,
the "current per share market price" of the Common Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Common Shares
are not publicly traded, the "current per share market price" of the Common
Shares shall mean the fair value per share as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent.
(e) Notwithstanding anything herein to the contrary, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest hundred thousandth of a Common Share or
thousandth of any other share or security as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment or (ii) the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Corporation
other than Common Shares, thereafter the number of other shares so receivable
upon exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in Section 11(a) through (c), inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Common
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Corporation subsequent
to any adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
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(h) Unless the Corporation shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Common Shares (calculated to the nearest thousandth of a Common Share) obtained
by (i) multiplying (x) the number of Common Shares covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Corporation may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of Common Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of Common Shares for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Right Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Right Certificates so to
be distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
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(j) Irrespective of any adjustment or change in the Purchase
Price or the number of Common Shares issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to express
the Purchase Price and the number of Common Shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the number of
Common Shares or other securities issuable upon exercise of the Rights, the
Corporation shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue such number of fully paid and non-assessable Common Shares or other
securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Common Shares or other securities of the Corporation, if any, issuable upon
such exercise over and above the Common Shares or other securities of the
Corporation, if any, issuable upon exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Corporation
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Notwithstanding anything in this Section 11 to the
contrary, the Corporation shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that (i) any consolidation or subdivision of the Common
Shares, (ii) issuance wholly for cash of Common Shares at less than the current
market price, (iii) issuance wholly for cash of Common Shares or securities
which by their terms are convertible into or exchangeable for Common Shares,
(iv) stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Corporation to holders of its Common
Shares shall not be taxable to such stockholders.
(n) The Corporation covenants and agrees that it shall not, at
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Corporation in a transaction which does not
violate Section 11(o) hereof), (ii) merge with or into any other Person (other
than a Subsidiary of the Corporation in a transaction which does not violate
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related transactions,
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assets or earning power aggregating more than 50% of the assets or earning power
of the Corporation and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(o) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(n).
(o) The Corporation covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action the purpose of which
is to, or if at the time such action is taken it is reasonably foreseeable that
the effect of such action is to, materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the
contrary, in the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Corporation shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case, the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
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(q) The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Sections 11 or 13
hereof, the Corporation shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Common Shares a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) In the event that, on or following the Shares
Acquisition Date, directly or indirectly, (x) the Corporation shall consolidate
with, or merge with and into, any Interested Stockholder, or if in such merger
or consolidation all holders of Common Shares are not treated alike, any other
Person, (y) the Corporation shall consolidate with, or merge with, any
Interested Stockholder, or if in such merger or consolidation all holders of
Common Shares are not treated alike, any other Person, and the Corporation shall
be the continuing or surviving corporation of such consolidation or merger
(other than, in a case of any transaction described in (x) or (y), a merger or
consolidation which would result in all of the securities generally entitled to
vote in the election of directors ("voting securities") of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of the surviving
entity) all of the voting securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or consolidation),
or (z) the Corporation shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Corporation and its Subsidiaries (taken as a
whole) to any Interested Stockholder or Stockholders or if in such transaction
all holders of Common Shares are not treated alike, any other Person (other than
the Corporation or any Subsidiary of the Corporation in one or more transactions
each of which does not violate Section 11(o) hereof), then, and in each such
case (except as provided in Section 13(d) hereof), proper provision shall be
made so that (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
a price equal to the then current Purchase
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Price, in accordance with the terms of this Agreement and in lieu of Common
Shares, such number of freely tradeable Common Shares of the Principal Party (as
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of Common Shares for
which a Right is then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii)) and dividing that product by (B)
50% of the then current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Corporation pursuant to this Agreement;
(iii) the term "Corporation" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the Common Shares
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which Common Shares of the Corporation are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation (including,
if applicable, the Corporation if it is the surviving corporation); and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any of the foregoing cases, (1) if the Common Shares
of such Person are not at such time and have not been continuously over the
preceding twelve (12) month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect Subsidiary of another Person the
Common Shares of which are and have been so registered, "Principal Party" shall
refer to such other Person; (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Shares having the greatest
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aggregate market value; and (3) in case such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth in (1) and (2)
above shall apply to each of the chains of ownership having an interest in such
joint venture as if such party were a "Subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Corporation shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of its authorized Common Shares which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Corporation and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under
the Act with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all respects with
the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. The rights
under this Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if: (i) such transaction is
consummated with a Person or Persons who
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acquired Common Shares pursuant to a Permitted Offer (or a wholly owned
Subsidiary of any such Person or Persons); (ii) the price per Common Share
offered in such transaction is not less than the price per Common Share paid to
all holders of Common Shares whose shares were purchased pursuant to such
Permitted Offer; and (iii) the form of consideration offered in such transaction
is the same as the form of consideration paid pursuant to such Permitted Offer.
Upon consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares. (a) The
Corporation shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Corporation. If on any such date no such market maker is making a market in
the Rights, the fair value of the Rights on such date as determined in good
faith by the Board of Directors of the Corporation shall be used.
(b) The Corporation shall not be required to issue fractions
of Common Shares upon exercise of the Rights or to distribute certificates which
evidence fractional Common Shares. In lieu of fractional Common Shares, the
Corporation shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one Common Share. For the purposes
of this Section 14(b), the current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant to
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Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
share upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect
of this Agreement, excepting the rights of action given to the Rights Agent
under Section 18 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Shares), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Corporation to enforce, or otherwise act in respect of,
his right to exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this
Agreement.
Section 16. Agreement of Right Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Corporation and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate form fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the
Corporation and the Rights Agent may deem and treat the person in whose name the
Right Certificate (or, prior to the Distribution Date, the associated Common
Shares certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificate or the associated Common
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Shares certificate made by anyone other than the Corporation or the Rights
Agent) for all purposes whatsoever, and neither the Corporation nor the Rights
Agent, subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the
contrary, neither the Corporation nor the Rights Agent shall have any liability
to any holder of a Right or a beneficial interest in a Right or other Person as
a result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Corporation must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Common Shares or any
other securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or other distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Corporation
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Corporation also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss, liability, or expense,
incurred without negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability in the premises. The
indemnity
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provided for herein shall survive the expiration of the Rights and the
termination of this Agreement.
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for Common Shares or for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer or all or substantially all of the corporate trust business
of the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
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Section 20. Duties of Rights Agent. The Rights Agent
undertakes only those duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Corporation and the holders
of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Corporation), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of an Acquiring Person and
the determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature on such Right Certificates) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Corporation of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or any
adjustment required under the provisions of Section 11 or Section 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to
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the exercise of Rights evidenced by Right Certificates after receipt of the
certificate described in Section 12 hereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any Common Shares to be issued pursuant to this Agreement or any
Right Certificate or as to whether any Common Shares will, when issued, be
validly authorized and issued, fully paid and non-assessable.
(f) The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer or the Secretary of the
Corporation, and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any action taken or
suffered by it in good faith or lack of action in accordance with instructions
of any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Corporation may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
any officer of the Corporation actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instruction in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or lend
money to the Corporation or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or for any other
legal entity.
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(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Corporation resulting from any
such act, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Corporation and
to the transfer agent of the Common Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Corporation
may remove the Rights Agent or any successor Rights Agent upon sixty (60) days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to the transfer agent of the Common Shares by registered or
certified mail, and to holders of the Right Certificates by first-class mail. If
the Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Corporation shall appoint a successor to the Rights Agent. If the
Corporation shall fail to make such appointment within a period of sixty (60)
days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Corporation), then
the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Corporation or by such a court, shall be
a corporation organized and doing business under the laws of the United States
or of the State of New York (or of any other state of the United States so long
as such corporation is authorized to do business as a banking institution in the
State of New York), in good standing, having an office in the State of New York,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or
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examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$100,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and the transfer
agent of the Common Shares, and mail a notice thereof in writing to the
registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Corporation may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors of
the Corporation to reflect any adjustment or change in the Purchase Price and
the number or kind or class of shares or other securities or property
purchasable under the Right Certificates made in accordance with the provisions
of this Agreement.
In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the earliest of the
Redemption Date, the Final Expiration Date and the consummation of a transaction
contemplated by Section 13(d) hereof, the Corporation (a) shall with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Corporation, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Corporation, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) the Corporation shall not be obligated to issue any such Right
Certificates if, and to the extent that, the Corporation shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Corporation or the Person to whom such Right Certificate
would be issued, and (ii) no Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination. (a)(i) Subject to
Section 23(a)(iii), the Board of Directors of the Corporation may, at its
option, redeem all but not less than all the then outstanding Rights at a
redemption price of $0.01 per Right,
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as such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"), at any time
prior to the earlier of (x) the time that any Person becomes an Acquiring
Person, or (y) the Final Expiration Date. The Corporation may, at its option,
pay the Redemption Price either in Common Shares (based on the "current per
share market price," as defined in Section 11(d) hereof, of the Common Shares at
the time of redemption) or cash; provided that if the Corporation elects to pay
the Redemption Price in Common Shares, the Corporation shall not be required to
issue any fractional Common Shares and the number of Common Shares issuable to
each holder of Rights shall be rounded down to the next whole share.
(ii) In addition, subject to Section 23(a)(iii), the
Board of Directors of the Corporation may, at its option, at any time following
a Shares Acquisition Date but prior to any Section 13 Event redeem all but not
less than all of the then outstanding Rights at the Redemption Price in
connection with any Section 13 Event in which all holders of Common Shares are
treated alike and not involving (other than as a holder of Common Shares being
treated like all other such holders) an Interested Stockholder.
(iii) The Board of Directors of the Corporation may
only redeem Rights pursuant to Section 23(a)(i) or 23(a)(ii) hereof if (A) a
majority of the Disinterested Directors, and (B) a majority of all of the
directors of the Corporation authorize such redemption. Notwithstanding anything
in this Agreement to the contrary, the Rights may not be redeemed pursuant to
this Section 23 unless there is at least one member of the Board of Directors of
the Corporation that is a Disinterested Director at the time of such redemption.
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the date for redemption set forth (or determined in
the manner specified in) in a resolution of the Board of Directors of the
Corporation ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. In the case of a redemption permitted only under Section
23(a)(ii), evidence of which shall have been filed with the Rights Agent, the
right to exercise the Rights will terminate and represent only the right to
receive the Redemption Price upon the later of ten Business Days following the
giving of such notice or the expiration of any period during which the rights
under Section 11(a)(ii) may be exercised. The Corporation shall promptly give
public notice of any such redemption; provided, however, that the failure to
give, or any defect in, any such notice shall not affect the validity of such
redemption. Within ten (10) days after such date for redemption set forth in a
resolution of the Board of Directors of the Corporation ordering
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<PAGE> 43
the redemption of the Rights, the Corporation shall mail a notice of redemption
to all the holders of the then outstanding Rights at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Corporation nor any of its Affiliates or Associates
may redeem, acquire or purchase for value any Rights at any time in any manner
other than that specifically set forth in this Section 23 and other than in
connection with the purchase of Common Shares prior to the Distribution Date.
(c) The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent of the Common Shares, and upon such action, all outstanding
Rights and Right Certificates shall be null and void without any further action
by the Corporation.
Section 24. Exchange. (a) Subject to Section 24(d), the Board
of Directors of the Corporation may, at its option, at any time after the time
that any Person becomes an Acquiring Person, exchange after all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) and Section
11(a)(ii) hereof) for Common Shares of the Corporation at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors of the Corporation shall
not be empowered to effect such exchange at any time after any Person (other
than the Corporation, any Subsidiary of the Corporation, any employee benefit
plan of the Corporation or any such Subsidiary, any entity holding Common Shares
for or pursuant to the terms of any such plan or any trustee, administrator or
fiduciary of such a plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of
the Corporation ordering the exchange of any Rights pursuant to subsection (a)
of this Section 24 and without any further action and without any notice, the
right to exercise such rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such rights held by
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<PAGE> 44
such holder multiplied by the Exchange Ratio. The Corporation shall promptly
give public notice of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. The Corporation promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) and
Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Corporation shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exchange of the Rights.
(d) The Board of Directors may only exchange Rights pursuant
to Section 24(a) hereof if (i) a majority of the Disinterested Directors, and
(ii) a majority of all of the directors of the Corporation authorize such
exchange. Notwithstanding anything in this Agreement to the contrary, the Rights
may not be exchanged pursuant to this Section 24 unless there is at least one
member of the Board of Directors of the Corporation that is a Disinterested
Director at the time of such exchange.
Section 25. Notice of Certain Events. (a) In case the
Corporation shall propose (i) to pay any dividend payable in stock of any class
to the holders of its Common Shares or to make any other distribution to the
holders of its Common Shares (other than a regularly quarterly cash dividend),
(ii) to offer to the holders of its Common Shares rights or warrants to
subscribe for or to purchase any additional Common Shares or shares of stock of
any class or any other securities, rights or options, (iii) to effect any
reclassification of its Common Shares (other than a reclassification involving
only the subdivision of outstanding Common Shares), (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Corporation in a transaction which does not violate Section 11(o)
hereof), or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer) in one or more
transactions, of 50% or more of the assets or earning power of the Corporation
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Corporation and/or any of its Subsidiaries in one or more transactions
each of which does not violate Section 11(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the
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<PAGE> 45
Corporation, then, in each such case, the Corporation shall give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action to the extent feasible and file a certificate with the Rights
Agent to that effect, which shall specify the record date for the purposes of
such stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the Common Shares for purposes of such action, and in the
case of any such other action, at least twenty (20) days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the Common Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the
Corporation shall as soon as practicable thereafter give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof
and (ii) all references in the preceding paragraph (a) to Common Shares shall be
deemed thereafter to refer also, if appropriate, to capital stock equivalents,
as provided for in Section 11(a)(iii).
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Corporation shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Rights Agent) as follows:
Loctite Corporation
10 Columbus Boulevard
Hartford, CT 06106
Attention: General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Corporation or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Corporation) as follows:
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<PAGE> 46
The First National Bank of Boston
Mail Stop 45-02-16
P.O. Box 1865
Boston, MA 02105-1865
Attention: Shareholder Services Division
(Loctite Corporation 1994 Rights
Agreement)
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Corporation.
Section 27. Supplements and Amendments. (a) Prior to the
Distribution Date, subject to Section 27(b) hereof, the Corporation and the
Rights Agent shall, if the Corporation so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date, subject to
Section 27(b) hereof, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
or amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
(b) The Corporation shall not supplement or amend any
provision of this Agreement unless (i) a majority of the Disinterested Directors
and (ii) a majority of all of
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the directors of the Corporation authorizes such supplement or amendment.
Notwithstanding anything in this Agreement to the contrary, this Agreement may
not be supplemented or amended pursuant to this Section 27 unless there is at
least one member of the Board of Directors of the Corporation that is a
Disinterested Director at the time of such supplement or amendment.
Section 28. Determination and Actions by the Board of
Directors of the Corporation, etc. Subject to Sections 1(c), 1(r), 23(a)(iii),
24(d) and 27(b) hereof, the Board of Directors of the Corporation shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board, or the Corporation, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including, without
limitation, a determination to redeem or not redeem the Rights or to amend the
Agreement and whether any proposed amendment adversely affects the interests of
the holders of Right Certificates). For all purposes of this Agreement, any
calculation of the number of Common Shares or other securities outstanding at
any particular time, including for purposes of determining the particular
percentage of such outstanding Common Shares or any other securities of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement. All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Corporation, the Rights Agent, the holders of the Right Certificates and all
other parties, and (y) not subject the Board to any liability to the holders of
the Right Certificates.
Section 29. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Corporation or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Corporation, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Corporation, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
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<PAGE> 48
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the date and year first
above written.
LOCTITE CORPORATION
By:
------------------------------
Name:
Title:
THE FIRST NATIONAL BANK
OF BOSTON
By:
------------------------------
Name:
Title:
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<PAGE> 50
Exhibit A-1
FORM OF TRANSFEREE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of [_____], between [Insert
Name of Transferee] (the "Transferee") and Loctite Corporation ("Loctite").
Capitalized terms used herein which are otherwise not defined herein shall have
the respective meanings ascribed to them in the Rights Agreement, dated as of
April 14, 1994, between Loctite and The First National Bank of Boston
(the "Rights Agreement").
WITNESSETH:
WHEREAS, pursuant to the acquisition agreement, dated as of [_______]
(the "Acquisition Agreement"), between [Insert Name of Transferor] (the
"Transferor") and the Transferee, the Transferor has agreed to sell on [_______]
(the "Closing Date") to the Transferee [_______] Common Shares pursuant to the
terms and conditions thereof (the "Proposed Sale Transaction");
WHEREAS, under the Rights Agreement, in order for the Transferee to be
deemed to be a Permitted Transferee, (i) the Transferee may not have been
declared an Adverse Person, (ii) [in the case of a Transfer from the Krieble
Family Group or a Permitted Transferee to the Transferee, the Transferee may not
beneficially own, after giving effect to the Proposed Sale Transaction
contemplated by the Acquisition Agreement, any Common Shares other than the
Common Shares transferred by the Transferor to the Transferee in the Proposed
Sale Transaction] [in the case of a Transfer from Henkel to the Transferee, the
Transferee may not beneficially own, after giving effect to the Proposed Sale
Transaction contemplated by the Acquisition Agreement, a percentage of the then
outstanding Common Shares in excess of the lesser of (1) the Henkel Percentage
in effect immediately prior to the Proposed Sale Transaction and (2) the sum of
0.3% of the then outstanding Common Shares and the percentage of the then
outstanding Common Shares to be transferred by Henkel to the Transferee in the
Proposed Sale Transaction] (iii) at least 30 days prior to consummation of the
Proposed Sale Transaction, the Transferee is required to execute and deliver to
Loctite this Agreement, which is substantially in the form of Exhibit A-1
attached to the Rights Agreement, and (iv) immediately prior to the consummation
of the Proposed Sale Transaction, the Transferee is required to execute and
deliver to Loctite an executive officer's certificate substantially in the form
of Exhibit A-2 to the Rights Agreement; and
<PAGE> 51
WHEREAS, the Transferee desires that, after giving effect to the
Proposed Sale Transaction contemplated by the Acquisition Agreement, the
Transferee will be a Permitted Transferee under the Rights Agreement and in
consideration thereof has entered into this Agreement.
NOW, THEREFORE, in consideration of the promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, each of the parties hereto agrees as follows:
1. Prohibited Actions. (a) So long as this Agreement is in
effect, (i) Loctite shall not adopt any shareholder rights plan or similar
device that does not contain substantially the same terms and conditions as
those set forth in the Rights Agreement (a "Substantially Similar Rights Plan")
and (ii) Loctite shall not amend, modify, waive, terminate or invalidate any
provision of the Rights Agreement or any Substantially Similar Rights Plan or
adopt, amend, modify, waive, terminate or invalidate any provision of its
certificate of incorporation or by-laws in any way which would adversely affect
the rights of the Transferee under the Rights Agreement or any Substantially
Similar Rights Plan.
(b) So long as this Agreement is in effect, the Transferee
shall not, and shall cause each of its Affiliates and Associates and any duly
and validly elected directors of Loctite (each a "Director") designated by, or
which is a representative of, the Transferee or any of its Affiliates or
Associates not to, directly or indirectly, seek to (i) amend, modify, waive,
terminate or invalidate, or cause the amendment, modification, waiver,
termination or invalidation of any provision of the Rights Agreement or any
Substantially Similar Rights Plan in any manner (including, without limitation,
by proxy contest, shareholder consent, or otherwise) or (ii) redeem or exchange
the Rights or any rights issued under any Substantially Similar Rights Plan, in
either case, unless a majority of the Directors who are neither nominees or
representatives of the Transferee or any Affiliate or Associate of the
Transferee nor officers or employees of Loctite (each an "Outside Director")
consent to such action in writing or at a duly called meeting of the Board of
Directors of Loctite (the "Board"); it being understood that the consent of the
Outside Directors may only be obtained if there is at least one Director that is
an Outside Director.
(c) Loctite acknowledges that nothing in this Agreement
shall be construed as prohibiting the Transferee, or its Affiliates or
Associates, from making, or in any way participating in, any "solicitation" of
"proxies" (as such terms are defined below), or becoming a "participant" in any
"election contest" (as such terms are defined
A-2
<PAGE> 52
below), in each case, for the election or removal of any of the Directors;
provided, however, that any Director designated by the Transferee, or any
Affiliate or Associate of the Transferee, shall be subject to the restrictions
contained in Section 1(b) hereof.
2. Permitted Transfers. (a) In connection with any proposed
Permitted Transfer by the Transferee, the Transferee shall deliver to Loctite no
later than 30 days prior to the Transfer Date (as defined below) (i) written
notice of such proposed Permitted Transfer (the "Transfer Notice") for such
proposed Permitted Transfer setting forth (A) the number of Common Shares
proposed to be transferred, (B) the identity of the proposed transferee (the
"Proposed Transferee"), including the Beneficial Owners thereof to the extent
known or reasonably determinable by the Transferee, and (C) the date on which
the proposed Permitted Transfer is to be consummated (the "Transfer Date") and
(ii) an agreement substantially in the form of Exhibit A-1 to the Rights
Agreement, duly and validly executed on behalf of the Proposed Transferee (the
"Transferee Agreement"). Upon receipt by Loctite of the Transferee Agreement
duly executed and delivered by the Proposed Transferee, Loctite shall duly
execute and deliver the Transferee Agreement.
(b) As soon as practicable after receipt of the Transfer
Notice, the Directors who are neither nominees or representatives of the
Transferor or any Affiliate or Associate of the Transferor nor officers or
employees of Loctite (each an "Unaffiliated Director") shall evaluate whether
the Proposed Transferee is an Adverse Person. The Transferee shall provide the
Unaffiliated Directors with any information within its control requested by them
to facilitate their evaluation, as soon as practicable after any request for
information is made.
(c) Subject to Section 2(d) hereof, a proposed Permitted
Transfer may be consummated on the Transfer Date as set forth in the Transfer
Notice and the Transferee Agreement related to such proposed Permitted Transfer
unless the Unaffiliated Directors shall have determined that the Proposed
Transferee is an Adverse Person no later than five days prior to the Transfer
Date for such proposed Permitted Transfer provided that the Transferee complies
with its obligations in Sections 2(a) and (b) hereof.
(d) With respect to any proposed Permitted Transfer, the
Proposed Transferee shall be deemed to be an Adverse Person for purposes of the
Rights Agreement, unless there is at least one Director that is an Unaffiliated
Director during the period from and including the date Loctite receives a
Transfer Notice in respect of such proposed Permitted Transfer to and including
the Transfer Date for such proposed Permitted Transfer. Except as required by
applicable law, Loctite covenants and agrees that it will not take any action to
cause there to be fewer than one Unaffiliated Director on the Board at any time.
A-3
<PAGE> 53
(e) Notwithstanding anything in this Agreement to the
contrary, no transferee of any Common Shares from the Transferee shall have any
rights under this Agreement.
3. Representations and Warranties of Transferee. The
Transferee represents and warrants to Loctite that:
(a) it has the requisite power and authority (corporate or
otherwise) to execute and deliver this Agreement, to carry out its obligations
hereunder and to consummate each of the transactions contemplated hereby;
(b) the execution, delivery and performance of this
Agreement and the consummation of each of the transactions contemplated hereby
have been duly authorized by its Board of Directors (or other relevant corporate
body), and no other corporate proceedings on its part are necessary to authorize
this Agreement or to consummate the transactions so contemplated;
(c) this Agreement has been duly executed and delivered by
it and constitutes a valid and binding obligation of it, enforceable against it
in accordance with its respective terms, except to the extent such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and is subject to the general principles of equity;
(d) neither the execution, delivery and performance of this
Agreement nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the provisions hereof will (i) conflict with or
result in any breach or violation of any provisions of its governing
organizational documents, (ii) require on its part any filing with, notification
to, or permit, authorization, consent or approval of, any governmental body or
authority or any other entity (other than filings by the Transferee with the
Securities and Exchange Commission under the Exchange Act) or (iii) constitute
(with or without notice or lapse of time or both) a breach, violation or
default, create a lien or other encumbrance or give rise to any right of
renegotiation or termination, amendment, cancellation, acceleration or
prepayment under (A) any material agreement or instrument to which it is a party
or by which any of its material properties or assets may be bound or subject or
(B) any order, writ, injunction, decree, statute, rule or regulation,
governmental permit or license applicable to it or any of its material
properties or assets;
A-4
<PAGE> 54
(e) A true, and complete copy of the Acquisition Agreement,
without amendment or modification, is attached hereto as Exhibit A; and
(f) after giving effect to the Proposed Sale Transaction
pursuant to the Acquisition Agreement, (i) the Transferee, together with all
Affiliates and Associates of the Transferee, will be the Beneficial Owner of
[insert number] Common Shares and (ii) [in the case of a Transfer from the
Krieble Family Group or a Permitted Transferee to the Transferee, the
Transferee, together with its Affiliates or Associates, will not beneficially
own any Common Shares, other than the Common Shares transferred by the
Transferor to the Transferee in the Proposed Sale Transaction] [in the case of a
Transfer from Henkel to the Transferee, the Transferee, together with its
Affiliates and Associates, will not beneficially own a percentage of the then
outstanding Common Shares in excess of the lesser of (A) the Henkel Percentage
in effect immediately prior to the Proposed Sale Transaction and (B) the sum of
0.3% of the then outstanding Common Shares and the percentage of the then
outstanding Common Shares to be transferred by Henkel to the Transferee in the
Proposed Sale Transaction].
4. Proposed Sale Transaction. The Transferee shall provide the
Unaffiliated Directors with any information requested by them to facilitate
their evaluation of whether the Transferee is an Adverse Person, as soon as
practicable after any request for information is made, and otherwise cooperate
with the Unaffiliated Directors in connection with their evaluation of the
Transferee.
5. Miscellaneous.
5.1. Entire Agreement. This Agreement embodies the entire
agreement and all understandings between the parties hereto and supersedes all
prior agreements and understandings relating to the subject matter hereof.
5.2. Binding Effect; Benefits; Assignment; Survival. This
Agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective legal representatives, successors and assigns.
Neither this Agreement nor any of the rights hereunder may be assigned by (i)
Loctite, without the prior written consent of the Transferee, or (ii) the
Transferee, unless there is at least one Unaffiliated Director and a majority of
the Unaffiliated Directors consents to such assignment in writing or at a duly
called meeting of the Board. Any attempted or purported assignment in violation
of the previous sentence shall be void and of no effect. The representations and
warranties set forth herein shall survive without limitation as to time.
A-5
<PAGE> 55
5.3. Amendments and Waivers. No modification, amendment,
termination or waiver of any provision of this Agreement, and no consent to any
departure therefrom, shall in any event be effective unless (i) there is at
least one Unaffiliated Director and (ii) the same shall be (a) in writing, (b)
signed by each of the parties hereto and (c) approved by a majority of the
Unaffiliated Directors, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given.
5.4. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware applicable to
agreements made and to be performed wholly within such jurisdiction, without
giving effect to the choice of law provisions thereof. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of Delaware for any litigation
arising out of, or relating to, this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts). [The Transferee hereby irrevocably appoints CT Corporation Systems
(the "Process Agent"), with an office on the date hereof at 1209 Orange Street,
Wilmington, Delaware 19801, United States, as its agent to receive, on its
behalf, service of any process, summons, notice or other document -- applicable
if the Transferee is a foreign entity.] The Transferee agrees that service of
any process, summons, notice or document by U.S. registered mail [to its
respective address set forth in Section 6.5 hereof] [to the Process Agent] shall
be effective service of process for any litigation brought against it in any
such court. Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any litigation arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of Delaware, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such litigation brought
in any such court has been brought in an inconvenient forum.
5.5. Notices. All notices, requests, demands, applications,
services of process and other communications which are required to be or may be
given under this Agreement shall be deemed to have been duly given if sent by
telex, telecopy or facsimile transmission or delivered or mailed, certified
first class mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
A-6
<PAGE> 56
To Loctite:
Loctite Corporation
10 Columbus Boulevard
Hartford, Connecticut 06103
Attention: General Counsel
With copies to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Arthur Fleischer, Jr., P.C.
To Transferee:
[ ]
[ ]
[ ]
Attention: [ ]
With copies to:
[ ]
[ ]
[ ]
Attention: [ ];
or to such other address as any party shall furnish to the other by notice given
in accordance with this Section 5.5. All such notices, requests, demands and
other communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; three business days after being
deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged,
if telecopied; and on the next business day, if timely delivered (with charges
prepaid) to a recognized national air courier guaranteeing overnight delivery.
5.6. Further Assurances. Each party hereto shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as any other
A-7
<PAGE> 57
party may reasonably request in order to carry out the intent and accomplish the
purpose of this Agreement and the consummation of the transactions contemplated
hereby.
5.7. Specific Performance. The parties hereto hereby
acknowledge that each party hereto would suffer irreparable injury and would not
have an adequate remedy at law for money damages if the provisions of this
Agreement were not performed in accordance with their terms. Each party hereto
agrees that the other parties hereto shall be entitled to specific enforcement
of the terms of this Agreement in addition to any other remedy to which they are
entitled, at law or in equity. Furthermore, if any action or proceeding shall be
instituted to enforce the provisions hereof, any party against whom such action
or proceeding is brought hereby waives the claim or defense therein that there
is an adequate remedy at law, and agrees not to urge in any such action or
proceeding the claim or defense that such remedy at law exists.
5.8. Termination. This Agreement shall terminate and be of
no further force and effect on April 14, 2004, and upon the termination of this
Agreement there shall be no liability on the part of any party to this Agreement
with respect to any of the provisions hereof, with the sole exception that
nothing contained in this Agreement shall in any way relieve any party hereto
from liability for any breach of the provisions of this Agreement for the period
prior to its termination.
5.9. Rights of Action. (a) Except as set forth in this
Section 5.9, nothing in this Agreement shall be construed to give any person or
corporation (other than Loctite and the Transferee) any legal or equitable
right, remedy or claim under this Agreement. The parties agree that, at any time
that there are no Unaffiliated Directors, the rights of action in respect of
this Agreement shall be vested in the respective holders of Common Shares; and
any holder of Common Shares, without the consent of any other holder of Common
Shares, may, on his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against any party to this
Agreement to enforce, any provision of this Agreement. Without limiting the
foregoing or any remedies available to the holders of Common Shares, it is
specifically acknowledged that the holders of Common Shares would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of the obligations of any party subject to, this
Agreement.
(b) The Transferee hereby agrees that in connection with
any action by Loctite to enforce any provision of this Agreement against the
Transferee, the Transferee will not take any action that would directly or
indirectly prevent Loctite from making the necessary funds and personnel
available to pursue such action.
A-8
<PAGE> 58
5.10. Counterparts. This Agreement may be executed in one
or more counterparts, each of which for all purposes shall be deemed an original
and all of which shall constitute the same instrument.
IN WITNESS WHEREOF, each of the Transferee and Loctite
has caused this Agreement to be duly executed on its behalf as of the date first
above written.
[NAME OF TRANSFEREE]
By:
Name:
Title:
LOCTITE CORPORATION
By:
Name:
Title:
A-9
<PAGE> 59
Exhibit A-2
FORM OF TRANSFEREE
EXECUTIVE OFFICER'S CERTIFICATE
[Name of Transferee]
[Address of Transferee]
Loctite Corporation
10 Columbus Boulevard
Hartford, Connecticut 06106
Reference is made to the Transferee Agreement, dated as of [_______],
between [Insert Name of Transferee] and Loctite Corporation (the "Transferee
Agreement"). The undersigned, [_______ ], an executive officer of the
Transferee, does hereby certify in my capacity as such executive officer that
all of the representations and warranties of the Transferee set forth in Section
3 of the Transferee Agreement are true and correct on and as of the date hereof
with the same effect as though made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has duly and validly executed this
Certificate this [insert date of closing of transfer].
____________________________
Name:
Title:
<PAGE> 60
Exhibit B
Form of Right Certificate
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER APRIL 14, 2004, OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL
AND VOID.
Right Certificate
Loctite Corporation
This certifies that _____________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of April 14, 1994 (the "Rights Agreement"),
between Loctite Corporation, a Delaware corporation (the "Corporation"), and The
First National Bank of Boston (the "Rights Agent"), to purchase from the
Corporation at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., New York time, on April 14, 2004,
unless the Rights evidenced hereby shall have been previously redeemed by the
Corporation, at the principal office or offices of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, one fully
paid non-assessable share of Common Stock, with a par value of $.01 per share
(the "Common Shares"), of the Corporation, at a purchase price of $175.00 per
Common Share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of Common
Shares which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of April
14, 1994, based on the Common Shares as constituted at such date.
<PAGE> 61
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Affiliate or
Associate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Affiliate or Associate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number of Common Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Corporation and the holders of the Right Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the principal
executive offices of the Corporation and the principal office or offices of the
Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Common Shares or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Corporation at a redemption
price of $.01 per Right (subject to adjustment as provided in the Rights
Agreement) payable in Common Shares or cash.
B-2
<PAGE> 62
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Common
Shares or of any other securities of the Corporation which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder thereof, as such, any
of the rights of a stockholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal. Dated as of _________, ____.
ATTEST: LOCTITE CORPORATION
_____________________________ By __________________________
Name: Name:
Title: Title:
Countersigned:
THE FIRST NATIONAL
BANK OF BOSTON
By __________________________
Authorized Signatory
Name:
Title:
B-3
<PAGE> 63
Form of the Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED____________________________________________
hereby sells, assigns and transfers unto________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: _______,____
_____________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
________________________________________________________________________________
The undersigned hereby certifies that (1) the Rights evidenced
by this Right Certificate are not being sold, assigned or transferred by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement) and (2)
after due inquiry and to the best knowledge of the undersigned, the undersigned
did not acquire the Rights evidenced by this Right Certificate from any Person
who is or was an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement).
_____________________________
Signature
________________________________________________________________________________
B-4
<PAGE> 64
Form of the Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires to exercise
Rights represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _________
Rights represented by this Right Certificate to purchase the Common Shares or
other securities issuable upon the exercise of such Rights and requests that
certificates for such Common Shares or other securities be issued in the name
of:
Please insert social security
or other identifying number ____________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ___________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:___________,______
___________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
B-5
<PAGE> 65
Form of the Reverse Side of Right Certificate -- continued
________________________________________________________________________________
The undersigned hereby certifies that (1) the Rights evidenced
by this Right Certificate are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement) and (2) after due inquiry and to the
best knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is or was an Acquiring
Person or an Affiliate [or Associate] thereof (as such terms are defined in the
Rights Agreement).
______________________________
Signature
________________________________________________________________________________
NOTICE
The signature on the foregoing Forms of Assignment and
Election and certificates must conform to the name as written upon the face of
this Right Certificate in every particular, without alteration or enlargement or
any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Corporation and the Rights Agent will deem the Beneficial Owner
(as such term is defined in the Rights Agreement) of the Rights evidenced by
this Right Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement) and such Assignment
or Election to Purchase will not be honored.
B-6
<PAGE> 66
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO,
OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
On April 14, 1994, the Board of Directors of Loctite Corporation (the
"Corporation") declared a dividend distribution of one right (a "Right") for
each outstanding share of Common Stock, $.01 par value per share (the "Common
Shares"), of the Corporation. The dividend is payable to the stockholders of
record on April 25, 1994 (the "Record Date") and with respect to Common Shares
issued thereafter until the Distribution Date (as defined below), and, in
certain circumstances, with respect to Common Shares issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Corporation one
Common Share at a price of $175.00 per Common Share (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") between the Corporation and The
First National Bank of Boston, as Rights Agent (the "Rights Agent"), dated as of
April 14, 1994.
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates (as
hereinafter defined) will be distributed. The Rights will separate from the
Common Shares upon the earlier to occur of (i) the date of a public announcement
that a person or "group" (other than a Grandfathered Stockholder (as hereinafter
defined) has acquired beneficial ownership of 10% or more of the outstanding
Common Shares (except pursuant to a Permitted Offer, as hereinafter defined); or
(ii) 10 days (or such later date as the Board may determine) following the
commencement of a tender offer or exchange offer the consummation of which would
result in a person or group becoming an Acquiring Person (as hereinafter
defined) (the earlier of such dates being called the "Distribution Date"). A
person or group whose acquisition of Common Shares causes a Distribution Date
pursuant to clause
<PAGE> 67
(i) above is an "Acquiring Person." The date that a person or group becomes an
Acquiring Person is the "Shares Acquisition Date."
Notwithstanding the foregoing, an Acquiring Person does not include the
following persons ("Grandfathered Stockholders"): (i) Henkel Corporation, a
Delaware corporation ("Henkel"), (ii) Mr. Robert H. Krieble, Ms. Nancy B.
Krieble, Mr. Frederick B. Krieble, Ms. Collette C. Krieble, Mr. James P.
Fusscas, Ms. Helen K. Fusscas, Mr. Martin Wolman, Management I, Limited and
Management II, Limited as a "group" (as such term is defined or used under Rule
13d-5(b) promulgated pursuant to Section 13(d) of the Securities Exchange Act of
1934, as amended) (collectively as such group, the "Krieble Family Group") and
(iii) any Permitted Transferee (as hereinafter defined); provided, however,
that, except under limited circumstances, (a) Henkel will cease to be a
Grandfathered Stockholder at any time after the date of the Rights Agreement
that Henkel beneficially owns a percentage of outstanding Common Shares in
excess of the Henkel Percentage (as hereinafter defined) then in effect (other
than as a result of a Permitted Offer), (b) the Krieble Family Group will cease
to be a Grandfathered Stockholder at the time after the date of the Rights
Agreement any member of the Krieble Family Group beneficially owns any
additional Common Shares (other than as a result of a stock dividend, a stock
split, a grant by the Corporation pursuant to a directors benefit plan
established by the Corporation of Common Shares or options to purchase Common
Shares (and the exercise thereof) or a Permitted Offer) and (c) any Permitted
Transferee will cease to be a Grandfathered Stockholder at the time such
Permitted Transferee beneficially owns any additional Common Shares (other than
as a result of a stock dividend, a stock split or a Permitted Offer). Initially,
the "Henkel Percentage" is 35% of the outstanding Common Shares and thereafter
is subject to adjustment as follows: (1) in the event of any transfer of Common
Shares by Henkel to any person (other than by means of a transfer of Common
Shares pursuant to a registered public offering or a broker's transaction under
Rule 144 under the Securities Act of 1933, as amended, and that satisfies
certain other conditions to ensure a wide distribution of those Common Shares
(each such transfer, a "Distribution Transaction")), the Henkel Percentage will
be reduced by the percentage of outstanding Common Shares so transferred; (2) in
the event of transfers aggregating more than 10% of the outstanding Common
Shares by Henkel by means of Distribution Transactions, the Henkel Percentage
will be reduced by the aggregate percentage of outstanding Common Shares so
transferred in excess of 10% of the outstanding Common Shares; and (3) in the
event that the Corporation acquires any Common Shares, the Henkel Percentage
immediately following such acquisition will equal the greater of the Henkel
Percentage immediately prior to such acquisition and the percentage of the
outstanding Common Shares beneficially owned by Henkel immediately following
such acquisition.
C-2
<PAGE> 68
A "Permitted Transfer" is any transfer of Common Shares from
Henkel, the Krieble Family Group as a whole, or any Permitted Transferee to any
person that (i) has not been declared an Adverse Person (as hereinafter defined)
by a majority of those directors of the Corporation who are neither officers or
employees of the Corporation nor a designee or representative of the proposed
transferor (the "Unaffiliated Directors"), (ii) does not beneficially own, after
giving effect to the transfer, in the case of a transfer from the Krieble Family
Group or any Permitted Transferee, any Common Shares other than the Common
Shares so transferred to such transferee or in the case of a transfer from
Henkel, a percentage of the then outstanding Common Shares in excess of the
lesser of (a) the Henkel Percentage in effect immediately prior to such proposed
transfer and (b) the sum of 0.3% of the then outstanding Common Shares and the
percentage of the then outstanding Common Shares so transferred to such
transferee, (iii) at least 30 days prior to the consummation of such proposed
transfer, executes and delivers to the Corporation an agreement substantially in
the form of Exhibit A-1 attached to the Rights Agreement and (iv) immediately
prior to the consummation of such transfer, executes and delivers to the
Corporation an executive officer's certificate substantially in the form of
Exhibit A-2 attached to the Rights Agreement. The Rights Agreement provides that
any proposed Permitted Transferee will be deemed to be an "Adverse Person" if it
is declared to be an Adverse Person by a majority of the Unaffiliated Directors
after having determined in its business judgment that beneficial ownership by
such proposed Permitted Transferee of 10% or more of the outstanding Common
Shares would be reasonably likely to materially adversely affect the Corporation
or its stockholders.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Common Shares. Until
the Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date (and to each initial record holder of certain Common Shares
issued after the Distribution Date), and these separate Right Certificates alone
will evidence the Rights.
C-3
<PAGE> 69
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on April 14, 2004, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a tender or exchange offer which is for all outstanding Common
Shares and (i) which is at a price and on terms which a majority of the
Disinterested Directors (as hereinafter defined) and a majority of the entire
Board determines to be adequate and in the best interests of the Corporation,
its stockholders and its other relevant constituencies, other than such person
making such offer, or (ii) which remains open for a period of at least 60 days
after the tender or exchange offer has commenced and the consummation of which
results in the person on whose basis the tender or exchange offer is made
becoming the beneficial owner of more than 50% of the outstanding Common Shares
(a "Permitted Offer")), each holder of a Right will thereafter have the right
(the "Flip-In Right") to receive upon exercise the number of Common Shares (or,
in certain circumstances, other securities of the Corporation) having a value
(immediately prior to this triggering event) equal to two times the Purchase
Price of the Right. In lieu of the Flip-In Right described above, the Board, at
its option, may exchange each Right for one Common Share, provided that at no
time has any person been the beneficial owner of 50% or more of the outstanding
Common Shares. Such an exchange must be authorized by (a) a majority of the
Disinterested Directors and (b) a majority of all of the directors of the Board.
A "Disinterested Director" means any director of the Corporation who is neither
an officer or employee of the Corporation nor any designee or representative of
any person attempting to effect a business combination or similar transaction
with the Corporation. Notwithstanding the foregoing, following the occurrence of
a person becoming an Acquiring Person, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void.
In the event that at any time following the Shares Acquisition Date,
(i) the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to (a) an Acquiring Person or any affiliate or associate or any other
person in which such Acquiring Person, affiliate or associate has an interest or
any person acting on behalf of or in concert with such Acquiring Person,
affiliate or associate, or, (b) any other person (but only if in any such
transaction referred to in clause (i) or (ii) above, all holders of Common
Shares are not treated alike), then each holder of a Right (except Rights which
previously have been voided as set forth
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<PAGE> 70
above) will have the right (the "Flip-Over Right") to receive, upon exercise,
common shares of the acquiring Corporation having a value equal to two times the
Purchase Price of the Right. The holder of a Right will continue to have the
Flip-Over Right whether or not such holder exercises or surrenders the Flip-In
Right.
The Purchase Price payable, and the number of Common Shares or other
securities issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or warrants to
subscribe for or purchase Common Shares at a price, or securities convertible
into Common Shares with a conversion price, less than the then current market
price of the Common Shares or (iii) upon the distribution to holders of the
Common Shares of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
The number of outstanding Rights and the number of Common Shares
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. Fractional Common Shares will not be required to be issued
by the Corporation, and in lieu thereof, an adjustment in cash will be made
based on the market price of the Common Shares on the last trading day prior to
the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Corporation may
redeem the Rights at a price of $.01 per Right (the "Redemption Price"), which
redemption will be effective upon approval of (a) a majority of the
Disinterested Directors and (b) a majority of all of the directors of the
Corporation. Additionally, following the Shares Acquisition Date, the then
outstanding Rights may be redeemed at the Redemption Price (if approved by (1) a
majority of the Disinterested Directors and (2) a majority of all of the
directors of the Corporation), if this redemption is in connection with a merger
or other business combination transaction or series of transactions involving
the Corporation in which all holders of Common Shares are treated alike but not
involving an Acquiring Person or its affiliates or associates.
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<PAGE> 71
Prior to the Distribution Date, all of the provisions of the Rights
Agreement may be amended by approval of (i) a majority of the Disinterested
Directors and (ii) a majority of all of the directors of the Corporation. After
the Distribution Date, the provisions of the Rights Agreement may be amended
upon approval of (a) a majority of the Disinterested Directors and (b) a
majority of all of the directors of the Corporation in order to cure any
ambiguity, defect or inconsistency, or to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person).
The Rights may not be redeemed, exchanged or amended unless there is at
least one Disinterested Director at the time of such redemption, exchange or
amendment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to stockholders of the Corporation, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
April 15, 1994. A copy of the Rights Agreement is available free of charge from
the Corporation. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
C-6
<PAGE> 1
Exhibit 99.7
---------------------------------------------------------------
AGREEMENT
among
LOCTITE CORPORATION
and
HENKEL KGaA, HENKEL CORPORATION
and HC INVESTMENTS, INC.
Dated as of April 14, 1994
-------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
Section 1. Termination of the Standstill Agreement...................................................... 2
Section 2. Shareholder Rights Agreement................................................................. 2
2.1 Adoption........................................................................... 2
2.2 Prohibited Actions................................................................. 2
2.2.1 Loctite................................................................. 2
2.2.2 Henkel Entities......................................................... 3
Section 3. Corporate Governance......................................................................... 4
3.1 Board of Directors................................................................. 4
3.2 Committees......................................................................... 7
3.3 Dissolution of Shareholder Relations
Committee ......................................................................... 7
3.4 Applicability...................................................................... 7
Section 4. Right of First Refusal....................................................................... 7
Section 5. Registration Rights.......................................................................... 10
Section 6. Henkel Transferees........................................................................... 10
6.1 Permitted Transfers................................................................ 10
6.2 Transferability.................................................................... 11
6.3 Distribution Transaction........................................................... 11
Section 7. Associates of Henkel Entities................................................................ 11
Section 8. Representations and Warranties............................................................... 12
8.1 Loctite Share Ownership............................................................ 13
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS cont'd
<TABLE>
<S> <C> <C>
Section 9. Miscellaneous................................................................................ 13
9.1 Entire Agreement................................................................... 13
9.2 Binding Effect; Benefits; Assignment;
Survival .......................................................................... 13
9.3 Amendments and Waivers............................................................. 14
9.4 Governing Law...................................................................... 14
9.5 Notices............................................................................ 14
9.6 Further Assurances................................................................. 15
9.7 Specific Performance............................................................... 16
9.8 Joint and Several Liability........................................................ 16
9.9 Termination........................................................................ 16
9.10 Rights of Action................................................................... 16
9.11 Counterparts....................................................................... 17
Signatures......................................................................... 17
</TABLE>
ii
<PAGE> 4
Agreement made as of this 14th day of April, 1994 (this "Agreement")
among Loctite Corporation, a Delaware corporation ("Loctite"), Henkel KGaA, a
Kommanditgesellschaft auf Aktien organized under the laws of the Federal
Republic of Germany ("Henkel Germany"), Henkel Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of Henkel Germany ("Henkel
America"), and HC Investments, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of Henkel America ("Henkel Subsidiary"). Henkel Germany,
Henkel America and Henkel Subsidiary are sometimes collectively referred to
herein as the "Henkel Entities" and individually as a "Henkel Entity".
WITNESSETH:
WHEREAS, pursuant to a Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated May 23, 1985, Henkel of America, Inc., the direct
parent of Henkel America ("Henkel Parent"), agreed to acquire from the sellers
listed on Schedule A thereto (collectively, the "Selling Stockholders") certain
shares of common stock, no par value, of Loctite (the "Common Stock");
WHEREAS, in connection with the Stock Purchase Agreement,
Henkel Parent and Loctite entered into an agreement, dated May 23, 1985 (the
"Standstill Agreement"), setting forth certain arrangements with respect to the
relationships between them;
WHEREAS, Henkel Parent assigned to Henkel America all of its
rights and obligations under the Stock Purchase Agreement and the Standstill
Agreement and Henkel America acquired from the Selling Stockholders all of the
shares of Common Stock sold by them pursuant to the Stock Purchase Agreement;
WHEREAS, Henkel America contributed all of its shares of
Common Stock to the capital of Henkel Subsidiary and has designated Henkel
Subsidiary to receive all shares of Common Stock purchased by Henkel America
under Section 7(b) of the Stock Purchase Agreement; and
WHEREAS, Henkel America and Loctite desire to terminate the
Standstill Agreement, and the Henkel Entities and Loctite desire to enter into
an agreement for the purpose of governing certain aspects of the relationships
among them.
NOW, THEREFORE, in consideration of the promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, each of the parties hereto agrees as follows:
<PAGE> 5
1. Termination of the Standstill Agreement. Loctite and Henkel
America agree that the Standstill Agreement shall terminate effective as of the
Record Date (as defined below). Effective as of the Record Date, the provisions
of the Standstill Agreement shall be of no further force and effect, and there
shall be no liability on the part of any party to the Standstill Agreement with
respect to any of the provisions thereof with the sole exception that nothing
contained in this Agreement shall in any way relieve any party from liability
for any breach of the provisions of the Standstill Agreement for the period
commencing on the date of this Agreement and ending on the Record Date. The
"Record Date" shall mean that certain date set forth in the Rights Agreement
referred to in Section 2.1 hereof on which the authorized and declared dividend
of one Right (as defined in the Rights Agreement) is issued in respect of each
share of Common Stock outstanding as of such date.
2. Shareholder Rights Agreement.
2.1 Adoption. Simultaneously with the execution of this
Agreement, Loctite is entering into a Rights Agreement with a bank or trust
company acting as rights agent, substantially in the form of Exhibit A hereto
(the Rights Agreement, as hereafter amended from time to time, shall be referred
to as the "Rights Agreement").
2.2 Prohibited Actions.
2.2.1 Loctite. (a) So long as this Agreement
is in effect, (i) Loctite shall not adopt any shareholder rights plan or similar
device that does not contain substantially the same terms and conditions as
those set forth in the Rights Agreement (a "Substantially Similar Rights Plan")
and (ii) Loctite shall not amend, modify, waive, terminate or invalidate any
provision of the Rights Agreement or any Substantially Similar Rights Plan or
adopt, amend, modify, waive, terminate or invalidate any provision of its
certificate of incorporation or by-laws in any way which would adversely affect
the rights of any of the Henkel Entities under the Rights Agreement or any
Substantially Similar Rights Plan.
(b) In the event of any Proposed Loctite
Action (as defined below), Loctite will give the Henkel Entities notice of such
Proposed Loctite Action within a reasonable period of time prior to Loctite's
taking of such Proposed Loctite Action and a reasonable opportunity to present
to Loctite and the Board (as defined below) the Henkel Entities' views on the
merits of such Proposed Loctite Action; provided, however, that if, in the
Board's business judgment, the giving of such notice and reasonable opportunity
to make such presentation would adversely affect the Board's
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<PAGE> 6
ability to carry out its fiduciary responsibilities and such Proposed Loctite
Action is, in the business judgment of the Board, in the best interests of
Loctite and its stockholders, Loctite shall have the absolute right to effect
such proposed Loctite Action without regard to this Section 2.2.1(b) (including,
without limitation, not providing the Henkel Entities with any notice of any
such Proposed Loctite Action and the opportunity to make a presentation with
respect thereto). As used herein, the term "Proposed Loctite Action" shall mean
(i) any proposed adoption, amendment, modification, waiver, termination or
invalidation by Loctite of any provision of the Rights Agreement, a
Substantially Similar Rights Plan, its certificate of incorporation or its
bylaws that is not prohibited by Section 2.2.1(a) hereof or (ii) any proposed
issuance by Loctite of additional shares of Common Stock (other than pursuant to
(1) the exercise of any outstanding stock option, warrant, convertible security
or other right to purchase shares of Common Stock, (2) any benefit plan or other
similar employee or director arrangement, (3) any stock split, stock dividend or
similar distribution made available to the holders of Common Stock generally or
(4) any issuance which alone, or together with any prior issuance of additional
shares of Common Stock covered by this clause (4), would not exceed, in the
aggregate, 2.5% of the shares of Common Stock outstanding on the date of this
Agreement).
2.2.2 Henkel Entities. (a) So long as this
Agreement is in effect, the Henkel Entities shall not, and shall cause each of
their respective Affiliates (as such term is defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended and in effect on the date of this Agreement (the "Exchange Act")) and
any Director (as defined below) nominated by, or which is a representative of,
any Henkel Entity or any of their respective Affiliates not to, directly or
indirectly, seek to (i) amend, modify, waive, terminate or invalidate, or cause
the amendment, modification, waiver, termination or invalidation of any
provision of the Rights Agreement or any Substantially Similar Rights Plan in
any manner (including, without limitation, by proxy contest, shareholder
consent, or otherwise) or (ii) redeem or exchange the Rights (as defined in the
Rights Agreement) or any rights issued under any Substantially Similar Rights
Plan, in either case, unless a majority of the duly and validly elected
directors of Loctite (each a "Director") who are neither nominees or
representatives of any Henkel Entity or any of their respective Affiliates nor
officers or employees of Loctite (each an "Outside Director") consent to such
action in writing or at a duly called meeting of the board of Directors of
Loctite (the "Board"); it being understood that the consent of the Outside
Directors may only be obtained if there is at least one Director that is an
Outside Director.
(b) In the event of any Proposed Henkel Action
(as defined below) by any Henkel Entities or any of their respective Affiliates
(the "Henkel Affiliates"), the Henkel Entities will give Loctite notice of such
Proposed Henkel Action within a reasonable period of time prior to the taking of
such Proposed Henkel Action by such
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<PAGE> 7
Henkel Entity or such Henkel Affiliate (as the case may be) and a reasonable
opportunity to present to the Henkel Entities its views on the merits of such
Proposed Henkel Action; provided, however, that if, in the reasonable judgment
of the Henkel Entities, the giving of such notice and reasonable opportunity to
make such presentation would adversely affect the ability of such Henkel Entity
or such Henkel Affiliate (as the case may be) to effect such Proposed Henkel
Action, such Henkel Entity or such Henkel Affiliates (as the case may be) shall
have the absolute right to effect such Proposed Henkel Action without regard to
this Section 2.2.2(b) (including, without limitation, not providing Loctite with
any notice of such Proposed Henkel Action and the opportunity to make a
presentation with respect thereto). As used herein, the term "Proposed Henkel
Action" shall mean any proposed action by any Henkel Entity or any Henkel
Affiliate regarding the "solicitation" of "proxies" (as such terms are defined
or used in Regulation 14A of the Exchange Act) or becoming of a "participant" in
any "election contest" (as such terms are defined or used in Rule 14a-11 of the
Exchange Act), in each case, either (i) in opposition to any proposal to the
holders of shares of Common Stock recommended by the Board or (ii) to remove any
Directors.
(c) Loctite acknowledges that, except for the provisions
of Section 2.2.2(b) hereof, nothing in this Agreement shall be construed as
prohibiting any Henkel Entity or any Henkel Affiliates from making, or in any
way participating in, any "solicitation" of "proxies" (as such terms are defined
or used in Regulation 14A of the Exchange Act), or becoming a "participant" in
any "election contest" (as such terms are defined or used in Rule 14a-11 of the
Exchange Act), in each case, for the election or removal of any of the
Directors; provided, however, any Director nominated by any Henkel Entity or any
Henkel Affiliates shall be subject to the restrictions contained in Section
2.2.2(a) hereof.
3. Corporate Governance.
3.1 Board of Directors. (a) As promptly as practicable
after the date hereof, but in no event later than November 15, 1994, the Outside
Directors and the Henkel Entities shall each recommend one person to become a
Director (each, an "Initial Recommended Person") to fill the two newly-created
directorships that will result upon the expansion of the Board from ten members
to twelve members in accordance with this Section 3.1. Subject to the second
sentence of Section 3.1(c)(iii) hereof, each Initial Recommended Person shall be
subject to the approval of a majority of all of the Directors, which approval
shall not be unreasonably withheld; the parties hereto acknowledge that it is
currently anticipated that such consent by the Directors would not be withheld
in the case of an Initial Recommended Person selected by the Henkel Entities
unless such person is the Executive Vice President-Adhesives (or otherwise is an
executive within the Adhesives division) of Henkel Germany (or another division
or
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<PAGE> 8
subdivision of Henkel Germany or its subsidiaries that may in the future
engage in substantially the same activities as the Adhesives division of Henkel
Germany engages in on the date hereof) or whose membership on the Board would be
a violation of law. If an Initial Recommended Person is not approved as provided
herein, then the Outside Directors or the Henkel Entities, as the case may be,
that recommended such person shall promptly recommend a substitute or
substitutes until approval is obtained in accordance with the terms of this
Section 3.1(a). Loctite shall cause the Board to be expanded from ten to twelve
members as soon as practicable after the Initial Recommended Persons are so
approved (each Initial Recommended Person which is so approved, shall be
referred to as an "Initial Approved Person"), and Loctite and the Henkel
Entities shall cause the Initial Approved Persons to be duly and validly elected
as Directors to fill the new board seats resulting from such expansion.
(b) From and after the expansion of the Board to twelve
members pursuant to Section 3.1(a) hereof, Loctite agrees not to expand or
reduce the size of the Board without the prior written consent of the Henkel
Entities.
(c) From and after the election of the Initial Approved
Persons pursuant to Section 3.1(a) hereof:
(i) Subject to Section 3.4 hereof, the Henkel
Entities shall be entitled to recommend the number of persons to serve as
Directors (each such person hereinafter referred to as a "Henkel Recommended
Person") set forth in the immediately succeeding sentence. At any time that the
Henkel Entities, together with the Henkel Affiliates, own, in the aggregate, 25%
or more of the outstanding shares of Common Stock, the Henkel Entities shall be
entitled to recommend three Henkel Recommended Persons; at any time that the
Henkel Entities, together with the Henkel Affiliates, own, in the aggregate,
less than 25% of the outstanding shares of Common Stock, but 15% or more of the
outstanding shares of Common Stock, the Henkel Entities shall be entitled to
recommend two Henkel Recommended Persons; and at any time that the Henkel
Entities, together with the Henkel Affiliates, own, in the aggregate, less than
15% of the outstanding shares of Common Stock, but 10% or more of the
outstanding shares of Common Stock, the Henkel Entities shall be entitled to
recommend one Henkel Recommended Person.
(ii) The Secretary of Loctite shall deliver
written notice (the "Secretary Notice") to Henkel America no later than 30 days
prior to any meeting of the Board at which the election of Directors is
scheduled on the agenda for action by the Board, setting forth the date of such
meeting. With respect to any Secretary Notice, Henkel America must deliver
written notice to Loctite setting forth the Henkel Recommended Persons no later
than 15 days after its receipt of such Secretary Notice.
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<PAGE> 9
(iii) Each Henkel Recommended Person shall be
subject to the approval of a majority of all of the Directors, which approval
shall not be unreasonably withheld; the parties hereto acknowledge that it is
currently anticipated that such consent by the Directors would not be withheld
unless such person is the Executive Vice President-Adhesives (or otherwise is an
executive within the Adhesives division) of Henkel Germany (or another division
or subdivision of Henkel Germany or its subsidiaries that may in the future
engage in substantially the same activities as the Adhesives division of Henkel
Germany engages in on the date hereof) or whose membership on the Board would be
a violation of law. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be construed as limiting in any manner the Directors from
exercising, in their business judgment, their fiduciary duties as Directors
under applicable law in connection with their making a determination whether to
approve an Initial Recommended Person selected by the Henkel Entities or any
Henkel Recommended Person pursuant to Section 3.1(a) hereof or Section
3.1(c)(iii) hereof, as the case may be. If a Henkel Recommended Person is not
approved as provided herein, then the Henkel Entities shall promptly recommend a
substitute or substitutes until approval is obtained in accordance with the
terms of this Section 3.1(c). Loctite shall include any Henkel Recommended
Person that has been approved by a majority of all of the Directors in the slate
of nominees recommended by the Board to Loctite's stockholders for election as
Directors. Each Henkel Recommended Person who is duly and validly elected by the
stockholders of Loctite to serve as a Director shall be referred to as a "Henkel
Nominee."
(d) From and after the election of the Initial Approved
Persons pursuant to Section 3.1(a) hereof:
(i) So long as there are any Henkel Nominees,
the Outside Directors shall recommend the remaining persons (other than the
Henkel Nominees) to serve as Directors (each such person shall be referred to
as an "Outside Director Recommended Person").
(ii) Each Outside Director Recommended Person
shall be subject to the approval of a majority of all of the Directors, which
approval shall not be unreasonably withheld. If an Outside Director Recommended
Person is not approved as provided herein, then the Outside Directors shall
promptly recommend a substitute or substitutes until approval is obtained in
accordance with the terms of this Section 3.1(d). Loctite shall include any
Outside Director Recommended Person that has been approved by a majority of all
of the Directors in the slate of nominees recommended by the Board to
stockholders for election as Directors. Loctite shall ensure that at least one
Outside Director Recommended Person so included in such slate shall be neither a
nominee or
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<PAGE> 10
representative of any Henkel Entity or any Henkel Affiliate nor an officer or
employee of Loctite. Each Outside Director Recommended Person who is duly and
validly elected by the stockholders of Loctite to serve as a Director shall be
referred to as a "Non-Henkel Nominee."
(e) Each Henkel Nominee and Non-Henkel Nominee shall
hold his office until his death, retirement or resignation or until his
successor shall have been duly elected and qualified. If any Henkel Nominee or
Non-Henkel Nominee shall cease to serve as a Director, the vacancy resulting
thereby shall be filled by another person recommended by the Henkel Entities or
the Outside Directors, respectively, and approved in accordance with Section
3.1(c) or 3.1(d), respectively.
3.2 Committees. Subject to Sections 3.3 and 3.4 hereof,
(a) at least one Henkel Nominee shall be a member of any key committee of the
Board that has up to four members on such key committee and (b) at least two
Henkel Nominees shall be members of any key committee of the Board that has five
or more members on such key committee.
3.3 Dissolution of Shareholder Relations Committee.
Loctite shall cause the Shareholder Relations Committee of the Board to be
dissolved effective as of the Record Date; provided, however, that Loctite
retains the right to reconstitute a committee of Disinterested Directors (as
defined below) or the Outside Directors, if in the opinion of the Disinterested
Directors or Outside Directors, as applicable, a need for such a committee
arises. The term "Disinterested Directors" means Directors who are neither
officers or employees of Loctite nor any person proposing or attempting to
effect a business combination or similar transaction with Loctite (including,
without limitation, a merger, tender offer or exchange offer, sale of
substantially all of Loctite's assets, or liquidation of Loctite's assets), any
Affiliate or Associate (as defined in Rule 12b-2 under the Exchange Act) of such
person or any other person acting directly or indirectly on behalf of, or as a
representative of, or in concert with, any such person, Affiliate or Associate.
3.4 Applicability. Notwithstanding anything in this
Agreement to the contrary, Loctite shall have no obligations, and the Henkel
Entities shall have no rights (including, without limitation, the right of the
Henkel Entities to recommend any person to serve as a Director), under Section
2.2.1(a) and this Section 3 from and after the time that the Henkel Entities,
together with their respective Affiliates, own, in the aggregate, less than 10%
of the outstanding shares of Common Stock.
4. Right of First Refusal. (a)(i) Upon receipt by Henkel
America of a Seller's Notice (as defined in the Stock Purchase Agreement),
Henkel America shall
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<PAGE> 11
deliver to Loctite within three days of its receipt thereof: (A) a copy of such
Seller's Notice and (B) written notice (a "Notice of Opportunity") setting forth
(I) the date that Henkel America received the Seller's Notice (the "Receipt
Date") and (II) the number of shares of Common Stock offered for sale pursuant
to the Seller's Notice (the "Offered Shares"); provided, however, that Henkel
America need not deliver a Notice of Opportunity if it is permitted under
Section 4(a)(ii) hereof to acquire all of the Offered Shares related to such
Seller's Notice and, within such three day period, Henkel America shall have
delivered a Henkel's Notice (as defined in the Stock Purchase Agreement)
exercising in full its right to acquire those Offered Shares under Section 7(b)
of the Stock Purchase Agreement. Unless the Offered Shares have been purchased
in accordance with the proviso to the immediately preceding sentence, Henkel
America shall deliver to Loctite within fifteen days of the Receipt Date (the
"Henkel Time Period") written notice (a "Notice of Decision") setting forth
whether Henkel America intends to exercise its right under Section 7(b) of the
Stock Purchase Agreement to acquire the Offered Shares related to such Seller's
Notice and, if so, subject to Section 4(a)(ii) hereof, the number of shares of
Common Stock which Henkel America shall purchase pursuant to Section 7(b) of the
Stock Purchase Agreement (the "Henkel Purchased Shares"). In connection with any
Seller's Notice, if Henkel America fails to provide Loctite with a Notice of
Decision within the Henkel Time Period or the Notice of Decision fails to set
forth the Henkel Purchased Shares, the Henkel Purchased Shares shall be deemed
to be zero. In connection with any Notice of Decision, Henkel America shall
purchase, or cause Henkel Subsidiary to purchase, the Henkel Purchased Shares
subject to such Notice of Decision in accordance with the terms and conditions
set forth in Section 7(b) of the Stock Purchase Agreement.
(ii) Each of Henkel America and Henkel
Subsidiary may only purchase shares of Common Stock pursuant to Section 7(b) of
the Stock Purchase Agreement if, after giving effect to such purchase, no Henkel
Entity is an Acquiring Person (as defined in the Rights Agreement).
(iii) In connection with any Seller's Notice,
Henkel America hereby assigns to Loctite all of Henkel America's rights under
Section 7(b) of the Stock Purchase Agreement with respect to the Loctite
Purchasable Shares (as defined below) related to such Seller's Notice, effective
as of the earlier of the (A) delivery to Loctite of the Notice of Decision
related to such Seller's Notice and (B) if Henkel America fails to deliver such
Notice of Decision, the expiration of the Henkel Time Period applicable to such
Seller's Notice. In connection with any Seller's Notice, the term "Loctite
Purchasable Shares" shall mean that number of shares equal to the difference, if
any, between (A) the Offered Shares related to such Seller's Notice and (B) the
Henkel Purchased Shares related to such Seller's Notice.
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<PAGE> 12
(b) In connection with any Seller's Notice, Loctite
shall have the right, but not the obligation, to purchase any or all of the
Loctite Purchasable Shares related to such Seller's Notice by delivering written
notice (the "Loctite Notice") to Henkel America and to the proposed seller of
the Offered Shares to which such Seller's Notice relates no later than 30 days
after the Receipt Date related to such Seller's Notice (the number of shares
which Loctite agrees to purchase, as set forth in the Loctite Notice, shall
hereinafter be referred to as the "Loctite Purchased Shares"), and Loctite shall
purchase those Loctite Purchased Shares in accordance with the terms and
conditions of Section 7(b) of the Stock Purchase Agreement.
(c) In connection with any Seller's Notice, if the
number of shares equal to the difference, if any, between (i) the Offered Shares
related to such Seller's Notice and (ii) the sum of (A) the Henkel Purchased
Shares related to such Seller's Notice and (B) the Loctite Purchased Shares
related to such Seller's Notice is equal to 3% or more of the then outstanding
shares of Common Stock, each of the Henkel Entities and Loctite shall use their
respective reasonable best efforts to cause those shares to be distributed as
widely as practicable (it being understood that none of the parties hereto shall
have any obligation to purchase those shares); provided, however, that no Henkel
Entity shall have any obligation to take any action pursuant to this Section
4(c) if such Henkel Entity reasonably determines that such action could require
it to make any payment under Section 16(b) of the Exchange Act if a suit for
recovery were duly instituted against such Henkel Entity.
(d)(i) The Henkel Entities represent and warrant to
Loctite that (A) except as set forth in Section 4(a) hereof, Henkel America has
not granted, assigned, pledged or otherwise disposed of any rights under Section
7(b) of the Stock Purchase Agreement to any person or entity other than Henkel
Subsidiary as set forth in the fourth recital of this Agreement and (B) a true,
correct and complete copy of the Stock Purchase Agreement, as in effect on the
date hereof, without amendment or modification, has been previously filed as an
exhibit to the Schedule 13D of Henkel Subsidiary filed with the Securities and
Exchange Commission under the Exchange Act.
(ii) Except as provided in Section 4(a) hereof, Henkel
America shall not assign, pledge or otherwise dispose of any of its rights under
Section 7(b) of the Stock Purchase Agreement and any attempted or purported
assignment, pledge or other disposition in violation of this provision shall be
void and of no effect.
(iii) Henkel America agrees not to amend, modify,
waive, terminate or invalidate any provision of, or take any action or fail to
take any action which would adversely affect its rights under, Section 7(b) of
the Stock Purchase Agreement.
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<PAGE> 13
5. Registration Rights. On at least two occasions at the
request of Henkel America, Loctite will prepare and file, and use its best
efforts to have made effective within six months from the receipt of such
request, a registration statement on any available form under the Securities Act
of 1933, as amended (the "1933 Act"), covering any equity securities of Loctite
then owned by the Henkel Entities, at the expense of the Henkel Entities. In
addition, any equity securities of Loctite owned by the Henkel Entities shall,
at Henkel America's request, be included in any other registration statement
covering Loctite equity securities (other than registration statements relating
to an exchange offer, merger or consolidation by Loctite or any equity-based
benefit or dividend reinvestment plan for directors, officers or employees of
Loctite or its subsidiaries), the Henkel Entities to pay only any incremental
expenses resulting from such inclusion. This Section 5 will not be operative if,
in the opinion of counsel for Loctite with which counsel for Henkel America
concurs, the Henkel Entities may dispose of their Loctite equity securities in
the manner and to the person, persons or class of persons contemplated by them
without registration under the 1933 Act, including, without limitation, under
Rule 144 promulgated pursuant to the 1933 Act. In addition, Loctite will use its
best efforts so that the Henkel Entities may sell their Loctite equity
securities pursuant to Rule 144 promulgated pursuant to the 1933 Act. In
connection with any registration pursuant to this Section 5, Loctite and the
Henkel Entities will enter into customary agreements relating to indemnification
and other matters.
6. Henkel Transferees.
6.1 Permitted Transfers. (a) In connection with any
proposed Permitted Transfer (as defined in the Rights Agreement) by Henkel
America, Henkel America shall deliver to Loctite no later than 30 days prior to
the Transfer Date (as defined below) for such proposed Permitted Transfer (i)
written notice of such proposed Permitted Transfer (the "Transfer Notice"),
setting forth (A) the number of shares of Common Stock proposed to be
transferred, (B) the identity of the proposed transferee (the "Proposed
Transferee"), including the beneficial owners thereof to the extent known or
reasonably determinable by Henkel America, and (C) the date on which the
proposed Permitted Transfer is to be consummated (the "Transfer Date") and (ii)
an agreement substantially in the form of Exhibit A-1 to the Rights Agreement,
duly and validly executed on behalf of the Proposed Transferee (the "Transferee
Agreement"). Upon receipt by Loctite of the Transferee Agreement duly executed
and delivered by the Proposed Transferee, Loctite shall duly execute and deliver
the Transferee Agreement.
(b) As soon as practicable after receipt of the
Transfer Notice, the Outside Directors shall evaluate whether the Proposed
Transferee is an Adverse Person (as defined in the Rights Agreement). Henkel
America shall provide the Outside
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<PAGE> 14
Directors with any information within its control requested by them to
facilitate their evaluation, as soon as practicable after any request for
information is made.
(c) Subject to Section 6.1(d) hereof, a proposed
Permitted Transfer may be consummated on the Transfer Date as set forth in the
Transfer Notice and the Transferee Agreement related to such proposed Permitted
Transfer unless the Outside Directors shall have determined that the Proposed
Transferee related to such proposed Permitted Transfer is an Adverse Person no
later than five days prior to the Transfer Date for such proposed Permitted
Transfer; provided, that Henkel America complies with its obligations in
Sections 6.1(a) and (b) hereof.
(d) With respect to any proposed Permitted Transfer,
the Proposed Transferee shall be deemed to be an Adverse Person for purposes of
the Rights Agreement unless there is at least one Director that is an Outside
Director during the period from and including the date Loctite receives a
Transfer Notice in respect of such proposed Permitted Transfer to and including
the Transfer Date for such proposed Permitted Transfer. Except as required by
applicable law or order of any court or other governmental authority, Loctite
covenants and agrees that it will not take any action to cause there to be fewer
than one Outside Director on the Board at any time.
6.2 Transferability. Notwithstanding anything in this
Agreement to the contrary, no transferee of any shares of Common Stock from any
Henkel Entity shall have any rights under this Agreement.
6.3 Distribution Transaction. In connection with any
Distribution Transaction (as defined in the Rights Agreement), Henkel shall use
its best efforts to cause the shares of Common Stock subject to such
Distribution Transaction to be distributed as widely as practicable.
7. Associates of Henkel Entities. (a) In the event that from
time to time any of the Henkel Entities or Loctite becomes aware of the fact
that the Henkel Entities, together with their respective Affiliates and
Associates, beneficially own (as such term is used in the Rights Agreement
without giving effect to the proviso to the definition of the term "Associate"
in the Rights Agreement) a percentage of outstanding shares of Common Stock in
excess of the Henkel Percentage (as defined in the Rights Agreement) then in
effect, the Henkel Entities (if any of them becomes aware of such fact) shall
promptly deliver to Loctite, or Loctite (if it becomes aware of such fact) shall
promptly deliver to the Henkel Entities, written notice (an "Associate Notice")
of such fact, setting forth (i) the amount by which such party is aware that the
percentage of outstanding shares of Common Stock beneficially owned by the
Henkel Entities, together with their respective Affiliates and Associates,
exceeds the Henkel Percentage and (ii) the date that
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<PAGE> 15
such party became aware of such fact. As used herein, (A) the term "Excess
Percentage" shall mean the amount of the percentage of outstanding shares of
Common Stock by which the aggregate percentage of outstanding shares of Common
Stock beneficially owned by the Henkel Entities, together with their respective
Affiliates and Associates (if and to the extent that any Henkel Entity has
become aware of such ownership directly or pursuant to an Associate Notice
delivered to the Henkel Entities by Loctite), exceeds the Henkel Percentage then
in effect and (B) the term "Discovery Date" shall mean the date that any Henkel
Entity becomes aware of the existence of an Excess Percentage or if Loctite
first became aware of the existence of an Excess Percentage, the date that the
Henkel Entities receive an Associate Notice from Loctite in connection
therewith.
(b) From and after a Discovery Date and so long as the
amount of the Excess Percentage is greater than zero, the Henkel Entities shall,
and shall cause their respective Affiliates to, (i) vote with respect to any
matter that percentage of outstanding shares of Common Stock beneficially owned
by the Henkel Entities and their respective Affiliates equal to the Excess
Percentage in the same proportion as all outstanding shares of Common Stock not
beneficially owned by the Henkel Entities and their respective Affiliates and
Associates are voted on such matter and (ii) tender into any tender or exchange
offer (or otherwise sell to the person making such tender or exchange offer) for
the shares of Common Stock that is not opposed by a majority of those Outside
Directors who are also Disinterested Directors (as defined in the Rights
Agreement) or is for all outstanding shares of Common Stock and is held open for
a period of at least 60 days from its commencement, that percentage of
outstanding shares of Common Stock beneficially owned by the Henkel Entities and
their respective Affiliates equal to the Excess Percentage in the same
proportion as all outstanding shares of Common Stock not beneficially owned by
the Henkel Entities and their respective Affiliates and Associates are tendered
in such tender or exchange offer.
8. Representations and Warranties. Each party hereto
represents and warrants to each other party hereto that:
(a) it has the requisite corporate power and authority
to execute and deliver this Agreement, to carry out its obligations hereunder
and to consummate each of the transactions contemplated hereby;
(b) the execution, delivery and performance of this
Agreement and the consummation of each of the transactions contemplated hereby
have been duly authorized by its Board of Directors (or other relevant corporate
body), and no other corporate proceedings on its part are necessary to authorize
this Agreement or to consummate the transactions so contemplated;
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<PAGE> 16
(c) this Agreement has been duly executed and delivered
by it and, assuming this Agreement constitutes a valid and binding obligation of
each other party hereto, constitutes a valid and binding obligation of it,
enforceable against it in accordance with its respective terms, except to the
extent such enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to the enforcement of creditors'
rights generally and is subject to the general principles of equity; and
(d) neither the execution, delivery and performance of
this Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the provisions hereof will (i) conflict
with or result in any breach or violation of any provisions of its governing
organizational documents, (ii) require on its part any filing with, notification
to, or permit, authorization, consent or approval of, any governmental body or
authority or any other entity (other than filings by Henkel Entities with the
Securities and Exchange Commission under the Exchange Act) or (iii) constitute
(with or without notice or lapse of time or both) a breach, violation or
default, create a lien or other encumbrance or give rise to any right of
renegotiation or termination, amendment, cancellation, acceleration or
prepayment under (A) any material agreement or instrument to which it is a party
or by which any of its material properties or assets may be bound or subject or
(B) any order, writ, injunction, decree, statute, rule or regulation,
governmental permit or license applicable to it or any of its material
properties or assets.
8.1 Loctite Share Ownership. The Henkel Entities
represent and warrant to Loctite that as of the date hereof, the Henkel Entities
and the Henkel Affiliates own, in the aggregate, 10,488,960 shares of Common
Stock.
9. Miscellaneous.
9.1 Entire Agreement. This Agreement embodies the
entire agreement and all understandings between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
9.2 Binding Effect; Benefits; Assignment; Survival.
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and their respective legal representatives, successors and
assigns. Neither this Agreement nor any of the rights hereunder may be assigned
by (i) Loctite, without the prior written consent of Henkel America, or (ii) any
Henkel Entity, unless there is at least one Outside Director and a majority of
the Outside Directors consents to such assignment in writing or at a duly called
meeting of the Board. Any attempted or purported assignment in
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<PAGE> 17
violation of the previous sentence shall be void and of no effect. The
representations and warranties of the parties hereto set forth herein shall
survive without limitation as to time.
9.3 Amendments and Waivers. No modification, amendment,
termination or waiver of any provision of this Agreement, nor consent to any
departure therefrom, shall in any event be effective unless (i) there is at
least one Outside Director and (ii) the same shall be (a) in writing, (b) signed
by each of the parties hereto and (c) approved by a majority of the Outside
Directors, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
9.4 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware applicable to
agreements made and to be performed wholly within such jurisdiction, without
giving effect to the choice of law provisions thereof. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of Delaware for any litigation
arising out of, or relating to, this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts). Henkel Germany hereby irrevocably appoints Henkel America as its
agent to receive, on its behalf, service of any process, summons, notice or
other document. Each Henkel Entity agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in Section 9.5 hereof shall be effective service of process for any litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Delaware, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such litigation brought in any such court has been brought in an
inconvenient forum.
9.5 Notices. All notices, requests, demands,
applications, services of process, and other communications which are required
to be or may be given under this Agreement shall be deemed to have been duly
given if sent by telex, telecopy or facsimile transmission or delivered or
mailed, certified first class mail, postage prepaid, return receipt requested,
to the parties hereto at the following addresses:
To Loctite:
Loctite Corporation
10 Columbus Boulevard
Hartford, Connecticut 06106
Attention: General Counsel
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<PAGE> 18
With copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Arthur Fleischer, Jr., P.C.
To any Henkel Entity:
Henkel Corporation
2200 Renaissance Boulevard
Gulph Mills, Pennsylvania 19406
Attention: Ernest G. Szoke, Esq.
With copies to:
Henkel KGaA
67 Henkelstrasse
40191 Dusseldorf-1
Germany
Attention: Dr. Karl Gruter
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Alan Appelbaum;
or to such other address as any party shall furnish to the other by notice given
in accordance with this Section 9.5. All such notices, requests, demands and
other communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; three business days after being
deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged,
if telecopied; and on the next business day, if timely delivered (with charges
prepaid) to a recognized national air courier guaranteeing overnight delivery.
9.6 Further Assurances. Each party hereto shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as any other
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<PAGE> 19
party may reasonably request in order to carry out the intent and accomplish
the purpose of this Agreement and the consummation of the transactions
contemplated hereby.
9.7 Specific Performance. The parties hereto hereby
acknowledge that each party hereto would suffer irreparable injury and would not
have an adequate remedy at law for money damages if the provisions of this
Agreement were not performed in accordance with their terms. Each party hereto
agrees that the other parties hereto shall be entitled to specific enforcement
of the terms of this Agreement in addition to any other remedy to which they are
entitled, at law or in equity. Furthermore, if any action or proceeding shall be
instituted to enforce the provisions hereof, any party against whom such action
or proceeding is brought hereby waives the claim or defense therein that there
is an adequate remedy at law, and agrees not to urge in any such action or
proceeding the claim or defense that such remedy at law exists.
9.8 Joint and Several Liability. Notwithstanding
anything to the contrary in this Agreement, it is expressly understood and
agreed that the obligations, covenants, agreements and duties of each Henkel
Entity under this Agreement shall be joint and several and shall not be
affected, modified or impaired by the compromise, settlement, waiver, change,
modification, amendment (whether material or otherwise) or termination of any or
all of the obligations, covenants, agreements or duties of any other Henkel
Entity under this Agreement or by the taking of, or the failure to take, or any
delay on the part of Loctite in taking, any action against any Henkel Entity to
enforce, assert or exercise any right, power or remedy conferred on Loctite by
this Agreement or otherwise.
9.9 Termination. This Agreement shall terminate and be
of no further force and effect on April 14, 2004, and upon the termination of
this Agreement, there shall be no liability on the part of any party to this
Agreement with respect to any of the provisions hereof, with the sole exception
that nothing contained in this Agreement shall in any way relieve any party
hereto from liability for any breach of the provisions of this Agreement for the
period prior to its termination.
9.10 Rights of Action. (a) Except as set forth in this
Section 9.10, nothing in this Agreement shall be construed to give any person or
corporation (other than Loctite and the Henkel Entities) any legal or equitable
right, remedy or claim under this Agreement. The parties agree that, at any time
(but only at such time) that there are no Outside Directors, the rights of
action by Loctite in respect of this Agreement shall be vested in the respective
holders of shares of Common Stock; and any holder of shares of Common Stock,
without the consent of any other holder of shares of Common Stock, may, on his
own behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against any party to this Agreement to enforce any
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<PAGE> 20
provision of this Agreement. Without limiting the foregoing or any remedies
available to the holders of shares of Common Stock, it is specifically
acknowledged that the holders of shares of Common Stock would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of the obligations of any party subject to, this
Agreement.
(b) Each of the Henkel Entities hereby agrees that in
connection with any action by Loctite to enforce any provision of this Agreement
against any of the Henkel Entities, none of the Henkel Entities will take any
action that would directly or indirectly prevent Loctite from making the
necessary funds and personnel available to appropriately pursue such action.
9.11 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed an
original and all of which shall constitute the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first above written.
LOCTITE CORPORATION
By:/s/ Eugene Miller
________________________________________
Name: Eugene Miller
Title: Vice President and
General Counsel
HENKEL KOMMANDITGESELLSCHAFT
AUF AKTIEN
By:/s/ Jurgen Manchot
________________________________________
Name: Jurgen Manchot
Title: Vice Chairman
Shareholders' Committee
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<PAGE> 21
By:/s/ Lothar Steinebach
________________________________________
Name: Lothar Steinebach
Title: Associate General Counsel
HENKEL CORPORATION
By:/s/ Ernest G. Szoke
________________________________________
Name: Ernest G. Szoke
Title: Secretary
HC INVESTMENTS, INC.
By:/s/ Ernest G. Szoke
________________________________________
Name: Ernest G. Szoke
Title: Secretary
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<PAGE> 1
EXHIBIT 99.8
RESOLUTIONS OF THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
OF
LOCTITE CORPORATION
a Delaware corporation
AUTHORIZATION TO FILE 14D-9
WHEREAS, the Committee has been advised by counsel that, in light of
the tender offer of Henkel KGaA and HC Investments, Inc. for the Common Stock
of the Corporation (the "Tender Offer"), the Company must file certain
documents, including a Schedule 14D-9 and any amendments thereto, in order to
comply with the requirements of federal securities law.
NOW, THEREFORE, BE IT, RESOLVED, that the Chairman of the Committee
be, and he hereby is authorized to execute and file, on behalf of the Committee,
all documents with the Securities and Exchange Commission (the "Commission"),
national securities exchanges or any other person as they deem necessary or
appropriate to comply with the requirements of the Securities Exchange Act of
1934, as amended, and the rules promulgated by the Commission thereunder, or any
other applicable laws, rules or regulations in connection with the Tender Offer,
including, without limitation, the filing of a Schedule 14D-9 and any amendments
thereto.
